GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
Espo's Inc.
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(Name of Small Business Issuer in its charter)
New York 11-3042779
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10501 FM 720 East, Frisco, Texas 75035
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(Address of principal executive offices) (ZIP Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Common Stock ($0.0001 Par Value) National Daily Quotation Sheets
Securities to be registered under Section 12(g) of the Act:
None
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(Title of class)
<PAGE>
PART I
Alternative 2
Item 6. Description of Business
(a) Narrative Description of Business.
(1) Business done and intended to be done
Espo's Inc. ("the Company") is a New York corporation chartered on
November 29, 1990. The Company formerly manufactured and sold clothing
and accessories and sold and rented sporting goods and gave lessons for
the sporting goods which it sold or rented. In December of 1999 the
Company divested itself of all its assets and traded shares of its
common stock to shareholders of Performance Interconnect Corp. in
exchange for their stock in Performance Interconnect Corp.
Performance Interconnect Corp. was incorporated October 10, 1996, in
the State of Texas. It was formed to acquire the assets of I-CON
Industries, Inc. , and actually acquired title to those assets on March
31, 1998. I-CON had been formed in 1979 as a limited partnership,
licensed by the Kollmorgen Corporation to design and manufacture
MULTIWIRE technology and was later incorporated under new ownership.
In March, 1999, PC Dynamics of Texas, Inc., a wholly owned subsidiary
of Performance Interconnect Corp., acquired all the assets of PC
Dynamics Corporation, a Frisco, Texas, manufacturer of metalback RF
circuit boards.
As a result of all the foregoing, the Company owns 99.67% of the common
stock of Performance Interconnect Corp., and Performance Interconnect
Corp. owns all of the common stock of PC Dynamics of Texas, Inc. The
Company's business is conducted under the names of Performance
Interconnect Corp. and PC Dynamics of Texas, Inc.
(i) Principal Products, Principal Markets, Method of Distribution
The Company manufactures and markets circuit boards. Circuit
boards are the basic semiconductor interconnection system used in
almost all electronics equipment. The circuit boards manufactured
and marketed by the Company are at the high end of the market,
both as to technology and as to price. The Company has four kinds
of products:
(1) High reliability (military) RF (radio frequency)
circuit boards.
(2) Commercial RF circuit boards.
(3) Discrete wiring technology (DWT) circuit boards.
(4) Fiber optics circuit boards
<PAGE>
All of these are typically manufactured on specific orders from
the customer and shipped directly from the factory to the customer
by a common carrier, such as UPS or Federal Express. Usually the
method of shipment is specified by the customer. Sales are
effected through six U.S. manufacturer's representatives, with a
total staff of about 16 persons, two in-house sales persons and
one manufacturer's representative in Europe.
High Reliability RF (Radio Frequency) Circuit Boards
RF circuit boards are multilayer circuit boards manufactured with
low dielectric constant laminates and precise mechanical
requirements for the circuits. These special materials require
special processes not ordinarily available from high-volume
multilayer competitors. The Company's high-reliability circuit
boards have primarily military applications. They are manufactured
and marketed under the Performance Interconnect name.
Commercial RF Circuit Boards
The commercial RF circuit boards manufactured by the Company are
used primarily in cellular and PSC telecommunications, military
radar and communications and various high volume commercial
applications, such as garage door openers and radar detectors.
The telecommunications applications of these circuit boards are
important in developed nations like the United States, but they
are especially valuable in underdeveloped nations which do not
have the telephone infrastructure in place. Many of these
countries are going directly to wireless.
The commercial RF circuit boards are manufactured and marketed
under the PC Dynamics name.
Discrete Wiring Technology (DWT) Circuit Boards
Most circuit boards in use today are what are known as multilayer
circuit boards. Their circuits are printed and etched onto the
board. DWT circuits, by contrast, actually use insulated wires to
provide the signal interconnects. DWT is a more expensive
process, but it has several distinct advantages over printed
boards. These advantages are improved signal integrity, more
consistent uniformity board-to-board, lower weight, lower
temperature, superior impedance control and superior route
ability. DWT circuit boards are used primarily in high-
performance computers and telecom switching equipment where the
choice is driven more by performance characteristics than by
price. The Company expects this market to expand in proportion to
the expected increase in computer speeds.
DWT circuit boards' target markets include supercomputers, test
equipment, telecommunications, satellite communications, military
avionics, counter measures, missiles, smart bombs, defense systems
and communications.
Worldwide DWT revenue is estimated at $40 million. Domestic sales
account for 35% of this figure. There are six suppliers
worldwide, two domestically. The two domestic suppliers are
Advanced Interconnect Technology (AIT), with estimated DWT
revenues totaling $10 million, and the Company, with $3.7 million.
<PAGE>
Fiber Optics Circuit Boards
3M has a DARPA contract to develop a fiber optics backplane
technology. (A "DARPA" contract is a type of agreement with the
federal government providing for government funding in the
development of certain technologies.) 3M approached the Company
about two and one-half years ago to develop putting the fiber onto
3M's adhesive. 3M and the Company have almost, but not quite,
completed an agreement to determine the system by which the
product is to be marketed. It is not yet certain whether the
Company will manufacture and sell to the end user or will
manufacture and sell to 3M.
Unlike the Company's other circuit boards which transmit electric
signals, this product transmits light-waves.
(iii) The Company estimates that it has spent $520,000 during
each of the last two fiscal years on Company-sponsored research
and development activities. In addition, the Company has spent an
estimated $80,000 in each of the last two fiscal years on material
customer-sponsored research activities relating to the development
of new products, services or techniques or the improvement of
existing products or techniques.
(iv) The Company has 91 full-time employees, 80 permanent and
eleven temporary.
(v) Federal, state and local provisions regulating discharge of
materials into the environment do not have a material affect on
the capital expenditures, earnings and competitive position of the
Company. The Company's manufacturing operations do generate acids
and other wastes. These wastes are collected and stored on a
short-term basis in an approved manner within the plant and are
then removed monthly under a contract with an approved carrier at
a total expense of approximately $10,000 per month. The disposal
of these wastes is subject to regulation and monitoring by the
Texas Natural Resources commission and by the Environmental
Protection Agency. There are no material estimated capital
expenditures for environmental control facilities for the
remainder of the current fiscal year or in the foreseeable future.
(2) Distinctive or Special Characteristics of the Company's Operation
or Industry Which May Have a Material Impact upon the Company's Future
Financial Performance.
The industry in which the Company is engaged (circuit boards) and the
industries which use the Company's products (high performance computers
and communications) have seen the rise and fall of numerous companies
and products in recent years. They are in a constant state of flux,
radically innovative. Any success which the Company may have had in
the past is probably less predictive in these industries than it is in
most.
<PAGE>
The Company intends to operate as a "niche" supplier and will not
typically compete with larger volume companies. There are, however,
many companies in the electronics field which have greater financial
resources, operational experience and technical facilities than the
Company. In the future these larger companies are not expected to
compete directly with the Company. If the "niche" grows larger and
more lucrative, the likelihood of competition will increase.
Item 7. Description of Property
The Company's executive offices and manufacturing facilities are located
together in a single building at 10501 FM 720 East, in Frisco, Texas,
approximately forty minutes northeast of DFW Airport. Performance
Interconnect Corp. leased the building for a 3-year term which began on
March 25, 1999. It contains 45,000 square feet. At the this time the
Company occupies approximately 85% of the building and estimates that the
building is being used at approximately 65% of its capacity. The Company is
now running one full, and one partial, manufacturing shift. Utilization
can be increased as necessary by making the second shift a full shift and by
running a third shift.
Item 8. Directors, Executive Officers and Significant Employees
The term of office of each of the directors and directors is one year,
beginning on the date of the annual meeting of shareholders, which is held
within five months after the end of the fiscal year on November 30.
D. Ronald Allen, President, Chairman of the Board and Director , age 49.
Mr. Allen is a financial consultant and C.P.A. located in Dallas, Texas.
From 1971 to 1984, he worked as a tax accountant becoming a partner with
KPMG Main-Hurdman prior to its merger with Peat Marwick. Since 1984, Mr.
Allen has been an independent consultant and manager of several real estate
and venture capital investments in both private and public companies.
Edward P. Stefanko, Vice President and Director, age 45. Mr. Stefanko has
served as President and Director of Performance Interconnect since its
organization in 1996. From 1995 to 1996 Mr. Stefanko was National Sales
Manager for Cuplex, Incorporated, Garland, Texas., supervising two
employees. Cuplex is a contract manufacturing operation which at that time
had sales of approximately $40 million per year. From 1993 to 1995 he was
Vice President Sales of I-CON Industries, Inc., Euless, Texas, where he
managed all of I-CON's sales activities, supervising two employees. The
assets of I-CON Industries were later acquired by the Company. I-CON's
sales during that period approximated $8 million per year.
Brooks Harman, Secretary and Director, age 52. Mr. Harman has been an
officer and Director of Performance Interconnect since it was first
organized in 1996, originally serving as Vice President and, since February
of 1999 as Chief Operating Officer. He has spent the past fifteen years as
a consultant and guiding companies and individuals through financial
restructuring. In addition to consulting, Mr. Harman has also been involved
in real estate sales and investments.
Doug Lippincott, National Sales Manager, age 40. Mr. Lippincott joined
Performance Interconnect in July of 1999. Before that time he was Regional
Sales Manager for Volex in 1998 and 1999, promoting and selling cable
assemblies and supervising a sales force of four others. Prior to his
service with Volex, Mr. Lippincott had been National Sales Manger for I-CON
Industries in 1997, supervising three other employees.
<PAGE>
Robert P. Noland, Plant Manager, age 51. Mr. Noland has served as Plant
Manager since October, 1997. He is responsible for operations plans to
support development of the RF capability as well as the DWT system,
operational plans and control of manufacturing, purchasing, engineering,
maintenance and facilities. From November, 1994, to October 1997, Mr.
Noland was with P.C. Boards, Inc., Chanute, Kansas. There he served first as
Operations Manager and later as Quality/Engineering Manager. As
Quality/Engineering Manager he implemented and directed all quality
activities, provided direction for acquiring ISO 9000 certification and lead
the team which updated the preproduction engineering capabilities. As
Operations Manager Mr. Noland had day-to-day responsibility for pre-
production engineering, process engineering, maintenance, quality and
manufacturing. From May, 1983, to November, 1995, Mr. Noland served as
Manufacturing Manager/Production Manager for P.C. Dynamics, Inc., Frisco,
Texas. In that position he directed planning activities and exercised
operational cost control in the areas of production, production control,
purchasing and shipping/receiving.
Dan Tucker, Controller, age 48. Mr. Tucker has served as Controller since
1997. From 1995 to 1997 Mr. Tucker was Controller for Holman Boiler Works,
Inc., Dallas, Texas. Holman is a $25 million operation providing service,
manufacturing and distribution for steam boiler, burners and related
components. From 1993 to 1994 he served as Executive Vice President and
Chief Financial Officer for WBH Industries, Inc., Arlington, Texas. WBH is
a $12 million international distributor of builders' hardware, doors and
frames to major construction projects.
Ronald L. Jordan, Quality Manager, age 61. Mr. Jordan has served as Quality
Manager since November, 1998. From January 1982, to November, 1998, he was
Quality Manager for Cuplex, Inc.
Steve Hallmark, Account Executive, age 47. Mr. Hallmark has over twenty
years of experience in manufacturing, the last eleven with PC Dynamics. With
PC Dynamics he has held positions as Engineering Manager, Quality Manager,
and Sales Manager. Mr. Jordan's responsibility is sales, and he is
concentrating his efforts on the military RF circuit board market.
Item 9. Remuneration of Directors and Officers.
The following chart shows the aggregate annual remuneration of the three
highest paid persons who are officers as a group during the Company's last
fiscal year:
Capacities in which Aggregate
Identity of group remuneration was received Remuneration
----------------- ------------------------- ------------
Three highest paid persons As employees (salary) $353,030.08 (1)
who are officers as a group
during the Company's last
fiscal year
(1) This figure includes payment into a trust for the family of one officer
and consulting fees described in Item 11 of this Part..
<PAGE>
Item 10. Security Ownership of Management and Certain Security Holders.
<TABLE>
(a) Voting securities and principal holders thereof.
Title of Percent of
Class Name and address of owner Amount owned Class
----- ------------------------- ------------ -----
<S> <C> <C> <C>
common Each of the three highest paid persons 4,628,989 (1) 78.90%
stock who are officers and directors of the
Company
common All officers and directors as a group 4,628,989 (1) 78.90%
stock
common Each shareholder who owns more than
stock 10% of any class of the Company's
securities (there are no shares subject
to outstanding options):
Associates Funding Group 1,249,244 (1) 21.29%
Winterstone Management, Inc. 905,244 (1) 15.43%
Stefanko Children's 932,041 (1) 15.89%
Irrevocable Trust
B.C. & Q. Corp. 849,485 (1) 14.48%
Summit Innovations 692,975 (1) 11.81%
(1) All of this stock is held through a trust or a corporation controlled
by an officer or director but not directly by that officer or director.
</TABLE>
(b) D. Ronald Allen holds the power to vote the securities of
Associates Funding Group, Winterstone Management, Inc., and B.C. & Q.
Corp. Ed Stefanko holds the power to vote the securities of the
Stefanko Children's Irrevocable Trust. Brooks Harman holds the power
to vote the securities of Summit Innovations.
<PAGE>
<TABLE>
(c) Non-voting securities and principal holders thereof:
Name and address Percent
Title of Class of owner Amount owned of Class
--------------- -------- ------------ --------
<S> <C> <C> <C>
Series A Cumulative Preferred CMLP Group Ltd. 1,770 shs. 59%
Stock; $10 par value; redemp- 17300 North Dallas Parkway
tion value of $1,000 per share; Suite 2040
dividends of 8% the first year, Dallas, Texas 75248
10% the second year, 12% the
third year, 14% the fourth Winterstone Management Inc. 1,230 shs. 41%
year and 16% thereafter 17300 North Dallas Parkway
Suite 2040
Dallas, Texas 75248
Series B Convertible Nations Corp. 900 shs. 100%
Preferred Stock; dividends
at rate of 6% of redemption
value per year; convertible
into the Company's common
stock at the rate of $3.00
per share for five years.
</TABLE>
(d) Options, warrants and rights: None of the individuals referred to
subsection (a) above has any option, warrant or right to purchase
securities from the Company or any of its subsidiaries.
(e) The Company has no parent company.
Item 11. Interest of Management and Others in Certain Transactions
(b) D. Ronald Allen, who is President, Chairman of the Board and a
Director of the Company, has received fees from Performance
Interconnect Corp. in the amount of $225 per hour for his consulting
services prior to his employment by the Company as of January 1, 2000.
These fees amounted to $100,585 in the fiscal year ended June 30, 1998,
and $150,581 in the fiscal year ended June 30, 1999.
<PAGE>
Item 12. Securities Being Registered
(a) The security which is being registered is Common Stock ($0.01 Par
Value).
(1) Brief outline of
(i) Dividend rights: Each share of Common Stock ($0.01 Par
Value) shares equally in dividends from sources legally
available therefor when, as and if declared by directors.
(ii) Voting rights: All shares of Common Stock ($0.01 Par
Value) are entitled to one vote per share. There are no
voting securities other than the Common Stock ($0.01 Par
Value).
(iii) Liquidation rights. Upon dissolution of the
Company, whether voluntary of involuntary, all shares of
Common Stock ($0.01 Par Value) are entitled to share equally
in the assets of the Company available for distribution to
stockholders.
(iv) Preemptive rights: None
(v) Conversion rights: None
(vi) Redemption provisions: None..
(vii) Sinking fund provisions: None.
(viii) Liability to further calls or to assessment by the
Company: None
PART II
Item 1. Market for Common Equity and Related Stockholder Matters
(a) Market Information
(1) The principal market where the Company's common equity is
traded is the National Daily Quotation Sheets.
(2) The amount of common equity -
(i) that is subject to outstanding options or warrants to
purchase or securities convertible into, common equity:
300,000 shares pursuant to a letter agreement dated November
29, 1999, to issue convertible preferred stock, described
above
(ii) that could be sold pursuant to Rule 144 under the
Securities Act: 5,516,947 shares.
(b) Holders. There is only one class of common equity, which is
Common Stock ($0.01 Par Value). There are 56 holders of record of the
Common Stock ($0.01 Par Value).
<PAGE>
(c) Dividends.
(1) No cash dividends have ever been declared on the common
equity of the Company or of its subsidiaries.
(2) There are two limitations on the Company's ability to pay
dividends on the common stock at this time: First, there are no
funds legally available for that purpose. Secondly, the Company's
Series A and Series B Preferred Stock is entitled to be paid
dividends in preference to any other class of capital stock. This
right to dividends is cumulative, commencing on the date the
Series A and Series B Preferred Stock was first issued.
Item 2. Legal Proceedings
Neither the Company nor its property is the subject of any pending legal
proceeding.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
During the Company's two most recent fiscal years and the later interim
period, the principal independent accountant or a significant subsidiary's
independent accountant on whom the principal accountant expressed reliance
in its report, did not resign (or decline to stand for re-election) and was
not dismissed.
Item 4. Recent Sales of Unregistered Securities
<TABLE>
Securities sold within the past three years without registering the
securities under the Securities Act:
(a)
Amount Class of persons
Date Title (shares) to whom sold Consideration
---- ----- -------- ------------ -------------
<S> <C> <C> <C> <C>
1-2-00 Common Stock 5,481,947 holders of 99.67% of 99.67% of the common
($0.01 Par Value) the common stock of stock of Performance
Performance Inter- Interconnect Corp.
connect Corp.
12-27-99 Series A 3,000 Holders of all the All the preferred
Performance Inter- stock of Performance
connect Corp. Interconnect Corp.
11-29-99 Series B 900 Nations Corp. 300,000 shares of
Preferred Stock common stock of
uniView Technologies
</TABLE>
<PAGE>
(b) There have been no underwriters. The tabulation at (a)
immediately above describes the persons or class of persons to whom the
Company sold the securities.
(c) There have been no underwriting discounts or commissions. No
securities have been sold for cash; the tabulation at (a) immediately
above describes the amount of consideration received for securities
sold other than for cash.
(d) The rule of the Commission under which the Company claimed
exemption from registration for the transactions described at (a) above
is Rule 506. The Company relied upon the following facts: Every one of
the persons who acquired stock in that transaction was an accredited
investor.
Item 5. Indemnification of Directors and Officers
The Company has no provision for indemnification of officers or
directors at this time; although the directors anticipate considering some
such provision in the relatively near future.
<PAGE>
PART F/S
ESPO'S INC.
FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 3O, 1999 AND 1998
<PAGE>
TABLE OF CONTENTS
Page No.
AUDITOR'S REPORT 1
FINANCIAL STATEMENT'S
Balance Sheets 2
Statements of Opeerations 3
Statements of Changes in Stockholder's Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOOUNTANT P.C.
27 SHELTER HILL ROAD
PLAIVIEW, NY 11803
TELEPHONE: (516) 933-9781
FACSIMILE: (516) 827-1203
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Espo's Inc.
East Hampton, New York
I have audited the accompanying balance sheets of Espo's Inc. (a New York
corporation) as of November 30. 1999 and 1998, and the related statements of
operations, stockholder's equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those Standards require that I plan and perform the audits to
obtain reasonable assurances about whether the financial statements are
free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audits, provide
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Espo's. Inc. as of November
30, 1999 and 1998, and the results of its operations and cash flows for the
years then ended, in conformity with generally accepted accounting
principles.
/s/
Stewart H. Benjamin
Certified Public Accountant, P.C.
Plainview, New York
December 21., 1999
<PAGE>
<TABLE>
ESPO'S INC.
BALANCE SHEET
November 30, November 30,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ - $ 7,675
Accounts receivable - 17,259
Inventory (Note 1) - 150,077
Prepaid insurance - 2,183
--------- ---------
Total current assets - 177,194
--------- ---------
Property and equipment, net (Notes 1 & 3) - 67,337
--------- ---------
Other assets
Deferred income taxes (Notes 1 & 4) - 2,529
--------- ---------
Total assets $ - $ 247,060
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ - $ 25,293
Notes payable (Note 5) - 50,000
Due to officer/stockholder (Note 9) - 5,915
Current portion of long-term debt - 4,089
Accrued expense - 2,072
Payroll taxes payable - 7,921
Sales tax payable - 7,803
Income taxes payable - 6,685
--------- ---------
Total current liabilities $ - $ 109,778
--------- ---------
Long-term debt, net of current
portion (Note 6) - 18,624
--------- ---------
Stockholders' Equity: (Note 2)
Common stock $.01 par value authorized,
25,000,000 shares, issued and
outstanding 2,356,250 shares at
November 30, 1999 and 2,000,230
shares at November 30, 1998 23,563 20,003
Additional paid-in capital 115,896 44,456
Retained earnings (deficit) (139,459) 54,199
--------- ---------
Total stockholders' equity - 118,658
--------- ---------
Total liabilities and stockholders' equity $ - $ 247,060
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
ESPO'S INC.
STATEMENT OF OPERATIONS
Year Year
Ended Ended
November 30, November 30,
1999 1998
--------- ---------
<S> <C> <C>
Sales $ 549,322 $ 716,829
Cost of sales 332,758 464,367
--------- ---------
Gross profit 216,564 252,462
Selling and administrative expenses 193,176 227,768
--------- ---------
Income from operations 23,388 24,694
--------- ---------
Other income (expense)
Interest income 10 -
Interest expense (11,571) (6,495)
--------- ---------
Total other income (expense) (11,561) (6,495)
--------- ---------
Income from continuing operations
before income taxes 11,827 18,199
Income taxes 2,621 5,548
--------- ---------
Income from continuing operations 9,206 12,651
Discountinued operations (Note 1)
Loss from sale and transfer of assets (202,864) -
--------- ---------
Net income (loss $ (193,658) $ 12,651
========= =========
Net income (loss) per common share $ (.08) $ .02
========= =========
Weighted-average common shares outstanding 2,308,458 655,518
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
ESPO'S INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period November 30, 1997 to November 30, 1999
Common Stock Additional Retained
------------------- Paid-In Earnings
Shares Amount Capital (Deficit)
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Balance at November 30, 1997 150 $ 1,000 $ 63,459 $ 14,423
Issuance of common stock 2,000,100 19,003 (19,003) -
Correction of 1997 error - - - 27,125
Net income - - - 12,651
--------- -------- -------- ---------
Balance at November 30, 1998 2,000,250 20,003 44,456 54,199
Issuance of common stock 356,000 3,560 71,440 -
Net loss for the year - - - (193,658)
--------- -------- -------- ---------
Balance at November 30, 1999 2,356,250 $ 23,563 $ 115,896 $ (139,459)
========= ======== ======== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
ESPO'S INC.
STATEMENT OF CASH FLOWS
<CAPTION>
Year Year
Ended Ended
November 30, November 30,
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Continuing Operations
Net Income $ 9,206 $ 12,651
Adjustments to reconcile income to net
cash used in continuing operations
Depreciation 19,679 17,593
Deferred income taxes 2,529 (2,529)
Change in assets and liabilities:
Increase in accounts receivable 17,259 (17,259)
Increase in inventories 150,077 (59,127)
(Increase) Decrease in prepaid expenses 2,183 (2,183)
Increase in accounts payable (25,293) 18,895
Decrease in accrued expenses (2,072) 2,072
Increase (Decrease) in payroll tax payable (7,921) 7,921
Increase in sales tax payable (7,803) 7,803
Increase in income taxes payable (6,685) 6,685
---------- ----------
CASH USED IN CONTINUING OPERATIONS 151,159 (7,478)
Discontinued operations
Loss from sale and transfer of assets (202,864) -
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (51,705) (7,478)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (11,728) (35,256)
Transfer of property and equipment 59,386 -
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 47,658 (35,256)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit 183,500 15,000
Repayment of line of credit (179,000) -
Transfers of line of credit (54,500) -
Proceeds from long-term borrowing - 23,995
Payments on long-term borrowing (4,089) (1,282)
Transfer of long-term borrowing (18,624) -
Loans from officer/stockholder 17,910 5,915
Transfer of loans from officer/stockholder (23,825) -
Proceeds from issuance of common stock 75,000 -
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (3,628) 43,628
---------- ----------
NET INCREASE (DECREASE) IN CASH (7,675) 894
CASH, BEGINNING OF YEAR 7,675 6,781
---------- ----------
CASH, END OF YEAR $ - $ 7,675
========== ==========
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest $ 12,538 $ 6,115
========== ==========
Income Taxes 7,323 1,392
========== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
ESPO'S INC.
Notes, to Financial Statements
Note 1 - Summary of Significant Accounting Policies
The financial statements presented are those of Espo's, Inc. (the
"Company"). The Company was incorporated under the laws of the State of New
York on November 29, 1990. The Company's business activities involve retail
and wholesale sales of beach and surfing related apparel, sporting goods and
accessories. Retail sales are a seasonal portion of the Company's
operations.
Discontinued Operations
Pursuant to an Agreement and Plan of Reorganization between the Company and
Performance Interconnect Corp. ("PIC"), a Texas corporation, whereby the two
companies entered into a stock-for-stock reverse merger transaction
effective December 23, 1999, the Company has transferred and assigned all of
its assets and liabilities and its on-going business operations J. Espo's
Inc., a New York corporation for $1 and some consideration. The Company
issued and exchanged 5,500,000 shares of Rule 144 restricted shares for a
minimum of 99% of PIC's issued and outstanding common stock totaling
2,437,000 shares in a transaction qualifying as tax-free, stock-for-stock
exchange pursuant to Section 368 (a)(1)(B) of the Internal Revenue Code.
Pursuant to the agreement, the current officers and directors of the
Company will resign their positions and PIC designees will be appointed as
the new management and Board of Directors. Subsequent to the balance sheet
date, the Company cancelled 1,97l,250 of its restricted shares held by the
Company's officers and directors. The balance of the Company's 385,000
shares issued and outstanding, of which 350,000 shares shall be free
trading, will be named by its shareholders.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reporting amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during this
period. Actual results, could differ from those estimates.
Inventory
Inventory is stated at the lower of cost or market, with cost determined on
a first-in first-out basis and market based on the lower of replacement cost
or realizable value.
<PAGE>
ESPO'S Inc.
Notes to Financial Statements
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation for both financial
reporting and income tax purpose is computed using combinations of the
straight line and accelerated methods over the estimated lives of the
respective assets. Maintenance and repairs are charged to expense when
incurred. When property and equipment are retired or otherwise disposed of,
the re1ated cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is credited or charged to income.
Income Taxes
The Company uses Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) in reporting deferred income
taxes. SFAS No. 109 requires a company to recognize deferred tax liabilities
and assets for the expected future income tax consequences of events that
have been recognized in the company's financial statements. Under this
method, deferred tax assets and liabilities are determined based on
temporary differences between the financial carrying amounts and the tax
bases of assets and liabilities using the enacted tax rate in effect in the
years in which the temporary differences are expected to reverse. The
differences relate solely to depreciable assets, (use of different
depreciation methods and lives for financial statement and income tax
purposes).
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing the net income
(loss) by the weighted average shares outstanding during the year.
Note 2 - Common Stock Transactions
During the year ended November 30, 1999, the Company issued 300,000 shares
of free trading common stock to individual shareholders at $.25 per share,
50,000 shares of free trading common stock to the Company's financial
consultant for services rendered, and 6,000 shares of restricted common
stock to officers and directors of the Company for services, and costs
advanced. Subsequent to the balance sheet date, the Company cance1ed
1,971,250 of its restricted shares held by the Company's officers and
directors. The balance of the Company's 385,000 shares issued and
outstanding, of which 350,000 shares shall be free trading, will be retained
by its shareholders.
<PAGE>
ESPO'S INC.
Notes to Financial Statements
Note 3 - Property and Equipment
Property and equipment consisted of the following at November 30, 1998:
Machinery and equipment $ 7,922
Furniture and fixtures 8,840
Automobile 30,795
Leasehold improvements 49,255
------
96,812
Less Accumulated depreciation 29,475
------
$67,337
======
During the year ended November 30, 1999, the Company purchased machinery and
equipment totaling $1,742 and furniture and fixtures totaling $9,986. The
Company's property and equipment was transferred to J. Espo's Inc. on
November 30, 1999 at its book value of $59,386.
Deprecation expense of $19,679 and $17,593 was charged to operations for the
year ended November 30, 1999 and 1998.
Note 4 - Income Taxes
Income tax expense is based on reported results of operations; deferred
income taxes reflect the impact of temporary differences. Income taxes
consisted of the following at November 30, 1999 and 1998:
1999 1998
----- -----
Current taxes
Federal $1,775 $4,072
State 1,221 2,930
----- -----
2,996 7,002
----- -----
Deferred tax expense (benefit)
Federal 256 (1,601)
State 148 (928)
----- -----
404 (2,529)
----- -----
Effect of prior year (over)
under-accrued taxes (779) 1,075
----- -----
$2,621 $5,548
===== =====
<PAGE>
ESPO'S INC.
Notes to Financial Statements
Note 5 - Note Payable
The Company has a bank line of credit with Bridgehampton National Bank that
provides short term borrowings up to $100,000. Interest on advances is
payable monthly at two percent over the prime rate. The note payable to the
bank is collateralized by cash deposits, inventories and equipment, and is
guaranteed by an officer/shareholder of the Company. Pursuant to the Plan
of reorganization, the Company's line of credit and lien against its assets
will be released by the bank, and the outstanding balance of $54,500 at
November 30, 1999 was transferred to the surviving company, J. Espo's Inc.
Note 6 - Long-term Debt
Long-term debt consists of an automobile loan payable to Suffolk County
National Bank in monthly installments of $500 inclusive of interest at a
rate of 9.15%. The loan matures on July 29, 2003 and is guaranteed by an
officer/shareholder of the Company. Interest expense related to the
automobi1e loan of $1,9l0 and $717 was charged to operations for the years
ended November 30, 1999 and 1998. Pursuant to the Plan of Reorganization,
the Company's loan will be released by the bank, and the outstanding balance
of $18,624 at November 30, 1999 was transferred to the surviving company,
J. Espo's Inc.
Note 7 - Lease Commitment
The Company 1eases its primary retail space under a non-cancelable operating
lease that expires in May 2000. Pursuant to the Plan of Reorganization, the
Company's obligation for the remainder of the lease was transferred to
J. Espo's Inc. on November 30, 1999.
Rent expense of $23,963 and $39,955 was charged to operations for the years
ended November 30, 1999 and 1998.
Note 8 - Litigation
The Company is a defendant in a lawsuit commenced by a former supplier on
July 1, 1996. The Company executed a counterclaim for damages caused by an
alleged defective tender of delivery. The Company expects to obtain a
favorable judgment in the case. However, the ultimate outcome of this
litigation is unknown at the present time. Accordingly, no provision for
any liability that may result has been made in the accompanying financial
statements. In the opinion of management, the existing litigation is not
considered to be material in relation to the Company's financial position
immediately prior to the transfer of its assets to J. Espo's. The president
of the Company and J. Espo's Inc. will assume the role of defendants
subsequent to the Plan of Reorganization.
<PAGE>
ESPO'S INC.
Notes to Financial Statements
Note 9 - Related Party Transactions
The Company leases its Easthampton, New York store from a corporation that
is 5O% owned by the Company's stockholder. The lease requires monthly
payments of $1,600, and the Company is responsible for all insurance and
utilities.
The Company was indebted to an officer/shareholder for expenses advanced on
behalf of the Company, in the amount of $23,825 immediately prior to
November 30, 1999. Such balance was transferred to J. Espo's Inc. on
November 30, 1999 pursuant to the Plan of Reorganization. There were no
specific repayment terms on the amount due to an officer/stockholder.
<PAGE>
PERFORMANCE INTERCONNECT CORP.
Consolidated Financial Statements
For the Five Months Ended
November 30, 1999
and
For the Years Ended
June 30, 1999 and 1998
<PAGE>
PERFORMANCE INTERCONNECT CORP.
Table of Contents
===========================================================================
Page
----
Independent Auditors' Report 1
Consolidated Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders'
Equity (Deficit) 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 19
<PAGE>
TRAVIS WOLFF
ADVISORS & ACCOUNTANTS
5580 LBJ Freeway
INDEPENDENT AUDITORS' REPORT Suite 400
---------------------------- Dallas, TX
75240-6265
972.661.1843 tel
To the Board of Directors and Stockholders 972.490.4120 fax
PERFORMANCE INTERCONNECT CORP. www.traviswolff.com
Frisco, Texas
We have audited the accompanying consolidated balance sheets of PERFORMANCE
INTERCONNECT CORP. as of November 30, 1999, June 30, 1999, and June 30,
1998, and the related consolidated statements of operations, stockholders
equity (deficit) and cash flows for the five months ended November 30, 1999
and the years ended June 30, 1999 and 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of PERFORMANCE INTERCONNECT CORP. as of November 30, 1999, June 30,
1999, and June 30, 1998, and the results of its operations and its cash
flows for the five months ended November 30, 1999 and the years ended June
30, 1999 and 1998, in conformity with generally accepted accounting
principles.
/s/
January 14, 2000
<PAGE>
<TABLE>
PERFORMANCE INTERCONNECT CORP.
Consolidated Balance Sheets
==========================================================================================
<CAPTION>
November 30, June 30,
----------- --------------------------
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ - $ 7,753 $ 52,311
Marketable securities 450,000 - -
Trade accounts receivable, net 719,961 619,564 129,510
Other receivables 114,193 22,768 1,500
Inventory 896,442 1,258,376 297,941
Prepaid expenses 35,393 48,257 13,194
----------- ----------- -----------
Total current assets 2,215,989 1,956,718 494,456
----------- ----------- -----------
Property and equipment, net of depreciation 3,213,324 3,387,364 2,887,333
----------- ----------- -----------
Other assets:
Goodwill, net of amortization 507,657 528,000 -
Loan origination fees, net of amortization 63,107 71,507 -
Deposits 8,270 7,345 -
----------- ----------- -----------
579,034 606,852 -
----------- ----------- -----------
Total Assets $ 6,008,347 $ 5,950,934 $ 3,381,789
=========== =========== ===========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ - $ 193,025 $ -
Current maturities of long-term debt 983,464 947,623 -
Lines of credit 915,461 575,255 -
Current portion of royalty payable 300,000 300,000 -
Accounts payable 1,243,663 1,164,704 607,572
Advances payable to related parties 15,000 15,000 296,200
Accrued expenses 623,232 681,982 297,206
----------- ----------- -----------
Total current liabilities 4,080,820 3,877,589 1,200,978
----------- ----------- -----------
Noncurrent liabilities:
Dividends and sinking fund payable 277,448 200,448 23,810
Long-term debt 2,127,279 1,566,519 50,000
Royalty payable 75,000 200,000 -
----------- ----------- -----------
Total noncurrent liabilities 2,479,727 1,966,967 73,810
----------- ----------- -----------
Stockholders' equity (deficit):
Preferred stock; par value $10.00, 2,000,000
shares authorized; Series A, 3,000 shares
authorized, 2,452 shares issued and
outstanding; 6% dividend on the aggregate
liquidation preference of $4,960,574 24,520 24,520 24,520
Additional paid-in capital, preferred stock 2,455,767 2,455,767 2,455,767
Preferred stock subscribed, funded and unissue 900,000 - -
Stock redemption fund - Series A Preferred (60,800) (44,800) (6,400)
Common stock; par value $0.001, 4,000,000
shares authorized, 2,437,500 shares issued
and outstanding 2,438 2,438 2,500
Additional paid-in capital, common stock 46,937 46,937 -
Accumulated deficit (3,921,062) (2,378,484) (369,386)
----------- ----------- -----------
Total stockholders' equity (deficit) (552,200) 106,378 2,107,001
----------- ----------- -----------
Total Liabilities and Stockholders' $ 6,008,347 $ 5,950,934 $ 3,381,789
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
PERFORMANCE INTERCONNECT CORP.
Consolidated Statements of Operations
For the Five From Operational
Months Ended For the Year Inception, July 1,
November 30, Ended 1997 through
1999 June 30, 1999 June 30, 1998
------------- ------------- --------------
<S> <C> <C> <C>
Net sales $ 3,867,356 $ 4,929,029 $ 1,122,379
Cost of sales 4,516,367 4,584,351 947,276
------------- ------------- --------------
Gross profit (loss) (649,011) 344,678 175,103
------------- ------------- --------------
Expenses:
General and administrative 472,173 1,388,039 254,399
Depreciation and
amortization (Note 4) 44,971 29,828 2,025
------------- ------------- --------------
517,144 1,417,867 256,424
Loss from operations (1,166,155) (1,073,189) (81,321)
------------- ------------- --------------
Other income (expense):
Interest expense (252,423) (319,131) (450,736)
Interest income - - 239,577
Moving expense - (221,774) -
Loss on disposal of equipment - (45,619) -
Miscellaneous expense - (51,785) (10,472)
------------- ------------- --------------
(252,423) (638,309) (221,631)
Income (loss) before provision
for income taxes (1,418,578) (1,711,498) (302,952)
Provision for income taxes - - -
------------- ------------- --------------
Net loss $ (1,418,578) $ (1,711,498) $ (302,952)
============= ============= ==============
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
PERFORMANCE INTERCONNECT CORP.
Consolidated Statements of Stockholders' Equity (Deficit)
===================================================================================================================================
Preferred Stock Common Stock
------------------------------------------------- -------------------------------------------------
Additional Subscribed Stock Additional
Paid-in Funded, & Redemption Paid-in Accumulated
Shares Amount Capital Unissued Fund Shares Amount Capital Deficit Total
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance at
July 1, 19 - $ - $ - $ - $ - 25,000,000 $2,500 $ - $ (16,834) $ (14,334)
Net loss - - - - - - - - (302,952) (302,952)
Shares issued in exchange
for debt 2,452 24,520 2,455,767 - - - - - - 2,480,287
Amounts contributed to
redemption fund - - - - (6,400) - - - - (6,400)
Cash dividends-preferred stock - - - - - - - - (49,600) (49,600)
1-for-4 reverse stock split - - - - - (18,750,000) - - - -
----- ------ --------- ------- ------- ---------- ----- ------ -------- ---------
Balance at June 30, 1998 2,452 24,520 2,455,767 - (6,400) 6,250,000 2,500 - (369,386) 2,107,001
Shares issued - - - - - 100,000 40 (40) - -
35,433 for 100,000 reverse
stock split - - - - - (4,100,000) (290) 290 - -
Amounts contributed to
redemption - - - - (38,400) - - - - (38,400)
Dividends - preferred stock - - - - - - - - (297,600) (297,600)
Shares issued - - - - - 187,500 188 46,687 - 46,875
Net loss - - - - - - - - 1,711,498) (1,711,498)
----- ------ --------- ------- ------- ---------- ----- ------ -------- ---------
Balance at June 30, 1999 2,452 24,520 2,455,767 - (44,800) 2,437,500 2,438 46,937 (2,378,484) 106,378
Amounts contributed to
redemption fund - - - - (16,000) - - - - (16,000)
Dividends - preferred stock - - - - - - - - (124,000) (124,000)
Subscribed, funded and
unissued - preferred stock - - - 900,000 - - - - - 900,000
Net loss - - - - - - - - (1,418,578) (1,418,578)
----- ------ --------- ------- ------- ---------- ----- ------ -------- ---------
Balance at November 30, 1999 2,452 $24,520 $2,455,767 $900,000 $ (60,800) 2,437,500 $2,438 $46,937 $(3,921,062) $ (552,200)
===== ====== ========= ======= ======= ========= ===== ====== ========== =========
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
PERFORMANCE INTERCONNECT CORP.
Consolidated Statements of Cash Flows
==============================================================================================
For the Five From Operational
Months Ended For the Year Inception, July 1,
November 30, Ended 1997 through
1999 June 30, 1999 June 30, 1998
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,418,578) $ (1,711,498) $ (302,952)
----------- ------------ ------------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 237,647 403,424 84,566
Loss on disposal of assets - 45,619 -
Inventory allowance 2,686 (60,956) 30,000
Changes in operating assets and liabilities:
Increase in trade accounts receivable (100,397) (197,029) (129,510)
(Increase) decrease in other receivables 10,260 (21,268) (1,500)
(Increase) decrease in inventory 361,934 (154,000) (297,941)
(Increase) decrease in prepaid expenses 12,864 (35,063) (13,194)
Increase in other assets (925) (82,616) -
Increase in accounts payable 78,959 557,132 607,572
Increase (decrease) in accrued expenses (58,750) 384,776 277,006
----------- ------------ ------------
Total adjustments 544,278 840,019 556,999
----------- ------------ ------------
Net cash provided by (used in)
operating activities (874,300) (871,479) 254,047
----------- ------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (49,866) (917,536) (173,912)
Investment in notes and advances receivable - - (2,576,200)
----------- ------------ ------------
Net cash used in investing activities (49,866) (917,536) (2,750,112)
----------- ------------ ------------
Cash flows from financing activities:
Advances from related party - 15,000 496,200
Dividends paid - (159,362) (32,190)
Payments on note payable (193,025) (100,000) -
Payments on royalty payable (125,000) - -
Proceeds from long-term debt 1,095,901 1,623,714 2,080,000
Payments on long-term debt (201,669) (257,025) -
Net proceeds from line of credit 340,206 575,255 -
Proceeds from sale of stock - 46,875 -
----------- ------------ ------------
Net cash provided by financing activities 916,413 1,744,457 2,544,010
----------- ------------ ------------
Increase (decrease) in cash (7,753) (44,558) 47,945
Cash, beginning of period 7,753 52,311 4,366
----------- ------------ ------------
Cash, end of period $ - $ 7,753 $ 52,311
=========== ============ ============
For supplemental disclosures of cash flow information, see Note 9.
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
<PAGE>
PERFORMANCE INTERCONNECT CORP.
Notes to Consolidated Financial Statements
===========================================================================
Note 1 - Summary of Significant Accounting Policies
History and organization
The consolidated financial statements include the accounts of PERFORMANCE
INTERCONNECT CORP. ("PI") and its wholly owned subsidiaries, Varga
Investments, Inc. and PC DYNAMICS OF TEXAS INC. (collectively referred to as
the "Company"). PERFORMANCE INTERCONNECT CORP. was incorporated in Texas in
1996 and began operations in 1998. Through its subsidiaries, the Company has
acquired certain assets and liabilities of two high tech manufacturing
operations in North Texas. The acquisitions were accounted for as a
purchase. The Company is involved in the design and manufacture of multi-
wire and rf/microwave circuit boards for sale and distribution throughout
the United States.
Principles of consolidation
All significant inter-company accounts and transactions have been eliminated
in consolidation.
Inventory
The Company's inventory is valued at the lower of cost, determined on a
first-in, first-out basis, or market. Valuation allowances have been
provided where product marketability and realizable values have decreased.
Property and equipment
The majority of the Company's property and equipment was acquired through
the purchase transactions described above and in Note 9. These assets are
shown at their acquisition value (approximate fair market value) less
accumulated depreciation. Subsequent acquisitions of property and equipment
are stated at cost, less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives of
the underlying assets ranging from 3 to 10 years. The cost of normal
maintenance and repairs is charged to operating expenses as incurred.
Material expenditures which increase the life of an asset are capitalized
and depreciated over the estimated remaining useful life of the asset. The
cost of items sold, or otherwise disposed of, and the related accumulated
depreciation or amortization, are removed from the accounts and any gains or
losses are reflected in current operations.
<PAGE>
Marketable equity securities
These securities are equity stocks in a publicly traded company that are
anticipated to be held for investment or used as collateral for future
borrowings. See Note 9.
Other assets
Included in other assets are loan origination fees and goodwill. Loan
origination fees are being amortized using the interest method over the
expected life of the loan.
Goodwill is the excess cost over fair value of net assets acquired. It
originated from the Company's 1999 acquisition as discussed in Note 9 and is
being amortized over 40 years using the straight-line method.
Deferred income taxes
Deferred taxes are calculated on temporary differences resulting from
different financial and income tax reporting methods used to recognize
income and expenses. These differences result primarily from the methods
used to calculate depreciation, amortization, accrued vacation and the
allowance for doubtful accounts. See Note 8.
Concentration of risk
The Company may, on occasion, have cash balances in bank accounts in excess
of the federally insured limits. The Company has not experienced any losses
from these accounts and management does not believe it has any significant
risk related to these accounts.
At November 30, 1999, there was approximately $816,000 of trade receivables
due from four customers. This accounted for approximately 67% of trade
receivables, including receivables factored with recourse. Additionally,
sales to these four customers accounted for approximately $2,534,000 of
revenue (65%) for the five months ending November 30, 1999. See Note 3.
At June 30, 1999, amounts due from four customers, totaling approximately
$760,000, accounted for approximately 78% of trade receivables, including
receivables factored with recourse. Approximately $3,400,000 of revenue
(68%) for the year ended June 30, 1999 was attributable to three of these
customers.
At June 30, 1998, amounts due from three customers, totaling $338,049,
accounted for approximately 60% of trade receivables. Additionally,
approximately $612,000 of revenues (55%) for the period ended June 30, 1998
was attributable to two of these customers.
Use of estimates
The preparation of financial statements requires management to make
estimates and assumptions that effect the financial statements at, and
during the reporting periods. Actual results could differ from these
estimates.
<PAGE>
Cash equivalents
For the purpose of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Note 2 - Inventory
<TABLE>
Inventories consist primarily of the following:
November 30, June 30,
---------- --------------------------
1999 1999 1998
---------- ---------- ---------
<S> <C> <C> <C>
Finished goods $ 416,546 $ 416,546 $ 604,304
Valuation allowance (416,546) (416,546) (604,304)
---------- ---------- ---------
- - -
---------- ---------- ---------
Work in progress 580,717 926,352 194,498
Valuation allowance (7,155) - (30,000)
---------- ---------- ---------
573,562 926,352 164,498
Raw materials 447,213 460,826 133,443
Valuation allowance (124,333) (128,802) -
---------- ---------- ---------
322,880 332,024 133,443
---------- ---------- ---------
Total inventory $ 896,442 $ 1,258,376 $ 297,941
========== ========== =========
</TABLE>
<PAGE>
Note 3 - Trade Accounts Receivable
The Company maintains an agreement to factor accounts receivable with a
financing group. The Company receives 85% of the face amount of qualifying
invoices and the remaining 15% is held by the factor as a reserve until the
invoice is collected, whereby the reserve is then refunded to the Company
less applicable fees. Trade invoices factored represents all invoices that
have not been collected by the factor through November 30, 1999. The
reserve uncollected amount represents the difference between the face amount
of the invoices factored and the advances received from the factorer. All
invoices are factored with recourse to the Company.
<TABLE>
Accounts receivable consists of the following:
November 30, June 30,
---------- ------------------------
1999 1999 1998
---------- --------- ---------
<S> <C> <C> <C>
Accounts receivable -
trade $ 1,118,450 $ 973,363 $ 592,534
Trade invoices factored (489,500) (404,843) (578,087
)
Reserve uncollected 113,942 73,975 131,994
Allowance for bad debts (22,931) (22,931) (16,931)
---------- --------- ---------
Trade accounts
receivable, net $ 719,961 $ 619,564 $ 129,510
========== ========= =========
</TABLE>
Note 4 - Property and Equipment
<TABLE>
Property and equipment consist of the following:
November 30, June 30,
---------- -------------------------
1999 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Furniture and fixtures $ 55,707 $ 53,707 $ 45,224
Computers 67,633 52,104 44,959
Vehicles 47,520 47,520 2,246
Production equipment 3,633,486 3,604,963 2,858,621
Leasehold improvements 88,017 84,203 20,849
---------- ---------- ----------
3,892,363 3,842,497 2,971,899
Less accumulated
depreciation and
amortization 679,039 455,133 84,566
---------- ---------- ----------
$ 3,213,324 $ 3,387,364 $ 2,887,333
========== ========== ==========
Depreciation expense for the five months ended November 30, 1999 totaled
$223,904 of which $192,676 was included in cost of sales for depreciation on
production equipment. Amortization expense of intangible assets totaled
approximately $13,700 for the five months ended November 30, 1999.
<PAGE>
Depreciation expense for the year ended June 30, 1999 totaled $399,660 of
which $373,595 was included in cost of sales for depreciation on production
equipment. Amortization expense of intangible assets totaled approximately
$3,800. Depreciation expense for the period ended June 30, 1998, totaled
$84,566 of which $82,541 was included in costs of sales for depreciation on
production equipment.
Note 5 - Lines of Credit
On March 25, 1999, a subsidiary of the Company entered in to an agreement
for a line of credit with a financial institution. The agreement allows
borrowings of up to the greater of $1,500,000 or a set percentage of
receivables and inventory. Interest is payable monthly with the principal
due at maturity. The agreement matures March 24, 2001, and shall be
automatically renewed for successive periods of one year unless otherwise
terminated as provided. Interest accrues at the Citibank, N.A. prime rate
(8.25% at November 30, 1999), plus 3%. The agreement is collateralized by a
first lien on specific assets of the Company and is guaranteed by a
stockholder and entities related through common ownership. The line of
credit also subjects the subsidiary to certain financial and negative
covenants. At November 30, 1999 and June 30, 1999, the outstanding balance
on this line of credit was $661,635 and $575,255, respectively. See Note 15.
In addition, the Company has a line of credit with its major stockholder
whereby the stockholder has agreed to provide funding in the event
outstanding checks are presented to the bank and the Company has inadequate
funds in its account. These advances are to be repaid upon the Company
receiving adequate cash or if significant funds are raised through an equity
offering. The funds accrue interest at approximately 18% and at November
30, 1999, the outstanding balance was $253,826.
Note 6 - Note Payable
In connection with the assets purchased during the year ended June 30, 1999,
as described in Note 9, the Company incurred a note payable to the seller.
The note accrued interest at the prime rate plus 1% and was payable in
monthly payments of $50,000 plus interest. The note was collateralized by a
subordinate lien on specific assets and guaranteed by the Company and a
stockholder of the Company. The balance of the note at June 30, 1999 was
$193,025 and has subsequently been paid in full.
<PAGE>
Note 7 - Long-term Debt
</TABLE>
<TABLE>
Long-term debt consists of the following:
<CAPTION>
November 30, June 30,
--------- ------------------------
1999 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Note payable to a
shareholder due August
2002. Interest accrues
at 24% and is due at
maturity. The loan is
collateralized by a partial
second lien on certain
assets of the Company. $ 50,000 $ 50,000 $ 50,000
Notes payable to an
individual due May and
June 2001. Interest
accrues at 24% and is
payable monthly. The loan
is collateralized by a
subordinated lien on the
Company's assets. 275,000 275,000 -
Notes payable to
stockholders, refinanced
with debt to third
parties. See Note 9. - 665,984 -
Note payable to the seller
originating from purchase
of assets, maturing March
2000. Interest accrues at
the prime rate (8.25 % at
November 30, 1999), plus
1%. In July 1999, the
note was restructured
whereby the payments to be
made were $26,610 per
month plus accruedinterest.
The note is collateralized
by a subordinated lien on
specific corporate assets.
The note is guaranteed by
the Company and a
stockholder of the Company. $ 640,429 $ 773,479 $ -
Note payable to a bank
maturing March 2004. The
note is payable in monthly
installments of $586,
including interest accrued
at 9.74%. The note is
collateralized by a
Company vehicle. 25,560 26,679 -
<PAGE>
Notes payable to a
financial institution
maturing July 2000.
Interest accrues at the
prime rate (8.25% at
November 30, 1999), plus
4% and is payable in
monthly payments of $7,750
plus accrued interest.
The notes are
collateralized by a first
lien on specific assets of
the Company. The notes
also require specific
financial and negative
covenants. See Note 15. 337,500 375,000 -
Note payable to a
financial institution
maturing March 2001.
Interest accrues at the
prime rate (8.25% at
November 30, 1999), plus
3% and is payable in
monthly payments of $6,000
plus accrued interest.
The note is collateralized
by a first lien on
specific assets of a
subsidiary of PI. The
note also requires
specific financial and
negative covenants. See
Note 15. $ 318,000 $ 348,000 $ -
Notes payable to a third
party maturing January 1,
2001. Interest is accrued
at 18% and is payable
monthly. The notes are
collateralized by a
security agreement for
various corporate assets. 1,214,254 - -
Note payable to a third
party maturing September
30, 2000. Interest is
accrued at 17% and is
payable monthly. The note
is collateralized by a
security agreement for
various corporate assets. 250,000 - -
--------- --------- ---------
3,110,743 2,514,142 50,000
Less amounts classified
as current 983,464 947,623 -
--------- --------- ---------
Total long-term debt $2,127,279 $1,566,519 $ 50,000
========= ========= =========
</TABLE>
<PAGE>
Note 7 - Long-term Debt - (Continued)
The minimum annual principal payments on long-term debt are as follows for
the years ending November 30:
2000 $ 983,464
2001 2,059,899
2002 57,659
2003 6,469
2004 3,252
Thereafter -
----------
$ 3,110,743
==========
Note 8 - Income Taxes
Due to losses generated during the periods ending November 30, 1999, June
30, 1999, and June 30, 1998, the Company has available a net operating loss
carryforward of approximately $3,800,000. In view of this loss and the
uncertainty of the Company's near-term profitability, management has
estimated the Company's current tax liability to be zero. The current
estimated net operating losses will expire in the years 2013 through 2015.
<TABLE>
The estimated net deferred taxes consist of the following:
November 30, June 30,
---------- -----------------------
1999 1999 1998
---------- --------- --------
<S> <C> <C> <C>
Deferred tax asset $ 1,290,000 $ 755,000 $ 110,000
Deferred tax asset
valuation allowance (1,290,000) (755,000) (110,000)
Deferred tax liability - - -
---------- --------- --------
$ - $ - $ -
========== ========= ========
</TABLE>
Note 9 - Cash Flow Information
Non-cash transactions
During the five months ended November 30, 1999, the Company continued to
receive cash advances from entities related through common ownership. As
funds were advanced during the period, the amounts were added to existing
notes payable. On October 15, 1999, two notes due to related entities were
replaced with three new notes payable to third parties. In addition, the
Company received 300,000 shares of stock in uniView Technologies Corporation
with an estimated fair market value of $900,000 (see Note 14). The Company
subsequently sold 150,000 of these shares valued at $450,000 to a entity
related through common ownership for forgiveness of existing debt, accrued
interest and a future advance (other receivable) that was funded in December
1999. The replacement of the notes and the acquisition and sale of the
stock were considered non-cash transactions.
<PAGE>
During the year ended June 30, 1999, the Company purchased certain assets of
a high-tech manufacturing entity for $1,066,554 of debt plus royalties. The
royalties were subsequently renegotiated as a series of payments totaling
$500,000, payable at $25,000 each month over a 20 month period and are based
on production and sales activity. In addition, the Company purchased a
vehicle with approximately $28,000 of bank debt.
During the year ended June 30, 1998, the Company received approximately
$2,575,000 of loans and advances from parties related through common
ownership. These funds were then advanced to an unrelated manufacturing
company. These and other funds previously advanced to the manufacturing
company were then converted into preferred stock of the manufacturing
company. The preferred stocks liquidating preference were the assets of the
manufacturing company. The Company subsequently exercised its liquidating
preference by exchanging the preferred stock and any accrued dividends for
fixed assets with an estimated value of $2,780,000.
On August 28, 1998, the board of directors amended the articles of
incorporation authorizing 2,000,000 shares of preferred stock, including
3,000 shares of Series A Preferred Stock ("Preferred Stock") with a par
value of $10. Pursuant to a letter of intent from four debt holders,
approximately $2,330,000 of long-term debt and $150,300 of accrued interest
were converted into 2,452 shares of Preferred Stock effective April 30,
1998. The conversion was incorporated into the financial statements as of
the effective date. The preferred stock pays a 6% cumulative dividend that
is computed on the liquidating value, which is two times the total of
converted debt plus accrued interest. The Preferred Stock is non-voting and
may be redeemed at the option of the Company at liquidating value. The
collateral associated with the converted debt was transferred to the
Preferred Stock and, in the event the Preferred Stock is not redeemed, the
holders of the Preferred Stock shall have the right to foreclose on the
collateral interest in the Company's assets.
Note 9 - Cash Flow Information - (Continued)
Supplemental information
Interest paid for the five months ended November 30, 1999 and the years
ended June 30, 1999 and 1998 totaled approximately $177,000, $261,000 and
$252,000, respectively. The Company was not required to and did not pay any
federal income taxes.
Note 10 - Related Party Transactions
As noted in Note 7, there are amounts included in long-term debt that are
due to related parties. Accrued interest relating to these liabilities
totaled approximately $41,000, $108,000 and $43,000 for the five months
ended November 30, 1999 and the years ended June 30, 1999 and 1998,
respectively. At November 30, 1999, June 30, 1999 and 1998, accounts
payable includes approximately $165,000, $200,000 and $61,000, respectively,
due Winterstone Financial Services for consulting services. Winterstone is
related to the Company through common ownership.
Included in current liabilities at November 30, 1999, June 30, 1999 and 1998
are advances payable to related parties. These advances are short-term
advances of operating capital that accrue interest at 24% and are payable on
demand.
<PAGE>
Note 11 - Stock Compensation
On February 28, 1998, the Board of Directors and management of the Company
approved a stock-based compensation plan (the "Plan") for all individuals
employed as of March 31, 1998. The original number of shares to be issued
was approximately $1,145,000; however, through reverse stock splits, this
has been decreased to approximately 114,500 shares. The Company accounts
for the fair value of its grants under the Plan in accordance with FASB 123,
Accounting for Stock-Based Compensation.
The related compensation costs that have been charged against income are
$5,367 for the five months ended November 30, 1999, $7,156 for the year
ended June 30, 1999 and $2,385 for the period ended June 30, 1998.
Note 11 - Stock Compensation - (Continued)
Under the Plan, employees are eligible to receive a predetermined amount of
shares, primarily based on their salary and tenure with the Company. The
employees vest at 25%, 25% and 50% for the periods ending March 1, 1999,
2000 and 2001, respectively. In the event the Company is purchased or
involved in a merger, all shares become 100% vested. The employees do not
have to contribute any capital to obtain the shares and, if terminated prior
to vesting, forfeit their rights to unvested shares.
Note 12 - Commitments
The Company rents office space, equipment and warehouse facilities under
non-cancellable operating leases. Total rent expense was $121,940 for the
five months ended November 30, 1999; $440,120 for the year ended June 30,
1999 and $84,728 for the year ended June 30, 1998. Future minimum lease
payments are as follows for the years ending November 30:
2000 $ 259,980
2001 214,221
2002 78,221
2003 1,493
2004 1,493
Thereafter -
---------
$ 555,408
---------
The Company has certain royalty agreements with a third party for sales of
multi-wire boards. Total royalty expense was approximately $41,000 for the
five months ended November 30, 1999, $101,000 for the year ended June 30,
1999 and $31,000 for the year ended June 30, 1998. The royalty agreement is
for a ten-year period ending December 31, 2003 and is automatically extended
for subsequent five-year periods. Either side may terminate at the end of
the ten-year or five-year periods.
<PAGE>
Note 13 - Warrants
In conjunction with a financing agreement, the Company issued warrants for
the purchase of 10% of the authorized number of shares of common stock for
$2,000,000. The warrants are exercisable through October 22, 2002. Due to
the estimated value of the underlying stock when the warrants were issued,
the restricted nature of the warrants and the exercise price, the warrants
have been estimated to have no significant value.
Note 14 - Stockholders' Equity
On November 29, 1999, the Company received $900,000 of consideration in the
form of equity securities in exchange for preferred stock that was to be
offered in the surviving entity of the reverse acquisition merger described
in Note 15. The consideration is classified as subscribed, funded and
unissued preferred stock in the equity section of the balance sheet.
The Preferred Stock requires the Company to make monthly dividend and stock
redemption fund payments of approximately $28,000 and gives the Company the
first right of refusal on a proposed sale of the Preferred Stock by a
shareholder. The stock redemption fund is classified as a contra equity
account as it accumulates funds paid by the Company until a significant
block of Preferred Stock can be redeemed.
The board of directors amended the articles of incorporation during the year
ended June 30, 1999 to provide for a common stock reverse split which called
for 4,000,000 total authorized shares, 2,250,000 shares issued and
outstanding with a per share par value of approximately $0.001. The Company
subsequently issued an additional 187,500 shares of common stock.
Note 15 - Subsequent Events
As discussed in Notes 5 and 7, PI and its subsidiaries are subject to
certain financial covenants related to the line of credit and certain long-
term debt. At November 30, 1999, a subsidiary was not in compliance with
the financial covenants and, therefore, requested and received a no-action
letter waiving compliance. For the year ended June 30, 1999, PI and the
subsidiary requested and received a similar letter.
On November 18, 1999, the major stockholder and chairman of the Company
signed a letter of intent with the president of ESPO's, Inc., an unrelated
third party, whereby the Company would enter into a reverse acquisition
merger and reorganization with ESPO's, Inc. Under the agreement, the
Company agrees to cause its stockholders to exchange at least 99% of Company
common stock for up to 5,500,000 shares of restricted common stock in
ESPO's, Inc. The above transaction was completed and consummated on
December 21, 1999 with ESPO's capital structure as follows:
Shares (restricted) distributed
to Company stockholders 5,481,947
Shares (free trading) owned by the
previous principals and public float 385,000
---------
5,866,947
=========
<PAGE>
Note 15 - Subsequent Events - (Continued)
Subsequent to closing the above transaction, ESPO's Inc. elected new
directors and officers, amended the articles of incorporation to permit
preferred stock and entered into an agreement whereby ESPO's Inc.'s newly
authorized preferred stock will be exchanged for the preferred stock held by
the preferred stockholder of the Company.
Note 16 - Continued Operations
At June 30, 1998, the Company's financial statements and key financial
indicators presented a financial picture of an entity that had not been able
to take advantage of certain economies of scale as expenses and liabilities
outpaced earnings.
On March 15, 1999, the Company facilitated the acquisition of certain assets
of PC DYNAMICS CORPORATION ("PCD") by the Company's wholly owned subsidiary,
PC DYNAMICS OF TEXAS, INC., and subsequently moved all manufacturing and
corporate operations of the Company to the leased facility previously
occupied by PCD. This move was viewed as an effort to apply corporate
overhead to a larger manufacturing base.
At June 30, 1999, the Company had completed the move and had ramped up
operations and, shortly thereafter, initiated a limited second production
shift. The Company was still requiring outside cash infusion, but mainly as
a result of moving costs and costs associated with the acquisition.
From June 30, 1999 through November 30, 1999, stockholders had advanced and
loaned the Company approximately $800,000 to meet its cash requirements.
During this period, the Company enacted a plan to upgrade quality control
procedures in order to reduce waste and spoilage. These procedures were
designed to improve manufacturing efficiency in an effort to help achieve
operational profitability. The directors are continuing to seek additional
equity funding and are optimistic that the reverse merger discussed in Note
15 will provide the needed capital to continue operations.
The accompanying financial statements were prepared as if the Company would
continue as a going concern and, therefore, contemplates the realization of
assets and the liquidation of liabilities in the normal course of business.
If the Company is unable to continue to generate increased sales, increased
profitability, or obtain additional equity participation to cover negative
cash flows, a director and several related party stockholders have agreed to
fund the capital requirements of the Company through November 30, 2000.
<PAGE>
PART III
Index of Exhibits
Ex. 2.1 Agreement and Plan of Reorganization by and between Performance
Interconnect Corp, its undersigned shareholders and Espo's Inc.
Ex. 3.1 Certificate of Incorporation filed in the Office of the Secretary
of State of the State of New York, November 29, 1990.
Ex. 3.2 Certificate of Amendment of Certificate of Incorporation filed
in the Office of the Secretary of State of the State of New York,
July 17, 1998
Ex. 3.3 Certificate of Amendment of Certificate of Incorporation filed
in the Office of the Secretary of State of the State of New York,
October 27, 1998.
Ex. 3.4 Certificate of Amendment of Certificate of Incorporation filed
in the Office of the Secretary of State of the State of New York,
March 20, 2000.
Ex. 3.5 Bylaws.
Ex. 4.1 Form of letter describing employee stock option plan.
Ex. 4.2 Letter agreement dated November 29, 1999, providing for issuance
of preferred stock of Espo's to Nations Corp. in exchange for
common stock of uniView Technologies Corp. This preferred stock
has not yet actually been issued.
Ex. 4.3 Letter agreement dated December 27, 1999, providing for issuance
of preferred stock of Espo's to CMLP Group Ltd. and Winterstone
Management Inc., in exchange for Series A preferred stock of
Performance Interconnect Corp. This preferred stock has not yet
actually been issued.
Ex. 4.4 Letter Agreement dated October 9, 1998, providing for issuance of
preferred stock of Performance Interconnect Corporation in
exchange for its promissory notes.
Ex. 4.5 Warrant dated as of October 22, 1997, authorizing the purchase of
4,000,000 shares of common stock of Performance Interconnect
Corp. at $0.50 per share.
Ex. 4.6 Letter dated February 24, 2000, addressed to Travis Wolff,
describing commitment to fund capital requirements of Performance
Interconnect Corp. through November 30, 2000.
Ex. 4.7 Promissory Note dated June 7, 1999, in the principal sum of
$75,000.00, by Performance Interconnect Corp. in favor of Gay
Rowe.
Ex. 4.8 Promissory Note dated May 1, 1999, in the principal sum of
$200,000.00, by Performance Interconnect Corp. in favor of Gay
Rowe.
Ex. 4.9 Promissory Note dated August 31, 1997, in the principal sum of
$50,000.00, by Varga Investments, Inc., in favor of Ed Stefanko.
Ex. 4.10 Security Agreement dated August 31, 1997, by and between Ed
Stefanko, Secured Party, and Varga Investments, Inc., Debtor.
Ex. 4.11 Letter Agreement dated October 15, 1999, by Winterstone
Management, Inc., and Performance Interconnect Corp,
Ex. 4.12 Promissory Note dated October 15, 1999, in the principal sum of
$619,477.88, by Performance Interconnect Corp. in favor of
Nations Investment Corp., Ltd.
Ex. 4.13 Promissory Note dated October 15, 1999, in the principal sum of
$594,777.69, by Performance Interconnect Corp. in favor of
Nations Investment Corp.
<PAGE>
Ex. 4.14 Security Agreement dated June 30, 1999, by Winterstone Management
Inc and Performance Interconnect Corp.
Ex. 4.15 Note dated September 30, 1999, in the principal sum of
$250,000.00, by Winterstone Management, Inc., in favor of Zion
Capital, Inc.
Ex. 4.16 Secured Promissory Note dated August 12, 1998, in the principal
sum of $131,570.00, by Performance Interconnect Corp. in favor of
FINOVA Capital Corporation.
Ex. 4.17 Secured Promissory Note dated August 12, 1998, in the principal
sum of $318,430.00, by Performance Interconnect Corp. in favor of
FINOVA Capital Corporation.
Ex. 4.18 Loan and Security Agreement dated as of August 12, 1998, by
Performance Interconnect Corp. in favor of FINOVA Capital
Corporation.
Ex. 4.19 Loan and Security Agreement dated March 25, 1999, by and between
PC Dynamics of Texas, Inc., and FINOVA Capital Corporation.
Ex. 4.20 Loan Schedule dated March 25, 1999, by PC Dynamics of Texas,
Inc., and FINOVA Capital Corporation.
Ex. 4.21 Subordination and Standstill Agreement dated March 25, 1999,
among FINOVA Capital Corporation, M-Wave, Inc., and PC Dynamics
of Texas, Inc.
Ex. 4.22 Environmental Certificate and Indemnity Agreement dated as of
March 25, 1999, by PC Dynamics of Texas, Inc., in favor of FINOVA
Capital Corporation.
Ex. 4.23 Continuing Personal Guaranty dated March 25, 1999, by D. Ronald
Allen, guaranteeing obligations of PC Dynamics of Texas, Inc.,
Borrower, to FINOVA Capital Corporation, Lender.
Ex. 4.24 Continuing Corporate Guaranty dated March 25, 1999, by Associates
Funding Group, Inc., guaranteeing obligations of PC Dynamics of
Texas, Inc., Borrower, to FINOVA Capital Corporation, Lender.
Ex. 4.25 Continuing Limited Corporate Guaranty dated March 25, 1999, by JH
&BC, Inc., guaranteeing obligations of PC Dynamics of Texas,
Inc., Borrower, to FINOVA Capital Corporation, Lender.
Ex. 4.26 Continuing Corporate Guaranty dated March 25, 1999, by
Performance Interconnect Corporation, guaranteeing obligations of
PC Dynamics of Texas, Inc., Borrower, to FINOVA Capital
Corporation, Lender.
Ex. 4.27 Continuing Corporate Guaranty dated March 25, 1999, by
Winterstone Management, Inc., guaranteeing obligations of PC
Dynamics of Texas, Inc., Borrower, to FINOVA Capital Corporation,
Lender.
Ex. 4.28 Secured Promissory Note dated March 25, 1999, by PC Dynamics of
Texas, Inc., in favor of FINOVA Capital Corporation.
Ex. 4.29 Amended and Restated Purchase & Sale Agreement dated March 31,
1998, by I-Con Industries, Inc., and Performance Interconnect
Corp., Sellers, in favor of USA Funding, Inc., Purchaser. This
is a sale of accounts receivable.
Ex. 10.1 Letter dated June 2, 1999, by Performance Interconnect Inc. to
M-Wave Inc.
Ex. 10.2 Lease of upgrade Mark V Bearing Spindle Drill, S/N 128, dated
11/12/97, by Excellon Automation Co. in favor of Winterstone
Management, Inc. and I-Con Industries, Inc.
Ex. 10.3 Equipment Lease Agreement dated 5/15/98 by Excellon Automation
Co., in favor of Performance Interconnect, Inc.
<PAGE>
Ex. 10.4 Guaranty by D. Ronald Allen of amounts set forth in Excellon
Lease Agreement dated May 15, 1998.
Ex. 10.5 Agreement dated as of March 15, 1999, between PC Dynamics,
Corporation, and PC Dynamics of Texas, Inc.
Ex. 10.6 Guaranty dated as of March 15, 1999, by D. Ronald Allen in favor
of PC Dynamics Corporation.
Ex. 10.7 Guaranty dated as of March 15, 1999, by Performance Interconnect
Corp. in favor of PC Dynamics Corporation.
Ex. 10.8 Assumption of Liabilities dated March 15, 1999, by PC Dynamics
of Texas, Inc., in favor of PC Dynamics Corporation.
Ex. 10.9 Royalty Agreement dated March 15, 1999, between PC Dynamics
Corporation and PC Dynamics of Texas, Inc.
Ex. 10.10 Promissory Note dated March 15, 1999, in the principal sum of
$773,479.00 by PC Dynamics of Texas, Inc., in favor of PC
Dynamics Corporation.
Ex. 10.11 Lease dated as of March 25, 1999, by PC Dynamics Corporation,
Landlord, and PC Dynamics of Texas, Inc., Tenant.
Ex. 10.12 Promissory Note dated March 15, 1999, in the principal sum of
$293,025.00 by PC Dynamics of Texas, Inc., in favor of PC
Dynamics Corporation.
Ex. 10.13 Letter dated May 27, 1999, by Joseph A. Turek on behalf of M-Wave
(parent company of PC Dynamics Corporation) on Poly Circuits
letterhead to Ron Allen (on behalf of Performance Interconnect.
Ex. 21 Subsidiaries of the Company.
Ex. 27 Financial Data Schedule.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
ESPO'S INC.
Date: 3/30/00
By: /s/ D. Ronald Allen
--------------------
D. Ronald Allen
President
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is entered into on this day of
December, 1999, by and between Performance Interconnect Corp., a Texas
corporation. (hereinafter "PlC") and its undersigned shareholders
(hereinafter "Stockholders"); and Espo's Inc., a publicly traded New York
corporation whose trading symbol is SPOS and whose address is 57 Main
Street. East Hampton, NY 11937 (hereinafter "SPOS" or the "Company").
RECITALS:
WHEREAS, Stockholders own beneficially and of record in excess of 99% of the
shares of voting common stock of PlC; and
WHEREAS, SPOS desires to acquire 100% but not less than a minimum of 99% of
the issued and outstanding common stock of PlC, making it a wholly-owned
subsidiary of the Company, and FTC Stockholders desire to make a tax-free
exchange of their shares in FTC solely far shares of SPOS common voting
stock (the "SPOS Shares");
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
Section 1
AGREEMENT
1.1 Plan of Reorganization. SPOS, PlC and Stockholders hereby agree that a
minimum of ninety nine (99%) percent of the issued and outstanding common
stock of PLC shall be acquired by SPOS in exchange solely for SPOS voting
common stock in a transaction qualifying as a tax-free, stock-for-stock
exchange pursuant to Section 368 (a)(1)(B) of the Internal Revenue Code of
1986, as amended.
1.2 Exchange of Stock. SPOS. PlC and Stockholders agree that all issued and
outstanding shares of common stock of PlC, equal to one hundred (100%)
percent, shall be exchanged for (5,500,000) Rule 144 restricted SPOS shares.
A list of the shareholders of PlC, the number of shares owned by each, and
the number of SPOS shares to be issued to them is attached hereto as Exhibit
"A" and by this reference is incorporated herein. In the event the
transaction contemplated herein is closed on the basis of less than 100% but
not less than 99% of the PlC common shares, then the proportionate number of
SPOS shares included in the (5,500,000) to be issued, shall be appropriately
withheld from distribution.
<PAGE>
1.3 Delivery of Shares On or before the Closing, certificates representing
a minimum of 99% of the outstanding shares of PIC will be delivered duly
endorsed so as to make SPOS the sole holder thereof, free and clear of all
claims and encumbrances.
1.4 Capital Structure of PIC. As of November 19, 1999, PIC had authorized
(4,000,000) shams of common stock, $.001 par value per share, and
(2,000,000) shares of Preferred Stock, par value $10.00 per share, of which
(2,437,000) shares of common stock were issued and outstanding held by
approximately (90) shareholders and (2,452) shares of Preferred Stock were
issued and outstanding held by (4) shareholders. The issued Preferred Stock
is not convertible into any other security. There is one common stock
Purchase Warrant outstanding that allows the holder to purchase (400,000)
shares of common stock at five ($5.00) dollars per share. There are no
other securities, rights, options, or warrants outstanding to purchase
securities of PIC.
1.5 Present Capital Structure of SPOS. SPOS is a non-reporting New York
corporation, currently traded over-the-counter and quoted in the National
Quotations Bureau Pink Sheets under the symbol: "SPOS". The authorized
capital stock of SPOS consists of (25,000,000) shares of common stock, $.01
par value per share, with (2,356,250) shares issued and outstanding held by
approximately (33) shareholders. SPOS has no outstanding options to acquire
it's common shares and no other securities convertible into its common
stock.
1.6 Capital Structure and Status of SPOS at Time of Closing. SPOS shall
have (385,000) shares of common stock issued and outstanding at the time of
Closing, and no options or other securities outstanding convertible into its
common stock that would result in an increase in the number of issued and
outstanding shares. All of the liabilities of SPOS shall be satisfied in
full prior to or at the Closing. Necessary Corporate resolutions and actions
as required shall he adapted prior to the Closing in accordance with New
York law, to ratify and approve the following actions and amendments to the
certificate of incorporation:
(a) Approve this Agreement and Plan of Reorganization.
(b) Approve the cancellation of previously issued and outstanding
common shares so that the number of issued and outstanding shares at
the time of Closing is (385,000) shares, held by at least 30
individual shareholders, of which at least (350,000) shares shall be
free trading without bearing any restrictive legends.
(c) Approve the issuance of (5,500,000) Rule 144 restricted SPOS
Common Shares to PlC shareholders as listed in the attached Exhibit
"A".
(d) Approve the resignations of current SPOS management and directors
and appoint PlC directors as the new management and Board of
Directors.
1.7 Changes in Capitalization of SPOS, SPOS, between the date of this
Agreement and the Closing, shall not make any changes to its capital
structure except as required under section 1.6 herein above.
<PAGE>
1.8 Capital Structure after Closing. After issuance of the SPOS shares
above, the capital structure of the merged company will be as follows:
Shareholders SPOS Shares %
---------------------------------- ----------- --------
FTC Shareholders (Rule 144 shares) 5,500,000 93.46
Current SPOS Shareholders 385,000 6.54
--------- ------
Total 5,885,000 100.00
Section 2
Closing, Effective Date, and Pre-Closing Actions
2.1 Closing. The Closing of the transaction contemplated herein shall be
held on December 15, 1999, or on such other later date as the parties hereto
may mutually agree, and shall be held at a location or under conditions as
may be mutually agreed by the parties hereto. In the event of a courier
telephonic closing, Steven L. Siskind, Attorney at Law and Bridgestone
Capital Group, L.L.C shall serve as agents to the parties to this
transaction in holding and redistributing the various original documents and
copies among the various parties following the closings. It is further
agreed that SPOS shall endeavor to perform its obligations hereunder such
that the Closing could be consummated as early as December 1,1999 and SPOS
does hereby grant PIC the option to schedule said Closing for any business
day between December 1, 1999 and December 15, 1999, upon PIC providing
notice 3 business days in advance.
2.2 Required of SPOS at Closing. At or prior to the Closing, SPOS shall
provide the following:
(a) a filed copy of the amended articles of incorporation as required
by the State of New York concerning the changes as detailed under
paragraph 1.6 above;
(b) all books and records of SPOS including all filed tax returns and
Company records supporting filings made and required to be made to
regulatory agencies through November 30, 1999;
(c) resignations of previous management and appointments of new
management chosen by PIC;
(d) a current shareholders list certified by SPOS's stock transfer
agent;
(e) corporate minute book containing all corporate minutes of
directors and stockholders;
(f) officer and directors certificate and indemnification notice:
(g) an original copy of the auditors report containing audited
financial statements for the fiscal year ended November 30, 1998:
<PAGE>
(h) a copy of engagement letter with the Company's auditors covering
the audit for the fiscal year ending November 30, 1999;
(i) a current and certified lien and judgment search flee of any
adverse items;
(j) a release of any or all current real estate and personal property
leases to which SPOS is or may be subject;
(k) a release of the current bank loan and lien against all the assets
of SPOS;
(l) full disclosure of facts and information concerning the current
lawsuit against SPOS;
(m) an opinion of counsel, based on examination of articles of
incorporation, minutes, bylaws, documents related to this
transaction and such other matters as counsel deems necessary, to
establish that (i) SPOS is a corporation duly formed, validly
existing and in good standing under the laws of the State of New
York and has all requisite power, authority, licenses, permits,
patents, copyrights and trademarks material to the ownership and
operation of its properties and to the carrying on of its
business; (ii) SPOS has all requisite corporate power and
authority and the legal right to enter into this Agreement and to
carry out its obligations hereunder; (iii) no consent, approval or
authorization of, registration with or declaration to any tribunal
or any person or approval by the shareholders of SPOS is required
in connection with the execution and delivery of this Agreement or
in connection wit the performance of any covenant or agreement
contained herein; (iv) counsel has no knowledge of any legal or
administrative proceedings pending at threatened against or
affecting SPOS except as otherwise specifically disclosed; and (v)
this Agreement does not violate, conflict with, result in the
breach of, or constitute a default under the provisions of the
articles of incorporation, as amended, or the bylaws as amended,
of SPOS or any laws or, to the best of counsel's knowledge, any
contract to which SPOS is a party.
2.3 Effective Date. For accounting purposes, the effective date of this
reorganization shall be December 1, 1999.
Section 3
Representations and Warranties of SPOS
SPOS and Jeffrey R. Esposito (who agrees that his execution of this
Agreement on behalf of SPOS is also an execution on his behalf individually)
represent and warrant to, and covenant with, the Stockholders as follows:
3.1 Corporate Status. SPOS warrants and represents to PIC that it is in
good standing in its state of New York, with approximately 33 stockholders
of record and beneficially, trading on the over-the-counter market and
quoted in the Pink Sheets, and has a currently active Corporation Records
Agreement with Standard & Poor's.
<PAGE>
3.2 Capital Structure of SPOS. The authorized capital stock of SPOS
consists of (25,000,000) shares of common stock, $.01 par value per share,
with (2,356,250) common shares issued and outstanding just prior to the date
first above written, which shall be reduced at the time of the Closing to
(385,000) shares issued and outstanding. SPOS, at time of Closing, shall
have no outstanding options, rights or warrants to acquire it's common
shares and no other securities outstanding convertible or exchangeable into
its common stock that would result in an increase to the number of issued
and outstanding shares.
3.3 Financial Statements. The financial statements of SPOS furnished to
PIC, consisting of audited financial statements dated November 30, 1998, for
the one year period then ended (attached hereto as Exhibit "B"), are true,
correct and fairly present the financial condition of SPOS at such date and
for the periods involved; such statements were prepared in accordance with
S.E.C. practice standards and in accordance with generally accepted
accounting principles consistently applied. SPOS further represents that it
will have similar audited financial statements for the fiscal year ended
November 30, 1999, prepared by its auditor and delivered to PIC as soon as
feasible following the close of the fiscal year.
3.4 No Current Business Operations. At November 30, 1999, SPOS has divested
of its business operations. Except for audit fees related to the audit of
its November 30, 1999 fiscal year. SKIS has no liabilities of any nature
whatsoever as of the Closing hereunder, whether accrued, absolute,
contingent or otherwise, and including, without limitation, tax liabilities
and interest due or to become due
3.5 Regulatory Compliance and Listings. SPOS is a non-reporting New York
corporation currently traded over-the-counter and quoted in the National
Quotations Bureau Pink Sheets (under the symbol: "SPOS"). SPOS is in full
compliance with, and not in violation of, any state or federal securities
laws. All outstanding shares of common stock of SPOS have been duly
authorized and are validly issued, fully paid, and non-assessable and free
of preemptive tights, and there are no registration rights existing or
granted to any holders of restricted common stock of SPOS. There has been no
stop order issued by any regulatory authority including but not limited to
NASD, SEC, or any State regulatory authority and furthermore SPOS has not
received any notice of any investigation, which might result in any stop
order.
3.6 Title to Property. SPOS has good and marketable title to all properties
and assets, real and personal, reflected in the Balance Sheet of SPOS, and
the properties and assets of SPOS are subject to no mortgage, pledge, lien
or encumbrances, except for liens shown therein, with respect to which no
default exists.
3.7 Litigation. There is no litigation or proceeding pending, or to the
knowledge of SPOS, threatened, against or relating to SPOS, its properties
or business, except as set forth in a list certified by the President of
SPOS and attached hereto as Exhibit "C".
3.8 Books and Records Prior to or at the Closing. SPOS will provide to PlC
or their representative(s) any and all relevant documents regarding
securities filings, listing information with Standard & Poor's, offering
memorandums, information concerning the properties and affairs of SPOS and
give full access during normal business hours to all of its offices, books,
records, contracts and other corporate documents and properties so that PLC
may inspect and audit them.
<PAGE>
3.9 Tax Returns. Prior to the Closing, SPOS will have filed all federal and
state income or franchise tax returns required to be filed at the time of
Closing except for returns for the tax year ended November 30, 1999, which
will be filed in conjunction with the completion of the audit for the fiscal
year then ended.
3.10 Confidentiality. Until the Closing (and thereafter if there is no
Closing), SPOS and its representatives will keep confidential any
information, which they obtain from PIC concerning the properties, assets
and business of PIC. If the transactions contemplated by this Agreement are
not consummated by December 31, 1999 or such other date as the parties may
mutually agree, SPOS will return to PIC all written matter with respect to
PLC obtained by SPOS in connection with the negotiation or consummation of
this Agreement.
3.11 Investment Intent. SPOS is acquiring the PIC shares to be transferred
to it under this Agreement for investment and not with a view to the sale or
distribution thereof, and SPOS has no commitment or present intention to
liquidate PIC or to sell or otherwise dispose of shares of its stock.
3.12 Corporate Authority. SPOS has full corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and will
deliver to PIC at the Closing a certified copy of resolutions of its Board
of Directors authorizing execution of this Agreement by its officers and
performance thereunder and which also contains approvals of all of the
conditions contained in Section 1.6 above.
3.13 Due Authorization. Execution of this Agreement and performance by SPOS
hereunder has been duly authorized by all requisite corporate action on the
part of SPOS, and this Agreement constitutes a valid and binding obligation
of SPOS and performance hereunder will not violate any provision of the
Articles of Incorporation, Bylaws, agreements, mortgages or other
commitments of SPOS. All matters described in Section 1.6 will have been
duly and properly approved as required under the laws of the State of New
York.
Section 4
Representations, Warranties and Covenants of PLC and Stockholders
PLC and Stockholders represent, warrant to, and covenant with,
SPOS as follows:
4.1 Corporate Status. PIG is a corporation duly organized, validly existing
and in good standing under the laws of the Statutes of Texas.
<PAGE>
4.2 PlC Shares. The Stockholders executing this Agreement shall hold full
right, tide and interest in at least ninety nine (99%) percent of the PIC
shares, free and clear of adverse claims of third parties.
4.3 Capitalization. PlC has authorized capital stock of (4,000,000) shares
of common stock, $.001 par value per share, and (2,000,000) shares of
Preferred Stock, par value $10.00 per share, of which (2,437,000) shares of
common stock were issued and outstanding held by approximately (......)
shareholders and (2,452) shares of Preferred Stock were issued and
outstanding held by (....) shareholders. The issued Preferred Stock is not
convertible into any other security. There is one common stock Purchase
Warrant outstanding that allows the holder to purchase (400,000) shares of
common stock at five ($5.00) dollars per share. There are no other
securities, tights, options, or warrants outstanding to purchase securities
of PIC.
4.4 Financial Statements of PIC. The financial statements of PIC furnished
to SPOS, consisting of audited financial statements for the fiscal year
ending June 30, 1999, axe attached hereto as Exhibit "D", and are true,
correct and fairly present the financial condition of PIC at such date and
for the periods involved; such statements were prepared in accordance with
generally accepted accounting principles consistently applied; and no
material change has occurred in the financial condition of PIC since June
30, 1999 except as in the normal course of operations.
4.5 Undisclosed Liabilities, PIC had no liabilities at June 30, 1999,
except to the extent reflected or reserved against in the Balance Sheet as
of that date and no material changes have occurred except for liabilities
that may have been incurred in the normal course of business operations.
4.6 Interim Changes. Since the date of the latest financial statements,
there have been no material changes in financial condition, assets, and
liabilities except as incurred in the normal course of business; nor any
material increase(s) in compensation or other benefits to employees.
4.7 Title to Property. PIC has good and marketable title to all properties
and assets, real and personal, reflected in the Balance Sheet of PIC, and
the properties and assets of PIC are subject to no mortgage, pledge, lien or
encumbrances, except for liens shown therein, with respect to which no
default exists, except as otherwise detailed and set forth in letter form,
signed and certified by the President of PIC and delivered to SPOS or its
representative.
4.8 Litigation. There is no litigation or proceeding, pending, or to the
knowledge of PIC, threatened against or relating to the property or business
of PIC, except as set forth in a list certified by the President of PIC and
delivered to SPOS or its representative.
4.9 Tax Returns. PIC has filed all federal and state income or franchise
tax returns required to be filed or has received currently effective
extensions of the required filing dates.
4.10 Books and Records. From the date of this Agreement to the Closing, PlC
shall give SPOS or its representative full access during normal business
hours to all of its offices, books, records, contracts and other corporate
documents and properties so that SPOS may inspect and audit them, and
furnish such information concerning the properties and affairs of PIC as
SPOS may reasonably request.
<PAGE>
4.11 Confidentiality. Until the Closing (and thereafter if there is no
Closing), PlC and its representatives will keep confidential any
information, which they obtain from SPOS concerning the properties, assets
and business of SPOS. If the transactions contemplated by this Agreement are
not consummated by December 31, 1999 or such other date as the parties
hereto may mutually agree, PIC will return to SPOS all written matter with
respect to SPOS obtained by PIC in connection with the negotiation or
consummation of this Agreement.
