NOTE AND SECURITY AGREEMENT
$2,504,695
September 25, 2000
FOR VALUE RECEIVED, the undersigned ("BORROWER") hereby promises to pay
to the order of Gateway Companies, Inc., a Delaware corporation ("LENDER"), at
its address of 4545 Towne Centre Court, San Diego, California 92121, or at such
other place or to such other party as Lender may from time to time designate in
writing, the principal sum of Two Million Five Hundred Four Thousand Six Hundred
Ninety-Five Dollars ($2,504,695), in lawful money of the United States of
America, together with interest on the principal amount outstanding from time to
time at the rate set forth herein until fully paid. The indebtedness evidenced
hereby shall be payable as set forth below.
Section 1. MATURITY DATE. This Note, including the principal balance
and all accrued but unpaid interest hereon, shall be due and payable in full on
September 24th, 2003 (the "MATURITY DATE").
Section 2. INTEREST. The principal amount of this Note from time to
time outstanding shall bear interest at the rate of 15 1/2% per annum. Interest
on this Note shall accrue monthly. Should Borrower fail to pay interest
hereunder as set forth herein, the amount unpaid shall be added to the unpaid
principal hereof and bear interest at the rate set forth above.
Section 3. DEFINITIONS. For the purposes of this Note, the following
terms shall have the following definitions:
(a) "CUSTOMER" means a person which has purchased any of the
Products.
(b) "CUSTOMER PAYMENTS" means payments (electronic or
otherwise) by Customers in respect of the Products, whether such payments
constitute principal or interest under the relevant Financing Agreement.
(c) "FINANCING AGREEMENT" means an agreement between Borrower
and a Customer, in form and substance reasonably satisfactory to Lender,
pursuant to which such Customer agrees to pay Borrower for Products. Any
document executed or delivered by or on behalf of a Customer in connection with
any such agreement, including any direction to such Customer's employer to
deduct payments due from such Customer's wages, shall be included in the term
"Financing Agreement."
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(d) "LOCKBOX ACCOUNT" means one or more bank accounts specified
by Lender to Borrower from time to time into which Customer Payments are to be
deposited.
(e) "PRODUCTS" means all goods shipped to Borrower by or on
behalf of Gateway and its affiliates, including all Gateway personal computers
and related peripheral products
Section 4. PAYMENTS UNDER NOTE. Borrower shall ensure that all
Customer Payments be directed to the Lockbox. All Customer Payments received by
Lender during a month shall, on the tenth business day of the following month,
be credited first to interest on, and then to principal of, this Note. If, by
the Maturity Date, Customer Payments are insufficient to pay either all interest
or the full principal balance of this Note, Borrower shall pay such deficit in
full on the Maturity Date. Borrower shall at all times be permitted to prepay
any part of the principal of this Note.
Section 5. SECURITY INTEREST. To secure all of its obligations
hereunder, Borrower hereby grants to Lender a security interest in all of its
right, title and interest in the Products, the Financing Agreements and all
proceeds of the foregoing (collectively, the "COLLATERAL"). Borrower shall
deliver to Lender all Financing Agreements executed or delivered from time to
time by or on behalf of Customers. Until shipped to Customers, all Products
shall be maintained by Borrower in a bonded warehouse and clearly marked as
being subject to Lender's security interest.
Section 6. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the
following representations and warranties to Lender:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted.
(b) The execution, delivery and performance of this Note by Borrower
have been duly authorized by Borrower. This Note constitutes the legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
with its terms. Borrower has the absolute and unrestricted right, power,
authority and capacity to execute and deliver this Note and to perform its
obligations under this Note.
(c) Neither the execution and delivery of this Note by Borrower nor the
consummation or performance of any of the transactions contemplated hereby will
give any person the right to prevent, delay or otherwise interfere with any of
such transactions pursuant to (i) any provision of Borrower's Certificate or
Articles of Incorporation or by-laws; (ii) any resolutions adopted by the board
of directors or the stockholders of Borrower; (iii) any applicable provision of
statutory law or governmental regulation applicable to this Note; or (iv) any
contract, agreement or other instrument to which Borrower is a party or by which
Borrower may be bound.
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(d) This Note creates and grants to Lender a legal, valid and perfected
first priority security interest in the Collateral. The Collateral is not
subject to any other security interest, lien or encumbrance.
(e) Each Financing Agreement complies in all material respects with all
applicable requirements of law.
