<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 7)
CARDIODYNAMICS INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
COMMON STOCK
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
141597104
- --------------------------------------------------------------------------------
(CUSIP NUMBER)
CARDIODYNAMICS HOLDINGS, LLC
C/O STEVE DECHANT
DEL MAR COUNTRY CLUB
P.O. BOX 9660
RANCHO SANTA FE, CA 92067
(619) 759-5990
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
AUGUST 21, 1998
- --------------------------------------------------------------------------------
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
(Continued on following pages)
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 141597104 Page 2 of 16 Pages
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CARDIODYNAMICS HOLDINGS, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
CALIFORNIA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
4,124,490
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 102,243
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,124,490
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
12.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 2 OF 16
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 141597104 Page 3 of 16 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ALLEN PAULSON
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
13,736,734
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 4,124,490
OWNED BY ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 13,838,977
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
17,861,224
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
55.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 3 OF 16
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 141597104 Page 4 of 16 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JAMES GILSTRAP
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
3,838,654
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 4,124,490
OWNED BY ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 2,823,654
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,963,144
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
24.7%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 4 OF 16
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 141597104 Page 5 of 16 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NICHOLAS DIACO
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
668,306
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 4,124,490
OWNED BY ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 668,306
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,792,796
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
14.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 5 OF 16
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 141597104 Page 6 of 16 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JOSEPH DIACO
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
405,306
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 4,124,490
OWNED BY ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 405,306
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,529,796
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
14.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 6 OF 16
<PAGE> 7
ITEM 1. SECURITY AND ISSUER
The class of securities to which this Statement relates is the common
stock (the "Common Stock") of CardioDynamics International Corporation, a
California corporation ("Issuer"), whose address is 6175 Nancy Ridge Drive,
Suite 300, San Diego, California 92121.
ITEM 2. IDENTITY AND BACKGROUND
Pursuant to Rule 13d-1(f) promulgated under the Securities Exchange Act
of 1934, as amended (the "Act"), the undersigned hereby jointly file this
amended statement on Schedule 13D ("Statement") on behalf of CardioDynamics
Holdings, LLC ("LLC"), a California limited liability company, Allen Paulson, a
Member of LLC, James Gilstrap, a Member of LLC, Nicholas Diaco, a Member of LLC,
and Joseph Diaco, a Member of LLC. The foregoing persons are sometimes
hereinafter referred to collectively as the "Reporting Persons." The Reporting
Persons are making this single, joint filing to comply with the reporting
requirements with respect to Common Stock of the Issuer that each beneficially
owns. With respect to Mr. Paulson's 13,736,743 privately beneficially-owned
shares of Common Stock, this is also a group filing (Paulson and LLC).
A. CardioDynamics Holdings, LLC
(a) CardioDynamics Holdings, LLC.
(b) LLC's business address is c/o Del Mar Country Club, P.O. Box
9660, Rancho Santa Fe, California 92067.
(c) LLC's business is to acquire and own the Common Stock and other
securities of Issuer as reported in this Statement.
(d)-(e) LLC has not, during the last five years, been convicted in any
criminal proceeding, excluding traffic violations or similar misdemeanors, nor
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which it was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) LLC is a limited liability company formed under the laws of
California.
B. Allen Paulson--Member of LLC
(a) Allen Paulson.
(b) Residence address: 6001 Clubhouse Drive, P. O. Box 9660, Rancho
Santa Fe, CA 92067.
(c) Present principal occupation: private investor.
PAGE 7 OF 16
<PAGE> 8
(d)-(e) Allen Paulson has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or similar
misdemeanors, nor been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) Citizenship: USA.
C. James Gilstrap --Member of LLC
(d) James Gilstrap.
(e) Residence address: 5067 Shore Drive, Carlsbad, CA 92008.
(f) Present principal occupation: private investor.
(d)-(e) James Gilstrap has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or similar
misdemeanors, nor been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) Citizenship: USA.
D. Nicholas Diaco--Member of LLC
(g) Nicholas Diaco.