4.12 Investment Intent. PlC Stockholders are acquiring the shares to be
delivered to them under this Agreement for investment and not with a view to
the sale or distribution thereof, and have no commitment or present
intention to liquidate the Company or to sell or otherwise dispose of the
SPOS stock. PlC Stockholders shall execute and deliver to SPOS at the
Closing an Investment Letter in the form attached hereto as Exhibit "E" for
the shares received by them under this Agreement.
4.13 Corporate Authority. PlC has full corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and will
deliver to SPOS at the closing a certified copy of resolutions of its Board
of Directors authorizing execution of this Agreement by its officers and
performance thereunder.
4.14 Due Authorization Execution of this Agreement and performance
hereunder has been duly authorized by all requisite corporate action on the
part of PIC, and this Agreement constitutes a valid and binding obligation
of PIC and performance hereunder will not violate any provision of the
Articles of Incorporation, Bylaws, agreements, or other commitments of PlC.
Section 5
Termination
This Agreement may be terminated (1) by mutual consent in writing; or (2) by
either the Board of Directors of SPOS or by the Board of Directors of PIC if
there has been a material misrepresentation or material breach of any
warranty or covenant by the other party hereto.
Section 6
General Provisions
6.1 Further Assurances. At any time, and from time to time, after the
Closing, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry
out the intent and purposes of this Agreement. Any failure on the part of
any party hereto to comply wit any of its obligations, agreements or
conditions hereunder may be waived in writing by the party to whom such
compliance is owed.
<PAGE>
6.2 Expenses. Each party shall bear its own expenses in regard to this
transaction. PlC shall pay: the legal fees of its securities counsel: its
auditing firm; costs of the initial press release: cost of issuing stock
certificates; and duplication and mailing costs of the shareholders letter.
SPOS shall pay the following costs: its securities counsel; auditors,
including the cost of the audit for the fiscal year ending November 30,
1999; for other legal opinions required to consummate this transaction; New
York franchise fees and filing fees (to complete changes called for in
section 1.6 hereto); the cost of preparation of board minutes and
resolutions of SPOS; shareholder meetings and/or consent resolutions; and
articles of amendment to the articles of incorporation of
SPOS.
6.3 Brokers. Except as otherwise specifically stated herein, each party
represents to the other party hereunder that no consultants, advisors,
brokers or finders have acted for it in connection with this Agreement, and
agree to indemnify and hold harmless the other party against any fee, loss
or expense arising out of claims by consultants, advisors, brokers or
finders employed or alleged to have been employed by it.
6.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or
sent by prepaid first-class registered or certified mail, return receipt
requested, as follows:
PIC SPOS
------------------------------ ------------------------------
D. Ronald Allen, Chairman Jeffrey R. Esposito, President
Performance Interconnect Corp. Espo's Inc.
10501 FM 720 East 57 Main Street
Frisco, Texas 75035 East Hampton, NY 11937
6.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties related to the transaction contemplated herein.
6.6 Headings. The section and subsection headings in this Agreement are
inserted for convenience only arid shall not affect in any way the meaning
or interpretation of this Agreement.
6.7 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
6.8 Assignment. This Agreement shall inure to the benefit of, and be
binding upon the parties hereto, and their successors and assigns; provided,
however, that any assignment by either party of its rights under this
Agreement without the written consent of the other party shall be void.
<PAGE>
6.9 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts via facsimile, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. The
Parties hereto further agree to exchange original signature documents of
this Agreement prior to or at the Closing.
IN WITNESS WHEREOF, the parties have executed the Agreement and Plan of
Reorganization as of the date first above written.
ATTEST: ESPO's INC.
/s/
-------------------------- ---------------------------------------
Jeffrey R. Esposito, President
ATTEST: PERFORMANCE INTERCONNECT CORP.
/s/
-------------------------- ---------------------------------------
D. Ronald Allen, Chairman
WITNESSETH
SHAREHOLDERS OF PlC:
Associates Funding Group, Inc.
By: /s/
-------------------------- ---------------------------------------
13:30 Corp.
By: /s/
-------------------------- ---------------------------------------
Stefanko Children's Irrevocable Trust
By: /s/
-------------------------- ---------------------------------------
BC&Q Corp.
By: /s/
-------------------------- ---------------------------------------
<PAGE>
(Reorganization Agreement between Performance Interconnect Corp. and Espo's,
Inc.)
Summit Innovations, Inc.
By: /s/
-------------------------- ---------------------------------------
Touchstone Enterprises, Inc.
By: /s/
-------------------------- ---------------------------------------
Bridgestone Capital Group, L.L.C.
By: /s/
-------------------------- ---------------------------------------
Global Stock Exchange Corp.
By: /s/
-------------------------- ---------------------------------------
The Hubinger Organization
By: /s/
-------------------------- ---------------------------------------
Marjorie Weinberg Trust
By: /s/
-------------------------- ---------------------------------------
/s/
-------------------------- ---------------------------------------
Robert Weinberg
/s/
-------------------------- ---------------------------------------
Mark Alba
/s/
-------------------------- ---------------------------------------
Evan H. Saricopoulos
<PAGE>
(Reorganization Agreement between Performance Interconnect Corp. and Espo's,
Inc.)
/s/
-------------------------- ---------------------------------------
Richard L. & Rebecca L. Price
/s/
-------------------------- ---------------------------------------
Kevin H. Kading
/s/
-------------------------- ---------------------------------------
Robert Koester
/s/
-------------------------- ---------------------------------------
David Rakiec
/s/
-------------------------- ---------------------------------------
William Harrison
/s/
-------------------------- ---------------------------------------
Gerald Patera
<PAGE>
EXHIBIT A
Performance Interconnect Corp./Espo's Inc.
Rule 144 Restricted Common Shares of Expo's to be Issued to Shareholders
of Performance
Sharehold Name & Address SS# or EIN
-------------------------------------------------------- ----------
Associates Funding Group, Inc. [ deleted for confidentiality ]
13:30 Corp. [ deleted for confidentiality ]
Winterstone Management, Inc. [ deleted for confidentiality ]
Custer company, Inc. [ deleted for confidentiality ]
Stefanko Children's Irrevocable Trust [ deleted for confidentiality ]
BC&Q Corp. [ deleted for confidentiality ]
Summit Innovations, Inc. [ deleted for confidentiality ]
Touchstone Enterprises, Inc. [ deleted for confidentiality ]
Richard L. or Rebecca L. Price [ deleted for confidentiality ]
Bridgestone Capital Group, L.L.C. [ deleted for confidentiality ]
Global Stock Exchange Corp. [ deleted for confidentiality ]
Marjorie Weinberg Trust [ deleted for confidentiality ]
Robert Weinberg [ deleted for confidentiality ]
Mark Alba [ deleted for confidentiality ]
Kevin H. Kading [ deleted for confidentiality ]
Gerald Patera [ deleted for confidentiality ]
Robert Koester [ deleted for confidentiality ]
David Rakiec [ deleted for confidentiality ]
George W. Harrison III Trust, [ deleted for confidentiality ]
The Hubinger Organization [ deleted for confidentiality ]
Evan H. Saricopoulos [ deleted for confidentiality ]
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
ESPOS INC.
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED NOV 29 1990
Filed by:
McAndrew, Conboy & Frisco, Esqs.
234 Peters Avenue
East Meadow, New York 11554
<PAGE>
CERTIFICATE OF INCORPORATION
ESPOS INC.
Under Section 402 of the Business Corporation Law.
The undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the Business Corporation Law of the State of New York, does
hereby certify and set forth:
FIRST: The name of the corporation is ESPO'S INC.
SECOND: The purposes for which the corporation is formed are:
To engage in any lawful act or activity for which corporations may be
organized under the business corporation law, provided that the corporation
is not formed to engage in any act or activity which requires the act or
approval of any state official, department, board, agency or other body
without such approval or consent first being obtained.
To manufacture, buy, suit, distribute, job, to be a franchise dealer
licensee, Import, export end otherwise deal in winter and summer clothing,
sporting goods and wearing apparel of every kind and description, and other
related and unrelated products at wholesale and at retail and as principal
and agent.
To manufacture, design, style, produce, cut, sew, process, prepare,
merchandise, buy, sell, transport, distribute, export and import, at
wholesale, retail and as jobber, as principal, contractor, broker, sales
representative or agent or commission, and otherwise generally and in all
ways handle, trade and deal in and with any and all articles and items of
wearing apparel, clothing, garments, and undergarments, including but not
limited to, shirts, sportswear, blouses, waists, pajamas, underwear, suits,
coats, trousers, slacks, jeans, jackets, sport clothes, dress clothes, play
clothes, work clothes, robes, swimwear, beachwear, leisurewear, cruisewear,
sweaters, rainwear, neckwear, scarves, nlghtwear, haberdashery, dresses,
skirts. separates, shorts, pedal pushers, belts, furnishings, footwear, hats
caps, hosiery, athletic wear, camp wear, handkerchiefs, mufflers, knitwear
and any and all other articles of general wearing apparel, accessories,
novelties and specialties, of every kind, nature and description and for
whatsoever use and purpose, and of every kind and type of material and,
composition.
<PAGE>
To conduct and carry on the business of custom and ready made tailoring
for men, women, and children; to manufacture, buy, sell, import, export and
generally deal in wearing apparel for men, woman and children end cloth. and
fabrics from which wearing apparel is made; to design clothing for men,
women and children and generally to do all things commonly done by those
engaged in the same line of business.
To acquire by purchase, subscription, underwriting or otherwise, and to
own, hold for investment, or otherwise, and to use, sell, assign, transfer,
mortgage, pledge, exchange or otherwise dispose of real and personal
property of every sort and description and wheresoever situated, including
shares of stock, bonds, debentures, notes, scrip. securities, evidences of
indebtedness, contracts or obligations of any corporation or association,
whether domestic or foreign, or of any firm or individual or of the United
States or any state, territory or dependency of the United States or any
foreign country, or any municipality or local authority within or without
the United States, and also to issue in exchange therefor, stocks, bonds or
other securities or evidences of indebtedness of this corporation and, while
the owner or holder of any such property, to receive, collect and dispose of
the interest, dividends and income on or from such property and to possess
and exercise in respect thereto all of the rights, powers and privileges of
ownership. including all voting powers thereon.
To construct, build, purchase, lease or otherwise acquire, equip, hold,
own, improve, develop, manage, maintain, control, operate, lease, mortgage,
create liens upon, sell, convey or otherwise dispose of and turn to account,
any and all plants, machinery, works, implements and things or property,
real and personal, of every kind and description, incidental to, connected
with, or suitable, necessary or convenient for any of the purposes
enumerated herein, including all or any part or parts of the properties.
assets, business' and goodwill of any persons, firms, associations or
corporations.
The powers, rights and privileges provided in this certificate are not
to be deemed to be in limitation of similar, other or additional powers,
rights and privileges granted or: permitted to a corporation by the Business
Corporation Law, it being intended that this corporation shall have all
rights, powers and privileges granted or permitted to a corporation by such
statute.
THIRD: The office of the corporation is to be located in the County of
Suffolk, State of New York.
<PAGE>
FOURTH: The aggregate number of shares which the corporation shall have
the authority to issue is Two Hundred (200), all of which shall be without
par value.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against it may be served. The post office
address to which the Secretary of State shall mail a copy of any process
against the corporation served on him is:
28D Jobs Lane
Southampton, New York 11968
SIXTH: The personal liability of directors to the corporation or its
shareholders for damages for any breach of duty in such capacity is hereby
eliminated except that such personal liability shall not be eliminated if a
Judgment or other final adjudication adverse to such director establishes
that his acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law or that he personally gained in
fact a financial profit or other advantage to which he was not legally
entitled or that his acts violated Section 719 of the Business Corporation
Law.
IN WITNESS WHEREOF, this certificate has been subscribed to this 27th
day of November, 1990 by the undersigned who affirms that the statements
made herein are true under the penalties of perjury.
/s/
---------------
GERALD WEINBERG
90 State Street
Albany, New York
[ FILING RECEIPT APPEARS HERE]
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ESPO'S INC.
Filed by: Kenneth C. Dollmann. Esq
4250 Veterans. Memorial
Highway
Suite 295E
Holbrook, New York 11741
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
ESPO'S INC.
Under Section 805 of the Business Corporation Law.
The undersigned, the sole shareholder of ESPO'S INC. does
hereby certify:
1. The name of the corporation in ESPO'S INC..
2. The certificate of incorporation was filed by the
Department of State on the 29th day of November, 1990.
3. The certificate of incorporation is hereby amended as
follows:
(a) To change and increase the capitalization of this
corporation from the presently authorized Two Hundred (200) shares
without par value to Five Million (5,000.000) shares, each with a
par value of One ($.O.01) Cent.
4. The corporation presently is authorized to issue Two
Hundred (200) shares without par value, One Hundred Fifty (150) of
which have been issued. Such shares shall be changed into 800,100
of the newly authorized One Cent ($0.01) par value shares, at the
rate of 1 for 5,334. The presently authorized but unissued Fifty
(50) no par value shares shall be changed into 4,199,900 of the
newly authorized One Cent ($0.01) par value shares, at the rate of 1
for 83.998.
Paragraph FOURTH of the Certificate of Incorporation which
sets forth the capitalization of this corporation shall read as
follows:
<PAGE>
FOURTH: The aggregate number of shares which the corporation
shall have the authority to issue is Five Million (5,000.000), each
with a par value of One ($0.01) Cent.
The above amendment to the certificate of incorporation was
authorized by the vote of the board of directors and then by
unanimous written consent of the holder of all the outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, this certificate has been subscribed to
this 17th day of July, 1998 by the undersigned who affirms that the
statements made herein are true under the penalties of perjury.
/s/
-------------------
JEFFREY R. ESPOSITO
Sole Shareholder
[ FILING RECEIPT APPEARS HERE ]
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF
ESPO'S INC.
under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is ESPO'S INC.
(2) The certificate of Incorporation was filed by the Department of
State on 29th day of November 1990.
(3) The Certificate of Incorporation be and the same hereby is amended
as follows:
(a) To change and increase the capitalization of this
corporation from the presently authorized Five Million
(5,000,000) shares each with a par value of One ($0.01)
Cent to Twenty-Five Million (25,000,000) shares each
with a par value of One ($0.01) Cent.
(4) The corporation presently is authorized to issue Five Million
(5,000,000) shares each with a par value of one ($0.01) Cent,
Eighty-Hundred-Thousand-One-Hundred (800,100) shares of which
have been issued. Such shares shall be changed into Two-Mil1ion-
Two-Hundred-Fifty (2,000,250) of the newly authorized One ($0.01)
Cent par value shares, at the rate of 1 for 2.5. The presently
authorized but unissued Four-Million-One-Hundred-Ninety-Nine-
Thousand-Nine-Hundred (4,199,900) shares each with a par value of
One ($0.01) Cent shall be changed into Twenty-Two-Million-Nine-
Hundred-Ninety-Nine-Thousand-Seven-Hundred-Fifty (22,999,750) of
the newly authorized one ($0.01) Cent par value shares, at the
rate of 1 for 5.4762614.
Paragraph FOURTH of the certificate of Incorporation which sets forth
the capitalization of this corporation shall read as follows:
FOURTH: The aggregate number of shares which the corporation shall
have the authority to issue is Twenty-Five Million (25,000,00), each with a
par value of One ($0.01) Cent.
(5) The amendment to the certificate of incorporation was authorized
first, by unanimous written consent of all the directors, and
then by unanimous written consent of the holders of all the
outstanding shares entitled to vote thereon.
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed to this __ day
of August 1998 by the undersigned who affirms that the statements made
herein are true under the penalties of perjury.
/s/
--------------------
JEFFREY R. EXPOSITO,
Sole Shareholder
[ FILING RECEIPT APPEARS HERE ]
Exhibit 3.4
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF ESPO'S INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned., being the President and Secretary of Espo's Inc. do hereby
certify and set forth:
(1) The name of the corporation is Espo's Inc.
(2) The certificate of incorporation of Espo's Inc was filed by the
Department of State on the 29th day of November 1990.
(3) Paragraph FOURTH of the certificate of incorporation of Espo's
Inc., which sets forth the number of shares which the corporation is
authorized to issue, is hereby amended to read as follows:
FOURTH: The aggregate number of shares, which the corporation shall
have authority to issue, is as follows:
Twenty-Five Million (25,000,000) shares of Common Stock, each with a
par value of One Cent ($0.01).
One Million (1,000,000) share of Preferred Stock, each with a par
value of One Cent ($0.01), with such designations, relative rights,
preferences and limitations as may be fixed by the Board of Directors.
(4) (a) This amendment to the certificate of incorporation of Espo's
Inc. makes no change in the shares of common Stock.
(b) This amendment to the certificate of incorporation of
Espo's Inc. makes the following changes in the shares of
Preferred Stock:
Issued shares changed: Before this change no Preferred Stock was
authorized and no Preferred Stock was issued.
Issued shares resulting from such change: No shares of Preferred Stock
have. been issued at this time.
Unissued shares changed: Before this change no Preferred Stock was
authorized.
Certificate of Amendment to the Certificate of Incorporation
Espo's Inc.
Page 1
<PAGE>
Unissued shares resulting from such change:
Number: One Million (1,000,000) shares
Par Value: $0.01
Class: Preferred
(5) This amendment to the Certificate of incorporation of Espo's Inc.
was authorized by unanimous written consent of the board of directors
followed by vote of the holders of a majority of all outstanding shares
entitled to vote thereon at a meeting of shareholders.
IN WITNESS WHEREOF, the undersigned has executed and signed this
certificate this 8th day of March, 2000.
/s/
President
/s/
Secretary
Certificate of Amendment to the Certificate of Incorporation
Espo's Inc.
Page 2
Exhibit 3.5
BYLAWS
OF
ESPO'S INC.
ARTICLE I
Registered Office
The registered office of the Corporation shall be at the location
specified in the Corporate Charter, as amended, or such other office (which
need not be a place of business of the Corporation) as may be designated
from time to time by the Board of Directors in the manner provided by law.
ARTICLE II
Shareholders
Section 1. Place of Meetings. All meetings of the shareholders shall
be held at the principal place of business of the Corporation or at such
other place within or without the State of New York as shall be specified or
fixed in the notices or waivers of notice thereof; provided that any or all
shareholders may participate in any such meeting by means of conference
telephone or similar communications equipment pursuant to Article VIII,
Section 8 hereof.
Section 2. Quorum; Required Vote for Shareholder Action; Adjournment of
Meetings. Unless otherwise required by law or provided in the Articles of
Incorporation or these bylaws, the holders of issued and outstanding shares
representing a majority of the votes entitled to be cast thereat, present in
person or represented by proxy, shall constitute a quorum at any meeting of
shareholders for the transaction of business, and the act of a majority of
the voting power of such stock so represented at any meeting of shareholders
at which a quorum is present shall constitute the act of the meeting of
shareholders.
Notwithstanding the other provisions of the Articles of Incorporation
or these bylaws, the chairman of the meeting or the holders of a majority of
the voting power of the issued and outstanding stock present in person or
represented by proxy at any meeting of shareholders, whether or not a quorum
is present, shall have the power to adjourn such meeting from time to time,
without any notice other than announcement at the meeting of the time and
place of the holding of the adjourned meeting. At such adjourned meeting
any business may be transacted that might have been transacted at the
meeting as originally called.
Section 3. Annual Meetings. An annual meeting of the shareholders,
for the election of directors to succeed those whose terms expire and for
the transaction of such other business as may properly come before the
meeting, shall be held at such place, within or without the State of New
York, on such date and at such time as the Board of Directors shall fix and
set forth in the notice of the meeting, which date shall be within 13 months
subsequent to the date of incorporation or the last annual meeting of
shareholders, whichever most recently occurred.
<PAGE>
Section 4. Special Meetings. Unless otherwise provided in the
Articles of Incorporation, special meetings of the shareholders for Chairman
of the Board (if any), the President, the Board of Directors, or such other
person or persons as may be authorized in the Articles of Incorporation or
(b) unless the Articles of Incorporation provide otherwise, the holders of
issued and outstanding shares representing at least ten percent of all the
votes entitled to be cast at the proposed special meeting.
If not otherwise stated in or fixed in accordance with the remaining
provisions hereof, the record date for determining shareholders entitled to
call a special meeting is the date any shareholder first signs the notice of
that meeting.
Only business within the purpose or purposes described in the notice
(or waiver thereof) required by these bylaws may be conducted at a special
meeting of the shareholders.
Section 5. Closing Transfer Books; Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a
purchase or redemption by the Corporation of any of its own shares) or share
dividend, or in order to make a determination of shareholders for any other
purpose, the Board of Directors of the Corporation may provide that the
stock transfer books shall be closed for a stated period but not to exceed,
in any case, 60 days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than 60 day and, in the
case of a meeting of shareholders, not less than ten days, prior to the date
on which the particular action requiring such determination of shareholders
is to be taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted,
as the case may be, shall be the record date for such determination of
shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided herein, such determination shall also
apply to any adjournment thereof except where the determination has been
made through the closing of stock transfer books and the stated period of
closing has expired.
<PAGE>
Section 6. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered
not less than ten nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary or the officer or person calling the meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, any such notice
shall be deemed to be delivered when deposited in t he United States mail,
addressed to the shareholder at his address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid.
Any notice required to be given to any shareholder under any provision
of the applicable state law or the Articles of Incorporation or these bylaws
need not be given to the shareholder if (a) notice of two consecutive annual
meetings and all notices of meetings held during the period between those
annual meetings if any or (b) all (but in no event less than two) payments
of distributions or interest on securities during a 12-month period have
been mailed to that person by first-class mail, addressed to him at his
address as shown on the records of the Corporation, and have been returned
undeliverable. Any action or meeting taken or held without notice to such
person shall have the same force and effect as if the notice had been duly
given and, if the action taken by the Corporation is reflected in any
articles or document filed with the Secretary of State, those articles or
that document may state that notice was duly given to all persons to whom
notice was required to be given. If such a person delivers to the
Corporation written notice setting forth his then current address, the
requirement that notice be given to that person shall be reinstated.
Section 7. Voting List. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make at least ten
days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a period of ten days prior to such meeting,
shall be kept on file at the registered office of the Corporation and shall
be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original stock
transfer books shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders. Failure to comply with the requirements of this Section shall
not affect the validity of any action taken at such meeting.
Section 8. Proxies. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Proxies for use at any meeting of shareholders or in
connection with the taking of any action by written consent shall be filed
with the Secretary, or such other officer as the Board of Directors may from
time to time determine by resolution, before or at the time of the meeting
or execution of the written consent, as the case may be. All proxies shall
be received and taken charge of and all ballots shall be received and
canvassed by the secretary of the meeting who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and
the acceptance or rejection of votes, unless an inspector or inspectors
shall have been appointed by the chairman of the meeting, in which event
such inspector or inspectors shall decide all such questions.
<PAGE>
No proxy shall be valid after 11 months from the date of its execution
unless otherwise provided in the proxy. A proxy shall be revocable unless
the proxy form conspicuously states that the proxy is irrevocable and the
proxy is coupled with an interest. Proxies coupled with an interest shall
include the appointment as proxy of any of the persons set forth in the
applicable state law, including without limitation:
(a) a pledgee;
(b) A person who purchased or agreed to purchase, or owns or holds an
option to purchase, the shares;
(c) a creditor of the Corporation who extended its credit under
terms requiring the appointment;
(d) an employee of the Corporation whose employment contract
requires the appointment; or
(e) a party to a voting agreement executed under applicable state
law.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide to the contrary, a majority of such persons
present at any meeting at which their powers thereunder are to be exercised
shall have and may exercise all the powers of voting or giving consents
thereby conferred, or if only one be present, then such powers may be
exercised by that one; or, if an even number attend and a majority do not
agree on any particular issue, the Corporation shall not be required to
recognize such proxy with respect to such issue if such proxy does not
specify how the shares that are the subject of such proxy are to be voted
with respect to such issue.
Section 9. Voting; Elections; Inspectors. Unless otherwise required
by law or provided in the Articles of Incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted
to a vote at a meeting of shareholders.
All voting, except as required by the Articles of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however,
that a vote by ballot shall be taken upon demand therefor by shareholders
holding issued and outstanding shares representing a majority of the voting
power present in person or by proxy at any meeting. Every vote by ballot
shall be taken by written ballots, each of which shall state the name of the
shareholder or proxy voting and such other information as may be required
under the procedure established for the meeting.
At any meeting at which a vote is taken by ballots, the chairman of the
meeting may appoint one or more inspectors, each of whom shall subscribe an
oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
Such inspector shall receive the ballots, count the votes and make and sign
a certificate of the result thereof. The chairman of the meeting may
appoint any person to serve as inspector, except no candidate for the office
of director shall be appointed as an inspector.
<PAGE>
At each election of directors each shareholder entitled to vote thereat
shall, unless otherwise provided by law or by the Articles of Incorporation,
have the right to vote the number of shares owned by him for as many persons
as there are to be elected and for whose election he has a right to vote.
Unless expressly prohibited by the Articles of Incorporation, a shareholder
shall have the right to cumulate his votes by giving one candidate as many
votes as the number of such directors multiplied by his shares shall equal,
or by distributing such votes on the same principle among any number of such
candidates. Any shareholder who intends to cumulate his votes shall give
written notice of such intention to the Secretary of the Corporation on or
before the day preceding the election at which such shareholder intends to
cumulate his votes. Any shareholder may cumulate his votes if such
shareholder or any other shareholder gives the written notice provided for
herein.
Section 10. Conduct of Meetings. All meetings of the shareholders
shall be presided over by the chairman of the meeting, who shall be the
Chairman of the Board (if any), or if he is not present, the President, or
if neither the Chairman of the Board (if any) nor President is present, a
chairman elected at the meeting. The Secretary of the Corporation, if
present, shall act as secretary of such meetings, or if he is not present,
an Assistant Secretary (if any) shall so act; if neither the Secretary nor
an Assistant Secretary (if any) is present, then a secretary shall be
appointed by the chairman of the meeting. The chairman of any meeting of
shareholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct
of discussion as seem to him in order. Unless the chairman of the meeting
shall otherwise determine or otherwise conduct the meeting, the order of
business shall be as follows:
(a) Calling of meeting to order.
(b) Election of a chairman, and the appointment of
a secretary, if necessary.
(c) Presentation of proof of the due calling of
the meeting.
(d) Presentation and examination of proxies and
determination of a quorum.
(e) Reading and settlement of the minutes of the
previous meeting.
(f) Reports of officers and committees.
(g) The election of directors, if an annual meeting
of a meeting called for that purpose.
(h) Other business.
(i) Adjournment.
Section 11. Treasury Stock. Neither the Corporation nor any other
person shall vote, directly or indirectly, at any meeting, shares of the
Corporation's own stock owned by the Corporation, shares of the
Corporation's own stock owned by another corporation the majority of the
voting stock of which is owned or controlled by the Corporation, and shares
of the Corporation's own stock held by the Corporation in a fiduciary
capacity; and such shares shall not be counted in determining the total
number of outstanding shares at any given time.
<PAGE>
ARTICLE III
Board of Directors
Section 1. Power; Number; Term of Office. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, and subject to the restrictions imposed by law or the Articles of
Incorporation, they may exercise all the powers of the Corporation.
Unless otherwise provided in the Articles of Incorporation, the number
of directors that shall constitute the entire Board of Directors shall be
determined from time to time by resolution of the Board of Directors
(provided that no decrease in the number of directors that would have the
effect of shortening the term of an incumbent director may be made by the
Board of Directors). If the Board of Directors makes no such determination,
the number of directors shall be the number set forth in the Articles of
Incorporation as the number of directors constituting the initial Board of
Directors. Each director shall hold office for the term for which he is
elected and thereafter until his successor shall have been elected and
qualified, or until his earlier death, resignation or removal.
Unless otherwise provided in the Articles of Incorporation, directors
need not be shareholders of the Corporation or residents of the State of New
York.
Section 2. Quorum; Required Vote for Director Action. Unless
otherwise required by law or provided in the Articles of Incorporation or
these bylaws, a majority of the total number of directors shall constitute a
quorum for the transaction of business of the Board of Directors, and the
vote of a majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
Section 3. Meetings; Order of Business. Meetings of the Board of
Directors may be held at such place or places as shall be determined from
time to time by resolution of the Board of Directors. At all meetings of
the Board of Directors business shall be transacted in such order as shall
from time to time be determined by the Chairman of the Board (if any), or in
his absence by the President (if the President is a director), or by
resolution of the Board of Directors.
Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Section 4. First Meeting. In connection with any annual meeting of
shareholders at which directors were elected, the Board of Directors may, if
a quorum is present, hold its first meeting for the transaction of business
immediately after and at the same place as such annual meeting of the
shareholders. Notice of such meeting at such time and place shall not be
required.
Section 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such
regular meetings shall not be required.
<PAGE>
Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President
or, on the written request of any one director, by the Secretary, in each
case on at least 24 hours personal, written, telegraphic, cable or wireless
notice to each director. Such notice, or any waiver thereof pursuant to
Article VIII, Section 3 hereof, need not state the purpose or purposes of
such meeting except as may otherwise be required by law or provided for by
the Articles of Incorporation or these bylaws.
Section 7. Removal. At any meeting of shareholders at which a quorum
of shareholders is present called expressly for that purpose, or pursuant to
a written consent adopted pursuant to Article VIII, Section 8 hereof, any
director may be removed, with or without cause, by vote of the holders of
issued and outstanding shares representing a majority of the votes entitled
to be cast for the election of such director; provided that if the
shareholders have the right to cumulate votes for the election of directors,
and less than the entire Board of Directors is to be removed, no director
may be removed if the votes cast against his removal would be sufficient to
elect him if then cumulatively voted (a) at an election of the entire Board
of Directors, or (b) if there be classes of directors, at an election of the
class of directors of which such director is a part.
Section 8. Vacancies; Increases in the Number of Directors. Any
directorship to be filled by reason of an increase in the number of
directors may be filled (a) by the Board of Directors for a term of office
continuing only until the next election of one or more directors by the
shareholders; provided, however, that during the period between any two
successive annual meetings of shareholders, the Board of Directors may not
fill more than two such directorships; or (b) by election at an annual or
special meeting of shareholders entitled to vote in the election of such
directors called for that purpose.
Any vacancy occurring in the Board of Directors other than by reason of
an increase in the number of directors may be filled (i) by election at an
annual or special meeting of the shareholders called for that purpose or
(ii) by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy occurring other than by reason of an increase in the number of
directors shall be elected for the unexpired term of his predecessor in
office.
Section 9. Compensation. Unless restricted by the Articles of
Incorporation, the Board of Directors shall have the authority to fix the
compensation, if any, of directors.
Section 10. Presumption of Assent. A director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
<PAGE>
Section 11. Approval or Ratification of Acts or Contracts by
Shareholders. The Board of Directors in its discretion may submit any act
or contract for approval or ratification at any annual meeting of the
shareholders, or at any special meeting of the shareholders called for the
purpose of considering any such act or contract, and any act or contract
that shall be approved or be ratified by the vote of the shareholders
holding a majority of the issued and outstanding shares of stock of the
Corporation entitled to vote and present in person or by proxy at such
meeting (provided that a quorum is present), shall be as valid and as
binding upon the Corporation and upon all the shareholders as if it shall
have been approved or ratified by every shareholder of the Corporation.
ARTICLE IV
Committees
Section 1. Designation; Powers. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from
among its members one or more committees, each of which, to the extent
provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors, except that no such committee shall
have the authority of the Board of Directors in reference to amending the
Articles of Incorporation, approving a plan of merger or consolidation,
recommending to the shareholders the sale, lease, or exchange of all or
substantially all of the property and assets of the Corporation otherwise
than in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the Corporation or a revocation
thereof, amending, altering, or repealing these bylaws or adopting new
bylaws for the Corporation, filling vacancies in the Board of Directors or
any such committee, filling any directorship to be filled by reason of an
increase in the number of directors, electing or removing officers of the
Corporation or members of any such committee, fixing the compensation of any
member of such committee, or altering or repealing any resolution of the
Board of Directors that by its terms provides that it shall not be so
amendable or repealable in such manner; and, unless such resolution or the
Articles of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
shares of the Corporation.
Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman and
secretary, shall keep regular minutes of its proceedings and report the same
to the Board of Directors when requested, shall fix its own rules or
procedures, and shall meet at such times and at such place or places as may
be provided by such rules, or by resolution of such committee or of the
Board of Directors. At every meeting of any such committee, the presence of
a majority of all the members thereof shall constitute a quorum, and the
affirmative vote of a majority of the members present shall be necessary for
the adoption by it of any resolution.
Section 3. Substitution of Members. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may
designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of such
committee.
<PAGE>
Section 4. Dissolution. The Board of Directors dissolve any committee
at any time, unless otherwise provided in the Article of Incorporation or
these bylaws.
ARTICLE V
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President and a Secretary and such other officers as
the Board of Directors may from time to time elect or appoint, including,
without limitation, a Chairman of the Board one or more Vice Presidents (any
one or more of whom may be designated Executive Vice President or Senior
Vice President), one or more Assistant Vice Presidents, a Treasurer, one or
more Assistant Secretaries. Each officer shall hold office until his
successor shall be duly elected and shall qualify or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided. Any number of offices may be held by the same person. Except for
the Chairman of the Board, if any, no officer need be a director.
Section 2. Salaries. The salaries or other compensation, if any, of
the officers and agents of the Corporation shall be fixed from time to time
by the Board of Directors.
Section 3. Removal. Any officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed, either with
or without cause, by the Board of Directors whenever in its judgment the
best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent or member of a
committee shall not of itself create contract rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 5. Powers and duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board (if any) or other
officer as chief executive officer. Subject to the control of the Board of
Directors, the chief executive officer shall have general executive charge,
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonable incident to such
responsibilities; he may agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the
Corporation and may sign all certificates for shares of capital stock of the
Corporation; and he shall have e such other powers and duties as designated
in accordance with these bylaws and as from time to time may be assigned to
him by the Board of Directors.
Section 6. Powers and Duties of the Chairman of the Board. The
Chairman of the Board (if any) shall preside at all meetings of the
shareholders and of the Board of Directors; and the Chairman shall have such
other powers and duties as designated in these bylaws and as from time to
time may be assigned to him by the Board of Directors.
<PAGE>
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to
agree upon and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Corporation; and, unless the Board of
Directors otherwise determines, he shall, in the absence of the Chairman of
the Board or if there be no Chairman of the Board, preside at all meetings
of the shareholders and (should he be a director) of the Board of Directors;
and the President shall have such other powers and duties as designated in
accordance with these bylaws and as from time to time may be assigned to him
by the Board of Directors.
Section 8. Vice Presidents. The Vice President(s), if any, shall
perform such duties and have such powers as the Board of Directors may from
time to time prescribe. In addition, in the absence of the Chairman of the
Board (if any) or President, or in the event of their inability or refusal
to act, (i) a Vice President designated by the Board of Directors or (ii) in
the absence of such designation, the Vice President who is present and who
is senior in terms of time as a Vice President of the Corporation, shall
perform the duties of the Chairman of the Board (if any), or the President,
as the case may be, and when so acting shall have all the powers of and be
subject to all the restrictions upon the Chairman of the Board (if any), or
the President; provided that he shall not preside at meetings of the Board
of Directors unless he is a director.
Section 9. Assistant Vice Presidents. Each Assistant Vice President,
if any, shall have the usual powers and duties pertaining to his office,
together with such other powers and duties as designated in these bylaws and
as from time to time may be assigned to him by the chief executive officer
or the Board of Directors or the Vice President. The Assistant Vice
Presidents shall exercise the powers of the Vice President during that
officer's absence or inability or refusal to act.
Section 10. Treasurer. The Treasurer, if any, shall have
responsibility for the custody and control of all the funds and securities
of the Corporation, and he shall have such other powers and duties as
designated in these bylaws and as from time to time may be assigned to him
by the Board of Directors. He shall perform all acts incident to the
position of Treasurer subject to the control of the chief executive officer
and the Board of Directors; and the Treasurer shall, if required by the
Board of Directors, give bond for the faithful discharge of his duties in
such form as the Board of Directors may require.
Section 11. Assistant Treasurers. Each Assistant Treasurer, if any,
shall have the usual powers and duties pertaining to his office, together
with such other powers and duties as designated in these bylaws and as from
time to time may be assigned to him by the chief executive officer or the
Board of Directors or the Treasurer. The Assistant Treasurers shall
exercise the powers of the Treasurer during that officer's absence or
inability or refusal to act.
<PAGE>
Section 12. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, and the minutes of all meetings of the
shareholders, in books provided for that purpose; he shall attend to the
giving and serving of all notices; he may in the name of the Corporation
affix the seal (if any) of the Corporation to all contracts of the
Corporation and attest thereto; he may sign with the other appointed
officers all certificates for shares of capital stock of the Corporation; he
shall have charge of the certificate books, transfer books and stock
ledgers, and such other books and papers as the Board of Directors may
direct, all of which shall at all reasonable times be open to inspection of
any director upon application at the office of the Corporation during
business hours, he shall have such other powers and duties as designated in
these bylaws and as from time to time may be assigned to him by the chief
executive officer or the Board of Directors; and he shall in general perform
all duties incident to the office of Secretary, subject to the control of
the chief executive officer and the Board of Directors.
Section 13. Assistant Secretaries. Each Assistant Secretary, if any,
shall have the usual powers and duties pertaining to his office, together
with such other powers and duties as designated in these bylaws and as from
time to time may be assigned to him by the chief executive officer or the
Board of Directors or the Secretary. The Assistant Secretaries shall
exercise the powers of the Secretary during that officer's absence or
inability or refusal to act.
Section 14. Action With Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, each of the chief
executive officer and the Treasurer (if any), or either of them, shall have
power to vote and otherwise act on behalf of the Corporation, in person or
by proxy, at any meeting of shareholders of or with respect to any action of
shareholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which
this Corporation may possess by reason of its ownership of securities in
such other corporation.
ARTICLE VI
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Subject to the limitations and
conditions as provided in this Article VI, each person who was or is made a
party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative (hereinafter a
"proceeding"), or any appeal in such a proceeding or any inquiry or
investigation that could lead to such a proceeding, by reason of the fact
that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the Corporation or while a director or
officer of the Corporation is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise shall be indemnified by the
Corporation to the fullest extent permitted by the applicable state statute,
as the same exists or may hereafter by amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against judgments, penalties
<PAGE>
including excise and similar taxes and punitive damages), fines, settlements
and reasonable expenses (including, without limitation, attorneys' fees)
actually incurred by such person in connection with such proceeding, and
indemnification under this Article VI shall continue as to a person who has
ceased to serve in the capacity which initially entitled such person to
indemnity hereunder. The rights granted pursuant to this Article VI shall be
deemed contract rights, and no amendment, modification or repeal of this
Article VI shall have the effect of limiting or denying any such rights with
respect to actions taken or proceedings arising prior to any such amendment,
modification or repeal. It is expressly acknowledged that the
indemnification provided in this Article VI could involve indemnification
for negligence or under theories of strict liability.
Section 2. Advance Payment. The right to indemnification conferred in
this Article VI shall include the right to be paid or reimbursed by the
Corporation the reasonable expenses incurred by a person of the type
entitled to be indemnified under Section 1 who was, is or is threatened to
be made a named defendant or respondent in a proceeding in advance of the
final disposition of the proceeding and without any determination as to the
person's ultimate entitlement to indemnification; provided, however, that
the payment of such expenses incurred by any such person in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of a written affirmation by such delivery to the Corporation of
a written affirmation by such director or officer of his or her good faith
belief that he or she has met the standard of conduct necessary for
indemnification under this Article VI and a written undertaking, by or on
behalf of such person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified person is not entitled to be
indemnified under this Article VI or otherwise.
Section 3. Indemnification of Employees and Agents. The Corporation,
by adoption of a resolution of the Board of Directors, may indemnify and
advance expenses to an employee or agent of the Corporation to the same
extent and subject to the same conditions under which it may indemnify and
advance expenses to directors and officers under this Article VI; and, the
Corporation may indemnify and advance expenses to persons who are not or
were not directors, officers, employees or agents of the Corporation but who
are or were serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other
enterprise against any liability asserted against him and incurred by him in
such a capacity or arising out of his status as such a person to the same
extent that it may indemnify and advance expenses to directors under this
Article VI.
Section 4. Appearance as a Witness. Notwithstanding any other
provision of this Article VI, the Corporation may pay or reimburse expenses
incurred by a director or officer in connection with his or her appearance
as a witness or other participation in a proceeding at a time when he or she
is not named defendant or respondent in the proceeding.
Section 5. Nonexclusivity of Rights. The right to indemnification and
the advancement and payment of expenses conferred in this Article VI shall
not be exclusive of any other right which a director or officer or other
person indemnified pursuant to Section 3 of this Article VI may have or
hereafter acquire under any law (common or statutory), provision of the
Articles of Incorporation of the Corporation or these bylaws, agreement,
vote of shareholders or disinterested directors or otherwise.
<PAGE>
Section 6. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was
serving as a director, officer, employee or agent of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, proprietorship, employee benefit plan, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under this Article VI.
Section 7. Shareholder Notification. To the extent required by law,
any indemnification of or advance of expenses to a director or officer in
accordance with this Article VI shall be reported i writing to the
shareholders with or before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission to shareholders
of a consent to action without a meeting and, in any case, within the 12-
month period immediately following the date of the indemnification or
advance.
Section 8. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction,
then the Corporation shall nevertheless indemnify and hold harmless each
director, officer or any other person indemnified pursuant to this Article
VI as to costs, charges and expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative to the
full extent permitted by any applicable portion of this Article VI that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
ARTICLE VII
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent
with that required by law and the Articles of Incorporation, as shall be
approved by the Board of Directors. The Chairman of the Board (if any),
President or a Vice President (if any) shall cause to be issued to each
shareholder one or more certificates, which shall be signed by the Chairman
of the Board (if any), President or a Vice President (if any) and the
Secretary or an Assistant Secretary (if any) or the Treasurer or an
Assistant Treasurer (if any) certifying the number of shares (and, if the
stock of the Corporation shall be divided into classes or series, the class
and series of such shares) owned by such shareholder in the Corporation;
provided, however, that any of or all the signatures on the certificate may
be facsimile. If the Board of Directors shall have provided for a seal,
such certificates shall bear such seal or a facsimile thereof. The stock
record books and the blank stock certificate books shall be kept by the
Secretary, or at the office of such transfer agent or transfer agents as the
Board of Directors may from time to time by resolution determine. In case
any officer, transfer agent or registrar who shall have signed or whose
facsimile signature or signatures shall have been place upon any such
certificate or certificates shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued by the Corporation,
such certificate may nevertheless be issued by the Corporation with the same
<PAGE>
effect as if such person were such officer, transfer agent or registrar at
the date of issue. The stock certificates shall be consecutively numbered
and shall be entered in the books of the Corporation as they are issued and
shall exhibit the holder's name and number of shares.
Each certificate shall conspicuously bear any legend required pursuant
to law.
Section 2. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives, upon surrender and cancellation of certificates for a like
number of shares (or upon compliance with the provisions of Section 5 of
this Article VII, if applicable). Upon such surrender to the Corporation or
a transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer (or upon compliance with the provisions of Section 5
of this Article VII, if applicable) and of compliance with any transfer
restrictions applicable thereto contained in an agreement to which the
Corporation is a party or of which the Corporation has knowledge by reason
of legend with respect thereto placed on any such surrendered stock
certificate, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
Section 4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or
the replacement of certificates for shares of capital stock of the
Corporation.
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates. The
Board of Directors may determine the conditions upon which a new certificate
of stock may be issued in place of a certificate that is alleged to have
been lost, stolen, destroyed or mutilated; and may, in its discretion,
require the owner of such certificate or his legal representative to give
bone, with sufficient surety, to indemnify the Corporation and each transfer
agent and registrar against any and all losses or claims which may arise by
reason of the issuance of a new certificate in the place of the one so lost,
stolen, destroyed or mutilated.
ARTICLE VIII
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation. The Secretary shall
have charge of the seal (if any). If and when so directed by the Board of
Directors, duplicates of the seal may be kept and used by the Treasurer, if
any, or by any Assistant Secretary or Assistant Treasurer.
<PAGE>
Section 3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the Articles of Incorporation or these bylaws,
except with respect to notices of meetings of shareholders (with respect to
which the provisions of Article II, Section 6 apply) and except with respect
to notices of special meetings of directors (with respect to which the
provisions of Article VIII, Section 6 apply), said notice shall be deemed to
be sufficient if given (a) by telegraphic, cable or wireless transmission or
(b) by deposit of same in a post office box in a sealed prepaid wrapper
addressed to the person entitled thereto at his address as it appears on the
records of the Corporation, and such notice shall be deemed to have been
given on the day of such transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Articles of
Incorporation or these bylaws, a written waiver thereof, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice.
Section 4. Resignations. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no time be
specified, at the time of its receipt by the chief executive officer of
Secretary. The acceptance of a resignation shall not be necessary to make
it effective, unless expressly so provided in the resignation.
Section 5. Facsimile Signatures. In addition to the provisions for
the use of facsimile signatures elsewhere specifically authorized in these
bylaws, facsimile signatures of any officer or officers of the Corporation
may be used whenever and as authorized by the Board of Directors.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the
proceedings of its shareholders and Board of Directors and shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving the names
and addresses of all shareholders and the number and class of the shares
held by each. Any books, records and minutes may be in written form or in
any other form capable of being converted into written form within a
reasonable time.
Section 7. Reliance Upon Books, Reports and Records. Neither a
director no a member of any committee of directors shall be liable if, in
the exercise of ordinary care, he relied and acted in good faith (a) upon
financial statements or other information of the Corporation represented to
him to be correct in all material respects by the President or by the
officer of the Corporation having charge of its books of account, or
reported by an independent public or certified public accountant or firm of
such accountants to present fairly the financial position of the
Corporation, or (b) upon the written opinion of an attorney for the
Corporation; nor shall he be so liable if, in the exercise of ordinary care
and in good faith, in voting for or assenting to a distribution by the
Corporation, he considered the assets of the Corporation to be of their book
value.
<PAGE>
Section 8. Action Without a Meeting or by Telephone Conference
Meeting. Any action permitted or required by law, the Articles of
Incorporation or these bylaws, to be taken at a meeting of the shareholders,
the Board of Directors or any committee designated by the Board of Directors
may be taken without a meeting if a consent in writing, setting forth the
action to be taken is signed by all the shareholders or members of the Board
of Directors or committee, as the case may be. Such consent shall have the
same force and effect as a unanimous vote at a meeting and may be stated as
such in any document or instrument filed with the Secretary of State, and
the execution of such consent shall constitute attendance or presence in
person at a meeting of shareholders, the Board of Directors or any such
committee, as the case may be. Subject to the requirements by law, the
Articles of Incorporation or these bylaws for notice of meetings, unless
otherwise restricted by the Articles of Incorporation, shareholders, members
of the Board of Directors, or members of any committee designated by the
Board of Directors, may participate in and hold a meeting of such
shareholders, Board of Directors or any committee of directors, as the case
may be by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, and participation in such meeting shall constitute
attendance and presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IX
Amendments
The Board of Directors may amend or repeal the Corporation's bylaws, or
adopt new bylaws, unless: (a) the Articles of Incorporation or the
applicable state statute reserves the power exclusively to the shareholders
in whole or part; or (b) shareholders, in amending, repealing or adopting a
particular bylaw, expressly provide that the Board of Directors may not
amend or repeal that bylaw.
Unless the Articles of Incorporation or a bylaw adopted by the
shareholders provides otherwise as to all or some portion of the
Corporation's bylaws, the Corporation's shareholders may amend, repeal or
adopt the Corporation's bylaws even though the bylaws may also be amended,
repealed or adopted by the Board of Directors.
Exhibit 4.1
February 11, 1998 PERFORMANCE
INTERCONNECT
Dan Tucker
Dear Dan:
We recognize that our success or failure will be due in large part to
the commitment and performance of our people. We also recognize that our
employees are making sacrifices as we rebuild this company and return it to
profitability. It is for these reasons that the partners have agreed that
the employees should share in the upswing as much as they have suffered
through the adversities. This is why we have implemented Employee Stock and
Cash Incentive Plans.
As a key member of the management team, we are extending to you 200,000
shares of Performance Interconnect stock. If you continue as an employee in
good standing, your shares will be vested 25% on March 1, 1999, 25% on March
1, 2000, and 50% on March 1, 2001. In the event that Performance
Interconnect is purchased, or involved in a merger, your shares will be 100%
vested at the time of the transaction.
The directors have also agreed to provide a $1000.00 cash bonus to
employees of record on December 15, 1998 and to have the employees share in
5% of the company's annual operating profit, up to 25% of your annual
salary.
Dan, we continue to believe that as a team we will succeed. These plans
are intended to provide each employee with the added financial and ownership
incentive to work toward our goals. Since this program is based upon
employee contribution to our success, we ask that your shares be kept in
confidence. If you have any additional questions, please see us.
Yours truly,
/s/
Ed Stefanko
/s/
Brooks Harman
Exhibit 4.2
PERFORMANCE INTERCONNECT CORP.
17300 N. Dallas Parkway
Suite 2040
Dallas. TX 75248
November 29, 1999
Mr. Hin Hiong Khnoo
Nations Corp
VIA FAX 011 65 487 7789
-----------------------
The purpose of this letter is to evidence our agreement regarding the
investment by Nations Corp ("NC") into Performance Interconnect Corp.
("PIC").
PIC has signed a Letter of Intent to enter into a reverse merger with ESPO's
Inc. a publicly traded non-reporting corporation whose symbol is SPOS
("SPOS"). Pursuant to the reverse merger agreement, the total number of
issued and outstanding shares of SPOS will be 5,885,000 immediately after
the closing.
The terms of the NC investment are as follows:
1. NC will transfer 300,000 shares of common stock in uniView Technologies
Corp to PI or its assignee at a value equal to the stock closing price
on November 29, 1999, $2.875 per share, plus a premium of .125 per
share, for a total of $3.00 per share.
2. PI will cause SPOS to issue convertible preferred stock to NC at
follows immediately after the closing of the reverse merger.
a. The redemption value of the preferred stock shall be equal to the
value of the uniView stock (i.e. $3.00 x 300,000). a total of
$900,000.
b. The preferred stock will have a six-percent annual dividend rate,
payable quarterly in cash.
c. The preferred stock will be convertible into SPOS common stock at
the rate of $3.00 per share for five years.
<PAGE>
Mr. Hin Hiong Khoo
November 29. 1999
d. SPOS will give NC standard registration rights for shares
converted into common stock. The stock will not be subject to
Rule 144.
3. SPOS and NC shall sign such documents as are necessary to carry out
this Agreement.
Sincerely,
/s/
---------------
D. Ronald Allen
Chairman
AGREED:
/s/
--------------
Hin Hiong Khoo
/s/
---------------
Marguerite Khoo
Exhibit 4.3
Associates Fundings Group, Inc.
17300 N. Dallas Parkway
Suite 2040
Dallas, Texas 75248
(972) 381-1212
Fax (972) 381-1211
December 27, 1999
Board of Directors
ESPO'S Inc.
17300 N. Dallas Parkway
Suite 2040
Dallas, TX 75248
Gentlemen:
The purpose of this letter is to evidence our Agreement with respect to
issuance of a series of preferred stock by ESPO's Inc. to replace the Series
A Preferred Stock issued by Performance Interconnect Corp. ("PI Series A").
Our Agreement is as follows:
1. ESPO's Inc. will amend its Corporate Charter to permit issuance
of preferred stock.
2. Immediately upon amendment of the charter, ESPO's Inc. will
approve of the following issue of preferred stock ("ESPO's
Preferred")
a. Par value shall be $10 per share
b. Redemption value shall be $1000 per share
c. Cumulative dividends, payable monthly, of 8 % per year of
the redemption value in the first year, 10% per year in the
second year, 12% per year in the third year, and 14% per
year in the fourth year, and 16% per year thereafter.
d. Collateral shall be given on all assets of ESPO's Inc.
3. The holders of PI Series A, consisting of 2,452 shares plus
rights to accrued dividends, shall exchange all their PI Series A
rights for 3,000 shares of ESPO's Preferred. The shares shall be
issued as follows:
CMLP Group Ltd. 1,770 shares
Winterstone Management Inc. 1,230 shares
-----
3,000 Shares
<PAGE>
Board of Directors
ESPO's Inc.
December 27, 1999
Page 2
4. The holders of the ESPO's Preferred Shares shall have the right
to be issued warrants that, if exercised, would prevent dilution
in the common stock ownership percentage of the ESPO's Preferred
shareholders and their affiliates. The warrants would be issued
on terms matching those of any issuance of stock or warrants and
would extend five years beyond the redemption date of the ESPO's
Preferred.
5. This Agreement shall be effective December 31, 1999 and shall be
given effect as of that date without regard to the actual date of
the Amendment to the Charter of ESPO's Inc.
Sincerely,
/s/
D. Ronald Allen, President
AGREED AND ACCEPTED:
ESPO's Inc. BC&Q Corp.
/s/ /s/
-------------------------- --------------------------
D. Ronald Allen, President D. Ronald Allen, President
Winterstone Management Inc. Touchstone Enterprises Inc.
/s/ /s/
-------------------------- --------------------------
D. Ronald Allen, President D. Ronald Allen, President
CMLP Group Ltd.
/s/
--------------------------
D. Ronald Allen, President,
General Partner
Associates Funding Group Inc.
Exhibit 4.4
Winterstone Management, Inc.
10911 Petal Street
Suite 105
Dallas, Texas 75238
(214) 503-0146
Fax (214) 503-8607
October 9, 1998
Mr. Ed Stefanko
Performance Interconnect Corp
1101 Pamela Dr.
Euless, TX 76040
Dear Mr. Stefanko:
Pursuant to the Letter of Intent dated August 28, 1998, principal and
accrued interest as of April 30, 1998 on the following notes shall be
converted to Preferred Stock:
1. Winterstone Management Inc. $ 600,000
2. Associates Funding Group Inc. 100,000
3. BC&Q Corp 1,000,000
4. Touchstone Enterprises Inc. 630,000
---------
$2,330,000
=========
Preferred shares shall be designated as "Series A Preferred Stock" pursuant
to the attached "Description of Series A Preferred Stock" and, subject to
the terms of the August 28, 1998 Letter of Intent, shall be issued as
follows:
BC&Q Corp 1,724
Winterstone Management Inc. 84
Associates Funding Group 14
Touchstone Enterprises Inc. 630
-----
2,452
=====
The shares and debt shall be treated as if the shares had been issued
April 30, 1998.
Winterstone Management Inc.
/s/
--------------------------
D. Ronald Allen, President
<PAGE>
Mr. Ed Stefanko October 9, 1998
Page 2
Associates Funding Group Inc.
/s/
--------------------------
D. Ronald Allen, President
BC&Q Corp.
/s/
--------------------------
D. Ronald Allen, President
Touchstone Enterprises Inc.
/s/
--------------------------
D. Ronald Allen, President
Performance Interconnect Inc.
/s/
--------------------------
Ed Stefanko, President
<PAGE>
DESCRIPTION OF SERIES A PREFERRED STOCK
---------------------------------------
Designation of Series A Preferred
---------------------------------
Pursuant to the authority expressly granted to and vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Articles at Incorporation, a series of Preferred Stock, with a par value of
$10.00 per share. of the Corporation be end hereby is established and given
the distinctive designation of "Series A Preferred Stock, $10.00 par value"
(the Series A Preferred). This Series is to consist of 3000 shares; of which
the rights and preferences and relative participating. optional or other
special rights, and the qualifications, limitations or restrictions of such
rights and preferences shall be as follows
1. Dividends. The holders of Series A Preferred shall be entitled
to receive when and as declared by the Board of Directors out of the funds
of the Corporation, legally available therefor, and the Corporation shall be
bound to pay thereon, payable in cash only, from said proceeds, at the
annual rate of six percent (6%) of the liquidation value per annum per share
of Series A Preferred. Such dividends shall be paid in preference to the
holders of any other class of capital stock, or series thereon. Such
dividends shall commence to accrue on the date any shares of the Series A
Preferred are first issued and become outstanding and shall be available to
holders of record on the record date as fixed by the board of directors of
the Corporation. Such dividends shall be cumulative, so that if at anytime,
dividends upon the outstanding Series A Preferred shall not have been paid
or declared and a sum sufficient for the payment thereof set apart for such
Description of payment, the amount of the deficiency shall accrue and shall
bear dividends at the annual rate of six percent (6%) per annum and the
aggregate deficiency shall be fully paid, or dividends in such amount
declared and a sum sufficient for the payment thereof set apart for such
payment, for all prior periods before any sum or sums shall be paid or set
aside as dividends for any other class, or series thereof, of capital stock
of the corporation. If the dividend on the Series A Preferred for any
dividend period shall not have been paid or set apart in full, no asset
which is by law available for the payment of dividends shall be paid or set
aside for the purchase or redemption of any class of capital stock, or any
series thereof, of the corporation.
2. Voting Rights. The Series A Preferred shall not have the right to
vote on any or all matters that the holders of Common Stock are entitled to
vote on.
<PAGE>
3. Redemption.
a. Subject to the other provisions of this Paragraph 3 and
applicable law, the corporation shall have the right, but not the
obligation, to redeem the Series A Preferred at any time at a price
equal to the liquidation value.
i. If any such notice of redemption shall have been duly
given or if the Corporation shall have granted to a bank or
trust company an irrevocable written authorization promptly
to give or complete such notice and pay all amounts due to
holders of shares (as evidenced by a list of holders of such
shares certified by the president or a vice president and by
the secretary or an assistant secretary of the Corporation)
called for redemption and if, on or before the redemption
date specified therein, all funds necessary for such
redemption (including an amount equal to the accumulated and
unpaid dividends thereon to the date fixed for redemption)
shall have been deposited by the Corporation with such bank
or trust company designated in such notice, in trust for the
pro rata benefit of the holders of the shares so called for
redemption, then, notwithstanding that any certificate for
shares so called for redemption shall not have been
surrendered for cancellation, from and after the time of
such deposit (or from and after the redemption date if such
notice shall fail to state the holders of the shares called
for redemption may receive their Redemption Price at any
time after such deposit), all shares with respect to which
such deposit shall have been made shall no longer be deemed
to be outstanding and all rights with respect to such shares
shall cease and terminate, except for the right of the
holders of the certificates, upon surrender thereof, to
receive the Redemption Price out of the funds so deposited,
without interest. Any interest accrued on such funds shall
be paid to the Corporation from time to time.
b. The Corporation has assigned a secured interest and a
perfected lien position on all assets of the corporation in order to
secure the redemption of the Series A Preferred Stock. This security
interest is not subordinated to any other class or series of stock.
c. If the Corporation shall fail to redeem the Series A Preferred
as set forth in Paragraph 3 herein, the holder of the Series A
Preferred Stock shall have a right to notify the Corporation of its
intent to foreclose on its security interest in the assets after the
notice time period legally required by the appropriate jurisdiction
for the asset classification intended to be foreclosed. Proceeds
remaining after the foreclosure sale and related expenses (including
attorney's fees) shall be distributed to the holders of the Series A
Preferred Stock pro-rata in accordance with the number of shares held
by each. After payment in full to the holders of Series A Preferred of
the amount distributable to them as herein provided, the excess, if
any, shall be remitted to the corporation.
d. Any shares of Series A Preferred redeemed, purchased or
otherwise acquired by the Corporation shall be deemed canceled and may
thereafter be reissued as Series A Preferred or any other series of
Preferred Stock at a par value set by the Board of Directors.
<PAGE>
4. Conversion No holder of Series A Preferred shall have the right
to convert the shares of Series A Preferred held by such holder into fully
paid and nonassessable shares of Common Stock of the Corporation.
5. Priority in Event of Dissolution and Liquidation or Sale of Assets.
a. Subject to the remaining provision of this Paragraph 5, in the
event of any sale of all or substantially all of the assets of the
Corporation or any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or otherwise (a
"Liquidating Event"), after payment or provision for payment of the
debts and other liabilities of the corporation, the holders of Series
A Preferred shall be entitled to receive, out of the remaining net
assets of the Corporation, an amount equal to $2,000.00 in cash, plus
all accumulated but unpaid dividends (the "Liquidation Value"), for
each outstanding share of Series A Preferred, before any distribution
or payment shall be made to the holders of Common Stock of the
corporation. Upon the occurrence of any Liquidating Event, and after
payment or provisions for payment of the debts and other liabilities
of the Corporation, if the assets of the Corporation available for
distribution to shareholders shall be insufficient to permit the
payment to the holders of Series A Preferred of an amount equal to the
Liquidation Value per share, then. all the remaining assets of the
Corporation shall be distributed ratably among the holders of Series A
Preferred then outstanding according to the number of shares held by
each. After payment in full to the holders of Series A. Preferred of
the amount distributable to them as herein provided, the holders of
any other junior capital stock shall be entitled, to the exclusion of
the holders of Series A Preferred, to share ratably in the remaining
assets of the Corporation in accordance with their respective rights.
b. Neither the consolidation nor merger of the corporation with
or into any other corporation shall be deemed to be a sale of all or
substantially all of the assets of the Corporation or a liquidation,
dissolution or winding up of the affairs of the Corporation. whether
voluntary or otherwise, within the meaning of this Paragraph 5.
c. No provision of this Paragraph 5 shall in any manner, prior to
any sale of all or substantially all of the assets of the corporation
or any liquidation, dissolution or winding up df the affairs of the
Corporation, whether voluntary or otherwise create or be considered or
deemed to create any restriction upon the surplus of the Corporation
or prohibit the payment of dividends on the capital stock of the
corporation out of the funds of the Corporation legally available
therefor, nor shall any such restriction or prohibition be in any
manner implied from the provisions of this Paragraph 5.
<PAGE>
6. Shareholders Agreement. The Series A Preferred Shareholders shall
notify the Corporation of any proposed transfer of the Series A Preferred
stock and shall give the Corporation a right of first refusal on a proposed
transfer of the Series A Preferred.
a. Notice of transfer of Series A Preferred shall be given by
mailing such notice not less than twenty (20) nor more than fifty (50)
days prior to the date fixed for such proposed transfer to the
Corporation of shares of Series A Preferred to be so transferred,
by first class mail, postage prepaid. If less than all of the
outstanding Series A Preferred is to be transferred, the redemption
may be made pro rata, by lot or in such other equitable manner as may
be prescribed by resolution of the Board of directors.
i. Subject to the foregoing and to the provisions contained
in this Paragraph 6, the Board of directors shall have full
power and authority to prescribe the terms and conditions
upon which Series A Preferred shall be transferred from time
to time.
Exhibit 4.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED; ASSIGNED OR OTHERWISE DISPOSED OF UNLESS THIS WARRANT
SHALL HAVE BEEN REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR OF THIS OR SUCH SALE, TRANSFER, ASSIGNMENT OR
DISPOSITION WILL NOT INVOLVE ANY VIOLATION OF THE REGISTRATION PRO VISIONS
OF THE ACT OR OF ANY APPLICABLE STATE SECURITIES LAW.
PERFORMANCE INTERCONNECT CORP.
(a Texas corporation)
Warrant for the purchase of securities of Performance Interconnect Corp.
VOID AFTER 5:00 P.M., EASTERN TIME, ON OCTOBER 22, 2002.
FOR VALUE RECEIVED, Performance Interconnect Corp., a Texas
corporation (the "Company"), hereby grants to USA Funding, Inc., or
its assigns (the "Holder"), the right, subject to the provisions of
this Warrant, to purchase from the Company at any time during the
period commencing on the date hereof and expiring at 5:00 p.m.,
Eastern Time, on October 22, 2002 (the "Expiration Date"), 4,000,000
fully paid and nonassessable shares of the Company's authorized but
unissued Common Stock (as hereinafter defined) at a price (the
"Exercise Price") of $0.50 per share (such Exercise Price and the
number of shares of Common Stock purchasable hereunder being subject
to adjustment as provided herein).
The term "Common Stock" means the common stock of the Company,
together with any other equity securities that may be issued by the
Company in respect thereof or in substitution therefor. The shares of
Common Stock deliverable or delivered upon such exercise, as adjusted
from time to time, are hereinafter referred to as "Warrant Stock."
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant
certificate and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification and upon surrender and
cancellation of this Warrant certificate, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
1. Exercise of Warrant. This Warrant may be exercised, subject to
the requirements set forth below, in whole or in part at any time or
from time to time prior to 5:00 p.m., Central Time, on the Expiration
Date, or, if such a day is a day on which banking institutions in
Dallas, Texas are authorized by law to close, then on the next
succeeding day that shall not be such a day, by presentation and
surrender of this Warrant certificate to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the
Warrant Exercise Form attached hereto duly executed and accompanied by
payment (either in cash or by certified or official bank check,
payable to the order of the Company) of the Exercise Price. Upon
receipt by the Company of this Warrant certificate, together with the
Exercise Price, at its office, or by the stock transfer agent if any,
<PAGE>
of the Company or at its offices, in proper form for exercise as
described above, the Holder shall be deemed to be the holder of record
for the shares of Common Stock issuable upon such exercise, even if
the stock transfer books of the Company shall then be closed or
certificates representing such shares of Common Stock shall not have
been delivered to the Holder. The Holder shall pay any and all
documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on
exercise of this Warrant The Company shall promptly thereafter issue
certificate(s) evidencing the Common Stock so purchased.
2. Reservation of Shares. The Company shall at all times
reserve for issuance and delivery upon exercise of this Warrant all
shares of Common Stock or other shares of capital stock of the Company
(and other securities) from time to time receivable upon exercise of
this Warrant. All such shares (and other securities) shall be duly
authorized and, when issued upon exercise, shall be validly issued,
fully paid and nonassessable.
3. No Fractional Shares Issued. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant, but the Company shall pay the Holder an amount equal to
the Fair Value (as hereinafter defined), on the business day prior to
the exercise of this Warrant, of such fractional share of Common Stock
in lieu of each fraction of a share otherwise called for upon exercise
of this Warrant.
4. Transfer.
(a) Securities Law. Neither this Warrant nor the Warrant
Stock issuable upon the exercise hereof has been registered under the
Securities Act of 1933, as amended (the "Act"), or under any state
securities laws and, unless so registered, may not be transferred,
sold, pledged, hypothecated or otherwise disposed of unless an
exemption for such registration is available. In the event Holder
desires to transfer this Warrant or any of the Warrant Stock issued
upon the exercise hereof, the Holder must give the Company prior
written notice of such proposed transfer including the name and address
of the proposed transferee. Such transfer may be made only either (i)
upon registration of the Warrants or Warrant Stock pursuant to the Act
and applicable state securities laws, (ii) upon publication by the
Securities and Exchange Commission (the "Commission") of a ruling,
interpretation, opinion or "no action letter" based upon facts
presented to the Commission, or (iii) upon receipt by the Company of an
opinion of counsel, reasonably satisfactory to the Company, in the case
of either (ii) or (iii), to the effect that the proposed transfer will
not involve any violation of the registration provisions of the Act or
of any applicable state securities laws.
<PAGE>
(b) Transfer. Except as restricted hereby, this Warrant and
the Warrant Stock may be transferred by the Holder only in whole at any
time. Upon surrender of this Warrant certificate to the Company with
the Assignment Form annexed hereto duly executed and funds sufficient
to pay any transfer tax, the Company shall, without charge, execute and
deliver a new Warrant certificate in the name of the assignee named in
such instrument of assignment, and this Warrant certificate shall
promptly be canceled. Any assignment, transfer, pledge, hypothecation
or other disposition of this Warrant attempted contrary to the
provisions of this Warrant, or any levy of execution, attachment or
other process attempted upon this Warrant, shall be null and void and
without effect.
(c) Rule 144A The Company will take, or will cause to be
taken, such action as the Holder may reasonably request from time to
time to facilitate any sale or disposition by the Holder of this
Warrant or any Warrant Stock without registration under the Act and/or
any applicable state securities laws within the limitations of the
exemptions of any rule or regulation thereunder, including, without
limitation, Rule 144A under the Act.
5. Rights of Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or
in equity, and the rights of the Holder are limited to those expressed in
this Warrant.
6. Anti-Dilution Provisions.
6.1. Adjustment of Number of Shares Purchasable. Upon any amendment
to the Company's articles of incorporation changing the number of shares
of Common Stock that the Company is authorized to issue, the number of
shares of Common Stock purchasable hereunder automatically shall be
adjusted to an amount (calculated to the nearest 1/100th of a share)
equal to ten percent of the number of shares of Common Stock that the
Company is then authorized to issue. Prior to the earlier of the
Expiration Date or the exercise of this Warrant, the Company shall not
amend its articles of incorporation to authorize the issuance of shares
of capital stock with rights and benefits substantially equivalent to the
Common Stock.
6.2. Adjustment of Exercise Price. Upon and in connection with any
adjustment in the number of shares of Common Stock purchasable hereunder,
the Exercise Price automatically shall be adjusted to an amount (rounded
to the nearest $0.01) equal to the quotient obtained by dividing
$2,000,000 by the number of shares of Common Stock purchasable hereunder
after such adjustment.
6.3. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as
practicable (but in any event not later than five days) after the
occurrence of any event requiring any adjustment under this Section 6 to
the Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), the Company
shall, at its expense, deliver to the Holder of this Warrant an officer's
certificate, setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated and
specifying the adjusted Exercise Price and the number of shares of Common
Stork purchasable upon exercise of this Warrant after giving effect to
such adjustment.
<PAGE>
(b) Extraordinary Corporate Events. If and whenever the
Company subsequent to the date hereof shall propose to (i) pay any
dividend to the holders of shares of Common Stock or to make any other
distribution to the holders of shares of Common Stock (including, without
limitation, any cash dividend), (ii) offer to the holders of shares of
Common Stock rights to subscribe for or purchase any additional shares of
any class of stock or any other rights or options, (iii) effect any
reclassification of the Common Stock (other than a reclassification
involving merely the subdivision or combination of outstanding shares of
Common Stock), (iv) engage in any reorganization or recapitalization or
any consolidation or merger (other than a merger in which no distribution
of securities or other property is to be made to holders of shares of
Common Stock), (v) consummate any sale, transfer or other disposition of
its property, assets and business or the property, assets and business of
any subsidiary of the Company as an entirety or substantially as an
entirety, or (vi) commence or effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall
deliver to the holder of this Warrant an officer's certificate giving
notice of such proposed action, specifying (A) the date on which the
stock transfer books of the Company shall close, or a record shall be
taken, for determining the holders of Common Stock entitled to receive
such dividend or other distribution or such rights or options, or the
date on which such reclassification, reorganization, recapitalization,
consolidation, merger, sale, transfer, other disposition, transaction,
liquidation, dissolution or winding up shall take place or commence, as
the case may be, and (B) the date as of which it is expected that holders
of Common Stock of record shall be entitled to receive securities or
other property deliverable upon such action, if any such date is to be
fixed. Such officer's certificate shall be delivered in the case of any
action covered by clause (i) or (ii) above, at least 20 days prior to the
record date for determining holders of Common Stock for purposes of
receiving such payment or offer, and, in any other case, at least 20 days
prior to the date upon which such action takes place and 20 days prior to
any record date to determine holders of Common Stock entitled to receive
such securities or other property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under this
Section 6.3 shall not affect the legality or validity of the adjustment
of the Exercise Price or the number of shares of Warrant Stock
purchasable upon exercise of this Warrant.
7. Various Covenants of the Company.
7.1. No Impairment or Amendment The Company shall not, and shall
not permit Varga Investments, Inc. ("Varga") or I-Con Industries, Inc.
("I-Con") to, by any action including, without limitation, amending its
charter, any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, (a) avoid or seek. to avoid the observance or
performance of any of the terms of this Warrant or (b) impair or seek to
impair the value of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate to protect the rights of
the holder hereof against impairment. Without limiting the generality of
the foregoing, the Company (a) will not permit the par value of any
shares of Warrant Stock issuable upon exercise of this Warrant to be
greater than the amount payable therefor upon such exercise, (b) will
take all such action as may be necessary or appropriate in order that the
<PAGE>
Company may validly issue fully paid and nonassessable shares of Warrant
Stock, (c) will obtain and maintain all such authorizations, exemptions
or consents from.any public regulatory body having jurisdiction as may be
necessary to enable the Company to perform its obligations under this
Warrant, (d) will not issue any capital stock or enter into any agreement
the terms of which would have the effect, directly or indirectly, of
preventing the Company from honoring its obligations hereunder, (e) will
not engage in any transaction with its officers, directors, employees,
directors or stockholders or their respective "associates" and
"affiliates" (as such terms are used in the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder)
on less than fair and reasonable terms or otherwise on less then an
arm's-length basis, (f) will cause Varga and I-Con to take, or will not
permit Varga or I-Con to take, any of the actions referred to in clauses
(a), (b), (c), (d) or (e) above, and (g) will remain the sole holder of
all of the issued and outstanding capital stock of Varga and all options,
warrants or other rights to acquire any such capital stock, and (h) will
cause Varga to remain the sole holder of all of the issued and
outstanding capital stock of I-Con and all options, warrants or other
rights to acquire any such capital stock. Without the prior written
approval of the bolder hereof, which approval may be withheld in such
holder's sole and absolute discretion, the Company shall not form or
become the owner or holder of the capital stock of any subsidiary other
than Varga and I-Con, and will not permit Varga or I-Con to form or
become the owner or holder of any capital stock of any subsidiary other
than, in the case Varga, I-Con.
So long as any Warrants or shares of Warrant Stock are outstanding,
the Company will acknowledge in writing, in form satisfactory to any
holder of any such security, the continued validity of the Company's
obligations hereunder.
7.2. Listing on Securities Exchanges, etc. At all times following
the exercise of this Warrant, the Company will use commercially
reasonable efforts to maintain the listing of all shares of Warrant Stock
on each securities exchange or market or trading system on which the
Common Stock is then or at any time thereafter listed or traded.
8. Legend and Stop Transfer Orders. Unless the shares of Warrant
Stock have been registered under the Act, upon exercise of any of this
Warrant and the issuance of any of the shares of Warrant Stock all
certificates representing shares of Warrant Stock shall bear on the face
thereof substantially the following legend, insofar as is consistent with
applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED
FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT AND APPLICABLE
STATE. SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO
THE COMPANY, IS OBTAINED STATING THAT SUCH DISPOSITION WILL NOT
INVOLVE ANY VIOLATION OF THE REGISTRATION PROVISIONS OF THE OR OF
ANY APPLICABLE STATE SECURITIES LAW."
<PAGE>
9. Registration.
(a) Piggyback Registrations. Notwithstanding the provisions
set forth above, the Company shall notify the Holder in writing at least
thirty (30) days prior to filing any registration statement under the Act
for purposes of a public offering of securities of the Company
(including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding
registration statements relating to employee benefit plans) and will
afford each such Holder an opportunity to include in such registration
statement the Warrant Stock. If the registration statement is for an
underwritten offering, the Company shall so advise the Holder and the
right of Holder to be included in a registration shall be subject to
reduction in the discretion of the underwriter (provided that any
reduction by such underwriter shall be effected pro rata with respect to
all persons or entities entitled to piggy-back registration of their
securities in such offering) and conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Warrant Stock and Holder's execution of the underwriting agreement.
(b) Payment of Expenses. All expenses incurred in connection
with registration (excluding underwriters' discounts and commissions and
the fees and expenses of counsel for the Holder), including, without
limitation, all registration, blue sky and qualification fees, printers'
and accounting fees, and fees and disbursements of counsel for the
Company shall be borne by the Company.
(c) Obligations of the Company. Whenever required to effect
the registration of the Warrant Stock, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file a registration statement with respect
thereto and use its best efforts to cause such
registration statement to become effective, and keep
such registration statement effective for up to one
hundred fifty (150) days.
(ii) Prepare and file such amendments and supplements to
such registration statement and the prospectus used in
connection wit such registration statement as may be
necessary to comply wit the provisions of the Act.
(iii). Furnish to the Holder such number of copies of a
prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such
other documents as may be reasonably requested.
(iv) Use its best efforts to register and quality the
securities covered by such registration statement under
such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the
Holder, provided that the Company shall not be required
in connection therewith or as a condition thereto to
quality to do business or to file a general consent to
service of process in any such states or jurisdictions.
<PAGE>
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting
agreement in usual and customary form, with the managing
underwriter(s) of such offering. The Holder
participating in such underwriting shall also enter into
and perform its obligations under such an agreement
(vi) Notify the Holder at any time when a prospectus
relating thereto is required to be delivered under the
Act of the happening of any event as a result of which
the prospectus included in such registration statement
or any document incorporated therein by reference, as
then in effect includes an untrue statement of a
material fact or omits to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances
then existing.
(vii) Furnish, at the request of any Holder requesting
registration on the date that such Warrant Stock is
delivered to the underwriters for sale, if such
securities are being sold through underwriters, or, if
such securities are not being sold through underwriters,
on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion,
dated as of such date, of the counsel representing the
Company for the purposes of such registration hi. form
and substance as is customarily given to underwriters in
an underwritten public offering and reasonably
satisfactory to the Holder, addressed to the
underwriters, if any, and to the Holder and (ii) a
letter dated as of such date, from the independent
certified public accountants of the Company, in form and
substance as is customarily given by independent
certified public accountants to underwriters in an
underwritten public offering and reasonably satisfactory
to the Holder, addressed to the underwriters, if any,
and to the Holder.
(viii) Afford to the Holder all rights (including the
right to conduct "due diligence" with respect to the
Company) customarily afforded to selling stockholders in
an underwritten public offering.
(d) Indemnification. The Company will indemnify and hold
harmless the Holder, the partners, officers and directors of the Holder,
any underwriter (as defined in the Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint and several)
to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or
<PAGE>
liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations
(collectively a "violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any Preliminary Prospectus or final Prospectus contained
therein or any amendments or supplements thereto, or any documents
incorporated therein by reference, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act,
any state securities law or Me or regulation promulgated under the Act,
the 1934 Act or any state securities law in connection with the offering
covered by such registration statement and the Company, at its option,
shall either assume the defense thereof or will reimburse the Holder,
partner, officer, or director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided. however that the indemnity agreement
contained in this subsection shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if the
Holder fails to promptly notify the Company of such claim or such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon a violation which
occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by such
Holder, partner, officer, director, underwriter or controlling person of
such Holder. The obligations of the Company under this paragraph shall
survive the completion of any offering of Warrant Stock.
(e) Survival. The Company's obligations under this Section
9 shall survive. until the third anniversary of the date hereof.
10. Representations and Warranties. The Company represents and
warrants to the Holder that:
(a) The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock, of which 25,000,000 shares of Common
Stock were issued and outstanding on the date hereof. Except as disclosed
by the Company to the Holder in wilting prior to the date of the issuance
of this Warrant, as of the date of the issuance of this Warrant, (i)
there are no outstanding rights, options, warrants or agreements for the
purchase from, or sale or issuance by, the Company or any of the
Company's subsidiaries of any capital stock or equity interests or
securities convertible into or exercisable or exchangeable for such stock
or equity interests; (ii) there are no agreements on the part of the
Company or any of the Company's subsidiaries to issue, sell or distribute
any securities or equity interests or any assets of the Company or any of
the Company's subsidiaries; (iii) none of the Company or any of the
Company's subsidiaries has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its securities or equity
interests or any interest therein or to pay any dividend or make any
distribution in respect thereof; and (iv) no person or entity is entitled
to (A) any preemptive or similar right with respect to the issuance of
any securities or equity interests of the Company or any of the Company's
subsidiaries, or (B) any rights with respect to the registration of any
securities or equity interests of the Company or any of the Company's
subsidiaries under the Act.
<PAGE>
(b) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, with all requisite power and authority to execute, deliver
and perform its obligations under this Warrant and to conduct its
business as presently conducted. The Company is duly qualified and
authorized to do business as a foreign corporation and is in good
standing in all states in which such qualification and good standing are
necessary or desirable for the conduct by the Company of its business or
the performance by the Company of its obligations hereunder. The
execution, delivery and performance by the Company of this Warrant do not
and will not constitute (a) a violation of any applicable law or the
Company's articles or certificate of incorporation or bylaws or (b) a
material breach of any other document, agreement or instrument to which
the Company is a party or by which the Company is bound. This Warrant
has been duly authorized, executed and delivered by the Company, and is
the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. No consent of,
approval by, registration or filing with or authorization from any
governmental authority or agency is required in connection with the
execution, delivery or performance by the Company of this Warrant.
11. Notice. All notices hereunder shall be in wilting and shall
be deemed given (a) when delivered personally, (b) the next business day
when sent by nationally recognized overnight courier service procuring a
return receipt, or (c) within three business days after mailing when by
certi5ed or registered mail, return receipt requested, to the Company at
1101 Pamela Drive, Euless, Texas 76040, or to the Holder at its address
on the Company's records or at such other address of which the Company or
Holder has been advised by notice hereunder.
12. Applicable Law. This Warrant is issued under and shall for
all purposes governed by and construed in accordance with the laws of the
State of Texas.
13. Miscellaneous. This Warrant represents the entire agreement
of the Company with respect to the subject matter hereof and may be
changed only by a written agreement executed by the Company and the
Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf in its corporate name, by its duly authorized officer, all
as of October 22, 1997.
PERFORMANCE INTERCONNECT CORP.
By: /s/
--------------------------
Name: ____________________
Title:
--------------------
<PAGE>
ASSIGNMENT FORM
For value received, the undersigned _______________, hereby sells,
assigns and transfers all of the rights of the undersigned under the within
Warrant, with respect to the number of shares of the capital stock covered
thereby set forth below, unto:
Name and address of Assignee Number of Shares
---------------------------- ----------------
Date:
Name of Holder:
By: ____________________________
<PAGE>
WARRANT EXERCISE FORM
1. The undersigned Warrant Holder of the attached original,
executed Warrant hereby elects to exercise its purchase right under such
Warrant with respect to the Warrant Stock, as defined in the Warrant of
Performance Interconnect Corp. (the "Company").
2. The undersigned Warrant Holder elects to pay the aggregate
exercise price for such Warrant Stock in the following manner
(a) by lawful money of the United States or the enclosed
certified check or postal or express money order payable in
United States dollars to the order of the Company in the
amount of $______________; or
(b) by wire transfer of United States funds to the account of
the Company in the amount of $_____________, which transfer
has been made before or simultaneously with the delivery
of this Warrant Exercise Form pursuant to the instructions
of the Company.
3. Please issue a stock certificate or certificates representing
the appropriate number of shares of Warrant Stock in the name of the
undersigned or in such names as is specified below:
Name: ___________________________________________
Address: ________________________________________
Tax Identification No. __________________________
HOLDER:__________________________________________
By: _____________________________________________
Date: ___________________________________________
Note: The signature of the Warrant Holder must conform in all respects to
the Warrant Holder as specified on the face of the Warrant, or
Assignment, without alteration, enlargement or any change whatsoever
Exhibit 4.6
Associates Fundings Group, Inc.
17300 N. Dallas Parkway
Suite 2040
Dallas, Texas 75248
(972) 381-1212
Fax (972) 381-1211
February 24, 2000
Mr. Michael Means
Travis Wolff
5580 LBJ Freeway, Suite 400
Dallas, TX 75240
Dear Mr. Means;
The purpose of this letter is to discuss our commitment to provide
additional funding for Performance Interconnect Corp. during its year-end
November 30, 2000.
As you know, Performance Interconnect has completed a reverse merger
transaction, and received verbal commitments for funding based upon the
merger. However, in the event that the funding is delayed or becomes
unavailable, please be advised that Associates Funding Group, Inc.,
Winterstone Management Inc., and I, individually, have committed to fund
capital requirements of Performance Interconnect Corp. through November 30,
2000.
Please feel free to call me if you require further information.
Sincerely,
/s/
---------------
D. Ronald Allen
DRA/pgr
Exhibit 4.7
PROMISSORY NOTE
$75,000.00 June 7, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
GAY ROWE, ("Payee"), the principal sum of Seventy-Five Thousand and
No/Dollars ($75,000.00), with interest on the principal balance from time to
time remaining unpaid prior to maturity at the rate (the "Applicable Rate")
of the lesser of (i) Twenty Four Percent (24%) per annum or (ii) the highest
rate of interest permitted by applicable law.
Interest shall be payable monthly during the term of this Note, with
the first payment due July 7, 1999 and continuing monthly thereafter, with
the entire unpaid amount of principal and accrued interest due and payable
in its entirety on June 7, 2001. Interest on this Note shall be calculated
at a daily rate equal to 1/360 of the annual percentage rate stated above,
subject to the provisions hereof limiting interest to the maximum permitted
by applicable law.
This Note may be prepaid without penalty.
The undersigned and all other parties now or here after liable for the
payment hereof, whether as endorser, guarantor, surety or otherwise,
severally waive demand, presentation, notice of dishonor, diligence in
collection, grace, notice (except as otherwise expressly provided herein),
protest, notice of intent to accelerate the maturity as herein provided, and
consent to all renewals and extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether
before or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay
reasonable attorney's fees together with all actual expenses of litigation
and cost of Court, incurred by the holder hereof.
This Note shall be secured pursuant to a Security Agreement dated
April 8, 1998.
<PAGE>
All agreements between the Maker and the holder hereof are hereby
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the holder hereof for the use,
forbearance or detention of the money to be loaned hereunder exceed the
maximum amount permissible under the applicable law. In the event that the
maturity of this Note should be accelerated for any reason the earned
interest may never include more than the maximum amount permitted under
applicable law and any unearned interest in excess of the maximum amount
permitted under applicable law shall be cancelled automatically and, if
theretofore paid, shall be refunded to the undersigned or credited to the
principal amount owing on this Note. If, from any circumstances whatsoever,
fulfillment of any provision thereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by applicable law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances the holder hereof should ever receive as interest an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing thereunder and not to the payment of interest or if such excessive
interest exceeds the unpaid balance of principal, the excess shall be
refunded to the Maker hereof. All sums contracted for, charged or received
hereunder for the use, forbearance of detention of the indebtedness
evidenced hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread through the full term of this Note
until payment in full so that the rate of interest on the account of such
indebtedness is uniform through the full term hereof. The terms and
provision of this paragraph shall control and supersede every other
provision of all agreements between the undersigned and the holder hereof.
This Note shall he governed by, and construed in accordance with, the
laws of the State of Texas and the United States of America to the extent,
and only to the extent, that the laws of the United States of America permit
a greater rate of interest to be contracted for, received, charged, reserved
or taken that would otherwise be permitted under the laws of the State of
Texas. Unless changed in accordance with applicable law, the applicable rate
ceiling under Texas law shall be the indicated rate ceiling as described in
Tex. Rev. Civ. State, Ann. Art. 5069-1-04(a), as amended.
MAKER
/s/
-----------------------------
Performance Interconnect Inc.
By: Ed Stefanko, President
Exhibit 4.8
PROMISSORY NOTE
$200,000.00 May 1, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
GAY ROWE, ("Payee"), the principal sum of Two Hundred Thousand and
No/Dollars ($200,000.00), with interest on the principal balance from time
to time remaining unpaid prior to maturity at the rate (the "Applicable
Rate") of the lesser of (i) Twenty Four Percent (24%) per annum or (ii) the
highest rate of interest permitted by applicable law.
Interest shall be payable monthly during the term of this Note, with
the first payment due June 1, 1999 and continuing monthly thereafter, with
the entire unpaid amount of principal and accrued interest due and payable
in its entirety on May 1, 2001. Interest on this Note shall be calculated at
a daily rate equal to 1/360 of the annual percentage rate stated above,
subject to the provisions hereof limiting interest to the maximum permitted
by applicable law.
This Note may be prepaid without penalty.