Section 7. DEFAULT. If any default occurs under this Note, then, or at
any time thereafter, the entire unpaid principal balance of and accrued but
unpaid interest owing on this Note shall, at the option of Lender and after
written notice thereof to Borrower, become immediately due and payable. This
option may be exercised at any time after any such event, and the acceptance of
one or more installments thereafter shall not constitute a waiver of Lender's
option. Lender's failure to exercise this option with regard to any default
shall not be construed as a waiver of the provisions hereof as regards any
subsequent default. Borrower shall be in default under this Note if:
(a) Borrower shall fail to make any payment under this Note
when due; or
(b) Any representation or warranty made by Borrower to Lender
in this Note shall be false on the date made or Borrower shall default in the
performance of or compliance with any term or covenant contained in this Note;
or
(c) Borrower shall admit in writing its inability to pay its
debts as they mature, or institute (by petition, application, answer, consent or
otherwise) a bankruptcy, insolvency or similar proceeding with respect to itself
under the laws of any jurisdiction (an "INSOLVENCY PROCEEDING") or any
Insolvency Proceeding shall be instituted by petition, application or otherwise
against Borrower and remain undismissed for a period of 30 days or an order for
relief with respect thereto shall be granted.
In addition, upon the occurrence of any such default, Lender may exercise all of
the rights of a secured party under the Uniform Commercial Code of the relevant
jurisdiction with respect to the Collateral.
Section 8. RESTRICTIONS ON DISPOSITION OF PORTFOLIO. If Borrower
directly, indirectly, or involuntarily agrees to or suffers to exist any lien or
encumbrance against all or any portion of the Collateral, then, or at any time
thereafter, Lender, at its option, may declare the entire indebtedness evidenced
hereby immediately due and payable.
Section 9. WAIVERS. Borrower waives presentment for payment, demand
and protest and notice of protest, and of dishonor and non-payment of this Note,
and expressly consents to any extension of the time of payment hereof or of any
installment hereof, to the release of any party liable for this obligation and
any such extension or release may be made without notice to any of such parties
and without in any way affecting or discharging this liability.
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Section 10. ATTORNEY'S FEES. If any default occurs hereunder, Borrower
further promises to pay reasonable attorney's fees and costs and expenses
incurred by Lender in connection with any such default or in any action or other
proceeding brought to enforce any of the provision of this Note.
Section 11. EXEMPTION FROM USURY; USURY SAVINGS CLAUSE. Borrower
acknowledges that the loan represented by this Note represents the result of
good faith bargaining by Borrower and Lender. If this Agreement is found not to
be exempt from the maximum interest rate limitations set forth in any applicable
usury law, all agreements between Borrower and Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
deferment in accordance with this Note or any agreement, or advancement of the
loan proceeds, acceleration of maturity of the loan, or otherwise, shall the
amount paid or agreed to be paid to Lender for the loan, use, forbearance or
detention of the money to be loaned hereunder exceed the interest rate limit
under applicable law. If, from any circumstance whatsoever, fulfillment of any
provision hereof or of any other agreement between the parties, at the time
performance of such provision shall be due, shall result in the interest charged
hereunder exceeding the limit therefor under applicable law, then IPSO FACTO the
interest to be paid shall be reduced to the allowable limit. If Lender shall
receive an amount which shall result in the interest charged hereunder exceeding
the limit therefor under applicable law, all sums in excess of such limit
collectible as interest for the period in question shall, without further
agreement or notice between or by any party hereto, be applied upon the
principal of this Note immediately upon the receipt of such monies by Lender
with the same force and effect as though Borrower had specifically designed such
sums to be so applied to principal. This provision shall never be superseded or
waived and shall control every other provision of all agreements between
Borrower and Lender.
Section 12. GOVERNING LAW. This Note shall be governed by, is to be
performed in and shall be construed in accordance with the laws of the State of
New York..
Section 13. BINDING EFFECT. This Note shall be binding upon Borrower
and shall inure to the benefit of the holder of this Note, and its successors
and assigns. Lender may assign or transfer this Note, or any part hereof, to any
assignee or transferee and such assignee or transferee shall thereupon become
vested with all of the powers and rights given to Lender in respect hereof.
IN WITNESS WHEREOF, this Note and Security Agreement has been executed
and delivered as of the date first hereinabove written.
EINSTEIN COMPUTER CORPORATION
By: /s/ MICHAEL SAMACH
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Name: Michael Samach
Title: Chief Financial Officer
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