The undersigned and all other parties now or here after liable for the
payment hereof, whether as endorser, guarantor, surety or otherwise,
severally waive demand, presentation, notice of dishonor, diligence in
collection, grace, notice (except as otherwise expressly provided herein),
protest notice of intent to accelerate the maturity as herein provided, and
consent to all renewals and extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether
before or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay
reasonable attorney's fees together with all actual expenses of litigation
and cost of Court, incurred by the holder hereof.
This Note shall be secured pursuant to a Security Agreement dated
April 8, 1998.
<PAGE>
All agreements between the Maker and the holder hereof are hereby
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the holder hereof for the use,
forbearance or detention of the money to be loaned hereunder exceed the
maximum amount permissible under the applicable law. In the event that the
maturity of this Note should be accelerated for any reason the earned
interest may never include more than the maximum amount permitted under
applicable law and any unearned interest in excess of the maximum amount
permitted under applicable law shall be cancelled automatically and, if
theretofore paid, shall be refunded to the undersigned or credited to the
principal amount owing on this Note. If, from any circumstances whatsoever,
fulfillment of any provision thereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by applicable law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances the holder hereof should ever receive as interest an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing thereunder and not to the payment of interest or if such excessive
interest exceeds the unpaid balance of principal, the excess shall be
refunded to the Maker hereof. All sums contracted for, charged or received
hereunder for the use, forbearance of detention of the indebtedness
evidenced hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread through the full term of this Note
until payment in full so that the rate of interest on the account of such
indebtedness is uniform through the full term hereof. The terms and
provision of this paragraph shall control and supersede every other
provision of all agreements between the undersigned and the holder hereof.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Texas and the United State of America to the extent,
and only to the extent, that the laws of the United States of America permit
a greater rate of interest to be contracted for, received, charged, reserved
or taken that would otherwise be permitted under the laws of the State of
Texas. Unless changed in accordance with applicable law, the applicable
rate ceiling under Texas law shall be the indicated rate ceiling as
described in Tex. Rev. Civ. State, Ann. Art. 5069-1.04(a), as amended.
MAKER
/s/
----------------------------
Performance Interconnect Inc.
By: Ed Stefanko, President
Exhibit 4.9
PROMISSORY NOTE
$50,000.00 August 31, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Ed
Stefanko, ("Payee"), the principal sum of Fifty Thousand and NO/lO0 dollars
($50,000.00) with interest on the principal balance from time to time
remaining unpaid prior to maturity at the rate (the "Applicable Rate") of
the lesser of (i) Twenty four percent (24%) per annum or (ii) the highest
rate of interest permitted by applicable law.
Interest shall be payable monthly during the term of this Note, with
the first payment due September 30, 1997 and continuing monthly thereafter,
with the entire unpaid amount of principal and accrued interest due and
payable in its entirety on August 31, 2002. Interest on this Note shall be
calculated at a daily rate equal to 1/360 of the annual percentage rate
stated above, subject to the provisions hereof limiting interest to the
maximum permitted by applicable law.
This Note may be prepaid without penalty.
The undersigned and all other parties now or hereafter liable for the
payment hereof, whether as endorser, guarantor, surety or otherwise,
severally waive demand, presentation, notice of dishonor, diligence in
collection, grace, notice (except as otherwise expressly provided herein),
protest, notice of intent to accelerate the maturity as herein provided, and
consent to all renewals and extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether
before or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court; whether before or after maturity, the undersigned agrees to pay
reasonable attorney's fees together with all actual expenses of litigation
and cost of Court, incurred by the holder hereof.
This Note shall be secured pursuant to a Security Agreement of even
date herewith.
<PAGE>
All agreements between the Maker and the holder hereof are hereby
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the holder hereof for the use,
forbearance or detention of the money to be loaned hereunder exceed the
maximum amount permissible under the applicable law. In the event that the
maturity of this Note should be accelerated for any reason then earned
interest may never include more than the maximum amount permitted under
applicable law and any unearned interest in excess of the maximum amount
permitted under applicable law shall be cancelled automatically and, if
theretofore paid, shall be refunded to the undersigned or credited to the
principal amount owing on this Note. If, from any circumstances whatsoever,
fulfillment of any provision hereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by applicable law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances the holder hereof should ever receive as interest an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owning thereunder and not to the payment of interest or if such excessive
interest exceeds the unpaid balance of principal, the excess shall be
refunded to the Maker hereof. All sums contracted for, charged or received
hereunder for the use, forbearance of detention of the indebtedness
evidenced hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread through the full term of this Note
until payment in full so that the rate of interest on the account of such
indebtedness is uniform through the full term hereof. The terms and
provision of this paragraph shall control and supersede every other
provision of all agreements between the undersigned and the holder hereof.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Texas and the United States of America to the extent,
and only to the extent, that the laws of the United States of America permit
a greater rate of interest to be contracted for, received, charged, reserved
or taken that would otherwise be permitted under the laws of the State of
Texas. Unless changed in accordance with applicable law, the applicable
rate ceiling under Texas law shall be the indicated rate ceiling as
described in Tex. Rev. Civ. State. Ann. art. 5069-1.04(a), as amended.
MAKER
/s/
--------------------------
Varga Investments Inc.
By: Ed Stefanko, President
Exhibit 4.10
Security Agreement
------------------
This Security Agreement ("Agreement") is made and entered into on this
31st day of August, 1997, by and between Ed Stefanko, ("Secured Party"), and
Varga Investments Inc., a Texas Corporation ("Debtor"), as follows:
W i t n e s s e t h
- - - - - - - - - -
Whereas, in order to secure the payment of the Indebtedness (as
hereinafter defined), Secured Party has required that Debtor assign a
security interest in the Collateral (as hereinafter defined) to Secured
Party; and
Whereas, Debtor has deemed it to be in the best interest of Debtor to
grant a security interest in the Collateral to secure the payment and
performance of the Indebtedness;
Now, Therefore, for and in consideration of the premises, covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged
and confessed, Secured Party and Debtor agree as follows:
1. Indebtedness. The Security Interest (defined below) is herein
created to secure Debtor's note of even date herewith, by and between Debtor
as Maker, and Secured Party, as Payee, in the original principal amount of
$50,000.00, and any and all renewals and extensions thereof ("Indebtedness")
2. Agreement and Collateral. Debtor hereby grants to Secured Party a
security interest ("Security Interest") in the following property
("Collateral"), whether now owned or hereafter acquired:
All Debtor's right, title and interest in and to 50 shares of
I-Con Industries Series A Preferred Stock, together with all rights,
powers and privileges thereunto appertaining, and all proceeds
thereof.
3. Debtor's Warranties. Covenants and Further Agreements.
a. Title. Except for the interests granted herein, Debtor has,
or on acquisition will have, fee simple title to the Collateral free
from any lien, security interest, encumbrance, or claim and Debtor
will, during the term of this Agreement, at Debtor's cost, keep the
Collateral free from other liens, security interests, encumbrances or
claims, and defend any action which may affect the Security Interest
or Debtor's title to the Collateral.
b. Financing Statement. Debtor will join in executing all
financing statements and other instruments, documents, certificates
and agreements deemed necessary by Secured Party to evidence, create,
perfect or enforce the Security Interest and will pay all costs
thereof.
c. Assignment. Notwithstanding any other provision hereof,
Debtor will not process, sell, lease, or otherwise dispose of all or
part of the Collateral. Secured Party may assign or transfer all or
part of his rights in, and obligations, if any, under the
Indebtedness, the Collateral and this Agreement.
<PAGE>
4. Rights of Debtor. Prior to the occurrence of a Default (as
hereinafter defined), Debtor may exercise any and all rights, voting and
otherwise, with respect to the Collateral. However, Debtor may not receive
any distributions and other payments made with respect to the Collateral
free from the Security Interest provided for in this Agreement.
5. Rights of Secured Party. Effective upon the occurrence of a
Default, Debtor hereby appoints secured Party as Debtor's attorney-in-fact
to do any act which Debtor is obligated by this Agreement to do, to exercise
all rights of Debtor in the Collateral, voting and otherwise, to receive all
distributions! made with respect to the Collateral, and to do all things
deemed necessary by Secured Party to perfect the Security Interest and
preserve, collect, enforce and protect the Collateral, all at Debtor's cost
and without any obligation on Secured Party so to act. Secured Party shall
not be liable for any act or omission on the part of Secured Party, his
agents or employees, except willful misconduct, nor shall Secured Party be
responsible for depreciation in value of the Collateral or for preservation
of ri9hts against prior parties. The foregoing rights and powers of Secured
Party may be exercised after default and shall be in addition to, and not a
limitation upon, any rights and powers of Secured Party given herein or by
law, custom, or otherwise.
6. Events of Default. Debtor shall be in default ("Default") under
this Agreement upon the occurrence of a default pursuant to the terms of the
Note, and Debtor's failure to cure such default within the time periods set
forth in the Note.
7. Remedies of Secured Party upon Default. When a Default occurs, and
except as may be otherwise provided in the Note, Secured Party may declare
all or a part of the Indebtedness immediately due and payable without
demand, notice of default, notice of intent to demand, notice of intent to
accelerate maturity, or notice of acceleration of maturity, and may proceed
to enforce payment of same and to exercise any and all of the rights and
remedies provided by Article 9 of the Texas Business and Commerce Code
("Code") as well as all other rights and remedies possessed by Secured Party
under this Agreement or otherwise at law or in equity. For purposes of the
notice requirements of the Code, Secured Party and Debtor agree that notice
given at least ten (10) calendar days prior to the related action hereunder
is reasonable. Secured Party shall be entitled to immediate possession of
the collateral and all books and records evidencing same and shall have
authority to enter upon any premises upon which said items may be situated
and remove same therefrom. Expenses of retaking, holding, preparing for
sale, selling, or the like, shall include without limitation, Secured
Party's reasonable attorney's fees and all such expenses shall be recovered
by Secured Party before applying the proceeds from the disposition of the
Collateral toward the Indebtedness. To the extent allowed by the Code,
Secured Party may use his discretion in applying the proceeds of any
disposition of the Collateral. All rights and remedies of Secured Party
hereunder are cumulative and may be exercised singly or concurrently. The
exercise of any right or remedy will not be a waiver of any other.
<PAGE>
8. General.
a. Exhaustion of Remedies. Secured Party shall not be required
to first foreclose, proceed against, or exhaust any other collateral
or security for any Indebtedness or obligation of Debtor hereby
secured before pursuing any of its rights pursuant to this Agreement.
Suit may be brought to recover other collateral at the election of
Secured Party, without joinder of Debtor.
b. Release of Collateral. Secured Party may surrender, release,
exchange or alter any collateral or security for the Indebtedness
hereby secured without effecting the Security Interest created by this
Agreement, and this Agreement shall continue effective notwithstanding
any legal disability of Debtor to incur any indebtedness or obligation
incurred to Secured Party.
c. Waiver by Secured Party. No waiver by Secured Party of any
right hereunder or of any default by Debtor shall be binding upon
Secured Party unless in writing. Failure or delay by Secured Party to
exercise any right hereunder or waiver of any default shall not
operate as a waiver of any other right, of further exercise of such
right, or of any further default.
d. Parties Bound. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors,
receivers, trustees and assigns where permitted by this Agreement.
e. Notice. Notice shall be given or sent when mailed postage
prepaid to Debtor's address given above or to Debtor's most recent
address as shown by notice of change on file with Secured Party.
f. Modifications. This Agreement shall not be amended in any way
except by a written agreement signed by the parties hereto.
g. Severability. The unenforceability of any provision of this
agreement shall not affect the enforceability or validity of any other
provision hereof.
h. Construction. The captions herein are for convenience of
reference only and not for definiti6n or interpretation.
i. ambiguity. In event it shall be determined that there is any
ambiguity contained herein, said ambiguity shall not be construed
against either party hereto as a result of such party's preparation of
this Agreement, but, shall be interpreted in favor or against either
of the parties hereto in light of all the facts, circumstances and the
intentions of the parties at the time of their executive of this
Agreement.
j. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
<PAGE>
Secured Party:
Ed Stefanko
By: /s/
-----------------
Debtor:
Varga Investments Inc.
By: /s/
-----------------
Ed Stefanko, President
Exhibit 4.11
Winterstone Management, Inc.
10911 Petal Street
Suite 105
Dallas, Texas 75238
(214) 503-0146
Fax (214) 503-8607
October 15, 1999
Mr. Ed Stefanko
Performance Interconnect Corp.
10501 FM 720 East
Frisco, TX 75035
Dear Mr. Stefanko:
The purpose of this letter is to memorialize our agreement with respect to
certain financial arrangements provided through our firm.
From July 1, 1999 to October 15, 1999 our firm has ranged net advances to
Performance Interconnect Corp ("PLC") of $838,682.46. As of October 15,
1999, the accrued interest on these advances is $22,295.42, bringing the
balance due to $860,977.88.
You agree to pay this balance as follows:
1. Assumption of full liability for all payments on a note payable by
Winterstone Management Inc. ("WMI") to Zion Capital Inc. dated
September 30, 1999 in the original principal balance of $250,000.00.
The assumption of this note shall be credited against $241,500.00 of
the advances, reflecting the loan costs of $8,500.00 paid by WMI.
2. The balance of the advances shall be paid by delivery and payment of a
promissory note from PLC to Nations Investment Corp Ltd. in the amount
of $619,477.88.
<PAGE>
Mr. Ed Stefanko
October 18, 1999
Page 2
In addition, the $555,867.00 note dated June 30, 1999 payable to WMI from
PLC has also been assigned to Nations Investment Corp. A replacement note
must be signed.
Please evidence your agreement below.
Sincerely,
/s/
D. Ronald Allen
AGREED AND ACCEPTED:
Perfomance Interconnect Corp.
/s/
----------------------
Ed Stefanko, President
Exhibit 4.12
PROMISSORY NOTE
$619,477.88 October 15, 1999
Dallas, Texas
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
NATIONS INVESTMENT CORP., LTD. ("Payee"), the principal sum of Six Hundred
Nineteen Thousand Four Hundred Seventy Seven and 88/100 11.5. Debars
($619,477.88), with interest on the principal balance from time to time
remaining unpaid prior to maturity at the rate (the "Applicable Rate") of
the lesser of (i) Eighteen Percent (18%) per annum or (ii) the highest rate
of Interest permitted by applicable law.
Interest shall be paid monthly during the term of this Note, with the
first payment due November 15, 1999 and continuing monthly thereafter, with
the entire unpaid amount of principal and accrued interest shall be due and
payable in its entirety on January 1, 2001. Interest on this Note shall be
calculated at a daily rate equal to 1/360 of the annual percentage rate
stated above, subject to the provisions hereof limiting interest to the
maximum permitted by applicable law.
This Note may be prepaid in whole or in part, at any time or from time
to time, without penalty or premium.
The undersigned and all other parties now or here after liable for the
payment hereof, whether as endorser, guarantor, surety or otherwise,
severally waive demand, presentation, notice of dishonor, diligence in
collection, grace, notice (except as otherwise expressly provided herein),
protest, notice of intent to accelerate the maturity as herein prodded, and
consent to all renewals and extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether
before or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay
reasonable attorney's fees together with all actual expenses of litigation
and cost of Court, incurred by the holder hereof.
This Note shall be secured by a Security Agreement dated June 30,
1999.
All agreements between the Maker and the bolder hereof are hereby
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the holder hereof for the use,
forbearance or detention of the money to be loaned hereunder exceed the
maximum amount permissible under the applicable law. In the event that the
maturity of this Note should be accelerated for any reason the earned
interest may never include more than the maximum amount permitted under
applicable law and any unearned interest in excess of the maximum amount
permitted under applicable law shall be cancelled automatically and, if
theretofore paid, shall be refunded to the undersigned or credited to the
principal amount owing on this Note. If, from any circumstances whatsoever,
fulfillment of any provision thereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
<PAGE>
prescribed by applicable law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances the holder hereof should ever receive as interest an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing thereunder and not to the payment of interest or if suck excessive
interest exceeds the unpaid balance of principal, the excess shall be
refunded to the Maker hereof. AU sums contracted for, charged or received
hereunder for the use, forbearance of detention of the indebtedness
evidenced hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread through the full term of this Note
until payment in full so that the rate of interest on the account of such
indebtedness is uniform through the full term hereof. The terms and
provision of this paragraph shall control and supersede every other
provision of all agreements between the undersigned and the holder hereof.
This Note Is issued pursuant to the provisions of Section 881(c) of
the Internal Revenue Code of 1986, as amended (the "Code") and is
transferable only to persons who (i) are not United States persons; and (ii)
provide the Maker with an executed Form W-8 on or before the date of the
transfer. This obligation is registered as to both principal and stated
interest with the issuer, and transfer of this obligation may be effected
only by surrender of this instrument to the issuer and either (a) the
reissuance by the issuer of this instrument to the new holder, or (b) the
issuance by the issuer of a new instrument to the new holder. Transfer of
this instrument at any time by any means other than the method described in
this paragraph shall be deemed void and ineffectual. This instrument shall
not be convertible to bearer form.
The Payee hereby agrees to provide to the Maker, upon request, an
executed Form W-8 certifying that Payee is not a U.S. person.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Texas and the United State of America to the extent,
and only to the extent, that the laws of the United States of America permit
a greater rate of interest to be contracted for, received, charged, reserved
or taken that would otherwise be permitted under the laws of the State of
Texas. Unless changed in accordance with applicable law, the applicable rate
ceiling under Texas law shall be the indicated rate ceiling as described in
Tex. Rev. Civ. State, Ann. Art. 5069-1.04(a), as amended.
MAKER
/s/
------------------------------
Performance Interconnect Corp.
By: Ed Stefanko, President
Exhibit 4.13
PROMISSORY NOTE
$594,777.69 October 15, 1999
Dallas, Texas
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
NATIONS INVESTMENT CORP., LTD. ("Payee"), the principal sum of Five Hundred
Ninety Four Thousand Seven Hundred Seventy Seven and 69/100 U.S. Dollars
($594,777.69), with interest on the principal balance from time to time
remaining unpaid prior to maturity at the rate (the "Applicable Rate") of
the lesser of (i) Eighteen Percent (18%) per annum or (ii) the highest rate
of interest permitted by applicable law.
Interest shall be paid monthly during the term of this Note, with the
first payment due November 15,1999 and continuing monthly thereafter, with
the entire unpaid amount of principal and accrued interest shall be due and
payable in its entirety on January 1, 2001. Interest on this Note shall be
calculated at a daily rate equal to 1/360 of the annual percentage rate
stated above, subject to the provisions hereof limiting interest to the
maximum permitted by applicable law.
This Note maybe prepaid in whole or in part, at any time or from time
to time, without penalty or premium.
The undersigned and all other parties now or here after liable for the
payment hereof, whether as endorser, guarantor, surety or otherwise,
severally waive demand, presentation, notice of dishonor, diligence in
collection, grace, notice (except as otherwise expressly provided herein),
protest, notice of intent to accelerate the maturity as herein provided, and
consent to all renewals and extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether
before or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay
reasonable attorney's fees together with all actual expenses of litigation
and cost of Court, incurred by the holder hereof.
This Note shall he secured by a Security Agreement dated June 30,
1999.
All agreements between the Maker and the holder hereof are hereby
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the holder hereof for the use,
forbearance or detention of the money to he loane4 hereunder exceed the
maximum amount permissible under the applicable law. In the event that the
maturity of this Note should be accelerated for any reason the earned
interest may never include more than the maximum amount permitted under
applicable law and any unearned interest in excess of the maximum amount
permitted under applicable law shall be cancelled automatically and, if
theretofore paid, shall be refunded to the undersigned or credited to the
principal amount owing on this Note. If, from any circumstances whatsoever,
<PAGE>
fulfillment of any provision thereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by applicable law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances the holder hereof should ever receive as interest an amount.
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing thereunder and not to the payment of interest or if such excessive
interest exceeds the unpaid balance of principal, the excess shall be
refunded to the Maker hereof. All sums contracted for, charged or received
hereunder for the use, forbearance of detention of the indebtedness
evidenced hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread through the full term of this Note
until payment in full so that the rate of interest on the account of such
indebtedness is uniform through the full term hereof. The terms and
provision of this paragraph shall control and supersede every other
provision of all agreements between the undersigned and the holder hereof.
This Note is issued pursuant to the provisions of Section 881(c) of
the Internal Revenue Code of 1986, as amended (the "Code") and is
transferable only to persons who (i) are not United States persons; and (ii)
provide the Maker with an executed Penn W-S on or before the date of the
transfer. This obligation is registered as to both principal and stated
interest with the issuer, and transfer of this obligation may be effected
only by surrender of this instrument to the issuer and either (a) the
reissuance by the issuer of this instrument to the new holder, or (b) the
issuance by the Issuer of a new instrument to the new holder. Transfer of
this instrument at any time by any means other than the method described in
this paragraph shall be deemed void and ineffectual. This instrument shall
not be convertible to bearer form.
The Payee hereby agrees to provide to the Maker, upon request, an
executed Form W-8 certifying that Payee is not a U.S. person.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Texas and the United State of America to the extent,
and only to the extent, that the laws of the United States of America permit
a greater rate of interest to be contracted for, received, charged, reserved
or taken that would otherwise be permitted under the laws of the State of
Texas. Unless changed in accordance with applicable law, the applicable rate
ceiling under Texas law shall be the indicated rate ceiling as described in
Tex. Rev. Civ. State, Ann. Art. 5069-1.04(a), as amended.
MAKER
/s/
-----------------------------
Performance Interconnect Corp.
By: Ed Stefanko, President
Exhibit 4.14
Security Agreement
This Security Agreement ("Agreement") is made and entered into on this 30th
day of June, 1999, by and between Winterstone Management Inc., a Texas
Corporation, ("Secured Party") and Performance Interconnect Corp., a Texas
Corporation ("Debtor"), as follows:
W I t n e s s e + h
Whereas, in order to secure the payment of the Indebtedness (as
hereinafter defined), Secured Party has required tat Debtor assign a
security interest in the collateral (as hereinafter defined) to Secured
party; and
Whereas, Debtor has deemed it to be in the best interest of Debtor to
grant a security interest in the collateral to secure the payment and
performance of the indebtedness;
Now, Therefore, for and in consideration of the premises, covenants
and agreements contained herein, and for other goad and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged
and confessed, Secured Party and Debtor agree as follows:
1. Indebtedness. The Security Interest (defined below) is herein
created to secure Debtor's Note of even date herewith, by and between
Debtor, as Maker, and Secured Party, as Payee, in the original principal
amount of $555,867.00, and any and all additions, renewals and extensions
thereof ("Indebtedness").
2. Agreement and Collateral Debtor hereby grants to Secured party a
security interest ("Security Interest") in the following property
("Collateral"), whether now owned or hereafter acquired:
All Debtor's right, title and interest in and to all of Debtor's
interest in the common stock of PC Dynamics of Texas, Inc. and PC Dynamics
Corp., together with all rights, powers and privileges thereunto
appertaining, and all proceeds thereof
3. Debtor's Warranties, Covenants and Further Agreements.
a. Title. Except for the interest granted herein, Debtor has,
or on acquisition will have, fee simple title to the collateral free
from any lien, security interest, encumbrance, or claim and Debtor
will, during the term of this Agreement, at Debtors cost, keep the
collateral free from other liens, security interests, encumbrances or
claims, and defend any action which may affect the Security Interest
or Debtor's title to the collateral.
<PAGE>
b. Financing Statement. Debtor will join in executing all
financing statements and other instruments, documents, certificates
and agreements deemed necessary by Secured Party to evidence, create,
perfect or enforce the Security Interest and will pay all costs
thereof.
c. Assignment. Notwithstanding any other provision hereof
Debtor will not process, sell, lease, or otherwise dispose of all or
part of the collateral. Secured Party may assign or transfer all or
part of his rights in, and obligations, if any, under the
Indebtedness, to Collateral and this Agreement.
4. Rights of Debtor. Prior to the occurrence of a Default (as
hereinafter defined), Debtor may exercise any and all rights, voting and
otherwise, with respect to the Collateral. However, Debtor may not receive
any distributions and other payments made with respect to the collateral
free from the Security Interest provided for in this Agreement
5. Rights of Secured Party. Effective upon the Occurrence of a
Default, Debtor hereby appoints Secured Party as Debtor's attorney-in-fact
to do any act which Debtor is obligated by this Agreement to do, to exercise
all rights of Debtor in the collateral, voting and otherwise, to receive all
distributions made with respect to the Collateral, and to do all things
deemed necessary by Secured party to perfect the Security Interest and
preserve, collect, enforce and protect the Collateral, all at Debtors cost
and without any obligation on Secured Party so to act. Secured Party shall
not be liable for any act or omission on the part of Secured party, his
agents or employees, except willful misconduct, nor shall Secured Party be
responsible for depreciation in value of the collateral for preservation of
rights against prior parties. The foregoing rights and powers of Secured
Party may be exercised after default and shall be in addition to, and not a
limitation upon, any rights and powers of Secured Party given herein or by
law, custom, or otherwise.
6. Events Default. Debtor shall be in default ("Default") under
this Agreement upon the occurrence of a default pursuant to the terms of the
Note, and Debtor's failure to cure such default within the time periods set
faith in the Note.
7. Remedies of Secured Party Upon Default. When a Default occurs,
and except as may be otherwise provided in the Note, Secured Party may
declare all or a part of the Indebtedness immediately due and payable
without demand, notice of default, notice of intent to demand, notice of
intent to accelerate maturity, or notice of acceleration of maturity, and
may proceed to enforce payment of seine and to exercise any and all of the
rights and remedies provided by Article 9 of the Texas Business and Commerce
Code ("Code") as well as all other rights and remedies possessed by Secured
Party under this Agreement or otherwise at law or inequity. For purposes of
the notice requirements of the Code, Secured Party and Debtor agree tat
notice given at least ten (10) calendar days prior to the related action
hereunder is reasonable. Secured Party shall be entitled to immediate
possession of the collateral and all books and records evidencing same and
shall have authority to enter upon any premises upon which said items maybe
<PAGE>
situated and removed same therefrom. Expenses of retaking, holding,
preparing for sale, selling or the like, shall include without limitation,
Secured Party's reasonable attorney's fees and all such expenses shall be
recovered by Secured Party before applying the proceeds from the disposition
of the collateral toward the Indebtedness. To the extent allowed by the
Code, Secured Party may use his discretion in applying the proceeds of any
disposition of the collateral. All rights and remedies of Secured Party
hereunder are cumulative and may be exercised singly or concurrently. The
exercise of any right or remedy will not be a waiver of any other.
8. General
a. Exhaustion of Remedies. Secured Party shall not be required
to first foreclose, proceed against, exhaust any other collateral or
security for any Indebtedness or obligation of Debtor hereby secured
before pursuing any of its rights pursuant to this Agreement. Suite
may be brought to recover other collateral at the election of Secured
Party, without joinder of Debtor.
b. - Release of Co11a+eral. Secured Party may surrender,
release, exchange or alter any collateral or security for the
lndebt4edness hereby secured without effecting the Security Interest
created by this Agreement, and this Agreement shall continue effective
notwithstanding any legal disability of Debtor to incur any
indebtedness or obligation incurred to Secured Party.
c. Waiver of Secured Party. No waiver by Secured Party of any
right hereunder or of any default by Debtor shall be binding upon
Secured Party unless in writing. Failure or delay by Secured Party to
exercise any right hereunder or waiver of any default shall not
operate as a waiver of any other right, or further exercise of such
right, or of any further default.
d. Parties Bound. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors,
receivers, trustees and assigns where permitted by this Agreement
e. Notice shall be given or sent when mailed postage prepaid to
Debtor's address given above or to Debtor's most recent address as
shown by notice of change on file with Secured Party.
f. Modifications. This Agreement shall not be amended in any
way except by a written agreement signed by the parties hereto.
g. Severability. The unenforceability of any provision of this
Agreement shall not affect the enforceability of validity of any other
provision hereof.
<PAGE>
h. Construction. The captions herein are for convenience of
reference only and not for definition or interpretation.
i. Ambiguity. In event it shall be determined that there is
any ambiguity contained herein, said ambiguity shall not be construed
against either party hereto as a result of such party's preparation
of this Agreement, but shall be interpreted in favor or against either
of the parties hereto in light of all the facts, circumstances and the
intentions of the parties at the time of their executive of this
Agreement.
j. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Secured Party:
Winterstone Management Inc.
By: /s/
--------------------------
D. Ronald Allen, President
Debtor:
Performance Interconnect Corp.
By: /s/
--------------------------
Ed Stefanko, President
Exhibit 4.15
NOTE
$250.000.00 September.30, 1999
FOR VALUE RECEIVED, the undersigned, WINTERSTONE MANAGEMENT, INC., a
Texas corporation (the "Maker"), hereby promises to pay to the order of ZION
CAPITAL, INC., a Nevada corporation ("Lender"), at its offices located at
3773 Howard Hughes Blvd., Suite 300 North, Las Vegas, Nevada 89109, or at
such other location as Lender may designate to Maker in writing, on or prior
to September ___, 2000, in lawful money of the United States of America, the
principal sum of TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00)
or so much thereof as may be advanced and outstanding hereunder, together
with interest as hereinafter described.
This Note (this "Note") evidences the Term Loan made pursuant to, and
has been executed and delivered under, and is subject to the terms of, the
Loan Agreement of even date herewith (as the same may be amended, modified
or supplemented from time to time, the "Loan Agreement"), between Maker and
Lender, and is the "Note" referred to therein. Unless otherwise defined
herein, each capitalized term used herein has the meaning given to such term
in the Loan Agreement. Reference is made to the Loan Agreement for
provisions affecting this Note regarding payments and prepayments,
acceleration of maturity, exercise of rights, payment of attorneys' fees,
court costs, and other costs of collection, certain waivers by Maker and
others now or hereafter obligated for payment of any sums due hereunder, and
security for the payment hereof.
Subject to the terms of, and as set forth in and calculated in
accordance with, the Loan Agreement, the unpaid principal balance from day
to day outstanding hereunder shall bear interest at a rate per annum equal
to the Fixed Rate. Accrued and unpaid interest on the outstanding principal
balance hereof shall be due and payable on the last day of each month,
commencing October 3], 1999, and at maturity. All past due principal and
interest shall bear interest at the Default Rate. The entire outstanding
principal balance hereof shall bear interest at the Default Rate during the
continuance of any Event of Default. Interest payable at the Default Rate
shall be payable from time to time on demand.
This Note is entitled to the benefits of the Loan Documents.
The Maker and each surety, guarantor, endorser, and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of
intent to accelerate, notice of intent to demand, diligence in collecting,
grace, and all other formalities of any kind, except any notice and grace
periods provided in the Loan Agreement, and consent to all extensions
without notice for any period or periods of time and partial payments,
before or after maturity, all without prejudice to the holder. The holder
shall similarly have the right to deal in any way, at any time, with one or
more of the foregoing parties without notice to any other party, and to
grant any such party any extensions of time for payment of any of said
indebtedness, or to grant any other indulgences or forbearances whatsoever,
without notice to any other party and without in any way affecting the
personal liability of any party hereunder.
<PAGE>
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEVADA AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THIS NOTE IS PERFORMABLE IN LAS VEGAS, NEVADA.
THIS NOTE AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED
AND DELIVERED BY MAKER IN CONNECTION WITH THE INDEBTEDNESS EVIDENCED BY THIS
NOTE EMBODY THE FINAL, ENTIRE AGREEMENT OF BORROWER AND LENDER WITH RESPECT
TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, RELATING TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF BORROWER AND LENDER THERE ARE NO ORAL
AGREEMENTS BETWEEN BORROWER AND LENDER.
Executed and delivered on the date first written above.
BORROWER:
WINTERSTONE MANAGEMENT, INC.
By: /s/
-------------------------------
Name: __________________________
Title:__________________________
Exhibit 4.16
SECURED PROMISSORY NOTE
-----------------------
$131,570 August 12, 1998
FOR VALUE RECEIVED, PERFORMANCE INTERCONNECT CORP, a Texas
corporation ("Borrower"), promise to pay to the order of FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), at its offices at 111 West
40th Street, 14th Floor, New York, New York 10018, or at such other place or
places as FINOVA may from time to time designate in writing, the principal
sum of One Hundred Thirty-One Thousand Five Hundred Seventy Dollars
($131,570), plus interest in the manner and upon the terms and conditions
set forth below. This Secured Promissory Note ("Note") is made pursuant to
that certain Loan and Security Agreement of even date between the FINOVA and
Borrower (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:
a. Twenty-three (23) successive monthly installments of
principal in the amount of Two Thousand Two Hundred Fifty Dollars ($2,250)
together with accrued interest thereon which payment shall be due and deemed
fully earned by FINOVA on the first day of each month, beginning September
1, 1998, and continuing through and including July 1, 2000, and must be
received by FINOVA no later than the 20th day of each month, irrespective of
the date of any monthly statement of account rendered by FIINOVA.
b. A final installment due and payable on the first day of
August, 2000, in the amount of the principal balance together with accrued
interest thereon remaining unpaid.
1.2 Prepayment may be made under this Note in whole but not in
part, subject to the Termination 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 and unpaid
interest and the full amount of the applicable Termination Fee.
Notwithstanding anything herein to the contrary, in the event the Loan
Agreement is terminated by Borrower, 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 the applicable
Termination Fee, shall become immediately due and payable in full on the
effective date of such termination, without presentment, notice or demand of
any kind.
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 four (4)
percentage points above the Prime Rate (as hereinafter defined), 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 six (6) percentage points above the
Prime Rate, 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
<PAGE>
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 [TBD] 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. Notwithstanding the foregoing, the interest
chargeable hereunder shall not exceed 15 1/2% and shall not be less than
9 1/2% provided no event of default has occurred. 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; 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 the Termination Fee, 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 fights and remedies available to it
under the Uniform Commercial Code or other law of the State of Arizona.
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 fight, 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.
<PAGE>
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 Schedule
"A" attached hereto, and is further 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, 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, 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, attorneys fees, expert witness
fees, letter of credit fees, collateral monitoring fees, closing fees,
facility fees, Termination 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 "contacted 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,
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
<PAGE>
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.
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) WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER,
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MESSENGEW
CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS SET
FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
<PAGE>
EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO BORROWER'S ADDRESS; (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 BORROWERS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
PERFORMANCE INTERCONNECT CORP
a Texas corporation
By: /s/
-----------------------------
Edward P. Stefanko, President
"Borrower"
Federal Taxpayer Identification
Number: 75-2681440
Address: 1101 Pamela Drive
Euless, Texas 76040
Exhibit 4.17
SECURED PROMISSORY NOTE
$318,430 August 12, 1998
FOR VALUE RECEIVED, PERFORMANCE INTERCONNECT CORP, a Texas
corporation ("Borrower"), promise to pay to the order of FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), at its offices at 111 West
40th Street, 14th Floor, New York, New York 10018, or at such other place or
places as FINOVA may from time to time designate in writing, the principal
sum of Three Hundred Eighteen Thousand Four Hundred Thirty Dollars
($318,430), plus interest in the manner and upon the terms and conditions
set forth below. This Secured Promissory Note ("Note") is made pursuant to
that certain Loan and Security Agreement of even date between the FINOVA and
Borrower (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:
a. Twenty-three (23) successive monthly installments of
principal in the amount of Five Thousand Five Hundred Dollars ($5,500)
together with accrued interest thereon which payment shall be due and deemed
fully earned by FINOVA on the first day of each month, beginning September
1, 1998, and continuing through and including July 1, 2000, and must be
received by FINOVA no later than the 20th day of each month, irrespective of
the date of any monthly statement of account rendered by FINOVA.
b. A final installment due and payable on the first day of
August, 2000, in the amount of the principal balance together with accrued
interest thereon remaining unpaid.
1.2 Prepayment may be made under this Note in whole but not in
part, subject to the Termination 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 and unpaid
interest and the full amount of the applicable Termination Fee.
Notwithstanding anything herein to the contrary, in the event the Loan
Agreement is terminated by Borrower, 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 the applicable
Termination Fee, 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 four (4)
percentage points above the Prime Rate (as hereinafter defined), 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 six (6) percentage points above the
Prime Rate, 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 [TBD] 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. Notwithstanding the foregoing, the interest
chargeable hereunder shall not exceed 15 1/2% and shall not be less than
9 1/2 % provided no event of default has occurred. 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; 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 Borrowers 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 the Termination Fee, 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, 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
co1lection, foreclosure fees, attorneys fees and expert witness fees
incurred by F1NOVA, 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, attorneys fees, expert witness
fees, letter of credit fees, collateral monitoring fees, closing fees,
facility fees, Termination 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 "contracted 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
fights 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.
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 THIS 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) WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED
MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH BELOW
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF
ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO
BORROWER'S ADDRESS; (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.
PERFORMANCE INTERCONNECT CORP
a Texas corporation
By: /s/
-----------------------------------------
Edward P. Stefanko, President
"Borrower"
Federal Taxpayer Identification
Number: 75-2681440
Address: 1101 Pamela Drive
Euless, Texas 76040
Exhibit 4.18
LOAN AND SECURITY AGREEMENT
dated as of August 12, 1998
by and between
Performance Interconnect Corp.
and
FINOVA Capital Corporation
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
AGREEMENT, dated as of August 12,1998, by and between PERFORMANCE
INTERCONNECT CORP. having its principal place of business at 1101 Pamela
Drive, Euless, Texas 76040 (the "Borrower") and FINOVA CAPITAL CORPORATION,
a Delaware corporation ("FINOVA") having a place of business at 111 West
40th Street, New York, New York 10018.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Borrower has requested FINOVA to make a loan to Borrower and
FINOVA is willing to make such loan to Borrower upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
ARTICLE I. DEFINITIONS; CONSTRUCTION
1.1 Certain Definitions.
In addition to other words and terms defined elsewhere in this
Agreement, as used herein the following words and terms have the following
meanings, respectively, unless the context hereof otherwise clearly
requires:
"Agreement" means this Loan and Security Agreement as amended,
modified or supplemented from time to time.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in
New York.
"Casualty" means any damage to, or destruction or loss of, any
Equipment, whether caused by fire or other cause.
"Closing Date" means the date on which the parties enter into this
Agreement.
"Collateral" has the meaning given to that term in Section 6.1.
"Constituent Documents" means the certificate of incorporation,
agreement of partnership or limited partnership, organizational agreement,
operating agreement, by-laws, or such other similar document pursuant to
which Borrower was organized or its affairs are governed.
"Disbursement Date" means the date the Loan proceeds are disbursed to
Borrower or to other persons at Borrowers direction.
"Equipment" means equipment, as such term is defined in Section
9-109(2) of the UCC now owned or hereafter acquired by Borrower and financed
or refinanced with the proceeds of the Loan and any and all additions
thereto and substitutions and replacements of any of the foregoing, wherever
located, and which forms a part of the Collateral.
<PAGE>
"Event of Default" means any of the Events of Default described in
Section 7.1 hereof.
"Examination Fee" means Borrower agrees to pay to FINOVA an
examination fee in the amount of $500 per person per day in connection with
each audit or examination of Borrower performed by FINOVA prior to or after
the date hereof, plus all costs and expenses incurred in connection
therewith (the "Examination Fee"). Without limiting the generality of the
foregoing, Borrower shall pay to FINOVA an initial Examination Fee in an
amount equal to $500 per person per day, plus all costs and expenses
incurred in connection therewith. Such initial Examination Fee shall be
deemed fully earned at the time of payment and due and payable upon the
closing of this transaction, and shall be deducted from any good faith
deposit paid by Borrower to PINOVA prior to the date of this Agreement.
"Executive Officer" means the President, the Chief Executive Officer,
or the Chief Financial Officer of Borrower elected from time to time.
"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied
on a consistent basis (except for changes in application in which Borrowers
independent certified public accountants concur), applied both to
classification of items and amounts.
"Interest Rate" means a per annum rate of 4% in excess of the prime
rate of interest announced publicly by Citibank, N.A., (or any successor
thereto), from time to time as its "prime rate" (the "Prime Rate") which may
not be such institution's lowest rate. The interest rate chargeable
hereunder in respect of the Term Loans shall be increased or decreased, as
the case may be, without notice or demand of any kind, upon the announcement
of any change in the Prime Rate. Notwithstanding the foregoing, the Interest
Rate chargeable hereunder will not exceed 15 1/2% or be less than 9 1/2%
provided no event of default has occurred or is continuing. Each change in
the Prime Rate shall be effective hereunder on the first day following the
announcement of such change. Interest charges and all other fees and charges
herein shall be computed on the basis of a year of 360 days and actual days
elapsed and shall be payable to FINOVA in arrears on the first day of each
month.
"Law" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any government.
"Legal Requirements" means any and all present and future judicial,
and administrative rulings or decisions, and any and all present and future
federal, state, and local laws, ordinances, rules, regulations, permits and
certificates, in each case, in any way applicable to Borrower, (or the
ownership or use of the Equipment), or this transaction.
"Lien" means any mortgage, pledge, lien, security interest (including
without limitation any conditional sale or other title retention agreement),
grant of a leasehold, charge or other encumbrance of any nature whatsoever,
and also means the filing of or the agreement to give any financing
statement or analogous document under the UCC or analogous law of any
jurisdiction.
<PAGE>
"Loan" means the aggregate principal amount loaned by FINOVA to
Borrower hereunder.
"Loan Commencement Date" means the date the Loan is made to Borrower.
"Loan Documents" means this Agreement, the Note, and any other
documents required to be, or which are, executed by Borrower in connection
with this Agreement or the Loan,
"Loan Party" means Borrower, each Guarantor, each Subordinating
Creditor and each other party (other than FINOVA) to any Loan Document.
"Maturity Date" means August 11, 2000.
"Note" means the promissory note or notes of Borrower executed and
delivered under this Agreement.
"Obligations" means all of the indebtedness, liabilities and
obligations of every kind and nature of Borrower to FINOVA, whether now
existing or hereafter arising, whether or not currently contemplated,
including, without limitation, those under, in connection with or evidenced
by this Agreement, the Note or the other Loan Documents.
"Office", when used in connection with FINOVA, means its office
located at 111 West 40th Street, New York, New York 10018, or at such other
office of FINOVA as may be designated in writing from time to time by FINOVA
to Borrower.
"Operating Cash Flow/Actual" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following
items, to the extent deducted from or added to the revenues of Borrower in
the calculation of net income or loss: (i) depreciation; (ii) amortization
and other non-cash charges; (iii) interest expense paid or accrued; (iv)
total federal and state income tax expense determined as the accrued
liability of Borrower in respect of such period, regardless of what portion
of such expense has actually been paid by Borrower during such period; and
(v) Management Fees paid, to the extent permitted hereunder, and after
deduction for each of (a) federal and state income taxes, to the extent
actually paid during such period: (b) any non-cash income; and (c) all
actual Capital Expenditures made during such period and not financed.
"Person" means an individual, corporation, national banking
association, partnership, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions),
governmental authority or agency, Indian tribe, or any other entity.
"Plan" means any employee benefit plan which, is covered by Title IV
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and which is maintained by Borrower or, in the case of a plan to
which more than one employer contributes, to which Borrower made
contributions at any time within the five plan years preceding the date of
termination.
<PAGE>
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for (I)
interest and scheduled principal payments due on the Term Loans (excluding
voluntary prepayment and payments made from Borrowers Excess Cash Flow, as
required pursuant to the Schedule), (ii) the Facility Fee, and (iii)
principal and interest payments due on the Permitted Senior Indebtedness.
"Term" means the period beginning on the Loan Commencement Date and
ending on the Maturity Date.
"Total Facility" means $450,000.
"UCC" means the Uniform Commercial Code as adopted in the State of
Arizona.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the plural, the
part the whole, and "or" has the inclusive meaning frequently identified by
the phrase "and/or." References to "determination" by FINOVA include a good-
faith estimate by PINOVA (in the case of a quantitative determination) and a
good faith belief by FINOVA (in the case of a qualitative determination).
The words "herein", "hereunder" and "hereof" and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. The Section and other headings contained in
this Agreement are for reference purposes only and shall not control or
affect the construction of this Agreement or the interpretation thereof in
any respect.
ARTICLE 2. THE CREDIT
2.1 The Loan.
Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, FINOVA agrees to make a
Loan to Borrower in a principal amount of Four Hundred Fifty Thousand
Dollars ($450,000).
2.2 The Note.
The obligation of Borrower to repay the Loan shall be evidenced by the
following:
(a) One term loan based upon the appraised auction value of Borrower's
existing machinery and equipment (the "M&E Term Loan"), provided that the
M&E Term Loan, if any, shall be in such amounts and on such terms as are set
forth on a separate promissory note of Borrower in form and substance
acceptable to FINOVA; and
<PAGE>
(b) One term loan (the "Purchase Money M&E Term Loan) in an aggregate
outstanding principal amount not to exceed $131,570 solely payable to
Newport Corporation (RAM Optical Implementation ("Supplier") for the
purchase of the equipment described in Schedule "A" annexed hereto and
incorporated herein by reference provided that such Purchase Money M&E Term
Loan, if any, shall be in such amounts and on such terms as are set forth on
a separate promissory note of Borrower in form and substance acceptable to
FINOVA.
In no event shall the M&E Term Loan and the Purchase Money M&E Term
Loan exceed the aggregate amount the Loan as set forth in Section 2.1
herein.
2.3 Disbursements.
Subject to the conditions set forth herein, FINOVA shall, on the
Disbursement Date, credit, by wire transfer, the amount of the Loan to the
account of Borrower or the Person or Persons specified by Borrower.
2.4 Loan Account.
FINOVA shall maintain a loan account on its books in the name of
Borrower for the Loan in which will be recorded all payments of principal
thereof and all accruals and payments of interest thereon. The entries in
the loan account (in the absence of manifest error in the making thereof
shall be conclusive evidence of the outstanding principal thereof and
accrued interest thereon from time to time. FINOVA shall provide Borrower
monthly with a statement of charges, expenses and payments made pursuant to
this Agreement. Such statements shall be deemed correct, accurate and
binding on Borrower unless Borrower notifies FINOVA in writing to the
contrary within thirty (30) days after each account is rendered, describing
the nature of any alleged errors or admissions.
2.5 Interest Rates and Fees.
2.5.1 Interest Prior to Maturity. Prior to maturity (whether by
acceleration or otherwise) the unpaid principal amount of the Loan shall
bear interest at the Interest Rate.
2.5.2 Default Interest. Commencing with the day after the
principal amount of any part of the Loan shall have become due and payable
(by acceleration or otherwise), such part of the Loan shall bear interest at
the daily rate of two percent (2%) per annum above the then applicable
Interest Rate.
2.5.3 Facility Fee. Borrower shall pay to FINOVA a facility fee
equal to 1% per annum of the amount of the Total Facility ("Facility Fee").
The Facility Fee shall be deemed fully earned and payable on the Closing
Date and thereafter shall be payable annually, commencing upon the first
anniversary of the date of this Agreement and continuing on each subsequent
anniversary thereof.
<PAGE>
2.6 Payments.
2.6.1 Time; Pace; Manner. All payments to be made in respect of
principal, interest, or other amounts due from Borrower hereund6r or under
the Note shall become due and deemed fully earned by FINOVA at 12:00 o'clock
noon, New York time, on the day when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived.
Such payments shall be made to FINOVA in lawful money of the United States
of America in immediately available funds, and which payments must be
received by FINOVA no later than the 20th day of each month, irrespective of
the date of any monthly statement of account rendered by FINOVA. In no event
shall Borrower of a monthly statement of account condition payment by
Borrower upon the rendering or the receipt.
2.6.2 Payment Dates. From and after the Loan Commencement Date,
the Loan shall be repaid on such terms as are set forth on separate
promissory notes of Borrower to FINOVA.
2.6.3 Net Payments. All payments hereunder and under the Note
shall be made by borrower to FINOVA without defense, set-off or counterclaim
and without deduction for any present or future income, stamp or other
taxes, levies, imposts, deductions, charges or withholdings whatsoever
imposed, assessed, levied or collected by or for the benefit of any
jurisdiction or taxing authority. In addition, Borrower shall pay any and
all taxes (stamp or otherwise) payable or determined to be payable in
connection with the execution and delivery of this Agreement, the Note and
on all payments to be made by Borrower hereunder and under the Note (other
than the FINOVA's income taxes) and all taxes payable in connection with or
related to the Collateral.
2.7 Prepayments.
Borrower may terminate this Agreement at any time but only upon sixty
(60) days' prior written notice and prepayment of the Obligations. Upon any
such early termination by Borrower or any termination of this Agreement by
FINOVA upon the occurrence of an Event of Default, then, and in any such
event, Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "Termination Fee") in an amount equal to:
(i) Four percent (4%) of the Total Facility if such prepayment is
made during the Loan Year beginning on the Closing Date; and
(ii) Two percent (2%) of the Total Facility if such prepayment is made
during the Loan Year beginning on the first anniversary of the
Closing Date.
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 Due Organizations.
It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, is qualified and authorized
to do business and is in good standing in all states in which such
qualification and good standing are necessary in order for it to conduct its
business and own its property, and has all requisite power and authority to
conduct its business as presently conducted, to own its property and to
execute and deliver each of the Loan Documents to which it is a party and
perform all of its Obligations thereunder, and has not taken any steps to
wind-up, dissolve or otherwise liquidate its assets.
3.2 Execution and Binding Effect.
This Agreement has been duly and validly executed and delivered by
Borrower and constitutes a legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, and the Note, and the other Loan
Documents when duly and validly executed and delivered by Borrower, will
constitute legal, valid and binding agreements and obligations of Borrower
enforceable in accordance with their terms.
3.4 Authorizations and Filings.
Except for the filing of UCC financing statements, no authorization,
consent, approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing with, any
governmental authority is or will be necessary or advisable in connection
with the execution and delivery of this Agreement, Note, the other Loan
Documents or the consummation by Borrower of the transactions herein and
therein contemplated, or performance by Borrower of or compliance by
Borrower with, the terms and conditions hereof or thereof.
3.5 Absence of Conflicts.
Neither the execution and delivery of this Agreement, the Note or
the other Loan Documents, nor consummation of the transactions therein
contemplated nor performance of, or compliance with the terms and conditions
thereof will (a) result in any violation of the provisions of Borrower's
Constituent Documents or any Law, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over Borrower, or
any of its property, or (b) result in the creation or imposition of any lien
upon any property (now owned or hereafter acquired) of Borrower, except for
the lien created by this Agreement.
<PAGE>
3.6 Financial Statements.
Borrower has heretofore furnished to FINOVA certain financial
statements and related financial information ("Financial Statements"). Such
Financial Statements (including the notes thereto) present fairly the
financial condition of Borrower as of the dates of the balance sheets
contained therein, and the results of its operations for the periods then
ended, all in conformity with GAAP on a basis consistent with that of
Financial Statements for corresponding prior periods. Except as disclosed
therein, Borrower has no material contingent liabilities (including
liabilities for taxes), unusual forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments.
3.7 No Event of Default.
No event has occurred and is continuing and no condition exists which
constitutes or which, with the giving of notice, the passage of time, or
both, would constitute an Event of Default.
3.8 Litigation.
There is no pending or threatened proceeding by or before any court or
governmental agency against or affecting Borrower which, if adversely
decided would have a material adverse effect on the business, operations or
financial condition of B6rrower or on the ability of Borrower to perform its
obligations under this Agreement, the Note or the other Loan Documents.
3.9 Title to Collateral.
At the time the Loan is made, Borrower will have good title to the
Equipment or will acquire good title thereto upon the disbursement of the
proceeds of the Loan, subject to no lien other than the lien created hereby.
3.10 Title to Property.
Borrower has good title to all property owned by it, including all
properties reflected in the most recent audited balance sheet referred to in
Section 3.6 hereof (except as sold or otherwise disposed of in the ordinary
course of business).
3.11 Taxes.
All tax returns required to be filed by Borrower have been properly
prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon Borrower or upon any of its properties, incomes,
sales or franchises, which are due and payable, have been paid.
3.12 Financial Accounting Practices.
Borrower makes and keeps books, records and accounts, which, in
reasonable detail, accurately and fairly reflect Borrower's transactions and
dispositions of its assets.
3.13 Power To Carry On Business.
Borrower has all requisite power and authority to own and operate its
properties and to carry on its businesses as now conducted and as presently
planned to be conducted.
<PAGE>
3.14 No Material Adverse Change.
Since the date of the Financial Statements referred to in Section 3.6,
there has been no material adverse change in the business, operations or
financial condition of Borrower.
3.15 Compliance with Laws.
Borrower is not in violation of any Law, except for violations, which
in the aggregate do not have a material adverse effect on the business,
operations or financial condition of Borrower.
3.16 Accurate and Complete Disclosure.
No representation or warranty made by Borrower in this Agreement and
no statement made by Borrower in the Financial Statements furnished pursuant
to Section 3.6 hereof or otherwise, any certificate, report, exhibit or
document furnished by Borrower to FiNOVA pursuant to or in connection with
this Agreement is false or misleading in any material respect (including by
omission of material information necessary to make such representation,
warranty or statement not misleading).
3.17 Regulations G, T, U and X.
Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying "margin stock", as such term is used in
Regulations G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System as amended from time to time. No part of the proceeds
of the Loan will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any "margin
stock". Borrower does not own any "margin stock".
3.18 Perfection.
Except for the filings under Article 9 of the UCC specified in Section
4.7 hereof (and continuation statements at periodic intervals) or under
applicable certificate of title acts with respect to the security interest
created by this Agreement, no further filing or recording is necessary under
the UCC or under any other laws of any jurisdiction, in order to perfect in
all applicable jurisdictions the security interest of FINOVA in the
Collateral.
3.19 Place of Business.
Both the place of business (or chief executive office if there is more
than one place of business) of Borrower and the place where it keeps its
corporate records concerning the Collateral and all of its interest in, to
and under this Agreement are located at the address set forth at the
beginning of this Agreement.
3.20 Location of Collateral.
For all purposes, including, without limitation, perfection of
security interests therein under Article 9 of the UCC, the Collateral is
deemed located in the State of Texas.
<PAGE>
3.21 Other Names.
Borrower has not, during the preceding five (5) years, been known by
or used any other corporate or fictitious name, nor has Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during such time, except that
Borrower acquired all or substantially all of the assets of I-Con
Industries, Inc. during such time.
3.22 Year 2000
Borrower shall take all action necessary to assure that there will be
no material adverse change to Borrower's business by reason of the advent of
the year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize
and process dates after April 1,1999.
ARTICLE 4. CONDITIONS OF LENDING
The obligation of FINOVA to make the Loan hereunder is subject to the
accuracy in all material respects, as of the date hereof and the
Disbursement Date, of the representations and warranties herein contained,
to the performance by Borrower of its obligations to be performed hereunder
on or before such Disbursement Date arid to the satisfaction of the
following further conditions.
4.1 Representations and Warranties.
The representations and warranties contained in Article 3 hereof shall
be true on the Closing Date and on and as of the Disbursement Date with the
same effect as if made on and as of such date, and on such date no Event of
Default or any event which, with the giving of notice or the passage of
time, or both, would become an Event of Default shall have occurred and be
continuing or exist or shall occur or exist after giving effect to the Loan.
4.2 Corporate Action.
On the Closing Date, Borrower shall deliver to FINOVA a certificate in
form and substance satisfactory to FINOVA, dated the Closing Date, signed by
a duly authorized officer of Borrower, certifying as to (a) true copies of
the Constituent Documents of Borrower, all as in effect on such date (b)
true copies of all action taken by Borrower relative to this Agreement, the
Note and the other Loan Documents, (c) compliance with Section 3.4 hereof,
and (d) the names, true signatures and incumbency of the officer or officers
of Borrower authorized to execute and deliver this Agreement, the Note and
the other Loan Documents (and FINOVA may conclusively rely on such
certificate unless and until a later certificate revising the prior
certificate has been furnished to FINOVA).
4.3 Opinion of Counsel.
On the Closing Date, FINOVA shall have received a favorable written
opinion of counsel for Borrower, dated the Closing Date and in form and
substance satisfactory to FINOVA and its counsel.
<PAGE>
4.4 No Change of Law or Facts.
No change shall have occurred after the date of execution and delivery
of this Agreement in applicable Law or regulations thereunder or
interpretations thereof by appropriate regulatory authorities which, in the
opinion of FINOVA or its counsel, would make it illegal for FINOVA to
acquire the Note, make the Loan, or otherwise to participate in the Loan,
nor shall any facts come to the attention of FINOVA, concerning Borrower,
its business or financial condition which, in the opinion of FINOVA, would
increase the risk to FINOVA of repayment of the Loan by Borrower.
4.5 Documents.
The following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto, shall be in form and
substance satisfactory to FINOVA and its counsel and shall be in full force
and effect on the Closing Date and on the disbursement Date, and an executed
counterpart of each thereof shall have been delivered to FINOVA and its
counsel:
4.5.1 this Agreement;
4.5.2 the Note;
4.5.3 insurance certificates or policies of insurance evidencing the
coverages required by Section 5.3 hereof;
4.5.4 other Loan Documents, if any.
4.6 Equipment.
Borrower shall provide to FINOVA a complete description of each item
of Equipment the cost of which will be paid or refinanced with the proceeds
of the Loan. FINOVA may reject any such item of Equipment, in which case
Borrower may substitute other Equipment acceptable to FINOVA or reduce the
amount of the Loan to be made.
4.7 Financing Statements.
Prior to the disbursement of the proceeds of the Loan, UCC financing
statements covering the security interest created by this Agreement in the
Equipment shall have been duly filed in the office of the Secretary of State
of the State where the Equipment is located and in all other places as. in
the opinion of FINOVA, or its counsel are necessary or desirable to perfect
such security interests.
4.8 Licenses and Permits.
All appropriate action shall have been taken prior to the Closing Date
in order to permit consummation of the transactions contemplated herein and
all licenses, permits, waivers, exemptions, authorizations and approvals
required (or, in the opinion of FINOVA or its counsel, advisable) to be in
effect on the Closing Date shall have been issued and shall be in full force
and effect on such date, and copies thereof shall have been delivered to
FINOVA.
<PAGE>
4.9 Proceedings and Documents.
All legal details and proceedings in connection with the transactions
contemplated by this Agreement shall be in form and substance reasonably
satisfactory to counsel for FINOVA and FINOVA shall have received all such
counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance, as
to certification and otherwise, reasonably satisfactory to said counsel for
FINOVA, as FINOVA or counsel for FINOVA may reasonably request.
ARTICLE 5. COVENANTS
Borrower covenants that from and after the date hereof and until
payment in full of the Note and interest thereon and all other amounts due
from Borrower hereunder or under the Note or the other Loan Documents,
unless FINOVA shall otherwise consent in writing:
5.1.1 Annual Audit Reports. As soon as practicable, and in any
event within 90 days after the close of each fiscal year of Borrower,
Borrower shall furnish to FINOVA statements of income, retained Warnings and
changes in financial position of Borrower for such fiscal year and a balance
sheet of Borrower as of the close of such fiscal year and notes to each, all
in reasonable detail, selling forth in comparative form the corresponding
figures for the preceding fiscal year where such presentation is appropriate
under GAPS, certified by independent certified public accountants of
recognized standing selected by Borrower and satisfactory to FINOVA,
together with (or included in such certification) a written statement of
such accountants substantially to the effect that (i) such accountants
examined such financial statements in accordance with generally accepted
auditing standards and accordingly made such tests of accounting records and
such other auditing procedures as they considered necessary in the
circumstances and (ii) in the opinion of such accountants such financial
statements present fairly the financial position of Borrower as of the end
of such fiscal year and the results of its operations and the changes in its
financial position for the fiscal year then ended, in conformity with
generally accepted accounting principles-applied on a basis consistent with
that of the preceding fiscal year except for changes in application in which
such accountants concur).
5.1.2 Quarterly Reports. Within 45 days after the end of each of
the first three fiscal quarters of each fiscal year, Borrower shall furnish
to FINOVA a copy of its interim financial statements certified by an
Executive Officer of Borrower.
5.1.3 Further Requests. Borrower will promptly furnish to FINOVA
such other information concerning Borrower in such form as FINOVA may
reasonably request.
5.1.4 Notice of Event of Default. Promptly upon becoming aware of
any Event of Default, or any event which, with the giving of notice or the
passage of time, or both, would become an Event of Default, Borrower shall
give FINOVA notice thereof, together with a written statement of an
Executive Officer of Borrower setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by Borrower.
5.1.5 Notice of Material Adverse Change. Promptly upon
becoming aware thereof Borrower shall give FINOVA written notice about any
material adverse change in the business, operations or financial condition
of Borrower.
<PAGE>
5.1.6 Notice of Material Proceedings. Promptly upon becoming
aware thereof Borrower shall give FINOVA written notice of the commencement,
existence or threat of any proceeding by or before any court or
administrative agency against or affecting Borrower which, if adversely
decided1 would have a material adverse effect on the business, operations or
financial condition of Borrower or on the ability of Borrower to perform its
obligations under this Agreement, the Note, or the other Loan Documents.
5.1.7 Visitation. Borrower shall permit such persons as FINOVA
may designate to visit and inspect the Collateral and to examine the books
and records of Borrower and take copies and extracts therefrom, and to
discuss its affairs with officers of Borrower and its independent
accountants, at such reasonable times and as often as FINOVA may reasonably
5.2 Preservation of Existence and Franchises.
5.2.1 Borrower shall not enter into any merger, reorganization,
or consolidation or wind up, liquidate or dissolve, nor agree to do any of
the foregoing.
5.2.2 Borrower will qualify to do business and will remain in
good standing under the laws of each jurisdiction in which it is required to
be qualified by reason of at the location of the properties owned or leased
by it or the conduct of its business
5.2.3 Borrower will comply with all Laws relative to the conduct
of its business or the location of the properties owned or leased by it, the
non-compliance with which could have a material adverse effect on the
business, operation, assets or financial or other condition of the Borrower,
as contemplated hereby, or the ability of Borrower to perform its
obligations under this Agreement, the Note, or the other Loan Documents and
will obtain or cause to be obtained as promptly as possible any permit,
license, consent or approval of any governmental authority and make any
filing or registration therewith which at the time shall be required with
respect to the performance of its obligations under this Agreement the Note
or the other Loan Documents for the operation of its business as presently
conducted or as contemplated by it
5.2.4 Borrower shall not. (i) convey, assign, sell, mortgage,
encumber, pledge, hypothecate, grant a security interest in, grant options
with respect to, lease or otherwise dispose of all or any part of any legal
or beneficial interest in any part or all of the Collateral or any interest
therein; or (ii) directly or indirectly sell, assign, lease or otherwise
dispose of or permit the sale, assignment or other disposition of (a) more
than 10% of the legal or beneficial interest in the stock of any corporation
which is either Borrower or is a beneficial owner of all or part of Borrower
without the prior written consent of FINOVA which will not be unreasonably
withheld; (b) any legal or beneficial interest in any of the Collateral or
(c) any legal or beneficial interest in Borrower if Borrower is a limited or
general partnership, joint venture, tenancy in common or tenancy by the
entirety; or (iii) convey, assign, transfer or otherwise dispose of a
material portion of the assets of Borrower (other than the Collateral),
other than in the ordinary course of business of Borrower.
<PAGE>
5.3 Insurance.
Borrower will maintain and deliver evidence to FINOVA of such
insurance as is required by FINOVA, written by insurers, in amounts, and
with lender's loss payee, additional insured, and other endorsements,
satisfactory to FINOVA. All premiums with respect to such insurance shall be
paid by Borrower as and when due Accurate and certified copies of the
policies shall be delivered by Borrower to FINOVA. If Borrower fails to
comply with this Section, FINOVA may (but shall not be required to) procure
such insurance and endorsements at Borrower's expense and charge the cost
thereof to Borrower's loan account as an Obligation.
5.4 Maintenance of Properties.
Borrower shall maintain or cause to be maintained in good repair,
working order and condition the properties now replacements and improvements
thereto so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, or hereafter owned,
leased or otherwise possessed by it, including the Equipment and shall make
or cause to be made all needful and proper repairs, renewals,
5.5 Payment of Taxes and Other Potential Charges.
Borrower shall pay or discharge
5.5.1 all taxes, assessments and other governmental charges or
levies imposed upon it or any of its properties, including the Collateral,
or income (including such as may arise under ERISA or any similar provision
of law). on or prior to the date on which penalties attach thereto,
5.5.2 all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, if unpaid, might
result in the creation of a Lien upon any such property, on or prior to the
date when due; provided, that unless and until foreclosure, distraint, levy,
sale or similar proceedings shall have been commenced, Borrower need not pay
or discharge any such tax, assessment, charge, levy, claim or current
liability so long as (i) the validity thereof is contested in good faith and
by appropriate proceedings diligently pursued, (ii) in FINOVA's sole
judgment there is no reasonably foreseeable risk of forfeiture of the
Collateral, and (iii) such reserves or other appropriate provisions as may
be required by GAPS shall have been made therefor, and so long as such
failure to pay or discharge does not have a material adverse effect on the
business, operations or financial condition of Borrower.
5.6 Financial Accounting Practices.
Borrower shall make and keep books, records and accounts, which, in
reasonable detail, accurately and fairly reflect its transactions and
dispositions of its assets.
5.7 Compliance with Laws.
Borrower shall comply with all applicable Laws in all respects,
provided, that Borrower shall not be deemed to be in violation of this
Section 5.7 as a result of any failures to comply which would not result in
fines, penalties, injunctive relief or other civil or criminal liabilities
which, in the aggregate, would not materially affect the business or
operations of Borrower or the ability of Borrower to perform its obligations
under this Agreement, the Note or the other Loan Documents..
<PAGE>
5.8 Maintenance of Collateral.
Borrower will maintain and preserve the Collateral in good condition
and repair, promptly repairing, replacing or rebuilding any part of the
Collateral, which may be destroyed by any casualty, or become damaged, worn
or dilapidated.
5.9 Financial Covenant.
5.9.1 Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the end of each
month or quarter (as determined by FINOVA in its sole and
absolute discretion), except as
5.9.1(a) From the closing date until the end of the current
fiscal year, Borrower shall maintain a Net Worth
of not less than Six Hundred Thousand Dollars
($600,000). For each fiscal year thereafter
Borrower's minimum net worth shall increase in
increments of $200,000.
5.9.1(b) Borrower shall maintain a ratio of Indebtedness to
Net Worth of not greater than 6.0 to 1.0; and
5.9.1(c) Senior Debt Service Coverage Ratio. As of the last
day of each calendar quarter ended September 30,
1999 or December 31, Borrower's Operating Cash
Flow /Actual for the period ending as of such last
day must be at least 1.0 times the amount
necessary to meet Borrower's Senior Contractual
Debt Service for such period, and as of the last
day of each calendar quarter ended March 31, 1999,
June 30, 1999, September30, 1999, December30, 1999
and March 31, 2000, Borrowers Operating Cash
Flow/Actual for the: period ending as of such last
day must be at least 20 times the amount necessary
to meet Borrower's Senior Contractual Debt Service
for such period; provided however, that, with
respect to the calculations set forth herein for
the period from the Closing Date through December
31, 1998, Borrower's Operating Cash Flow/Actual
and Senior Contractual Debt Service shall be
determined beginning as of June 30, 1998 (the
"Start Date") and be measured as follows: (a) the
time period from the Start Date through September
30, 1998, shall be for such amounts for such
period, and (b) the time period from the Start
Date through December 31, 1998, shall be for such
amounts for such period; and, provided further,
that all such determinations shall be made on a
consolidated basis.
5.9.2 Words and terms used in this Section 5.9 and not otherwise
defined in this Agreement shall have the meanings commonly ascribed to such
terms in accordance with GAAP.
<PAGE>
5.9.2 Year 2000.
Borrower shall take all action necessary to assure that there will be
no material adverse change to Borrower's business by reason of the advent of
the year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize
and process dates after April 1, 1999. At FINOVA's request, Borrower shall
provide to FINOVA assurance reasonably acceptable to FINOVA that Borrowers
computer-based systems, embedded microchips and; other processing
capabilities are year 2000 compatible.
5.10 Further Assurances
Borrower shall cause to be done, executed, acknowledged and delivered
all and every such further act, conveyance and assurance as FINOVA shall
require for accomplishing the purposes of this Agreement, the Note and the
other Loan Documents. Borrower will defend and protect its title with
respect to the Collateral and will indemnify FINOVA with respect thereto.
Any payment in respect of such indemnity shall be made directly to FINOVA on
demand in immediately available funds. Forthwith after notice from FINOVA,
Borrower shall promptly, without further consideration, execute, acknowledge
and deliver such further instruments and documents and will take such other
actions as FINOVA may deem necessary or advisable from time to time to
ensure the enforceability or priority of the liens granted hereby, or
otherwise to confirm and carry out the intent and purpose of this Agreement.
ARTICLE 6. SECURITY INTEREST
6.1 Security.
To secure the payment and performance of the Obligations when due,
Borrower hereby grants to FINOVA a first priority security interest (subject
only to Permitted Encumbrances) in all of Borrowers now owned or hereafter
acquired or arising Machinery and Equipment and a security interest in all
of Borrower's now owned or hereafter acquired or arising, accounts
receivables, inventory, life insurance policies and the proceeds thereof,
trademarks, copyrights. licenses and patents, investment property (as
defined in Section 9-115 of the Code) and general intangibles, including,
without limitation, all of Borrower's deposit accounts, money, any and all
property now or at any time hereafter in FINOVA's possession (including
claims and credit balances), and all proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties),
all products and all books and records and computer data related to any of
the foregoing together with that certain machinery and equipment described
in Schedule "A" annexed hereto (all of the foregoing, together with all
other property in which FINOVA may be granted a lien or security interest,
is referred to herein, collectively, as the "Collateral").
6.2 FINOVA Has Rights and Remedies of a Secured Party.
In addition to all rights and remedies given to FINOVA by this
Agreement, FINOVA shall have all the rights and remedies of a secured party
under the UCC.
<PAGE>
6.3 Provisions Applicable to the Collateral.
The parties agree that, at all times during the term of this
Agreement, the following provisions shall be applicable to the Collateral:
6.3.1 Borrower covenants and agrees that it will keep accurate
and complete books and records concerning the Collateral owned or acquired
by it in accordance with GAAP.
6.3.2 FINOVA shall have the right t& review the books and
records of Borrower pertaining to the Collateral and to copy the same and to
make excerpts therefrom, all at such reasonable times upon reasonable notice
and as often as FINOVA may reasonably request.
6.3.3 Borrower shall maintain and keep its principal place of
business and its chief executive office at the address set forth at the
beginning of this Agreement, and at no other location without giving FINOVA
at least thirty (30) days prior written notice of any move. Borrower shall
maintain and keep its records concerning the Collateral at such address and
at no other location without giving FINOVA at least thirty (30) days prior
written notice of any move. Borrower shall keep any Equipment comprising the
Collateral only at such address. Borrower may change any such location only
if it has given FINOVA thirty (30) days prior written notice of the new
location. Borrower may not move the Collateral without the prior written
consent of FINOVA.
6.3.4 Borrower shall not sell, lease, transfer or otherwise
dispose of or encumber any of the Collateral.
6.3.5 Borrower shall cause the Equipment and any other Collateral
to be maintained and preserved in the same condition, repair and working
order as when new, ordinary wear and tear excepted, and shall promptly make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable to that end.
6.3.6 Borrower shall not permit any item of Equipment to become a
fixture (other than a trade fixture) to real estate or an accession to other
property.
6.4 Certain Covenants.
Borrower covenants and agrees with FINOVA for the benefit of FINOVA
that:
6.4.1 Borrower has and will have good and merchantable title to
all Collateral, in each case as from time to time owned or acquired by it,
free and clear of all Liens. Borrower will defend such title against the
claims and demands of all Persons whomsoever.
<PAGE>
6.4.2 Borrower will faithfully preserve and protect FINOVA's
security interest in the Collateral and will, at its own cost and expense,
cause said security interest to be perfected and continued perfected, and
for such purpose Borrower will from time to time at the request of FINOVA
and at the expense of Borrower, make, execute, acknowledge and deliver, and
file or record, or cause to be filed or recorded, in. the proper filing
places, all such instruments, documents and notices, including without
limitation financing statements and continuation statements, as FINOVA may
deem necessary or advisable from time to time in order to perfect and
continue perfected said security interest. Borrower will do all such other
acts and things and make, execute, acknowledge and deliver all such other
instruments and documents, including without limitation further security
agreements pledges, endorsements, assignments and notices, as FINOVA may
deem necessary or advisable from time to time in order to perfect and
preserve the priority of said security interest as a first lien security
interest in the Collateral prior to the rights of all other Persons therein
or thereto.
6.4.3 Borrower will not, without the prior written consent of
FINOVA, (i) borrow or permit any Person to borrow against the Collateral
other than the Loan to Borrower from FINOVA pursuant to this Agreement; (ii)
create, incur, assume or suffer to exist any Lien with respect to any of the
Collateral: (iii) permit any levy or attachment to be made against any of
the Collateral except any levy or attachment relating to this Agreement; or
(iv) permit any financing statement to be on file with respect to any of the
Collateral, except financing statements in favor of FINOVA.
6.4.4 Risk of loss of, damage to or destruction of the
Collateral is and shall remain upon Borrower. Borrower will insure the
Collateral as provided in Section 5.3 of this Agreement. If Borrower fails
to effect and keep in full force and effect such insurance or fails to pay
the premiums thereon when due, FINOVA may do so for the account of Borrower
and add the cost thereof to the Obligations and the same shall be payable to
FINOVA on demand. Borrower hereby assigns and sets over unto FINOVA for the
benefit of FINOVA all moneys which may become payable on account of such
insurance, including without limitation any return of unearned premiums
which may be due upon cancellation of any such insurance, and directs the
insurers to pay FINOVA any amount so due. FINOVA, its officers, employees
and authorized agents and its successors and assigns, are hereby appointed
attorneys-in-fact of Borrower, for the purpose of endorsing any draft or
check which may be payable to Borrower in order to collect the proceeds of
such insurance or any return of unearned premiums. Such appointment is
irrevocable and coupled with an interest. The proceeds of insurance shall be
applied to reduction of the Obligations in any order FINOVA may choose or,
in FINOVA's sole discretion, to the repair or replacement of the Collateral,
or any part thereof, in which case FINOVA may impose such conditions on the
disbursement of the proceeds as FINOVA in its sole discretion deems
appropriate.
6.4.5 Upon the occurrence and during the continuation or
existence of any Event of Default, Borrower shall promptly upon demand by
FINOVA assemble the Equipment and any other Collateral and make it available
to FINOVA at the place or places to be designated by FINOVA. The right of
FINOVA to have the Equipment and any other Collateral assembled and made
available to it is of the essence of this Agreement and FINOVA may, at its
election, enforce such right in equity for specific performance.
<PAGE>
6.4.6 FINOVA shall have no duty as to the collection or
protection of the Collateral or any part thereof or any income thereon, or
as to the preservation of any rights pertaining thereto, beyond exercising
reasonable care in the custody of any Collateral actually in the possession
of FINOVA. FINOVA shall be deemed to have exercised reasonable care in the
custody and preservation of such of the Collateral as may be in its
possession if it takes such action for that purpose as Borrower shall
request in writing, provided that such requested action shall not, in the
judgment of FINOVA, impair FINOVA's security interest in the Collateral or
its rights in, or the value of, the Collateral, and provided further that
such written request is received by FINOVA in sufficient time to permit it
to take the requested action.
ARTICLE 7. DEFAULTS
7.1 Events of Default.
The occurrence of one or more of the following described events is an
Event of Default:
7.1.1 Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise:
7.1.2 Borrower or any other Loan Party fails or neglects to perform,
keep, or observe any Obligation including, but not limited to, any term,
provision, condition, covenant or agreement contained in any Loan Document
to which Borrower or such other Loan Party is a party;
7.1.3 Any material adverse change occurs in Borrowers business,
assets, operations, prospects or condition, financial or otherwise;
7.1.4 The prospect of repayment of any portion of the Obligations or
the value or priority of FINOVA's security interest in the Collateral is
materially impaired;
7.1.5 Any portion of Borrower's assets is seized, attached, subjected
to a writ or distress warrant, is levied upon or comes into the possession
of any judicial officer;
7.1.6 Borrower shall generally not pay its debts as they become due or
shall enter into any agreemen5t (whether written or oral), or offer to enter
into any agreement, with all or a significant number of its creditors
regarding any moratorium or other indulgence with respect to its debts or
the participation of such creditors or their representatives in the
supervision, management or control of the business of Borrowers.
7.1.7 Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
7.1.8 Any notice of lien, levy or assessment is filed of record with
respect to any of Borrower's assets;
7.1.9 Any judgments are entered against Borrower in an aggregate
amount exceeding $25,000 in any fiscal year:
<PAGE>
7.1.10 Any default shall occur under (i) any material agreement
between Borrower and any third party including, without limitation, any
default which would result in a right by such third party to accelerate the
maturity of any Indebtedness of Borrower to such third party, or (ii) any
Subordinated Debt;
7.1.11 Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in
connection therewith shall prove to have been misleading in any material
respect;
7.1.12 Any Guarantor becomes incapacitated, dies, terminates or
attempts to terminate its Guaranty or any security therefor or becomes
subject to any bankruptcy or other insolvency proceeding;
7.1.13 Any Prohibited Transaction or Reportable Event shall occur
with respect to a Plan which could have a material adverse effects on the
financial condition of Borrower; any lien upon the assets of Borrower in
connection with any Plan shall arise; Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any Plan
or any Multi employer Plan as one or more contributions thereto; Borrower or
any of its ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency, whether or not waived; or
7.1.14 Any transfer of more than ten percent (10%) of the issued
and outstanding shares of common stock or other evidence of ownership of
Borrower without the prior written consent of FINOVA which consent shall not
be unreasonably withheld.
7.1.15 Any default by Borrower of any-term, condition or payment to
be made under this Agreement, the Note or any other agreement by and between
Borrower and FINOVA.
7.1.16 Any default by JH & BC Corp. under the Note, executed by JH&
BC Corp., dated as of June 16, 1998, and delivered to FINOVA, the Deed of
Trust, dated as of June 16, 4998, covering the premises located at Southwest
Corner of State Highway 199 and Interstate 820 in Lake Worth, Texas, naming
JH & BC Corp. as Grantor and FINOVA as Beneficiary, and any other agreement
entered into by and, between JH & BC corp. and FINOVA.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
<PAGE>
7.2 Consequences of Event of Default.
Upon the occurrence of an Event of Default, FINOVA may. at its option
and in its sole and absolute discretion and in addition to all of its other
rights under the Loan Documents, cease making Loans, terminate this
Agreement and/or declare all of the Obligations to be immediately payable in
full. Borrower agrees that FINOVA shall also have all of its rights and
remedies under applicable law, including, without limitation, the default
rights and remedies of a secured party under the UCC, and upon the
occurrence of an Event of Default Borrower hereby consents to the
appointment of a receiver by FINOVA in any action initiated by FINOVA
pursuant to this Agreement and to the jurisdiction and venue set forth in
Section 9.26 hereof, and Borrower waives notice and posting of a bond in
connection therewith. Further, FINOVA may, at anytime, take possession of
the Collateral and keep it on Borrowers premises, at no cost to FINOVA, or
remove any part of it to such other place(s) as FINOVA may desire, or
Borrower shall, upon FINOVA's demand, at Borrower's sole cost assemble the
Collateral and make it available to FINOVA at a place reasonably convenient
to FINOVA. FINOVA may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's sole and absolute discretion,
and may, if FINOVA deems it reasonable, postpone or adjourn any sale of the
Collateral by an announcement at the time and place of sale or of such
postponed or adjourned sale without giving a new notice of sale. Borrower
agrees that FINOVA has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. FINOVA is hereby
granted a license or other right to use, without charge, Borrowers labels,
patents, copyrights, name, trade secrets, trade names, trademarks and
advertising matter, or any similar property, in completing production,
advertising or selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to FINOVA's benefit. Any
requirement of reasonable notice shall be met if such notice is mailed
postage prepaid to Borrower at its address set forth in the heading to this
Agreement at least five (5) days before sale or other disposition. The
proceeds of sale shall be applied, first, to all attorneys fees and other
expenses of sale, and second, to the Obligations in such order as FINOVA
shall elect, in its sole and absolute discretion. FINOVA shall return any
excess to Borrower and Borrower shall remain liable for any deficiency to
the by law fullest extent permitted
ARTICLE 8. MISCELLANEOUS
8.1 Indemnity.
BORROWER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS FINOVA FROM AND
AGAINST, AND, UPON DEMAND, REIMBURSE FINOVA FOR, ALL CLAIMS, DEMANDS,
LIABILITIES, LOSSES, DAMAGES, JUDGMENTS, PENALTIES, COSTS AND EXPENSES,
INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES AND DISBURSEMENTS,
WHICH MAY BE IMPOSED UPON, ASSERTED AGAINST OR INCURRED OR PAID BY FINOVA,
ON ACCOUNT OF ANY ACT PERFORMED OR OMITTED TO BE PERFORMED UNDER THIS
AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS OR ON ACCOUNT OF ANY
TRANSACTION ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE COLLATERAL OR
THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, OR ANY OTHER AGREEMENT
BY AND BETWEEN FINOVA AND BORROWER, EXCEPT AS A RESULT OF THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF FINOVA.
<PAGE>
8.2 No Implied Waiver; Cumulative Remedies.
No course of dealing and no delay or failure of FINOVA in exercising
any right, power or privilege under this Agreement, the Note or any of the
other Loan Documents shall affect such right, power or privilege except as
and to the extent that the assertion of any such right, power or privilege
shall be barred by an applicable statute of limitations; nor shall any
single or partial exercise thereof or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any further
exercise thereof or of any other right, power or privilege. The rights and
remedies of FINOVA under this Agreement, the Note or the other Loan
Documents are cumulative and not exclusive of any rights or remedies which
FINOVA would otherwise have.
8.3 Taxes.
Borrower agrees to pay or reimburse FINOVA for any and all stamp,
document, transfer, recording or filing taxes or fees and all similar
impositions payable or hereafter determined by FINOVA to be payable in
connection with this Agreement, the Note or the other Loan Documents
(including but not limited to those necessary or advisable to record or to
ensure the enforceability or priority of this Agreement, the Note or the
other Loan Documents), as determined by FINOVA in its sole discretion from
time to time, and any other documents, instruments or transactions pursuant
to or in connecu6n herewith, and Borrower agrees to save FINOVA harmless
from and against any and all present or future claims or liabilities with
respect to or resulting from any delay in paying or omission to pay any such
taxes, fees or similar impositions.
8.4 Modifications, Amendments or Waivers.
FINOVA and Borrower may from time to time enter into written
agreements amending, modifying or supplementing this Agreement, the Note or
the other Loan Documents or changing the rights of FINOVA or Borrower
hereunder or thereunder, and FINOVA may from time to time grant waivers or
consents to a departure from the due performance of the obligations of
Borrower thereunder. Any such agreement, waiver or consent must be in
writing and shall be effective only to the extent set forth in such writing.
In the case of any such waiver or consent, any Event of Default so waived or
consented to shall be deemed to be cured and not continuing, but no such
waiver or consent shall extend to any subsequent or other Event of Default
or impair any right consequent thereto.
8.5 Holidays.
Except as otherwise provided herein, whenever any payment or action to
be made or taken hereunder or the Note or any other Loan Document shall be
stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day, unless
such next succeeding Business Day falls in a different calendar month, in
which case payment or action shall be made or taken on the next preceding
Business Day.
<PAGE>
8.6 Notices.
8.6.1 Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement with a copy to yard Griffith, VP, at 355 S.
Grand Ave., Suite 2400, Los Angeles, CA 90071, and a copy to Joseph R.
D'Arnore, VP-Associate General Counsel, at 1850 N. Central Avenue, Suite
1141, Phoenix, AZ 85002. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or
otherwise, or upon deposit in the United States mail, postage pre paid.
8.6.2 If any notice is given by telex, facsimile transmission, or
telegram, the party giving such notice shall confirm such notice by a
writing delivered by hand or overnight courier; provided, however, that for
all purposes hereunder, notice shall be deemed effective at the time given
by telex, facsimile transmission or telegram.
8.7 Reimbursement for Certain Expenses.
Borrower agrees to pay or cause to be paid and to save FINOVA harmless
against liability for the payment of all reasonable out-of-pocket expenses,
including counsel fees, incurred by FINOVA from time to time (i) arising in
connection with the negotiation, execution, delivery, and recordation of
this Agreement, the Note or the other Loan Documents (ii) relating to
any requested amendments, waivers or consents to or in connection with this
Agreement, the Note or any other Loan Document, and (iii) arising in
connection with FINOVA's enforcement or preservation of rights under this
Agreement, The Note or any other Loan Document, including but not limited to
such expenses as may be incurred by FINOVA in the collection of the Note.
8.8 Personal Jurisdiction and Service of Process.
Borrower hereby irrevocably consents to personal jurisdiction and
venue in any court of the State of Arizona or any federal court sitting in
the State of Arizona, and hereby waives any claim either may have that such
court is an inconvenient forum for the purposes of any suit, action or other
proceeding arising out of this Agreement, the Note or any other Loan
Document or any of the agreements or transactions contemplated hereby or
thereby, which is brought against Borrower by FINOVA, and hereby agrees that
all claims in respect of any such suit, action or proceeding may be heard or
determined in any such court; and Borrower further consents to the service
of process in any such suit, action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Borrower at its
address set forth herein for the giving of notes, such service to become
effective on the earlier of the date of receipt as evidenced by a signed
return receipt or ten (10) days after mailing.
8.9 Severability.
The provisions of this Agreement, the Note and the other Loan
Documents are intended to be severable. If any such provision is held
invalid or unenforceable in whole or in part in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the
validity or enforceability thereof in any other jurisdiction or the
remaining provisions hereof in any jurisdiction.
<PAGE>
8.10 Governing Law.
This Agreement the Note, the other Loan Documents and the rights and
obligations of the parties hereto and thereto shall be governed by and
construed and enforced in accordance with the laws of the State of Arizona.
8.11 Prior Understandings.
This Agreement supersedes all prior understandings and agreements,
whether written or oral, between the parties hereto relating to the
transactions provided for herein.
8.12 Survival.
All representations and warranties of Borrower contained in this
Agreement or any other Loan Document or made in writing in connection
herewith or therewith shall survive the execution and delivery of this
Agreement, the Note and the other Loan Documents, any investigation or
inspection by FINOVA, the making of the Loan hereunder, the payment of the
Note or the expiration of this Agreement. All covenants and agreements of
Borrower contained herein shall continue in full force until payment in full
of all Obligations. Borrowers obligation to pay the principal of and
interest on the Note and all such other amounts shall be absolute and
unconditional under any and all circumstances.
8.13 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of
FINOVA and Borrower and their respective successors and permitted assigns,
except that Borrower may not assign or transfer any of its rights or
obligations hereunder or any interest herein without the consent of FINOVA
which FINOVA may withhold in its absolute discretion. Any actual or
attempted assignment by Borrower without FINOVA's consent shall be null,
void and of no effect whatsoever. FINOVA may assign its rights and
obligations hereunder and under the Note and the other Loan Documents in
whole or in part. If FINOVA makes such an assignment, the assignee shall
have all of the rights of the FINOVA and Borrower shall not assert against
the assignee any defense, counterclaims or setoff which Borrower may have
against FINOVA. Except to the extent otherwise required by its context, the
word "FINOVA" where used in this Agreement shall mean and include the holder
of the Note originally issued to FINOVA, and the holder of such Note shall
be bound by and have the benefits of this Agreement to the same extent as if
such holder had been a signatory hereto.
8.14 Counterparts.
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts each of which, when so
executed and delivered by the parties, constituting an original but all such
counterparts together constituting but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by the officers thereunto duly
authorized, have executed and delivered this Agreement effective as of the
day and year first above written.
PERFORMANCE INTERCONNECT CORP
By: /s/
-----------------------------
Edward P. Stefanko, President
Federal Tax ID No. 75-2681440
1101 Pamela Drive
Euless Texas 76040
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
On this 12th day of August in the year 1998, before me, the
undersigned, a Notary Public in and for said state, personally appeared
Edward P. Stefanko, personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that be/she/they executed
the same in his/her/their capacity(ies) and that by his/her/their
signature(s) on the instrument, the person(s) or the entity upon behalf of
which the person(s) acted, executed the instrument.
/s/
-----------------------------------
Notary Public
FINOVA Capital Corporation
By: /s/
----------------------------
Mark Picillo, Vice President
Exhibit 4.19
FINOVA
FINANCIAL INNOVATORS
LOAN AND SECURITY AGREEMENT
PC DYNAMICS OF TEXAS. INC.
--------------------------
Borrower
10501 FM 720 EAST
-----------------
FRISCO. TEXAS 75034
-------------------
Address
75-2808489
----------
Borrower Fed ID Tax No.
$2,035,000.O0
-------------
Credit Limit
MARCH 25, 1999
--------------
Date
===========================================================================
FINOVA BUSINESS CREDIT
===========================================================================
<PAGE>
1. DEFINITIONS 3
2. LOANS: INTEREST RATE AND OTHER CHARGES 3
3. SECURITY 4
4. CONDITIONS OF CLOSING 4
5. BORROWER REPRESENTATIONS AND COVENANTS 5
6. INTENTIONALLY LEFT BLANK 7
7. DEFAULTS AND REMEDIES 7
8. EXPENSES AND INDEMNITIES 8
g. MISCELLANEOUS 8
SCHEDULES:
LOAN SCHEDULE S1
DEFINITION SCHEDULE S8
<PAGE>
LOAN AND SECURITY AGREEMENT dated March 25, 1999, between PC DYNAMICS OF
TEXAS, INC., a Texas corporation, having its principal place of business at
10501 FM 720 East, Frisco, Texas 75034, ("Borrower"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation, having a principal office at 355 South
Grand Avenue, Suite 2400, Los Angeles, California 90071, (hereinafter called
"FINOYA")
1. DEFINITIONS. All capitalized terms used in this Agreement are defined
either in this Agreement, in the attached Loan Schedule, in the attached
Definition Schedule, or in any supplement to this Agreement The Loan
Schedule, Definition Schedule and any supplement to this Agreement are
integral parts of this Agreement and all references to "herein", "herewith"
and words of similar import shall for all purposes be deemed to include the
Schedules and supplements.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
(a) Loans. Whenever the Borrower makes a request, FINOVA shall make
loans or extend credit to or for the Borrower; but FINOVA shall not be
obligated to make loans or extend credit beyond the Total Facility set forth
in the Loan Schedule ("Total Facility"), and subject to deduction of any
loan reserves ("Loan Reserves") FINOVA deems proper from time to time in its
Permitted Discretion, and less amounts FINOVA may be obligated to pay in the
future on behalf of Borrower. Advances under the Total Facility ("Loans"
and individually, a "Loan") shall be comprised of the amounts shown on the
Loan Schedule.
(b) Interest and Fees; Principal Payments. The Borrower shall pay
FINOVA the interest and fees set forth on the Loan Schedule, but only to the
maximum extent permitted by applicable law. Except where evidenced by notes
or other instruments issued or made by Borrower to FINOVA specifically
containing payment provisions which are in conflict with this Section (in
which event the conflicting provisions of such notes or other instruments
shall govern and control), that portion of the Obligations consisting of
principal payable on account of Loans shall be payable by Borrower to FINOVA
immediately upon the earliest of (i) the receipt by FINOVA or Borrower of
any proceeds of any of the Collateral, to the extent of said proceeds, (ii)
the occurrence of an Event of Default in consequence of which FINOVA elects
to accelerate the maturity and payment of such leans, or (iii) any
termination of this Agreement; provided, however, that any Overadvance or
Overline shall be payable on demand. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to,
any deduction for any setoff or counterclaim.
(c) Overlines; Overadvances If at any time or for any reason the
outstanding amount of advances extended or issued pursuant hereto exceeds
any of the. dollar limitations ("Overline") or percentage limitations
("Overadvance") in the Loan Schedule, then Borrower shall, upon FINOVA's
demand, immediately pay to FINOVA, in cash the full amount of such Overline
or Overadvance which, at FINOVA's option, may be applied to reduce the
outstanding principal balance of the Loans or any other Obligations. without
limiting Borrowers obligation to repay to FINOVA on demand the amount of any
Overline or Overadvance, Borrower agrees to pay FINOVA interest on the
Outstanding principal amount of any Overline or Overadvance, on demand, at
the rate set forth on the Loan Schedule and applicable to the Revolving
Credit Loans
<PAGE>
(d) Establishment of a Lockbox Account or Dominion Account. Borrower
shall cause all proceeds of Collateral to be deposited into a lockbox
account, or such other "blocked account" as FINOVA may require (each, a
"Blocked Account") pursuant to an arrangement with such bank as may be
selected by Borrower and be acceptable to FINOVA which proceeds, unless
otherwise provided herein, shall be applied in payment of the Obligations in
such order as FINOVA determines in its sole discretion. Borrower shall issue
to any such bank an irrevocable letter of instruction directing said bank to
transfer such funds so deposited to FINOVA, either to any account maintained
by FINOVA at said bank of by wire transfer to appropriate account(s) of
FINOVA. All funds deposited in a Blocked Account shall immediately become
the sole property of FINOVA and Borrower shall obtain the agreement by such
bank to waive any offset rights against the funds so deposited. FINOVA
assumes no responsibility for any Blocked Account arrangement, including
without limitation, any claim of accord and satisfaction or release with
respect to deposits accepted by any bank thereunder. Alternatively, FINOVA
may establish depository accounts in the name of FINOVA at a bank or banks
for the deposit of such funds (each, a "Dominion Account") and Borrower
shall deposit all proceeds of Receivables and all cash proceeds of any sale
of Inventory or, to the extent permitted herein, Equipment or cause same to
be deposited, in kind, in such Dominion Accounts of FINOVA in lieu of
depositing same to Blocked Accounts, and, unless otherwise provided herein
all. such funds shall be applied, by FINOVA to the Obligations in such order
as FINOVA determines in its sole discretion. Notwithstanding anything to
the contrary in this Agreement, Borrower agrees that, in computing the
charges under this Agreement, all items of payment. including any prepayment
of the Obligation, shall be deemed applied by FINOVA on account of the
Obligations Three (3) business days after receipt by FINOVA of good funds
which have been finally credited to FINOVA's account, whether such funds are
received directly from Borrower or from the Blocked Account bank or the
Dominion Account bank, and this provision shall apply regardless of the
amount of the Obligations outstanding or whether any Obligations are
outstanding; provided, that if any such goad funds are received after
10:00a.m. noon Los Angeles time on any business day or at any time on any
day not constituting a business day, such funds shall be deemed received on
the immediately following business day. FINOVA is not, however, required to
credit Borrowers account for the amount of any item of payment which is
unsatisfactory to FINOVA in its Permitted Discretion and FINOVA may charge
Borrowers loan account for the amount of any item of payment which is
returned to FINOVA unpaid.
(e) Monthly Accountings FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless
Borrower notifies FINOVA in writing to the contrary within thirty (30) days
after each account is rendered, describing the nature of any alleged errors
or admissions.
<PAGE>
(f) Application of Collateral and Payments Except as otherwise provided
herein, FINOVA shall have the continuing and exclusive right to apply or
reverse and re-apply any and all payments to any portion of the Obligations
in such order and manner as FINOVA shall determine in its Permitted
Discretion. The amount of all payments or amounts received by FINOVA with
respect to the Loan shall be applied to the extent applicable under this
Agreement (i) first, to accrued but unpaid interest through the date of such
payment, including any Default Interest; (ii) then, to any late fees,
overdue risk assessments. Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loan; provided however, while an Event of Default exists under this
Agreement or under any other Loan I Document, each payment hereunder shall
be (x) held as cash collateral to secure Obligations relating to any other
contingent obligations arising under the Loan Documents and/or (y) applied
to amounts owed to FINOVA by Borrower as FINOVA in its Permitted Discretion
may determine. In calculating interest and applying payments as set forth
above: (a) interest shall be calculated and collected through the date a
payment is actually applied by FINOVA under the terms of this Agreement (b)
interest on the outstanding balance shall be charged during any grace period
permitted hereunder; or (c) at the end of each month, all accrued and unpaid
interest and other charges provided for hereunder shall be added to the
principal balance of the Loan. To the extent that Borrower makes a payment
or FINOVA receives any payment or proceeds of the Collateral for Borrowers
benefit that is subsequently invalidated, set aside or required to be repaid
to any other Person, then, to such extent, the Obligations intended to be
satisfied shall be revived and continue as if such payment or proceeds had
not been received by FINOVA and FINOVA may adjust the Loan balances, in its
Permitted Discretion.
3. SECURITY. To secure the payment and performance of the Obligations
when due, Borrower hereby grants to FINOVA a first priority security
interest (subject only to Permitted Encumbrances) in all of Borrower's now
owned or hereafter acquired or arising Inventory, Equipment, Receivables,
life insurance policies and the proceeds thereof, trademarks, copyrights,
licenses and patents. investment property, and general intangibles,
including, without limitation, all of Borrower's deposit accounts, money,
any and all property now or at any time hereafter in FINOVA's possession
(including claims and credit balances), and all proceeds (including proceeds
of any insurance policies, proceeds of proceeds and claims against third
parties), all products and all books and records and computer data related
to any of the foregoing and Borrower assigns, transfers and sets over to
FINOVA all of its right, title and interest, powers, privileges and other
benefits of all leases, rental agreements and related documents entered into
by Borrower with respect to any Equipment leased by Borrower together with
all income, proceeds and other benefits thereof (all of the foregoing,
together with all other property in which FINOVA may be granted a lien or
security interest, is referred to herein, collectively, as the
"Collateral").
<PAGE>
4. CONDITIONS OF CLOSING.
(a) Initial Advance. The obligation of FINOVA to make the initial
advance hereunder is subject to the fulfillment, to the satisfaction of
FINOVA and its counsel. of each of the following conditions on or prior to
the date set forth herein or on The Loan Schedule:
(1) The execution of all the loan and related documents listed on
the Document Checklist provided by FINOVA to Borrower
(2) Borrower shall have complied with all additional closing
conditions set forth in the Loan Schedule.
(b) Subsequent Advances The obligation of FINOVA to make any advance
(including the initial advance) shall be subject to the further
preconditions that, on and as of the date of such advance: (a) the
representations and warranties of Borrower forth in this Agreement shall be
accurate, before and after giving effect to such advance or issuance and to
the application of any proceeds thereof; (b) no Event of Default and no
event which, with notice or passage of time or both, would constitute an
Event of Default has occurred and is continuing, or would result from such
advance or issuance or trom the application of any proceeds thereof; (c) no
material adverse change has occurred in the Borrower's business, operations,
financial condition, in the condition of the Collateral or other assets of
Borrower or in the prospect of repayment of the Obligations; and (d) FINOVA
shall have received such other approvals, opinions or documents as FINOVA
shall reasonably request.
5. BORROWER REPRESENTATIONS AND COVENANTS.
(a) The Borrower is a corporation, limited liability company or
partnership duly organized and in good standing under the laws of the state
appearing at the beginning of this agreement as the state of its
organization; it is and shall be duly qualified and in good standing in
every other state in which, if accounts are Collateral hereunder it enters
into contracts giving rise to accounts, and, if goods of any nature are
Collateral hereunder, it maintains such goods; it keeps and shall keep its
books of account and goods of any nature which are purported to be
Collateral at its address appearing at the beginning of this agreement the
execution, delivery and performance hereof are within the Borrower's
authority and powers, have been duly authorized and are not in contravention
of law or the terms of the Borrowers charter, by-laws or of any undertaking
by which it is bound; except for the security interest granted hereby, the
Borrower is and shall be the owner of all property located on its premises
(except as noted on a separate list signed and delivered to FINOVA on behalf
of the Borrower concurrently herewith); it owns all property purported to be
included in the Collateral free from any Lien, security interest or
encumbrance; it does have and shall have the absolute right to subject the
same to a security in FINOVA; after the security interest of FINOVA shall
have attached to any such property. the Borrower's properties of any type
shall not be further subject to any security interest, Lien or encumbrance
of any other person, except pursuant to FINOVA's written consent, which
shall not be unreasonably withheld to permit the Borrower to obtain further
purchase money financing from others on terms which. in FINOVAs discretion,
shall not adversely affect the interests of FINOVA; subject to any
limitations stated therein or in connection therewith, all balance sheets,
earnings statements and other financial data which have been or may
hereafter be furnished to FINOVA, do or shall fairly present the financial
<PAGE>
condition of the person reported upon as of the dates and the results of
his, her or its operations for the periods for which the same are furnished;
and all other information heretofore furnished to FINOVA is, and all
information hereafter furnished to FINOVA shall be accurate and correct in
all material respects and not fail to disclose any fact necessary to make
the information, furnished not misleading
(b) The Borrower shall at all reasonable times give FINOVA access to
all places where any part of the Collateral or records pertaining Thereto
may be maintained, and shall from time to time allow FINOVA by or through
any of its officers, agents, attorneys or accountants, to make extracts from
such records; and it shall at all times keep FINOVA informed of the name and
location of each of its bank accounts.
(c) Any Loan at any time received by the Borrower from FINOVA shall not
be used directly or indirectly other than in the Borrower's business; it
shall not, directly or indirectly, pay any dividend on its stock other than
a dividend payable in shares of its own stock; it shall not, directly or
indirectly, make any loan to, or pay any claim other than for current
remuneration or current reimbursable expense payable to any Person
controlling, controlled by or under common control with the Borrower, and it
shall, on demand, obtain and deliver to FINOVA subordinations in form and
substance satisfactory to FINOVA of all claims of controlling and controlled
persons consistent with the foregoing.
(d) The Borrower shall keep all its properties, whether included in the
Collateral or not, in good order and repair, and shall not waste or destroy
them or any part thereof or use Them or any part Thereof in violation of any
applicable law; it shall not dispose of any of its properties except in the
ordinary course of business and it shall not dispose of any equipment
included in the Collateral without the prior written consent of FINOVA; it
shall pay promptly, when due, any justly owing account payable of its in
which FINOVA holds a security interest, all rents or similar charges payable
with respect to any premises where any part of the collateral may at any
time be located and all taxes payable by it, including withholding taxes; it
shall procure and maintain theft, burglary and fire insurance containing so-
called extended coverage insurance, covering all goods included in the
Collateral, all of which insurance shall be in such reasonable amounts and
written by insurers and with lender's loss payee, additional insured, and
other endorsements satisfactory to FINOVA, and shall be, if adjustable,
adjustable by FINOVA, and payable to and for the benefit of the Borrower and
FINOVA as their interests may appear; and the Borrower shall. upon FINOVA's
request, furnish FINOVA with evidence satisfactory to FINOVA of its payment
of such rent or similar charges and taxes and with policies or certificates
evidencing its compliance with such insurance requirements. If Borrower
fails to comply with this Section, FINOVA may (but shall not be required to)
procure such insurance and endorsements at Borrower's expense and charge the
cost thereof to Borrower's loan account as an Obligation.
<PAGE>
(e) Upon its receipt or creation of any property of the type in which
FINOVA has a security interest, The Borrower shall furnish FINOVA with
information adequate to identify such property, which information shall be
in such form as FINOVA may request, accompanying such information with
specific pledges. assignments and designations in form and substance
satisfactory to FINOVA and copies of relevant invoices and vouchers; and if
accounts are included in the Collateral, promptly after the end of each
month it shall furnish FINOVA with an aging of its receivables as of the
last day of such month, showing for each of its account debtors, identified
by name and address, the amount owed by such debt or with respect to
invoices or other payment obligations due to Borrower generated within the
then past month, each of the prior three months and at any time prior to the
fourth preceding month; and if so requested by FINOVA, it shall furnish
FINOVA with statements for each account debtor for mailing to them,
reflecting the indebtedness of such account debtor and the derivation by
invoice or other written evidence of such indebtedness.
(f) At the time the Borrower notifies FINOVA of the existence of any
account, such account shall be good and valid, representing an undisputed
bona fide indebtedness incurred by the account debtor named therein for
merchandise theretofore delivered pursuant to a contract of sale or lease or
for services theretofore performed by the Borrower for said account debtor
pursuant to a contract therefor; ho agreement under which any deduction or
discount may be acquired shall have been made with such account debtor
except as indicated in the written schedule, invoice or other written
evidence of such obligation furnished to FINOVA concurrently with the
Borrower's notifying FINOVA of the existence of the account; the net amount
so derived of each account shall be paid in full at its maturity as
expressed in the invoice or other written evidence of such obligation
evidencing such account and the schedule pertaining Thereto; and such
payment shall be delivered to FINOVA as provided in Subsection 5(h) below.
(g) The Borrower shall immediately notify FINOVA, if accounts are
included in. the Collateral, of all cases involving the return, rejection,
repossession, less of or damage to merchandise covered by an account and of
any dispute arising or credit or adjustment granted or discount or offset
taken with respect to an account and if goods are included in the
Collateral, of any event causing loss or depreciation in the value of such
goods and the amount of such loss or depreciation; and the Borrower shall
forthwith pay FINOVA, as a principal payment hereunder, the invoice amount
of the merchandise involved or the amount of the dispute, credit,
adjustment, discount. offset, loss, damage or depreciation, as the case may
be.
(h) The Borrower shall do all things necessary and usual in the
ordinary course of business, to sell in the ordinary course of business
inventory included in the Collateral to responsible purchasers and to
collect on accounts included in the Collateral, and shall receive IN TRUST
for FINOVA, without commingling with its other funds and assets, all cash,
checks, notes, chattel paper and other proceeds received by it with respect
to any of the Collateral, and shall deliver the same, other than merchandise
returns, to FINOVA in the form received, promptly upon the receipt thereof
<PAGE>
(i) If certificates of title are or shall be issued with respect to any
equipment or inventory included in the collateral, the Borrower shall, on
demand, cause the interest of FINOVA to be properly noted thereon with
respect to such equipment and properly endorsed in blank or to FINOVA, if
inventory; if any equipment included in the Collateral is or shall be deemed
a fixture under applicable law, the Borrower shall, on demand, furnish
FINOVA with disclaimers signed by all persons having an interest in the
affected real estate, insofar as the security interest of FINOVA is
concerned; and FINOVA is authorized to destroy from time to time papers
theretofore delivered to it in connection with invoices which have become
paid.
(j) The Borrower shall, at its own expense, do all acts and execute
and deliver all writings FINOVA may at any time require to protect or
enforce FINOVA's interests, rights and remedies created by, provided in or
emanating from this Agreement
(k) Borrower shall comply with all financial covenants as set forth
herein or in the Loan Schedule.
(l) Borrower shall comply with all negative covenants as set forth
herein or in the Loan Schedule.
(m) Borrower shall take all action necessary to assure that there will
be no material adverse change to Borrower's business by reason of the advent
of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1,1999. At FINOVA's request,
Borrower shall provide to FINOVA assurance reasonably acceptable to FINOVA
that Borrower's computer-based systems, embedded microchips and other
processing capabilities are year 2000 compatible.
6. INTENTIONALLY LEFT BLANK.
7. DEFAULTS AND REMEDIES.
(a) The following constitute Events of Default
(1) The breach by the Borrower of any representation or covenant
made by it pursuant to the Loan Documents, which, provided it shall not
constitute any other Event of Default, shall remain uncured for more than
ten (10) days after notice thereof to the Borrower; or
<PAGE>
(2) The failure of the Borrower to pay any Obligation to FINOVA
calling for the payment of money pursuant to this or any other agreement, as
and when the same should be paid, including failure to pay such Obligation
on a date set by The Borrower for such payment; the Borrower's becoming
insolvent; its suspending its business; its petitioning for or a petition
against it being filed for a receivership of its business or property or a
bankruptcy or arrangement or any other legal proceeding or action relating
to the relief of debtors or the readjustment of debts; its making an
assignment for the benefit of creditors, seeking a composition of creditors
or suffering alien against or the attachment of any of its property; its
disposing of any property included in the Collateral otherwise than in
accordance with this agreement; its committing or suffering, by any of its
agents or employees, a fraudulent conversion of any part of the Collateral;
or, insofar as property of the type included in the Collateral is involved,
its breaching a representation or covenant contained in Section 5(f), (g) or
(h) above.
(3) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise, or the prospect
of repayment of any portion of the Obligations or the value or priority of
FINOVA's security interest in the Collateral is materially impaired;
(4) Any default shall occur under (i) any material agreement between
Borrower and any third party including, without limitation, any default
which would result in a right by such third party to accelerate the maturity
of any indebtedness of Borrower to such third party or (ii) any Subordinated
Debt.
(5) Any representation or warranty made or deemed to be made by
Borrower, any affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in
connection therewith or the failure to disclose any material disclosure
which if disclosed shall prove to have been misleading in any material
respect;
(6) Any Guarantor dies, terminates or attempts to terminate its
Guaranty or any security therefor or becomes subject to any bankruptcy or
other insolvency proceeding; or
(7) Any transfer of more than ten percent (10%) of the issued and
outstanding shares of common stock or other evidence of ownership of
Borrower
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
(b) Remedies. Upon the occurrence of an Event of Default, FINOVA may,
at its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, cease making advances or Loans, terminate
this Agreement and/or declare all of the Obligations to be immediately
payable in full. Borrower agrees that FINOVA shall also have all of its
rights and remedies under applicable law, including without limitation, the
default rights and remedies of a secured party under the Arizona Uniform
Commercial Code (which includes the right to notify account debtors of the
Borrower to make payment directly to FINOVA); and upon the occurrence of an
Event of Default Borrower hereby consents to the appointment of a receiver
by FINOVA in any action initiated by FINOVA pursuant to this Agreement and
<PAGE>
to the jurisdiction and venue set forth in this Agreement, and Borrower
waives notice and posting of a bond in connection therewith. Further, FINOVA
may, at any time, take possession of the Collateral and keep it on
Borrower's premises, at no cost to FINOVA or remove any part of it to such
other place(s) as FINOVA may desire, or Borrower shall, upon FINOVA's
demand, at Borrower's sole cost, assemble the Collateral and make it
available to FINOVA at a place reasonably convenient to FINOVA. FINOVA may
sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as FINOVA deems
advisable, at FINOVA's discretion, and may, if FINOVA deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the
time and place of sale or of such postponed or adjourned sale without giving
a new notice of sale. Borrower agrees that FINOVA has no obligation to
preserve rights to the Collateral or marshall any Collateral for the benefit
of any Person FINOVA is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, name, trade secrets,
trade names, trademarks and advertising matter, or any similar property, in
completing production, advertising or selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to
FINOVA's benefit. Any requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower at its address set forth in the
heading to this Agreement at least five (5) days before sale or other
disposition. The proceeds of sale shall be applied, first, to all attorneys
fees and other expenses of sale, and second, to the Obligations in such
order as FINOVA shall elect, in its sole discretion. FINOVA shall return any
excess to Borrower and Borrower shall remain liable for any deficiency to
the fullest extent permitted by law.
(c) Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by FINOVA, including, but not limited to,
FINOVA's use in its sole discretion of other or different times, places and
manners of noticing and conducting any disposition of Collateral shall not
be deemed unreasonable): Any public or private disposition: (i) as to which
on no later than the fifth calendar day prior thereto written notice thereof
is mailed or personally delivered to Borrower and, with respect to any
public disposition, on no later than the fifth calendar day prior thereto
notice thereof describing in general non-specific terms, the Collateral to
be disposed of is published once in a newspaper of general circulation in
the county where the sale is to be conducted (provided that, subject to
applicable law to the contrary, no notice of any public or private
disposition need be given to the Borrower or published if the Collateral is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market); (ii) which is conducted at any
place designated by FINOVA, with or without the Collateral being present;
and (iii) which commences at any time between 8:00 a.m. and 5:00 p.m.
Without limiting the generality of the foregoing, Borrower expressly agrees
that, with respect to any disposition of accounts, instruments and general
intangibles, it shall be commercially reasonable for FINOVA to direct any
prospective purchaser thereof to ascertain directly from Borrower any and
all information concerning the same, including, but not limited to, the
terms of payment, aging and delinquency, if any, the financial condition of
any obligor or account debtor thereon or guarantor thereof, and any
collateral therefor.
<PAGE>
8. EXPENSES AND INDEMNITIES.
(a) Expenses. Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse FINOVA for all costs, fees and expenses incurred by FINOVA in
connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents, including, but
not limited to, the attorneys' and paralegals' fees of counsel.
(b) Environmental Matters. The Environmental Certificate dated on or
about the date of this Agreement is incorporated herein for all purposes as
if fully stated in this Agreement.
9. MISCELLANEOUS.
(a) Examination of Records; Financial Reporting. FINOVA shall at all
reasonable times have full access to and the right to examine, audit, make
abstracts and copies from and inspect Borrower's records, files, books of
account and all other documents, instruments and agreements relating to the
Collateral and the right to check, test and appraise the Collateral.
Borrower shall furnish FINOVA, upon request and at the times specified by
FINOVA. such information and statements as FINOVA shall request from time to
time regarding Borrowers business affairs, financial condition and the
results of its operations. Failure to provide any of the requested
information and statements to FINOVA at the time specified by FINOVA shall
be an Event of Default Borrower shall cause each of the Guarantors to
deliver to FINOVA such Guarantor's annual financial statement (in form
acceptable to FINOVA) and a copy of such Guarantor's federal income tax
return with respect to the corresponding year, in each case on the date when
such tax return is due or, if earlier, on the date when available.
(b) Term; Termination; Termination Fee. The Initial Term of the
Revolving Credit Loans facility and the obligation of FINOVA to make
advances with respect thereto in accordance with this Agreement shall be as
set forth on the Loan Schedule, and the Revolving Credit Loans facility and
this Agreement shall be automatically renewed for one or. more Renewal
Term(s) as set forth in the Loan Schedule, unless earlier terminated as
provided herein. Each party shall have the right to terminate this Agreement
effective at the end of the Initial Term or at the end of any Renewal Term
by giving the other party written notice not less than sixty (60) days prior
to the effective date of such termination, by registered or certified mail.
Upon the effective date of termination, the Obligations shall become
immediately due and payable in full in cash and FINOVA shall have no further
obligation to make advances to Borrower hereunder. In addition to the
procedure set forth above, Borrower may terminate this Agreement at any time
but only upon sixty (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination (or any voluntary prepayment
of any Term Loan) by Borrower or any termination of this Agreement by FINOVA
upon the occurrence of an Event of Default, then, and in any such event,
Borrower shall pay to FINOVA upon the effective date of such termination a
fee (the "Termination Fee") in an amount equal to the amount shown on the
Loan Schedule.
<PAGE>
(c) Recourse to Security; Certain Waivers; No Waiver by FINOVA. All
Obligations shall be payable by Borrower as provided for herein and, in
full, at the termination of this Agreement; recourse to security shall not
be required at any time. Borrower waives presentment and protest of any
instrument and notice thereof, notice of default and, to the extent
permitted by applicable law, all other notices to which Borrower might
otherwise be entitled. Neither FINOVA's failure to exercise any right
remedy or option under this Agreement, any supplement, the Loan Documents or
other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. An Event of Default shall
exist or continue or be continuing until such Event of Default is waived in
writing by FINOVA as herein provided. No waiver by FINOVA shall be effective
unless in writing and then only to the extent stated. No waiver by FINOVA
shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
(d) Binding on Successor and Assigns; Severability. All terms,
conditions, promises, covenants, provisions and warranties shall inure to
the benefit of and bind FINOVA's and Borrowers respective representatives,
successors and assigns. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
(e) Amendments; Assignments. This Agreement may not be modified
altered or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof including,
without limitation, any of Borrower's rights, title, interests, remedies,
powers and duties hereunder or thereunder. Borrower hereby consents to
FINOVA's participation, sale, assignment, transfer or other disposition, at
any time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including, without
limitation, FINOVA's rights, title, interests, remedies, powers and duties
hereunder or thereunder. In connection therewith, FINOVA may disclose all
documents and information which FINOVA now or hereafter may have relating to
Borrower or Borrower's business. To the extent that FINOVA assigns its
rights and obligations hereunder to a third party, FINOVA shall thereafter
be released from such assigned obligations to Borrower and such assignment
shall effect a novation between Borrower and such third party.
(f) Integration; Survival. This Agreement, together with the loan
Schedule (which is a part hereof) and the other Loan Documents, reflect the
entire understanding of the parties with respect to the transactions
contemplated hereby. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this
Agreement or of any guaranty of the Obligations shall affect or impair the
powers, obligations, duties, rights, representations, warranties or
liabilities of the parties hereto and all shall survive such termination.
(g) Evidence of Obligations. Each Obligation. may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by
Borrower to FINOVA. If not so evidenced, such Obligation shall be evidenced
solely by entries upon FINOVA's books and records.
<PAGE>
(h) Loan Requests. Each oral or written request for an advance by any
Person who purports to be any employee, officer or authorized agent of
Borrower shall be made to FINOVA on or prior to 10:00 a.m., Pacific time, on
the business day on which the proceeds thereof are requested to be paid to
Borrower and shall be conclusively presumed to be made by a Person
authorized by Borrower to do so and the crediting of a loan to Borrower's
operating account shall conclusively establish Borrower's obligation to
repay such loan. Unless and until Borrower otherwise directs FINOVA in
writing, all loans shall be wired to Borrower's operating account set forth
on the Loan Schedule.
(i) Notices. Any written notice, consent or other communication
provided for in this Agreement shall be delivered personally (effective upon
delivery), via facsimile (effective upon confirmation of transmission), via
overnight courier (effective the next business day after dispatch if
instructed to deliver on next business day) or via U.S. Mail, certified or
registered with return receipt requested (effective 3 days after mailing,
postage prepaid) to each party at its address(es) and/or facsimile number(s)
set forth below its signature, or to such other address as either party
shall specify to the other in writing from time to time.
(j) Brokerage Fees. Borrower represents and warrants to FINOVA that,
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission and Borrower agrees to
indemnify and hold FINOVA harmless against any and all such claims.
(k) Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute
one and the same instrument, admissible into evidence.
(l) Application of Insurance Proceeds. The net proceeds of any
Casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to FINOVA, or toward payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be
applied in such manner as FINOVA may elect. In no event shall such
application relieve Borrower from payment in full of all installments of
principal and interest which thereafter become due in the order of maturity
thereof or with respect to the payment of fees and costs.
(m) Power of Attorney. Borrower appoints FINOVA and its designees as
Borrowers attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that
come into FINOVA's possession; to sign Borrower's name on any invoice or
bill of lading relating to any Receivable, on drafts against customers, on
assignments of Receivables, on notices of assignment, financing statements
and other public records, on verifications of accounts and on notices to
customers or account debtors; to send requests for verification of
Receivables to customers or account debtors; after the occurrence of any
Event of Default, to notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by FINOVA
and to open and dispose of all mail addressed to Borrower and to do all
other things FINOVA deems necessary or desirable to carry out the terms of
this Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither FINOVA nor any of its designees shall be liable for any
acts or omissions nor for any error of judgment or mistake of fact or law
while acting as Borrower's attorney. This power, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder shall have terminated.
<PAGE>
(n) Governing Law; Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT
SHALL BE INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE
CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF FINOVA,
IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. FINOVA AND BORROWER EACH HEREBY WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANYWAY
RELATING TO THIS AGREEMENT, WHETHER ARISING N CONTRACT, TORT OR OTHERWISE.
(p) Lien Termination. In recognition of FINOVA's right to have all of
its attorneys fees and other expenses incurred in connection with this
Agreement secured by the Collateral, notwithstanding the payment in full of
the obligations, EINOVA shall not be required to execute or record any
terminations or satisfactions of any of its liens on the Collateral unless
and until Borrower and all Guarantors have executed and delivered to FINOVA
general releases of all claims. inform and substance satisfactory to FINOVA
in its sole discretion.
<PAGE>
Borrower: FINOVA:
PC DYNAMICS OF TEXAS, INC. FINOVA CAPITAL CORPORATION
Fed. Tax ID #75-2808489
By /s/
-----------------------------
By /s/ Pete Martinez, Vice-President
--------------------------
D. Ronald Allen, President
FINOVA's address for notices:
-----------------------------
Borrower's address for notices: FINOVA Capital Corporation
------------------------------- 355 South Grand Ave
10501 FM 720 East Los Angeles, CA 90071
Frisco, Texas 75034 Attn: Ronald Vanek
Facsimile: (213) 625-2486
Attn: D. Ronald Allen
Facsimile: 972-335-2841 With a copy to:
---------------
FINOVA Capital Corporation
1850 North Central Avenue
Phoenix. AZ 85002
Attn: Joseph R. D'Amore
Facsimile: (602) 207-5036
And
---
FINOVA Capital Corporation
355 South Grand Avenue,
Suite 2400
Attn: David Sands
Facsimile: 213-625-2746
<PAGE>
STATE OF TEXAS )
)ss:
COUNTY OF DALLAS )
BEFORE ME, a Notary Public, in and for said county and state,
personally appeared the above-named PC Dynamics, a Texas corporation, by D.
Ronald Allen, its President who acknowledged that he did sign the foregoing
agreement and that the same is his free act and deed and the free act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
Dallas, Dallas County, Texas, this the 25th day of March, 1999.
/s/
------------------------------------
Notary Public For the State of Texas
[ SEAL APPEARS HERE ]
CATHERINE ANN PHILLIPS
Notary Public
STATE OF TEXAS
My Comm Exp. O8/15/200O
Exhibit 4.20
Loan Schedule
Borrower: PC DYNAMICS OF TEXAS, INC.
Address: 10501 FM 720 East
Frisco, Texas 75034
Date: March 25, 1999
This Loan Schedule forms an integral part of the Loan and Security Agreement
between the above Borrower and FINOVA Capital Corporation dated the above
date, and all references herein and therein to "this Agreement" shall be
deemed to refer to said Agreement, this Loan Schedule and the attached
Definition Schedule.
============================================================================
TOTAL FACILITY:
$2,035,000.00
------------
============================================================================
LOANS:
Revolving Credit Loans: A revolving tine of credit consisting of loans
against Borrowers Eligible Receivables ("Receivable Loans") and
against Borrowers Eligible Inventory ("Inventory Loans") (the
Receivable Loans and the Inventory Loans shall be collectively
referred to as the "Revolving Credit Loans") in an aggregate
outstanding principal amount not to exceed the lesser of (a) or (b)
below:
(a) One Million Five Hundred Thousand Dollars ($1,500,000.00)
(the "Revolving Credit Limit", any Loan Reserves, or
(b) the sum of
(i) an amount equal to (A) eighty percent (80%) of the net
amount of Eligible Receivables, less (B) the aggregate
undrawn face amount of all Letters of Credit issued under
this Agreement; plus
(ii) an amount not to exceed the lesser of (A) fifty
percent (50%) of the value of Borrowers Eligible Inventory,
calculated at the lower of cost or market value and
determined on a first-in, first-out basis, or (B) Two
Hundred Thousand Dollars ($200,000), provided that,
notwithstanding the foregoing, advances against raw
materials inventory shall never exceed one hundred thousand
dollars ($100,000.00) less
(iii) any Loan Reserves.
Term Loans: one or more term loans against the value of Borrowers
machinery and equipment ("Term Loans") in an aggregate outstanding
principal amount not to exceed Three Hundred Sixty Thousand Dollars
($360,000.00); provided, that the Terms Loans, if any, shall be in
such amounts and on such terms as are set forth on separate promissory
notes of Borrower from time to time, each in form and substance
satisfactory to FINOVA in its sole discretion. All Term Loans shall be
amortized over five years, but due and payable at the end of the
second year.
<PAGE>
Capital Expenditure Loan: one or more term loans against seventy-five
percent (75%) of the Borrower's hard cost of the Equipment purchased,
and contingent upon covenant compliance ("Capital Expenditure Loans")
in an aggregate outstanding principal amount not to exceed One Hundred
Seventy Five Thousand Dollars ($175,000.00); provided, that the
Capital Expenditure Loans, if any, shall be in such amounts and on
such terms as are set forth on separate promissory notes of Borrower
from time to time, each in form and substance satisfactory to FINOVA
in its sole discretion. All Capital Expenditure Loans shall be
interest only for the first year, then amortized over four years, but
due and payable at the end of the second year.
============================================================================
INTEREST AND FEES:
Revolving Interest Rate. Borrower shall pay FINOVA interest on the
daily outstanding balance of Borrowers Revolving Credit Loans at a per
annum rate of three percent (3%) in excess of the rate of interest
announced publicly by Citibank, N.A., (or any successor thereto), from
time to time as its "prime rate" (the "Prime Rate") which may not be
such institution's lowest rate. The interest rate chargeable hereunder
in respect of the Revolving Credit Loans (herein, the "Revolving
Interest Rate") shall be increased or decreased, as the case may be,
without notice or demand of any kind, upon the announcement of any
change in the Prime Rate. Each change in the Prime Rate shall be
effective hereunder on the first day following the announcement of
such change. Interest charges and all other fees and charges herein
shall be computed on the basis of a year of 360 days and actual days
elapsed and shall be payable to FINOVA in arrears on the first day of
each calendar month.
Notwithstanding the foregoing, subsequent to the first
anniversary date, the interest rate will be reduced to two and one-
half percent (2.5%), provided that Borrower maintains the following:
(i) continued profitability for the year ending December 31, 1999;
(ii) meets or exceeds eighty percent (80%) of its profitability
projections; (iii) no Event of Default has occurred; and (iv) FINOVA
has received reviewed financial statements from a Certified Public
Accountant acceptable to FINOVA.
Term Interest Rate: Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's Term Loans at a per annum rate of
three percent (3%) in excess of the rate of interest announced
publicly by Citibank, NA., (or any successor thereto), from time to
time as its "prime rate" (the "Prime Rate") which may not be such
institution's lowest rate. The interest rate chargeable hereunder in
respect of the Term Loans (herein, the "Term Interest Rate") shall be
increased or decreased, as the case may be, without notice or demand
of any kind, upon the announcement of any change in the Prime Rate.
Each change in the Prime Rate shall be effective hereunder on the
first day following the announcement of such change. Interest charges
and all other fees and charges herein shall be computed on the basis
of a year of 360 days and actual days elapsed and shall be payable to
FINOVA in arrears on the first day of each calendar month.
<PAGE>
Notwithstanding the foregoing, subsequent to the first
anniversary date, the interest rate will be reduced to two and one-
half percent (2.5%). provided that Borrower maintains the following:
(i) continued profitability for the year ending December 31, 1999;
(ii) meets or exceeds eighty percent (80%) of its profitability
projections; (iii) no Event of Default has occurred; and (iv) FINOVA
has received reviewed financial statements from a Certified Public
Accountant acceptable to FINOVA.
Default Interest Rate. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations at a rate per annum which is
four percent (4%) in excess of the rate which would otherwise be
applicable thereto pursuant to this Loan Schedule
Collateral Monitoring Fee. At the closing of this transaction and on
the first day of each calendar month thereafter, Borrower shall pay
FINOVA a collateral monitoring fee of Seven Hundred Fifty Dollars
($750.00) ("Collateral Monitoring Fee") provided however, that Borrower
agrees and acknowledges that each Loan Year a full year's fee shall be
deemed earned at the beginning of the respective Loan Year.
Facility Fee. Borrower shall pay to FINOVA a facility fee equal to one
percent (1%) per annum of the amount of the Total Facility ("Facility
Fee"). The Facility Fee shall be deemed fully earned at the time when
due and is otherwise due and payable annually, commencing upon the
first anniversary of the date of this Agreement and continuing on each
subsequent anniversary thereof.
Examination Fee. Borrower agrees to pay to FINOVA an examination fee in
the amount of Seven Hundred Fifty Dollars ($750.00) per person per day
in connection with each audit or examination of Borrower performed by
FINOVA prior to or after the date hereof, plus all costs and expenses
incurred in connection therewith (the "Examination Fee"). Without
limiting the generality of the foregoing. Borrower shall pay to FINOVA
an initial Examination Fee in an amount equal to Seven Hundred Fifty
Dollars ($750.00) per person per day, plus all costs and expenses
incurred in connection therewith. Such initial Examination Fee shall be
deemed fully earned at the time of payment and due and payable on the
Closing Date, and shall be deducted from any good faith deposit paid by
Borrower to FINOVA prior to the date of this Agreement.
============================================================================
CLOSING CONDITIONS:
(1) Minimum Excess Availability. Borrower shall have Excess
Availability as of the Closing Date and not calculated on a thirty (30)
day average under the Revolving Credit Loans of not less than One
Hundred Fifty Thousand Dollars ($150,000.00) after giving effect to (i)
the initial advance hereunder, (ii) any applicable Loan Reserves
against borrowing availability under the Revolving Credit Loans, and
(iii).payment in full of all of Borrowers accounts payable outstanding
thirty (30) days or more from due date and all book overdrafts.
(2) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement.
<PAGE>
(3) No Material Adverse Changes. Prior to the Closing Date, there
shall have occurred no material adverse change in the financial
condition of Seller or Borrower, or in the condition of the assets of
Seller, from that shown on the draft financial statements for Seller
dated December 31, 1998. At the closing, Borrower shall deliver to
FINOVA an officers certification confirming that Borrower is unaware of
the existence of any such material adverse change in Seller's financial
condition.
(4) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which Borrower shall be a party,
including any agreements between Seller and Borrower.
(5) Transaction Costs. Borrower shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any
Person in connection with the making of the Loan, including any
acquisition costs, as well as appropriate documentation evidencing
such costs and the payment thereof. All such information must be
acceptable to FINOVA, in FINOVA's sole discretion, exercised in good
faith.
(6) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been
delivered, executed and recorded and shall be in form and substance
satisfactory to FINOVA and its counsel.
============================================================================
BORROWER INFORMATION:
Borrower's State of Incorporation: Texas
Borrower's copyrights, patents trademarks, and licenses:
[Borrower to Supply on Separate Exhibit].
Fictitious Names/Prior Corporate Names:
Prior Corporate Names: None
Fictitious Names: None
Borrower Locations:
10501 FM 720 East, Frisco, Texas 75034
Borrowers Federal Tax Identification Number 75-2808489
Permitted Encumbrances:
Indebtedness between Borrower and Seller that has been
Subordinated to the Borrower
<PAGE>
============================================================================
FINANCIAL COVENANTS
Borrower shall comply with all of the following covenants. Compliance
shall be determined as of the end of each month, except as otherwise
specifically provided below:
Current Ratio. Borrower shall maintain a ratio of Current Assets to
Current Liabilities of not less than 1.0 to 1.0;
Net Worth. Borrower shall maintain Net Worth of not less than the
following:
(i) One Hundred Thousand Dollars ($100,000.00) from April 1, 1999
up to and through June 29, 1999;
(ii) Two Hundred Seventy Five Thousand Dollars ($275,000.00) from
June 30, 1999 up to and through September 29, 1999;
(iii) Four Hundred Fifty Thousand Dollars ($450,000.00) from
September 30, 1999 up to and through December 30, 1999;
(iv) Six Hundred Thousand Dollars ($600,000.00) from December 31,
1999 up to and through March 30, 2000;
(v) Seven Hundred Fifty Thousand Dollars ($750000.00) from March
31, 2000 up to and through June 29, 2000;
(vi) Nine Hundred-Thousand Dollars ($900,000.00) from June 30,
2000 up to and through September 29, 2000;
(vii) One Million Fifty Thousand Dollars ($1,050,000.00) from
September 30, 2000 up to and through December 30, 2000;
(viii) One Million Two Hundred Thousand Dollars ($1,200,000.00)
from December 31, 2000 and thereafter.
Senior Debt Service Coverage Ratio. As of the last day of each calendar
quarter ended March 31. June 30, September 30 or December 31,
Borrower's Operating Cash Flow/Actual for the consecutive
12-month period ending as of such last day must be at least
1.25 times the amount necessary to meet Borrower's Senior
Contractual Debt Service for such 12-month period;
Total Debt Service Coverage Ratio. As of the last day of each calendar
quarter ended March 31, June 30, September 30 or December 31,
Borrower's Operating Cash Flow/Actual for the consecutive
12-month period ending as of such last day must be at least
1.10 times the amount necessary to meet Borrower's Total
Contractual Debt Service for such 12-month period;
<PAGE>
============================================================================
NEGATIVE COVENANTS:
Employee Advances: Borrower shall not make any loans or advances to
Employees except in the ordinary course of business and
consistent with past practices of Borrower in an
aggregate amount not exceeding at any time Ten Thousand
Dollars ($(10,000.00).
Capital Expenditures: Borrower shall not make or incur any unfinanced
Capital Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by Borrower
in any fiscal year (beginning with the 1999 fiscal year)
would exceed Fifty Thousand Dollars ($50,000.00).
Compensation: Borrower shall not pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions,
drawing accounts and other payments, whether directly or
indirectly, in money or otherwise, during any fiscal
year to all of Borrowers executives, officers and
directors (or any relative thereof in an amount in
excess of 115% of such total compensation paid in the
immediately preceding fiscal year.
Indebtedness: Borrower shall not create, incur, assume or permit to
exist any Indebtedness for Borrowed Money in excess of
Fifty Thousand ($50,000.00) other than (i) the
Obligations, (ii) other Indebtedness existing on the
date of this Agreement and reflected in Permitted
Encumbrances listed in this Schedule (other than
Indebtedness paid on the date of this Agreement from
proceeds of the initial advances hereunder).
============================================================================
REPORTING REQUIREMENTS:
Borrower shall provide FINOVA with:
1. Monthly agings aged by invoice date and reconciliations of
Receivables within ten (10) days after the end of each month.
2. Monthly accounts payable agings aged by invoice date, outstanding
or held check registers and inventory certificates within ten (10)
clays after the end of each month.
3. Monthly perpetual inventory reports for the Inventory valued on a
first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are
reasonably requested by FINOVA, all within ten (10) days after the
end of each month.
4. Monthly unaudited financial statements within thirty (30) days
after the end of each month.
5. Quarterly compilation financial statement within thirty (30) days
after the end of each fiscal quarter.
<PAGE>
6. Audited consolidated and consolidating fiscal financial statements
within one hundred twenty (12O) days after the end of each fiscal
year, and with an opinion issued by a Certified Public Accountant
which is acceptable to FINOVA.
7. Annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal
year of Borrower within thirty (30) days prior to the end of each
fiscal year of Borrower.
============================================================================
TERM:
The initial term of this Agreement shall be two (2) year(s) from the
date hereof (the "Initial Term") and shall be automatically renewed for
successive periods of one (1) year each (each, a "Renewal Term"), unless
earlier terminated as provided elsewhere in this Agreement.
============================================================================
TERMINATION FEE:
(A) Revolving Credit Loans Facility. The Termination Fee applicable to
the Revolving Credit Loans facility shall be an amount equal to the
following percentage of the Revolving Credit Limit:
(i) five percent (5%), if such early termination occurs on or
prior to the first anniversary of the date of this Agreement;
(ii) two percent (2%), if such early termination occurs after the
first anniversary of the date of this Agreement.
(B) Term Loans. The Termination Fee applicable to the Term Loans shall
be equal to:
(i) five percent (5%) of the amount prepaid if such prepayment is
made during the Loan Year beginning on the Closing Date;
(ii) two percent (2%) of the amount prepaid if such prepayment is
made during the Loan Year beginning on the first anniversary of
the Closing Date.
============================================================================
DISBURSEMENT:
Unless and until Borrower otherwise directs FINOVA in writing, all
loans shall be wired to Borrower's following operating account:
Compass Bank - Frisco Banking Center
8951 East Main
Frisco, Texas 75034
972-705-4520
Fax: 972-705-8635
Account # [ deleted for confidentiality ]
Contacts: Dan Kelly. Bank Manager or Nicole Ritcheson
ABA# [ deleted for confidentiality ]
<PAGE>
============================================================================
BORROWER: FINOVA:
PC DYNAMICS OF TEXAS, INC. FINOVA CAPITAL
CORPORATION
By /s/ By: /s/
-------------------------- -----------------------------
D. Ronald Allen, President Pete Martinez, Vice-President
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
BEFORE ME, a Notary Public, in and for said county and state,
personally appeared the above-named PC Dynamics of Texas, Inc., a
Texas corporation, by d. Ronald Allen, its President who acknowledged
that he did sign the foregoing agreement and that the same is his free
act and deed and the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
Dallas, Dallas County, Texas, this 25th day of March, 1999.
/s/
------------------------------------
Notary Public for the State of Texas
[ SEAL APPEARS HERE ]
CATHERINE ANN PHILLIPS
Notary Public
STATE OF TEXAS
My Comm Exp. O8/15/200O
<PAGE>
DEFINITION SCHEDULE
Borrower: PC Dynamics of Texas, Inc.
Date: March 25, 1999
This Definition Schedule forms an integral part of the Loan and Security
Agreement between the above Borrower and FINOVA Capital Corporation dated
the above date, and all references herein and therein to "this Agreement"
shall be deemed to refer to said Agreement, this Definition Schedule, and
the Loan Schedule.
"Capital Expenditures" means all expenditures made and liabilities
incurred in accordance with GAAP for the acquisition of any fixed asset or
improvement, replacement, substitution or addition thereto which has a
useful life of more than one year and including, without limitation, those
arising in connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP. should be capitalized for financial reporting
purposes and reflected as a liability on the balance sheet of Borrower.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Eligible Inventory" means Inventory which FINOVA, in its Permitted
Discretion, deems Eligible Inventory, based on such considerations as
FINOVA may from time to time deem appropriate. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory
unless, in FINOVA's Permitted Discretion, such Inventory (i) consists of
raw materials and finished goods, in good, new and salable condition which
are not obsolete, unmerchantable, slow moving, returned, damaged and/or
defective, (ii) are not comprised of work in process, packaging materials
or supplies; (iii) meets all standards imposed by any governmental agency
or authority; (iv) conforms in all respects to the warranties and
representations set forth herein; (v) is at all times subject to FINOVA's
duly perfected, first priority security interest; and (vi) is situated at
a location in compliance with this Agreement.
"Eligible Receivables" means Receivables arising in the ordinary
course of Borrowers business from the sale of goods or rendition of
services, which FINOVA, in its Permitted Discretion, shall deem eligible
based on such considerations as FINOVA may from time to time deem
appropriate. Without limiting the foregoing, a Receivable shall not be
deemed to be an Eligible Receivable if (i) the account debtor has failed
to pay the Receivable within a period of ninety (90) days after invoice
date, to the extent of any amount remaining unpaid after such period; (ii)
the account debtor has failed to pay more than twenty five percent (25%)
of all outstanding Receivables owed by it to Borrower within ninety (90)
days, after invoice date; (iii) the account debtor is an affiliate of
Borrower; (iv) the goods relating thereto are placed on consignment,
guaranteed sale, "bill and hold," "COD" or other terms pursuant to which
payment by the account debtor may be conditional; (v) the account debtor
is not located in the United States or Ontario or Alberta, Canada, unless
the Receivable is supported by a letter of credit or other form of
guaranty or security, in each case in form and substance satisfactory to
<PAGE>
FINOVA; (vi) the account debtor is the United States or any department,
agency or instrumentality thereof or any State, city or municipality of
the United States, except as otherwise agreed to in writing by FINOVA;
(vii) Borrower is or may become liable to the account debtor for goods
sold or services rendered by the account debtor to Borrower; (viii) the
account debtor's total obligations to Borrower exceed fifteen percent
(15%) of all Eligible Receivables, to the extent of such excess, except
that (a) Receivables due from Rockwell International shall not exceed
sixty percent (60%) of all Eligible Receivables provided such Receivables
are within sixty (60) days from invoice date, (b) Receivables due from
Lockheed Martins shall not exceed twenty-five percent (25%) provided such
Receivables are within sixty (60) days from invoice date, and (c)
Receivables due from Honeywell, Inc. shall not exceed twenty-five percent
(25%) of all Eligible Receivables provided such Receivables are within
sixty (60) days from invoice date; (ix) the account debtor disputes
liability or makes any claim with respect thereto (up to the amount of
such liability or claim), or is subject to any insolvency or bankruptcy
proceeding, or becomes insolvent, fails or goes out of a material portion
of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more
than ninety (90) days past due; (xii) the face amount thereof exceeds
Seventy Thousand Dollars ($70,000.00) unless accompanied by evidence of
shipment of the goods relating thereto satisfactory to FINOVA in its
Permitted Discretion; (xiii) the invoice constitutes a progress billing on
a project not yet completed, except that the final billing at such time as
the matter has been completed and delivered to the customer may be deemed
an Eligible Receivable; (xiv) the amount thereof is not yet represented by
an invoice or bill issued in the name of the applicable account debtor;
(xv) the amount thereof is denominated in or payable with any currency
other than U.S. Dollars; or (xvi) such Receivable is not at all times
subject to FINOVA's duly perfected first priority security interest.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment,
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes,
jigs, goods and other tangible personal property (other than Inventory) of
every kind and description used in Borrower's operations or owned by
Borrower and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions or
improvements to any of the foregoing, wherever located.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards which are
applicable to the circumstances as of the date of determination
consistently applied, except that, for the financial covenants set forth
in this Agreement, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to FINOVA
prior to the date hereof.
"Guarantor" means D. Ronald Allen, Performance Interconnect
Corporation, Associates Funding Group, Inc., Winterstone Management, Inc.,
and JH & BC Corporation.
<PAGE>
"Indebtedness" means all of Borrower's present and future
obligations, liabilities, debts, claims and indebtedness, contingent,
fixed or otherwise, however evidenced, created, incurred, acquired, owing
or arising, whether underwritten or oral agreement, operation of law or
otherwise, and includes, without limiting the foregoing (i) the
Obligations, (ii) obligations and liabilities of any Person secured by a
lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable therefor,
(iii) obligations and liabilities created or arising under any lease
(including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower,
even though the rights and remedies of the lessor, seller or lender are
limited to repossession, (iv) all unfunded pension fund obligations and
liabilities and (v) deferred tax liabilities.
"Indebtedness for Borrowed Money" means without duplication, all
Indebtedness: (i) in respect of borrowed money (including, without
limitation, pursuant to the Loan Documents or any Capital Leases), (ii)
evidenced by a note, debenture, or other like written obligation to pay
money (including, without limitation, all interest on the Obligations),
(iii) for the deferred purchase price of property (other than trade
payables arising in the ordinary course of business), or (iv) in respect
of obligations under conditional sales or other title retention
agreements; and all guaranties of any or all of the foregoing.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of
any kind, nature or description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or
other personal property, and all documents of title or other documents
representing them.
"Lien" means any mortgage pledge, assignment, lien, charge,
encumbrance or security interest of any kind, or the interest of a vendor
or lessor under any conditional sale agreement, Capitalized Lease or title
retention agreement.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower and payable to FINOVA, and any other present or
future agreement entered into in connection with this Agreement, together
with all alterations, amendments, changes, extensions, modifications,
refinancings, refundings, renewals, replacements, restatements, or
supplements, of or to any of the foregoing.
"Loan Party" means Borrower, each Guarantor, each Subordinating
Creditor and each other party ( other than FINOVA) to any Loan Document.
"Loan Year" means each twelve month period commencing on the Closing
Date and applicable anniversary dates of the Closing Date.
"Net Worth" at any date means the Borrower's net worth as determined
in accordance with GAAP.
<PAGE>
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time
owing by Borrower to FINOVA, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
FINOVA in Borrower's debt's owing to others), absolute or contingent, due
or to become due, including, without limitation, all interest, charges,
expenses, fees, attorney's fees, expert witness fees, Examination Fees,
Collateral Monitoring Fees, Closing Fees, Facility Fees, Termination Fees,
and any other sums chargeable to Borrower hereunder or under any other
agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or
losses), determined in accordance with GAAP, plus or minus each of the
following items, to the extent deducted from or added to the revenues of
Borrower in the calculation of net income or loss: (i) depreciation; (ii)
amortization and other non-cash charges; (iii) interest and fee expenses
paid or accrued; (iv) total federal and state income tax expense
determined as the accrued liability of Borrower in respect of such period,
regardless of what portion of such expense has actually been paid by
Borrower in respect of such period; (v) gain or loss on sale of property,
plant or Equipment of Borrower; and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such
period; (b) any non-cash income; and (c) all actual Capital Expenditures
made during such period and not financed.
"Permitted Discretion" means FINOVA's judgment exercised in good
faith based upon its consideration of any factor which FINOVA believes in
good faith: (i) will or could adversely affect the value of any
Collateral, the enforceability or priority of FINOVA's liens thereon or
the amount which FINOVA would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral; (ii) suggests that any collateral report
or financial information delivered to FINOVA by any Person on behalf of
the Borrower is incomplete, inaccurate or misleading in any material
respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other Insolvency proceeding involving the Borrower, any
Loan Party or any of the Collateral, or (iv) creates or reasonably could
be expected to create an Event of Default. In exercising such judgment,
FINOVA may consider such factors already included in or tested by the
definition of Eligible Receivables or Eligible inventory, as well as any
of the following: (i) the financial and business climate of the Borrower's
industry and general macroeconomic conditions, (ii) changes in collection
history and dilution with respect to the Receivables, (iii) changes in
demand for, and pricing of, Inventory. (iv) changes in any concentration
of risk with respect to Receivables and/or Inventory, and (v) any other
factors that change the credit risk of lending to the Borrower on the
security of the Receivables and Inventory. The burden of establishing lack
of good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Loan Schedule.
<PAGE>
"Permitted Liens" means any of the following Liens (i) Liens in the
Collateral granted to FINOVA; (ii) Liens for taxes or assessments and
similar charges, which either are (a) not delinquent or (b) being
contested diligently and in good faith by appropriate proceedings, and as
to which Borrower has set aside reserves on its books in accordance with
GAAP; (iii) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carriers or other like Liens, incurred in good faith in
the ordinary course of business, provided that the underlying obligations
relating to such Liens are paid in the ordinary course of business, or are
being contested diligently and in good faith by appropriate proceedings
and as to which Borrower has set aside reserves on its books in accordance
with GAAP, or the payment of which obligations are otherwise secured in a
manner satisfactory to FINOVA; (iv) zoning ordinances, easements,
licenses, reservations. provisions, covenants, conditions, waivers or
restrictions on the use of Property and other title exceptions, in each
case, that are acceptable to FINOVA; (v) Liens to secure payment of
insurance premiums (a) to be paid in accordance with applicable laws in
the ordinary course of business relating to payment of worker's
compensation, or (b) that are required for the participation in any fund
in connection with worker's. compensation, unemployment insurance, old-age
pensions or other social security programs; and (vi) Permitted
Encumbrances.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, limited liability company, government, or any agency or
political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), proceeds of any
letters of credit naming Borrower as beneficiary, contract rights, chattel
paper, instruments, documents and all other forms of obligations at any
time owing to Borrower, all guaranties and other security therefor,
whether secured or unsecured, all merchandise returned to or repossessed
by Borrower, and all rights of stoppage in transit and all other rights or
remedies of an unpaid vendor, lienor or secured party.
"Seller" means PC Dynamics, Inc. and M-Wave, Inc.
"Seller Noncompete Agreement" means that certain noncompete agreement
between Seller, Borrower, and Performance Interconnect Corporation, dated
as of the same date as this schedule
"Seller Subordinated Notes" means any and all indebtedness owed by
Borrower to Seller.
<PAGE>
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for
(i) interest, fees and scheduled principal payments due on the Term Loans
(excluding voluntary prepayment and payments made from Borrower's Excess
Cash Flow, as required pursuant to the Loan Schedule), and (ii) interest
only payments due on the Revolving Credit Loans facility plus the
Collateral Monitoring Fee, the Facility Fee, the Examination Fee, and the
Unused Line Fee, and (iii) interest and scheduled principal payments due
on any and all other Indebtedness for Borrowed Money, excluding the
Subordinated Debt.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the Obligations.
pursuant to a subordination agreement acceptable to FINOVA in its sole
discretion, including without limitation the indebtedness of Borrower
described in the Subordination Agreements.
"Subordinating Creditor" means M-Wave, Inc.
"Total Contractual Debt Service" means, for any period, the sum of
payments made (or. as to clause (i) of this sentence, required to be made)
by Borrower during such period for (i) Senior Contractual Debt Service,
(ii) pursuant to the Seller Subordinated Note and/or Seller Noncompete
Agreement, and (iii) interest and scheduled principal payments due on any
and all other Indebtedness for Borrowed Money of Borrower, including
without limitation the Subordinated Debt.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with GAAP. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the applicable
Uniform Commercial Code or equivalent statute, to the extent such terms
are defined therein.
Exhibit 4.21
SUBORDINATION AND STANDSTILL AGREEMENT
--------------------------------------
This Agreement is made as of this the 25th day of March, 1999, among
FINOVA CAPITAL CORPORATION, a Delaware corporation ("Senior Lender"), and
M-Wave, Inc., a Delaware corporation ("Subordinated Lends"), and PC Dynamics
of Texas, Inc., a Texas corporation, ("Borrower").
W I T N E S S E T H:
WHEREAS, Senior Lender and Borrower have entered into a Loan and
Security Agreement, dated as of the date hereof (as from time to time
modified, extended, renewed, or restated, the "Loan Agreement"), together
with the other Loan Documents (as defined in the Loan Agreement), whereby
Senior Lender has made and shall make available to Borrower a credit
facility in the aggregate amount of Two Million Thirty Five Thousand Dollars
($2,035,000.00) (collectively, the "Senior Loan") therein set forth, which
Senior Loan is secured by certain assignments of and security interests in
the assets of Borrower, now or hereafter existing, all as more fully set
forth in the Loan Documents; and
WHEREAS, Borrower has issued certain promissory notes (collectively,
the "Notes") and has incurred certain otter indebtedness and payment
obligations under that certain Asset Purchase Agreement, dated as of March
25,1999 (as amended, the "Purchase Agreement"), all as described in the
"Subordinated Debt Schedule" attached hereto and incorporated herein, (the
Purchase Agreement and all other documents or instruments executed in
connection therewith, as from time to time modified, extended, renewed or
restated, collectively the "Subordinated Documents"); and
WHEREAS, as set forth in Section 19 hereof, Subordinated Lender shall
benefit from the execution and delivery of the Loan Agreement and the making
of the Senior Loan; and
WHEREAS, as a condition of the financing accommodations under the Loan
Documents, the parties hereto are required to enter into this Agreement to
establish the priority of the repayment of the Borrowers debt, and to
address certain related matters; and
WHEREAS, Subordinated Lender and Borrower desire to enter into this
Agreement in order to induce Senior Lender to enter into the Loan Agreement
with Borrower and to make the Senior Loan.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. Definitions. Except as otherwise provided herein, all
capitalized terms used in this Agreement shall have the meanings ascribed to
such terms in the Loan Agreement, provided that the following terms shall
have the meanings set forth below:
"Borrowers Property" means all assets, property and property rights,
of any kind or nature, tangible or intangible, now or hereafter existing, in
which Borrower owns, asserts or maintains an interest.
<PAGE>
"Finally Paid" or "Final Payment," when used in connection with the
Senior Indebtedness shall mean the full, final and indefeasible payment of
all of the Senior Indebtedness and the irrevocable termination of Senior
Lenders obligation to make loans or other advances under the loan Agreement.
"Insolvency Proceeding" shall mean any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code, or under any
other bankruptcy or insolvency law, including assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"Liens" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge, set-off right or other encumbrance, whether now existing
or hereafter created, acquired or arising.
"Notes" shall have the meaning set forth in the recitals hereof.
"Senior Indebtedness" means all principal, interest and other
obligations at any time due and owing by Borrower to Senior Lender arising
out of or incurred in connection with the Loan Documents or other documents
executed in connection with the Senior Loan (and any indebtedness which
refinances such principal, interest or other obligations), as modified,
extended, renewed or restated, whether direct or contingent, and whether now
existing or hereafter created. Senior Indebtedness shall include, without
limitation, interest which accrues on the principal amount of the Senior
Indebtedness subsequent to the commencement of, a case under Chapter 11 of
the Bankruptcy Code, but only to the extent such interest is allowed as a
claim in such case.
"Subordinated Lender" means, individually and collectively, the
individuals and entities named on the signature page hereto, and each
reference herein to "Subordinated Lender" shall be deemed to mean each
Subordinated Lender, individually and collectively, as the context requires.
"Subordinated Indebtedness" means all indebtedness of Borrower to
Subordinated Lender pursuant to the Subordinated Documents and all present
and future loans, advances, debts, liabilities, obligations, and
indebtedness otherwise owing by Borrower to any Subordinated Lender, whether
evidenced by any note, or other instrument or document, whether absolute or
contingent, due or to become due, including, without limitation, all
interest charges, expenses, fees, attorneys' fees and any other sums
chargeable to Borrower. Notwithstanding the foregoing, Subordinated
Indebtedness shall not include lease payments due and owing Subordinated
Lender pursuant to that certain Lease Agreement of the facility located at
10501 FM 720 East, Frisco, Texas 75034, by and between Subordinated Lender
and Borrower, dated March 25, 1999.
"Subordinated Lender Remedies" means any action which results in (A)
the sale, foreclosure, realization on or liquidation of any of Borrowers
Property, (B) the execution on any judgment obtained against Borrower, (C)
the acceleration of the Subordinated Indebtedness, (D) the filing of any
petition or lien under any bankruptcy, insolvency or creditors' rights laws
with respect to Borrower, or (E) the institution or exercise against
Borrower of any suit, legal action, arbitration or other enforcement remedy.
"UCC" shall mean Article 9 of the Uniform Commercial Code, as in
effect in the State of Arizona from time to time.
<PAGE>
2. Subordination. Subordinated Lender hereby postpones and
subordinates in right of payment all of the Subordinated Indebtedness to the
Final Payment of all of the Senior Indebtedness as per this Subordination
and Standstill Agreement. Subordinated Lender does not, as of the date
hereof, hold any Liens or security interests in Borrowers Property and
hereby agrees that any Liens, security interests, claims and rights of any
kind Subordinated Lender may hereafter acquire against Borrower and
Borrowers Property (with the prior written consent of Senior Lender) shall
be subordinate and subject to the Liens, security interests, claims and
rights against Borrower and/or Borrowers Property of Senior Lender arising
from or out of the Senior Indebtedness, regardless of the order or time as
of which any Liens attach to any of the Borrowers Property, the order or
time of UCC filings or any other filings or recordings., the order or time
of granting of any such Liens, or the physical possession of any of the
Borrowers Property until this Agreement is terminated in accordance with
Section 26 hereof. If Borrower issues any instrument or document evidencing
the Subordinated Indebtedness each such instrument and document shall bear a
conspicuous legend that it is subordinated to the Senior Indebtedness in
accordance with the terms of this Agreement Borrowers books shall be marked
to evidence the subordination of all of the Subordinated Indebtedness to the
holder of Senior Indebtedness, in accordance with the terms of this
Agreement Senior Lender is authorized to examine such books from time to
time arid to make any notations required by this Agreement.
3. Warranties and Representations of Borrower and Subordinated
Lender. Borrower and Subordinated Lender each hereby severally represents
and warrants to the Senior Lender that the Senior Lender has been furnished
with a true and correct copy of all instruments and securities evidencing or
pertaining to the Subordinated Indebtedness. Borrower hereby represents and
warrants to the Senior Lender that this Agreement has been duly executed and
delivered by Borrower and constitutes a legal, valid and binding obligation
of Borrower enforceable in accordance with its terms except to the extent
that the enforceability thereof may be limited by any applicable bankruptcy
insolvency, reorganization, moratorium or similar laws from time to time in
effect affecting generally the enforcement of creditors' rights and remedies
and general principles of equity. Subordinated Lender represents and
warrants to the Senior Lender: (A) that this Agreement has been duly
executed and delivered by Subordinated Lender and constitutes a legal, valid
and binding Obligation of Subordinated Lender enforceable against the
Subordinated Lender in accordance with its terms, except to the extent that
the enforceability thereof may be limited by any applicable bankruptcy,
insolvency; reorganization, moratorium or similar laws from, time to time in
effect affecting generally the enforcement of creditors' rights and remedies
and general principles of equity; (B) that Subordinated Lender is a Delaware
corporation having its chief executive office at the address set forth below
his name on the signature page hereto; (C) that Subordinated Lender is
acquiring the Subordinated Indebtedness for its [his or her] own account and
not with a view to the distribution thereof and has no present intention of
distributing the Subordinated Indebtedness; (D) that Subordinated Lender has
not relied and shall not rely on any representation or information of any
nature made by or received from Senior Lender relative to Borrower in
deciding to execute this Agreement or to permit it to continue in effect.
<PAGE>
4. Negative Covenants. Until all at the Senior Indebtedness has
been Finally Paid (A) Borrower shall not1 directly or indirectly, grant a
security interest in, mortgage, pledge, assign or transfer any properties,
to secure or satisfy all or any part of the Subordinated Indebtedness; (B)
Subordinated Lender shall not demand or accept from Borrower any collateral;
(C) Borrower shall not discharge the Subordinated Indebtedness other than in
accordance with its terms; (D) Subordinated Lender shall not demand or
accept from Borrower any consideration which would result in a discharge of
the Subordinated Indebtedness other than in accordance with its terms; (E)
Subordinated Lender shall not hereafter give any subordination in respect of
the Subordinated Indebtedness or convert any or all of the Subordinated
Indebtedness to capital stock, equity, ownership interest or other
securities of Borrower; (F) Subordinated Lender shall not transfer or assign
any of the Subordinated Indebtedness to any person1 except upon the prior
written consent of Senior Lender and subject to the condition that such
transferee or assignee shall have agreed in writing to be bound by the terms
of this Agreement as a Subordinated Lender hereunder; (G) Borrower shall not
hereafter issue any instrument security or other writing evidencing any part
of the Subordinated Indebtedness, and Subordinated Lender shall not receive
any such writing, except upon the condition that such security shall bear
the legend referred to in Section 2 above and a true copy thereof shall be
furnished to Senior Lender; (H) neither Borrower nor Subordinated Lender
otherwise shall take any action contrary to Senior Lenders priority position
over Subordinated Lender that is created by this Agreement, except with
respect to the exercise by Subordinated Lender of the rights granted to it
in this Agreement.
5. Payments of Subordinated Indebtedness. Until all of the Senior
Indebtedness has been Finally Paid, Borrower shall not make and Subordinated
Lender shall not accept any direct or indirect payment or prepayment in
cash, property or securities, by set-off or otherwise, with respect to any
Subordinated Indebtedness, except that scheduled payments of principal
and/or interest under the Notes may be paid in arrears ("Allowed Payment")
if, and only to the extent that at the time of any such Allowed Payment: (a)
no "Event of Default" has occurred and is continuing under the Loan
Agreement and no Event of Default would result from the making of such
Allowed Payment, and (b) according to the monthly financial statements
submitted to Senior Lender by Borrower pursuant to the Loan Agreement (i)
Borrower will have a Debt Service Coverage Ratio of no less than 1.10 to 1.0
and will be in compliance with the other financial covenants set forth in
Section 5(k) of the Loan Agreement after giving effect to the Allowed
Payment, and (ii) Borrower will have at least Two Hundred Thousand Dollars
($200,000.00) of Excess Availability under the Revolving Credit Loans after
giving effect to the Allowed Payment.
<PAGE>
6. Prohibition on Payments.
(A) Notwithstanding the provisions of Section 5 above, upon the
happening of any Event of Default under and as defined in the Loan
Agreement, and upon receipt by Subordinated Lender of written notice thereof
(the "Default Notice") from the Senior Lender, no direct or indirect payment
or prepayment in cash, property or securities, by set-off or otherwise,
shall be made or agreed to be made by the Borrower or accepted by the
Subordinated Lender on account of the principal of. premium or interest on,
or any other amounts in respect of the Subordinated Indebtedness, and the
Borrower shall not segregate or hold in trust money for any such payment or
distribution, unless and until the Subordinated Lender has received a
written notice from the Senior Lender that the default referred to in such
Default Notice has been cured or waived by Senior Lender, and thereafter
Subordinated Lender shall be entitled to the payment of suspended payments
of the Subordinated Indebtedness from Borrower, to the extent permitted as
an Allowed Payment under Section 5 hereof, provided that no Event of Default
will result from the making of such payments by Borrower.
(B) In the event that the Borrower shall make or Subordinated Lender
shall collect any payment on account of the principal of, premium or
interest on or any other amounts due under the Subordinated Indebtedness in
contravention of this Section 6, such payments shall be paid over and
delivered to the Senior Lender immediately upon receipt thereof.
(C) In the event that any failure of the Borrower to make or the
Subordinated Lender to receive any payment with respect to the Subordinated
Indebtedness as a result of the provisions of this Section 6 shall be deemed
a default under the Subordinated Documents, such event shall not give rise
to any right of Subordinated Lender to exercise any Subordinated Lender
Remedies, any provision of the Subordinated Documents to the contrary
notwithstanding.
7. Forbearance of Legal Remedies. Until all of the Senior
Indebtedness has been Finally Paid, the Subordinated Lender shall not
exercise any Subordinated Lender Remedies or other remedies it may have for
a default under the Subordinated Documents, except as permitted below.
Whether or not a Default Notice is then in effect, the Subordinated Lender
may exercise one or more or all of the following rights and remedies (in
each case, subject at all times to the payment subordination and lien
subordination provisions set forth in this Agreement), but only the
following rights and remedies, after prior written notice to Senior Lender
and upon the occurrence of any of the following conditions, including any
such occurrence during the effective period of any Default Notice: (a) an
Insolvency Proceeding shall occur, or (b) the Senior Lender commences legal
proceedings against the Borrower.
(i) accelerate payment of the Subordinated Indebtedness;
(ii) commence legal proceedings against the Borrower and, if
requested by the Senior Lender, become a co-plaintiff in any legal
proceedings commenced by the Senior Lender, provided, that in no event shall
Subordinated Lender be permitted to execute on any judgment obtained against
Borrower until the Senior Indebtedness shall have been Finally Paid unless
the proceeds of such execution of judgment are paid to the Senior Lender for
application against the Senior Indebtedness, and further provided that
Subordinated Lender shall not be permitted to execute on any judgment
obtained against Borrower if the only predicate act above the acceleration
of payment of the Senior Indebtedness; and
<PAGE>
(iii) file a proof of claim and otherwise participate in any
Insolvency Proceeding. The Subordinated Lender agrees to provide the Senior
Lender with not less than six (6) days prior written notice of its intent to
exercise any legal remedy, which notice may be given during any period of
time that a Default Notice is in effect.
8. Subordinated Indebtedness Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution. Liquidation or Reorganization of the
Borrower. Upon any distribution of assets of the Borrower in any
dissolution, winding up, liquidation or reorganization of the Borrower
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise) tending toward
liquidation of the business and assets of Borrower:
(A) the holder of all Senior Indebtedness shall first be entitled to
receive payment in full (or to have such payment duly provided for in a
manner previously agreed upon or otherwise satisfactory to it) of the
principal thereof, and premium and interest due thereon, and other amounts
payable comprising such Senior Indebtedness, before the Subordinated Lender
is entitled to receive any payment on account of the principal of, premium
or interest on or any other amounts due under the Subordinated Indebtedness;
and
(B) any payment or distribution of assets of the Borrower of any
kind or character, whether in cash, property or securities, to which the
Subordinated Lender would be entitled except for these provisions, shall be
paid by the liquidating trustee or agent or other person making such payment
or distribution directly to the holder of the Senior Indebtedness, to the
extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Senior
Indebtedness.
The Borrower shall give prompt written notice to the Senior Lender and
the Subordinated Lender of any dissolution, winding up. liquidation or
reorganization of the Borrower or any assignment for the benefit of any of
the creditors of the Borrower tending toward the liquidation of the business
and assets of the Borrower.
9. Obligation of Borrower Unconditional. Nothing contained herein
or in the Loan Documents is intended to or shall impair, as between the
Borrower and the Subordinated Lender only, the obligation of the Borrower,
which is absolute and unconditional, to pay to the holder of the
Subordinated Indebtedness the Subordinated Indebtedness as and when the same
shall become due and payable in accordance with their terms, or to affect
the relative rights of the Subordinated Lender and creditors of the Borrower
other than the Senior Lender.
10. Subordination Rights Not Impaired by Acts or Omissions of
Borrower or Holder of Senior Indebtedness. No right of any present or future
holder of any Senior Indebtedness to enforce subordination as provided
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Borrower by any act or failure to act,
which act or failure is in good faith, by any such holder; by any act or
failure to act by any other holder of the Senior Indebtedness; or by any
noncompliance by the Borrower with the terms hereof, regardless of any
knowledge thereof which any such holder may have or be otherwise charged
with. Subordinated Lender shall not be released, nor shall Subordinated
<PAGE>
Lenders obligation hereunder be in anyway diminished, by any of the
following: (A) the exercise or the failure to exercise by Senior Lender of
any rights or remedies conferred on it or them under the Loan Documents
hereunder or existing at law or otherwise, or against any of Borrowers
Property; (B) the commencement of an action at law or the recovery of a
judgment at law against Borrower or any obligor ("Obligor") for the
performance of the Senior Indebtedness and the enforcement thereof through
levy or execution or otherwise; (C) the taking or institution or any other
action or proceeding against Borrower or any Obligor; or (D) any delay in
taking, pursuing, or exercising any of the foregoing actions, rights,
powers, or remedies (even though requested by Subordinated Lender) by Senior
Lender or anyone acting for Senior Lender. Without limiting the generality
of the foregoing, and anything else contained herein to the contrary
notwithstanding, Senior Lender, from time to time, without prior notice to
or the consent of Subordinated Lender, may take all or any of the following
actions without in any manner affecting or impairing the obligation or
liability of Subordinated Lender hereunder (I) obtain a lien or a security
interest in any property to secure any of the Senior Indebtedness; (II)
obtain the primary and secondary liability of any party or parties with
respect to any of the Senior Indebtedness; (III) renew, extend, or otherwise
change the time for payment of the Senior Loan or any installment thereof
for any period; (IV) release or compromise any liability of any nature of
any person or entity with respect to the Senior Indebtedness; (V) exchange,
enforce, waive, release, and apply any of Borrowers Property and direct the
order or manner of sale thereof as Senior Lender may in its discretion
determine; (VI) enforce their rights hereunder, whether or not Senior Lender
shall proceed against any other person or entity; (VII) exercise its rights
to consent to any action or non-action of Borrower which may violate the
covenants and agreements contained in the Loan Documents, with or without
consideration, on such terms and conditions as may be acceptable to it; or
(VIII) exercise any of its rights conferred by the Loan Documents or by law.
11. Authority to Act for Subordinated Lender. Until the Senior
Indebtedness has been Finally Paid, in the event an Insolvency Proceeding
shall occur and be continuing, if the Subordinated Lender is within forty-
five (45) days of a final bar on exercising its right to present a proof of
debt, proof of claim, suit or other similar right available for the purpose
of protecting the Senior Lenders rights created by the subordination herein
(to the extent that any of the foregoing proofs, procedures, or rights are
relevant in the context of the particular Insolvency Proceeding involved),
Subordinated Lender shall advise Senior Lender prior to the date thirty (30)
days before such final bar occurs whether Subordinated Lender intends to
exercise its rights and present a proof of debt, proof of claim, file suit,
or preserve such other rights as are available to Subordinated Lender prior
to the expiration of such rights. In the event that Subordinated Lender
advises Senior Lender of its intention to let any such rights lapse, Senior
Lender shall thereupon immediately have the right to act as Subordinated
Lender's attorney-in-fact for the purposes specified in the remainder of
this Section 11 (but solely to the extent that any of the actions on behalf
of Senior Lender authorized hereby are relevant in the context of the
particular Insolvency Proceeding involved). In the event Subordinated
Lender, regardless of whether Subordinated Lender notified Senior Lender of
its intention to preserve its rights or not, is within fifteen (15) days
of a final bar on exercising its right to present a proof of debt, proof of
claim, file suit or exercise such other similar rights as are available to
Subordinated Lender, Senior Lender shall have the right to act as
Subordinated Lender's attorney-in-fact for the purposes specified herein,
and Subordinated Lender hereby irrevocably appoints Senior Lender its true
<PAGE>
and lawful attorney, with full power of substitution, in the name of
Subordinated Lender or in the name of Senior Lender, for the use and benefit
of Senior Lender, without further or additional notice to Subordinated
Lender or any of its representatives. successors or assigns, to perform the
following acts, at Senior Lenders option, in such Insolvency Proceeding:
(A) To enforce or vote claims comprising the Subordinated
Indebtedness, either in its own name or in the name of Subordinated Lender,
by proof of debt, proof of claim, suit or otherwise; and
(B) To collect any assets of Borrower distributed, divided or
applied by way of dividend or payment, or any securities issued, on account
of the Subordinated Indebtedness and to apply the same, or the proceeds of
any realization upon the same that Senior Lender in its discretion elects to
effect, to the Senior Indebtedness until all of the Senior Indebtedness
(including, without limitation, interest accruing on the Senior Indebtedness
after the commencement of any bankruptcy case, but only to the extent such
interest is included within the definition of Senior Indebtedness hereunder)
has been paid in full, rendering any surplus to Subordinated Lender if and
to the extent permitted by law.
In no event shall Senior Lender be liable to Subordinated Lender any
failure to prove the Subordinated Indebtedness, to exercise any right with
respect thereto or to collect any sums payable thereon
12. Waivers. Borrower and Subordinated Lender each hereby waives, to
the fullest extent permitted by law, any defense based on the adequacy: of a
remedy at law which might be asserted as a bar to the remedy of specific
performance of this Agreement in any action brought therefore by Senior
Lender. To the fullest extent permitted by law and except as to any notices
specified in this Agreement, notices regarding the intended sale or
disposition of any portion of the Collateral by Senior Lender, or any notice
which may not be waived in accordance with the UCC, Borrower and
Subordinated Lender each hereby further waives: presentment, demand,
protest, notice of protest, notice of default or dishonor, notice of payment
or nonpayment and any and all other notices and demands of any kind in
connection with all negotiable instruments evidencing all or any portion of
the Senior Indebtedness or the Subordinated Indebtedness to which Borrower
or Subordinated Lender may be a party; prior notice of and consent to any
loans made, extensions granted or other action taken in reliance thereon;
and all other demands and notices of every kind in connection with this
Agreement, the Senior Indebtedness or the Subordinated Indebtedness.
Subordinated Lender consents to any release, renewal, extension, compromise
or postponement of the time of payment of the Senior Indebtedness, to any
substitution, exchange or release of collateral therefor, and to the
addition or release of any person primarily or secondarily liable thereon.
13. Indulgences Not Waivers. Neither the failure nor any delay on
the part of Senior Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an. estoppel,
nor be construed as an agreement to modify the terms of this Agreement, nor
shall any single or partial exercise of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver by a party hereunder shall be effective unless it is in writing and
signed by the party making such waiver, and then only to the extent
specifically stated in such writing.
<PAGE>
14. Default. If any material representation or warranty of Borrower
or Subordinated Lender in this Agreement or in any instrument evidencing,
securing or relating to the Senior Indebtedness proves to have been
materially false when made, or, in the event of a material breach by either
the Borrower or Subordinated Lender in the performance of any of the
material terms of this Agreement, or any instrument or agreement evidencing,
securing or relating to the Senior Indebtedness, all of the Senior
Indebtedness shall, at the option of Senior Lender, become immediately due
and payable without presentment, demand, protest, or notices of any kind,
notwithstanding any time or credit otherwise allowed. At any time
Subordinated Lender fails to comply with any provision of this Agreement
that is applicable to Subordinated Lender, Senior Lender may demand specific
performance of this Agreement, whether or not Borrower has complied with
this Agreement, and may exercise any other remedy available at law or
equity.
15. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Borrower referred to in
this Agreement, the Subordinated Lender shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of a trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Subordinated Lender,
for the purpose of ascertaining the persons entitled to participate in such
payment or distribution, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto
or to this Agreement.
16. Amendment of the Subordinated Documents. Subordinated Lender
agrees that it will not, without the consent of the Senior Lender, amend
the Subordinated Documents, so as to modify the financial terms thereof
(including, without limitation, the amount of principal, rate of interest,
dividends, fees and prepayment premiums, if any), extend the maturity
thereof add or change any covenants in a manner materially more
restrictive to the Borrower, or effect any other modification to the
Subordinated Documents, which would: be materially adverse to the Senior
Lender.
17. Inconsistent or Conflicting Provisions. In the event a provision
of the Loan Documents or the Subordinated Documents, is inconsistent or
conflicts with the provisions of this Agreement, the provisions of this
Agreement shall govern and prevail.
<PAGE>
18. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when
delivered against receipt or when deposited in the United States mails,
certified or registered mail, return receipt requested, postage prepaid,
addressed as set forth below, and actually presented at the address of the
notice party.
If to Senior Lender:
FINOVA Capital Corporation
355 South Grand Avenue, Suite 2400
Los Angeles, California 90017
Attention: David Sands
If to Subordinated Lender:
The address set forth below the
signature of such Subordinated
Lender on the signature page hereto.
If to Borrower:
PC Dynamics of Texas, Inc.
10501 FM 720 East
Frisco, Texas 75035
Any addressee may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
19. Benefit. Subordinated Lender represents and warrants that the
making of the Senior Loan will benefit Subordinated Lender in that
Subordinated Lender is financially interested in Borrower and will benefit
from the financial success of Borrower. Subordinated Lender acknowledges
that Senior Lender would not make the Senior Loan but for the execution of
this Agreement. Therefore; Subordinated Lender has received good, sufficient
and adequate consideration for the making of this Agreement.
20. Entire Agreement. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereto and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral
or written. Neither this Agreement nor any portion or provision hereof may
be changed, waived or amended orally or in any manner other than by an
agreement in writing signed by Senior Lender and Subordinated Lender
provided, however, any such change, waiver or amendment shall be binding
upon the Borrower by its written consent thereto.
21. Additional Documentation. Borrower and Subordinated Lender
shall execute and deliver to Senior Lender such further instruments and
shall take such further action as Senior Lender may at any time or times
reasonably request in order to carry out the provisions and intent of this
Agreement.
<PAGE>
22. Expenses. Borrower agrees to pay Senior Lender on demand all
expenses of every kind, including reasonable attorney's fees, that Senior
Lender may incur in enforcing any of its rights against Borrower under this
Agreement. As between Senior Lender and the Subordinated Lender, the court
may, in the exercise of its discretion, award attorneys fees to a prevailing
party, in a manner consistent with Arizona law governing actions arising out
of a contract, and the prevailing party shall have the right to petition the
court to make such award.
23. Successors and Assigns. This Agreement shall inure to the
benefit of Senior Lender, its successors and assigns, and shall be binding
upon Borrower and its successors and assigns, and each Subordinated Lender
and their respective heirs, legatees, distributees, transferees, executors,
administrators and personal representatives and assigns, including without
limitation, any subsequent holders of the Note. Senior Lender without prior
notice or consent of any kind, may sell, assign or transfer the Senior
Indebtedness, and in such event each and every immediate and successive
assignee or transferee thereof may be given the right by Senior Lender to
enforce this Agreement in full against Borrower and Subordinated Lender, by
suit or otherwise, for its own benefit, provided that such successor,
assignee or transferee agrees to be bound by the terms of this Agreement.
24. Covenant Not to Challenge. This Agreement has been negotiated
by the parties with the expectation and in reliance upon the assumption that
the instruments and documents evidencing the Senior Indebtedness are valid
and enforceable. In determining whether to enter into this Agreement,
Subordinated Lender has assumed such validity and enforceability, and has
agreed to the provisions contained herein, without relying upon any189
reservation of a right to challenge or call into question such validity or
enforceability. As between Senior Lender and Subordinated Lender,
Subordinated Lender hereby covenants and agrees, to the fullest extent
permitted by law, that it shall not initiate in any proceeding a challenge
to the validity or enforceability of the documents and instruments
evidencing the Senior Indebtedness, nor shall Subordinated Lender instigate
other parties to raise any such challenges, nor shall Subordinated Lender
participate in or otherwise assert any such challenges which are raised by
other parties. The foregoing notwithstanding, in the event that any other
party is successful in establishing the invalidity or unenforceability of
any of the documents or instruments evidencing the Senior Indebtedness, then
Subordinated Lender shall be entitled to the benefit of such result, and
Subordinated Lender shall not be bound by the subordination provisions of
this Agreement to the extent of such invalidity or unenforceability.
25. Subrogation. Subject to the foregoing provisions hereof,
provided that the Senior Indebtedness has been Finally Paid (and shall not
be subject to avoidance under Section 547 of the Bankruptcy Code) the
Subordinated Lender shall be subrogated, to the extent of such Senior
Indebtedness so paid, to the rights of the holder of such Senior
Indebtedness to receive payments or distributions or assets of the Borrower
that secure such Senior Indebtedness until all amounts owing on the
Subordinated Indebtedness shall be paid in full. For the purpose of such
subrogation no payments or distributions to the holder of the Senior
Indebtedness by or on behalf of the Borrower or by or on behalf of
Subordinated Lender by virtue of the provisions hereof which otherwise would
have been made to the Subordinated Lender shall, as between the Borrower, a
creditor of the Borrower (other than Subordinated Lender and The Senior
Lender) and the Subordinated Lender, be deemed to be payment by the Borrower
<PAGE>
to or on account of the Subordinated Indebtedness, it being understood that
the provisions of this Agreement are, and are intended solely, for the
purpose of defining the relative rights of Subordinated Lender on the one
hand, and Senior Lender on the other hand. In the event that Subordinated
Lender turns over to any Senior Lender any payment or contributions received
by it in accordance with this Agreement, Subordinated Lender shall, for
purposes of determining whether any default under the Subordinated Documents
has occurred, be deemed never to have received such payment or distribution.
In the event that Borrower fails to make any payment on account of the
Subordinated Indebtedness by reason of any provision contained herein, such
failure shall, notwithstanding such provision contained herein, constitute a
default with respect to the Subordinated Indebtedness if and to the extent
such failure would otherwise constitute such a default in accordance with
the terms of the Subordinated Indebtedness.
26. Termination of Agreement. This Agreement shall continue and
shall be irrevocable until the date all of the Senior Indebtedness has been
Finally Paid by Borrower or otherwise discharged and released by the Senior
Lender.
27. Reinstatement. The obligations of Subordinated Lender under the
Agreement shall continue to be effective, or be reinstated, as the ease may
be, if at any time any payment in respect of any Senior Indebtedness is
rescinded or must otherwise be restored or returned by Senior Lender by
reason of any bankruptcy, reorganization, arrangement, composition or
similar proceeding or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, Borrower or
any substantial part of its property, or otherwise, all as though such
payment had not been made.
28. Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ARIZONA. BORROWER AND SUBORDINATED LENDER HEREBY AGREE THAT ALLOCATIONS OR
PROCEEDINGS INITIATED BY EITHER BORROWER OR SUBORDINATED LENDER AND ARISING
DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN A190
MARICOPA COUNTY, ARIZONA SUPERIOR COURT OR THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA OR, IF SENIOR LENDER INITIATES SUCH ACTION, IN
ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE
SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. EACH OF BORROWER AND
SUBORDINATED LENDER HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY SENIOR LENDER AND
HEREBY WAIVES ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED UPON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM AS
SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT,
BY SENIOR LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING.
BY SENIOR LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND EACH OF BORROWER AND SUBORDINATED LENDER HEREBY WAIVE THE
RIGHT TO COLLATERALLY ATTACK SUCH JUDGMENT OR ACTION.
29. Jury Trial. SENIOR LENDER, SUBORDINATED LENDER AND BORROWER
WAIVE TRIAL BY JURY IN ANY DISPUTE ARISING FROM, UNDER OR IN CONNECTION WTH
THIS AGREEMENT.
<PAGE>
30. Severability. The provisions of this Agreement are independent
of and separable from each other. If any provision hereof shall for any
reason be held invalid or unenforceable, it is the intent of the parties
that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof, and that this Agreement shall
be construed as if such invalid or unenforceable provision had never been
contained herein.
31. Counterparts. This Agreement may be executed in any number of
separate counterparts, all of which, when taken together, shall constitute
one and the same instrument, notwithstanding the fact that all parties did
not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUBORDINATED LENDER: M-Wave, Inc.,
a Delaware corporation
By: /s/
Name: ____________________
Title: ___________________
Address: _________________
__________________________
SENIOR LENDER: FINOVA CAPITALCORPORATION,
a Delaware corporation
By: /s/
-----------------------------
Pete Martinez, Vice-President
BORROWER: PC DYNAMICS OF TEXAS, INC.,
a Texas Corporation
By: /s/
-----------------------
D. Ron Allen, President
LEGEND TO BE INSERTED
AT THE TOP OF
SUBORDINATED NOTES
------------------
ALL INDEBTEDNESS EVIDENCED HEREBY AND REFERENCED HEREIN IS SUBORDINATED IN
RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL OF ALL INDEBTEDNESS OWED TO
FINOVA CAPITAL CORPORATION AS SET FORTH IN THAT CERTAIN SUBORDINATION AND
STANDS TILL AGREEMENT AMONG FINOVA CAPITAL CORPORATION, THE PAYEE OF THIS
NOTE AND THE OTHER PARTIES NAMED THEREIN
Exhibit 4.22
Environmental Certificate and Indemnity Agreement
THIS ENVIRONMENTAL CERTIFICATE AND INDEMNITY AGREEMENT (this
"Agreement") is made as of March 25, 1999, by the undersigned, PC DYNAMICS
OF TEXAS, INC., a Texas corporation ("Company"), in favor of FINOVA CAPITAL
CORPORATION, a Delaware corporation ("lndemnitee") and other Indemnified
Parties (defined below).
RECITALS:
A. Indemnitee is making a loan (the "Transaction") to Company in
the face amount of Two Million Thirty Five Thousand Dollars ($2,035,000.00).
The documents evidencing, governing or securing the Transaction are
sometimes referred to herein collectively as the "Transaction Documents".
The Transaction is secured by the real property, personal property or
equipment (the "Property") described in the other Transaction Documents.
B. Indemnitee is unwilling to close the Transaction unless
Company agrees to provide the indemnifications, certifications,
representations, warranties, and covenants and other matters described in
this Agreement for the benefit of Indemnified Parties.
AGREEMENT
NOW THEREFORE, in order to induce the Indemnitee to close the
Transaction, and in consideration of the substantial benefit Company will
derive from the Transaction, Company agrees as follows:
ARTICLE I - DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
The term "Disclosure Statement" means that certain Environmental
Disclosure Statement executed by Company on Indemnitee's standard form in
connection with the Transaction.
The term "EHS Permits" means all environmental, health and safety
permits, licenses, consents and authorizations required under any
Environmental Law.
The term "Environmental Conditions" means the presence or release
of any Hazardous Materials on, in, about, under or from the Property, as
applicable.
The term "Environmental Law" means any present or future federal,
state or local laws, statutes, codes, ordinances, rules, regulations,
standards, policies, court orders, decrees, administrative orders,
guidelines or other governmental directives, as well as common law, relating
to protection of human health or the environment, relating to Hazardous
Materials that apply to Company or the Property and relate to Hazardous
Materials.
<PAGE>
The term "Environmental Lien" means a lien in favor of any
Governmental Authority for any: (a) liability under any Environmental
Requirement; or (b) damages arising from, or costs incurred by such
Governmental Authority in response to a Release.
The term "Environmental Report" means the environmental site
assessment reports for the Property obtained by Indemnitee from its
environmental consultant or an environmental consultant approved by
Indemnitee, in connection with the Transaction.
The term "Environmental Requirement" means all Environmental Laws
or EHS Permits.
The term "Governmental Authority" means any federal, state or
local agency, department, court or other administrative, legislative or
regulatory federal, state or Focal governmental body, or any private
individual or entity in place of such entities.
The term "Hazardous Materials" shall mean (a) petroleum and
petroleum derived substances, products, compounds and wastes, including
gasoline, diesel fuel and oil; (b) explosive or flammable materials; (c)
radioactive materials; (d) polychlorinated biphenyl ("PCBs") and compounds
containing them; (e) lead and lead-based paint; (f) asbestos or asbestos-
containing materials; (g) medical wastes; (h) any substance the presence of
which is prohibited by any Environmental Requirement; (I) any substance that
requires special handling; and (j) any other material or substance now or in
the future defined as or regulated under any Environmental Requirement as a
"hazardous substance," "hazardous material", hazardous waste", toxic
substance", "toxic pollutant", "contaminant", or "pollutant".
The term "Indemnified Parties" means Indemnitee, any person or
entity who is or will have been involved in the origination of the
Transaction, any person or entity who is or will have been involved in the
servicing of the Transaction, any person or entity in whose name any
obligation or any encumbrance created by the other Transaction Documents is
or will have been recorded, persons and entities who may hold or acquire or
will have held a full or partial interest in the Transaction (including, but
not limited to, investors in securities backed by the Transaction, as well
as custodians, trustees and other fiduciaries who hold or have held a full
or partial interest in the Transaction for the benefit of. third parties) as
well as the respective directors, officers, shareholders, partners, members,
employees, agents, servants, representatives, contractors, subcontractors,
affiliates, subsidiaries, participants, successors and assigns of any and
all of the foregoing (including but not limited to any other person or
entity who holds or acquires or will have held a participation or other full
or partial interest in the Transaction or the Property, whether during the
term of the Transaction or as a part of or following a foreclosure of the
Transaction or exercise of any remedies under the other Transaction
Documents, and including, but not limited to, any successors by merger,
consolidation or acquisition of all or a substantial portion of Indemnitee's
assets and business).
The term "Legal Action" means any claim, suit or proceeding,
whether administrative or judicial in nature.
<PAGE>
The term "Losses" shall mean any and all claims, demands, suits,
liabilities (including, without limitation, strict liabilities), actions,
proceedings, obligations, debts. Damages, losses, costs, expenses, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement of whatever kind or nature (including but not limited to
attorneys', accountants', engineers' and contractors' fees and other costs)
arising out of any Environmental Condition. "Losses" shall include, without
limitation, all past, current and future expenses, arising out of: (i) any
pending, threatened or completed action by a Governmental Authority or any
person or entity for property damage, bodily injury or personal injury
(including any appeals whether instituted by Company, any Governmental
Authority or any other person or entity); (ii) any inquiry, investigation,
audit, study, assessment, notice of violation, administrative complaint,
summons, citation directive or judicial complaint; (iii) any development of
remedial or response plans; and (iv) any conduct or activity in any way
associated therewith.
The term "Release" with respect to any Hazardous Material means
actual or threatened release, deposit, discharge, emission, leaking,
leaching, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, escaping, dumping, disposing or other movement of Hazardous
Materials in, under, on, above or from the Property, as applicable.
The term "Remedial Action" means actions required to: (a) clean
up, remove, treat or otherwise address any Release of Hazardous Materials;
(b) prevent or minimize the Release of Hazardous Materials; or (c) determine
if a remedial response or corrective action is needed, design an appropriate
response, compile necessary data and reports, conduct pre- and post-remedial
investigation, monitoring, operation, maintenance and care.
ARTICLE 2-INDEMNIFICATION
2.1 INDEMNIFICATION. Company covenants and agrees at its sole
cost and expense, to protect, defend, indemnify, release and hold
Indemnified Parties harmless from and against any and all Losses imposed
upon or incurred by or asserted against any Indemnified Parties and directly
or indirectly arising out of or in any way relating to any one or more of
the following: (a) any presence of any Hazardous Materials in, on, above,
under or from the Property, as applicable; (b) any past, present or
threatened Release of Hazardous Materials in, on, above, under or from the
Property, as applicable; (c) any activity by Company, any person or entity
affiliated with Company, and any tenant or other user of the Property in
connection with any actual, proposed or threatened use, treatment, storage,
holding, existence, disposition or other Release, generation, production,
manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Materials at any time located in, under, on or above the Property
or any actual or proposed remediation of any Hazardous Materials at any time
located in, under, on or above the Property, whether or not such remediation
is voluntary or pursuant to court or administrative order, including but not
limited to any removal, remedial or corrective action; (d) any past, present
or threatened non-compliance or violations of any Environmental Requirements
in connection with the Property, including but not limited to any failure by
Company, any person or entity affiliated with Company, and any tenant or
other user of the Property to comply with any order of any Governmental
Authority in connection with any Environmental Requirements; (e) the
imposition, recording or filing or the threatened imposition, recording or
filing of any Environmental Lien encumbering the Property; (1) any acts of
<PAGE>
Company, any person or entity affiliated with Company, and any tenant or
other user of the Property in (i) arranging for disposal or treatment, or
arranging with a transporter for transport for disposal or treatment, of
Hazardous Materials at any facility or incineration vessel containing such
or similar Hazardous Materials or (ii) accepting any Hazardous Materials for
transport to disposal or treatment facilities, incineration vessels or sites
from which there is a Release, or a threatened Release of any Hazardous
Material which causes the incurrence of costs for remediation; and (g) any
misrepresentation or inaccuracy in any representation or warranty or
material breach or failure to perform any covenants or other obligations
pursuant to this Agreement or the other Transaction Documents relating to
environmental matters.
2.2 DUTY TO DEFEND AND ATTORNEYS AND OTHER FEES AND EXPENSES.
Upon written request by any Indemnified Party, Company shall defend same (if
requested by any Indemnified Party, in the name of the Indemnified Party) by
attorneys and other professionals approved by the Indemnified Parties. Upon
demand, Company shall pay or, in the sole discretion of the Indemnified
Parties, reimburse, the Indemnified Parties for the payment of reasonable
fees and disbursements of attorneys, engineers, environmental consultants,
laboratories and other professionals in connection therewith.
2.3 SUBROGATION. Company shall take any and all reasonable
actions, including institution of legal action against third-parties,
necessary or appropriate to obtain reimbursement, payment or compensation
from such persons responsible for the presence of any Hazardous Materials
at, in, on, under or near the Property or otherwise obligated by law to bear
the cost. Indemnified Parties shall be and hereby are subrogated to all of
Company's rights now or hereafter in such claims.
2.4 INTEREST. Any amounts payable to any indemnified Parties
under this Agreement shall become immediately due and payable on demand and,
if not paid within thirty (30) days of such demand therefor, shall bear
interest at a per annum rate equal to the lesser of (a) any default rate set
forth in the other Transaction Documents or (b) the maximum interest rate
which Company may by law pay or Indemnified Parties may charge and collect,
from the date payment was due.
2.5 SURVIVAL. The representations, covenants, warranties,
obligations and liabilities of Company under this Agreement are continuing
and shall fully survive indefinitely notwithstanding any termination,
satisfaction, assignment, entry of a judgment of foreclosure, exercise of
any power of sale, delivery of a deed in lieu of foreclosure or other
exercise of remedies under the other Transaction Documents.
2.6 NOTICE OF LEGAL ACTIONS. Coin an shall, within five (5)
business days of receipt thereof, give written notice to Indemnitee of (i)
any notice, advice or other communication from any Governmental Authority or
any source whatsoever with respect to Hazardous Materials on, from or
affecting the Property, (ii) any matter which would constitute a breach of
or deviation from any representation, warranty, covenant or agreement
contained herein; and (iii) any Legal Action brought against such party or
related to the Property, with respect to which Company may have liability
under this Agreement. Upon request, Company shall provide to Indemnitee
copies of any documents pertaining to any of the above-described matters in
this Section.
<PAGE>
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES AND COVENANTS
3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
described in the Disclosure Statement or the Environmental Report, Company,
to the best of its knowledge after due inquiry and investigation, hereby
represents, covenants and warrants to Indemnitee as follows:
(a) The Property is not listed on any federal, state, or
local list identifying properties with a known or suspected Release. Company
is unaware of any condition that, if known to a Governmental Authority,
would require (1) the Property be listed or (2) Remedial Action.
(b) The operation of or on the Property have never been, and
will not be, for the purpose of the manufacture, generation, Release, or
refining of any Hazardous Material (whether legal or illegal, accidental or
intentional).
(c) Company obtained, and is and will continue to be in
material compliance with, all EHS Permits necessary for the ownership, use
and operation of the Property.
(d) No Environmental Lien has, is, or will be attached to
the Property or any portion thereof.
(e) Company is not, has not, and does not anticipate being,
subject to any action by a Governmental Authority regarding: (i) the
violation-of any Environmental Requirement; (ii) any Remedial Action: (iii)
any liability arising out of or related to the presence or Release of any
Hazardous Material resulting from or pertaining to the operation, use or
ownership of the Property.
3.2 CONFLICTS. In the case of any conflict between the
provisions of this Agreement and the provisions of any other Transaction
Documents pertaining to environmental matters, the provisions of this
Agreement shall control.
3.3 REMEDIAL ACTION. Company, at its own cost, shall perform
all Remedial Action to result in the best economic use of the Property
(e.g., no deed or use restrictions), and shall be conducted: (a) in
accordance with all Environmental Requirements; (b) to the reasonable
satisfaction of Indemnitee; and (c) in accordance with any Governmental
Authority orders, directives, and/or terms, whether negotiated or imposed.
3.4 SITE ASSESSMENTS. If Indemnitee reasonably believes that
Hazardous Materials (other than those described in the Disclosure Statement
or the Environmental Report) affect the Property, lndemnitee, at any time,
may contract for the services of any environmental engineering company
("Environmental Consultant") to perform an environmental site assessment
("Site Assessment") to determine whether any Environmental Condition exists
that could result in the diminution of the value of the Property, and/or any
liability, cost, or expense to the owner, occupier, or operator of the
Property. Site Assessments may be performed at anytime, upon reasonable
notice and with minimal interference with Company's affairs to the extent
practicable, as determined by Indemnitee. Company will not impede or
interfere with any such Site Assessment, and will cooperate fully with the
Environmental Consultant including providing all historical and operating
information for the Property. The Environmental Consultant, and its
employees, agents, subcontractors, and assigns, are hereby authorized to
<PAGE>
examine or enter upon the Property, as applicable, for such purposes and are
further authorized to perform tests on the Property necessary to conduct the
Site Assessment. On request, Indemnitee shall make the results of such Site
Assessments available to Company. The cost of performing the Site
Assessments, including, without limitation, sampling and monitoring, the
preparation of any reports or studies, and the cost of laboratory analysis,
shall be paid by Company upon demand.
ARTICLE 4-GENERAL
4.1 UNIMPAIRED LIABILITY. The liability of Company under this
Agreement shall in no way be limited or impaired by, and Company hereby
consents to and agrees to be bound by, any amendment or modification of the
provisions of the other Transaction Documents to or with Indemnitee by
Company or any person who succeeds Company or any person as owner of the
Property. In addition, the liability of Company under this Agreement shall
in no way be limited or impaired by, (i) any extensions of time for
performance required by the other Transaction Document, (ii) any sale or
transfer of all or part of the Property, (iii) any exculpatory provision in
the other Transaction Document limiting Indemnitee's recourse to the
Property or to any other security for the Company's obligations under the
other Transaction Documents, or limiting Indemnitee's rights to a deficiency
judgment against Company, (iv) the accuracy or inaccuracy of the
representations and warranties made by Company under any other Transaction
Document or herein, (v) the release of Company or any other person from
performance or observance of any of the agreements, covenants, terms or
condition contained in any Transaction Document by operation of law,
Indemnitee's voluntary act, or otherwise, (vi) the release or substitution
in whole or in part of any security for the Transaction, or (vii)
Indemnitee's failure to record or file any UCC financing statements or other
Transaction Documents (or Indemnitee's improper recording or filing of any
thereof) or to otherwise perfect, protect, secure or insure any security
interest or lien given as security for the Transaction; and, in any such
case, whether with or without notice to Company and with or without
consideration.
4.2 ENFORCEMENT. Indemnified Parties may enforce the
obligations of Company under this Agreement without first resorting to or
exhausting any security or collateral or without first having recourse to
the other Transaction Documents or any of the Property, through foreclosure
proceedings, exercise i of remedies under the other Transaction Documents or
otherwise, provided, however, that nothing herein shall inhibit or prevent
Indemnitee from suing on the other Transaction Documents or from foreclosing
or exercising any power of sale or other rights and remedies under the other
Transaction Documents. This Agreement is not collateral or security for the
obligations of the Company under the other Transaction Documents, unless
Indemnitee expressly elects in writing to make this Agreement additional
collateral or security for the obligations of the Company under the other
Transaction Documents, which Indemnitee is entitled to do in its sole
discretion. It is not necessary for an Event of Default to have occurred
pursuant to and as defined in any other Transaction Document for Indemnified
Parties to exercise their rights pursuant to this Agreement. Notwithstanding
any provision of any other Transaction Document, the obligations pursuant to
this Agreement are exceptions to any non-recourse or exculpation provision
of any other Transaction Document, and Company is fully and personally
liable for such obligations, and its liability is not limited to the
original or amortized principal amount of the Transaction or the value of
the Property.
<PAGE>
4.3 WAIVERS. (a) Company hereby waives (i) any right or claim
of right to cause a marshalling of Company's assets or to cause Indemnitee
or other Indemnified Parties to proceed against any of the security for the
Transaction before proceeding under this Agreement against Company: and (ii)
all rights and remedies accorded by applicable law to indemnitors or
guarantors, except any rights of subrogation which Company may have,
provided that the indemnity provided for hereunder shall neither be
contingent upon the existence of any such rights of subrogation nor subject
to any claims or defenses whatsoever which may be asserted in connection
with the enforcement or attempted enforcement of such subrogation rights
including, without limitation, any claim that such subrogation rights were
abrogated by any acts of Indemnitee or other Indemnified Parties.
Notwithstanding anything to the contrary contained herein, Company hereby
agrees to postpone the exercise of any rights of subrogation with respect to
any collateral securing the Transaction until the Transaction shall have
been paid in lull. No delay by any Indemnified Party in exercising any
right, power or privilege under this Agreement shall operate as a waiver of
any such privilege, power or right.
(b) COMPANY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO
THE TRANSACTION, THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS OR ANY
ACTS OR OMISSIONS OF ANY INDEMNIFIED PARTIES IN CONNECTION THEREWITH.
4.4 REMEDIES. In addition to and without limiting Indemnitee's
other rights and remedies under the other Transaction Documents, Indemnitee
shall have the right, but not the obligation, to enter onto or take
possession of the Property or to take such other actions as its deems
necessary or advisable to effectuate a Remedial Action, or to in any other
way resolve or minimize the impact of, or otherwise deal with, any Hazardous
Materials on or affecting the Property.
4.5 TRANSACTION AMOUNT NO LIMITATION. The amount of Company's
liability under this Agreement is unrelated to and independent of, the
amount of any loss that Indemnitee may suffer by reason of the failure of
Company to satisfy in full its obligations under the other Transaction
Documents, and shall not be determined by reference to the amount of any
Transaction loss. No amount paid to any Indemnified Party pursuant to this
Agreement shall be considered to be paid on account of or in satisfaction of
Company's obligations under the other Transaction Documents or any
deficiency or loss suffered by Indemnitee by reason of the failure of
Company to satisfy in full its obligations under the other Transaction
Documents. The enforcement of this Agreement by any Indemnified Party shall
not be construed as an indirect attempt to recover any such Transaction
loss. Company acknowledges that they may have liability under this Agreement
even if Company satisfies in full its obligations under the other
Transaction Documents by reason of a full credit bid at any foreclosure sale
under any other Transaction Document, and that the amount of Company's
liability hereunder could exceed the entire amount paid by Company for the
Property.
4.6 SURVIVAL. The indemnity in this Section is intended to be
operable under 42 U.S.C. 9607(e)(1), and any successor section thereof, and
shall survive the foreclosure, release or reconveyance of any Transaction
Document, whether by payment of the obligations under the Transaction
Documents or any deed-in-lieu of foreclosure of the Property.
<PAGE>
ARTICLE 5 - MISCELLANEOUS
5.1 NOTICES. All notices or other written communications here
under shall be given in accordance with the requirements of the other
Transaction Documents.
5.2 NO THIRD-PARTY BENEFICIARY. The terms of this Agreement are
for the sole and exclusive protection and use of Indemnified Parties. No
party shall be a third-party beneficiary hereunder, and no provision hereof
shall operate or inure to the use and benefit of any such third party. It is
agreed that those persons and entities included in the definition of
Indemnified Parties are not such excluded third party beneficiaries.
5.3 DUPLICATE ORIGINALS: COUNTERPARTS. This Agreement may be
executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Agreement.
The failure of any party hereto to execute this Agreement. or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.
5.4 NO ORAL CHANGE. This Agreement, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Company or
any Indemnified Party, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
5.5 HEADINGS. ETC. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof.
5.6 NUMBER AND GENDER/SUCCESSORS AND ASSIGNS. All pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or persons referred
to may require. Without limiting the effect of specific references in any
provision of this Agreement, the term "Company" shall be deemed to refer to
each and every person or entity comprising Company from time to time, as the
sense of a particular provision may require, and to include the heirs,
executors, administrators, legal representatives, successors and assigns of
Company, all of whom shall be bound by the provisions of this Agreement,
provided that no obligation of Company may be assigned except with the
written consent of Indemnitee. Each reference herein to Indemnitee shall be
deemed to include its successors and assigns. This Agreement shall inure to
the benefit of Indemnified Parties and their respective successors and
assigns forever.
5.7 JOINTAND SEVERAL LIABILITY. If Company consists of more
than one person or entity, the obligations and liabilities of each such
person hereunder are joint and several.
5.8 RELEASE OF LIABILITY. Any one or more parties liable upon or
in respect of this Agreement may be released without affecting the liability
of any party not so released.
<PAGE>
5.9 RIGHTS CUMULATIVE. The rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies which Indemnitee
has under the other Transaction Documents or would otherwise have at law or
in equity.
5.10 INAPPLICAELEPROVISIONS. If any term, condition or covenant
of this Agreement shall be held to be invalid, illegal or unenforceable in
any respect, this Agreement shall be construed without such provision.
5.11 GOVERNING LAW. This Agreement shall be governed, construed,
applied and enforced in accordance with the laws of the state in which the
Property is located.
5.12 APPROVALS. Wherever pursuant to this Agreement (i)
Indemnified Parties exercise any right given to it to approve or disapprove,
(ii) any arrangement or term is to be satisfactory to Indemnified Parties,
or (iii) any other decision or determination is to be made by Indemnified
Parties, the decision of Indemnified Parties to approve or disapprove, all
decisions that arrangements or terms are satisfactory or not satisfactory
and all other decisions and determinations made by Indemnified Parties,
shall be in the sole discretion of Indemnified Parties, except as may be
otherwise expressly and specifically provided herein.
5.13 LEGAL FEES. Wherever pursuant to this Agreement it is
provided that Company pay any costs and expenses, such costs and expenses
shall include, but not be limited to, legal fees and disbursements of
Indemnified Parties, whether with respect to retained firms, the
reimbursement for the expenses of the in-house staff or otherwise.
IN WITNESS WHEREOF, this Agreement has been executed by Company
and is effective as of the day and year first above written.
Company:
PC Dynamics of Texas, Inc.
By: /s/
--------------------------
D. Ronald Allen, President
Exhibit 4.23
FINOVA CAPITAL CORPORATION
FINOVA BUSINESS CREDIT
CONTINUING PERSONAL GUARANTY
FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted
to PC DYNAMICS OF TEXAS, INC. ("Borrower"), by FINOVA CAPITAL CORPORATION
("Lender"), the undersigned. D. RONALD ALLEN ("Guarantor"), hereby agrees as
follows:
1. Guaranty of Obligations. Guarantor unconditionally,
absolutely and irrevocably guarantees the full and prompt payment and
performance when due, whether by acceleration or otherwise, and at all times
thereafter, of all obligations of Borrower to Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, or
now or hereafter existing or due or to become due, including, without
limitation, under or in connection with that certain Loan and Security
Agreement of even date, between Borrower and Lender (the "Loan Agreement")
and each of the documents, instruments and agreements executed and delivered
in connection therewith, as each may be modified, amended, supplemented or
replaced from time to time (all such obligations are herein referred to
collectively as the "Liabilities", and all documents evidencing or securing
any of the Liabilities are herein referred to, collectively, as the "Loan
Documents"). This Continuing Personal Guaranty (this "Continuing Guaranty")
is a guaranty of payment and performance when due and not of collection.
In the event of any default by Borrower in making payment of, or
default by Borrower in performance of, any of the Liabilities. Guarantor
agrees on demand by Lender to pay and perform all of the Liabilities as are
then or thereafter become due and owing or are to be performed under the
terms of the Loan Documents. Guarantor further agrees to pay all expenses
(including reasonable attorneys' fees and expenses) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and
in enforcing this Continuing Guaranty.
2. Continuing Nature of Guaranty: and Liabilities. This
Continuing Guaranty shall be continuing and shall not be discharged,
impaired or affected by:
a. the insolvency of Borrower or the payment in full
of all of the Liabilities at any time or from time to time;
b. the power or authority or lack thereof of
Borrower to incur the Liabilities;
<PAGE>
c. the validity or invalidity of any of the Loan
Documents or the documents securing the same;
d. the existence or non-existence of Borrower as a
legal entity;
e. any transfer by Borrower of all or any part of any
collateral in which Lender has been granted a lien or security
interest pursuant to the Loan Documents;
f. any statute of limitations affecting the liability
of Guarantor under this Continuing Guaranty or the Loan Documents or
the ability of Lender to enforce this Continuing Guaranty or any
provision of the Loan Documents; or
g. any right of offset, counterclaim or defense of
Guarantor, including, without limitation, those which have been waived
by Guarantor pursuant to Paragraph nine (9) hereof
3. Insolvency of Borrower or Guarantor. Without limiting
the generality of any other provision hereof Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower or Guarantor or the
inability of Borrower or Guarantor to pay their respective debts as they
mature, or an assignment by Borrower or Guarantor for the benefit of
creditors, or the institution of any proceeding by or against Borrower or
Guarantor alleging that Borrower or Guarantor is insolvent or unable to pay
their respective debts as they mature, Guarantor will pay to Lender
forthwith the full amount which would be payable hereunder by Guarantor if
all of the Liabilities were then due and payable, whether or not such event
occurs at a time when any of the Liabilities are otherwise due and payable.
4. Payment of the Liabilities. Any amounts received by
Lender from whatever source on account of the Liabilities may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect, and notwithstanding any
payments made by or for the account of Guarantor pursuant to this Continuing
Guaranty.
Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Lender to any of the Liabilities is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of
Borrower), such Liabilities shall, for the purposes of this Continuing
Guaranty and to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence notwithstanding such
application by Lender, and this Continuing Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such Liabilities, all
as though such application by Lender had not been made
<PAGE>
5. Permitted Actions of Lender. Lender may from time to
time, in its sole discretion and without notice to Guarantor, take any or
all of the following actions:
a. retain or obtain a security interest in any
assets of Borrower or any third party to secure any of the
Liabilities or any obligations of Guarantor hereunder;
b. retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to Guarantor, with
respect to any of the Liabilities;
c. extend or renew for one or more periods (whether
or not longer than the original period), alter or exchange any of the
Liabilities;
d. waive, ignore or forbear from taking action or
otherwise exercising any of its default rights or remedies with
respect to any default by Borrower under the Loan Documents;
e. release, waive or compromise any obligation of
Guarantor hereunder or any obligation of any nature of any other
obligor primarily or secondarily obligated with respect to any of the
Liabilities;
f. release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part
of any collateral now or hereafter securing any of the Liabilities or
any obligation hereunder, or extend or renew for one or more periods
(whether or not longer than the original period) or release, waive,
compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and
g. demand payment or performance of any of the
Liabilities from Guarantor at any time or from time to time, whether
or not Lender shall have exercised any of its rights or remedies with
respect to any property securing any of the Liabilities or any
obligation hereunder or proceeded against any other obligor primarily
or secondarily liable for payment or performance of any of the
Liabilities.
6. Specific Waivers. Without limiting the generality of
any other provision of this Continuing Guaranty, Guarantor hereby expressly
waives:
a. notice of the acceptance by Lender of this
Continuing Guaranty;
b. notice of the existence, creation, payment,
nonpayment, performance or nonperformance of all or any of the
Liabilities;
c. presentment, demand, notice of dishonor, protest,
notice of protest and all other notices whatsoever with respect to
the payment or performance of the Liabilities or the amount thereof
or any payment or performance by Guarantor hereunder;
<PAGE>
d. all diligence in collection or protection of or
realization upon the Liabilities or any thereof, any obligation
hereunder or any security for or guaranty of any of the foregoing;
e. any right to direct or affect the manner or timing
of Lenders enforcement of its rights or remedies;
f. any and all defenses which would otherwise arise
upon the occurrence of any event or contingency described in Paragraph
1 hereof or upon the taking of any action by Lender permitted
hereunder;
g. any defense, right of set-off, claim or
counterclaim whatsoever and any and all other rights, benefits,
protections and other defenses available to Guarantor now or at any
time hereafter; and
h. all other principles or provisions of law, if any,
that conflict with the terms of this Continuing Guaranty, including,
without limitation, the effect of any circumstances that may or might
constitute a legal or equitable discharge of a guarantor or surety.
7. Irrevocability. Guarantor hereby further waives all
rights to revoke this Continuing Guaranty at any time, and all rights to
revoke any agreement executed by Guarantor at any time to secure the payment
and performance of Guarantors obligations under this Continuing Guaranty.
8. Statutory Waiver of Rights and Defenses Regarding
Election of Remedies. Guarantor waives all rights and defenses arising out
of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantors rights of subrogation and reimbursement
against Borrower by the operation of any applicable law, or otherwise.
9. Subordination. Guarantor hereby subordinates any and
all indebtedness of Borrower to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Lender shall be
entitled to receive payment of all Liabilities prior to Guarantor's receipt
of payment of any amount of any indebtedness of Borrower to Guarantor. Any
payments on such indebtedness to Guarantor, if Lender so requests, shall be
collected, enforced and received by Guarantor, in trust, as trustee for
Lender and shall be paid over to Lender on account of the Liabilities, but
without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Lender is authorized and empowered,
but not obligated, in its discretion, (a) in the name of Guarantor, to
collect and enforce, and to submit claims in respect of, any indebtedness of
Borrower to Guarantor and to apply any amounts received thereon to the
Liabilities, and (b) to require Guarantor (i) to collect and enforce, and to
submit claims in respect of, any indebtedness of Borrower to Guarantor, and
(ii) to pay any amounts received on such indebtedness to Lender for
application to the Liabilities
10. Subrogation. Guarantor will not exercise any rights
which it may acquire by way of subrogation under this Continuing Guaranty,
by any payment hereunder or otherwise, until all of the Liabilities have
been paid in full, in cash, and Lender shall have no further obligations to
Borrowers under the Loan Documents or otherwise. If any amount shall be paid
to Guarantor on account of such subrogation rights at any other time, such
amount shall be held in trust for the benefit of Lender and shall be
forthwith paid to Lender to be credited and applied to the Liabilities,
whether matured or unmatured, in such manner as Lender shall determine in
its sole discretion.
<PAGE>
11. Assignment of Lender's Rights. Lender may, from time
to time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment
or transfer of the Liabilities or any subsequent assignment or transfer
thereof, the Liabilities shall be and remain the Liabilities for the purpose
of this Continuing Guaranty. Each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of such party's interest in the Liabilities, be
entitled to the benefits of this Continuing Guaranty to the same extent as
if such assignee or transferee were Lender; provided, however, that unless
Lender shall otherwise consent in writing, Lender shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to
enforce this Continuing Guaranty for its own benefit as to those of the
Liabilities which Lender has not assigned or transferred.
12. Indulgences Not Waivers. No delay in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any of the provisions of this Continuing
Guaranty be binding upon Lender, except as expressly set forth in a writing
duly signed and delivered by Lender. No action of Lender permitted hereunder
shall in any way affect or impair the rights of Lender or the obligations of
Guarantor under this Continuing Guaranty
13. Financial Condition of Borrower. Guarantor represents
and warrants that it is fully aware of the financial condition of Borrower,
and Guarantor delivers this Continuing Guaranty based solely upon its own
independent investigation of Borrower's financial condition and in no part
upon any representation or statement of Lender with respect thereto.
Guarantor further represents and warrants that it is in a position to and
hereby does assume full responsibility for obtaining such additional
information concerning Borrowers financial condition as Guarantor may deem
material to its obligations hereunder, and Guarantor is not relying upon,
nor expecting Lender to furnish it any information in Lender's possession
concerning Borrower's financial condition or concerning any circumstances
bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the Liabilities.
<PAGE>
Guarantor hereby waives any duty on the part of Lender to
disclose to Guarantor any facts it may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume
or has reason to believe that such facts are unknown to Guarantor
Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "Continuing Guaranty" which includes,
without limitation, the possibility that Borrower will contract for
additional indebtedness for which Guarantor may be liable hereunder after
Borrower's financial condition or ability to pay its lawful debts when they
fall due has deteriorated.
14. Representations and Warranties. Guarantor represents
and warrants to Lender that each of the following statements is accurate and
complete as of the date of this Continuing Guaranty:
a. this Continuing Guaranty has been duly executed
and delivered by Guarantor and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement
of creditors' rights generally;
b. the execution, delivery and performance of this
Continuing Guaranty do not (i) violate any provisions of law or any
order of any court or other agency of government (each, a
"Requirement of Law"), (ii) contravene any provision of any material
contract or agreement to which Guarantor is a party or by which
Guarantor or Guarantor's assets are bound (each, a "Contractual
Obligation"), or (iii) result in the creation or imposition of any
lien, charge or encumbrance of any nature upon any property, asset or
revenue of Guarantor;
c. all consents, approvals, orders and
authorizations of, and registrations, declarations and filings with,
any governmental agency or authority or other person or entity
(including, without limitation, the shareholders or partners of any
entity), if any, which are required to be obtained in connection with
the execution and delivery of this Continuing Guaranty or the
performance of Guarantor's obligations hereunder have been obtained,
and each is in full force and effect;
d. Guarantor has paid all, taxes and other charges
imposed by any governmental agency or authority due and payable by
Guarantor other than those which are being challenged in good faith
by appropriate proceedings;
<PAGE>
e. Guarantor is not in violation of any Requirement
of Law or Contractual Obligation other than any violation the
consequences of which could not have a material adverse effect on
Guarantor's ability to perform its obligations hereunder (a "Material
Adverse Effect"); and
f. no action, proceeding, investigation or litigation
is pending or, to the knowledge of Grantor, overtly threatened against
Guarantor by any person or entity which, if adversely determined,
could have a Material Adverse Effect.
15. Guarantor Financial Information. Guarantor will
provide Lender in writing such financial and other information with respect
to Guarantor's assets and liabilities as Lender shall reasonably request
from time to time, in form satisfactory to Lender.
16. Binding Upon Successors: Death of Guarantor. This
Continuing Guaranty shall be binding upon Guarantor and Guarantor's
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. This Continuing Guaranty shall not terminate or be
revoked upon the death of Guarantor, notwithstanding any knowledge by Lender
of Guarantor's death.
All references herein to Borrower shall be deemed to include its
successors and assigns, and all references herein to Guarantor shall be
deemed to include Guarantor and Guarantor's successors and assigns or, upon
the death of Guarantor, the duly appointed representative, executor or
administrator of Guarantor's estate.
In addition and notwithstanding anything to the contrary
contained in this Continuing Guaranty or in any other document, instrument
or agreement between or among any of Lender, Borrower, Guarantor or any
third party, the obligations of Guarantor with respect to the Liabilities
shall be joint and several with any other person or entity that now or
hereafter executes a guaranty of any of the Liabilities separate from this
Continuing Guaranty.
17. Notices. All notices required or permitted to be given
hereunder shall be in writing and shall be either personally delivered,
transmitted by facsimile to the facsimile numbers provided herein or sent by
United States certified or registered mail, return receipt requested,
addressed to Guarantor or Lender at their respective addresses stated below
or at such other address as either party hereafter notifies the other party
as herein provided. Notices shall be deemed received on the earlier of (i)
the date noted on the return receipt as delivered if mail delivery of the
notice is successful or the date inscribed on a confirmation of successful
transmission, if sent by facsimile; (ii) the last date of attempted
delivery, as noted by the United States Postal Service on the envelope
containing the notice, if mail delivery is unsuccessful; or (iii) the date
of the actual delivery if personally delivered.
<PAGE>
18. Governing Law: Additional Waivers. This Continuing
Guaranty has been delivered 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.
GUARANTOR HEREBY
(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE
OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS CONTINUING
GUARANTY, AND ACKNOWLEDGES THAT LENDER ALSO WAIVES SUCH RIGHT
(ii) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE
ORFEDERAL COURT LOCATED IN MARICOPA COUNTY, ARIZONA, OVER ANY ACTIONOR
PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS CONTINUING GUARANTY;
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR 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
jurisdictions by suit on the judgment or in any other manner provided
by law; and
(v) agrees not to institute any legal action or proceeding
against Lender or any of Lender's directors, officers, employees,
agents or property concerning any matter arising out of or relating to
this Continuing Guaranty in any court other than one located in
Maricopa County, Arizona.
Nothing herein shall affect or impair Lenders right to serve
legal process in any manner permitted by law or Lender's right to bring any
action or proceeding against Guarantor or its property in the courts of any
other jurisdiction. Wherever possible each provision of this Continuing
Guaranty shall be interpreted as to be effective and valid under applicable
law, but if any provision of this Continuing Guaranty shall be prohibited by
or invalid under such law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Continuing Guaranty.
19. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS EITHER OBTAINED THE ADVICE OF COUNSEL OR HAS HAD THE
OPPORTUNITY TO OBTAIN SUCH ADVICE IN CONNECTION WITH THE TERMS AND
PROVISIONS OF THIS CONTINUING GUARANTY.
<PAGE>
20. Entire Agreement. This Continuing Guaranty contains
the complete understanding of the parties hereto with respect to the subject
matter herein. Guarantor acknowledges that Guarantor is not relying upon any
statements or representations of Lender not contained in this Continuing
Guaranty and that such statements or representations, if any, are of no
force or effect and are fully superseded by this Continuing Guaranty. This
Continuing Guaranty may only be modified by a writing executed by Guarantor
and Lender.
IN WITNESS WHEREOF, Guarantor has executed this Continuing
Guaranty this 25th day of March, 1999.
D. Ronald Allen
"Guarantor"
By: /s/
--------------------------
D. Ronald Allen
SSN: [ deleted for confidentiality ]
[ deleted for confidentiality ]
Dallas, Texas 75248
Facsimile:
[ deleted for confidentiality ]
Lender's address for notices:
FINOVA Capital Corporation
Attn:David Sands
355 South Grand Avenue, Suite 2400
Los Angeles, California 90071
Facsimile: 213-625-2746
Exhibit 4.24
FINOVA CAPITAL CORPORATION
FINOVA BUSINESS CREDIT
CONTINUING CORPORATE GUARANTY
FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted
to PC DYNAMICS OF TEXAS, INC. ("Borrower"), by FINOVA CAPITAL CORPORATION
("Lender"), the undersigned, ASSOCIATES FUNDING GROUP, INC. ("Guarantor"),
hereby agrees as follows:
1. Guaranty of Obligations. Guarantor unconditionally,
absolutely and irrevocably guarantees the full and prompt payment and
performance when due, whether by acceleration or otherwise, and at all times
thereafter, of all obligations of Borrower to Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, or
now or hereafter existing or due or to become due, including, without
limitation, under or in connection with that certain Loan and Security
Agreement of even date, between Borrower and Lender (the "Loan Agreement")
and each of the documents, instruments and agreements executed and delivered
in connection therewith, as each may be modified, amended, supplemented or
replaced from time to time (all such obligations are herein referred to
collectively as the "Liabilities", and all documents evidencing or securing
any of the Liabilities are herein referred to, collectively, as the "Loan
Documents"). This Continuing Corporate Guaranty (this "Continuing Guaranty")
is a guaranty of payment and performance when due and not of collection.
In the event of any default by Borrower in making payment of, or
default by Borrower in performance of, any of the Liabilities, Guarantor
agrees on demand by Lender to pay and perform all of the Liabilities as are
then or thereafter become due and owing or are to be performed under the
terms of the Loan Documents. Guarantor further agrees to pay all expenses
(including reasonable attorneys' fees and expenses) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and
in enforcing this Continuing Guaranty.
2. Continuing Nature of Guaranty and Liabilities. This
Continuing Guaranty shall be continuing and shall not be discharged,
impaired or affected by:
a. the insolvency of Borrower or the
payment in full of all of the Liabilities at any time
or from time to time:
b. the power or authority or lack thereof
of Borrower to incur the Liabilities;
<PAGE>
c. the validity or invalidity of any of
the Loan Documents or the Documents securing the same;
d. the existence or non-existence of
Borrower as a legal entity;
e. any transfer by Borrower of all or any
part of any collateral in which Lender has been
granted a lien or security interest pursuant to the
Loan Documents;
f. any statute of limitations affecting
the liability of Guarantor under this Continuing
Guaranty or the Loan Documents or the ability of
Lender to enforce this Continuing Guaranty or any
provision of the Loan Documents; or
g. any right of offset, counterclaim or
defense of Guarantor, including, without limitation,
those which have been waived by Guarantor pursuant to
Paragraph nine (9) hereof.
3. Insolvency of Borrower or Guarantor. Without limiting
the generality of any other provision hereof, Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower or Guarantor or the
inability of Borrower or Guarantor to pay their respective debts as they
mature, or an assignment by Borrower or Guarantor for the benefit of
creditors, or the institution of any proceeding by or against Borrower or
Guarantor alleging that Borrower or Guarantor is insolvent or unable to pay
their respective debts as they mature, Guarantor will pay to Lender
forthwith the full amount which would be payable hereunder by Guarantor if
all of the Liabilities were then due and payable, whether or not such event
occurs at a time when any of the Liabilities are otherwise due and payable.
4. Payment of the Liabilities. Any amounts received by
Lender from whatever source on account of the Liabilities may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect, and notwithstanding any
payments made by or for the account of Guarantor pursuant to this Continuing
Guaranty.
Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Lender to any of the Liabilities is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of
Borrower), such Liabilities shall, for the purposes of this Continuing
Guaranty and to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence notwithstanding such
application by Lender, and this Continuing Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such Liabilities, all
as though such application by Lender had not been made.
<PAGE>
5. Permitted Actions of Lender. Lender may from time to
time, in its sole discretion and without notice to Guarantor, take any or
all of the following actions:
a. retain or obtain a security interest
in any assets of Borrower or any third party to secure
any of the Liabilities or any obligations of Guarantor
hereunder;
b. retain or obtain the primary or
secondary obligation of any obligor or obligors, in
addition to Guarantor, with respect to any of the
Liabilities;
c. extend or renew for one or more
periods (whether or not longer than the original
period), alter or exchange any of the Liabilities;
d. waive, ignore or forbear from taking
action or otherwise exercising any of its default
rights or remedies with respect to any default by
Borrower under the Loan Documents;
e. release, waive or compromise any
obligation of Guarantor hereunder or any obligation
of any nature of any other obligor primarily or
secondarily obligated with respect to any of the
Liabilities;
f. release its security interest in, or
surrender, release or permit any substitution or
exchange for, all or any part of any collateral now
or hereafter securing any of the Liabilities or any
obligation hereunder, or extend or renew for one or
more periods (whether or not longer than the
original period) or release, waive, compromise,
alter or exchange any obligations of any nature of
any obligor with respect to any such property; and
g. demand payment or performance of any
of the Liabilities from Guarantor at any time or
from time to time, whether or not Lender shall have
exercised any of its rights or remedies with respect
to any property securing any of the Liabilities or
any obligation hereunder or proceeded against any
other obligor primarily or secondarily liable for
payment or performance of any of the Liabilities.
6. Specific Waivers. Without limiting the generality
provision of this Continuing Guaranty, Guarantor hereby expressly waives:
a. notice of the acceptance by Lender
of this Guaranty;
b. notice of the existence, creation,
payment, nonpayment performance or nonperformance of
all or any of the Liabilities;
<PAGE>
c. presentment, demand, notice of
dishonor, protest, notice of protest and all other
notices whatsoever with respect to the payment or
performance of the Liabilities or the amount thereof
or any payment or performance by Guarantor
hereunder;
d. all diligence in collection or
protection of or realization upon the Liabilities or
any thereof, any obligation hereunder or any
security for or guaranty of any of the foregoing;
e. any right to direct or affect the
manner or timing of Lenders enforcement of its
rights or remedies;
f. any and all defenses which would
otherwise arise upon the occurrence of any event or
contingency described in Paragraph 1 hereof or upon
the taking of any action by Lender permitted
hereunder
g. any defense, right of set-off,
claim or counterclaim whatsoever and any and all
other rights, benefits, protections and other
defenses available to Guarantor now or at any time
hereafter; and
h. all other principles or provisions
of law, if any, that conflict with the terms of this
Continuing Guaranty, including, without limitation,
the effect of any circumstances that may or might
constitute a legal or equitable discharge of a
guarantor or surety.
7. Irrevocability. Guarantor hereby further waives all
rights to revoke this Continuing Guaranty at any time, and all rights to
revoke any agreement executed by Guarantor at any time to secure the payment
and performance of Guarantor's obligations under this Continuing Guaranty.
8. Statutory Waiver of Rights and Defenses Regarding
Election of Remedies. Guarantor waives all rights and defenses arising out
of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower by the operation of any applicable law, or
otherwise.
9. Subordination. Guarantor hereby subordinates any and
all indebtedness of Borrower to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Lender shall be
entitled to receive payment of all Liabilities prior to Guarantor's receipt
of payment of any amount of any indebtedness of Borrower to Guarantor. Any
payments on such indebtedness to Guarantor, if Lender so requests, shall be
collected, enforced and received by Guarantor, in trust, as trustee for
Lender and shall be paid over to Lender on account of the Liabilities, but
without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Lender is authorized and empowered,
<PAGE>
but not obligated, in its discretion, (a) in the name of Guarantor, to
collect and enforce, and to submit claims in respect of, any indebtedness of
Borrower to Guarantor and to apply any amounts received thereon to the
Liabilities, and (b) to require Guarantor (i) to collect and enforce, and to
submit claims in respect of, any indebtedness of Borrower to Guarantor, and
(ii) to pay any amounts received on such indebtedness to Lender for
application to the Liabilities.
10. Subrogation. Guarantor will not exercise any rights
which it may acquire by way of subrogation under this Continuing Guaranty,
by any payment hereunder or otherwise, until all of the Liabilities have
been paid in full, in cash, and Lender shall have no further obligations to
Borrowers under the Loan Documents or otherwise. If any amount shall be paid
to Guarantor on account of such subrogation rights at any other time, such
amount shall be held in trust for the benefit of Lender and shall be
forthwith paid to Lender to be credited and applied to the Liabilities,
whether matured or unmatured, in such manner as Lender shall determine in
its sole discretion.
11. Assignment of Lender's Rights. Lender may, from time
to time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment
or transfer of the Liabilities or any subsequent assignment or transfer
thereof, the Liabilities shall be and remain the Liabilities for the purpose
of this Continuing Guaranty. Each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of such party's interest in the Liabilities, be
entitled to the benefits of this Continuing Guaranty to the same extent as
if such assignee or transferee were Lender; provided, however, that unless
Lender shall otherwise consent in writing. Lender shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to
enforce this Continuing Guaranty for its own benefit as to those of the
Liabilities which Lender has not assigned or transferred.
12. Indulgences Not Waivers. No delay in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any of the provisions of this Continuing
Guaranty be binding upon Lender, except as expressly set forth in a writing
duly signed and delivered by Lender. No action of Lender permitted hereunder
shall in any way affect or impair the rights of Lender or the obligations of
Guarantor under this Continuing Guaranty.
13. Financial Condition of Borrower. Guarantor represents
and warrants that it is fully aware of the financial condition of Borrower,
and Guarantor delivers this Continuing Guaranty based solely upon its own
independent investigation of Borrowers financial condition and in no part
upon any representation or statement of Lender with respect thereto.
Guarantor further represents and warrants that it is in a position to and
hereby does assume full responsibility for obtaining such additional
information concerning Borrowers financial condition as Guarantor may deem
material to its obligations hereunder, and Guarantor is not relying upon,
nor expecting Lender to furnish it any information in Lender's possession
concerning Borrower's financial condition or concerning any circumstances
bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the Liabilities.
<PAGE>
Guarantor hereby waives any duty on the part of Lender to
disclose to Guarantor any facts it may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume
or has reason to believe that such facts are unknown to Guarantor.
Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "Continuing Guaranty" which includes,
without limitation, the possibility that Borrower will contract for
additional indebtedness for which Guarantor may be liable hereunder after
Borrower's financial condition or ability to pay its lawful debts when they
fall due has deteriorated.
14. Representations and Warranties. Guarantor represents
and warrants to Lender that each of the following statements is accurate and
complete as of the date of this Continuing Guaranty:
a. this Continuing Guaranty has been duly executed
and delivered by Guarantor and constitutes a legal,
valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its
terms, except as limited by bankruptcy, insolvency
or other laws of general application relating to or
affecting the enforcement of creditors' rights
generally;
b. the execution, delivery and performance of this
Continuing Guaranty do not (i) violate any
provisions of law or any order of any court or other
agency of government (each, a "Requirement of Law").
(ii) contravene any provision of any material
contract or agreement to which Guarantor is a party
or by which Guarantor or Guarantor's assets are
bound (each, a "Contractual Obligation"), or (iii)
result in the creation or imposition of any lien,
charge or encumbrance of any nature upon any
property, asset or revenue of Guarantor;
c. all consents, approvals, orders and
authorizations of, and registrations, declarations
and filings with, any governmental agency or
authority or other person or entity (including,
without limitation, the shareholders or partners of
any entity), if any, which are required to be
obtained in connection with the execution and
delivery of this Continuing Guaranty or the
performance of Guarantor's obligations hereunder
have been obtained, and each is in full force and
effect;
d. Guarantor has paid all taxes and other charges
imposed by any governmental agency or authority due
and payable by Guarantor other than those which are
being challenged in good faith by appropriate
proceedings;
<PAGE>
e. Guarantor is not in violation of any Requirement
of Law or Contractual Obligation other than any
violation the consequences of which could not have a
material adverse effect on Guarantor's ability to
perform its obligations hereunder (a "Material
Adverse Effect"); and
f. no action, proceeding, investigation or litigation
is pending or, to the knowledge of Grantor, overtly
threatened against Guarantor by any person or entity
which, if adversely determined, could have a
Material Adverse Effect.
15. Guarantor Financial Information. Guarantor will
provide Lender in writing such financial and other information with respect
to Guarantor's assets and liabilities as Lender shall reasonably request
from time to time, in form satisfactory to Lender.
16. Binding Upon Successors: Death of Guarantor. This
Continuing Guaranty shall be binding upon Guarantor and Guarantor's
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. This Continuing Guaranty shall not terminate or be
revoked upon the death of Guarantor, notwithstanding any knowledge by Lender
of Guarantor's death.
All references herein to Borrower shall be deemed to include its
successors and assigns, and all references herein to Guarantor shall be
deemed to include Guarantor and Guarantor's successors and assigns.
In addition and notwithstanding anything to the contrary
contained in this Continuing Guaranty or in any other document, instrument
pr agreement between or among any of Lender, Borrower. Guarantor or any
third party, the obligations of Guarantor with respect to the Liabilities
shall be joint and several with any other person or entity that now or
hereafter executes a guaranty of any of the Liabilities separate from this
Continuing Guaranty.
17. Notices. All notices required or permitted to be
given hereunder shall be in writing and shall be either personally
delivered, transmitted by facsimile to the facsimile numbers provided herein
or sent by United States certified or registered mail, return receipt
requested, addressed to Guarantor or Lender at their respective addresses
stated below or at such other address as either party hereafter notifies the
other party as herein provided. Notices shall be deemed received on the
earlier of (i) the date noted on the return receipt as delivered if mail
delivery of the notice is successful or the date inscribed on a confirmation
of successful transmission, if sent by facsimile; (ii) the last date of
attempted delivery, as noted by the United States Postal Service on the
envelope containing the notice, if mail delivery is unsuccessful; or (iii)
the date of the actual delivery if personally delivered.
18. Governing Law: Additional Waivers. This Continuing
Guaranty has been delivered 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.
<PAGE>
GUARANTOR HEREBY
(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS CONTINUING GUARANTY. AND ACKNOWLEDGES THAT LENDER
ALSO WAIVES SUCH RIGHT;
(ii) 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 CONTINUING
GUARANTY;
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR
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 jurisdictions by suit on the judgment or in
any other manner provided by law; and
(v) agrees not to institute any legal action or proceeding
against Lender or any of Lender's directors, officers,
employees, agents or property concerning any matter
arising out of or relating to this Continuing Guaranty
in any court other than one located in Maricopa County,
Arizona.
Nothing herein shall affect or impair Lender's right to serve
legal process in any manner permitted by law or Lender's right to bring any
action or proceeding against Guarantor or its property in the courts of any
other jurisdiction. Wherever possible each provision of this Continuing
Guaranty shall be interpreted as to be effective and valid under applicable
law, but if any provision of this Continuing Guaranty shall be prohibited
by or invalid under such law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Continuing
Guaranty.
19. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS EITHER OBTAINED THE ADVICE OF COUNSEL OR HAS HAD THE
OPPORTUNITY TO OBTAIN SUCH ADVICE IN CONNECTION WITH THE TERMS AND
PROVISIONS OF THIS CONTINUING GUARANTY.
20. Entire Agreement. This Continuing Guaranty contains the
complete understanding of the parties hereto with respect to the subject
matter herein. Guarantor acknowledges that Guarantor is not relying upon
any statements or representations of Lender not contained in this Continuing
Guaranty and that such statements or representations, if any, are of no
force or effect and are fully superseded by this Continuing Guaranty. This
Continuing Guaranty may only be modified by a writing executed by Guarantor
and Lender.
<PAGE>
IN WITNESS WHEREOF. Guarantor has executed this Continuing
Guaranty this 25th day of March, 1999.
Associates Funding Group. Inc.
"Guarantor"
By: /s/
--------------------------
D. Ronald Allen, President
FEIN: 75-2527104
10911 Petal Street, Suite 105
Dallas, Texas 75238
Facsimile: 214-503-8607
Lenders address for notices:
FINOVA Capital Corporation
Attn: David Sands
355 South Grand Avenue, Suite 2400
Los Angeles, California 90071
Facsimile: (213) 625-2746
Exhibit 4.25
FINOVA CAPITAL CORPORATION
FINOVA BUSINESS CREDIT
CONTINUING LIMITED CORPORATE GUARANTY
FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted
to PC DYNAMICS OF TEXAS. INC. ("Borrower"), by FINOVA CAPITAL CORPORATION
("Lender"), the undersigned, JH & BC, INC. ("Guarantor"), hereby agrees as
follows:
1. Guaranty of Obligations. Guarantor unconditionally,
absolutely and irrevocably guarantees the full and prompt payment and
performance when due, whether by acceleration or otherwise, and at all times
thereafter, of all obligations of Borrower to Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, or
now or hereafter existing or due or to become due, including, without
limitation, under or in connection with that certain Loan and Security
Agreement of even date, between Borrower and Lender (the "Loan Agreement")
and each of the documents, instruments and agreements executed and delivered
in connection therewith, as each may be modified, amended, supplemented or
replaced from time to time (all such obligations are herein referred to
collectively as the "Liabilities", and all documents evidencing or securing
any of the Liabilities are herein referred to, collectively, as the "Loan
Documents"). This Limited Continuing Corporate Guaranty (this "Continuing
Guaranty") is a guaranty of payment and performance when due and not of
collection.
In the event of any default by Borrower in making payment of, or
default by Borrower in performance of, any of the Liabilities, Guarantor
agrees on demand by Lender to pay and perform all of the Liabilities as are
then or thereafter become due and owing or are to be performed under the
terms of the Loan Documents. Guarantor further agrees to pay all expenses
(including reasonable attorneys' fees and expenses) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and
in enforcing this Continuing Guaranty.
2. Limitation on Guaranty. Notwithstanding any other
provision of this Continuing Guaranty, the aggregate liability of Guarantor
hereunder shall not exceed One Hundred Thousand Dollars ($100,000.00).
3. Continuing Nature of Guaranty and Liabilities. This
Continuing Guaranty shall be continuing and shall not be discharged,
impaired or affected by:
a. the insolvency of Borrower or the payment in full of
all of the Liabilities at any time or from time to time;
<PAGE>
b. the power or authority or lack thereof of Borrower to
incur the Liabilities;
c. the validity or invalidity of any of the Loan Documents
or the documents securing the same;
d. the existence or non-existence of Borrower as a legal
entity;
e. any transfer by Borrower of all or any part of any
collateral in which Lender has been granted a lien or security interest
pursuant to the Loan Documents
f. any statute of limitations affecting the liability of
Guarantor under this Continuing Guaranty or the Loan Documents or the
ability of Lender to enforce this Continuing Guaranty or any provision
of the Loan Documents or the Security Document; or
g. any right of offset, counterclaim or defense of
Guarantor, including, without limitation, those which have been waived
by Guarantor pursuant to Paragraph nine (9) hereof.
4. Insolvency of Borrower or Guarantor. Without limiting
the generality of any other provision hereof Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower or Guarantor or the
inability of Borrower or Guarantor to pay their respective debts as they
mature, or an assignment by Borrower or Guarantor for the benefit of
creditors, or the institution of any proceeding by or against Borrower or
Guarantor alleging that Borrower or Guarantor is insolvent or unable to pay
their respective debts as they mature, Guarantor will pay to Lender
forthwith the full amount which would be payable hereunder by Guarantor if
all of the Liabilities were then due and payable, whether or not such event
occurs at a time when any of the Liabilities are otherwise due and payable.
5. Payment of the Liabilities. Any amounts received by
Lender from whatever source on account of the Liabilities may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect, and notwithstanding any
payments made by or for the account of Guarantor pursuant to this Continuing
Guaranty.
Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Lender to any of the Liabilities is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of
Borrower), such Liabilities shall, for the purposes of this Continuing
Guaranty and to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence notwithstanding such
application by Lender, and this Continuing Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such Liabilities, all
as though such application by Lender had not been made.
<PAGE>
6. Permitted Actions of Lender. Lender may from time to
time, in its sole discretion and without notice to Guarantor, take any or
all of the following actions:
a. retain or obtain a security interest in any assets of
Borrower or any third party to secure any of the Liabilities or any
obligations of Guarantor hereunder;
b. retain or obtain the primary or secondary obligation of
any obligor or obligors, in addition to Guarantor, with respect to any
of the Liabilities;
c. extend or renew for one or more periods (whether or not
longer than the original period), alter or exchange any of the
Liabilities;
d. waive, ignore or forbear from taking action or
otherwise exercising any of its default rights or remedies with respect
to any default by Borrower under the Loan Documents;
e. release, waive or compromise any obligation of
Guarantor hereunder or any obligation of any nature of any other
obligor primarily or secondarily obligated with respect to any of the
Liabilities;
f. release its security interest in, or surrender, release
or permit any substitution or exchange for, all or any part of any
collateral now or hereafter securing any of the Liabilities or any
obligation hereunder, or extend or renew for one or more periods
(whether or not longer than the original period) or release, waive,
compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and
g. demand payment or performance of any of the Liabilities
from Guarantor at any time or from time to time, whether or not Lender
shall have exercised any of its rights or remedies with respect to any
property securing any of the Liabilities or any obligation hereunder or
proceeded against any other obligor primarily or secondarily liable for
payment or performance of any of the Liabilities.
7. Specific Waivers. Without limiting the generality of
any other provision of this Continuing Guaranty. Guarantor hereby expressly
waives:
a. notice of the acceptance by Lender of this
Continuing Guaranty;
b. notice of the existence, creation, payment,
nonpayment, performance or nonperformance of all or any of the
Liabilities;
<PAGE>
c. presentment, demand, notice of dishonor,
protest, notice of protest and all other notices whatsoever with
respect to the payment or performance of the Liabilities or the
amount thereof or any payment or performance by Guarantor hereunder;
d. all diligence in collection or protection of or
realization upon the Liabilities or any thereof any obligation
hereunder or any security for or guaranty of any of the foregoing;
e. any right to direct or affect the manner or
timing of Lenders enforcement of its rights or remedies;
f. any and all defenses which would otherwise arise
upon the occurrence of any event or contingency described in
Paragraph 1 hereof or upon the taking of any action by Lender
permitted hereunder;
g. any defense, right of set-off, claim or
counterclaim whatsoever and any and all other rights, benefits,
protections and other defenses available to Guarantor now or at any
time hereafter; and
h. all other principles or provisions of law, if
any, that conflict with the terms of this Continuing Guaranty,
including, without limitation, the effect of any circumstances that
may or might constitute a legal or equitable discharge of a guarantor
or surety.
8. Irrevocability. Guarantor hereby further waives all
rights to revoke this Continuing Guaranty at any time, and all rights to
revoke any agreement executed by Guarantor at any time to secure the
payment and performance of Guarantor's obligations under this Continuing
Guaranty.
9. Statutory Waiver of Rights and Defenses Regarding
Election of Remedies. Guarantor waives all rights and defenses arising out
of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower by the operation of any applicable law or
otherwise.
10. Subordination. Guarantor hereby subordinates any and
all indebtedness of Borrower to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Lender shall be
entitled to receive payment of all Liabilities prior to Guarantor's receipt
of payment of any amount of any indebtedness of Borrower to Guarantor. Any
payments on such indebtedness to Guarantor, if Lender so requests, shall be
collected, enforced and received by Guarantor, in trust, as trustee for
Lender and shall be paid over to Lender on account of the Liabilities, but
without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Lender is authorized and empowered,
but not obligated, in its discretion, (a) in the name of Guarantor, to
collect enforce, and to submit claims in respect of, any indebtedness of
Borrower to Guarantor and to apply any amounts received thereon to the
Liabilities, and (b) to require Guarantor (i) to collect and enforce and to
submit claims in respect of, any indebtedness of Borrower to Guarantor, and
(ii) to pay any amounts received on such indebtedness to Lender for
application to the Liabilities.
<PAGE>
11. Subrogation. Guarantor will not exercise any rights
which it may acquire by way of subrogation under this Continuing Guaranty,
by any payment hereunder or otherwise, until all of the Liabilities have
been paid in full, in cash, and Lender shall have no further obligations to
Borrowers under the Loan Documents or otherwise. If any amount shall be paid
to Guarantor on account of such subrogation rights at any other time, such
amount shall be held in trust for the benefit of Lender and shall be
forthwith paid to Lender to be credited and applied to the Liabilities,
whether matured or unmatured, in such manner as Lender shall determine in
its sole discretion.
12. Assignment of Lenders Rights. Lender may, from time
to time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment
or transfer of the Liabilities or any subsequent assignment or transfer
thereof the Liabilities shall be and remain the Liabilities for the purpose
of this Continuing Guaranty. Each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of such party's interest in the Liabilities, be
entitled to the benefits of this Continuing Guaranty to the same extent as
if such assignee or transferee were Lender; provided, however, that unless
Lender shall otherwise consent in writing, Lender shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to
enforce this Continuing Guaranty for its own benefit as to those of the
Liabilities which Lender has not assigned or transferred.
13. Indulgences Not Waivers. No delay in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof or tbe exercise of any other right or remedy; nor
shall any modification or waiver of any of the provisions of this Continuing
Guaranty be binding upon Lender, except as expressly set forth in a writing
duly signed and delivered by Lender. No action of Lender permitted hereunder
shall in any way affect or impair the rights of Lender or the obligations of
Guarantor under this Continuing Guaranty
14. Financial Condition of Borrower. Guarantor
represents and warrants that it is fully aware of the financial condition of
Borrower, and Guarantor delivers this Continuing Guaranty based solely upon
its own independent investigation of Borrower's financial condition and in
no part upon any representation or statement of Lender with respect thereto.
Guarantor further represents and warrants that it is in a position to and
hereby does assume full responsibility for obtaining such additional
information concerning Borrowers financial condition as Guarantor may deem
material to its obligations hereunder, and Guarantor is not relying upon,
nor expecting Lender to furnish it any information in Lender's possession
concerning Borrower's financial condition or concerning any circumstances
bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the Liabilities.
Guarantor hereby waives any duty on the part of Lender to
disclose to Guarantor any facts it may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume
or has reason to believe that such facts are unknown to Guarantor.
<PAGE>
Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "Continuing Guaranty" which includes,
without limitation, the possibility that Borrower will contract for
additional indebtedness for which Guarantor may be liable hereunder after
Borrower's financial condition or ability to pay its lawful debts when they
fall due has deteriorated.
15. Representations and Warranties. Guarantor represents
and warrants to Lender that each of the following statements is accurate and
complete as of the date of this Continuing Guaranty:
a. this Continuing Guaranty has been duly executed
and delivered by Guarantor and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement
of creditors' rights generally;
b. the execution, delivery and performance of this
Continuing Guaranty do not (i) violate any provisions of law or any
order of any court or other agency of government (each, a
"Requirement of Law"), (ii) contravene any provision of any material
contract or agreement to which Guarantor is a party or by which
Guarantor or Guarantor's assets are bound (each, a "Contractual
Obligation"), or (iii) result in the creation or imposition of any
lien, .charge or encumbrance of any nature upon any property, asset
or revenue of Guarantor;
c. all consents, approvals, orders and authorizat-
ions of, and registrations, declarations and filings with, any
governmental agency or authority or other person or entity
(including, without limitation, the shareholders or partners of any
entity), if any, which are required to be obtained in connection with
the execution and delivery of this Continuing Guaranty or the
performance of Guarantor's obligations hereunder have been obtained,
and each is in full force and effect;
d. Guarantor has paid all taxes and other charges
imposed by any governmental agency or authority due and payable by
Guarantor other than those which are being challenged in good faith
by appropriate proceedings;
e. Guarantor is not in violation of any
Requirement of Law or Contractual Obligation other than any
violation the consequences of which could not have a material
adverse effect on Guarantor's ability to perform its obligations
hereunder (a "Material Adverse Effect"); and
f. no action, proceeding, investigation or
litigation is pending or, to the knowledge of Grantor, overtly
threatened against Guarantor by any person or entity which, if
adversely determined, could have a Material Adverse Effect.
16. Guarantor Financial Information. Guarantor will
provide Lender in writing such financial and other information with respect
to Guarantor's assets and liabilities as Lender shall reasonably request
from time to time, in form satisfactory, to Lender.
<PAGE>
17. Binding Upon Successors: Death of Guarantor. This
Continuing Guaranty shall be binding upon Guarantor and Guarantor's
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. This Continuing Guaranty shall not terminate or be
revoked upon the death of Guarantor, notwithstanding any knowledge by
Lender of Guarantor's death.
All references herein to Borrower shall be deemed to include its
successors and assigns, and all references herein to Guarantor shall be
deemed to include Guarantor and Guarantor's successors and assigns.
In addition and notwithstanding anything to the contrary
contained in this Continuing Guaranty or in any other document, instrument
or agreement between or among any of Lender, Borrower, Guarantor or any
third party, the obligations of Guarantor with respect to the Liabilities
shall be joint and several with any other person or entity that now or
hereafter executes a guaranty of any of the Liabilities separate from this
Continuing Guaranty.
18. Notices. All notices required or permitted to be
given hereunder shall be in writing and shall be either personally
delivered, transmitted by facsimile to the facsimile numbers provided herein
or sent by United States certified or registered mail, return receipt
requested, addressed to Guarantor or Lender at their respective addresses
stated below or at such other address as either party hereafter notifies the
other party as herein provided. Notices shall be deemed received on the
earlier of (i) the date noted on the return receipt as delivered if mail
delivery of the notice is successful or the date inscribed on a confirmation
of successful transmission, if sent by facsimile; (ii) the last date of
attempted delivery, as noted by the United States Postal Service on the
envelope containing the notice, if mail delivery is unsuccessful; or (iii)
the date of the actual delivery if personally delivered.
19. Governing Law: Additional Waivers: This Continuing
Guaranty has been delivered 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.
GUARANTOR HEREBY
(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS
CONTINUING GUARANTY, AND ACKNOWLEDGES THAT LENDER ALSO WAIVES SUCH
RIGHT;
(ii) 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 CONTINUING GUARANTY
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING;
<PAGE>
(iv) agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in any other
jurisdictions by suit on the judgment or in any other manner provided
by law; and
(v) agrees not to institute any legal action or proceeding
against Lender or any of Lender's directors, officers, employees,
agents or property concerning any matter arising out of or relating
to this Continuing Guaranty in any court other than one located in
Maricopa County, Arizona.
Nothing herein shall affect or impair Lender's right to serve
legal process in any manner permitted by law or Lender's right to bring any
action or proceeding against Guarantor or its property in the courts of any
other jurisdiction. Whenever possible each provision of this Continuing
Guaranty shall be interpreted as to be effective and valid under applicable
law, but if any provision of this Continuing Guaranty shall be prohibited by
or invalid under such law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Continuing Guaranty.
20. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS EITHER OBTAINED THE ADVICE OF COUNSEL OR HAS HAD THE
OPPORTUNITY TO OBTAIN SUCH ADVICE IN CONNECTION WITH THE TERMS AND
PROVISIONS OF THIS CONTINUING GUARANTY.
21. Entire Agreement. This Continuing Guaranty contains
the complete understanding of the parties hereto with respect to the
subject matter herein. Guarantor acknowledges that Guarantor is not relying
upon any statements or representations of Lender not contained in this
Continuing Guaranty and that such statements or representations, if any,
are of no force or effect and are fully superseded by this Continuing
Guaranty. This Continuing Guaranty may only be modified by a writing
executed by Guarantor and Lender.
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Continuing
Guaranty this 25th day of March, 1999.
JH & BC, Inc.,
"Guarantor"
By: /s/
--------------------------
D. Ronald Allen, President
FEIN: 75-2489134
10911 Petal Street, Suite 105
Dallas, Texas 75238
Facsimile: 214-503-8607
Lender's address for notices:
FINOVA Capital Corporation
Attn: David Sands
355 South Grand Avenue, Suite 2400
Los Angeles, California 90071
Facsimile: 213-625-2746
Exhibit 4.26
FINOVA CAPITAL CORPORATION
FINOVA BUSINESS CREDIT
CONTINUING CORPORATE GUARANTY
FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted
to PC DYNAMICS OF TEXAS, INC. ("Borrower"), by FINOVA CAPITAL CORPORATION
("Lender"), the undersigned, PERFORMANCE INTERCONNECT CORPORATION
("Guarantor"), hereby agrees as follows:
1. Guaranty of Obligations. Guarantor unconditionally,
absolutely and irrevocably guarantees the full and prompt payment and
performance when due, whether by acceleration or otherwise, and at all times
thereafter, of all obligations of Borrower to Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, or
now or hereafter existing or due or to become due, including, without
limitation, under or in connection with that certain Loan and Security
Agreement of even date, between Borrower and Lender (the "Loan Agreement")
and each of the documents, instruments and agreements executed and delivered
in connection therewith, as each may be modified, amended, supplemented or
replaced from time to time (all such obligations are herein referred to
collectively as the "Liabilities", and all documents evidencing or securing
any of the Liabilities are herein referred to, collectively, as the "Loan
Documents"). This Continuing Corporate Guaranty (this "Continuing Guaranty")
is a guaranty of payment and performance when due and not of collection.
In the event of any default by Borrower in making payment of, or
default by Borrower in performance of, any of the Liabilities, Guarantor
agrees on demand by Lender to pay and perform all of the Liabilities as are
then or thereafter become due and owing or are to be performed under the
terms of the Loan Documents. Guarantor further agrees to pay all expenses
(including reasonable attorneys' fees and expenses) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and
in enforcing this Continuing Guaranty.
2. Continuing Nature of Guaranty and Liabilities. This
Continuing Guaranty shall be continuing and shall not be discharged,
impaired or affected by:
a. the insolvency of Borrower or the payment in full
of all of the Liabilities at any time or from time to time;
<PAGE>
b. the power or authority or lack thereof of
Borrower to incur the Liabilities:
c. the validity or invalidity of any of the Loan
Documents or the documents securing the same;
d. the existence or non-existence of Borrower as a
legal entity;
e. any transfer by Borrower of all or any part of
any collateral in which Lender has been granted a lien or security
interest pursuant to the Loan Documents;
f. any statute of limitations affecting the
liability of Guarantor under this Continuing Guaranty or the Loan
Documents or the ability of Lender to enforce this Continuing Guaranty
or any provision of the Loan Documents; or
g. any right of offset, counterclaim or defense of
Guarantor, including, without limitation, those which have been waived
by Guarantor pursuant to Paragraph nine (9) hereof
3. Insolvency of Borrower or Guarantor. Without limiting
the generality of any other provision hereof, Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower or Guarantor or the
inability of Borrower or Guarantor to pay their respective debts as they
mature, or an assignment by Borrower or Guarantor for the benefit of
creditors, or the institution of any proceeding by or against Borrower or
Guarantor alleging that Borrower or Guarantor is insolvent or unable to pay
their respective debts as they mature, Guarantor will pay to Lender
forthwith the full amount which would be payable hereunder by Guarantor if
all of the Liabilities were then due and payable, whether or not such event
occurs at a time when any of the Liabilities are otherwise due and payable
4. Payment of the Liabilities. Any amounts received by
Lender from whatever source on account of the Liabilities may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect, and notwithstanding any
payments made by or for the account of Guarantor pursuant to this Continuing
Guaranty.
Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Lender to any of the Liabilities is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of
Borrower), such Liabilities shall, for the purposes of this Continuing
Guaranty and to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence notwithstanding such
application by Lender, and this Continuing Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such Liabilities, all
as though such application by Lender had not been made.
<PAGE>
5. Permitted Actions of Lender. Lender may from time to
time, in its sole discretion and without notice to Guarantor, take any or
all of the following actions:
a. retain or obtain a security interest in any
assets of Borrower or any third party to secure any of the
Liabilities or any obligations of Guarantor hereunder;
b. retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to Guarantor, with
respect to any of the Liabilities
c. extend or renew for one or more periods (whether
or not longer than the original period), alter or exchange any of the
Liabilities;
d. waive, ignore or forbear from taking action or
otherwise exercising any of its default rights or remedies with
respect to any default by Borrower under the Loan Documents;
e. release, waive or compromise any obligation of
Guarantor hereunder or any obligation of any nature of any other
obligor primarily or secondarily obligated with respect to any of the
Liabilities;
f. release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part
of any collateral now or hereafter securing any of the Liabilities or
any obligation hereunder, or extend or renew for one or more periods
(whether or not longer than the original period) or release, waive,
compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and
g. demand payment or performance of any of the
Liabilities from Guarantor at any time or from time to time, whether
or not Lender shall have exercised any of its rights or remedies with
respect to any property securing any of the Liabilities or any
obligation hereunder or proceeded against any other obligor primarily
or secondarily liable for payment or performance of any of the
Liabilities.
6. Specific Waivers. Without, limiting the generality of
any other provision of this Continuing Guaranty, Guarantor hereby expressly
waives:
a. notice of the acceptance by Lender of this Continuing
Guaranty;
b. notice of the existence, creation. payment, nonpayment,
performance or nonperformance of all or any of the
Liabilities;
<PAGE>
c. presentment, demand, notice of dishonor, protest, notice
of protest and all other notices whatsoever with respect
to the payment or performance of the Liabilities or the
amount thereof or any payment or performance by Guarantor
hereunder;
d. all diligence in collection or protection of or
realization upon the Liabilities or any thereof any
obligation hereunder or any security for or guaranty of
any of the foregoing;
e. any right to direct or affect the manner or timing of
Lenders enforcement of its rights or remedies;
f. any and all defenses which would otherwise arise upon
the occurrence of any event or contingency described in
Paragraph 1 hereof or upon the taking of any action by
Lender permitted hereunder;
g. any defense, right of set-off, claim or counterclaim
whatsoever and any and all other rights, benefits,
protections and other defenses available to Guarantor
now or at any time hereafter; and
h. all other principles or provisions of law, if any, that
conflict with the terms of this Continuing Guaranty,
including, without limitation, the effect of any
circumstances that may or might constitute a legal or
equitable discharge of a guarantor or surety.
7. Irrevocability. Guarantor hereby further waives all rights
to revoke this Continuing Guaranty at any time, and all rights to revoke
any agreement executed by Guarantor at any time to secure the payment and
performance of Guarantors obligations under this Continuing Guaranty.
8. Statutory Waiver of Rights and Defenses Regarding Election
of Remedies. Guarantor waives all rights and defenses arising out of an
election of remedies by Lender, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower by the operation of any applicable law, or
otherwise.
9. Subordination. Guarantor hereby subordinates any and all
indebtedness of Borrower to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Lender shall
be entitled to receive payment of all Liabilities prior to Guarantor's
receipt of payment of any amount of any indebtedness of Borrower to
Guarantor. Any payments on such indebtedness to Guarantor, if Lender so
requests, shall be collected, enforced and received by Guarantor, in trust,
as trustee for Lender and shall be paid over to Lender on account of the
Liabilities, but without reducing or affecting in any manner the liability
of Guarantor under the other provisions of this Guaranty. Lender is
authorized and empowered, but not obligated, in its discretion, (a) in the
name of Guarantor, to collect and enforce, and to submit claims in respect
of, any indebtedness of Borrower to Guarantor and to apply any amounts
received thereon to the Liabilities, and (b) to require Guarantor (i) to
collect and enforce, and to submit claims in respect of, any indebtedness
of Borrower to Guarantor, and (ii) to pay any amounts received on such
indebtedness to Lender for application to the Liabilities.
<PAGE>
10. Subrogation. Guarantor will not-exercise any rights.which
it may acquire by way of subrogation under this Continuing Guaranty, by any
payment hereunder or otherwise, until all of the Liabilities have been paid
in full, in cash, and Lender shall have no further obligations to Borrowers
under the Loan Documents or otherwise. If any amount shall be paid to
Guarantor on account of such subrogation rights at any other time, such
amount shall be held in trust for the benefit of Lender and shall be
forthwith paid to Lender to be credited and applied to the Liabilities,
whether matured or unmatured, in such manner as Lender shall determine in
its sole discretion.
11. Assignment of Lender's Right. Lender may, from time
to time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment
or transfer of, the liabilities or any subsequent assignment or transfer
thereof, the Liabilities shall be and remain the Liabilities for the purpose
of this Continuing Guaranty. Each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of such party's interest in the Liabilities, be
entitled to the benefits of this Continuing Guaranty to the same extent as
if such assignee or transferee were Lender; provided, however that unless
Lender shall otherwise consent in writing, Lender shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to
enforce this Continuing Guaranty for its own benefit as to those of the
Liabilities which Lender has not assigned or transferred
12. Indulgences Not Waivers. No delay in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any of the provisions of this Continuing
Guaranty be binding upon Lender, except as expressly set forth in a writing
duly signed and delivered by Lender. No action of Lender permitted
hereunder shall in any way affect or impair the rights of Lender or the
obligations of Guarantor under this Continuing Guaranty.
13. Financial Condition of Borrower. Guarantor represents
and warrants that it is fully aware of the financial condition of Borrower,
and Guarantor delivers this Continuing Guaranty based solely upon its own
independent investigation of Borrower's financial condition and in no part
upon any representation or statement of Lender with respect thereto,
Guarantor further represents and warrants that it is in a position to and
hereby does assume full responsibility for obtaining such additional
information concerning Borrowers financial condition as Guarantor may deem
material to its obligations hereunder, and Guarantor is not relying upon,
nor expecting Lender to furnish it any information in Lender's possession
concerning Borrower's financial condition or concerning any circumstances
bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the Liabilities.
Guarantor hereby waives any duty on the part of Lender to
disclose to Guarantor any facts it may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume
or has reason to believe that such facts are unknown to Guarantor.
<PAGE>
Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "Continuing Guaranty" which includes,
without limitation, the possibility that Borrower will contract for
additional indebtedness for which Guarantor may be liable hereunder after
Borrower's financial condition or ability to pay its lawful debts when they
fall due has deteriorated.
14. Representations and Warranties. Guarantor
represents and warrants to Lender that each of the following statements is
accurate and complete as of the date of this Continuing Guaranty:
a. this Continuing Guaranty has been duly
executed and delivered by Guarantor and constitutes a legal, valid
and binding obligation of Guarantor, enforceable against Guarantor
in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally;
b. the execution, delivery and performance of
this Continuing Guaranty do not (i) violate any provisions of law
or any order of any court or other agency of government (each, a
"Requirement of Law"), (ii) contravene any provision of any
material contract or agreement to which Guarantor is a party or by
which Guarantor or Guarantor's assets are bound (each, a
"Contractual Obligation"), or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature upon
any property, asset or revenue of Guarantor;
c. all consents, approvals, orders and
authorizations of, and registrations, declarations and filings
with, any governmental agency or authority or other person or
entity (including, without limitation, the shareholders or
partners of any entity), if any, which are required to be obtained
in connection with the execution and delivery of this Continuing
Guaranty or the performance of Guarantor's obligations hereunder
have been obtained, and each is in full force and effect.
d. Guarantor has paid all taxes and other charges
imposed by any governmental agency or authority due and payable by
Guarantor other than those which are being challenged in good
faith by appropriate proceedings;
e. Guarantor is not in violation of any Requirement
of Law or Contractual Obligation other than any violation the
consequences of which could not have a material adverse effect on
Guarantor's ability to perform its obligations hereunder (a
"Material Adverse Effect"); and
f. no action, proceeding, investigation or litigation
is pending or, to the knowledge of Grantor, overtly threatened
against Guarantor by any person or entity which, if adversely
determined, could have a Material Adverse Effect.
15. Guarantor Financial Information. Guarantor will provide
Lender in writing such financial and other information with respect to
Guarantor's assets and liabilities as Lender shall reasonably request
from time to time, in form satisfactory to Lender.
<PAGE>
16. Binding Upon Successors: Death of Guarantor This
Continuing Guaranty shall be binding upon Guarantor and Guarantor's
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. This Continuing Guaranty shall not terminate or be
revoked upon the death of Guarantor, notwithstanding any knowledge by Lender
of Guarantor's death.
All references herein to Borrower shall be deemed to include its
successors and assigns, and all references herein to Guarantor shall be
deemed to include Guarantor and Guarantor's successors and assigns.
In addition and notwithstanding anything to the contrary
contained in this Continuing Guaranty or in any other document, instrument
or agreement between or among any of Lender, Borrower, Guarantor or any
third party, the obligations of Guarantor with respect to the Liabilities
shall be joint and several with any other person or entity that now or
hereafter executes a guaranty of any of the Liabilities separate from this
Continuing Guaranty.
17. Notices. All notices required or permitted to be given
hereunder shall be in writing and shall be either personally delivered,
transmitted by facsimile to the facsimile numbers provided herein or sent by
United States certified or registered mail, return receipt requested,
addressed to Guarantor or Lender at their respective addresses stated below
or at such other address as either party hereafter notifies the other party
as herein provided. Notices shall be deemed received on the earlier of (i)
the date noted on the return receipt as delivered if mail delivery of the
notice is successful or the date inscribed on a confirmation of successful
transmission, if sent by facsimile; (ii) the last date of attempted
delivery, as noted by the United States Postal Service on the envelope
containing the notice, if mail delivery is unsuccessful; or (iii) the date
of the actual delivery if personally delivered.
18. Governing Law; Additional Waivers. This Continuing
Guaranty has been delivered 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.
GUARANTOR HEREBY
(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE
OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS CONTINUING
GUARANTY, AND ACKNOWLEDGES THAT LENDER ALSO WAIVES SUCH RIGHT;
(ii) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE
ORFEDERAL COURT LOCATED IN MARICOPA COUNTY, ARIZONA, OVER ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED
TO THIS CONTINUING GUARANTY;
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR 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
jurisdictions by suit on the judgment or in any other manner provided
by law; and
<PAGE>
(v) agrees not to institute any legal action or proceeding
against Lender or any of Lender's directors, officers, employees,
agents or property concerning any matter arising out of or relating to
this Continuing Guaranty in any court other than one located in
Maricopa County, Arizona.
Nothing herein shall affect or impair Lenders right to serve
legal process in any manner permitted by law or Lender's right to bring any
action or proceeding against Guarantor or its property in the courts of any
other jurisdiction. Wherever possible each provision of this Continuing
Guaranty shall be interpreted as to be effective and valid under applicable
law, but if any provision of this Continuing Guaranty shall be prohibited by
or invalid under such law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Continuing Guaranty.
19. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS EITHER OBTAINED THE ADVICE OF COUNSEL OR
HAS HAD THE OPPORTUNITY TO OBTAIN SUCH ADVICE IN
CONNECTION WITH THE TERMS AND PROVISIONS OF THIS
CONTINUING GUARANTY.
20. Entire Agreement. This Contributing Guaranty contains
the complete understanding of the parties hereto with respect to the subject
matter herein. Guarantor acknowledges that Guarantor is not relying upon
any statements or representations of Lender not contained in this Continuing
Guaranty and that such statements or representations, if any, are of no
force or effect and are fully superseded by this Continuing Guaranty. This
Continuing Guaranty may only be modified by a writing executed by Guarantor
and Lender.
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Continuing
Guaranty this 25th day of March, 1999.
Performance Interconnect Corporation
"Guarantor"
By: /s/
---------------------
Brooks L. Harman, Jr.
FEIN: 75-268144O
10501 FM Road East
Frisco, Texas 75034
Facsimile: 972-335-2841
Lenders address for notices:
FINOVA Capital Corporation
Attn: David Sands
355 South Grand Avenue, Suite 2400
Los Angeles, California 90071
Facsimile: (213) 625-2746
Exhibit 4.27
FINOVA CAPITAL CORPORATION
FINOVA BUSINESS CREDIT
CONTINUING CORPORATE GUARANTY
FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted
to PC DYNAMICS OF TEXAS, INC. ("Borrower"), by FINOVA CAPITAL CORPORATION
("Lender"), the undersigned, WINTERSTONE MANAGEMENT, INC. ("Guarantor"),
hereby agrees as follows:
1. Guaranty of Obligations. Guarantor unconditionally,
absolutely and irrevocably guarantees the full and prompt payment and
performance when due, whether by acceleration or otherwise, and at all times
thereafter, of all obligations of Borrower to Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, or
now or hereafter existing or due or to become due, including, without
limitation, under or in connection with that certain Loan and Security
Agreement of even date, between Borrower and Lender (the "Loan Agreement")
and each of the documents, instruments and agreements executed and delivered
in connection therewith, as each may be modified, amended, supplemented or
replaced from time to time (all such obligations are herein referred to
collectively as the "Liabilities", and all documents evidencing or securing
any of the Liabilities are herein referred to, collectively, as the "Loan
Documents"). This Continuing Corporate Guaranty, (this "Continuing
Guaranty") is a guaranty of payment and performance when due and not of
collection
In the event of any default by Borrower in making payment of, or
default by Borrower in performance of, any of the Liabilities. Guarantor
agrees on demand by Lender to pay and perform all of the Liabilities as are
then or thereafter become due and owing or are to be performed under the
terms of the Loan Documents. Guarantor further agrees to pay all expenses
(including reasonable attorneys' fees and expenses) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and
in enforcing this Continuing Guaranty.
2. Continuing Nature of Guaranty and Liabilities. This
Continuing Guaranty shall be continuing and shall not be discharged,
impaired or affected by:
a. the insolvency of Borrower or the payment in full
of all of the Liabilities at any time or from time to time;
b. the power or authority or lack thereof of Borrower
to incur the Liabilities;
<PAGE>
c. the validity or invalidity of any of the Loan
Documents or the documents securing the same;
d. the existence or non-existence of Borrower as a
legal entity;
e. any transfer by Borrower of all or any part of
any collateral in which Lender has been granted a lien or security
interest pursuant to the Loan Documents;
f. any statute of limitations affecting the
liability of Guarantor under this Continuing Guaranty or the Loan
Documents or the ability of Lender to enforce this Continuing Guaranty
or any provision of the Loan Documents; or
g. any right of offset, counterclaim or defense of
Guarantor, including, without limitation, those which have been waived
by Guarantor pursuant to Paragraph. nine (9) hereof.
3. Insolvency of Borrower or Guarantor. Without limiting
the generality of any other provision hereof, Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower or Guarantor or the
inability of Borrower or Guarantor to pay their respective debts as they
mature, or an assignment by Borrower or Guarantor for the benefit of
creditors, or the institution of any proceeding by or against Borrower or
Guarantor alleging that Borrower or Guarantor is insolvent or unable to pay
their respective debts as they mature, Guarantor will pay to Lender
forthwith the full amount which would be payable hereunder by Guarantor if
all of the Liabilities were then due and payable, whether or not such event
occurs at a time when any of the Liabilities are otherwise due and payable.
4. Payment of the Liabilities. Any amounts received by
Lender from whatever source on account of the Liabilities may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect, and notwithstanding any
payments made by or for the account of Guarantor pursuant to this Continuing
Guaranty.
Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Lender to any of the Liabilities is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of
Borrower), such Liabilities shall, for the purposes of this Continuing
Guaranty and to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence notwithstanding such
application by Lender, and this Continuing Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such Liabilities, all
as though such application by Lender had not been made.
<PAGE>
5. Permitted Actions of Lender. Lender may from time to
time, in its sole discretion and without notice to Guarantor, take any or
all of the following actions:
a. retain or obtain a security interest in any assets
of Borrower or any third party to secure any of the Liabilities or any
obligations of Guarantor hereunder;
b. retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to Guarantor, with
respect to any of the Liabilities;
c. extend or renew for one or more periods (whether
or not longer than the original period), alter or exchange any of the
Liabilities;
d. waive, ignore or forbear from taking action or
otherwise exercising any of its default rights or remedies with
respect to any default by Borrower under the Loan Documents;
e. release, waive or compromise any obligation of
Guarantor hereunder or any obligation of any nature of any other
obligor primarily or secondarily obligated with respect to any of the
Liabilities;
f. release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part of
any collateral now or hereafter securing any of the Liabilities or any
obligation hereunder, or extend or renew for one or more periods
(whether or not longer than the original period) or release, waive,
compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and
g. demand payment or performance of any of the
Liabilities from Guarantor at any time or from time to time, whether
or not Lender shall have exercised any of its rights or remedies with
respect to any property securing any of the Liabilities or any
obligation hereunder or proceeded against any other obligor primarily
or secondarily liable for payment or performance of any of the
Liabilities.
6. Specific Waivers. Without limiting the generality of
any other provision of this Continuing Guaranty, Guarantor hereby expressly
waives:
a. notice of the acceptance by Lender of this
Continuing Guaranty;
b. notice of the existence, creation, payment,
nonpayment, performance or nonperformance of all or any of the
Liabilities:
c. presentment, demand, notice of dishonor. protest,
notice of protest and all other notices whatsoever with respect to
the payment or performance of the Liabilities or the amount thereof or
any payment or performance by Guarantor hereunder;
<PAGE>
d. all diligence in collection or protection of or
realization upon the Liabilities or any thereof, any obligation
hereunder or any security for or guaranty of any of the foregoing;
e. any right to direct or affect the manner or
timing of Lenders enforcement of its rights or remedies;
f. any and all defenses which would otherwise arise
upon the occurrence of any event or contingency described in Paragraph
1 hereof or upon the taking of any action by Lender permitted
hereunder
g. any defense, right of set-off, claim or
counterclaim whatsoever and any and all other rights, benefits,
protections and other defenses available to Guarantor now or at any
time hereafter; and
h. all other principles or provisions of law, if
any, that conflict with the terms of this Continuing Guaranty,
including, without limitation, the effect of any circumstances that
may or might constitute a legal or equitable discharge of a guarantor
or surety.
7. Irrevocability. Guarantor hereby further waives all
rights to revoke this Continuing Guaranty at any time, and all rights to
revoke any agreement executed by Guarantor at any time to secure the payment
and performance of Guarantors obligations under this Continuing Guaranty.
8. Statutory Waiver of Rights and Defenses Regarding
Election of Remedies. Guarantor waives all rights and defenses arising out
of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower by the operation of any applicable law, or
otherwise.
9. Subordination. Guarantor hereby subordinates any and
all indebtedness of Borrower to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Lender shall be
entitled to receive payment of all Liabilities prior to Guarantor's receipt
of payment of any amount of any indebtedness of Borrower to Guarantor. Any
payments on such indebtedness to Guarantor, if Lender so requests, shall be
collected, enforced and received by Guarantor, in trust, as trustee for
Lender and shall be paid aver to Lender on account of the Liabilities, but
without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Lender is authorized and empowered,
but not obligated, in its discretion, (a) in the name of Guarantor, to
collect and enforce, and to submit claims in respect of, any indebtedness of
Borrower to Guarantor and to apply any amounts received thereon to the
Liabilities, and (b) to require Guarantor (i) to collect and enforce, and to
submit claims in respect of, any indebtedness of Borrower to Guarantor, and
(ii) to pay any amounts received on such indebtedness to Lender for
application to the Liabilities.
<PAGE>
10. Subrogation Guarantor will not exercise any rights
which it may acquire by way of subrogation under this Continuing Guaranty,
by any payment hereunder or otherwise, until all of the liabilities have
been paid in full, in cash, and Lender shall have no further obligations to
Borrowers under the Loan Documents or otherwise. If any amount shall be paid
to Guarantor on account of such subrogation rights at any other time, such
amount shall be held in trust for the benefit of Lender and shall be
forthwith paid to Lender to be credited and applied to the Liabilities,
whether matured or unmatured, in such manner as Lender shall determine in
its sole discretion.
11. Assignment of Lender's Rights. Lender may, from time
to time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment
or transfer of the Liabilities or any subsequent assignment or transfer
thereof, the Liabilities shall be and remain the Liabilities for the purpose
of this Continuing Guaranty. Each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of such party's interest in the Liabilities, be
entitled to the benefits of this Continuing Guaranty to the same extent as
if such assignee or transferee were Lender provided, however, that unless
Lender shall otherwise consent in writing, Lender shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to
enforce this Continuing Guaranty for its own benefit as to those of the
Liabilities which Lender has not assigned or transferred.
12. Indulgences Not Waivers. No delay in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any of the provisions of this Continuing
Guaranty be binding upon Lender, except as expressly set forth in a writing
duly signed and delivered by Lender. No action of Lender permitted
hereunder shall in any way affect or impair the rights of Lender or the
obligations of Guarantor under this Continuing Guaranty.
13. Financial Condition of Borrower. Guarantor represents
and warrants that it is fully aware of the financial condition of Borrower,
and Guarantor delivers this Continuing Guaranty based solely upon its own
independent investigation of Borrower's financial condition and in no part
upon any representation or statement of Lender with respect thereto.
Guarantor further represents and warrants that it is in a position to and
hereby does assume full responsibility for obtaining such additional
information concerning Borrower's financial condition as Guarantor may deem
material to its obligations hereunder, and Guarantor is not relying upon,
nor expecting Lender to furnish it any information in Lender's possession
concerning Borrower's financial condition or concerning any circumstances
bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the Liabilities.
<PAGE>
Guarantor hereby waives any duty on the part of Lender to
disclose to Guarantor any facts it may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume
or has reason to believe that such facts are unknown to Guarantor.
Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "Continuing Guaranty" which includes,
without limitation, the possibility that Borrower will contract for
additional indebtedness for which Guarantor may be liable hereunder after
Borrower's financial condition or ability to pay its lawful debts when they
fall due has deteriorated.
14. Representations and Warranties. Guarantor represents
and warrants to Lender that each of the following statements is accurate and
complete as of the date of this Continuing Guaranty:
a. this Continuing Guaranty has been duly executed
and delivered by Guarantor and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement
of creditors' rights generally;
b. the execution. delivery and performance of this
Continuing Guaranty do not (i) violate any provisions of law or any
order of any court or other agency of government (each, a "Requirement
of Law"), (ii) contravene any provision of any material contract or
agreement to which Guarantor is a party or by which Guarantor or
Guarantor's assets are bound (each, a "Contractual Obligation"), or
(iii) result in the creation or imposition of any lien, charge or
encumbrance of any nature upon any property, asset or revenue of
Guarantor;
c. all consents, approvals, orders and
authorizations of, and registrations, declarations and filings with,
any governmental agency or authority or other person or entity
(including, without limitation, the shareholders or partners of any
entity), if any, which are required to be obtained in connection with
the execution and delivery of this Continuing Guaranty or the
performance of Guarantor's obligations hereunder have been obtained,
and each is in full force and effect;
d. Guarantor has paid all taxes and other charges imposed
by any governmental agency or authority due and payable by Guarantor
other than those which are being challenged in good faith by
appropriate proceedings;
<PAGE>
e. Guarantor is not in violation of any Requirement
of Law or Contractual Obligation other than any violation the
consequences of which could not have a material adverse effect on
Guarantor's ability, to perform its obligations hereunder (a "Material
Adverse Effect"); and
f. no action, proceeding, investigation or
litigation is pending or, to the knowledge of Grantor, overtly
threatened against Guarantor by any person or entity which, if
adversely determined, could have a Material Adverse Effect.
15. Guarantor Financial Information. Guarantor will
provide Lender in writing such financial and other information with respect
to Guarantor's assets and liabilities as Lender shall reasonably request
from time to time, in form satisfactory to Lender.
16. Binding Upon Successors: Death of Guarantor. This
Continuing Guaranty shall be binding upon Guarantor and Guarantor's
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. This Continuing Guaranty shall not terminate or be
revoked upon the death of Guarantor, notwithstanding any knowledge by Lender
of Guarantor's death.
All references herein to Borrower shall be deemed to include its
successors and assigns, and all references herein to Guarantor shall be
deemed to include Guarantor and Guarantor's successors and assigns.
In addition and notwithstanding anything to the contrary
contained in this Continuing Guaranty or in any other document, instrument
or agreement between or among any of Lender, Borrower, Guarantor or any
third party, the obligations of Guarantor with respect to the Liabilities
shall be joint and several with any other person or entity that now or
hereafter executes a guaranty of any of the Liabilities separate from this
Continuing Guaranty.
17. Notices. All notices required or permitted to be given
hereunder shall be in writing and shall be either personally delivered,
transmitted by facsimile to the facsimile numbers provided herein or sent by
United States certified or registered mail, return receipt requested,
addressed to Guarantor or Lender at their respective addresses stated below
or at such other address as either party hereafter notifies the other party
as herein provided. Notices shall be deemed received on the earlier of (i)
the date noted on the return receipt as delivered if mail delivery of the
notice is successful or the date inscribed on a confirmation of successful
transmission, if sent by facsimile; (ii) the last date of attempted
delivery, as noted by the United States Postal Service on the envelope
containing the notice, if mail delivery is unsuccessful: or (iii) the date
of the actual delivery if personally delivered.
<PAGE>
18. Governing Law: Additional Waivers. This Continuing
Guaranty has been delivered 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.
GUARANTOR HEREBY
(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE
OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS CONTINUING
GUARANTY, AND ACKNOWLEDGES THAT LENDER ALSO WAIVES SUCH RIGHT;
(ii) 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 CONTINUING GUARANTY;
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR
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
jurisdictions by suit on the judgment or in any other manner provided
by law; and
(v) agrees not to institute any legal action or proceeding
against Lender or any of Lender's directors, officers, employees,
agents or property concerning any matter arising out of or relating
to this Continuing Guaranty in any court other than one located in
Maricopa County, Arizona.
Nothing herein shall affect or impair Lenders right to serve
legal process in any manner permitted by law or Lenders right to bring any
action or proceeding against Guarantor or its property in the courts of
any other jurisdiction. Wherever possible each provision of this
Continuing Guaranty shall be interpreted as to be effective and valid
under applicable law, but if any provision of this Continuing Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Continuing Guaranty:
19. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS EITHER OBTAINED THE ADVICE OF COUNSEL OR HAS HAD THE
OPPORTUNITY TO OBTAIN SUCH ADVICE IN CONNECTION WITH THE TERMS AND
PROVISIONS OF THIS CONTINUING GUARANTY.
<PAGE>
20. Entire Agreement. This Continuing Guaranty contains
the complete understanding of the parties hereto with respect to the
subject matter herein Guarantor acknowledges that Guarantor is not relying
upon any statements or representations of Lender not contained in this
Continuing Guaranty and that such statements or representations, if any,
are of no force or effect and are fully superseded by this Continuing
Guaranty. This Continuing Guaranty may only be modified by a writing
executed by Guarantor and Lender.
IN WITNESS WHEREOF. Guarantor has executed this Continuing
Guaranty this 25th day of March, 1999.
Winterstone Management. Inc.
"Guarantor"
By: /s/
-------------------------
D.Ronald Allen, President
FEIN: 75-2124749
10911 Petal Street, Suite 105
Dallas, Texas 75238
Facsimile: 214-503-8607
Lender's address for notices:
FINOVA Capital Corporation
Attn: David Sands
355 South Grand Avenue, Suite 2400
Los Angeles, California 90071
Facsimile: (213) 625-2746
Exhibit 4.28
SECURED PROMISSORY NOTE
$360,000.00 Phoenix, Arizona
March 25, 1999
FOR VALUE RECEIVED, PC DYNAMICS OF TEXAS, INC. a Texas
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 Three Hundred Sixty Thousand Dollars ($360,000.00), plus
interest in the manner and upon the terms and conditions set forth below.
This Secured Promissory Note ("Note") is made pursuant to that certain Loan
and Security Agreement of even date between the FINOVA and Borrower (the
"Loan Agreement"), the provision 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:
a. Twenty-three (23) equal successive monthly installments of
principal of Six Thousand Dollars ($6000.00) each on the first day of each
month, beginning May 1,1999, and continuing through and including April 30,
2001; and
b. A final installment of Two Hundred Twenty-Two Thousand
Dollars ($222,000.00) on the May 1, 2001, together with accrued interest on
the principal balance from time to time remaining unpaid, payable monthly on
the first day of each and every month, beginning March 25, 1999.
1.2 Prepayment may be made under this Note in whole but not in part,
subject to the Termination 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 applicable Termination Fee. Notwithstanding
anything herein to the contrary, in the event the Loan Agreement is
terminated by Borrower, by FINOVA or by any other person at anytime, then
the entire unpaid principal balance of this Note, together with all accrued
and unpaid interest hereon and the full amount of the applicable Termination
Fee, shall become immediately due and payable in full on the effective date
of such termination, without presentment, notice or demand of any kind.
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 three (3)
percentage points above the Prime Rate (as hereinafter defined), 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 (4) percentage points above the
Prime Rate, 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, NA. (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. 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.
<PAGE>
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; 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 Borrowers 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 the Termination Fee, 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 Borrowers 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.
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, 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,
<PAGE>
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, 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, attorneys fees, expert witness
fees, letter of credit fees, collateral monitoring fees, closing fees,
facility fees, Termination 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 "contracted 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.
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 tp 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.
<PAGE>
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.
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 UNIF6RM COMMEBOIAL 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) WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED
MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH BELOW
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF
ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO
BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT BORROWER
MAYEFFECTIVELY 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 RIGHTTO A TRIAL BY JURY IN ANY ACTION ARISING
UNDER OR IN CONNECTION WITH THIS NOTE. NOTHING IN THIS PARAGRAPH SHALL
AFFECT OR IMPAIR FINOVAS RIGHTTO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED
BY LAW OR FINOVA'S RIGHT TO BRING ANY ACTION OR AGAINST BORROWER OR
BORROWERS PROPERTY IN THE COURTS OF ANTOTHER JURISDICTION.
PC DYNAMICS OF TEXAS, INC.,
a Texas corporation
By: /s/
--------------------------
D. Ronald Allen, President
FEIN: 75-2808489
10501 FM 720 East
Frisco, Texas 75034
Exhibit 4.29
AMENDED AND RESTATED PURCHASE & SALE AGREEMENT
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Name of Sellers ("Sellers"): I-CON INDUSTRIES, Inc., a Delaware
corporation, and PERFORMANCE INTERCONNECT
CORP., a Texas corporation.
Dated: March 31, 1998
Sellers and USA Funding, Inc., a Delaware corporation ("Purchaser"),
hereby agree to the terms and conditions set forth in this Purchase & Sale
Agreement ("Agreement"):
1. Purchase & Sale of Accounts Receivable.
(a) Sellers hereby offer to sell, assign, transfer, convey and
deliver to Purchaser, as absolute owner, all of the right, title and
interest of Sellers in and to the following accounts ("Account" or
"Accounts") which arise from the sale of Sellers' services or merchandise
(herein collectively referred to-as the "Merchandise") as indicated by the
box checked below, together with all guarantees and security therefor, and
all of Sellers' right, title and interest in the Merchandise purchased and
represented by such Accounts, including all of Sellers' rights to returned
goods and rights of stoppage in transit, repletion, and reclamation as an
unpaid vendor (with respect to each Account, such guarantees, security and
rights are herein called the "Related Rights"):
X All of Sellers' Eligible Accounts (as defined below) not to exceed
--- $750,000 (the "Commitment") outstanding at any time, which Eligible
Accounts Purchaser agrees to purchase on the terms and conditions set
forth herein, or
Eligible Accounts totaling not less than $______________ outstanding
--- at any time, in which case Purchaser shall be obligated (subject to
the terms and conditions stated below) to purchase Eligible Accounts
totaling not more than "Commitment") outstanding at any time, or
Only those Eligible Accounts which Sellers from time to time may wish
--- to sell but not to exceed $_____________ (the "Commitment") per month,
which Eligible Accounts Purchaser agrees to purchase on the terms and
conditions set forth herein;
provided, however, that in no case shall the purchase price payable
hereunder for all Eligible Accounts purchased at any one time be less tan
$5,000.00.
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(b) Subject to the terms of this Agreement, Purchaser hereby agrees
to purchase Eligible Accounts and the Related Rights relating thereto
acceptable to Purchaser in its sole and absolute discretion. Purchaser shall
not be obligated to purchase any Eligible Account if (i) an Event of Default
or an event that, with the giving of notice, the passage of time or both,
would constitute an Event of Default has occurred and is continuing
hereunder, (ii) after such purchase is made, the aggregate face amount of
all outstanding Eligible Accounts which have been purchased by Purchaser
would exceed the Commitment, or (iii) Purchaser has not determined to
purchase such Eligible Account in its sole and absolute discretion.
"Eligible Accounts" means all Accounts except the following: (i) any Account
which has payment terms longer than "net 30 days" or has been outstanding
for more than ninety (90) days from invoice date, (ii) any Account as to
which Purchaser does not have a valid and perfected, first priority security
interest, (iii) any Account that is owed by a customer (an "Account Debtor")
which is an affiliate of a Seller or an officer or employee of a Seller,
(iv) any Account that arises out of a sale made or services performed
outside of the United States of America or tat is owed by an Account Debtor
located outside the United States of America, (v) any Account that is owed
by an Account Debtor which is a creditor or supplier of a Seller or which
has asserted any defense or contested any liability with respect to such
Account, (vi) if twenty-five percent (25%) or more of the aggregate amount
of Accounts owed by an Account Debtor to the Sellers have been outstanding
more than ninety (90) days from invoice date, all Accounts of such Account
Debtor, (vii) any Account that is considered a "progress" billing, (viii)
any retainages, and (ix) any Account which has not been approved by
Purchaser, in its sole and absolute discretion, as an Eligible Account. A
credit investigation by Purchaser shall not be deemed an acceptance of an
Account and Purchaser shall be free to reject any Account submitted by
either Seller if Purchaser deems the Account unacceptable, even tough
Purchaser may have previously approved such Account Debtor.
(c) No single Account Debtor's total purchased and outstanding
Accounts shall ever constitute more than twenty-five percent (25%) of
Sellers' total Accounts purchased and outstanding for all of Sellers'
Account Debtors, except that purchased and outstanding Accounts of one
Account Debtor may constitute up to fifty percent (50%) of the purchased and
outstanding Accounts of all Sellers' Account Debtors. In the event any
single Account Debtor's total purchased and outstanding Accounts exceed the
concentration limits set forth above, Purchaser may in its sale discretion
increase the Sellers' Reserve Accounts to cover such excess on a dollar for
dollar basis. In addition, for purposes of Section 4.A, the amount of any
Eligible Accounts owed by an Account Debtor in excess of the concentration
limit set forth above shall not be Eligible Accounts.
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(d) Accounts shall be submitted to Purchaser on a Schedule of
Accounts listing each Account separately. The Schedule of Accounts shall be
in the form attached hereto as Exhibit "A," shall list the Accounts of only
one Seller and shall be signed by a person acting or purporting to act on
behalf of such Seller. There shall be no more than one Schedule of Accounts
submitted by each Seller each week unless Purchaser otherwise agrees in
writing. At the time the Schedule of Accounts is presented, the applicable
Seller shall also deliver to Purchaser one copy of an invoice for each
Account listed an such Schedule of Accounts, evidence of shipment of the
Merchandise covered by such invoice and a copy of the contract between such
Seller and the Account Debtor giving rise to such Account. All invoices
relating to Accounts shall plainly state on their face that amounts payable
thereunder are payable only to Purchaser at the remittance address set forth
below. Payment by Purchaser of the sum specified in paragraph 2(a) below
shall constitute acceptance of an Account by Purchaser at which time such
Account shall become an Eligible Account.
(e) Amy and all Eligible Accounts shall be purchased with full
recourse against Sellers, including but not limited to, recourse as to the
insolvency or other financial inability of the Account Debtor to pay. Any
Eligible Accounts not paid after ninety (90) days from invoice date shall be
repurchased by Sellers, by means of Sellers paying directly to Purchaser the
face amount of each such Eligible Account, Purchaser deducting such face
amount from the purchase price for the next Eligible Accounts purchased or
from the next Inventory Advance made hereunder or Purchaser charging such
face amount against the Reserve Accounts, as Purchaser may elect in its sole
discretion.
2. Purchase Price and Fees.
(a) Purchaser shall purchase an Eligible Account at a purchase price
equal to the face amount of such Eligible Account less the Reserve
Percentage (as defined in paragraph 4 below) of such face amount which shall
be credited to the applicable Reserve Account. The purchase price for any
Eligible Accounts shall be advanced by Purchaser to the applicable Seller on
the date of purchase as directed by such Seller. Sellers shall pay to
Purchaser a discount (the "Discount") for each Eligible Account purchased
hereunder equal to one-half of one percent (0.5%) of the face amount of the
Eligible Account in question; provided that the Discount for any Eligible
Account bearing terms in excess of the standard net 30-day terms shall be
increased by 1.00% for each additional 30 days or fraction thereof. The
Discount for an Eligible Account shall be due and payable on the earlier of
the ninetieth (90th) day after the related invoice date and the date on
which Purchaser collects such Eligible Account. Sellers hereby authorize
Purchaser to deduct any Discount payable hereunder from the purchase price
of Eligible Accounts or any Inventory Advance hereunder or to charge such
Discount against the Reserve Accounts or collections on the related Eligible
Account, as Purchaser elects at its sole discretion.
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(b) Sellers shall pay to Purchaser interest on the daily balance of
all sums (the "Advances") remitted, paid, or otherwise advanced by Purchaser
to Sellers or for Sellers' benefit (including but not limited to the
purchase price of Eligible Accounts purchased by Purchaser hereunder and the
outstanding principal balance of any Inventory Advances), net of all
payments received from Sellers' Account Debtors or otherwise received by
Purchaser on the Sellers' behalf which are credited to the Sellers' account.
Interest shall be charged on the Advances at a rate (the "Interest Rate"),
equal to the greater of (i) nine and one-half percent (9.5%) per annum and
(ii) the Prime Rate in effect from time to time plus two percent (2%) per
annum but in no event to exceed the maximum rate permitted by applicable
law. If the Prime Rate changes after the date hereof, the Interest Rate
shall be automatically increased or decreased, as the case may be, if
required hereunder, without notice to Sellers from time to time as of the
effective time of each change in the Prime Rate. Interest shall be due and
payable on the last day of each calendar month and may, in Purchaser's sole
discretion, be charged against the Reserve Accounts or other sums that may
be due to Sellers hereunder. As used herein, the term "Prime Rate" means
the rate as published from time to tune by The Wall Street Journal as the
base rate for corporate loans at large commercial banks (if more than one
such rate is published, the Prime Rate will be the higher or highest of the
rates published). If such rate is no longer published by The Wall Street
Journal, then Purchaser shall, in its sole discretion select the base or
prime rate for corporate loans at a large commercial bank as the "Prime
Rate." All interest accruing hereunder shall be calculated on the basis of
actual days elapsed (including the first day but excluding the last) plus
five (5) business days and a year of 360 days.
(c) In the event that the aggregate amount actually paid to Purchaser
pursuant to paragraph 2(a) as Discount (the "Discount Fee") during any
calendar month is less than $1,000 (the "Monthly Minimum Discount"), Sellers
shall pay to Purchaser additional Discount for such calendar month in an
amount equal to the Monthly Minimum Discount minus the aggregate Discount
Fee actually paid to Purchaser during such month. The additional fee payable
hereunder for any calendar month shall be due and payable within five
business days after the end of such calendar month. Sellers hereby
authorize Purchaser to deduct any such additional fee from the purchase
price for Eligible Accounts or any Inventory Advance or to charge any such
additional fee against the Reserve Accounts, as Purchaser elects at its sole
discretion.
(d) Sellers shall pay to Purchaser a liquidation fee ("Liquidation
Fee") in the amount of five percent of the face amount of each Eligible
Account outstanding at any time during a Liquidation Period (as defined
below). For purposes of this section, "Liquidation Period" means a period
beginning on the earliest date of (i) the commencement against or by either
Seller of any voluntary or involuntary case under the federal Bankruptcy
Code, (ii) the general assignment by either Seller for the benefit of its
creditors; (iii) the appointment or taking possession by a receiver,
liquidator, assignee, custodian or similar official of all or a substantial
part of either Seller's assets, or (iv) the cessation of business either of
Seller, and ending on the date on which Purchaser has actually received all
fees, costs, expenses and other amounts owing to it hereunder. The
Liquidation Fee shall be paid either by means of Purchaser charging the
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Liquidation Fee against the Reserve Accounts or by Sellers paying the amount
of the Liquidation Fee directly to Purchaser, as Purchaser may elect in its
sole discretion. The Liquidation Fee is in addition to any termination fee
provided for in paragraph 14. The Liquidation Fee shall be payable on the
earlier to occur of(i) the date on which Purchaser collects the applicable
Eligible Account and (ii) the ninetieth (90th) day from invoice date of the
Eligible Account.
(e) The parties hereto intend to contract in strict compliance with
applicable usury law from time to time in effect. In furtherance thereof,
the parties hereto stipulate and agree that none of the terms and provisions
contained in this Agreement shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of
the maximum amount of interest permitted to be charged by applicable law
from time to time in effect. Neither Sellers nor any present or future
guarantor or any other person hereafter becoming liable for the payment of
the obligations of Sellers hereunder shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess
of the maximum amount that may be lawfully charged under applicable law from
time to time in effect, and the provisions of this paragraph shall control
over all other provision of the Agreement which may be in conflict
therewith. If any indebtedness or obligation owed by the Sellers under this
Agreement is prepaid or accelerated and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or
Purchaser shall otherwise collect moneys which are determined to constitute
interest which would otherwise increase the interest on all or any part of
such obligations to an amounts in excess of that permitted to be charged by
applicable law then in effect, then all such sums determined to constitute
interest in excess of such legal limit shall, without penalty, be promptly
applied to reduce the then outstanding principal of the related indebtedness
or obligations or, at Purchaser's option returned to the Sellers or the
other payor thereof upon such determination. In determining whether or not
any amount paid or payable, under any circumstance, exceeds the maximum
amount permitted under applicable law, Sellers and the Purchaser shall to
the greatest extent permitted under applicable law, characterize any non-
principal payment as an expense, fee or premium rather than as interest and
amortize, prorate, allocate and spread the total amount of interest
throughout the entire contemplated term of this Agreement in accordance with
the amounts outstanding from time to time hereunder and the Maximum Rate
from time to time in effect under applicable law in order to lawfully charge
the maximum amount of interest permitted under applicable law. If at any
time the rate at which interest is payable hereunder exceeds the Maximum
Rate, the amount outstanding hereunder shall bear interest at the Maximum,
Rate only, but shall continue to bear interest at the Maximum Rate until
such time as the total amount of interest accrued hereunder equals (but does
not exceed) the total amount of interest which would have accrued hereunder
had there been no Maximum Rate applicable hereto. In the event applicable
law provides for an interest ceiling under Chapter 1D of the Texas Credit
Title, that ceiling shall be the indicated (weekly) rate ceiling and shall
be used when appropriate in determining the maximum rate permitted by
applicable law. As used in this paragraph, (i) the term "applicable law"
means the laws of the State of Texas or the laws of the United States of
America, whichever laws allow the greater interest, as such laws now exist
or may be changed or amended or come into effect in the future, and (ii) the
term "Maximum Rate" means, at the time of determination, the maximum rate of
interest which, under applicable law, may then be charged hereunder. The
parties agree that this Agreement shall not be subject to Chapter 346 of the
Texas Finance Code.
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3. Transfer. Upon Purchaser's acceptance of each Eligible Account,
Purchaser shall be the sole owner and holder of such Eligible Account and
the Related Rights relating thereto. Sellers hereby sell, transfer, convey
and assign to Purchaser all their right, title and interest in and to each
Eligible Account together with all Related Rights, effective at the time of
acceptance thereof by Purchaser. Sellers agree to execute and deliver to
Account Debtors obligated under Eligible Accounts such written notices of
sale of the Eligible Accounts as Purchaser may request.
4. Reserve Accounts. Purchaser shall create and maintain a reserve
account for each Schedule of Accounts (each a "Reserve Account" and
collectively the "Reserve Accounts") in the amount of fifteen percent (15%)
(the "Reserve Percentage") of the face amount of the Eligible Accounts
listed on such Schedule of Accounts out of any payments or credits otherwise
to be made to Purchaser with respect to such Eligible Accounts, subject to
adjustment as hereinafter provided. Purchaser may increase the Reserve
Percentage from time to time with notice to Sellers if in Purchaser's sole
discretion the dilution experienced by Sellers with respect to the Accounts
or other factors adversely affecting the value or collectibility of the
Accounts or other Collateral justify such increase. In no event shall the
aggregate amount of the Reserve Accounts for all Schedules of Accounts at
any time equal less than the Reserve Percentage of the Eligible Accounts
remaining unpaid. Purchaser may charge against the Reserve Accounts any
amount for which Sellers may be obligated to Purchaser at any time, whether
under the terms of this Agreement, or otherwise, including but not limited
to any damages suffered by Purchaser as a result of Sellers' breach of any
provision of paragraph 5 hereof (whether intentional or unintentional), any
losses (under only one or more Schedules of Accounts) due to an Account
Debtor's insolvency or other financial inability to pay or any Disputes
pursuant to paragraph 5(e) hereof, any Adjustments or other amounts due
under paragraph 16 hereof and any attorneys' fees and disbursements due
under paragraph 17 hereof. Sellers recognize that the balances in the
Reserve Accounts represent bookkeeping entries and not cash funds. It is
further agreed that with respect to the balances in the Reserve Accounts.
Purchaser is authorized to withhold such payments and credits otherwise due
to Sellers under the terms of this Agreement for reasonably anticipated
claims such as, for example, chargebacks or credits against Sellers for
Account Debtor claims. A Reserve Account shall be calculated and maintained
on each Schedule of Accounts, and the amount remaining in the Reserve
Account for a Schedule of Accounts shall be paid to the applicable Seller on
the first to occur of the 10th or 25th day of any calendar month following
the time when all Accounts listed on such Schedule of Accounts have been
collected or Purchaser has, in its sole discretion, determined that it will
make no further efforts to collect the Accounts listed on such Schedule of
Accounts, provided that (i) there is a positive balance in the Reserve
Account for such Schedule of Accounts, (ii) no Event of Default or an event
that, with the giving of notice, the passage of time or both, would
constitute an Event of Default has occurred and is continuing, (iii) Sellers
have not ceased selling Accounts to Purchaser, and (iv) the balances in the
Reserve Accounts for all Schedules of Accounts on an aggregate basis shall
not be less than the Reserve Percentage of the Eligible Accounts outstanding
after payment of such remaining amount, and (v) the outstanding principal
balance of any Inventory Advances then outstanding does not exceed the
Borrowing Base (as defined in paragraph 4.A). If an Event of Default or an
event that, with the giving of notice, the passage of time or both, would
constitute an Event of Default has occurred and is continuing, or, in the
event Sellers shall cease selling Accounts to Purchaser, Purchaser shall not
<PAGE>
disburse any amounts in the Reserve Accounts until all Accounts listed on
each Schedule of Account have been collected or Purchaser has determined, in
its sole-discretion, that it will make no further efforts to collect any
Accounts listed on any Schedules of Accounts and all sums due Purchaser
hereunder have been paid. Purchaser shall make available to Sellers,
through Purchaser's computer link capabilities or otherwise, within 15 days
of the close of the preceding calendar month, a summary or statement of
Sellers' account, prepared from Purchaser's records, which will conclusively
be deemed correct and accepted by Sellers unless Sellers give Purchaser a
written statement of exceptions within 30 days after receipt of such extract
or statement.
4.A Inventory Advances
(a) Subject to the terms of this Agreement, including, without
limitation, Section 4.A(g), Purchaser shall make advances to I-Con
Industries, Inc. ("I-Con") (each an "Inventory Advance" and collectively the
"Inventory Advances") from time to time during the Term; provided, however,
that the aggregate principal amount of Inventory Advances outstanding at any
time shall not exceed the lesser of the (i) Borrowing Base determined by
Purchaser from time to time and (ii) the Inventory Commitment. I-Con shall
not be entitled to request more than one Inventory Advance during any
calendar week, and each Inventory Advance must be greater than or equal to
$5,000 or must equal the unadvanced portion of the Borrowing Base. Sellers
hereby agree to repay to Purchaser all Inventory Advances made to I-Con,
hereunder, together with interest thereon, in the manner provided herein.
The principal owing hereunder in respect of the Inventory Advances at any
given time shall equal the aggregate amount of Inventory Advances made
hereunder minus all principal payments thereon received by Purchaser
hereunder. Subject to the terms and conditions hereof, I-Con may borrow,
repay and reborrow under this Inventory Commitment.
(b) Each request by I-Con to Purchaser for an Inventory Advance
hereunder must be in writing or promptly confirmed in writing. Each such
written request or confirmation shall be accompanied by a "Borrowing Base
Certificate" in the form attached hereto as Exhibit "B," together with a
schedule of Eligible Inventory, setting forth the location of all such
Inventory, including Eligible Inventory not in the possession of I-Con and
the name of the person or entity in possession thereof and such other
information as Purchaser shall request.
(c) Promptly after receiving each Borrowing Base Certificate,
Purchaser shall, based upon such Borrowing Base Certificate and such other
information available to Purchaser, redetermine the Borrowing Base, which
redetermination shall take effect immediately and remain in effect until the
next such redetermination. If all conditions precedent to any Inventory
Advance requested have been met, Purchaser will on the date requested make
such Inventory Advance available to I-Con by wire transfer to the account
designated in writing by I-Con. In the event Purchaser does not receive an
appropriately completed Borrowing Base Certificate, Purchaser shall have no
obligation to redetermine the Borrowing Base or make any additional
Inventory Advances hereunder.
<PAGE>
(d) If the aggregate unpaid principal balance of the Inventory
Advances exceeds the Borrowing Base at any time, Sellers shall, upon receipt
of notice thereof from Purchaser immediately repay the principal amount of
the Inventory Advances in an amount at least equal to such excess. At
Purchaser's election, it may require Sellers to pay any such excess directly
to Purchaser, deduct any such excess from the purchase price of the next
Eligible Accounts purchased hereunder or deduct such excess from the Reserve
Accounts or any other amounts due to Sellers hereunder. Any principal
repaid pursuant to this Section 4.A(d) shall be in addition to, and not in
lieu of, all payments otherwise required to be paid under this Agreement.
(e) The aggregate unpaid principal balance of the Inventory
Advances plus all accrued but unpaid interest thereon shall be payable by
Sellers to Purchaser on demand, or if no demand is made, on the last day of
the Term.
(f) As used herein, the term "Borrowing Base" shall mean an
amount, determined by Purchaser from time to time in its sole discretion,
equal to the lesser of (a) the Eligibility Percentage of the face amount of
Eligible Accounts then outstanding or (b) 100% of the value of Eligible
Inventory, valued at the lower of cost or market. As used herein, the term
"Eligible Inventory" shall mean, at the time of determination, all raw
materials that are part of I-Con's Inventory, that (i) are owned by I-Con,
are located in the United States of America and, if located on leased or
mortgaged premises, are subject to the terms of a lien waiver letter
executed by the landlord or mortgagee of such premises if deemed necessary
by Purchaser in its sole discretion, (ii) are ready for sale, and are not,
in the opinion of Purchaser, damaged, obsolete or otherwise not readily
salable at full value, (iii) have been held in Inventory for not more than
365 days, (iv) are not on lease or consignment or furnished under any
contract of service from or to any person or entity, (v) are subject to an
enforceable, first priority, perfected security interest in favor of
Purchaser, (vi) are not the subject of an invoice giving rise to an Eligible
Account, and (vii) have been approved by Purchaser, in its sole and absolute
discretion, for inclusion in the Borrowing Base. As used herein, the term
"Eligibility Percentage" shall mean 10% initially, but such percentage shall
be decreased by the amount of any increase in the Reserve Percentage
pursuant to Section 4. As used herein, the term "Inventory" shall mean all
goods, now owned or hereafter acquired by I-Con, wherever located, that are
held for sale or lease or are to be furnished under any contract of service
(including, but not limited to raw materials, work in process, finished
goods and materials used or consumed in the manufacture or production
thereof, goods in which I-Con has an interest in mass or a joint or other
interest or rights of any kind, and goods which have been returned to or
repossessed or stopped in transit by I-Con). As used herein, the term
"Inventory Commitment" shall mean $75,000.
(g) Purchaser shall not be obligated to make any Inventory
Advance hereunder (including the first), unless: (i) all representations and
warranties made by Sellers in this Agreement are true on and as of the date
of such Inventory Advance as if such representations and warranties had been
made as of the date of such Inventory Advance, (ii) Sellers have performed
and complied with all agreements and conditions required in this Agreement
to be performed or complied with by it on or prior to the date of such
Inventory Advance, (iii) no Event of Default or any event or circumstance
that, with the passage of time, the giving of notice or both, would become
an Event of Default shall have occurred, (iv) such Inventory Advance shall
not be prohibited by any law or any regulation or any order of any court or
<PAGE>
governmental agency or authority, (v) Sellers shall have not repudiated or
made any anticipatory breach of any of their obligations under this
Agreement, (vi) Gehan Investments, Inc. shall have delivered to Purchaser a
landlord waiver subordinating its interest in the Collateral to Purchaser's
security interest therein, (vii) all conditions to the purchase of Eligible
Accounts contained Th paragraph 1(b) shall have been satisfied, (viii)
Sellers shall have implemented a perpetual inventory tracking system
satisfactory to Purchaser in its sole and absolute discretion and otherwise
shall maintain books and records and management procedures relating to its
Inventory satisfactory to Fidelity in its sole and absolute discretion, and
(ix) Purchaser shall have approved such Inventory Advance in its sole
discretion.
5. Sellers' Representations and Covenants. Sellers represent,
warrant and covenant to Purchaser that:
(a) Each Seller is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation and is
qualified and authorized to do business and is m good standing in all states
in which such qualification and good standing are necessary or desirable.
The execution, delivery and performance by each Seller of this Agreement do
not and will not constitute a violation of any applicable law or the
articles of incorporation or bylaws of such Seller or any material breach of
any other document, agreement or instrument to which Seller is a party or by
which such Seller is bound. This Agreement is a legal, valid and binding
obligation of each Seller enforceable against it in accordance with its
terms.
(b) Immediately prior to the execution and delivery of each Schedule
of Accounts, the related Seller will be the sole owner and holder of, and
will have good and marketable title to, each of the Accounts described
thereon and the Related Rights relating thereto, free and clear of all
liens, security interests and other adverse claims. Upon Purchaser's
acceptance of each Eligible Account, it shall become the sole owner and
holder of, and will have good and marketable title to, such Eligible Account
and the Related Rights relating thereto, free and clear of all liens,
security interests and other adverse claims. I-Con is the sole owner of all
Eligible inventory and has good and marketable title thereto free and clear
of all liens, security interests and other adverse claims.
(c) No Eligible Account or other Collateral shall be subject to any
lien, encumbrance, security interest or other claim of any kind or nature.
Sellers will not transfer, pledge or give a security interest in any of
their Accounts to anyone other than Purchaser. Sellers will not factor or
sell any of its Accounts except to Purchaser. There are no financing
statements now on file in any public office governing any property of
Sellers of any kind, real or personal, in which any Seller is named in or
has signed as the debtor, except the financing statement or statements filed
or to be filed in respect of this Agreement or those statements on file as
of the date of this Agreement that have been disclosed in writing by Sellers
to Purchaser. Neither Seller will execute any financing statement in favor
of any other person or entity, other than Purchaser, during the Term.
<PAGE>
(d) The amount of each Eligible Account is due and owing to the
applicable Seller and represents an accurate statement of a bona fide sale,
delivery and acceptance of Merchandise or performance of service by such
Seller to or for an Account Debtor. The terms for payment of Eligible
Accounts are 30 days from date of invoice and the payment of such Eligible
Accounts is not contingent upon the fulfillment by the applicable Seller of
any further performance of any nature whatsoever. Each Account Debtors
business is solvent to the best of Sellers' knowledge.
(e) There are and shall be no set-offs, allowances, discounts,
deductions, counterclaims, or Disputes with respect to any Eligible Account,
either at the time it is accepted by Purchaser for purchase or prior to the
date it is to be paid. "Dispute," as used in the last preceding sentence,
shall mean any claim by an Account Debtor against either Seller, of any kind
whatsoever, valid or invalid, that is asserted by the Account Debtor as a
basis for refusing to pay an Eligible Account either in whole or in part.
Sellers agree to inform Purchaser in writing immediately upon learning that
there exists or may exist any Account which is subject to any contra account
charge back, credit consignment, right to return merchandise, or other
matter which diminishes or may diminish the dollar amount or timely
collection of such Account. Sellers shall accept no returns and shall grant
no allowance or credit to any Account Debtor without notice to and the prior
written approval of Purchaser. Sellers shall provide to Purchaser for each
Account Debtor on Eligible Accounts that have been purchased, a weekly
report in form and substance satisfactory to Purchaser itemizing all such
returns and allowances made during the previous week with respect such
Eligible Accounts and a check (or wire transfer) payable to Purchaser for
the amount thereof.
(f) The address set forth below Sellers' signature hereon is, and for
at least the past six months has been, Sellers' mailing address, their chief
executive office and principal place of business. The street and other
business addresses set forth below Sellers' signature hereon are, and for at
least the past six months have been, the offices where all of the books and
records concerning the Eligible Accounts are maintained and the location of
all Collateral. Sellers shall not change their mailing address, chief
executive office, principal place of business or place where such records
are maintained or the Collateral is kept without 30 days prior written
notice to Purchaser. Neither Seller has been a party to a merger or
consolidation with or acquired all or substantially all of the assets of any
person or entity during the past five years.
(g) Sellers shall maintain their books and records in accordance with
generally accepted accounting principles and shall reflect on its books the
absolute sale of the Eligible Accounts and the Related Rights to purchaser.
Sellers shall furnish Purchaser, upon request, such information and
statements as Purchaser shall request from time to time regarding Sellers'
business affairs, financial condition and results of its operations. Without
limiting the generality of the foregoing, Sellers shall provide Purchaser,
on or prior to the 30th day of each month, unaudited consolidated and
consolidating financing statements with respect to the prior month and,
within 90 days after the end of each of Sellers' fiscal years, monthly
annual reviewed consolidated and consolidating financial statements and such
certificates relating to the foregoing as Purchaser may request including,
without limitation, a monthly certificate from the president and chief
financial officer of Sellers stating whether any Events of Default have
occurred and stating in detail the nature of the Events of Default. Sellers
<PAGE>
will furnish to Purchaser on or before the last day of each month and at
such other times as Purchaser shall request a current month end listing of
all open and unpaid accounts payable and accounts receivable, and such other
items of information that Purchaser may deem necessary or appropriate from
time to time. Unless otherwise expressly provided herein or unless Purchaser
otherwise consents, all financial statements and reports furnished to
Purchaser hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with generally
accepted accounting principles, consistently applied. Sellers shall deliver
to Purchaser a Borrowing Base Certificate, with all supporting
documentation, at least once each calendar week and at such other times as
Purchaser shall request.
(h) Purchaser shall have the right, at any time, and from time to
time, to audit Sellers' books, records and operations during normal business
hours. Sellers shall pay all costs associated with such audits which shall
be $700 per day per person plus reasonable out-of-pocket expenses.
(i) Sellers have paid and will pay all taxes and governmental charges
imposed with respect to sales of the Merchandise and furnish to Purchaser
upon request satisfactory proof of payment and compliance with all federal,
state and local tax requirements.
(j) Sellers will promptly notify Purchaser of (i) the filing of any
lawsuit against either Seller involving amounts greater than $10,000 and
(ii) any attachment or any other legal process levied against either Seller.
(k) Each Seller has served or caused to be served any and all
preliminary notices required by law to perfect or enforce any mechanic's
liens or stop notice or bonded stop notice for the Eligible Accounts and the
information contained in those notices is true and correct to the best of
Sellers' knowledge. Waivers and releases for all labor, services, equipment
or material of Sellers and others will be submitted on Purchaser's form
concurrently with each Schedule of Accounts.
(l) The application ("Application") made by Sellers in connection
with this Agreement, and the statements made therein are true and correct at
the time that this Agreement is executed. There is no fact which either
Seller has not disclosed to Purchaser in writing which could materially
adversely affect the properties, business or financial condition of Sellers,
or any of the Eligible Accounts or Collateral, or which it is necessary to
disclose in order to keep the foregoing representations and warranties from
being misleading.
(m) Sellers are engaged primarily in commercial, manufacturing or
industrial pursuits In no event shall the finds paid to Sellers hereunder
be: used or indirectly for consumer personal, family, household or
agricultural purposes, but shall be used solely for business or investment
activities.
(n) Sellers do not do business, and for the past five years have not
done business, under any trade or assumed name except as indicated below:
NONE.
(o) Sellers shall not merge or consolidate with or transfer or assign
all or substantially all of its assets and properties to any person or
entity without Purchasers prior written consent.
<PAGE>
(p) Sellers shall not repay the principal amount of any debt owed by
Seller to Touchstone Enterprises, Inc., Winterstone Management, Inc., or
Associates Funding Group, Inc., without the prior written consent of
Purchaser.
6. Notice of Purchase. Sellers shall execute and deliver to
Purchaser and/or file at such times and places as Purchaser may designate
such financing statements, continuations thereof and amendments thereto as
are necessary or desirable to give notice of Purchaser's purchase of the
Eligible Accounts under the Uniform Commercial Code in effect in any
applicable jurisdiction.
7. Collateral. In order to secure the payment of all indebtedness
and obligations of Sellers to Purchaser, whether presently existing or
hereafter arising, each Seller hereby grants to Purchaser a security
interest in and lien upon all of such Seller's right, title and interest in
and to (a) the Reserve Accounts and all payments (if any) due or to become
due to such Seller from the Reserve Accounts; (b) all accounts, contract
rights, general intangibles, receivables and claims whether now existing or
hereafter arising, all guaranties and security therefor and all of such
Seller's right title and interest in the goods purchased and represented
thereby, if any, including all of such Seller's rights in and to returned
goods and rights of stoppage in transit, replevin and reclamation as unpaid
vendor; (c) all Inventory, wherever located and whether now or hereafter
existing, and all accessions thereto and products thereof and documents
therefor; (d) all machinery and equipment, wherever located and whether now
or hereafter existing, and all parts thereof, accessions thereto, and
replacements therefor and all documents and general intangibles covering or
relating thereto; (e) all books and records pertaining to the foregoing,
including but not limited to computer programs, data and lists; and (f) all
proceeds of the foregoing (collectively, the "collateral"). Sellers agree to
comply with all appropriate laws in order to perfect Purchaser's security
interest in and to the Collateral, to execute any financing statements,
continuations thereof, amendments thereto or additional documents as
Purchaser may require, to deliver to Purchaser a list of all locations of
its inventory and equipment and to obtain any landlord or mortgagee lien
waivers that Purchaser may require. Each Seller shall provide written
notice to Purchaser of any change in the locations at which the keeps its
inventory and equipment at least 30 days prior to any such change. To
induce Purchaser to make a loan of $1,150,000 to BC&Q Corp. pursuant to the
BC&Q Loan Agreement (as hereinafter defined), I-Con guaranteed, such loan
pursuant to the General Continuing Guarantee (as amended, supplemented or
modified from time to time, the "Guarantee"), dated October 22, 1997, from
I-Con in favor of Purchaser and granted to Purchaser a lien on and security
interest in the Collateral to secure the Guarantee pursuant to the Security
Agreement (as amended, supplemented or modified from time to time, the
"Security Agreement"), dated as of October 22, 1997, from I-Con in favor of
Purchaser. It is expressly agreed that the security interest granted to
Purchaser under the this Agreement shall secure I-Con's obligations to
Purchaser under the Guarantee and the Security Agreement. Purchaser hereby
is authorized to pay to itself any amount required to be paid by Purchaser
to Sellers hereunder, whether as the Purchase Price of Eligible Accounts, an
Inventory Advance, a Reserve Account disbursement or otherwise, to be
applied to the payment of any amounts then due by I-Con to Purchaser under
the Guarantee or the Security Agreement. From time to time, upon the written
request of either Seller and so long as no Event of Default or event or
<PAGE>
circumstance that would, with the giving of notice, the passage of time or
both, constitute an Event of Default, has occurred, the Purchaser shall
release from the lien and security interest created hereby any specific item
of machinery or equipment constituting a part of the Collateral and used by
such Seller as security for obtaining a loan or other financial
accommodations from and the lender.
8. Collection.
(a) Sellers shall notify all Account Debtors and take other necessary
or appropriate means to insure that all of Sellers' Accounts, whether or not
purchased by Purchaser, shall be paid directly to Purchaser at the
remittance address set forth below. After collection by Purchaser, all
payments on Collateral shall be promptly remitted to Sellers, subject to and
following the exercise of Purchaser's rights therein as a secured party and
its rights to offset any sums then owing by Sellers hereunder
(b) Purchaser, as the sole and absolute owner of the Eligible
Accounts purchased hereunder, shall have the sole and exclusive power and
authority to collect each such Eligible Account, through legal action or
otherwise, and Purchaser may, in its sole discretion, settle, compromise, or
assign (in whole or in part) any of such Eligible Accounts, or otherwise
exercise any other right now existing or hereafter arising with respect to
any of such Eligible Accounts. If either Seller receives payment of all or
any portion of any Eligible Accounts or other Account, such Seller shall
notify Purchaser immediately and shall hold all checks and other instruments
so received in trust for Purchaser and immediately shall deliver to
Purchaser such checks and other instruments in the form received with any
necessary endorsements.
(c) Purchaser shall have the right at any time, either before or
after the occurrence of an Event of Default and without notice to Sellers,
to notify any or all Account Debtors on the Eligible Accounts and the other
Collateral of the assignment thereof to Purchaser and to direct such Account
Debtors to make payment of all amounts due or to become due to Sellers
directly to Purchaser, and to the extent permitted by law, to enforce
collection thereof and to adjust, settle or compromise the amount or payment
thereof Payments received by Purchaser may, at the sole discretion of
Purchaser, be applied by Purchaser to the payment of the indebtedness and
obligations of Sellers to Purchaser or held as cash collateral for such
indebtedness and obligations. All amounts and proceeds (including
investments and writings) received by Sellers in respect of the Collateral
shall be received in trust for the benefit of Purchaser hereunder, shall be
segregated from other funds of Sellers and immediately shall be paid over to
Purchaser in the same form as so received (with any necessary endorsement)
to be applied in the same manner as payments received directly by Purchaser.
9. Power of Attorney. Each Seller grants to Purchaser an irrevocable
power of attorney authorizing and permitting Purchaser, at its option with
or without notice to such Seller to do any or all of the following:
(a) Endorse the name of such Seller on any checks or other evidences
of payment whatsoever that may come into the possession of Purchaser
regarding Eligible Accounts or Collateral, including checks received by
Purchaser pursuant to paragraph S hereof;
(b) Receive, open and dispose of any mail addressed to such Seller
and put Purchaser's address on any statements mailed to Account Debtors,
<PAGE>
(c) Pay, settle, compromise, prosecute or defend any action, claim,
conditional waiver and release, or proceeding relating to Eligible Accounts
or Collateral;
(d) Upon the occurrence of an Event of Default, notify in the name of
such Seller, the U.S. Post Office to change the address for delivery of mail
addressed to such Seller to such address as Purchaser may designate
(provided that Purchaser shall turn over to such Seller all such mail not
relating to Eligible Accounts or Collateral);
(e) Verify, sign, acknowledge, record, file for recording, serve as
required by law, any claim of mechanic's lien, stop notice or bonded stop
notice in the sole and absolute discretion of Purchaser relating to any
Eligible Account or Collateral;
(f) Insert all recording or service information in any mechanic's
lien or assignment of rights under stop notice/bonded stop notice which such
Seller has signed in connection with this Agreement, recorded or served to
enforce payment of the Eligible Accounts or Collateral;
(g) Execute and file on behalf of such Seller any financing statement
deemed necessary or appropriate by Purchaser to protect Purchaser's interest
in and to the Eligible Accounts or Collateral, or under any provision of
this Agreement; and
(h) To do all other things necessary and proper in order to carry out
this Agreement. The authority granted to Purchaser herein is irrevocable
until this Agreement is terminated and all amounts owed to Purchaser
hereunder are fully satisfied.
10. Default and Remedies. An event of default ("Event of Default")
shall be deemed to have occurred hereunder and Purchaser shall have no
further obligation to purchase Accounts and may immediately exercise its
fights and remedies with respect to the Eligible Accounts and the Collateral
under this Agreement, the Uniform Commercial Code, and applicable law, upon
the happening of one or more of the following:
(a) Either Seller shall fail to pay when due any amount owed to
Purchaser, whether arising hereunder or otherwise;
(b) There shall be commenced by or against either Seller any
voluntary or involuntary case under the federal Bankruptcy Code, or any
assignment shall be made by either Seller for the benefit of its creditors,
or there shall be appointment of a receiver or custodian for a substantial
portion of either Seller's assets;
(c) Either Seller shall become insolvent in that its debts are
greater than the fair value of its assets, or either Seller is generally not
paying its debts as they become due;
(d) Any involuntary lien, garnishment, attachment or the like shall
be issued against or shall attach to the Eligible Accounts, the Eligible
Inventory, the Collateral, any other assets of either Seller or any portion
thereof;
<PAGE>
(e) Either Seller shall suffer the entry against it of a final
judgment for the payment of money in excess of $25,000, unless the same is
discharged within 30 days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period and a
stay of execution pending such appeal is obtained;
(f) Either Seller shall breach any covenant or agreement made by it
herein;
(g) Any warranty or representation set forth herein shall be untrue
when made or any report, certificate, schedule, financial statement, profit
and loss statement or other statement furnished by either Seller, or by any
other person on behalf of either Seller, to Purchaser is not true and
correct furnished;
(h) Either Seller shall have a federal or state tax lien filed
against any of its properties, or either Seller shall fail to pay any
federal or state tax when due, or either Seller shall fail to file any
federal or state tax form when due;
(i) In Purchaser's sole judgment, a material adverse change shall
have occurred in either Seller's financial condition, business or operations
or the value of the Collateral; or
(j) In Purchaser's sole judgment, the prospect for payment of any
amounts due to it hereunder shall have become impaired.
(k) Either Seller shall have ceased the operation of its business.
(l) A default or an event of default shall have occurred under any
instrument or agreement relating to, securing, creating or evidencing debt
owed by I-Con to Winterstone Management, Inc., Touchstone Enterprises, Inc.
or Associates Funding Group, Inc., any such debt shall have been accelerated
or called due prior to maturity.
(m) An "event of default" shall have occurred under the Security
Agreement or the Loan and Security Agreement (as amended, supplemented or
modified from time to time, the "BC&Q Loan Agreement"), dated as of October
22, 1997, between BC&Q Corp. and Purchaser, or the indebtedness evidenced by
the Guarantee or the BC&Q Loan Agreement shall have been accelerated.
Upon the occurrence of an Event of Default described in clauses (5) or (c)
of this Section 10, Sellers immediately shall repurchase from Purchaser all
outstanding Eligible Accounts purchased by Purchaser from Sellers hereunder
at a price equal to the aggregate face amount thereof and shall pay to
Purchaser all other amounts owing by Sellers to Purchaser hereunder, whether
or not then due, including, without limitation, the outstanding principal
balance of all Inventory Advances and accrued but unpaid interest thereon,
all without demand, presentment, notice of demand or of dishonor and
nonpayment, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Sellers. During the continuation of any other
Event of Default, Purchaser, at any time, may require Sellers to (and
Sellers shall) repurchase from Purchaser all outstanding Eligible Accounts
purchased by Purchaser from Sellers hereunder at a price equal to the
aggregate face amount thereof and pay to Purchaser all other amounts owing
by Sellers to Purchaser hereunder, whether or not then due, including,
without limitation, the outstanding principal balance of all Inventory
<PAGE>
Advances and accrued but unpaid interest therein, all without notice,
demand, presentment, notice of demand or of dishonor and nonpayment, or any
notice or declaration of any kind, all of which are hereby expressly waived
by Sellers. In addition to, and without limitation of, the foregoing
provisions of this Agreement, if an Event of Default shall have occurred and
be continuing, Purchaser may from time to time in its discretion, without
limitation and without notice except as expressly herein: (a) exercise in
respect of the Collateral, in addition to other rights and remedies provided
for herein, or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code (the "UCC")
(whether or not the IJCC applies to the affected Collateral); (5) require
Sellers to, and Sellers hereby agree that they will at their expense,
assemble all or part of the Collateral as directed by Purchaser and make it
available to Purchaser at a place to be designated by Purchaser; (c) reduce
its claim to judgment or foreclose. or otherwise enforce, in whole or in
part, the security interest created hereby by any available judicial
procedure; (d) dispose of, at its office, on the premises of Sellers or
elsewhere, all or any part of the Collateral, as a unit or in parcels, by
public or private proceedings; (e) buy the Collateral, or any part thereof,
at any public sale, or at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type that is the subject
to widely distributed standard price quotations; (f) apply by appropriate
judicial proceedings for appointment of a receiver for the Collateral, or
any part thereof, and Sellers hereby consent to any such appointment; and
(g) at its discretion, retain the Collateral in satisfaction of the
obligations due Purchaser hereunder whenever the circumstances are such that
Purchaser is entitled to do so under the UCC or otherwise. Sellers agree
that, to the extent notice of sale shall be required by law, at least five
days' notice to Sellers of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Purchaser shall not be obligated to make any sale of
Collateral regardless of whether any notice of sale has been given.
Purchaser may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. If any Event of Default shall have occurred and be continuing,
Purchaser may in its discretion apply any cash proceeds received by
Purchaser in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in
such order as Purchaser may elect: (a) the repayment of all or any portion
of the obligations owed to Purchaser by Sellers, whether hereunder or
otherwise; (5) the repayment of reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Purchaser
(whether or not litigation has been commenced or a judgment has been issued,
and if litigation has been commenced, whether at trial or any appellate
level) in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, of the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement
of any of the rights of Purchaser hereunder, or (iv) the failure of Sellers
to perform or observe any of the provisions hereof; (c) the payment or other
satisfaction of any liens and other encumbrances upon any of the Collateral;
(d) the reimbursement of Purchaser for the amount of any obligations of
Sellers paid or discharged by Purchaser, and of any expenses of Purchaser
payable by Sellers hereunder; (e) by holding the same as Collateral; (f) the
payment of any other amounts required by applicable law (including, without
limitation, Part 5 of Article 9 of the UCC or any successor or similar
applicable statutory provision); and (g) by delivery to Sellers or to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
<PAGE>
11. Equitable Relief. In the event that either Seller commits any act
or omission which prevents or unreasonably interferes with: (a) Purchasers
exercise of the rights and privileges arising under the power of attorney
granted in paragraph 9 of this Agreement; or (5) Purchaser's perfection of
or levy upon the security interest granted in the Collateral, including any
seizure of any Collateral, such conduct will cause immediate, severe,
incalculable and irreparable harm and injury, and shall constitute
sufficient grounds to entitle Purchaser to an injunction, writ of
possession, or other applicable relief in equity, and to make such
application for such relief in any court of competent jurisdiction, without
any prior notice to either Seller.
12. Cumulative Rights; Waivers. All rights, remedies and powers
granted to Purchaser in this Agreement, or in any other instrument or
agreement given by Sellers to Purchaser or otherwise available to Purchaser
in equity or at law, are cumulative and may be exercised singularly or
concurrently with such other rights as Purchaser may have. These rights may
be exercised from time to time as to all or any part of the Eligible
Accounts purchased hereunder or the Collateral as Purchaser in its
discretion may determine. In the event that the transaction between Sellers
and Purchaser is construed to be a loan from Purchaser to Sellers, such loan
shall be secured by the Eligible Accounts and the Collateral and Purchaser
shall have all rights and remedies available to a lender in addition to its
rights and remedies hereunder. Purchaser may not waive its rights and
remedies unless the waiver is in writing and signed by Purchaser. A waiver
by Purchaser of a right or remedy under this Agreement on one occasion is
not a waiver of the right or remedy on any subsequent occasion.
13. Notices. Any notice or communication with respect to this
Agreement shall be given in writing, sent by (i) personal delivery, or (ii)
expedited delivery service with proof of delivery, or (iii) United States
mail, postage prepaid, registered or certified mail, or (iv) prepaid
telegram, telex or telecopy, addressed to each party hereto at its address
set forth below or to such other address or to the attention of such other
person as hereafter shall be designated in writing by the applicable party
sent in accordance herewith. Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery service or mail, as of the date of first attempted deliver
at the address and in the manner provided herein, or m the case of telegram,
telex or telecopy, upon receipt. Sellers hereby agree that Purchaser may
publicize the financing transaction contemplated by this Agreement in
newspapers, trade and similar publications including, without limitation,
the publication of a "tombstone".
14. Term. The term of this Agreement shall expire on August 27, 2000
(the "Original Term"); provided that the term of this Agreement shall be
extended automatically for an additional year and for each succeeding year
unless written notice determination is given by one party hereto to the
other party hereto at least sixty (60) days, but no more than ninety (90)
days, prior to the end of the Term or any extension thereof (the Original
Term and any extensions thereof are herein referred to as the "Term"). In
the event that during the Term this Agreement is terminated for any reason,
Sellers shall pay to Purchaser an early termination fee in an amount equal
to (a) six percent (6%) of the sum of the Commitment and the Inventory
Commitment, if this Agreement is terminated during the first year of the
Term, (b) four percent (4%) of the sum of the Commitment and the Inventory
Commitment if this Agreement is terminated during the second year of the
Term, and (c) two percent (2%) of the sum of the Commitment and the
<PAGE>
Inventory Commitment, if this Agreement is terminated thereafter during the
Term (but in no event shall any such early termination fee exceed the
maximum amount permitted by applicable law). Any termination of this
Agreement shall not affect Purchaser's security interest in the Collateral
and Purchasers ownership of the Eligible Accounts and the Related Rights,
and this Agreement shall continue to be effective, until all transactions
entered into and obligations incurred hereunder have been completed and
satisfied in full.
15. Right of First Offer. Sellers hereby agree that in the event
either Seller receives an offer during the Term from a third party to
provide financing or factoring to such Seller, which offer such Seller
intends to accept, Sellers shall require the offeror to reduce such offer to
a written commitment (the "new commitment"). In addition, Sellers will (i)
notify Purchaser in writing of the identity of the offeror of the
commitment and the complete terms of the new commitment and (ii) if, within
30 days after its receipt of such notice, (which shall be accompanied by a
copy of the new commitment), Purchaser elects, in its sole discretion, to
offer to terminate this Agreement and match the new commitment, accept
Purchaser's offer.
16. Charges; Indemnification. Sellers shall pay to Purchaser its
normal and customary charges for the following items in connection with the
transactions contemplated hereby: long-distance telephone charges,
reasonable travel expenses, copying, legal fees incurred in collecting the
Accounts or enforcing this Agreement, postage, credit reports, lock box
charges, wire transfers, overnight mail delivery, UCC and tax lien searches
and filing fees ("Adjustments"). Sellers hereby indemnify and agree to hold
harmless and defend Purchaser and Purchaser's officers, directors,
shareholders, affiliates, agents, employees and attorneys (collectively, the
"Indemnified Persons") from and against any and all claims, demands,
actions, causes of action, judgments, liabilities, damages and consequential
damages, penalties, fines, costs, fees, expenses and disbursements
(including, without limitation, fees and expenses of attorneys and other
professional consultants and experts in connection with any investigation or
defense) of every kind, known or unknown, existing or hereafter arising,
foreseeable or unforeseeable, which may be imposed upon, threatened or
asserted against or incurred or paid by any Indemnified Person at any time
and from time to time, because of, resulting from, in connection with or
arising out of any transaction, act, omission, event or circumstance in any
way connected with the Collateral or this Agreement (including but not
limited to enforcement of Purchaser's rights thereunder or the defense of
Purchaser's actions thereunder) (each, as "Indemnified Claims"), excluding
with respect to any Indemnified Persons, any of the foregoing resulting from
such Indemnified Person's gross negligence or willful misconduct. THE
FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH INDEMNIFIED CLAIMS
ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANX
NEGLIGENT ACT OR OMISSION OF ANY INDEMNIFIED PERSON. Upon notification and
demand, Sellers agree to provide defense of any Indemnified Claim and to pay
all costs and expenses of counsel selected by any Indemnified Person in
respect thereof. Any Indemnified Person against whom any Indemnified Claim
may be asserted reserves the right to settle or compromise any such
Indemnified Claim as such Indemnified Person may determine in its sole
discretion, and the obligations of such Indemnified Person, if any, pursuant
to any such settlement or compromise shall be deemed included within the
<PAGE>
Indemnified Claims. Except as specifically provided in this section, Sellers
waive all notices from any Indemnified Person. The provisions of this
paragraph 16 shall survive the termination of this Agreement. Purchaser may,
in its sole and absolute discretion, deduct any Adjustments or other amounts
owed under this paragraph from the Reserve Accounts.
17. Attorney's Fees. Sellers agree to reimburse Purchaser upon demand
for all costs and expenses incurred by Purchaser in connection with its due
diligence review of Sellers and the negotiation, documentation, closing and
consummation of the transactions contemplated hereby, including attorney's
fees and expenses and all reasonable attorney's fees, court costs and other
expenses incurred by Purchaser in the enforcement of this Agreement and
protecting or enforcing its interest in the Eligible Accounts or the
Collateral, in collecting the Eligible Accounts or the Collateral, or in the
representation of Purchaser in connection v4th any bankruptcy case or
insolvency proceeding involving either Seller, the Collateral, any Account
Debtor, or any Eligible Account. Sellers hereby authorize Purchaser, at its
sole discretion, to deduct such fees, costs and expenses from the purchase
price for Eligible Accounts or charge any such fees, costs and expenses
against the Reserve Accounts, as Purchaser elects at its sole discretion.
18. Severability; Joint and Severally Liability. Each and every
provision, condition, covenant and representation contained in this
Agreement is, and shall be construed, to be a separate and independent
covenant and agreement. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of the Agreement shall
not be affected thereby. The obligations of Sellers hereunder shall be joint
and several.
19. Parties in Interest. All grants, covenants and agreements
contained in this Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns; provided,
however, that Sellers may not delegate or assign any of their duties or
obligations under this Agreement without the prior written consent of
Purchaser. PURCHASER RESERVES THE RIGHT TO ASSIGN ITS RIGHTS AND OBLIGATIONS
UNDER THIS AGREEMENT IN WHOLE OR IN PART TO ANY PERSON OR ENTITY.
20. GOVERNING LAW: SUBMISSION TO PROCESS. THIS AGREEMENT SHALL BE
DEEMED A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE
CONSTRUED AN]) ENFORCED IN ACCORDANCE WITH AND GOVERNED BY TILE INTERNAL
LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO THE RULES THEREOF RELATING
TO CONFLICTS OF LAW. EACH SELLER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN TEXAS, AND
AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDING RELATING TO THIS AGREEMENT, THE PURCHASE OF ELIGIBLE AQCOUNTS OR
ANY OTHER RELATIONSHIP BETWEEN PURCHASER AND SELLER BY ANY MEANS ALLOWED
UNDER STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY
WAY RELATED TO THIS AGREEMENT, THE PURCHASE OF ELIGIBLE ACCOUNTS OR ANY
OTHER RELATIONSHIP BETWEEN PURCHASER AND SELLER SHALL BE BROUGHT AND
LITIGATED EXCLUSIVELY IN ANY ONE OF THE STATE OR FEDERAL COURTS LOCATED IN
THE STATE OF TEXAS HAVING JURISDICTION. THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY
SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER.
<PAGE>
21. WAIVER OF JURY TRIAL. PUNITIVE AND CONSEOUENTIAL DAMAGES, ETC.
EACH OF EACH SELLER AND PURCHASER HEREBY (A) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT
OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
PARAGRAPH.
22. THIS AGREEMENT RESTATES AND AMENDS THE PURCHASE & SALE AGREEMENT
DATED AUGUST 28, 1997 BETWEEN I-CON AN]) PURCHASER (AS THE SAME MAY HAVE
HERETOFORE BEEN AMENDED OR MODIFIED, THE "ORIGINAL AGREEMENT,") IN ITS
ENTIRETY EFFECTIVE AS OF THE DATE HEREOF, AND ALL OF THE TERMS AND
PROVISIONS HEREOF SHALL SUPERSEDE THE TERMS AND PROVISIONS THEREOF; PROVIDED
THAT ALL INDEBTEDNESS AND OBLIGATIONS OF I-CON TO PURCHASER UNDER THE
ORIGINAL AGREEMENT ARE RENEWED AND EXTENDED HEREBY AND ALL LIENS, SECURITY
INTERESTS, ASSIGNMENTS, SUPERIOR TITLES, RIGHTS, REMEDIES, POWERS, EQUITIES
AND PRIORITIES (THE "LIENS") CREATED BY TILE ORIGINAL AGREEMENT ARE RENEWED
AND EXTENDED HEREBY AND SHALL CONTINUE IN FULL FORCE AND, EFFECT TO SECURE
THE OBLIGATIONS BY THIS AGREEMENT, THE LIENS ARE HEREBY RATIFIED AND
CONFIRMED AS VALID, SUBSISTING AND CONTINUING TO SECURE THE OBLIGATIONS.
23. COMPLETE AGREEMENT. THIS AGREEMENT, THE WRITTEN DOCUMENTS
EXECUTED PURSUANT TO THIS AGREEMENT, IF ANY, AND THE ACKNOWLEDGMENT
DELIVERED 111 CONNECTION HEREWITH SET FORTH THE ENTIRE UNDERSTANDING AND
AGREEMENT OF THE PARTIES HERETO WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREIN AN]) MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. NO
MODIFICATION OR AMENDMENT OF OR SUPPLEMENT TO THIS PURCHASE & SALE AGREEMENT
OR TO SUCH ACKNOWLEDGMENT SHALL BE VALID OR EFFECTIVE UNLESS THE SAME IS IN
WRITING AND SIGNED BY THE PARTY AGAINST WHOM IT IS SOUGHT TO BE ENFORCED.
<PAGE>
The undersigned have entered into this Agreement on the date first
above written.
USA FUNDING, INC., I-CON Industries, Inc.,
a Delaware corporation a Delaware corporation
BY: /s/ By: /s/
--------------------------- -----------------------
Name: Name:
--------------------------- -----------------------
Title: Title:
--------------------------- -----------------------
Remittance Address: Mailing Address of I-Con:
P. O. Box 971194 1101 Pamela Drive
Dallas, Texas 75397-1194 Euless, TX 76040
Mailing Address: Street Address of I-Con:
12770 Merit Drive, Sixth Floor 1101 Pamela Drive
Dallas, TX 75251 Euless, TX 76040
Performance Interconnect Corp.
By: /s/
------------------------
Name:
------------------------
Title:
------------------------
Mailing Address of Performance:
10911 Pearl Street, Suite 105
Dallas, TX 75238
<PAGE>
SCHEDULE OF ACCOUNTS
DATE:_____________ SCHEDULE NO.___________________________
SELLER: [I-CON INDUSTRIES, INC.]
[PERFORMANCE INTERCONNECT CORP.]
Total Number of Accounts Sold:_________
Total Amount Sold:_____________________
Reserve:_______________________________
ACCOUNT INVOICE INVOICE INVOICE
DEBTOR NUMBER AMOUNT DATE
------ ------ ------ ----
The undersigned does hereby certify that he or she has made a thorough
inquiry into all matters certified herein and, based upon such inquiry and
experience does hereby certify that:
1. He or she is the duly elected, qualified, and acting _____________
of [I-CON INDUSTRIES, INC.] [PERFORMANCE INTERCONNECT CORP.].
2. This Schedule of Accounts is being submitted to USA Funding, Inc.
("Purchaser") pursuant to that certain Amended and Restated Purchase & Sale
Agreement dated as of March 31, 1998, between Performance Interconnect
Corp., I-Con Industries, Inc. and Purchaser (as from time to time
supplemented or amended, the "Agreement").
3. All representations and warranties made by Sellers (as defined in
the Agreement) in the Agreement or any other instrument, document,
certificate or other agreement executed in connection therewith
(collectively, the "Transaction Documents") delivered on or before the date
hereof are true on and as of the date hereof as if such representations and
warranties had been made as of the date hereof
4. No Event of Default (as defined in the Agreement) or any event
that, with the giving of notice, the passage of time or both, would
constitute an Event of Default exists on the date hereof.
5. Sellers have performed and complied with all agreements and
conditions required in the Transaction Documents to be performed or complied
with by it on or prior to the date hereof.
6. All information contained in this Schedule of Accounts is true,
correct and complete.
IN WITNESS WHEREOF, this instrument is executed by the undersigned
as of ________, 1997.
[I-CON INDUSTRIES, INC.]
[PERFORMANCE INTERCONNECT CORP.]
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
[ CONSENT AND AGREEMENT APPEARS HERE ]
Exhibit 10.1
PERFORMANCE INTERCONNECT INC.
10911 Petal Street, Suite 105
Dallas, TX 75238
June 2, 1999
Mr. Joe Turek
M-Wave Inc.
215 Park Street
Benseaville, IL 60106
VIA FAX: 630/860-5350
Dear Joe:
The purpose of this letter is to respond to your proposed sale of the
building in Frisco to J. Baxter Brinkman.
Based upon the terms contained in your letter of May 27, 1999 (copy
attached). Performance Interconnect Corp has agreed not to exercise its
rights to purchase the building as provided in Section 4.06 (b) of the lease
with respect to the proposed sale to Mr. Brinkman.
Please have your attorney draft a new note for $773,479 plus 50% of the
sales commissions as soon as possible.
We will send the documents related to our efforts to purchase the property,
which include an appraisal, a survey, and preliminary title work via
overnight delivery.
Please call if you require anything further.
Sincerely,
/s/
D. Ronald Allen
DRA/pgr
Exhibit 10.2
----------------------------------------------------------------------------
RICHLUND & Associates, Inc. 2050 Bluestone Drive Lease Number
ST CHARLES MISSOURI 63303 10974983
TELEPHONE (314) 947-4800
FAX (314) 949-5086
----------------------------------------------------------------------------
FULL LEGAL NAME AND ADDRESS OF LESSEE
Winterstone Management, Inc. and
I-Con Industries, Inc. as Co-Lessees
1101 Pamela Drive
Euless, TX 76040
JOINTLY AND SEVERALLY RESPONSIBLE
SUPPLIER OF EQUIPMENT (COMPLETE ADDRESS)
Excellon Automation Co.
2121 West University Ste 116
Tempe, AZ 85281
----------------------------------------------------------------------------
EQUIPMENT LEASED
1 Upgrade Mark V Bearing Spindle Drill S/N 128
----------------------------------------------------------------------------
TERMS
AMOUNT OF EACH PAYMENT
(PLUS SALES TAX, IF APPLICABLE) $ 727.32
MONTHLY [ X ]
TERM OF LEASE (# OF MTHS) 60
# OF PAYMENTS 60
SECURITY DEPOSIT [ ] $________
ADVANCE PAYMENT [ X ] $1,454.64
----------------------------------------------------------------------------
<PAGE>
TERMS AND CONDITIONS OF LEASE
1. LEASE, Lessee hereby leases from Lessor, and Lessor leases to Lessee,
the personal property described above, together with any replacement
parts, additions, repairs or accessories now or hereafter incorporated
in or affixed to it (hereinafter referred to as the "Equipment")
2. ACCEPTANCE OF EQUIPMENT, Lessee agrees to inspect the Equipment and to
execute an Acknowledgment and Acceptance of Equipment by Lessee
notice, as provided by Lessor. Such notice should be executed by
Lessee after the Equipment has been delivered and Lessee is satisfied
with the Equipment. Such acceptance will authorize Lessor to start
the lease and pay Supplier(s). Lessee hereby authorizes Lessor to
insert in the Lease serial numbers or other identifying data with
respect to the Equipment.
----------------------------------------------------------------------------
3. DISCLAIMER OF WARRANTIES AND CLAIMS: LIMITATION OF REMEDIES, THERE
ARE NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and
agrees by his signature below as follows. (a) LESSOR MAKES NO
WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITIONS OF THE
EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR ANY
PARTICULAR PURPOSE. ITS DESIGN ITS CAPACITY, ITS QUALITY, OR WITH
RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT: (b) Lessee has fully
inspected the Equipment which it has requested Lessor to acquire and
lease to Lessee, and the Equipment is in good condition and to
Lessee's complete satisfaction: (c) Lessee leases the Equipment "as
is" and with all faults: (d) Lessee specifically acknowledges that
the Equipment is leased to Lessee solely for commercial or business
purpose and not for personal, family, household, or agricultural
purposes: (e) If the Equipment is not properly installed, does not
operate as represented or warranted by the supplier or manufacturer,
or is unsatisfactory for any reason, regardless of cause or
consequences. Lessee's only remedy, if any, shall be against the
supplier or manufacturer of the Equipment: (g) LESSEE SHALL HAVE NO
REMEDY FOR CONSEQUENTAIL OR INCIDENTAL DAMAGES AGAINST LESSOR, and
(h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIVE LESSEE OF
ANY OBLIGATION UNDER THIS LEASE.
The parties have specifically negotiated and agreed to the foregoing
paragraph. Initials /s/
----------------------------------------------------------------------------
<PAGE>
4. STATUTORY FINANCE LEASE. Lessee aggress and acknowledges that it is
the intent of both parties to this Lessee that it qualify as a
statutory finance lease under Article 2A of the Uniform Commercial
code. Lessee acknowledges and agrees that Lessee had selected both:
(1) the Equipment; and (2) the supplier from whom Lessor is to
purchase the Equipment. Lessee acknowledges that Lessor has not
participated in any way in Lessee's selection of the Equipment or of
the supplier, and Lessor has not selected, manufactured, or supplied
the Equipment.
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT
EVIDENCING THE LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE
SUPPLIER CHOSEN BY LESSEE AND THAT LESSEE SHOULD CONTACT THE
SUPPLIER OF THE EQUIPMENT FOR A DESCRIPTION OF ANY SUCH RIGHTS.
5. ASSIGNMENT BY LESSEE PROHIBITED, WITHOUT LESSOR'S PRIOR WRITTEN
CONSENT. LESSEE SHALL NOT ASSIGN THIS LEASE OR SUBLEASE THE EQUIPMENT
OR ANY INTEREST THEREIN, OR PLEDGE OR TRANSFER THIS LEASE, OR
OTHERWISE DISPOSE OF THE EQUIPMENT COVERED HEREBY.
6. RENTAL PAYMENTS. Lessee agrees to pay the total rent equal to the
"Amount of Each Payment" multiplied by the number of payments
specified in "No. of Payments." Payments will be made in advance and
periodically as specified in "Terms" above. Payments shall be made by
Lessee to Lessor as set forth above via ACH from Lessees bank or as
otherwise allowed by Lessor. This document shall act as ACH
authorization to Lessees bank. In the event Lessor allows a different
method of payment by Lessee, Lessee shall incur a billing charge equal
to $5 per month which shall be added to the monthly invoice. Lessee
shall not abate, set off, deduct any amount, or reduce any payment for
any reason. In the event this lease does not commence for any reason,
Lessee agrees that Lessor is entitled to keep all Advance Payments as
liquidated damages. The first payment shall be due on the date of
acceptance of the Equipment by Lessee, and subsequent payments shall
be due on the due date selected by Lessor of each succeeding month
throughout the term of the Lease.
THIS LEASE IS NOT CANCELABLE OR TERMINABLE BY LESSEE. LESSEE
UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER, IS AUTHORIZED
TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE, AND NO
REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE BROKER OR
SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER,
SHALL IN ANY WAY AFFECT LESSEE.
7. CHOICE OF LAW/PROPER AUTHORITY. This lease shall not be effective
until signed by Lessor at its principal office listed above. This
Lease shall be considered to have been made in the state of Missouri
and shall be interpreted in accordance with the laws and regulations
of the state of Missouri. Lessee agrees to jurisdiction in the state
of Missouri in any action, suit or proceeding regarding this Lease,
and concedes that it and each of them, transacted business in the
state of Missouri by entering into this Lease. In the event of any
legal action with regard to this lease or equipment covered hereby,
Lessee agrees that venue may be laid in the County of St. Charles,
Missouri.
<PAGE>
LESSEE ACKNOWLEDGES UNDER PENALTY OF LAW THAT THE INDIVIDUAL SIGNING ON
BEHALF OF LESSEE HAS THE AUTHORITY TO BIND LESSEE TO THIS OBLIGATION AND
THAT, IN THE EVENT, LESSEE'S CHARTER REQUIRES BOARD OR PARTNERSHIP
APPROVAL OR RESOLUTION TO ENTER INTO THIS LEASE AGREEMENT, LESSEE HAS
RECEIVED SUCH APPROVAL.
LESSEE: Winterstone Management, Inc. and
I Con Industries, Inc as Co-Lessees
/s/
-------------------------------------------------------------
David R. Allen, President of Winterstone Management, Inc. DATE 11/12/97
/s/
-------------------------------------------------------------
Brooks L. Harman, Jr. Vice President of I-Con Industries, Inc. DATE 11/12/97
LESSOR: RICHLUND & Associates, Inc.
The reverse side of this AGREEMENT contains more terms and conditions which
are part of this Lease.
============================================================================
<PAGE>
This Guaranty is executed for the benefit of Lessor, and successors and
assigns the Lessor to induce Lessor to enter into the above Lease with
the above named Lessee.
WHEREAS, Guarantor has an interest, financial or otherwise, in Lessee,
and it is to the benefit of Guarantor that Lessor enter into the Lease
with Lessee, and Guarantor has read the proposed Lease in full and finds
the terms of said LEASE acceptable, and in recognition that Lessor would
be unwilling to enter into the Lease without the Guaranty hereinafter set
forth, and in recognition of Lessor's reliance upon the Guaranty in
entering into the Lease;
NOW, THEREFORE, In order to induce Lessor to enter into the Lease,
Guarantor, jointly and severally, unconditionally guaranties the faithful
and full performance by Lessee of all terms and conditions of the Lease.
In the event of default by Lessee, or failure to faithfully perform any
of the terms or conditions required of Lessee under the Lease, or in the
event of failure of Lessee to make any and all payments of money required
of it under the Lease. Guarantor unconditionally promises to pay to
Lessor, in lawful money of the United States, all sums at any time due
and unpaid under the Lease, plus costs of collection, including
reasonable attorney fees with or without trial, and upon appeal and
review.
The obligations of Guarantor hereunder are joint and several and are
independent of the obligations of Lessee under the Lease, and a separate
action or actions may be brought against Guarantor, whether action is
brought against Lessee or whether Lessee be joined in any action or
actions, the Liability of Guarantor hereunder being primary. Guarantor
hereby waives the benefit of any surelyship defenses affecting its
liability hereunder or the enforcement hereof.
Guarantor authorizes Lessor, without notice or demand, and without
affecting Guarantor's liability hereunder, from time to time to renew,
extend, accelerate, or otherwise change the payment terms or other terms
of the Lease or any part thereof, Lessor may, without notice, assign this
Guaranty in whole or part.
Guarantor hereby waives any right to require Lessor to: (a) proceed
against Lessee; (b) proceed against or exhausted any security held by
Lessor; or (c) pursue any other remedy in Lessor's power. Guarantor
waives any defense arising by reason of any defense of Lessee, or by
reason of the cessation, from any cause whatsoever, of the liability of
Lessee under the Lease. Guarantor waives any and all demands for
performance, notices of nonperformance or default, and notices of
cancellation or forfeiture. Lessor may apply all proceeds received from
Lessee or others to such part of Lessee's indebtedness, as Lessor may
deem appropriate without consulting Guarantor and without prejudice to or
in any way limiting or lessening the liability of Guarantor under this
Guaranty.
If Lessee is a corporation, the undersigned warrant and represent that
they are stockholders, directors or officers and/or are financially or
otherwise interested in Lessee, and, if married, their marital
communities are so interested.
This Guaranty shall not be affected or discharged by the death of the
undersigned, but shall bind Guarantor's heirs and personal
representatives, and shall inure to benefit of any successors or assigns
of Lessor.
This instrument constitutes the entire agreement between Lessor and
Guarantor. No oral or written representation not contained herein shall
in any way affect this Guaranty, which shall not be modified except by
the parties writing. Waiver by Lessor of any provisions hereof in one
instance shall not constitute a waiver as to any other instance.
<PAGE>
IMPORTANT: THIS AGREEMENT CREATES SPECIFIC LEGAL OBLIGATIONS. DO NOT
SIGN UNTIL YOU HAVE READ IT. BY SIGNING YOU COMPLETELY AGREE TO ITS
TERMS.
IN WITNESS WHEREOF, the undersigned Guarantor(s) has/ have executed this
Guaranty this 12th day of November, 1997.
/s/
-------------------------------------------
David R. Allen, Individual GUARANTOR
/s/
-------------------------------------------
WITNESS
----------------------------------------------------------------------------
<PAGE>
8. COMMENCEMENT AND EXPIRATION. This Lease shall commence upon Lessor's
acceptance of it. Lessor shall have not obligation to the Lessee
under this Lease if the Equipment, for whatsoever reason, is not
delivered to Lessee within 90 days after Lessee signs this Lease.
Lessor shall have no obligation to Lessee under this Lease if Lessee
fails to execute and deliver to Lessor an Acknowledgment and
Acceptance of Equipment by Lessee notice for the equipment within 30
days after the Equipment is delivered to the Lessee. Unless earlier
terminated or canceled by Lessor, this Lease shall expire upon the
expiration of the number of months (following Lessee's acceptance of
the Equipment) set forth in "Term of Lease" above.
9. SECURITY DEPOSIT. As security for the prompt and full payment of the
amounts due under this Lease, and Lessee's complete performance of all
of its obligations under this Lease, and any extension or removal
hereof, Lessee has deposited with Lessor the security amount set forth
in the section shown as "Security Deposit." In the event any default
shall be made in the performance of any Lessee's obligations under
this Lease, Lessor shall have the right, but shall not be obligated,
to apply the security deposit to the curing of such default. Within
15 days after Lessor mails notice to Lessee that Lessor has applied
any portion of the security deposit to the curing of any default,
Lessee shall restore said security deposit to the full amount set
forth above. On the expiration or earlier termination or cancellation
of this Lease, or any extension or renewal hereof, provided Lessee has
paid all of the rent called for and fully performed all other
provisions of this Lease, Lessor will return to the Lessee any then
remaining balance of said security deposit, without interest. Said
security may be commingled with Lessor's other funds.
10. LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY. In the
event it is necessary to amend the terms of this Lease to relect a
change in one or more of the following conditions.
(a) Lessor's actual cost of procuring the Equipment, or
(b) Lessor's actual cost of providing the Equipment to Lessee, or
(c) A change in rental payments as a result of (1) or (2) above, or
(d) Description of the Equipment
<PAGE>
Lessee agrees that any such amendments shall be described in a letter from
Lessor to Less, and unless within 15 days after the date of such letter
Lessee objects in writing to Lessor, this Lease shall be determined amended
and amendments shall be incorporated in this Lease herein as if originally
set forth.
Lessee grants to Lessor a specific power of attorney for Lessor to use as
follows, (1)Lessor may sign and file on Lessee's behalf any document Lessor
deems necessary to perfect or protect Lessor's interest in the Equipment or
pursuant to the Uniform Commercial Code. And (2)Lessor may sign, endorse or
negotiate for Lessor's benefit any instrument representing proceeds from
any policy of insurance covering the Equipment.
11. LOCATION. The Equipment shall be kept at the location specified
above or, if none is specified, at Lessee's address as set forth above
and shall not be removed without Lessor's prior written consent.
12. USE. Lessee shall use the Equipment in a careful manner, make all
necessary repairs at Lessee's expense, shall comply with all laws
relating to its possession, use, or maintenance, and shall not make
any alterations, additions, or improvements made to the Equipment
without Lessor's prior written consent. All additions, repairs or
improvements made to the Equipment shall belong to Lessor.
13. OWNERSHIP; PERONALITY. The Equipment is, and shall remain, the
property of Lessor, and Lessee shall have no right, title, or interest
in the Equipment except as expressly set forth in this Lease. The
Equipment shall remain, the property of Lessor, and Lessee shall have
no right, title, or interest in the Equipment except as expressly set
forth in this Lease. The Equipment shall remain personal property
even though installed in or attached to real property.
14. SURRENDER. By this Lease, Lessee acquires no ownership rights in the
Equipment, and has ho option to purchase same unless specified by a
Purchase Option Addendum signed by both Lessor and Lessee. In the
event Lessee opts to purchase equipment in accordance with the
Purchase Option Addendum, Lessee must give written notice of its
intention to do so sixty (60) days prior to Lease maturity. Upon the
expiration, or earlier termination or cancellation of this Lease, or
in the event of a default under Paragraph 22, hereof, Lessee, at its
expense shall return the Equipment in good repair, ordinary wear and
tear resulting from proper use thereof alone expected, by delivering
it, packed and read for shipment to such place or carrier as Lessor
may specify.
15. LEASE MATURITY. At the expiration or earlier termination of the
Lease, Lessee shall return or purchase the Equipment in accordance with
Paragraph 14, hereof. If upon such expiration or termination, Lessee
does not exercise either option or give notice of Lessee's intent to
purchase Equipment, the term of this Agreement shall continue to be
extended from month to month at the same monthly rent as scheduled
during the original term subject to the right of either Lessor or
Lessee to terminate the Lease upon sixty (60) days written notice
whereupon Lessee shall either exercise its Option to Purchase or
return the Equipment as provided for in Paragraph 14. Monthly rentals
are not pro-rated. At the time of final termination by purchase or
return, Lessee shall pay a termination fee equal to the greater of 1%
of the original equipment cost or $75.
<PAGE>
16. LOSS AND DAMAGE. Lessee shall at all times after signing the Lease
bear the entire risk of loss, theft, damage or destruction of the
Equipment from any cause whatsoever, and no loss, theft, damage or
destruction of the Equipment shall relieve Lessee of the obligation to
pay rent or to comply with any other obligation under this Lease. In
the event of damage to any part of the Equipment, Lessee shall
immediately place the same in good repair at Lessee's expense. If
Lessor determines that any part of the Equipment is lost, stolen,
destroyed, or damaged beyond repair, Lessee shall, at Lessee's option,
do one of the following:
(a) Replace the same with like equipment in good repair, acceptable
to Lessor; or
(b) Pay Lessor in cash the following: (i) all amounts due by Lessee
to Lessor under this Lease up to the date of the loss; (ii) the
accelerated balance of the total amounts due for the remaining
term of this Lease attributable to said item, discounted to
present value at a discount rate of 6%, as of the date of loss.
Upon Lessor's receipt of payment as set forth above, Lessee shall
be entitled to title to the Equipment without warranties. If
insurance proceeds are used to fully comply with this
subparagraph, the balance of any such proceeds shall go to Lessee
to compensate for loss of use of the Equipment for the Equipment
for the remaining term of the Lease.
17. INSURANCE; LIENS; TAXES. Lessee shall provide and maintain insurance
against loss, theft, damage or destruction of the Equipment in an
amount not less than the full replacement value of the Equipment, with
loss payable to Lessor, Lessee also shall provide and maintain
comprehensive general all risk liability insurance including but not
limited to protect liability coverage, insuring Lessor and Lessee,
with a severability of interest endorsement, or its equivalent,
against any and all loss or liability for all damages, either to
persons or property or otherwise, which might result from or happen in
connection with the condition, use, or operation of the Equipment,
with such limits and with an insurer satisfactory to Lessor. Each
policy shall expressly provide that said insurance as to Lessor and
its assigns shall not be invalidated by any act, omission, or neglect
of Lessee and cannot be canceled without 30 day' prior written notice
to Lessor. As to each policy Lessee shall furnish to Lessor a
certificate of insurance from the insurer, which certificate shall
evidence the insurance coverage required by this paragraph. Lessor
shall have no obligation to ascertain the existence of or provide any
insurance coverage required by this paragraph. Lessor shall have no
obligation to asertain the existence of or provide any insurance
coverage for the Equipment or for Lessee's benefit. If Lessee fails
to provide such insurance, Lessor will have the right, but no
obligation, to have such insurance protecting Lessor placed at
Lessee's expense. Such placement will result in on the right, but no
obligation, to have such insurance protecting Lessor placed at
Lessee's expense. Such placement will result in an increase in
Lessee's periodic payments, such increase attributed to Lesso's costs
of obtaining such insurance and any customary changes or fees of
Lessor's or its designee associated with such insurance. Lessee shall
keep the Equipment free and clear of all levies, liens, and
encumbrances. Lessee shall pay all charges and taxes (local, state,
and federal) which may now or hereafter be imposed upon the ownership,
leasing, or rental, sale, purchase, possession, or use of Equipment,
excluding, however, all taxes on or measured by Lessor's net income.
<PAGE>
If Lessee fails to pay said charges or taxes, Lessor shall have the
right, but not be obligated, to pay such charges or taxes. In that
event, Lessor shall have the right, but not be obligated, to pay such
charges or taxes. In that event, Lessor shall notify Lessee of such
payment and Lessee shall repay to Lessor the cost thereof within 15
days after such notice is mailed to Lessee.
18. INDEMNITIY. Lessee shall indemnify Lessor against any claims,
actions, damages, or liabilities, including all attorney fees, arising
out of or connected with Equipment, without limitation. Such
indemnification shall survive the expiration, cancellation, or
termination of this Lease. Lessee waives any immunity Lessee may have
under industrial insurance act, with regard to indemnification of
Lessor.
19. ASSIGNMENT BY LESSOR. Any assignee of Lessor shall have all of the
rights but none of the obligations of Lessor under this Lease. Lessee
shall recognize and hereby consent to any assignment of this Lease by
Lessor, and shall not assert against the assignee any defense,
counterclaim, or setoff that Lessee may have against Lessor. Subject
to the foregoing, this Lease inures to the benefit of and is binding
upon the heirs, devisees, personal representatives, survivors,
successors in interest, and assigns of the parties hereto.
20. SERVICE CHARGES; INTEREST. If Lessee shall fail to make any payment
required by this Lease within 10 days of the due date thereof, Lessee
shall pay to Lessor a service charge of 5% of the amount due;
provided, however, that not more than one such service charge shall be
made on any actual additional expenses incurred by Lessor in
collection efforts, including but not limited to long distance
telephone charges and travel expenses. Lessee shall pay to Lessor
interest on any delinquent payment or amount due under this Lease from
the due date thereof until paid, at the lesser of the maximum rate of
interest allowed by law or 18% per annum.
21. TIME OF ESSENCE. Time is of the essence of this Lease, and this
provision shall not be implied to have been waived by the acceptance
on occasion of late or defective performance.
22. DEFAULT. Lessee shall be in default if:
(a) Lessee shall fail to make any payment due under the terms of
this Lease for a period of 10 days from the due date thereof; or
(b) Lessee shall fail to observe, keep, or perform any provision of
this Lease, and such failure shall continue for a period of 10
days; or
(c) Lessee has made any misleading or false statement in connection
with application for or performance of this Lease; or
(d) The Equipment or any part hereof shall be subject to any lien,
levy, seizure, assignment, transfer, bulk transfer, encumbrance,
attachment, execution, sublease, or sale without prior written
consent of Lessor, or if Lessee shall abandon Equipment or permit
any other entity or person to use the Equipment without the prior
written consent of Lessor; or
(e) Lessee dies or ceases to exist; or
(f) Lessee defaults on any other agreement it has with Lessor or
(g) Any guarantor of this agreement defaults on any obligations to
Lessor or any of the above listed events of default occur with
respect to any such guarantor files or has filed against it a
petition under the bankruptcy laws.
<PAGE>
23. REMEDIES. If Lessee is in default, Lessor, with or without any
notice to Lessee, shall have the right to exercise any one or more of
the following remedies, concurrently or separately, and without any
election of remedies being deemed to have been made:
(a) Lessor may enter upon Lessee's premises and without any court
order or any process of law may repossess and remove the
Equipment, or render the Equipment unusable without removal,
either with or without notice to Lessee. Lessee hereby waives
any trespass or right of action for damages by reason of such
entry, removal, or disabling. Any such repossession shall not
constitute a termination of this Lease unless Lessor so notifies
Lessee in writing;
(b) Lessor may require Lessee, at its expense, to return the
Equipment in good repair, ordinary wear and tear resulting from
proper use thereof alone expected, by delivering it, packed and
ready for shipment, to such place or carrier as Lessor may
specify;
(c) Lessor may cancel or terminate this Lease and may retain any and
all prior payments paid by Lessee;
(d) Lessor may declare all sums due and to become due under this
Lease immediately due and payable, including as to any or all
items of Equipment, without notice or demand to Lessee;
(e) Lessor may re-lease the Equipment, without notice to Lessee, to
any third party, upon such terms and conditions as Lessor alone
shall determine, or may sell the Equipment, without notice to
Lessee, at private or public sale, at which sale Lessor may be
the purchaser;
(f) Lessor may sue for and recover from Lessee the sum of all unpaid
rents and other payments due under this Lease, discounted to
their present value at a discount rate of 6% as of the date of
default, plus Lessor's estimate at the time this Lease was
entered into of Lessor's residual interest in the Equipment as of
the date of default, less the net proceeds of disposition, if
any, of the Equipment;
(g) To pursue any other remedy available at law, by statue or in
equity. No right or remedy herein conferred upon or reserved to
Lessor is exclusive of any other right or remedy herein, or by
law or by equity provided or permitted, but each shall be
cumulative of every other right or remedy given herein or now or
hereafter existing by law or equity or by statue or otherwise,
and may be enforced concurrently therewith or from time to time.
No single or partial exercise by Lessor of any right or remedy
hereunder shall preclude any other further exercise of any other
right or remedy.
<PAGE>
24 MULTIPLE LESSEES. Lessor may, with the consent of any one of the
Lessees hereunder, modify extend, or change any of the terms hereof
without consent or knowledge of the other Lessees. Each Lessee is
jointly and severally responsible and liable to Lessor under this
Lease.
25. EXPENSE OF ENFORCEMENT. In the event of any legal action with
respect to this Lease, the prevailing party in any such action shall
be entitled to reasonable attorney fees, including attorney fees
incurred at the trial level, including action in bankruptcy court, on
appeal or review, or incurred without action, suits, or proceedings,
together with all costs and expenses incurred in pursuit thereof.
26. SEVERABILITY. This Lease is intended to constitute a valid and
enforceable legal instrument, and no provisions of this Lease that may
be deemed unenforceable shall in any way invalidate any other
provision or provisions hereof, all of which shall remain in full
force and effect.
27. FINANCIAL STATEMENTS. Lessee shall supply Lessor with financial
statements upon Lessor's request during the term of the lease.
28. ENTIRE AGREEMENT; NO ORAL MODIFICATIONS; NO WAIVER. This instrument
constitutes the entire agreement between Lessor and Lessee. No
provision of this Lease shall be modified or rescinded unless in
writing signed by Lessee and Lessor. Waiver by Lessor of any
provision hereof in one instance shall not waiver as to any other
instance.
(END OF DOCUMENT) INITIALS /s/
--------
Exhibit 10.3
EQUIPMENT LEASE AGREEMENT
AGREEMENT NO: 120 EFFECTIVE DATE: 5/15/98
MONTHLY $6,537.22 MODEL:1 CONCEPT I
RENTAL: S/N 2555
TERM OF LEASE:24 MONTHS INSTALLED DATE:
UNIT PRICE: $204,000.00
INSTALLED AT: 1101 PAMELA DRIVE SHIPPED DATE: TBA
EULESS, TEXAS 76040
This EQUIPMENT LEASE AGREEMENT made by and between EXCELLON AUTOMATION CO.,
a California Corporation, having an office at 24751 Crenshaw Boulevard,
Torrance, California 90505 ("EXELLON") and PERFORMANCE INTERCONNECT, INC.,
having an office at 1101 Pamela Drive, Euless, Texas 76040 ("PERFORMANCE
INTERCONNECT").
WHEREAS PERFORMANCE INTERCONNECT desires to lease certain equipment from
EXCELLON; WHEREAS EXCELLON lease this equipment to PERFORMANCE INTERCONNECT;
The parties hereto agree as follows:
I. DEFINITIONS I
(a) Equipment shall mean the EXCELLON System leased pursuant to this Lease
Agreement, including the basic unit and any extra equipment, and all
repair and renewal parts installed therein.
(b) Rent shall mean the amount specified above which is the combination
of(l) EXCELLON's charge for exclusive availability of the Equipment at
all times for use by PERFORMANCE INTERCONNECT; and (1) EXCELLON's
charge for servicing and maintaining Equipment at 100% of EXCELLON's
published performance standards(excluding travel time expense.
PERFORMANCE INTERCONNECT will pay for the travel nine expense).
(c) Effective Date shall mean the date specified above on which this Lease
was accepted at EXCELLON's office by its authorized representative.
2. LEASE OF EQUIPMENT
(a) Term. Excellon shall lease the Equipment for a term of 24 months
specified above, commencing on the date of this agreement and
continuing for the duration of the Lease term, unless PERFORMANCE
INTERCONNECT shall exercise the purchase option set forth in Section 10
of this Agreement prior to such date.
(b) Delivery Schedule. Excellon will ship the Equipment to PERFORMANCE
INTERCONNECT'S installation site.
<PAGE>
3. RENTAL PAYMENT
PERFORMANCE INTERCONNECT shall pay to EXCELLON rental at the monthly
rate specified above. First Rental Payment is due on June 1, 1998 and
payable in advance of each monthly rental period. Should PERFORMANCE
INTERCONNECT fail to pay any part of the rent or any other sum required
hereunder, Excellon shall be entitled to assess a late charge on such
delinquent payment at the lesser of ten percent (10%) of the highest
legal interest rate from the date when such payment was due until paid.
Payment received after 5 days from due date is considered late.
4. TRANSPORTATION
Excellon will ship the Equipment to PERFORMANCE INTERCONNECT at the
install site as noted above, FOB Factory, freight collect.
5. SITE PREPARATION
PERFORMANCE INTERCONNECT shall be responsible for preparing and
maintaining the installation site for the Equipment in accordance with
EXCELLON' s specifications.
6. TITLE, RISK OF LOSS AND INSURANCE
(a) The Equipment is and all times shall remain the property of
EXCELLON. No right, title or interest in the Equipment shall pass to
PERFORMANCE INTERCONNECT other that the right to maintain possession
and use of the Equipment for the full Lease term; provided that in the
event PERFORMANCE INTERCONNECT exercised the purchase option, such
title and interest shall pass to PERFORMANCE INTERCONNECT upon full
payment to EXCELLON of the purchase price in cash.
(b) During the Lease term, PERFORMANCE INTERCONNECT shall assume all
risk of loss or damage to the Equipment, whether or not insured, until
the Equipment is returned to EXCELLON. No loss or damage to the
EQUIPMENT at PERFORMANCE INTERCONNECT's site shall relieve PERFORMANCE
INTERCONNECT from any obligation under this Lease which shall continue
in full force and effect
(c) PERFORMANCE INTERCONNECT shall keep the Equipment insured against
theft awl all risks of loss or damage for not less than the replacement
cost of the Equipment and shall carry public liability insurance
covering the Equipment and its use.
7. WARRANTIES AND LIMITATION OF REMEDIES
(a) Excellon warrants that the Equipment leased hereunder shall be
free from defects in material and workmanship in accordance with its
standard warranty terms.
(1) During the term of this Lease, Excellon will, at its option,
repair or replace any defective Equipment components at no
additional expense or labor charges Replacement components will be
either reconditioned or new. When returning defective components,
PERFORMANCE INTERCONNECT must obtain a return material
authorization "RMA" from Excellon, and prepay any shipping costs.
<PAGE>
(2) The foregoing warranties do not extend to any (i) disposable or
consumable materials supplied for use with the Equipment including
but not limited to, collets, hoses, lamps, fuses, cassettes, and
other similar items, or (ii) routine adjustments, alignments or
repairs due to normal wear or tear.
(3) EXCELLON shall have no obligation to repair or replace any
Equipment component (i) which has been modified in any respect
without the prior written approval of EXCELLON, (ii) which has
been installed, serviced or repaired by PERFORMANCE INTERCONNECT
or other third party without the prior written approval of
EXCELLON, (iii) which has been damaged due to PERFORMANCE
INTERCONNECT's failure to conform to the site and environmental
conditions as specified in EXCELLON's installation specifications,
(iv) which has been removed from its officially designated
location without the prior written approval of EXCELLON, (v) which
has been subject to unusual physical or electrical stress, and
(vi) which has been damaged or rendered defective by reason of
accident neglect, misuse, transportation, or exposure to corrosive
agents.
(b) The foregoing warranty is exclusive and in lieu of all other
warranties, whether express or implied (including any warranty of
merchantability or fitness for particular purpose).
(c) IN NO EVENT SHALL EXCELLON BE LIABLE TO PERFORMANCE INTERCONNET OR
OTHER END-USER, ON THE BASIS OF CONTRACT, NEGLIGENCE, STRICT PRODUCTS
LIABILITY OROTHERWISE, FOR LOSS OR DAMAGE TO PROPERTY OF PERFORMANCE
INTERCONNECT OR OTHERS, INJURY TO PERSONS, LOSS OF USE, EXPENSES
INVOLVING COSTS OF CAPITAL, LOSS OF REVENUES OR PROEIT, OR FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES WHATSOEVER
8. LOCATION OF EQUIPMENT
PERFORMANCE INTERCONNECT shall not move the Equipment from the
installed site location without the prior written consent of EXCELLON,
which consent shall not be unreasonably withheld.
9. TAXES
PERFORMANCE INTERCONNECT shall pay SALES TAX to EXCELLON at the rate of
8.25%, and must pay all license and registration fees, assessments,
stamp and documentary taxes, use taxes, personal property taxes, gross
receipts taxes, excise taxes, ad valorem and all other taxes and other
taxes and charges, however designated, which may now or hereafter,
during the term of this Lease, be imposed by any government body or
agency upon this Lease or the ownership, leasing, rental, sale,
purchase, possession or use of the Equipment, if applicable.
10. PURCHASE OPTION
(a) This Lease may be canceled at any time during the Lease term by
written notification to EXCELLON by PERFORMANCE INTERCONNECT of its
intention to purchase the equipment and full payment of the purchase
price in cash pursuant to the terms of this paragraph 10.
(b) The purchase price will be the stated Unit Price of the Equipment
less 60% of all lease payments made by PERFORMANCE INTERCONNECT.
<PAGE>
(c) The Equipment warranty will be for a period of one year. A full
service maintenance agreement will be in effect for the second year,
and is included in the purchase price.
11. DEFAULT
The following events shall constitute default by PERFORMANCE
INTERCONNECT under the Lease: (a) PERFORMANCE INTERCONNECT shall fail
to timely pay rent or any other payment hereunder when due and such
failure to pay shall continue for 20 days after written notice thereof
to PERFORMANCE INTERCONNECT, or (b) PERFORMANCE INTERCONNECT shall
default in the performance of any other covenant of this Lease arid
such default shall continue for 20 days after written notice thereof to
PERFORMANCE INTERCONNECT, or (c) PERFORMANCE INTERCONNECT shall become
insolvent or make an assignment for the benefit of creditors, or (d)
PERFORMANCE INTERCONNECT shall apply for or consent to the appointment
of a receiver, trustee or liquidator of PERFORMANCE INTERCONNECT of all
or a substantial part of the assets of PERFORMANCE INTERCONNECT, or if
such receiver, trust or liquidator is appointed without the application
or consent of PERFORMANCE INTERCONNECT, or (e) any proceeding shall be
commenced or other action taken by or against PERFORMANCE INTERCONNECT
under the BANKRUPTCY Act or any other insolvency law providing for the
relief of creditors including, without limitation a petition for
reorganization, arrangement or extension), or (f) PERFORMANCE
INTERCONNECT shall discontinue its business or dissolve, sell or
otherwise dispose of substantially all of its assets.
12. REMEDIES
Upon the occurrence of an event of default EXCELLON may immediately
exercise, at its sole discretion1 any one or more of the following
remedies: (a) by written notice to the PERFORMANCE INTERCONNECT,
declare the entire unpaid rent for the full Lease Term immediately due
and payable whereupon such rent shall become immediately due and
payable without further notice or demand; (b) proceed by appropriate
court action to enforce performance by PERFORMANCE INTERCONNECT of the
applicable covenant or to recover damages for the breach thereof; (c)
sue for and recover all rent and other payments then accrued or
thereafter accruing under this Lease; (d) terminate this Lease -by
written notice to
PERFORMANCE INTERCONNECT, whereupon all rights of PERFORMANCE
INTERCONNECT in and to the Equipment shall terminate and PERFORMANCE
INTERCONNECT return the Equipment to Lessor as provided in Article 13
hereof; or (g) pursue any other remedy at law or in equity. PERFORMANCE
INTERCONNECT agrees to pay EXCELLON all costs and expenses, including
reasonable attorney's fees, incurred hereunder or enforcing any of the
terms and conditions of this Lease
13. RETURN OF EQUIPMENT
Upon expiration of the Lease term or other termination pursuant to the
terms of this Lease, PERFORMANCE INTERCONNECT shall immediately return
the Equipment to EXCELLON in as good a condition as received, less
normal wear and tear. The return of the Equipment shall be, at
PERFORMANCE INTERCONNECT's sole expense, and the Equipment shall be
properly crated and shipped (freight prepaid) and properly insured.
<PAGE>
14. ENTIRE AGREEMENT; NON-WAIVER; SEVERABILITY
This Lease contains the entire agreement and understanding between
PERFORMANCE INTERCONNECT and EXCELLON relating to the subject matter
hereof. No Modification of this agreement shall be binding in the
parties hereto unless set forth in writing and signed by the parties.
The provisions of this Lease shall be binding upon and shall inure to
the benefit of the permitted assigns, successors, heirs and personal
representatives of PERFORMANCE INTERCONNECT.
15. CHOICE OF LAW
This lease Agreement shall be governed by and construed in accordance
with the laws of California.
16. UCC FILINGS
PERFORMANCE INTERCONNECT shall execute or obtain and deliver to
EXCELLON, upon EXCELLON's request, such instruments, financing
statements and assurances, including without limitation, waivers of
interest of owners or mortgages of real estate upon which the Equipment
is located, ad Excellon deems necessary or advisable forte
confirmation, protection or perfection of this lease EXCELLON's rights
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to he
executed by their duly authorized representatives.
ACCEPTED AND AGREED TO:
EXCELLON AUTOMATION CO. PERFORMANCE INTERCONNECT, INC.
BY _______________________ BY: /s/
GERARD J. MITSCH --------------------------
TITLE: CONTROLLER TITLE:
DATE:______________________ DATE: 5-11-98
<PAGE>
[ PURCHASE ORDER 26975 APPEARS HERE ]
Exhibit 10.4
GUARANTY
--------
For value received, the undersigned ("Guarantor") hereby enters into
this Guaranty ("Guaranty") and unconditionally endorses, guarantees and
promises to pay to Excellon Automation Co. ("Excellon") the amounts set
forth in tat certain Excellon Lease Agreement (the "Agreement") dated May
15, 1998 by and between Excellon and Performance Interconnect, Inc.
("Obligor") and all extensions and renewals of the Agreement and all
expenses, including reasonable attorneys' fees, incurred in collecting the
Agreement or enforcing this Guaranty, or both.
The obligation of the Guarantor hereunder is independent of the
obligation of the Obligor under the Agreement, and a separate action or
actions may be brought or prosecuted against the Guarantor, whether action
is brought against the Obligor under the Agreement or any other guarantor be
joined in any such action or actions.
The Guarantor hereby waives any right to require Excellon to (a)
proceed against the Obligor under the Agreement; or (b) pursue any other
remedy in said Excellon's power whatsoever. Until all payment obligations
set forth in Section 2 of the Agreement have been performed and satisfied in
full, Guarantor shall not waive any right of subrogation, and hereby waives
any right to enforce any remedy which Excellon now has or may hereafter have
against the Obligor under the Agreement, and waives any benefit of and any
right to participate in any security now or hereafter held by Excellon.
The Guarantor hereby waives all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, and notices of
dishonor.
No failure or delay by Excellon to insist upon the strict performance
of any term, condition, covenant or agreement of this Guaranty or to
exercise any right, power or remedy hereunder or consequent upon a breach
hereof shall constitute a waiver of any such term, condition, covenant,
agreement, right, power or remedy of any such breach, or preclude Excellon
from exercising any such right, power or remedy at any later time or times.
In case any one or more of the provisions contained in this Guaranty
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
<PAGE>
This Guaranty (a) constitutes the entire Agreement, and supersedes all
prior agreements and understandings, both written and oral, among Obligor
and Guarantor with respect to the subject matter hereof, (b) may be executed
in several counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument, and (c)
shall be binding upon Guarantor and its successors and assigns and shall
inure to the benefit of, and shall be enforceable by, Excellon and its
successors and assigns.
Unless otherwise specifically provided herein, all notices,
instructions, requests and other communications required or permitted
hereunder shall be in writing and become effective when received or if
mailed when deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt requested. Notices shall be directed to
Excellon at its address set forth in the Agreement, and to Guarantor at its
address set forth below, or at such other addresses as such party may from
time to time furnish to the other by notice similarly given.
This Guaranty shall be binding upon the Guarantor and his or her
successors and shall inure to the benefit of the Excellon.
This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of California.
TN WITNESS WHEREOF, the undersigned has executed this Guaranty on the
date of the Agreement.
/s/
---------------
D. Ronald Allen
Address:
10911 Petal St., Suite 105
Dallas, TX 75238
ACCEPTED BY EXCELLON AUTOMATION CO.
/s/
---------------------------
5/15/98
Exhibit 10.5
AGREEMENT
AGREEMENT made as of March 15, 1999 between PC DYNAMICS CORPORATION, a
Texas corporation ("PC DYNAMICS"), and PC Dynamics of Texas, Inc. a Texas
corporation ("BUYER").
WHEREAS, PC DYNAMICS is engaged in the business of manufacturing primed
circuit boards, which business is conducted at PC DYNAMICS' owned facility
located in Frisco, Texas (the "Facility").
WHEREAS, PC DYNAMICS desires to sell to, and BUYER desires to
purchase, certain of the assets at PC DYNAMICS, subject to certain of the
liabilities of PC DYNAMICS, on the terms and conditions herein.
NOW, THEREFORE, for and in consideration of the obligations and
payments recited herein, the receipt and sufficiency of which is hereby
acknowledged, it is hereby agreed as follows:
Section 1. Purchase and Sale of Assets.
1.1 On the terms and subject to the conditions set forth in this
Agreement, at the Closing, BUYER will purchase from PC DYNAMICS, and PC
DYNAMICS will sell, transfer, assign, convey and deliver to BUYER; all of
the following assets (the "Assets"):
(a) the machinery, equipment, and furniture owned by PC DYNAMICS
on the Closing Date and listed on Schedule 1 attached hereto
(collectively, the "Equipment"); and
(b) the raw materials and supplies, work and goods in process and
finished goods inventories owned by PC DYNAMICS on the Closing Date,
excluding obsolete inventory or finished goods inventory that is not
subject to a purchase order, and listed on Schedule 2 attached hereto
(collectively, the "Inventory"):
(c) all accounts receivable due to PC DYNAMICS on the Closing
Date and listed on Schedule 3 attached hereto (collectively, the
"Accounts Receivable");
(d) all deposits of PC DYNAMICS which are listed on Schedule 4
attached hereto (collectively, the "Deposits");
(e) all contracts, agreements, purchase or sale orders to which
PC DYNAMICS is a party (collectively, the "Contracts").
(f) to the extent legally assignable, all licenses, approvals,
permits and certificates obtained from governmental agencies and held
by PC DYNAMICS as of the Closing Date;
<PAGE>
(g) all telephone numbers currently assigned to PC DYNAMICS;
(h) the name "PC DYNAMICS" and any related or derivative name;
and
(i) the business of PC DYNAMICS as a going concern and all
goodwill of, in, related to or associated with such business.
1.2 Notwithstanding anything contained in Section 1.1 to the
contrary, PC DYNAMICS is not selling, and BUYER is not purchasing, pursuant
to this Agreement, any of the following, all of which shall be retained by
PC DYNAMICS:
(a) the consideration delivered or to be delivered to PC DYNAMICS
pursuant to this Agreement;
(b) the right of PC DYNAMICS to enforce the obligations of BUYER
under the Transaction Documents (as defined below);
(c) the cash and bank accounts of PC DYNAMICS;
(d) any claims asserted by PC DYNAMICS in any litigation
involving PC DYNAMICS;
(e) PC DYNAMICS' minute books, tax returns and other corporate
documents
(f) the Facility; and
(g) any other asset which is not specifically enumerated in
1.3 BUYER acknowledges and agrees that PC DYNAMICS makes no
warranties with respect to the Assets and the Assets are being said "AS IS"
and "WHERE IS" and all warranties, express or implied, of merchantability or
fitness for purpose or otherwise with respect in the condition, quality or
suitability of the Assets, are hereby expressly disclaimed.
1.4 As promptly as practicable after the Closing, and in consideration
of the obligations and payments recited herein, M-Wave, Inc. agrees to: (i)
cause PC DYNAMICS to transfer any remaining assets and liabilities
(contingent or otherwise) of PC DYNAMICS to M-Wave, Inc. and (ii)
immediately thereafter transfer to PlC all of the outstanding shares of PC
DYNAMICS to PIC.
Section 2. Consideration to be Paid by BUYER.
2.1 The purchase price for the Assets shall be paid by BUYER as
follows:
<PAGE>
(a) At the Closing. BUYER shall pay to PC DYNAMICS an amount
equal to eight hundred ninety three thousand and three hundred nineteen
dollars ($893,319) by wire transfer of immediately available funds to
an account designated in writing by PC DYNAMICS;
(b) At the Closing, BUYER shall pay to PC DYNAMICS an amount
equal to seven hundred seventy three thousand four hundred and seventy
nine dollars ($773,479) in the form of BUYER's promissory note payable
to PC DYNAMICS in the form attached hereto as Exhibit A-1 (the "Note
A-1"):
(c) At the Closing, BUYER shall pay to, PC DYNAMICS an amount
equal to two hundred ninety three thousand and twenty-five dollars
($293,025) in the form of BUYER'S promissory note payable to PC
DYNAMICS in the form attached hereto as Exhibit A-2 (the "Note A-2",
and together with the Note A-1, the "Notes").
(d) At the Closing, BUYER shall execute and deliver to PC
DYNAMICS the royalty agreement in the form attached hereto as Exhibit
B (the "Royalty Agreement").
2.2 As further consideration for consummation of the transactions
contemplated hereby, BUYER shall assume and agree to thereafter pay when due
and discharge and indemnify PC DYNAMICS and hold PC DYNAMICS harmless with
respect to the executory liabilities and obligations of PC DYNAMICS under
each Contract assigned to BUYER pursuant to Section 1.1(e) hereof.
2.3 The assumption by BUYER of liabilities of PC DYNAMICS pursuant to
this Agreement shall in no way expand the rights or remedies of any third
party against BUYER or PC DYNAMICS as compared to the rights and remedies
which such third party would have had against PC DYNAMICS had BUYER not
assumed such liabilities. Without limiting the generality of the foregoing,
the assumption by BUYER of liabilities of PC DYNAMICS pursuant to this
Agreement shall not create any third party beneficiary rights.
2.4 The purchase price shall be allocated by the parties among the
Assets as follows: Accounts Receivable, Inventory, Equipment and Utility
Deposits, at book value, as of the Closing Date. The parties shall file all
tax returns and Form 8594 consistent with the allocation of the purchase
price as provided herein.
Section 3. Closing and Closing Date.
3.1 The consummation of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Sonnenschein
Nath & Rosenthal, 8000 Sears Tower, Chicago, Illinois, at 8:00 a.m., Chicago
time, on the date hereof (the "Closing Date"), or at such other place or on
such other date as PC DYNAMICS and BUYER may agree.
<PAGE>
3.2 At or prior to the Closing, BUYER shall deliver to PC DYNAMICS:
(a) the cash required to be delivered by BUYER at the Closing in
accordance with Section 2.1(a) hereof,
(b) each of the Notes executed by BUYER;
(c) the Royalty Agreement executed by BUYER;
(d) a lease in the form of Exhibit C attached hereto with respect
to the Facility (the "Lease") executed by BUYER;
(e) an assumption of liabilities executed by BUYER in the form of
Exhibit D attached hereto (the "Assumption Agreement");
(f) a bill of sale executed by BUYER in the form of Exhibit E
attached hereto (the "Bill of Sale"); and
(g) such other documents executed by BUYER required to effect the
transactions contemplated hereby.
3.3 At or prior to the Closing, PC DYNAMICS shall deliver to BUYER:
(a) the Royalty Agreement executed by PC DYNAMICS;
(b) the Security Agreement executed by PC DYNAMICS;
(c) the Lease executed by PC DYNAMICS;
(d) the Assumption of Liabilities executed by PC DYNAMICS;
(e) a Bill of Sale executed by PC DYNAMICS;
(f) a subordination agreement in the form of Exhibit F attached
hereto;
(g) a consent by PC DYNAMICS' mortgagor to the Lease, which
consent is
mutually acceptable to such mortgagor and BUYER; and
(h) such other documents executed by PC DYNAMICS required to
effect the transactions contemplated hereby.
3.4 The parties acknowledge and agree that (a) each of Performance
Interconnect Corp., a Texas corporation, and Mr. D. Ronald Allen has
executed and delivered to PC DYNAMICS a guarantee in the form of Exhibit G
attached hereto (the "Guarantee"); and (b) M-Wave, Inc. has executed and
delivered the Non-Compete Agreement in the form of Exhibit H attached
hereto.
<PAGE>
Section 4. Representations and Warranties.
4.1 PC DYNAMICS represents and warrants to BUYER as follows:
(a) PC DYNAMICS is a corporation duly organized, validly existing
and in good standing under the laws of Texas.
(b) PC DYNAMICS has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement
and all other agreements, instruments, certificates and other documents
to be entered into or delivered by any party to this Agreement in
connection with the transactions contemplated hereby (collectively, the
"Transaction Documents") and to perform its obligations pursuant to the
Transaction Documents.
(c) The execution, delivery and performance of the Transaction
Documents by PC DYNAMICS, and the consummation by PC DYNAMICS of the
transactions contemplated by the Transaction Documents, have been
authorized by the Board of Directors of PC DYNAMICS and no other
corporate action is necessary for the execution, delivery and
performance by PC DYNAMICS of the Transaction Documents and the
consummation by PC DYNAMICS of the transactions contemplated by the
Transaction Documents. Each of the Transaction Documents constitutes
the valid and legally binding obligations of PC DYNAMICS, enforceable
in accordance with its terms and conditions.
(d) All of the Assets are owned by PC DYNAMICS and are free of
any and all liens and encumbrances, except as set forth on Schedule 5.
4.2 BUYER represents and warrants to PC DYNAMICS as follows:
(a) BUYER is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation.
(b) BUYER has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and all
other Transaction Documents and to perform its obligations pursuant to
the Transaction Documents.
(c) The execution, delivery and performance of the Transaction
Documents by BUYER, and the consummation by BUYER of the transactions
contemplated by the Transaction Documents, have been authorized by the
Board of Directors of BUYER and no other corporate action is necessary
for the execution, delivery and performance by BUYER of the
Transaction Documents and the consummation by BUYER of the
transactions contemplated by the Transaction Documents. Each of the
Transaction Documents constitutes the valid and legally binding
obligations of BUYER, enforceable in accordance with its terms and
conditions.
<PAGE>
Section 5. Indemnification.
5.1 Indemnification by PC DYNAMICS. PC DYNAMICS shall indemnify and
hold harmless BUYER in respect of any and all claims, losses,, liabilities,
and expenses (including, without limitation, settlement costs and any legal,
accounting and other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by BUYER, in connection with each
and all of the following:
(a) any breach of any representation or warranty made by PC
DYNAMICS in this Agreement;
(b) the breach of any covenant, agreement or obligation of PC
DYNAMICS contained in this Agreement or any other instrument
contemplated by this Agreement; and
(c) any liabilities or obligations of PC DYNAMICS not
specifically assumed by BUYER pursuant to this Agreement.
5.2 Indemnification by BUYER. BUYER shall indemnify and hold harmless
PC DYNAMICS in respect of any and all claims, losses, damages, liabilities
and expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by PC DYNAMICS, in connection with
each and all of the following:
(a) any breach of any representation or warranty made by BUYER in
this Agreement; and
(b) any failure by BUYER to pay any liability or fulfill any
obligation of PC DYNAMICS assumed by BUYER pursuant to this Agreement
or any other breach of any covenant, agreement or obligation of BUYER
contained in this Agreement or any other instrument contemplated by
this Agreement.
5.3 Claims for Indemnification. Whenever: any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"indemnified party") shall promptly notify the other party (the
"indemnifying party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal
proceedings by a third party, the notice to the indemnifying party shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The indemnified party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification
hereunder, without the prior written consent of the indemnifying party
(which shall not be unreasonably withheld) unless suit shall have been
instituted against it and the indemnifying party shall not have taken
control of such suit after notification thereof as provided in Section 5.4
of this Agreement.
<PAGE>
5.4 Defense by lndemnifying Party. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement,
the indemnifying party at its sole cost and expense may, upon written notice
to the indemnified party, assume the defense of any such claim or legal
proceeding with counsel reasonably satisfactory to the party asserting such
indemnification claim if the indemnifying party acknowledges in writing its
obligations to indemnify the indemnified party with respect to all elements
of such claim. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at
its own expense. If the indemnifying parry does not assume the defense of
any such claim or litigation resulting therefrom, (a) the indemnified party
may defend against such claim or litigation, in such manner as it may deem
appropriate, including, but, not limited to, settling such claim or
litigation, after giving notice of the same in the indemnifying party, on
such terms as the indemnified party may deem appropriate, and (b) the
indemnifying party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
indemnifying party thereafter seeks to question the manner in which the
indemnified party defended such third party claim or the amount or nature of
any such settlement, the indemnifying party shall have the burden to prove
by a preponderance of the evidence that the indemnified party did not defend
or settle such third party claim in a reasonably prudent manner.
Section 6 Collection of Accounts Receivable.
6.1 For a period at three (3) months after the Closing Date (the
"Collection Period") BUYER shall use its reasonable best efforts to collect
the Accounts Receivable. BUYER may, but shall not be obligated to, use a
collection agency or commence legal actions in connection with such
collection efforts. BUYER shall maintain complete records of all customer
payments received by BUYER. During the Collection Period, authorized
representatives of PC DYNAMICS shall have reasonable access to BUYER's
premises, credit personnel and accounts receivable records, including
without limitation, bank deposits and cash receipts information, for the
purpose of monitoring BUYER's collection procedure with respect to the
Accounts Receivable and consulting with BUYER concerning such procedure. PC
DYNAMICS may, but shall not be obligated to, use a collection agency or
commence legal actions in an effort to collect the Accounts Receivable
during the Collection Period upon reasonable notice to BUYER. Within ten
(10) business days after the end of each month during the Collection Period,
BUYER shall furnish to PC DYNAMICS a statement setting forth the Accounts
Receivable showing the aging thereof as of the end of such month. Promptly
after the expiration of the Collection Period, BUYER shall advise PC
DYNAMICS of those Accounts Receivable which have not been collected as of
the end of the Collection Period which BUYER wishes PC DYNAMICS to purchase.
BUYER shall assign and sell to PC DYNAMICS (without recourse to BUYER) all
such designated Accounts Receivable then remaining unpaid for a purchase
price equal to the book value of the Accounts Receivable as set forth
Schedule 3 after deducting the aggregate amount collected by BUYER during
the Collection Period.
<PAGE>
6.2 Upon PC DYNAMICS' repurchase of any unpaid Account Receivable
pursuant to this Section. (a) BUYER shall promptly deliver to PC DYNAMICS
any tangible evidence of such Account Receivable then in the possession of
BUYER or under its control, and (b) PC DYNAMICS shall be entitled to take
any and all actions which it may deem necessary or desirable in order to
collect such unpaid Account Receivable. BUYER will, from time to time after
such repurchase, execute and deliver to PC DYNAMICS such instruments and
other documents as PC DYNAMICS may reasonably request to assist PC DYNAMICS
in its collection efforts.
6.3 In the event that any payment received by BUYER during the
Collection Period is remitted by a customer which is indebted under both
Accounts Receivable and an account receivable arising out of the sale of
inventory in the ordinary course of business after the Closing Date (a "New
Receivable"), such payments shall first be applied to the Accounts
Receivable due from such customer and the balance remaining after payment in
full of all Accounts Receivable due from such customer shall be applied to
the New Receivable.
6.4 BUYER will cooperate, at PC DYNAMICS' expense, with PC DYNAMICS
in collecting any Accounts Receivable which are repurchased by PC DYNAMICS
pursuant to this Section; provided, however, that the foregoing shall not
require BUYER to be a party to any action brought by PC DYNAMICS to collect
such Accounts Receivable.
6.5 PC DYNAMICS hereby authorizes BUYER to open any and all mail
addressed to the PC DYNAMICS (if delivered by BUYER) if received on or after
the Closing Date and prior to the expiration of the Collection Period and
hereby grants to BUYER a power of attorney to endorse and cash any checks or
instruments made payable or endorsed to PC DYNAMICS or its order and
received by BUYER.
6.6 Any sums received by BUYER in respect of Accounts Receivable (and
so identified by the relevant account debtor) after their repurchase by PC
DYNAMICS pursuant to Section 6.1 hereof, shall be promptly transmitted by
BUYER to PC DYNAMICS.
Section 7. Post-Closing, Consents: Nonassignable Contracts.
7.1 If requested by BUYER after the Closing Date with respect to any
Contract, PC DYNAMICS will cooperate with BUYER to obtain any third party
consents with respect to such Contract: that was not obtained prior to the
Closing Date and that is required to transfer and assign such Contract to
BUYER in connection with the transactions contemplated by this Agreement. To
the extent that the transfer or attempted transfer of any Contract could
constitute a breach or a violation of any law, rule or regulation, nothing
in this Agreement will constitute a transfer or an attempted transfer
thereof or the assumption by BUYER of any liabilities or obligations arising
thereunder or otherwise relating thereto.
<PAGE>
Section 8. Employees
8.1 BUYER shall deliver an offer of employment at least five days
prior to the Closing Date to all of the employees listed on Schedule 6
attached hereto, each of whom has been employed by PC DYNAMICS in whole or
in part in connection with the business of PC DYNAMICS. BUYER's offer shall
be contingent upon the occurrence of the Closing and shall provide that all
accrued but unused vacation earned by such employees while in the employ of
PC DYNAMICS shall be carried over and honored by BUYER upon acceptance of
BUYER's offer of employment. All employees who accept BUYER's offer of
employment shall become employees of BUYER effective upon the Closing (such
employees hereinafter referred to as the "Continuing Employees"). BUYER
shall provide to PC DYNAMICS at the Closing a list of all Continuing
Employees and PC DYNAMICS shall deliver a termination notice to each of the
Continuing Employees of BUYER.
Section 9. Miscellaneous.
9.1 No party will issue any press release or announcement relating to
the subject matter of this Agreement without the prior written approval of
the other party; provided that any party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing party will advise the other party prior to making such
disclosure).
9.2 Except as otherwise expressly provided by this Agreement, each of
the parties hereto will bear all legal and other expenses incurred by it or
on its behalf in connection with the transactions contemplated by this
Agreement.
9.3 The provisions of this Agreement may be amended or waived only by
a written agreement between PC DYNAMICS and BUYER. No course of dealing
between the parties to this Agreement or any delay in exercising any rights
hereunder will waive any rights of such parties.
9.4 No party hereto may assign or delegate any of such party's rights
or obligations under or in connection with this Agreement without the
written consent of the other party hereto; provided that (i) PC DYNAMICS may
assign this Agreement to M-Wave, Inc. and (ii) BUYER may assign this
Agreement to a wholly-owned subsidiary of BUYER (provided that any such
assignment shall nor relieve BUYER from any of its obligations under this
Agreement). Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will be binding upon and enforceable against the respective
successors and assigns of such party and will be enforceable by and will
inure to the benefit of the respective successors and permitted assigns of
such party.
9.5 Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
<PAGE>
9.6 This Agreement may be executed simultaneously in two or more
counterparts any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and
the same Agreement.
9.7 The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
9.8 All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to
the recipient or when sent to the recipient by telecopy (receipt confirmed),
one business day after the date when sent to the recipient by reputable
express courier service (charges prepaid) or two business days after the
date when mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to PC DYNAMICS and BUYER at the addresses
indicated below, or to such other address as a party may from time to time
designate by notice to the other party given in accordance with this
Section:
If to
PC DYNAMICS: PC DYNAMICS, INC.
c/o M-Wave, Inc.
216 Evergreen Street
Bensenville, IL 60106
Attention: President
If to
BUYER: PC DYNAMICS OF TEXAS, INC.
10501 FM 720 East
Frisco, Texas 75035
Attention: D. Ronald Allen
9.9 Except as otherwise expressly provided in this Agreement, this
Agreement will not confer any rights or remedies upon any person or entity
other than PC DYNAMICS, BUYER and their respected successors and permitted
assigns.
9.10 This Agreement and the other Transaction Documents constitute the
entire agreement among the parties and supersedes any prior understandings,
agreements or representations by or among the parties, written or oral, that
may have related in any way to the subject manner hereof.
9.11 The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party. The use of the
word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
<PAGE>
9.12 The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
9.13 All questions concerning the construction, validity and
interpretation of this Agreement and the Exhibits and Schedules hereto will
be governed by the internal law, and not the law of conflicts, of the State
of Illinois. Any legal action or proceeding with respect to this Agreement
shall be brought exclusively in the courts of the State of Illinois or of
the United States of America within Cook County, Illinois and by execution
and delivery of this Agreement, each of the parties hereto hereby consents,
for itself and in respect of its property, to the jurisdiction of the
aforesaid courts. Each of the parties hereto hereby irrevocably waives any
objection, including without limitation, any objection to the laying of
venue or based on grounds of forum non conveniens which it may now or
hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Agreement or any document related hereto.
IN WITNESS WHEREOF, the parties hereto have executed and deliver this
Agreement as of the date first written above.
PC DYNAMICS CORPORATION
By: /s/
---------------------
Its:
---------------------
PC DYNAMICS OF TEXAS, INC.
By: /s/
---------------------
Its:
---------------------
<PAGE>
For purposes of Section 1.4
of this Agreement:
M-WAVE, INC.
By: /s/
----------------------
Its:
----------------------
Exhibit 10.6
GUARANTY
--------
This Guaranty ("Guaranty") is made as of March 15, 1999, by MR. D.
RONALD ALLEN,. an individual residing in the State of Texas (the
"Guarantor"), in favor of PC DYNAMICS CORPORATON, a Texas corporation ("PC
Dynamics"). Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Note referred to below.
WITNESSETH THAT:
WHEREAS, PC Dynamics and PC DYNAMICS OF TEXAS, INC., a Texas
corporation ("BUYER") have entered into that certain Agreement dated as of
March 15, 1999 pursuant to which BUYER has agreed to purchase certain Assets
from PC Dynamics related to the manufacturing of printed circuit boards (the
"Agreement");
WHEREAS, part of consideration paid by BUYER for the Assets was the
execution by BUYER of a promissory note payable to PC Dynamics in the
principal amount of $773,479 and a promissory note payable to PC Dynamics in
the principal amount of $293,025 (collectively, the "Notes");
WHEREAS,. Guarantor is a shareholder of Performance Interconnect
Corp., a Texas corporation and Owner of all of the outstanding capital
stock of BUYER, and will derive substantial benefit from BUYER's purchase of
the Assets and the acceptance by PC Dynamics of the Note as partial
consideration therefore; and
WHEREAS, PC Dynamics has required as a condition among others, to
accepting the Notes as partial consideration for the Assets that the
Guarantor execute and deliver this Guaranty to PC Dynamics.
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit heretofore, now or
hereafter made to or for the benefit of BUYER by PC Dynamics and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged. Guarantor hereby agrees as follows:
1. Guarantor absolutely, unconditionally and irrevocably guarantees
to PC Dynamics the full and prompt payment of the principal of and interest
on the Notes when due, whether upon demand, at stated maturity, upon
acceleration or otherwise, and at all times thereafter, and the prompt
payment of all sums which may now be or may hereafter became due and owing
under the Note, the Agreement and this Guaranty, and the other documents
delivered in connection therewith (collectively, the "Obligations"),
regardless of any standstill agreement or other prohibition relating to such
payment. Guarantor hereby agrees that this Guaranty is an absolute
guarantee of payment and performance and is not a guaranty of collection.
<PAGE>
2. In the event BUYER at any time fails to observe, perform or
satisfy the Obligations, Guarantor agrees, on demand by PC DYNAMICS, to
promptly pay, perform and satisfy the Obligations. Guarantor shall also pay
to PC Dynamics, on demand and in immediately available funds, (a) all fees,
costs and expenses (including, without limitation, all court costs and
attorneys' and paralegals' fees, costs and expenses) paid or incurred by PC
Dynamics in: (i) endeavoring to collect all or any part of the Obligations
from, or in prosecuting any action against, Guarantor; and (ii) preserving,
protecting or defending the enforceability of this Guaranty or its rights
hereunder (all such costs and expenses hereinafter collectively referred to
as the "Expenses"); and (b) interest of such obligations of Guarantor under
this Guaranty from the date of demand until paid in full at the rate of
interest applicable to overdue principal and interest described in paragraph
1 of the Note.
3. Guarantor hereby agrees that his obligations under this Guaranty
shall be unconditional, irrespective of
(a) the enforceability, avoidance or subordination of any of the
Obligations;
(b) the absence of any attempt by, or on behalf of, PC Dynamics
to collect, or take any other action to enforce, all or any part of
the Obligations from BUYER or from any other guarantor of all or any
part or the Obligations or any other person or entity;
(c) the election of any remedy by, or on behalf of PC Dynamics
with respect to all or any part of the Obligations;
(d) the waiver, consent, extension, forbearance or granting of
any indulgence by, or on behalf of, PC Dynamics with respect to any
provision of the Agreement, the Note or this Guaranty;
(e) the failure of PC Dynamics to take any steps to perfect and
maintain its security interest in, or to preserve its respective right
to any collateral or security now or hereafter given to PC Dynamics
for all or any part of the Obligations (the "Collateral");
(f) the election by, or on behalf of, PC Dynamics, in any
proceeding instituted under the United States Bankruptcy Code (the
"Bankruptcy Code") of the application of Section 1111 (b)(2) of the
Bankruptcy Code;
(g) any borrowing or grant of a security interest by BUYER, as
debtor-in-possession, under Section 364 of the Bankruptcy Code;
<PAGE>
(h) the disallowance under Section 502 of the Bankruptcy Code of
all or any portion of the claims of PC Dynamics to: repayment of all
or any part of the Obligations or any Expenses relating thereto; or
(i) any other circumstances other than payment in full which
might otherwise constitute a legal or equitable discharge or defense
of a guarantor other than fraud by PC DYNAMICS.
4. Guarantor hereby waives any requirement of diligence,
presentment, demand of payment, filing of claims with a court in the event
of receivership or bankruptcy of BUYER, protest or notice with respect to
all or any part of the Obligations, the benefit of any statutes of
limitation, and all demands whatsoever (and Guarantor shall not require at
the same be made on BUYER as a condition precedent to any of Guarantor's
obligations hereunder), and covenants chat this Guaranty will not be
discharged, except by complete performance of the Obligations or by payment
to PC Dynamics of the entire amount of Guarantor's liability hereunder.
5. If demand is made for payment under the Notes in accordance with
the terms of the Notes, and BUYER tails to immediately pay, PC Dynamics may
proceed directly and at once, without notice, against Guarantor to obtain
performance of and to collect and recover the full amount, or any portion,
of the Obligations without first proceeding against BUYER, or any other
person or entity or any Collateral for all or any part of the Obligations.
Payments and credits, if any, from Guarantor, BUYER, any other guarantor of
all or any portion of the Obligations or any other person or entity on
account of the Obligations or of any other liability or obligation of
Guarantor to PC Dynamics, shall be applied to the Obligations in such order
as the PC Dynamics may elect, but neither Guarantor, BUYER, any other
guarantor of all or any portion of the Obligations nor any other person or
entity shall have any further liability with respect to any such payments
and credits if such payments and credits have been made as provided herein;
provided, however, that if such payments or credits, or any part thereof,
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to Guarantor, BUYER, any other guarantor
or any other person or entity, or their respective estates, trustees,
receivers or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, the Obligations or other obligations or liabilities or any part
thereof which has been paid, reduced or satisfied by such amount shall be
reinstated and shall continue in full force and effect as of the time
immediately preceding the dine such initial payment, credit, reduction or
satisfaction occurred.
6. Guarantor agrees that, notwithstanding anything set forth in this
Guaranty to the contrary, if, after demand is made under the Notes in
accordance with the terms of the Notes, BUYER fails to immediately pay, and
PC Dynamics is prevented by applicable law from exercising any of its rights
to accelerate the maturity of all or any part of the Obligations, to collect
all or any part of the Obligations or to enforce or exercise any other right
or remedy wit respect to all or any part of the Obligations, or is prevented
from talking any action to realize on all or any parrot the Collateral,
Guarantor shall pay to PC Dynamics, on demand therefor and in immediately
available funds, the amount that would otherwise have been due and payable
had such rights and remedies been permitted to be exercised by PC Dynamics.
<PAGE>
7. PC Dynamics is hereby authorized without notice or demand and
without affecting the liability of Guarantor hereunder, from time to time
(a) to renew, extend, accelerate or otherwise change the time for payment
of, or other terms relating to; all or my part of the Obligations or to
otherwise modify, amend or change the terms of the Agreement, the Notes and
any of the documents executed in connection therewith (the "Financing
Documents"); (b) to accept partial payments on all or any part at the
Obligations; (c) to take and hold security or collateral for the payment of
all or any part of the Obligations, this Guaranty, or any other guaranties
of all or any part of the Obligations or other liabilities of BUYER; (d) to
exchange, enforce, waive and release any such collateral or security; (e) to
release any other guarantor of the Obligations; and (f) to settle, release,
compromise, collect or otherwise liquidate all or any part of the
Obligations and exchange, enforce, release or waive any security or
collateral for all or any part of the Obligations, and any of the foregoing
may be done in any manner, without affecting or impairing all or any part of
the obligations of Guarantor hereunder.
8. Subject to the provisions of the Financing Documents, at any time
after all or any part of the Obligations have become due and payable, until
all of such Obligations have been paid in full and the Financing Documents
have been terminated. PC Dynamics may, in its Sole discretion, without
notice cc Guarantor and regardless of the acceptance of any security or
collateral for the payment hereof, appropriate and apply toward the payment
of all or any part of such Obligations (a) any indebtedness due or to become
due from PC Dynamics to Guarantor; and (b) any monies, credits or other
property belonging to Guarantor, at any rime held by or coming into the
possession of PC Dynamics.
9. Guarantor hereby assumes responsibility for keeping itself
informed of the financial condition of BUYER and any and all endorsers
and/or other guarantors of all or any part of the Obligations, and of all
other circumstances hearing upon the risk of nonpayment of the Obligations,
or any part thereof, that diligent inquiry would reveal and Guarantor hereby
agrees that PC Dynamics shall have no duty to advise Guarantor of
information known to it regarding such condition or any such circumstances.
Guarantor hereby acknowledges and agrees that in the event PC Dynamics, in
its sole discretion, undertakes at any time or from time to time to provide
any such information to Guarantor, then the party providing such information
shall be under no obligation (a) to undertake any investigation nor a part
of its regular business routine; (b) to disclose any information which,
pursuant to accepted or reasonable banking or commercial finance practices,
such party wishes to maintain confidential; or (c) to make any other or
future disclosures of such information or any other information to
Guarantor.
<PAGE>
10. Guarantor consents and agrees that PC Dynamics or any person or
entity acting for or on behalf of PC Dynamics shall not be under any
obligation to marshal any assets in favor of Guarantor or against or in
payment of all or any part of the Obligations.
11. Until the Obligations shall have been paid in full, Guarantor (a)
shall have no right of subrogation with respect to the Obligations and (b)
hereby waives any right to enforce any remedy which PC Dynamics now has or
may hereafter have against BUYER, any endorser or any other guarantor of all
or any part of the Obligations or any other person or entity, and Guarantor
hereby waives any benefit of, and any right to participate in, any security
or collateral given to or for the benefit of PC Dynamics to secure payment
or performance of all or any part of the Obligations or any other liability
of BUYER to PC Dynamics. Guarantor further agrees that any and all claims
of Guarantor against BUYER, any endorser or any other guarantor of all or
any part of the Obligations, or against any of their respective properties,
whether arising by reason of any payment by Guarantor pursuant to the
provisions hereof, or otherwise, and all indebtedness of BUYER to Guarantor,
shall be subordinate and subject in right of payment to the prior payment,
in full, of all principal and interest, all reasonable costs of collection
(including, without limitation, attorneys' and paralegals' fees, costs and
expenses) of such principal and interest and all Obligations owing to PC
Dynamics by BUYER. Guarantor also waive all setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance
of this Guaranty by any person or entity who is at any time an obligee with
respect to any of the Obligations. Guarantor further waives all notices of
the existence, creation or incurring of new or additional indebtedness,
arising either from additional loans extended to BUYER or otherwise, and
also waives all notices that the principal amount, or any portion thereof,
and/or any interest with respect to any of the Obligations is due, notices
of any and all proceedings to collect from the maker, any endorser, any
other guarantor, or any other person or entity of all or any part of the
Obligations, and, so the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to PC
Dynamics to secure payment of all or any part of the Obligations.
12. No delay on the part of PC Dynamics in the exercise of any right
or remedy arising under this Guaranty, the Note, or any of the other
Financing Documents or otherwise with respect to all or any part of the
Obligations, the Collateral or any other guaranty of or security for all or
any part of the Obligations shall operate as a waiver thereof, and no single
or partial exercise by any such person or entity of any such right or remedy
shall preclude any further exercise thereof. No modification or waiver of
any of the provisions of this Guaranty shall be binding upon PC Dynamics
except as expressly set forth in a writing duly executed and delivered by PC
Dynamics. Failure by PC Dynamics at any time or times hereafter to require
strict performance by BUYER, Guarantor, any other guarantor of all or any
part of the Obligations or any other person or entity of any of the
provisions, warranties, terms and conditions contained in the Financing
Documents now or at any tine or times hereafter executed by any such persons
<PAGE>
or entities and delivered to PC Dynamics shall not waive, affect or diminish
any right of PC Dynamics at any time or times hereafter to demand strict
performance thereof, and such right shall not be deemed to have been
modified or waived by any act or knowledge of PC Dynamics, unless such
waiver is contained in an instrument in writing, and directed and delivered
to Guarantor or BUYER, as applicable, specifying such waiver signed by PC
Dynamics. Any final determination by a court of competent jurisdiction of
the amount of any principal and/or interest owing by BUYER to PC Dynamics,
shall be conclusive and binding on Guarantor irrespective of whether
Guarantor was a party to the suit or action in which such determination was
made.
13. This Guaranty shall be binding upon Guarantor and upon the
successors and assigns of Guarantor and shall inure to the benefit of PC
Dynamics and its respective successors and assigns (which may include
M-Wave, Inc.). All references herein to BUYER and Guarantor shall be deemed
to include their respective successors and assigns. The successors and
assigns of BUYER and Guarantor shall include, without limitation, a
receiver, trustee or debtor-in-possession of or for BUYER or Guarantor.
14. This Guaranty shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois applicable to contracts
made and to be performed within such State, without giving effect to its
conflicts of laws, principles or rules. Whenever possible, each provision
of this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
held to be prohibited or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Guaranty.
15. WITHOUT LIMITING THE RIGHT OF PC DYNAMICS TO BRING ANY ACTION OR
PROCEEDING AGAINST GUARANTOR OR AGAINST PROPERTY OF GUARANTOR ARISING OUT OF
OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER FINANCING DOCUMENTS (AN
"ACTION") IN THE COURTS OF OTHER. JURISDICTIONS, GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO AND ACCEPTS THE NONEXCLUSIVE JURISDICTION OF ANY
ILLINOIS STATE COURT, OR ANY FEDERAL COURT SITTING IN COOK COUNTY, AND
GUARANTOR HEREBY IRREVOCABLY AGREES THAT ANY ACTION MAY BE HEARD AND
DETERMINED IN SUCH ILLINOIS STATE COURT OR IN SUCH FEDERAL COURT. GUARANTOR
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO
SO, ANY DEFENSE OR OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY DEFENSE OR
OBJECTION TO VENUE BASED ON THE GROUNDS OF FORUM NONCONVENIENS) WHICH HE MAY
NOW OR HEREAFTER HAVE TO THE MAINTENANCE ANY ACTION IN ANY JURISDICTION.
GUARANTOR HEREBY IRREVOCABLY AGREES THAT THE SUMMONS AND COMPLAINT OR ANY
OTHER PROCESS IN ANY ACTION IN ANY JURISDICTION MAY BE SERVED BY MAILING
(USING CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID) TO THE NOTICE ADDRESS
FOR GUARANTOR SPECIFIED BELOW OR BY HAND DELIVERY TO A PERSON OF SUITABLE
AGE AND DISCRETION AT SUCH ADDRESS. SUCH SERVICE WILL BE COMPLETE ON THE
DATE SUCH PROCESS IS SO MAILED OR DELIVERED, AND GUARANTOR WILL HAVE THIRTY
DAYS FROM SUCH COMPLETION OF SERVICE IN WHICH TO RESPOND IN THE MANNER
PROVIDED BY LAW. GUARANTOR MAY ALSO BE SERVED IN ANY OTHER MANNER PERMITTED
BY LAW, IN WHICH EVENT GUARANTOR'S TIME TO RESPOND SHALL BE THE TIME
PROVIDED BY LAW.
<PAGE>
16. TO THE FULLEST EXTENT PEPM1flED BY LAW, AND AS SEPAPARATELY
BARGAINED FOR CONSIDERATION TO PC DYNAMICS, GUARANTOR HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY (WHICH PC DYNAMICS ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATING TO THIS
GUARANTY, ANY OF THE OTHER FINANCING DOCUMENTS, OR PC DYNAMICS' CONDUCT IN
RESPECT OF ANY OF THE FOREGOING.
17. Any notice required or desired in be served, given or delivered
hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered (a) one (1) Business Day after being deposited
with a nationally-recognized overnight courier with all charges prepaid, or
(b) when delivered, if hand-delivered, by messenger, in each case properly
addressed to the party to be notified at the address for such party set
forth on the signature page of this Guaranty.
18. This Guaranty may be executed in separate counterparts each of
which shall be an original and all of which taken together shall constitute
one and the same instrument.
19. Guarantor hereby agrees that, regardless of whether any amounts
are hereafter funded under the Note, Guarantor shall not disclose the terms
of any of the Financing Documents to any party including, without
limitation, other sources of financing), without PC Dynamics' prior written
consent. The terms of this paragraph shall survive the expiration or
termination hereof.
20. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof. The singular shall include
the plural and vice versa and any gender shall include any other gender as
the context may require.
21. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed as of the
day and year set forth above.
/s/
-------------------
MR. D. RONALD ALLEN
Notice Address
[TO Follow]
Telephone: _______________
Telecopy: _______________
Agreed and Accepted
PC DYNAMICS CORPORATION
By: /s/
-----------------
Name:
-----------------
Its:
-----------------
Notice Address
216 Evergreen Street
Bensenville, Illinois 60106
Exhibit 10.7
GUARANTY
--------
This Guaranty ("Guaranty") is made as of March 15, 1999, by
Performance Interconnect Corp., a Texas corporation (the "Guarantor"), in
favor of PC DYNAMICS CORPORATION, a Texas corporation ("PC Dynamics").
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings ascribed to them in the Note referred to below.
WITNESSETH THAT:
WHEREAS, PC Dynamics and PC DYNAMICS OF TEXAS, INC., a Texas
corporation ("BUYER") have entered into that certain Agreement dated as of
March 15, 1999 pursuant to which BUYER has agreed to purchase certain Assets
from PC Dynamics related to the manufacturing of printed circuit boards (the
"Agreement");
WHEREAS, part of consideration paid by BUYER for the Assets was the
execution by BUYER of a promissory note payable to PC Dynamics in the
principal amount of $723,479 and a promissory note payable to PC Dynamics in
the principal amount of $293,025 (collectively, the "Notes");
WHEREAS, Guarantor is the owner of all of the outstanding capital
stock of BUYER, and will derive substantial benefit from BUYER's purchase of
the Assets and the acceptance by PC Dynamics of the Note as partial
consideration therefore; and
WHEREAS, PC Dynamics has required as a condition among others, to
accepting the Notes as partial consideration for the Assets that the
Guarantor execute and deliver this Guaranty to PC Dynamics.
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit heretofore, now or
hereafter made to or for the benefit of BUYER by PC Dynamics and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Guarantor hereby agrees as follows:
1. Guarantor absolutely, unconditionally and irrevocably guarantees to
PC Dynamics the full and prompt payment of the principal of and interest on
the Notes when due, whether upon demand, at stated maturity, upon
acceleration or otherwise, and at all times thereafter, and the prompt
payment of all sums which may now be or may hereafter become due and owing
under the Note, the Agreement and this Guaranty, and the other documents
delivered in connection therewith (collectively, the "Obligations"),
regardless of any standstill agreement or other prohibition relating to such
payment. Guarantor hereby agrees that this Guaranty is an absolute
guarantee of payment and performance and is not a guaranty of collection.
<PAGE>
2. In the event BUYER at any time fails to observe, perform or satisfy
the Obligations, Guarantor agrees, on demand by PC DYNAMICS, to promptly
pay, perform and satisfy the Obligations. Guarantor shall also pay to PC
Dynamics, on demand and in immediately available funds, (a) all fees, costs
and expenses (including, without limitation, all court costs and attorneys'
and paralegals' fees, costs and expenses) paid or incurred by PC Dynamics
in: (i) endeavoring to collect all or any part of the Obligations from, or
in prosecuting any action against, Guarantor; and (ii) preserving,
protecting or defending the enforceability of this Guaranty or its rights
hereunder (all such costs and expenses hereinafter collectively referred to
as the "Expenses"); and (b) interest on such obligations of Guarantor under
this Guaranty from the date of demand until paid in full at the rate of
interest applicable to overdue principal and interest described in paragraph
1 of the Note.
3. Guarantor hereby agrees that his obligations under this Guaranty
shall be unconditional, irrespective of
(a) the enforceability, avoidance or subordination of any of the
Obligations;
(b) the absence of any attempt by, or on behalf of, PC Dynamics to
collect, or take any other action to enforce, all or any part of the
Obligations from BUYER or from any other guarantor of all or any part
or the Obligations or any other person or entity;
(c) the election of any remedy by, or an behalf of, PC Dynamics
with respect to all or any part of the Obligations;
(d) the waiver, consent, extension, forbearance or granting of any
indulgence by, or on behalf of, PC Dynamics with respect to any
provision of the Agreement, the Note or this Guaranty;
(e) the failure of PC Dynamics to take any steps to perfect and
maintain its security interest in, or to preserve its respective right
to any collateral or security now or hereafter given to PC Dynamics
for all or any part of the Obligations (the "Collateral");
(f) the election by, or an behalf of, PC Dynamics, in any
proceeding instituted under the United States Bankruptcy Code (the
"Bankruptcy Code") of the application of Section 1111(b)(2) of the
Bankruptcy Code;
(g) any borrowing or grant of a security interest by BUYER, as
debtor-in-possession, under Section 364 of the Bankruptcy Code;
<PAGE>
(h) the disallowance under Section 502 of the Bankruptcy Code of
all or any portion of the claims of PC Dynamics for repayment of all
or any part of the Obligations or any Expenses relating thereto; or
(i) any other circumstance other than payment in full which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor other than fraud by PC DYNAMICS.
4. Guarantor hereby waives any requirement of diligence,
presentment, demand of payment, filing of claims with a court in the event
of receivership or bankruptcy of BUYER, protest or notice with respect to
all or any part of the Obligations, the benefit of any statutes of
limitation, and all demands whatsoever (and Guarantor shall not require that
the same be made on BUYER as a condition precedent to any of Guarantor's
obligations hereunder), and covenants that this Guaranty will not be
discharged, except by complete performance of the Obligations or by payment
to PC Dynamics of the entire amount of Guarantor's liability hereunder.
5. If demand is made for payment under the Notes in accordance with
the terms of the Notes, and BUYER fails to immediately pay, PC Dynamics may
proceed directly and at once, without notice, against Guarantor to obtain
performance of and to collect and recover the full amount, or any portion,
of the Obligations without first proceeding against BUYER, or any other
person or entity, or any Collateral for all or any part of the Obligations.
Payments and credits, if any, from Guarantor, BUYER, any other guarantor of
all or any portion of the Obligations or any other person or entity on
account of the Obligations or of any other liability or obligation of
Guarantor to PC Dynamics, shall be applied to the Obligations in such order
as the PC Dynamics may elect, but neither Guarantor, BUYER, any other
guarantor of all or any portion of the Obligations nor any other person or
entity shall have any further liability with respect to any such payments
and credits if such payments and credits have been made as provided herein;
provided, however, that if such payments or credits, or any part thereof,
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to Guarantor, BUYER, any other guarantor
or any other person or entity, or their respective estates, trustees,
receivers or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, the Obligations or other obligations or liabilities or any part
thereof which has been paid, reduced or satisfied by such amount shall be
reinstated and shall continue in full force and effect as of the time
immediately preceding the time such initial payment, credit, reduction or
satisfaction occurred.
6. Guarantor agrees that, notwithstanding anything set forth in this
Guaranty to the contrary, if, after demand is made under the Notes in
accordance with the terms of the Notes, BUYER fails to immediately pay, and
PC Dynamics is prevented by applicable law from exercising any of its rights
to accelerate the maturity of all or any part of the Obligations, to collect
all or any part of the Obligations or to enforce or exercise any other right
or remedy with respect to all or any part of the Obligations, or is
prevented from taking any action to realize on all or any part of the
Collateral, Guarantor shall pay to PC Dynamics, on demand therefor and in
immediately available funds, the amount that would otherwise have been due
and payable had such rights and remedies been permitted to be exercised by
PC Dynamics.
<PAGE>
7. PC Dynamics is hereby authorized, without notice or demand and
without affecting the liability of Guarantor hereunder, from time to time
(a) to renew, extend, accelerate or otherwise change the time for payment
of, or other terms relating to, all or any part of the Obligations or to
otherwise modify, amend or change the terms of the Agreement, the Notes and
any of the documents executed in connection therewith (the "Financing
Documents"); (b) to accept partial payments on all or any part of the
Obligations; (c) to take and hold security or collateral for the payment of
all or any part of the Obligations, this Guaranty, or any other guaranties
of all or any part of the Obligations or other liabilities of BUYER; (d) to
exchange, enforce, waive and release any such collateral or security; (e) to
release any other guarantor of the Obligations; and (f) to settle, release,
compromise, collect or otherwise liquidate all or any part of the
Obligations and exchange, enforce, release or waive any security or
collateral for all or any part of the Obligations, and any of the foregoing
may be done in any manner, without affecting or impairing all or any part of
the obligations of Guarantor hereunder.
8. Subject to the provisions of the Financing Documents, at any time
after all or any part of the Obligations have become due and payable, until
all of such Obligations have been paid in full and the Financing Documents
have been terminated, PC Dynamics may, in its sole discretion, without
notice to Guarantor and regardless of the acceptance of any security or
collateral for the payment hereof, appropriate and apply toward the payment
of all or any part of such Obligations (a) any indebtedness due or to become
due from PC Dynamics to Guarantor; and (b) any monies, credits or other
property belonging to Guarantor, at any time held by or coming into the
possession of PC Dynamics.
9. Guarantor hereby assumes responsibility for keeping itself
informed of the financial condition of BUYER and any and all endorsers
and/or other guarantors of all or any part of the Obligations, and of all
other circumstances bearing upon the risk of nonpayment of the Obligations,
or any part thereof, that diligent inquiry would reveal and Guarantor hereby
agrees that PC Dynamics shall have no duty to advise Guarantor of
information known to it regarding such condition or any such circumstances.
Guarantor hereby acknowledges and agrees that in the event PC Dynamics, in
its sole discretion, undertakes at any time or from tine to time to provide
any such information in Guarantor, then the party providing such information
shall be under no obligation (a) to undertake any investigation not a part
of its regular business routine; (b) to disclose any information which,
pursuant to accepted or reasonable banking or commercial finance practices,
such party wishes to maintain confidential; or (c) to make any other or
future disclosures of such information or any other information to
Guarantor.
<PAGE>
10. Guarantor consents and agrees that PC Dynamics or any person or
entity acting for or on behalf of PC Dynamics shall not be under any
obligation to marshal any assets in favor of Guarantor or against or in
payment of all or any part of the Obligations.
11. Until the Obligations shall have been paid in full, Guarantor (a)
shall have no right of subrogation with respect to the Obligations and (b)
hereby waives any right to enforce any remedy which PC Dynamics now has or
may hereafter have against BUYER, any endorser or any other guarantor of all
or any part of the Obligations or any other person or entity, and Guarantor
hereby waives any benefit of, and any right to participate in, any security
or collateral given to or for the benefit of PC Dynamics to secure payment
or performance of all or any part of the Obligations or any other liability
of BUYER to PC Dynamics. Guarantor further agrees that any and all claims
of Guarantor against BUYER, any endorser or any other guarantor of all or
any part of the Obligations, or against any of their respective properties,
whether arising by reason of any payment by Guarantor pursuant to the
provisions hereof, or otherwise, and all indebtedness of BUYER to Guarantor,
shall be subordinate and subject in right of payment to the prior payment,
in full, of all principal and interest, all reasonable costs of collection
(including, without limitation, attorneys' and paralegals' fees, costs and
expenses) of such principal and interest and all Obligations owing to PC
Dynamics by BUYER. Guarantor also waive all setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance
of this Guaranty by any person or entity who is at any time an obligee with
respect to any of the Obligations. Guarantor further waives all notices of
the existence, creation or incurring of new or additional indebtedness,
arising either from additional loans extended to BUYER or otherwise, and
also waives all notices that the principal amount, or any portion thereof,
and/or any interest with respect to any of the Obligations is due, names of
any and all proceedings to collect from the maker, any endorser, any other
guarantor, or any other person or entity of all or any part of the
Obligations, and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to PC
Dynamics to secure payment of all or any part of the Obligations.
12. No delay on the part of PC Dynamics in the exercise of any right
or remedy arising under this Guaranty, the Note, or any of the other
Financing Documents or otherwise with respect to all or any part of the
Obligations, the Collateral or any other guaranty of or security for all or
any part of the Obligations shall operate as a waiver thereof, and no single
or partial exercise by any such person or entity of any such right or remedy
shall preclude any further exercise thereof. No modification or waiver of
any of the provisions of this Guaranty shall be binding upon PC Dynamics
except as expressly set forth in a writing duly executed and delivered by PC
Dynamics. Failure by PC Dynamics at any time or times hereafter to require
strict performance by BUYER. Guarantor, any other guarantor of all or any
part of the Obligations or any other person or entity of any of the
provisions, warranties, terms and conditions contained in the Financing
Documents now or at any time or times hereafter executed by any such persons
or entities and delivered to PC Dynamics shall not waive, affect or diminish
any right of PC Dynamics at any time or times hereafter to demand strict
performance thereof, and such right shall not be deemed to have been
modified or waived by any act or knowledge of PC Dynamics, unless such
waiver is contained in an instrument in writing, and directed and delivered
to Guarantor or BUYER, as applicable, specifying such waiver signed by PC
Dynamics. Any final determination by a court of competent jurisdiction of
the amount of any principal and/or interest owing by BUYER to PC Dynamics,
shall be conclusive and binding on Guarantor irrespective of whether
Guarantor was a party to the suit or action in which such determination was
made.
<PAGE>
13. This Guaranty shall be binding upon Guarantor and upon the
successors and assigns of Guarantor and shall inure to the benefit of PC
Dynamics and its respective successors and assigns (which may include M-
Wave, Inc). All references herein to BUYER and Guarantor shall be deemed to
include their respective successors and assigns. The successors and assigns
of BUYER and Guarantor shall include, without limitation, a receiver,
trustee or debtor-in-possession of or for BUYER or Guarantor.
14. This Guaranty shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois applicable to contracts
made and to be performed within such State, without giving effect to its
conflicts of laws principles or rules. Whenever possible, each provision of
this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
held so be prohibited or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Guaranty.
15. WITHOUT LIMITING THE RIGHT OF PC DYNAMICS TO BRING ANY ACTION OR
PROCEEDING AGAINST GUARANTOR OR AGAINST PROPERTY OFGUARANTOR ARISING OUT OF
OR RELATNG TO THIS GUARANTY OR ANY OF THE OTHER FINANCING DOCUMENTS (AN
"ACTION") IN THE COURTS OF OTHER JURISD1CTIONS, GUARANTOR HEREBY IRREVOCABLY
SUBMITS TO AND ACCEPTS THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS STATE
COURT OR ANY FEDERAL COURT SITTING IN COOK COUNTY, AND GUARANTOR HEREBY
IRREVOCABLY AGREES THAT ANY ACTION MAY BE HEARD AND DETERMINED IN SUCH
ILLINOIS STATE COURT OR IN SUCH FEDERAL COURT. GUARANTOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OR
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY DEFENSE OR OBJECTION TO VENUE
BASED ON THE GROUNDS OF FORUM NONCONVENIENS) WHICH HE MAY NOW OR HEREAFTER
HAVE TO THE MAINTENANCE ANY ACTION IN ANY JURISDICTION. GUARANTOR HEREBY
IRREVOCABLY AGREES THAT THE SUMMONS AND COMPLAINT OR ANY OTHER PROCESS IN
ANY ACTION IN ANY JURISDICTION MAY BE SERVED BY MAILING (US1NG CERTIFIED OR
REGISTERED MAIL, POSTAGE PREPA ID) TO THE NOTICE ADDRESS FOR GUARANTOR
SPECIFIED BELOW OR BY HAND DELIVERY TO A PERSON OF SUITABLE AGE AND
DISCRETION AT SUCH ADDRESS. SUCH SERVICE WILL BE COMPLETE ON THE DATE SUCH
PROCESS IS SO MAILED OR DELIVERED, AND GUARANTOR WILL HAVE THIRTY DAYS FROM
SUCH COMPLETION OF SERVICE IN WHICH TO RESPOND IN THE MANNER PROVIDED BY
LAW. GUARANTORMAY ALSO BE SERVED) IN ANY OTHER MANNER PERMITTED BY LAW, IN
WHICH EVENT GUARANTOR'S TIME TO RESPOND SHALL BE THE TIME PROVIDED BY LAW.
16. TO TUE FULLEST EXTENT PERMITTED BY LAW, AND AS SEPARATELY
BARGAINED-FOR CONSIDERATION TO PC DYNAMICS,GUARANTOR HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY (WHICH PC DYNAMICS ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATING TO THIS
GUARANTY, ANY OF THE OTHER FINANCING DOCUMENTS, OR PC DYNAMICS' CONDUCT IN
RESPECT OF ANY OF THE FOREGOING.
<PAGE>
17. Any notice required or desired to be served, given or delivered
hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered (a) one (1) Business Day after being deposited
with a nationally-recognized overnight courier with all charges prepaid, or
(b) when delivered, if band-delivered, by messenger, in each case properly
addressed to the party will be notified at the address for such party set
forth on the signature page of this Guaranty.
18. This Guaranty may be executed in separate counterparts each of
which shall be an original and all of which taken together shall constitute
one and the same instrument.
19. Guarantor hereby agrees that, regardless of whether any amounts
are hereafter funded under the Note, Guarantor shall not disclose the terms
of any of the Financing Documents to any party (including, without
limitation, other sources of financing), without PC Dynamics' prior written
consent. The terms of this paragraph shall survive the expiration or
termination hereof.
20. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof. The singular shall include
the plural and vice versa and any gender shall include any other gender as
the context way require.
21. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed as of the day and
year first set forth above.
/s/
____________________________________________
PERFORMANCE INTERCONNECT CORP.
Notice Address:
[TO FOLLOW]
Telephone: _______________________
Telecopy: ________________________
Agreed and Accepted
PC DYNAMICS CORPORATION
/s/
By: ________________________________
Name: ______________________________
Its: _________________________________
Notice Address:
216 Evergreen Street
Bensenville, Illinois 60106
Exhibit 10.8
ASSUMPTION OF LIABILITIES
-------------------------
Assumption of Liabilities dated as of March 15, 1999 by PC DYNAMICS OF
TEXAS, INC., a Texas corporation ("BUYER") in favor of PC DYNAMICS
CORPORATION, a Texas corporation ("PC DYNAMICS").
WHEREAS, PC DYNAMICS and BUYER have entered into that certain Agreement
dated March ___, 1999 (the "Agreement") pursant to which, among other
things, BUYER is acquiring certain assets of PC DYNAMICS;
WHEREAS, the Agreement provides that, concurrently with such
acquisition BUYER assume and agree to pay, defend, defend, discharge and
perform certain liabilities and obligations of PC DYNAMICS:
NOW, THEREFORE, BUYER hereof confirms that it has assumed and agreed to pay,
defend, discharge and perform when due each of the executory liabilities and
obligations of PC DYNAMICS under each Contract in effect on the Closing Date
and assigned to BUYER pursuant to Section 1.1(e) of the Agreement.
The Assumption of Liabilities shall immure to the benefit of and be
binding upon the successors and assigns of BUYER and PC DYNAMICS.
All capitalized terms contained herein without definition shall have
the respective meanings ascribed to such terms in the Agreement.
This Assumption of Liabilities is executed, delivered and effective on
and as of March 15, 1999.
PC DYNAMICS OF TEXAS, INC.
By: /s/
---------------------
Its:
PC DYNAMICS CORPORATION
By: /s/
---------------------
Its:
Exhibit 10.9
ROYALTY AGREEMENT
This Royalty Agreement ("Agreement") is dated as of March 15, 1999
between PC DYNAMICS CORPORATION, a Texas corporation ("PC Dynamics"), and PC
DYNAMICS OF TEXAS, INC., a Texas Corporation ("BUYER").
WHEREAS, PC DYNAMICS and BUYER have entered into that Certain
Agreement dated the date hereof (the "Purchase Agreement") with respect to
the sale and purchase of certain of PC Dynamics' assets; and
WHEREAS, as partial consideration for the transactions contemplated by
she Purchase Agreement. BUYER has agreed to pay PC DYNAMICS a royalty on the
sale of Products (as defined herein).
NOW, THEREFORE, far and in consideration of the obligations and
payments recited herein, the receipt and sufficiency of which is hereby
acknowledged, it is hereby agreed as follows:
1. Royalty Payments. BUYER hereby agrees to pay to PC Dynamics an
amount equal to 8.5% of she Net Invoice Value (as defined below) of all
Products (as hereinafter defined) sold by BUYER or any affiliate (as defined
in Rule l2b-2 under the Securities Exchange Act of 1934) of BUYER from March
26, 1999 (products sold by PC Dynamics On or after March 16, 1999 through
the Closing Date (as defined in the Purchase Agreement) shall be considered
sales by Buyer) trough October 31, 2000, such payments to be made on or
prior to the end of she first week of the third month following such month
of sale; provided that BUYER shall not be required to pay PC Dynamics in
excess of $500,000 in aggregate royalty payments pursuant in this Section 1.
BUYER further agrees to pay interest on any overdue royalty payments
pursuant to this Section 1 at a rate per annum equal to the greater of: (i)
the Prime Rate (as defined below) from time to time in effect plus 5% and
(ii) 15%. All royalty and interest payments pursuant to this Section 1 are
payable in lawful money of the United States of America and in immediately
available funds to PC Dynamics as 216 Evergreen Street, Bensenville.
Illinois 60106. In the event BUYER fail to collect the Net Invoice Value of
any Product within 120 days after the sale of such Product, then upon
written notice from BUYER to PC DYNAMICS, PC DYNAMICS agrees to reimburse
BUYER for 8.5% of such Net Invoice Value provided that PC DYNAMICS
previously received royalty payments pursuant to this Section 1 based on
such Net Invoice Value. Notwithstanding anything in this Section 1 to the
contrary, in the event that BUYER purchases the Facility (as defined in the
Agreement) in accordance with the provisions of the Lease (as defined in the
Agreement), whether before or after [the end of The eighteenth month
following the month of the Closing Date], then BUYER hereby agrees (in lieu
of the foregoing) to pay to PC DYNAMICS an amount equal to the difference
between (i) $500,000 and (ii) the aggregate royalty payments paid to PC
DYNAMICS prior to the date of such purchase, such amount to be paid in
monthly installments of $25,000 on the first day of each calendar month
until paid in full, commencing with the first day of the first month
following such purchase.
Exhibit 10.10
ALL INDEBTEDNESS EVIDENCED HEREBY AND REFERENCED HEREIN IS SUBORDINATED IN
RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL OF ALL INDEBTEDNESS OWNED TO
FINOVA CAPITAL CORPORATION AS SET FORTH IN THAT CERTAIN SUBORDINATION AND
STANDSTILL AGREEMENT AMONG FINOVA CAPITAL CORPORAT1ON, THE PAYEE OF THIS
NOTE AND THE OTHER PARTIES NAMED THEREIN.
PROMISSORY NOTE
Bensenville, Illinois
$773,479 March 15, 1999
1. Payment. FOR VALUE RECEIVED, PC Dynamics of Texas, Inc., a Texas
corporation ("BUYER"), hereby promises to pay to the order of PC Dynamics
Corporation, a Texas corporation ("PC Dynamics"), the principal sum of
Seven hundred and seventy three thousand four hundred and seventy-nine
Dollars ($773,479) in nine equal monthly principal installments of
$85,942, payable on the first day of each month, commencing with July 1,
1999. Nor withstanding the foregoing sentence, (i) in the event that
BUYER purchases the Facility (as defined in the Agreement) in accordance
with the provisions of the Lease (as defined in the Agreement (as defined
below)) on or before June 25, 1999, the unpaid principal amount
outstanding shall be payable in equal monthly principal installments of
$75,000, payable on the first day of each month, commencing with the
first month following the month of the closing of the purchase of the
Facility, until all obligations hereunder have been paid in full; and
(ii) in the event that BUYER purchases the Facility in accordance with
the provisions of the Lease after June 25, 1999 but prior to the
September 25, 1999, the unpaid principal amount outstanding shall be
payable in equal monthly principal installments of $100,000, payable on
the first day of each month, commencing with the first month following
the closing of the purchase of the Facility, until all obligations
hereunder have been paid in full. BUYER hereby further promises to pay
interest (computed on the basis of a 360-day year of twelve 30-day
months) at the Prime Rate (as defined below) plus 1% per annum on the
principal amount from time to time outstanding from the date hereof, such
interest to be payable on each date specified above for principal
payments and until this Note and all obligations hereunder have been paid
in full. Notwithstanding the foregoing, BUYER promises to pay interest
on any overdue principal and (to the extent legally enforceable) on any
overdue installment of interest at a rate per annum equal cc the greater
of: (i) the Prime Rate from time to time in effect plus 5% and (ii) 15%.
Both principal and interest hereunder are payable in lawful money of the
United States of America and in next-day funds to PC Dynamics at 216
Evergreen Street, Bensenville, Illinois 60106, Attention: President.
For purposes of this Note, (i) "Prime Rate" shall mean for each
calendar month commencing with March, 1999, the rate of interest
established, announced or published by Harris Trust and Savings Bank on
the last Business Day preceding the first day of such calendar month, as
their prime rate, reference rate or comparable or equivalent rate for
loans made in Chicago, Illinois; and (ii) "Business Day" shall mean any
day other than a Saturday or Sunday on which banks are generally open for
business in Chicago, Illinois.
<PAGE>
2. Other Documents. This Promissory Note (the "Note") is the Note
referred to in Section 3.2(b) of that certain Agreement dated as of March
15, 1999 (the "Agreement") between BUYER and PC Dynamics. Unless otherwise
defined herein, the capitalized terms used herein which are defined in the
Agreement shall have the meanings specified in the Agreement. This Note is
guaranteed pursuant to the terms of that certain (i) Guarantee dated as of
March 15, 1999 executed by Mr. D. Ronald Allen in favor of PC DYNAMICS and
(ii) Guarantee dated March 15, 1999 executed by Performance Interconnect
Corp. ("PIC") in favor of PC DYNAMICS.
3. Optional Prepayment. BUYER may repay all or any portion of this Note
that is $1,000 or an integral multiple thereof at any time or times, without
premium or penalty. BUYER shall give PC Dynamics not less than five (5)
Business Days' prior written notice of any intended prepayment. Any
prepayment shall first be credited against accrued but unpaid interest
hereunder to the date of the prepayment and the balance, if any, shall be
credited against the then-outstanding principal amount hereof.
4. Business and Financial Covenants. With respect to its financial and
business affairs, BUYER covenants with PC Dynamics as follows:
(a) Inspection Rights. PC Dynamics or its authorized representatives
may visit, at their expense, any of BUYER's properties, inspect and examine
its records and books of accounts, take abstracts or copies thereof, and
discuss its affairs, finances and books of accounts with its officers, at
reasonable times and in a reasonable manner.
(b) Maintenance of Properties: Compliance. BUYER shall keep the
Assets in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto, and BUYER will
at all times comply with the material provisions of all legal requirements
and leases to which it is a party or under which it occupies property so as
to prevent any loss or forfeiture thereof or thereunder.
(c) Maintenance of Corporate Existence and Conduct of Business. BUYER
shall preserve its corporate existence, rights and franchises; BUYER will
carry on and conduct its business in substantially the same manner as it is
presently conducted by PC Dynamics, shall not use its properties for any
unlawful purpose, shall not permit its properties or any part thereof to be
levied upon under execution, attachment or restraint unless any action is
contested by BUYER and protected by appropriate bond or other surety and
shall not waste or destroy any of its properties or any part thereof.
<PAGE>
(d) Expenses. BUYER agrees to pay PC Dynamics all reasonable costs
and expenses (including, but not limited to, reasonable attorneys' fees and
court costs) incurred by it in the collection of this Note or in the
enforcement of any provision of this Note.
(e) Limitations on Disposition. BUYER will not sell, exchange,
transfer or otherwise dispose of any of the Assets, or attempt or contract
to do so, except for sale of inventory in the ordinary course of business.
(f) Non-competition. BUYER will not permit any of its officers,
directors, employees or Affiliates to, directly or indirectly, whether as a
principal, partner, shareholder, joint venturer, consultant, agent,
proprietor, creditor or otherwise, engage in any commercial activity or
pursuit whatsoever which may in any way be in competition or conflict with
the products and business which comprise the business of PC Dynamics and
BUYER as of the Closing Date.
(g) Additional Covenants. BUYER shall not, without the consent of PC
Dynamics:
(i) merge with or into or consolidate with any other entity,
or sell, lease or otherwise dispose of substantially all of its
assets;
(ii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction; or
(iii) become subject to any agreement or instrument, which by
its terms would (under any circumstances) restrict BUYER' rights to
perform any of its obligations to PC Dynamics pursuant to the terms
of this Note.
5. Events of Default. (a) The occurrence of any one or more of the
following events ("Events of Default") shall in respect of this Note, at the
option of PC Dynamics, and without regard to any standstill agreement or
other prohibition relating to any of the following events, constitute a
default under this Note:
(i) Default in the payment of interest on or principal on this Note
when the same shall become due and payable by lapse of time, declaration or
otherwise;
(ii) Default in the observance or performance of any of the other
covenants or provisions of any of the Transaction Documents or default in
the observance or performance of any other provisions of this Note not
involving the payment of money which is not remedied within ten (10) days
after notice thereof to BUYER is given by PC Dynamics;
(iii) If BUYER becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they mature or makes an assignment for the
benefit of creditors, or if BUYER applies for or consents to the appointment
of a trustee or receiver for itself or for a major part of its properties or
assets, or shall voluntarily file a petition seeking reorganization or other
protection under the Federal bankruptcy laws;
<PAGE>
(iv) If a trustee or receiver is appointed for BUYER or for the
major part of any of its properties or assets and the order of such
appointment is not discharged, vacated or stayed within thirty (30) days
after such appointment;
(v) If BUYER shall be adjudicated a bankrupt or a decree or order
approving as properly filed a petition or answer asking reorganization of
BUYER under the Federal bankruptcy laws, as now in effect or hereafter
amended, or under the laws of any state, shall be entered, and any such
decree or judgment or order shall not have been vacated or set aside within
thirty (30) days from the date of the entry or granting thereof;
(vi) the existing shareholders of PIC shall fail to own at least 51%
of the voting and ownership interests in PIC or BUYER shall fail to be a
wholly-owned subsidiary of PIC; or
(vii) If the obligation of any guarantor of this Note is limited or
terminated by operation of law or by the guarantor, or any such guarantor
becomes the subject of an insolvency proceeding under Federal bankruptcy
laws or under any other bankruptcy or insolvency law.
(b) Rights and Remedies Upon Default.
(i) When any Event of Default described above in this Section 5 has
occurred, BUYER agrees to give notice within two (2) days of such default to
PC Dynamics, such notice to be in writing and sent by registered or
certified mail or by telecopier.
(ii) When any Event of Default described above in Section 5 has
happened and is continuing uncured, (A) PC Dynamics may, by notice in
writing to BUYER, declare the principal of and accrued interest on this Note
to be immediately due and payable; and thereupon all principal and interest
shall become immediately due and payable, without further presentment,
protest, demand or notice or other legal process of any kind; and (B) PC
Dynamics may take any action or proceeding at law or in equity which it
deems advisable to collect and enforce payment of all amounts then due upon
this Note whether by reason of maturity or of such amounts or acceleration.
6. Assignment: Amendment: Waiver. This Note may not be assigned (by
operation of law or otherwise) by BUYER. This Note may only be amended in
writing duly executed by the parties hereto. No failure or delay on the
part of the holder of this Note or to exercise any power or right under this
Note shall operate as a waiver of such power or right or preclude other or
further exercise thereof or the exercise of any other power or right. No
waiver of any condition or performance will operate as a waiver of any
subsequent condition or obligation. BUYER hereby waives diligence,
presentment, demand for payment, notice of dishonor or acceleration, protest
and notice of protest, and any and all other notices or demands in
connection with delivery, acceptance, performance, default or enforcement of
this Note.
<PAGE>
7. Notices. All notices or demands by any party relating to this Note
shall in writing in accordance with Section 9.8 of the Agreement.
8. Severability. If there is any provision of this Note or the
application thereof to any party or circumstances which shall be prohibited
by, or invalid under, such applicable law, such provision shall be
ineffective to the minimal extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
the Note, or the applications of such provisions to other parties or
circumstances.
9. Governing Law: Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of Illinois. Any legal
action or proceeding with respect to this Note shall be brought exclusively
in the courts of the State of Illinois or of the United States of America
within Cook County, Illinois, and by execution and delivery of this Note,
BUYER hereto hereby covenants, for itself and in respect of its property, to
the jurisdiction of the aforesaid courts. BUYER hereby irrevocably waives
any objection, including without limitation, any objections to the laying of
venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Note or any document related hereto.
PC DYNAMICS OF TEXAS, INC.
/s/
By: __________________________________________
Title: _________________________________________
Address:
______________________________________________
______________________________________________
______________________________________________
Exhibit 10.11
LEASE
Between
PC Dynamics Corporation, Landlord
And
PC Dynamics of Texas, Inc., Tenant
<PAGE>
LEASE
THIS LEASE (this "Lease") is made as of the 25th day of March,
1999, by and between PC Dynamics Corporation, a Texas corporation
("Landlord"), and PC Dynamics of Texas, Inc. ("Tenant")
WITNESSETH:
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
hereby covenant as follows:
ARTICLE 1.
Definitions, Demise, Premises, Term, Rent
Section 1.01 Definitions. The following terms shall have the meanings
hereinafter set forth throughout this Lease.
(A) "Base Rent" shall be the sum of $204,000.00 per year, payable in
equal monthly installments of $17,000.00 per month in advance on the
first day of each calendar month during the Term of this Lease.
(B) "Commencement Date shall mean March 25, 1999.
(C) "Expiration Date" shall mean the third (3rd) anniversary of the
Commencement Date; unless sooner terminated or extended as provided in
this Lease.
(D) "Landlord's Notice Address" shall mean 216 Evergreen Street,
Bensenville, Illinois 60106.
(E) "Lease Year" shall mean a one year period beginning on the
Commencement Date and ending one year after the Commencement Date.
(F) "Option Price" shall mean $2,500,000.00 (provided that $500,000 of
the Option Price shall be payable in accordance with the terms of the
Royalty Agreement dated as of March 15, 1999 by and between Landlord
and Tenant).
(G) "Parking Spaces" shall mean those parking spaces located on
Property.
(H) "Permitted Uses" shall mean use of the Premises for the assembly of
printed circuit boards and related activities.
(I) "Premises" shall mean the property legally described on Exhibit A
attached hereto (the "Property"), the Parking Spaces and any other
improvement located on the Property.
(J) "Security Deposit" shall mean $17,000.00.
(K) "Tenant's Notice Address" shall mean 10501 FM 720 East. Frisco,
Texas 75O35.
<PAGE>
(L) "Term" shall mean the period commencing on the Commencement Date and
ending on the Expiration Date, being 36 months.
Section 1.02 Demise: Condition of the Premises.
(A) Subject to and upon the terms and conditions set forth herein, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the Premises
for the Term, commencing on the Commencement Date and ending on the
Expiration Date.
(B) Tenant has inspected the Premises and is satisfied with the physical
condition thereof, including all equipment and appearances and agrees to
accept the Premises in their present "AS IS" condition.
Section 1.03 Base Rent. Tenant shall pay Landlord, monthly, in advance, on
the first day of each calendar month during the Term, monthly installments
of Base Rent, without notice or demand and without any setoff, offset,
abatement or deduction whatsoever, to Landlord's Notice Address.
Section 1.04 Additional Rent. All sums other than Base Rent payable by
Tenant under this Lease shall be deemed additional rent ("Additional Rent")
payable on demand (at the same place Base Rent is paid), and in currency
which, at the time of payment, is legal tender for public and private debts
in the United States of America unless other payment dates are set forth
herein. Landlord shall have the same rights and remedies with respect to the
failure by Tenant in pay Additional Rent as Landlord has with respect to the
failure by Tenant to pay Base Rent.
Section 1.05 Use. The Premises shall be used and occupied by Tenant solely
for the Permitted Uses, and for no other purpose without the prior written
consent of Landlord, which consent shall not be unreasonably withheld.
ARTICLE 2.
Alterations and Additions
Section 2.01 Alterations. Tenant shall not make or suffer to be made any
alterations, additions or improvements (collectively "Alterations") in, on
or to the Premises or any part thereof without the prior written consent of
Landlord which consent shall not be unreasonably withheld if the proposed
Alterations are nonstructural. Tenant shall furnish plans and specifications
to Landlord at the time ii requests Landlord's consent to any Alterations if
the desired Alterations will require the filing of plans and specifications
with any governmental or quasi-governmental agency or authority. Subsequent
to obtaining Landlord's consent and prior to commencement of the
Alterations, Tenant shall deliver to Landlord any building permit required
by applicable law and a copy of the executed construction contract(s). If
Landlord consents to the making of any Alteration, such Alteration shall be
made by Tenant at Tenant's sole cost and expense by a contractor approved in
writing by Landlord. Tenant shall provide, at its expense, such completion,
performance and/or payment bonds as Landlord considers necessary with
respect to such construction work. Tenant shall also require its contractor
to maintain insurance in such amounts and in such form as Landlord may
<PAGE>
require and evidence of such insurance shall be delivered to Landlord. Any
construction, alteration, maintenance, repair, replacement, installation,
removal or decoration undertaken by Tenant in connection with the Premises
shall be completed in accordance with the plans and specifications therefor,
shall be carried out in good, workmanlike and prompt manner and shall comply
with all applicable statutes, laws, ordinances, regulations, rules, orders
and requirements of the authorities having jurisdiction thereof.
ARTICLE 3.
Management of the Premises
Section 3.01 Absolute Net Lease. This Lease shall be an absolute net lease.
Tenant shall pay for and be responsible for all of the maintenance,
management, upkeep and care of the Premises, as specified herein, and Tenant
shall pay all Operating Expenses (as hereinafter defined) relaxed to the
Premises. The term "Operating Expenses" shall mean the aggregate of those
costs and expenses paid or incurred relating to the ownership, maintenance
and operation of the Premises, including, but nor limited to, all of those
costs specified at this Article 3.
Section 3.02 Taxes. Tenant shall pay all Taxes (as hereinafter defined)
relaxed to the Premises before delinquency. The term "Taxes" shall mean all
taxes, fees and assessments and governmental charges levied, whether by
federal, state, county, municipal, or other taxing districts or authorities
presently or hereafter created, taxing the Premises and any other general or
special taxes, fees, charges or assessments attributable to the Premises or
their operation. "Taxes" shall also include any and all taxes levied or
assessed and payable during the Term upon all of Tenant's leasehold
improvements, equipment, furniture, fixtures, and other personal property
located on the Premises. In addition, "Taxes" shall mean all real estate
taxes and assessments or substitutes therefore or supplements thereto upon
all or any portion of the Premises or any improvements thereon, for any
whole or partial tax year or period occurring during the Term hereof. If and
to the extent that, due to a change in the method of taxation or assessment,
any franchise, capital stock, capital, rent, income, profit or other tax or
charge shall be a substitute for or supplement to any of the foregoing, then
all such items shall be included within the term Taxes for the purposes of
this Lease. If Tenant should choose to dispute and contest Taxes, Tenant
shall pay for all costs associated with such dispute or contest and such
costs also shall be considered Taxes for purposes of this Lease.
Section 3.03 Insurance. Tenant hereby agrees that it shall bear the risk of
any damage, loss or casualty relating to the Premises, except as otherwise
specified in this Lease. Tenant shall provide and pay for all insurance
("Insurance") of any type that Landlord, in its reasonable judgment, shall
deem necessary or advisable to carry in relation to the Premises, including,
but not limited to, Commercial General Liability Insurance, fire and
extended coverage insurance, State Worker's Compensation Insurance,
Hazardous Materials Insurance and any other insurance in order to protect
itself, the Premises, its personal property used in connection therewith, or
its interests therein. Tenant shall maintain such insurance in commercially
reasonable amounts, sufficient to cover any risks related to the Premises
and all of its obligations pursuant to this Lease, including, but not
limited to, those obligations specified in Section 4.03, Section 6.02. and
Section 6.04. All policies for Insurance related to the Premises shall name
the Landlord and the Landlord's mortgagee, if any, as additional insureds.
<PAGE>
Section 3.04 Maintenance Costs. Tenant shall pay all Maintenance Costs (as
hereinafter defined). The term "Maintenance Costs" shall mean all costs paid
or incurred in connection with the operation or maintenance of the Premises
including, without limitation, ill parking areas (whether temporary or
permanent), access roads, driveways, curbs, truckways, loading areas and
docks, retaining walls, lighting facilities, service corridors, comfort
stations, pedestrian sidewalks, stairways, plazas, foundations, exterior and
demising walls, roofs over any portion of the Premises, elevators, courts
and ramps, decorative walls, vacant areas, landscaped and planting areas and
facilities, service lines or conduits for gas, water, electric, sewage,
heating, storm water, ventilating, air conditioning and lighting services,
music and intercom equipment, and fire suppression and warning systems,
conduits and appurtenances for use by Tenant, and other areas and facilities
relaxed to the Premises, whether on or off of the Property.
Section 3.05 Maintenance and Repair. Subject to the provisions of Sections
6.01 and 6.02 hereof, Tenant shall maintain and repair the Premises during
the Term and preserve same in the condition delivered to Tenant on the
Commencement Date, normal wear and tear excepted, and shall make all repairs
and replacements to the interior of the Premises, structural or otherwise,
including, without limitation, concrete floors, supporting columns,
interiors plumbing and electrical lines and facilities, doors and door
fames, and window and window frames, as and when necessary in order to
preserve the Premises in good working order and condition in accordance with
the terms and provisions of this Lease, including chose governing the
performance of any Alterations to the Premises. Tenant agrees to keep and
maintain in good working order and condition the waste and sewer systems,
sprinkler, plumbing, air-conditioning, electrical and heating and
ventilating systems and equipment in and/or servicing the Premises and keep
in force a standard maintenance agreement with contractors designed by
Landlord on all such equipment and systems, and to furnish a copy thereof to
Landlord. In addition, Tenant shall replace at the expense of Tenant, any
and all plate and other glass and exterior window treatment including,
without limitation, any protective films damaged or broken by any cause
whatsoever in and about the Premises to the building standard conditions
adopted by Landlord front time to nine. Tenant shall pay for and keep the
foundation of the Premises in good repair. Tenant shall not pay for repair
or maintenance of the exterior walls and roof, except where such repair and
maintenance is necessitated by Tenant's negligence or willful acts. Tenant
shall keep the Parking Spaces well lit, well striped, and clear of snow and
debris. Tenant shall be responsible for proper landscaping, including, but
not limited to, lawnmowing and debris removal, and other exterior
maintenance of the Premises in order to keep the Premises in a sightly and
clean condition. Tenant shall provide security for the Premises, including,
but not limited to, alarm systems and security guards. All damages or injury
done to the Premises by Tenant or by any person who may be in or upon the
Premises shall be paid for by Tenant. If Tenant refuses or neglects to
perform any of Tenant's obligations hereunder, Landlord shall have the
right, but not the obligation, to make such repairs or perform such
obligations an behalf of and for the account of Tenant. In such event, the
cost thereof shall be paid for by Tenant, as Additional Rent upon demand.
Tenant agrees to give Landlord or its managing agent prior written notice of
the necessity for any repairs in or to the Premises and shall not proceed to
perform same until Landlord or its managing agent has consented thereto.
<PAGE>
Section 3.06 Utilities. Tenant shall obtain all water, electricity,
sewerage, gas, telephone and other utilities directly from the public
utility company furnishing same. Any meters required in connection therewith
shall be installed at Tenants sole cost. Tenant shall all utility deposits
and fees, and all monthly service charges for water, electricity. Sewage,
gas, telephone and any other utility services furnished to the Premises
during the Term. In the event any such utilities are not separately matted
on the Commencement Date, then until such time as such services arc
separately metered, Tenant shall pay to Landlord Tenant's equitable share of
the cost of such services, as reasonably determined by landlord.
Section 3.07 HVAC. Tenant shall have the right to use the existing heating,
air conditioning and ventilation equipment in the Premises, if any. All such
equipment shall be maintained, repaired and replaced, as necessary, by
Tenant at its sale cost and expense and shall be surrendered by Tenant to
Landlord at the end of the Tern together with the Premises. Landlord makes
no representation or warranty as to the condition or capacity of such
equipment. Landlord shall have no obligation whatsoever to provide the
Premises whith heat, air conditioning, ventilation or hot water.
Section 3.08 Cleaning. Tenant, at its expense, shall keep the Premises clean
and in good order to the reasonable satisfaction of Landlord and shall pay
for all garbage removal as incurred. Tenant shall store all rubbish and
refuse in locations and in a manner as may be designated by Landlord from
time to time. Tenant shall arrange for the removal of garbage and other
refuse by a cartage company acceptable to Landlord during such hours as may
be designated by Landlord from time to time or, Landlord may elect by
written notice to Tenant, to arrange for the removal of such garbage and
other refuse by Landlord's cartage company, and Tenant shall pay Landlord
all charges thereby as Additional rent, within ten (10) days after receipt
of a bill therefor.
Section 3.09 Compliance with Law. Tenant, at its sole expense, shall comply
with all laws, orders and regulations of federal, state, county and
municipal authorities and with any directive of any public officer or
officers pursuant to law which shall impose any violation, order or duty
upon Landlord or Tenant with respect to the Premises or the use or occupancy
thereof. Tenant, at its sole cost and expense, shall obtain and keep in
effect during the term, all permits, licenses and other authorizations
necessary to permit Tenant to use and occupy the Premises for the Permitted
Uses. Tenant shall not use the Premises, or permit any act to be done in or
about the Premises which will in any way conflict with any law, stature,
ordinance or governmental rule or regulation now or hereafter in force.
Section 3.10 Liens. Tenant shall keep the Premises free from any liens
arising out of any work performed, materials furnished, or obligations
incurred by or on behalf of Tenant. Should any mechanic's or other lien be
filed against the Premises by reason of Tenant's or its agents' or
contractors' acts or omissions or because of a claim against Tenant. Tenant
shall cause the same to be canceled and discharged of record by bond or
otherwise within thirty (30) days after the filing thereof. Should Tenant
fail to discharge such lien within such thirty (30) day period, Landlord may
cure same, in which event Tenant shall reimburse Landlord, on demand, as
Additional Rent, for the amount of the lien or the amount of the bond, if
greater, plus all administrative costs incurred by Landlord in connection
therewith. The remedies provided herein shall be in addition to all other
remedies available to Landlord.
<PAGE>
ARTICLE 4.
Tenant's Covenants and Rights
Section 4.01 Assignment and Subletting.
(A) Tenant covenants that it shall not, by operation of law or otherwise,
assign, sublet, encumber or mortgage this lease, or any part thereof, or
permit the Premises to be used by others without the prior written consent
of Landlord in each instance. Any attempt by Tenant to assign, sublet,
encumber or mortgage this Lease shall be null and void. The consent by
Landlord to any assignment, mortgage, encumbrance, sub1ettng or use of the
Premises by others shall not constitute a waiver of Landlord's right to
withhold its consent to any other assignment, subletting, encumbrance,
mortgage or use by others of the Premises. For the purpose of this Section
4.01, (i) a takeover agreement shall be deemed a transfer of this Lease,
(ii) an assignment of the Lease shall be deemed to occur if Tenant shall
fail to be a wholly-owned subsidiary of Performance Interconnect Corp., a
Texas corporation I ("PIC"), or if the existing shareholders of PIC shall in
the aggregate fail to own at least 51% of the voting and ownership interests
in PIC, (iii) any person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Section 4.01 and (iv) a modification,
amendment or extension of a sublease shall be deemed a sublease.
(B) No consent by Landlord to an assignment of this Lease shall be effective
unless and until Tenant shall deliver to Landlord an agreement in form and
substance satisfactory to Landlord pursuant to which such assignee assumes
and agrees to be bound by all of the terms, covenants, provisions and
agreements of this Lease. In no event shall Tenant be released from its
obligations hereunder as a result of any assignment of this Lease.
(C) Notwithstanding anything an this Section 4.01 to the contrary, Tenant
may permit Premises to be used by an affiliate of Tenant upon prior written
notice to Landlord; provided, however, that Tenant and any such affiliate
shall comply with all of the terms, covenants, provisions and agreements of
this Lease. For purposes of this Lease, an "affiliate" means a entity that
controls, is controlled by, or is under the common control of another
entity.
Section 4.02 Interruption or Access, Use or Service. Landlord shall not be
liable for any failure (to the extent required of it by this Lease) to
provide access to the Premises, to assure the beneficial use of the Premises
or to furnish any services or utilities when such failure is caused by
natural occurrences, riots, civil disturbances, insurrection, war, court
order, public enemy, accidents, breakage, repairs, strikes, lockouts, other
labor disputes, the making of repairs, alterations or improvements to the
Premises, the inability to obtain fuel, gas, steam, water, electricity,
labor or other supplies or by any other condition beyond Landlord's
reasonable control, and Tenant shall not be entitled to any damages
resulting from such failure, nor shall such failure relieve Tenant of the
obligation to pay all sums due hereunder or constitute or be construed as a
constructive or other eviction of Tenant. If any governmental entity
promulgates or revises any statute, ordinance or building code, fire code or
other code, or imposes mandatory or voluntary controls or guidelines on
Landlord or the Premises or any part thereof, relating to the use of the
<PAGE>
Premises or the conservation of any utility or service provided with respect
to this lease, or if Landlord is required to make alterations to the
Premises in order to comply with such mandatory or voluntary controls or
guidelines, Tenant shall comply with such mandatory controls or guidelines
or make such alterations to the Premises. Tenant may, in its sale
discretion, comply with such voluntary controls or guidelines, or make such
alterations to the Premises, pursuant to the requirements of Article 2 of
this Lease. If Tenant chooses not to comply with such voluntary controls or
guidelines, Landlord may make such changes or alterations as are necessary
to comply with such voluntary controls or guidelines at Landlord's sole cost
and expense. Neither such compliance nor the making of such alterations
shall in any event entitle Tenant to any damages, relieve Tenant of the
obligation to pay any of the sums due hereunder, or constitute or be
construed as a constructive or other eviction of Tenant.
Section 4.03 Tenant's indemnification.
(A) Tenant shall indemnify, defend and hold harmless Landlord and its
officers, directors, employees, attorneys and agents (collectively, the
"indemnitees") from and against any and all claims, demands, causes of
action, judgments, costs and expenses, and all losses and damages (including
consequential and punitive damages) arising from Tenants use of the Premises
or from the conduct of its business or from any activity, work, or other
acts or things done, permitted or suffered by Tenant in or about the
Premises, and shall further indemnity, defend and hold harmless the
Indemnitees from and against any and all claims rising from any breach or
default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease, or rising from any act, omission or
negligence or willful or criminal misconduct of Tenant, or any officer,
agent, employee, independent contractor, guest, or invitee thereof, and from
all costs, attorney's fees and disbursements, and liabilities incurred in
the defense of any such claim, demand, cause of action or proceeding which
may be brought against, out of or in any way related to this Lease. Upon
notice from Landlord, Tenant shall defend any such claim, demand, cause of
action or suit at Tenant's expense by counsel satisfactory to Landlord in
its sole discretion. As a material part of the consideration to Landlord for
this Lease, Tenant hereby assumes all risk of damage so property or injury
to persons in, upon or about the Premises from any cause, and Tenant hereby
waives all claims with respect thereto against Landlord Tenant shall give
immediate notice to Landlord in case of casualty or accidents in the
Premises. The provisions of this Section shall survive the expiration or
sooner termination of this Lease.
(B) All personal property of Tenant, including goods, wares, merchandise,
inventory, trade fixtures and other personal property of Tenant, shall be
stored at sole rise of Tenant. Landlord or its agents shall not be liable
for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part or the Premises or from the pipes, appliances or plumbing
works therein or from the roof, street or subsurface or from any other
places resulting from dampness or any other cause whatsoever, except
personal injury or other damages caused by or due to the gross negligence or
willful misconduct of Landlord. Landlord or its agents shall not be liable
for interference with the electrical service, ventilation, or for any latent
defect in the Premises.
<PAGE>
(C) The parties hereto acknowledge that all or a part of the Premises may
be used for the storage and shipment of goods not owned by Tenant, and
Landlord is not willing to enter into this Lease unless Tenant indemnifies
the Indemnitees to Landlord's satisfaction from any liability on the part of
the Indemnitees to the owner(s) of such goods for damage to the same arising
out of any acts or omissions of the Indemnitees. As a material inducement to
Landlord to enter into this Lease, Tenant agrees to defend, indemnify and
hold the Indemnitees harmless from and against any and all losses, claims,
liabilities, obligations and damages imposed upon or incurred or asserted
against the Indemnitees by reason of damage to goods of persons storing such
goods wit Tenant, notwithstanding the fact that such losses, claims,
liabilities, obligations or damages may have been caused by the acts or
omissions of Landlord. Tenant agrees that at all times during which it shall
store goods not owned by it in the Premises, it shall insure the indemnity
described under this Section 4.03(C) if a manner reasonably satisfactory to
Landlord. Landlord shall not be deemed a bailee, consignee, or warehouseman
(or responsible for the standard of care incidental thereto) with respect to
any goods stored or shipped to or from the Premises for consignment or
bailment and Tenant shall insert a clause to that effect in all warehouse
receipts or coassignment agreements for the storage or shipment of goods to
or from the Premises.
Section 4.04 Security Deposit. Concurrently with the execution of this
Lease, Tenant has deposited with Landlord the Security Deposit, the receipt
of which, subject to collection, is hereby acknowledged, as security for the
payment by Tenant of all Base Rent and Additional Rent and for the faithful
performance of all the terms, covenants and conditions hereof. Landlord
shall not be required to upgrade the Security Deposit from other deposits or
from other funds of Landlord or pay interest thereon, unless required by
applicable law. If, at any time during the Term, Tenant does not fulfill any
of its obligations under this Lease, Landlord shall have the right to use
the Security Deposit, or so much thereof as necessary, to satisfy such
obligations. If any portion of the Security Deposit is used, applied, or
retained by Landlord as herein permitted, then within five (5) days under
written demand therefor, Tenant shall deposit with Landlord an amount
sufficient to restore the Security Deposit to its original amount, and
Tenant's failure to do so shall be a breach of this Lease. If Tenant fully
and faithfully performs every term, covenant, condition and obligation of
this Lease during the Term, the Security Deposit (or any balance thereof),
without interest, shall be returned to Tenant after the expiration of the
Term. Landlord may deliver the Security Deposit to any purchaser of
Landlord's interest in the Premises if such interest is sold, in which event
Landlord shall be discharged from any further liability with respect to the
Security Deposit. The Security Deposit shall not be construed as Liquidated
damages, and if Landlord's claims hereunder exceed the Security Deposit.
Tenant shall remain liable for the balance of such claims.
Section 4.05 Surrender. Upon the expiration of the Term or other termination
of this Lease, and without further notice, Tenant shall peaceably and
quietly quit and surrender to Landlord the Premises, broom clean, in the
same condition as existed on the Commencement Date, excepting only any
Alterations made by Tenant if consented to by Landlord if Landlord's consent
was required, ordinary wear and tear and loss by fire or other casualty
which Tenant is not obligated to repair pursuant to the terms hereof. Any
property of Tenant not removed at or prior to the Expiration Date or prior
termination of this Lease shall, at Landlord's election, be deemed abandoned
and shall become the property of Landlord.
<PAGE>
Section 4.06 Option to Purchase Premises.
(A) Tenant shall have the option to purchase the Premises ("Option") at
the Option Price payable to Landlord; provided, however, that (i)Tenant
provides Landlord with written notice of its exercise of the Option no later
than ninety (90) days prior to the end of the Term and (ii) Tenant is not
then in default under this Lease or under any other agreement or obligation
of Tenant to Landlord, or, if Tenant is in default under this Lease,
Landlord elects, at its sole option, to allow Tenant to exercise the Option
or to proceed to purchase the Premises. The sale shall be made upon
substantially the same terms and conditions provided in the contract
attached as Exhibit B hereto. Tenant shall take title to the Premises
subject to their existing liens or encumbrances and any other act done or
suffered by Tenant. Landlord and Tenant shall close the sale of the Premises
as soon as they can agree to close, but in no event shall the closing of the
transaction contemplated hereby occur later than thirty (30) days after the
date Landlord receives written notice of Tenant's election to exercise the
Option (the "Exercise Date"). After the valid exercise of the Option and
until the closing of the transaction to purchase the Premises (the
"Closing"), this Lease shall remain in full force and effect. Upon Closing,
this Lease shall terminate and be of no force and effect with no further
action of the Landlord and Tenant, shall record a termination lease pursuant
to Section 8.09 hereof. If the transaction contemplated hereby does not
close due to a breach by Landlord, Tenant may, at its option, terminate this
Lease by providing written notice to Landlord thereof. If the transaction
contemplated hereby does not close due to a breach by Tenant, Landlord may,
at its option, terminate this Lease by providing Tenant with written notice
thereof. If the Lease is terminated pursuant to this Section 4.06(A), This
Lease shall terminate on the last day of the month following the month in
which such notice of termination was given. If Landlord notifies Tenant of a
bona fide offer under Section 4.06(B) of this Lease. Tenant's option to
purchase under this Section 4.06(A) may not be exercised and becomes null
and void unless and until Tenant's Option shall be reinstated pursuant to
Section 4.06(B).
(B) If Landlord obtains a bona fide offer to purchase the Premises from
any third party (except as set forth in subsection (C) below), Landlord
shall notify Tenant of the existence of such offer and Tenant shall have the
right, within twenty (20) days after receipt of the notice, to purchase the
Premises at the Option Price upon substantially the same terms and
conditions provided in the contract attached as Exhibit B hereto. If Tenant
does not give Landlord notice in writing within the 20-day period that
Tenant intends to exercise its rights hereunder, then Landlord shall be free
to sell the Premises within one hundred and twenty (120) days of its
original notice to Tenant and Tenant's Option shall become null and void.
If, however, Landlord and the third party purchaser fail to consummate the
sale of the Premises, Tenant's Option shall be reinstated.
(C) Landlord shall not be obligated to notify Tenant and Tenant shall not
have any rights under subsection (B) if (i) Landlord determines to sell or
transfer Landlord's interest in the Premises to a related entity of
Landlord, (ii) Landlord obtains a bona fide first mortgage from an
institutional lender not related to or affiliated with Tenant which mortgage
is a so-called "participating mortgage" under which the lender has a right
to participate in the profits or cash flow or both of the Premises or (iii)
the Premises is sold by Landlord in a transaction involving the
simultaneous master lease of the Premises back to Landlord.
<PAGE>
ARTICLE 5.
Landlord's Covenants and Rights
Section 5.01 Quiet Enjoyment and Subordination.
(A) Landlord covenants and agrees that upon performance by Tenant of all
the terms, covenants, obligations, conditions and provisions hereof on
Tenant's part to be kept and performed, Tenant shall have, hold and enjoy
the Premises, subject and subordinate to the terms and conditions of this
Lease.
(B) This Lease is subject and subordinate to, and Tenant will comply with,
any reciprocal easement agreements or any other easements (each, an
"Easement"); any other restrictions on or agreements pertaining to the
Premises, as disclosed in Exhibit B-1: any mortgage, deed of trust or deed
to secure debt (each, a "Mortgage") and to any renewals, modifications,
increases, extensions, replacements, and substitutions of any thereof now or
hereafter affecting the Premises. This provision shall be self-operative and
no further instrument of subordination shall be required; provided, however
that Tenant agrees to execute and deliver, upon request, such further
instrument(s) in recordable form confirming this subordination as may be
requested by Landlord, or the holder of any Mortgage or the lessor under any
Superior Lease. Notwithstanding anything to the contrary contained herein,
at the option of the holder of any Mortgage, this Lease shall be made
superior to such Mortgage by the insertion therein of a declaration that
this Lease is superior.
Section 5.02 Entry by Landlord.
(A) Landlord and Landlord's agents and representatives shall have the right
to enter the Premises at any time in case of an emergency, and at all
reasonable times upon advance notice to Tenant.
(B) Tenant shall give Landlord a key for all of the doors for the Premises,
excluding Tenant's vaults, safes and files. Landlord shall have the right to
use any and all means to open the doors to the Premises in an emergency in
order to obtain entry thereto without liability to Tenant therefor. Any
entry to the Premises by Landlord by any of the foregoing means, or
otherwise, shall not be consumed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises, or an eviction, partial eviction
or constructive eviction, of Tenant from the Premises or any portion
thereof, and shall not relieve Tenant of its obligations hereunder.
Section 5.03 Minimize Interference. In performing its covenants under this
Lease, Landlord shall use reasonable efforts to minimize interference with
the conduct of Tenant's business in connection with the performance by
Landlord of any work or the provision of any services required or permitted
pursuant to the terms of this Lease, but Landlord shall not be required to
use overtime or premium pay labor.
<PAGE>
Section 5.04 Landlord's Right to Cure. All agreements and provisions to be
performed by Tenant under any of the terms of this Lease shall be at
Tenant's sole cost and expense and without any abatement of Base Rent and
Additional Rent. If Tenant shall fail to perform any act or to pay any sum
of money (other than Base Rent) required to be performed or paid by it
hereunder, or shall fail to cure any default and such failure shall continue
for ten (10) days after written notice thereof by Landlord to Tenant, then
Landlord may, at its option, and without waiving or releasing Tenant from
any of its obligations hereunder, make such payment or perform such act on
behalf of Tenant. All sums paid and all costs incurred by Landlord in taking
such action shall be deemed Additional Rent and shall be paid to Landlord on
demand.
Article 6.
Eminent Domain, Casualty, Hazardous Materials
Section 6.01 Eminent Domain.
(A) If during the Term all of the Premises shall be taken (or temporarily
taken for a period of one (1) year or more) by a public authority under any
statute or by right of eminent domain, or purchased under threat of such
taking, this Lease shall automatically terminate on the date on which the
condemning authority takes possession of the Premises ("Date of Such
Taking").
(B) If, during the Term, part of the Premises is so taken or purchased, and
if, in the reasonable opinion of Landlord, substantial alteration or
reconstruction of the Premises is necessary or desirable as a result
thereof, whether or not the Premises are or may be affected, Landlord shall
have the right to terminate this Lease by giving Tenant at least thirty (30)
days' written notice of such termination, and thereupon this Lease shall
terminate on the date set forth in such notice.
(C) Tenant shall immediately surrender to Landlord the Premises and all
interests therein under this Lease on any such date of termination under
this Section 6.01. Landlord may re-enter and take possession of the Premises
and remove Tenant there from if necessary, and, in the event of a
termination under this Section 6.01, the Base Rent and Additional Rent shall
abate on the later of the date of termination or the Date of Such Taking.
After such termination, and on notice from Landlord stating the Base Rent
and Additional Rent then owing, Tenant shall forthwith pay Landlord such
amounts.
(D) If a portion of the Premises is so taken, and no rights of termination
herein conferred are timely exercised, the Term of this Lease shall expire
with respect to the portion so taken on the Date of Such Taking. In such
event, the Base Rent and Additional Rent with respect to such portion so
taken shall abate on such date or on such later date as Tenant shall deliver
possession thereof, and the Base Rent and Additional Rent thereafter payable
with respect to the remainder of the Premises shall be adjusted pro rate by
Landlord in order to account for the reduction in the number of rentable
square feet in the Premises. Landlord shall restore and redemise the
Premises to the extent required to exclude from the Premises that portion so
taken; provided, that Landlord's obligation to restore and redemise the
remainder of the Premises shall be limited to the funds available to
<PAGE>
Landlord from the condemnation award or other consideration paid for the
affected portion of the Premises. Landlord shall not be obligated to
replace, repair or restore any improvements or alterations to the Premises
made by or on behalf of Tenant, nor shall Landlord be obligated to replace,
repair or restore Tenant's leasehold improvements, personal property,
furniture, fixtures, equipment or the like.
(E) Upon any such taking or purchase. Landlord shall be entitled to receive
and retain the entire award or consideration for the affected portion of
the Premises, and Tenant shall not have or advance any claim against
Landlord for the value of its property or its leasehold estate or the
unexpired Term of the Lease, or for costs of removal or relocation, or
business interruption expense or any other damages arising out of such
taking or purchase. Nothing herein shall give Landlord any interest in or
preclude Tenant from seeking and recovering for its own account from the
condemning authority any award or compensation attributable to the taking or
purchase of Tenants improvements, channels or trade fixtures, or the removal
or relocation of its business and effects, or the interruption of its
business; provided that any such award or compensation shall nor reduce the
award otherwise payable to Landlord. If any such award made or compensation
paid to either party specifically includes an award or amount for the other,
the party first receiving the same shall promptly account therefor to the
other.
(F) If all or any portion of the Premises shall be condemned or taken for
governmental occupancy for a period of less than one year, this Lease shall
continue in full force and effect and Tenant shall continue to pay in full
all Base Rent and Additional Rent and other charges herein reserved, without
reduction or abatement, and Tenant shall be entitled to receive, for itself,
so much of any award or payment made for such use as is equal to the
payments that are actually made by Tenant to Landlord during such temporary
taking, and Landlord shall receive the balance thereof.
Section 6.02 Damage by Fire or Other Casualty.
(A) If the Premises shall be damaged by fire or other casualty, then the
damage shall be repaired, except as otherwise provided in this Section 6.02,
by and at the expense of Tenant with reasonable promptness; provided,
however, that Tenant's obligation to restore shall at all times be subject
to obtaining all necessary approvals from all applicable governmental
entities, the Landlord and the holder of any Mortgage and the willingness of
such holder to make the proceeds of casualty insurance policies available to
Tenant for such purposes. The Base Rent and the other charges due Landlord
hereunder shall be equitably abated in the proportion which the part of the
Premises which is not usable by Tenant bears to the entire Premises until
the repairs required to be made by Tenant hereunder shall be made.
(B) If the Premises are totally damaged or rendered wholly untenantable by
fire or other casualty, or if Tenant's architect certifies that the Premises
cannot be repaired within twelve (12) months after the casualty, or if all
or any portion of the proceeds of any insurance policy are retained by the
holder of any Mortgage, then Tenant may, within one hundred eighty (180)
days after such fire or other casualty, give Landlord notice of termination
of this Lease, and thereupon the Term shall expire ten (10) days after such
notice is given, and Tenant shall vacate the Premises and surrender same to
Landlord.
<PAGE>
(C) If the repair and restoration of the Premises are not substantially
completed within twelve (12) months after the date of the casualty, other
than on account of delays by Tenant, but subject to delays resulting from
causes beyond the reasonable control of Tenant and unless the Lease is
terminated in accordance with this Section 6.02, any abatement in Base Rent
and Additional Rent shall cease and Tenant's obligation to pay the same
shall recommence.
(D) Tenant shall give immediate written notice to Landlord of any damage
caused to the Premises by fire or other casualty.
Section 6.03 Subrogation. Norwithstanding anything to the contrary contained
herein, Landlord and Tenant hereby mutually waive and release their
respective rights of recovery against one another and their officers, agents
and employees for any damage to real or personal property, including
resulting loss of use, interruption of business and other expenses occurring
as a result of the use or occupancy of the Premises to the extent of
insurance coverage which would be included in a standard "all risk" or
special form policy of property insurance. Landlord and Tenant agree that
all policies of insurance obtained by them pursuant to the terms of this
Lease shall contain provisions or endorsements thereto waiving the insurer's
rights of subrogation with respect to claims against the other, and, unless
the policies permit waiver of subrogation without notice to the insurer,
each shall notify its insurance companies of the existence of the waiver and
indemnity provisions set forth in this Lease.
Section 6.04 Hazardous Materials.
(A) During the term of this Lease, Tenant shall comply with all
Environmental Laws and Environmental Permits (both as defined in Section
6.04(F) hereof) applicable to the operation or use of the Premises, will
cause all other persons occupying or using the Premises to comply with all
such Environmental Laws (as defined in Section 6.04(F) hereof) and
Environmental Permits, will immediately pay or cause to be paid all costs
and expenses incurred by reason of such compliance, and will obtain and
renew all Environmental Permits required for operation or use of the
Premises.
(B) Tenant shall not generate, use, treat, store, handle, release or dispose
of, or permit the generation, use, treatment, storage, handling, release or
disposal of Hazardous Materials (as defined in Section 6.04(F) hereof) on
the Premises, or transport or permit the transportation of hazardous
Materials to or from the Premises except in compliance with all applicable
Environmental Laws and Environmental Permits.
(C) Tenant shall bear all risk and all costs related to complying with all
Environmental Laws and Environmental Permits.
(D) Tenant will not change or permit to be changed the present use of the
Premises unless Tenant shall have notified Landlord thereof in writing and
Landlord Shall have determined, in its sole and absolute discretion, that
such change will not result in the presence of Hazardous Materials on the
Premises except for those described in Subsection (B) above.
<PAGE>
(E) (1) Tenant agrees to defend, indemnify and hold harmless the Indemnitees
from and against all obligations (including removal and remedial actions),
losses, claims, suits, judgments, liabilities, penalties, damages (including
consequential and punitive damages), costs and expenses (Including
attorneys' and consultants' fees and expenses) of any kind or nature
whatsoever that may at any time be incurred by, imposed on or asserted
against such Indemnitees directly or indirectly based on, or arising or
resulting from (a) the actual or alleged presence of Hazardous Materials on
the Premises which is caused or permitted by Tenant and (b) any
Environmental Claim relaxing in any way to Tenant's operation or use of the
Premises (the "Hazardous Materials Indemnified Matters"). The provisions of
this Section 6.04(E) shall survive the expiration or sooner termination of
this Lease.
(2) To the extent that the undertaking in the preceding paragraph may
be unenforceable because it is violative of any law or public policy, Tenant
will contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Hazardous
Materials Indemnified Matters incurred by Indemnitees.
(3) All sums paid and costs incurred by Landlord with respect to any
Hazardous Materials Indemnified Matter shall bear interest at the lesser of
(i) ten percent (10%) per annum, or (ii) the maximum legal rate of interest
allowed by the state in which the Premises are located, from the date so
paid or incurred until reimbursed by Tenant, and shall such sums and costs
shall be immediately due and payable on demand.
(F) (1) "Hazardous Materials" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and radon gas; (b) any
substances defined as or included in the definition of hazardous substances,
"hazardous wastes" "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" at "pollutants," or words of similar import, under any
applicable Environmental Law; and (c) any other substance exposure which is
regulated by any governmental authority (2) "Environmental Law" means any
federal, state or local statute, law, ru1e, regulation, ordinance, code,
policy or rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials,
including without limitation on, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. 6901 et seq.; the
Resource Conservation and Recovery Act, 42 U.S. C. [S] 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. [S] 1801 et seq; the
Clean Water Act, 33 U.s.c. [S]1251 et seq.; the Toxic Substances Control
Act, 15 U.S.C. [S][S] 2601 et seq.; the Clean Air Act, 42 U.S.C. 7401 et
seq.; the Safe Drinking Water Act, 42 USC. [S][S] 300f et seq.; the Atomic
Energy Act, 42 U.S.C. [S] 2011 et seq.; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. 136 et seq.; the Occupational Safety and
Health Act, 29 U.S.C. [S][S] 651 et seq.; (3) "Environmental Claims" means
any and all administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of non-compliance or violation,
investigations, proceedings, consent orders or consent agreements relating
in any way to any Environmental Law or any Environmental Permit, including
without limitation (a) any and all Environmental Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial
<PAGE>
or other actions or damages pursuant to any applicable Environmental Law and
(b) any and all Environmental Claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from alleged injury or
threat of injury to health, safety or the environment: (4) "Environmental
Permits" means all permits, approvals, identification numbers, licenses and
other authorizations required under any applicable Environmental Law.
(2) "Release" means disposing, discharging, injecting, spilling,
Leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing
and the like, into or upon any land or water or air, or otherwise entering
into the environment."
ARTICLE 7.
Even of Default, Remedies
(A) In addition to any other event specified in this Lease as an event of
default, the occurrence of any one or more of the following events during
the Term (each, individually, an "Event of Default" and collectively,
"Events of Default") shall constitute a breach of this Lease by Tenant and
Landlord may exercise the rights set forth in Section 7.02 of this Lease or
as otherwise provided at law or in equity:
(1) Tenant shall fail to pay any Base Rent. Additional Rent, or
any other sums payable by Tenant under this Lease (or cure any other default
which is curable by the payment of money) within five (5) days after the
date when the same shall become due and payable; or (2) Tenant shall default
in the performance of or compliance with any of the other covenants,
agreements, terms or conditions of this Lease to be performed by Tenant
(other than any default curable by the payment of money), and such default
shall continue for a period of thirty (30) days after written notice thereof
from Landlord to Tenant, or, in the case of a default which cannot with due
diligence be cured within thirty (30) days, Tenant fails to commence such
cure promptly within such fifteen (15) day period and thereafter diligently
prosecute such cure to completion; or (3) Tenant shall become insolvent
within the meaning of the United States Bankruptcy Code, as amended from
time to time (the "Codes), or shall have ceased to pay its debts in the
ordinary course of business, or shall be unable to pay its debts as they
become due, or Tenant shall notify Landlord it anticipates any of the
foregoing conditions; Tenant shall file, take any action to file, or notify
Landlord that Tenant intends to file, a petition, or proceeding under any
section or chapter of the Code, or under any similar law or statute of the
United States or any state thereof relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts; Tenant
shall be adjudicated as a bankrupt or insolvent or consent to, or file an
answer admitting or tailing reasonably to contest the material allegations
of, a petition filed against it in any such case or proceeding in the
preceding clause; or seek to or consent to or acquiesce in the appointment
of any receiver, trustee, liquidator or other custodian of Tenant or any
material part of its or their properties, whether or not the same shall
relate to their interests in this Lease; or Tenant shall make a general
assignment for the benefit of creditors; or take any other action for the
purpose of effecting any of the foregoing or (4)if, within thirty (30) days
after the filing of an involuntary petition in bankruptcy against Tenant or
the commencement of any case or proceeding against Tenant seeking any
<PAGE>
reorganization, composition, arrangement, liquidation, dissolution,
readjustment or similar relief under any law, such proceeding shall not have
been dismissed; or if, within thirty (30) days after the appointment,
without consent or acquiescence of Tenant, of any trustee, receiver or
liquidator of Tenant, or of all or any substantial part of the properties of
Tenant, or of all or any part of the Premises, such appointment shall not
have been vacated or stayed on appeal or otherwise; or if, within thirty
(30) days after the expiration of any such stay, such appointment shall not
have been vacated; or if, within thirty (30) days after the taking of
possession without the consent or acquiescence of Tenant, by any
governmental office or agency pursuant to statutory authority for the
dissolution or liquidation of Tenant, such taking shall not have been
vacated or stayed on appeal or otherwise; or (5) the Premises shall be
effectively abandoned by Tenant, as shown by failure to occupy the Premises,
for a period of ten (10) days; or (6) any execution or attachment is issued
against Tenant or any of its property whereupon the Premises shall be taken
or occupied or attached, or attempted to be taken or occupied or attached by
someone other than Tenant; or (7) a tax lien or a mechanic's and/or
materialmen's lien is filed against any property of Tenant, or Tenant does
or permits to be done anything which creates a lien upon the Premises and
such lien is not discharged by Tenant within ten (10) days of the filing
thereof: or (8) Tenant shall default beyond any applicable notice and grace
period under any other lease or sublease with Landlord, with Landlord's
agent or with any entity which controls, is controlled by, or is under
common control with Landlord.
(B) If an Event of Default occurs more than two (2) times within any period
of six (6) months, then, notwithstanding that each such Event of Default
shall have been cured, any further default shall be deemed to be deliberate,
and Landlord may exercise the remedies provided herein or at law or in
equity upon giving such notice as is provided for in this Lease or as is
required by law and without affording Tenant an opportunity to cure such
default.
Section 7.02 Remedies Upon Default.
(A) Upon the occurrence of any Event of Default, Landlord shall have the
option to pursue any one or more of the following remedies without notice or
demand whatsoever, in addition to, or in lieu of, any and all remedies
available to Landlord under the laws of the state in which the Premises are
located:
(1) Landlord may give Tenant written notice of its election to
terminate this Lease, effective on the date specified therein, whereupon
Tenant's right to possession of the Premises shall cease and this Lease,
except as to Tenant's liability determined in accordance with subsection
7.02(C) below, shall be terminated.
(2) Landlord and its agents may immediately re-enter and take
possession of the Premises, or any part thereof, either by summary
proceedings, or by any other applicable action or proceeding, or by force or
otherwise (without being liable for indictment, prosecution or damages
therefor) and may repossess same as Landlord's former estate and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both or either, without being deemed guilty in any manner of trespass, and
without prejudice to any remedies for arrears of rent or Tenant's breach of
covenants or conditions.
<PAGE>
(3) Should Landlord elect to re-enter as provided hereinabove or
should Landlord take possession pursuant to legal proceedings or pursuant to
any notice provided by law, Landlord shall take reasonable measures to the
extent required by law and without terminating this Lease, to relet the
Premises or any part thereof. Any such reletting shall be in Landlord's or
Tenant's name, but for the account of Tenant (subject to the provisions of
subsection 7.02(B)), for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the
Term) and on such terms and conditions (which may include concessions of
free rent and alteration, repair and improvement of the Premises) as
Landlord reasonably determines to be necessary to maximize the effective
rent on reletting and Landlord may collect and receive the rents therefor
without relieving Tenant of any liability under this Lease or otherwise
affecting any such liability. Landlord shall in no event be 1iable for
refusal or failure to relet the Premises or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent due
upon such reletting, and no such refusal or failure shall operate to relieve
Tenant of any liability under this Lease or otherwise to affect any such
liability. No such re-entry or taking possession of the Premises by Landlord
shall be construed as an election on Landlord's part to terminate this Lease
unless a written notice of such intention be given to Tenant. No notice from
Landlord hereunder or under a forcible entry and detainer statute or similar
law shall constitute an election by Landlord to terminate this Lease unless
such notice specifically so states. Landlord reserves the right following
any such re-entry and/or reletting to exercise its right to terminate this
Lease by giving Tenant written notice thereof, in which event this Lease
will terminate as specified in said notice.
(B) Tenant hereby waives the service of any notice of intention to re-enter
or to institute legal proceedings to that end which may otherwise be
required to be given wider any present or future law. Tenant, on its own
behalf and on behalf of all persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such persons might otherwise have under any present or future
law to redeem the Premises, or to re-enter or repossess the Premises, or to
restore the operation of this Lease, after (i) Tenant shall have been
dispossessed by a judgment or by warrant of any court or judge, or (ii) any
re-entry by Landlord, or (iii) any expiration or termination of this Lease
and the Term, whether such dispossess, re-entry, expiration or termination
shall be by operation of law or pursuant to the provisions of this Lease.
The words "re-enter", "re-entry" and "re-entered" as used in this Lease
shall not be deemed to be restricted to their technical legal meanings. In
the event of a breach or threatened breach by Tenant, or any persons
claiming through or under Tenant, of any term, covenant or condition of this
Lease on Tenant's part to be observed or performed, Landlord shall have the
right to enjoin such breach and the right to invoke any other remedy allowed
by law or in equity as if re-entry, summary proceedings and other special
remedies were not provided in this Lease for such breach. The right to
invoke the remedies hereinbefore set forth are cumulative and shall not
preclude Landlord from invoking any other remedy allowed at law or in equity
(C) (1) In the event this Lease is terminated in accordance with the
provisions of Section 7.02(A)(l), Tenant shall remain liable to Landlord for
damages in an amount equal to the Base Rent, Additional Rent and any other
sums due hereunder as of the date of termination of this Lease plus the Base
Rent, Additional Rent, the unamortized cost of any work performed in the
Premises by Landlord in preparing the Premises for occupancy by Tenant (the
"Unamortized Costs") and other sums which would have been owing by Tenant
<PAGE>
hereunder for the balance of the Term (collectively, the "Aggregate Gross
Rent") had this Lease not been terminated, less the net proceeds, if any,
received as a result of any Reletting of the Premises by Landlord subsequent
to such termination, after deducting all of Landlord's expenses including,
without limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, expenses of employees, alteration and repair
costs and expenses of preparation for such reletting (collectively, the
"Reletting Costs"). Landlord shall be entitled to collect the Unamortized
Costs immediately upon termination of this Lease, and all other damages from
Tenant monthly on the days on which the rent and other charges would have
been payable hereunder if this Lease had not been terminated. Alternatively,
at the option of Landlord, in the event this Lease is so terminated,
Landlord shall be entitled to recover forthwith against Tenant, as
liquidated damages and not as a penalty, the then Value of the Aggregate
Gross Rent and Reletting Costs less the aggregate rental value of the
Premises for what otherwise would have been the unexpired balance of the
Term. In the event Landlord shall relet the Premises for the period which
otherwise would have constituted the unexpired portion of the Term (or any
part thereof), the amount of rent and other sums payable by the Tenant
thereunder shall be deemed prima facie to be the rental value for the
Premises (or the portion thereof so relet) for the term of such reletting.
(2) In the event Landlord does not elect to terminate this Lease,
but takes possession as provided in subsection 7.02(A)(2). Tenant shall pay
to Landlord the Base Rent and Additional Rent as herein provided which would
be payable hereunder if such repossession had not occurred, less the net
proceeds received by Landlord, if any, of any reletting of the Premises by
Landlord after deducting the Reletting Costs to the extent not paid to
Landlord pursuant to the following sentence. Tenant shall pay the
Unamortized Costs, Base Rent and any Additional Rent due to Landlord,
monthly, on the days on which Base Rent would have been payable hereunder if
possession had not been retaken.
(D) (1) This Lease shall continue in effect for so long as Landlord does
not terminate Tenant's right to possession, and Landlord may enforce all its
rights and remedies under this Lease, including the right to recover the
Base Rent and Additional Rent, as the same become due under this Lease. Acts
of maintenance or preservation or efforts to relet the Premises or the
appointment of a receiver upon the initiative of Landlord to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's rights to possession unless Landlord shall have specifically
elected to terminate this Lease as provided in subsection 7.02(A).
(2) No payments of money by Tenant to landlord after the expiration
or other termination of this Lease after the giving of any notice by
Landlord to Tenant shall reinstate or extend the Term, or make ineffective
any notice given to Tenant prior to the payment of such money. After the
service of notice or the commencement of a suit, or after final judgment
granting Landlord possession at the Premises, Landlord may receive and
collect any sums due under this Lease, and the payment thereof shall not
make ineffective any notice, or in any manner affect any pending suit or any
judgment theretofore obtained.
<PAGE>
ARTICLE 8.
Miscellaneous Provisions
Section 8.01 Notices.
(A) Any and all notices herein required or which either party herein may
desire to give to the other (each, a "Notice") pursuant hereto shall be made
in writing and shall be given by certified or registered mail, postage
prepaid, return receipt requested, or by recognized overnight courier, such
as Federal Express, and shall be deemed to be given on the third (3rd)
business day following the date of posting in a United States Post Office or
branch post office or one day after delivery to the overnight courier, and
shall be delivered to Tenant's Notice Address or Landlord's Notice Address,
as appropriate. The parties agree that copies of all Notices to be delivered
to Landlord and Tenant hereunder shall be simultaneously delivered to the
specified addresses for copies as set forth in Section 1.01(D) and Section
1.01(J), respectively, if any. Either party may, by notice as aforesaid
actually received, designate a different address or addresses for
communications intended for it. Anything contained herein to the contrary
notwithstanding, any bills or invoices for Base Rent, Additional Rent or any
other sums due hereunder, or any Landlord's Operating Statement may be given
by hand or by mail (which need not be registered or certified) and, if so
given, shall be deemed given on the date of delivery or refusal, if by hand,
or on the third business day following the date of posting if mailed.
(B) Notices given hereunder by any party may be given by counsel for such
party. The foregoing notice provisions shall in no way prohibit notice from
being given as provided in the rules of civil procedure of the state in
which the Premises is located, as the same may be amended from time to time
and any notice so given shall constitute notice herein.
Session 8.02 Entire Agreement
(A) Tenant acknowledges and agrees that it has not relied upon any
statements, representations, agreements or warranties except those expressed
in this Lease, and that this Lease contains the entire agreement of the
parties. No amendment or modification of this Lease shall be binding or
valid unless expressed in writing and executed and delivered by Landlord and
Tenant in the same manner as the execution of this Lease.
(B) The submission of this document for examination and review does not
constitute an option, an offer to lease space, or an agreement to lease
space. This document shall have no binding effect on the parties hereto
unless and until executed and delivered by both Landlord and Tenant and will
be effective only upon Landlord's execution and delivery of same.
Section 8.03 Severability. If any term or provision of this Lease or the
application thereof to any person or circumstances shall, to any extent, be
illegal, invalid or unenforceable, the remainder of this Lease, or the
app1ication of such term or provision to persons or circumstances other than
those to which it is held invalid or unenforceable, shall not be affected
thereby, and all other terms and provisions of this Lease shall be valid and
enforced to the fullest extent permitted by law.
<PAGE>
Section 8.04 No Setoff. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent, and Tenant
shall not be entitled to any setoff, offset, abatement or deduction of rent
or other amounts due Landlord hereunder if Landlord fails to perform its
obligations hereunder provided, however, the foregoing shall in no way
impair the right of Tenant to commence a separate action against Landlord
for any violation by Landlord of the provisions hereof or to which Tenant
has not waived any claim pursuant to the provisions of this Lease so long as
notice is first given to Landlord and any holder of a Mortgage and/or lessor
under a Superior Lease and reasonable opportunity is granted to Landlord and
such holder under lessor to correct such violation. In no event shall
Landlord or any holder of a Mortgage and/or lessor under a Superior Lease be
responsible for any consequential damages incised by Tenant, including,
without limitation, lost profits or interruption of business, as a result of
any default by Landlord.
Section 8.05 Relationship of Parties. Nothing contained in this Lease shall
create any relationship between the parties hereto other than that of
Landlord and Tenant, and it is acknowledged and agreed that Landlord shall
not be deemed to be a partner of Tenant in the conduct of its business, or
a joint venturer or a member of a joint or common enterprise with Tenant.
Section 8.06 Successors Bound. Except as otherwise specifically provided
herein, the terms, covenants and conditions contained in this Lease shall
bind and inure to the benefit of the respective heirs, successors,
executors, administrators and assigns of each of the parties hereto.
Section 8.07 Interpretation.
(A) Whenever in this Lease any words of obligation of duty are used, such
words or expressions shall have the same force and effect as though made in
the form of a covenant.
(B) Words of any gender used in this Lease shall be deemed to include any
other gender, and words in the singular shall be deemed to include the
p1ural, when the context requires.
(C) All pronouns and any variances thereat shall be deemed to refer to the
neuter, masculine, feminine, singular or plural when the context requires.
(D) No remedy or election given pursuant to any provision in this Lease
shall be deemed exclusive unless so indicated, but each shall, wherever
possible, be cumulative with all other remedies at law or in equity as
otherwise specifically provided herein.
(E) If and to the extent that, any of the provisions of any amendment,
modification or rider to this Lease conflict or are otherwise inconsistent
with any of the preceding provisions of this Lease, whether or not such
inconsistency is expressly noted in such amendment, modification or rider,
the provisions of such amendment, modification or rider shall prevail.
(F) The parties mutually agree that the headings and captions contained in
this Lease are inserted for convenience of reference only, and are not to be
deemed part of or to be used in construing this Lease.
(G) This Lease shall be construed in accordance with the laws of the State
of Texas.
<PAGE>
(H) Except as expressly concerned herein, (i) neither Landlord nor
Landlord's agent or attorneys have made any representations, warranties, or
promises with respect to the Premises or this Lease; (ii) Tenant has
inspected the Premises and agrees to take same in their "as-is" condition;
and (iii) Landlord shall have no obligation to do any work in and to the
Premises in order to prepare the Premises for occupancy and use by Tenant.
Section 8.08 Limitation Of Landlord Liability. Notwithstanding anything to
the contrary provided in this Lease, neither Landlord, nor any general or
limited partner in or of Landlord, whether direct or indirect, nor any
direct or indirect partners in such partners, nor any disclosed or
undisclosed officers, shareholders, principals, directors, employees,
partners, servants or agents of Landlord, nor any of the foregoing, nor any
investment adviser or other holder of any equity interest in Landlord, their
successors, assigns, agents, or any mortgage in possession shall have any
personal liability with respect to any provisions of this Lease and, if
Landlord is in breach or default with respect to its obligations or
otherwise, Tenant shall look solely to Landlord's interest in the Premises
for the satisfaction of Tenant's remedies.
Section 8.09 Short Form Lease. Tenant shall not record this Lease or a
memorandum hereof without the prior written consent Of Landlord. If Landlord
should consent to recording a memorandum of this Lease, Landlord and Tenant
agree to execute and acknowledge a short form lease in recordable form,
indicating the names and addresses of Landlord and Tenant, a description of
the Premises, the Term, the Commencement and Expiration Date, options for
renewal, if any, and the Option but omitting rent and other terms of this
Lease if such a memorandum of this Lease is recorded. Landlord and Tenant
agree to execute and acknowledge a termination of lease in recordable form
before or upon the Expiration Date or sooner termination of the Term. This
termination of lease shall be recorded after the Expiation Date or sooner
termination of the Term.
Section 8.10 Assignment of Rents, Leases.
(A) Tenant agrees that Landlord may assign the rents and its interest in
this Lease to the holder of any Mortgage.
(B) Tenant further agrees that, in the event of such an assignment Tenant
shall give the holder of such Mortgage a copy of any request for performance
by Landlord or any notice of default by Landlord and, in the event Landlord
fails to cure any such default, Tenant shall give such holder a reasonable
period, commencing on the last day on which Landlord could cure such
default, in which to cure same.
Section 8.11 Estoppel Certificate.
(A) At any time and from time to time upon written request by Landlord,
Tenant hereby agrees to deliver within ten (10) days after request, a
certificate ("Estoppel Certificate") to Landlord or to any present or
proposed (a) mortgagee, (b) lessor under a Superior Lease, or (c) purchaser
designated by Landlord, in the form supplied, certifying: (1) that Tenant
has accepted the Premises (or, if Tenant has not done so, that Tenant has
not accepted the Premises, and specifying the reasons therefor): (2) that
this Lease is in full force and effect and has not been modified (or if
modified, serving forth all modifications), or, if this Lease is not in full
force and effect, the certificate shall so specify the reasons therefor (3)
the Commencement Date, the Expiration Date and the terms of any extension
<PAGE>
options of Tenant; (4) the date to which the Base Rent and Additional Rent
have been paid under this Lease and the amount thereof then payable; (5) the
amount of the Security Deposit and prepaid rent, if any, being held by
landlord; (6)whether there are then any existing defaults by Landlord in the
performance of its obligations under this Lease, and if there are any such
defaults, specifying the nature and extent thereof; (7) that no notice has
been received by Tenant of any default under this Lease which has not been
cured, except as to defaults specified in the certificate; (8) the capacity
of the person executing such certificate, and that such person is duly
authorized to execute the same on behalf of Tenant; and (9) any other
information reasonably requested by Landlord or its present or proposed
purchaser, holder of any Mortgage or lessor under a Superior Lease.
(B) If Tenant shall fail or refuse so sign a certificate in accordance with
the provisions of this Section within ten (10) days following written
request by Landlord, Tenant irrevocably constitutes and appoints Landlord as
its attorney in fact to execute and deliver the certificate so any such
third party, it being stipulated that such power of attorney is coupled with
an interest and is irrevocable.
Section 8.12 Mortgagee Requirements. Tenant hereby agrees to cooperate with
Landlord if Landlord should seek financing for the Premises or any portion
thereof. Tenant agrees to comply with any reasonable requirements of
mortgage, including, but not limited to, executing a subordination,
adornment and non-disturbance agreement in a form agreeable to mortgagee,
executing an Estoppel Certificate and making changes to this Lease as may be
reasonably necessary to make this lease conform to the mortgage documents.
Section 8.13 Attorneys' Fees. In the event of any action or proceeding
between the parties with respect to or in any way related to this Lease, the
losing party shall pay all costs and expenses incurred by the prevailing
party in connection with such action or proceeding, including reasonable
attorneys' fees.
Section 8.14 No Waiver. The failure of Landlord to exercise its rights in
connection with any breach or violation of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant
or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of Base
Rent and Additional Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition
of this Lease other than the failure of Tenant to pay the particular amount
of Base Rent or Additional Rent so accepted regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such monies.
Section 8.15 No Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not result in a merger of
Landlord's and Tenant's estates and shall, at the option of Landlord, either
terminate any or all existing subleases or subtenancies, or operate as an
assignment to Landlord of any or all of such subleases or subtenancies.
<PAGE>
Section 8.16. JURY TRIAL AND COUNTERCLAIM WAIVER. LANDLORD AND TENANT
HEREBY WAIVE TRIAL BY JURY N ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN
RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE
PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR
STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR
ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT
INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH
COUNTERCLAIM SHALL SE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION BUT SHALL
BE RELEGATED TO AN INDEPENDENT ACTION AT LAW.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first written.
LANDLORD: TENANT:
PC DYNAMICS CORPORATION PC DYNAMICS OF TEXAS, INC.
By: /s/ BY: /s/
-------------------- ----------------------
VICE PRESIDENT PRESIDENT
<PAGE>
Exhibit A
---------
Legal Description
10501 FM 720 East.
Frisco,Texas 75035
<PAGE>
Exhibit B-1
-----------
Permitted Exceptions
Exhibit B
ATTACHED BLANK PURCHASE SALE MEMORANDUM
[ WIRE TRANSFER INSTRUCTION APPEAR HERE ]
Exhibit 10.12
ALL INDEBTEDNESS EVIDENCED HEREBY AND REFERENCED HEREIN IS SUBORDINATED IN
RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL OF ALL INDEBTEDNESS OWNED TO
FINOVA CAPITAL CORPORATION AS SET FORTH IN THAT CERTAIN SUBORDINATION AND
STANDSTILL AGREEMENT AMONG FINOVA CAPITAL CORPORATION, THE PAYEE OF THIS
NOTE AND THE OTHER PARTIES NAMED THEREIN.
PROMISSORY NOTE
Bensenville, Illinois
$293,025 March 15, 1999
1. Payment. FOR VALUE RECEIVED, PC Dynamics of Texas, Inc., a Texas
corporation ("BUYER"), hereby promises to pay to the order of PC Dynamics
Corporation, a Texas corporation ("PC Dynamics"), the principal sum of Two
hundred ninety three thousand and twenty-five Dollars ($293,025) in equal
monthly principal installments of $50,000, payable on the first day of each
month, commencing with May 1, 1999, until all obligations hereunder have
been paid in full. BUYER hereby further promises to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) at the Prime Rate
(as defined below) plus 1% per annum on the principal amount from time to
time outstanding from the date hereof, such interest to be payable on each
date specified above for principal payments and until this Note and all
obligations hereunder have been paid in full. Notwithstanding the
foregoing, BUYER promises to pay interest on any overdue principal and (to
the extent legally enforceable) on any overdue installment of interest at a
rate per annum equal to the greater of: (i) the Prime Rate from time to
time in effect plus 5% and (ii) 15%. Both principal and interest hereunder
are payable in lawful money of the United States of America and in next-day
funds to PC Dynamics at 216 Evergreen Street, Bensenville, Illinois 60106,
Attention: President.
For purposes of this Note, (i) "Prime Rate" shall mean for each
calendar month commencing with March, 1999, the rate of interest
established, announced or published by Harris Trust and Savings Bank on the
last Business Day preceding the first day of such calendar month, as their
prime rate, reference rate or comparable or equivalent rate for loans made
in Chicago, Illinois; and (ii) "Business Day" shall mean any day other than
a Saturday or Sunday on which banks are generally open for business in
Chicago, Illinois.
2. Other Documents. This Promissory Note (the "Note") is the Note
referred to in Section 3.2(b) of that certain Agreement dated as of March
15, 1999 (the "Agreement") between BUYER and PC Dynamics. Unless otherwise
defined herein, the capitalized terms used herein which are defined in the
Agreement shall have the meanings specified in the Agreement. This Note is
guaranteed pursuant to the terms of that certain (i) Guarantee dated as of
March 15, 1999 executed by Mr. D. Ronald Allen in favor of PC DYNAMICS and
(ii) Guarantee dated as of March 15, 1999 executed by Performance
Interconnect Corp. ("PIC") in favor of PC DYNAMICS.
<PAGE>
3. Optional Prepayment. BUYER may repay all or any portion of this Note
that is $1,000 or an integral multiple thereof at any time or times, without
premium or penalty. BUYER shall give PC Dynamics not less than five (5)
Business Days' prior written notice of any intended prepayment. Any
prepayment shall first be credited against accrued but unpaid interest
hereunder in the date of the prepayment and the balance, if any, shall be
credited against the then-outstanding principal amount hereof.
4. Business and Financial Covenants. With respect to its financial
and business affairs, BUYER covenants with PC Dynamics as follows:
(a) Inspection Rights. PC Dynamics or its authorized representatives
may visit, at their expense, any of BUYER's properties, inspect and examine
its records and books of accounts, take abstracts or copies thereof, and
discuss its affairs, finances and books of accounts with its officers, at
reasonable times and in a reasonable manner.
(b) Maintenance of Properties: Compliance. BUYER shall keep the
Assets in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto, and BUYER will
at all times comply with the material provisions of all legal requirements
and leases to which it is a party or under which it occupies property so as
to prevent any loss or forfeiture thereof or thereunder.
(c) Maintenance of Corporate Existence and Conduct of Business. BUYER
shall preserve its corporate existence, rights and franchises; BUYER will
carry on and conduct its business in substantially the same manner as it is
presently conducted by PC Dynamics, shall not use its properties for any
unlawful purpose, shall nor permit its properties or any part thereof to be
levied upon under execution, attachment or restraint unless any action is
contested by BUYER and protected by appropriate bond or other surety and
shall not waste or destroy any of its properties or any part thereof.
(d) Expenses. BUYER agrees to pay PC Dynamics all reasonable costs
and expenses (including, but not limited to, reasonable attorneys' fees and
court costs) incurred by it in the collection of this Note or in the
enforcement of any provision of this Note.
(e) Limitations on Disposition. BUYER will not sell, exchange,
transfer or otherwise dispose of any of the Assets, or attempt or contract
to do so, except for sale of inventory in the ordinary course of business.
(f) Non-competition. BUYER will not permit any of its officers,
directors, employees or Affiliates to, directly or indirectly, whether as a
principal, partner, shareholder, joint venturer, consultant, agent,
proprietor, creditor or otherwise, engage in any commercial activity or
pursuit whatsoever which may in any way be in competition or conflict with
the products and business which comprise the business of PC Dynamics and
BUYER as of the Closing Date.
<PAGE>
(g) Additional Covenants. BUYER shall not, without the Consent of PC
Dynamics:
(i) merge with or into or consolidate with any other entity, or
sell, lease or otherwise dispose of substantially all of its assets;
(ii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction; or
(iii) become subject to any agreement or instrument, which by its
terms would (under any circumstances) restrict BUYER' rights to perform any
of its obligations to PC Dynamics pursuant to the terms of this Note.
5. Events of Default. (a) The occurrence of any one or more of the
following events ("Events of Default") shall in respect of this Note, at the
option of PC Dynamics, and without regard to any standstill agreement or
other prohibition relating to any of the following events, constitute a
default under this Note:
(i) Default in the payment of interest on or principal on this Note
when the same shall become due and payable by lapse of time, declaration or
otherwise;
(ii) Default in the observance or performance of any of the other
covenants or provisions of any of the Transaction Documents or default in
the observance or performance of any other provisions of this Note not
involving the payment of money which is not remedied within ten (10) days
after notice thereof to BUYER is given by PC Dynamics;
(iii) If BUYER becomes insolvent or bankrupt or admits in writing
its inability to pay its debts as they mature or makes an assignment for the
benefit of creditors, or if BUYER applies for or consents to the appointment
of a trustee or receiver for itself or for a major part of its properties or
assets, or shall voluntarily file a petition seeking reorganization or other
protection under the Federal bankruptcy laws;
(iv) If a trustee or receiver is appointed for BUYER or for the
major part of any of its properties or assets and the order of such
appointment is nor discharged, vacated or stayed within thirty (30) days
after such appointment;
(v) If BUYER shall be adjudicated a bankrupt or a decree or order
approving as properly flied a petition or answer asking reorganization of
BUYER under the Federal bankruptcy laws, as now in effect or hereafter
amended, or under the laws of any state, shall be entered, and any such
decree or judgment or order shall not have been vacated or set aside within
thirty (30) days from the date of the entry or granting thereof;
(vi) the existing shareholders of PIC shall fail to own at least 51%
of the voting and ownership interests in PIC or BUYER shall fail to be a
wholly-owned subsidiary of PIC; or
<PAGE>
(vii) If the obligation of any guarantor of this Note is limited or
terminated by operation of law or by the guarantor, or any such guarantor
becomes the subject of an insolvency proceeding under Federal bankruptcy
laws or under any other bankruptcy or insolvency law.
(b) Rights and Remedies Upon Default.
(i) When any Event of Default described above in this Section 5 has
occurred, BUYER agrees to give notice within two (2) days of such default to
PC Dynamics, such notice to be in writing and sent by registered or
certified mail or by telecopier.
(ii) When any Event of Default described above in Section 5 has
happened and is continuing uncured, (A) PC Dynamics may, by notice in
writing to BUYER, declare the principal of and accrued interest on this Note
to be to be immediately due and payable; and thereupon all principal and
interest shall become immediately due and payable, without further
presentment, protest, demand or notice or other legal process of any kind;
and (B) PC Dynamics may take any action or proceeding at law or in equity
which it deems advisable to collect and enforce payment of all amounts then
due upon this Note whether by reason of maturity or of such amounts or
acceleration.
6. Assignment: Amendment: Waiver. This Note may not be assigned (by
operation of law or otherwise) by BUYER. This Note may only be amended in
writing duly executed by the parties hereto. No failure or delay on the
part of the holder of this Note or to exercise any power or right under this
Note shall operate as a waiver of such power or right or preclude other or
further exercise thereof or the exercise of any other power or right. No
waiver of any condition or performance will operate as a waiver of any
subsequent condition or obligation. BUYER hereby waives diligence,
presentment, demand for payment, notice of dishonor or acceleration, protest
and notice of protest, and any and all other notices or demands in
connection with delivery, acceptance, performance, default or enforcement of
this Note.
7. Notices. All notices or demands by any party relating to this Note
shall in writing in accordance with Section 9.8 of the Agreement.
8. Severability. If there is any provision of this Note or the
application thereof to any party or circumstances which shall be prohibited
by, or invalid under, such applicable law, such provision shall be
ineffective to the minimal extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
the Note, or the applications of such provisions to other parties or
circumstances.
9. Governing Law: Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of Illinois. Any legal
action or proceeding with respect to this Note shall be brought exclusively
in the courts of the State of Illinois or of the United States of America
within Cook County, Illinois, and by execution and delivery of this Note,
BUYER, hereto hereby covenants, for itself and in respect of its property,
to the jurisdiction of the aforesaid courts. BUYER hereby irrevocably
waives any objection, including without limitation, any objections to the
laying of venue or based on the grounds of forum non conveniens, which it
way now or hereafter have to the bringing of any action or proceeding in
such jurisdiction in respect of this Note or any document related hereto.
<PAGE>
PC DYNAMICS OF TEXAS, INC.
/s/
By: _____________________________________
Title:
____________________________________
Address:
____________________________________
Exhibit 10.13
Poly Circuits 215 Park St. Bensenville, IL 60106
Phone: 630-860-3560
----------------------------------------------------------------------------
Date: May 27, 1999 Fax Number: 214-503-8607
To: Mr. Ron Allen Company:Performance Interconnect
From: Joseph A. Turek
Subject: Sale of Frisco building to Brinkman
Dear Ron,
I have discussed your proposal with the M-Wave Directors and they have
given their approval to move forward. I have outlined your proposal as we
understand it. If there is an error please get back to me ASAP.
1. The current Note of $293,025 which is to be paid out monthly beginning
May 1, 1999 at a rate of $50K per month as per the original agreement.
2. The Royalty agreement would convert to a monthly payment $25K per month
until the balance of $5OOK is paid.
3. We would roll the inventory note of $773,479 and 50%. of the sales
commission into a 30 month note with interest on this note at Prime plus 1%.
4. We would credit you $15K for your investment in documents to purchase
the property. M-Wave would gain ownership of those documents which will be
delivered to M-Wave upon the acceptance of this agreement.
5. PC Dynamics of Texas would immediately give notice that they would not
be purchasing the Frisco, TX facility and allow M-Wave to sell the building
to a third party, provided all the provision of the lease and current
agreements with M-Wave are met.
If you are in agreement with the above, please put this in a legal form for
me to sign off on. Or if you wish, I can have Sonnenschein draft up a
letter.
/s/
Best Regards
Joseph A. Turek
Exhibit 21
SUBSIDIARIES OF THE COMPANY
Espo's Inc. has three subsidiaries, as follows:
State of Names under which the
Name Incorporation subsidiary does business
------------------------------ ------------- -----------------------------
Performance Interconnect Corp. Texas Performance Interconnect Corp.
PC Dynamics Inc Texas PC Dynamics Inc.
Varga Investments, Inc. Texas Varga Investments, Inc.
As of the date of the most recent audit PC Dynamics Inc. and Varga
Investments, Inc., were subsidiaries of Performance Interconnect Corp., but
as of the date of this filing they are direct subsidiaries of Espo's Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE ESPO'S INC. NOVEMBER 30, 1999 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> (24)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 549
<TOTAL-REVENUES> 549
<CGS> 333
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 193
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 12
<INCOME-TAX> 3
<INCOME-CONTINUING> 9
<DISCONTINUED> (203)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (194)
<EPS-BASIC> (.08)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE PERFORMANCE INTERCONNECT CORP.
NOVEMBER 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 0
<SECURITIES> 450
<RECEIVABLES> 857
<ALLOWANCES> 23
<INVENTORY> 896
<CURRENT-ASSETS> 2,216
<PP&E> 3,892
<DEPRECIATION> 679
<TOTAL-ASSETS> 6,008
<CURRENT-LIABILITIES> 4,080
<BONDS> 0
0
3,320
<COMMON> 49
<OTHER-SE> (3,921)
<TOTAL-LIABILITY-AND-EQUITY> 6,008
<SALES> 3,867
<TOTAL-REVENUES> 3,867
<CGS> 4,516
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253
<INCOME-PRETAX> (1,419)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,419)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,419)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