(h) Business address: 1301 20th St., Suite 400, Santa Monica, CA
90404.
(i) Present principal occupation: Physician; Cardiology Consultants of
Santa Monica, 1301 20th St., Suite 400, Santa Monica, CA 90404.
(d)-(e)Nicholas Diaco has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or similar
misdemeanors, nor been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) Citizenship: USA.
PAGE 8 OF 16
<PAGE> 9
E. Joseph Diaco--Member of LLC
(j) Joseph Diaco.
(k) Business address: 4700 N. Habana, Suite 403, Tampa, FL 33614.
(l) Present principal occupation: Physician.
(d)-(e) Joseph Diaco has not, during the last five years, been convicted
in any criminal proceeding, excluding traffic violations or similar
misdemeanors, nor been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) Citizenship: USA.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
LLC used $25,408 contributed by its four Members (from their personal
funds) to purchase the securities set forth in the first paragraph of Item 5(a)
of this Statement. This $25,408 figure is net of $2,849,592 (from their personal
funds) attributable to securities which were acquired by LLC and then on
September 9, 1997 distributed to the four Members.
Allen Paulson used $1,156,500 of his personal funds to directly purchase
4,626,000 shares of outstanding Common Stock, of which he subsequently sold
3,015,000 shares for a total of $757,500. Approximately $2,200,000 of his
personal funds, which is less than the larger amount he contributed to LLC, is
attributable to the 12,088,734 shares of Common Stock distributed by LLC to him
on September 9, 1997. Any exercises of outstanding stock options would be from
his personal funds.
James Gilstrap used $219,000 of his personal funds to directly purchase
876,000 of the shares of outstanding Common Stock. Also, he earlier received
150,000 shares of Common Stock from Issuer as a fee for services in connection
with LLC's February 1995 investment in Issuer. Approximately $500,000 of his
personal funds, which is less than the larger amount he contributed to LLC, is
attributable to the 2,780,654 shares of Common Stock distributed by LLC to him
on September 9, 1997. In December 1997, he gifted 5,000 shares of Common Stock
to his daughters and contributed 1,015,000 shares of Common Stock to the Jim and
Sue Gilstrap Family Limited Partnership. Any exercises of outstanding stock
options would be from his personal funds.
Nicholas Diaco used $1,500 of his personal funds to directly purchase
6,000 of the shares of outstanding Common Stock. Also, he earlier received
150,000 shares of Common Stock from Issuer as a fee for services in connection
with LLC's February 1995 investment in Issuer. Approximately $75,000 of his
personal funds, which is less than the larger amount he contributed to LLC, is
attributable to the 405,306 shares of Common Stock distributed by LLC to him on
September 9, 1997. On June 10, 1998, he gifted 30,000 shares of Common Stock to
friends. Any exercises of outstanding stock options would be from his personal
funds.
PAGE 9 OF 16
<PAGE> 10
Approximately $75,000 of Joseph Diaco's personal funds, which is less
than the larger amount he contributed to LLC, is attributable to the 405,306
shares of Common Stock distributed by LLC to him on September 9, 1997.
ITEM 4. PURPOSE OF TRANSACTION
LLC acquired control of Issuer through election of a majority of
Issuer's Board of Directors on May 15, 1995, and it and its Members retain that
control. The individual Reporting Persons' acquisitions of securities have been
for investment purposes. The September 9, 1997 distribution of Issuer shares by
LLC to its Members may be deemed to have placed control of Issuer in Allen
Paulson. The purpose of the distribution was to give the Members more
flexibility in utilizing and controlling the Issuer shares which they formerly
indirectly owned through LLC (e.g., Mr. Paulson's pledge of shares; see Item
6(l).
(a) Regarding LLC: See Items 6(d), 6(h), and 6(i), which are
incorporated herein by reference. Regarding James Gilstrap: See Item 5(c)(1),
which is incorporated herein by reference. Issuer is likely to acquire further
third-party equity capitalization.
On July 24, 1998, Issuer amended its Articles of Incorporation to
authorize 18,000,000 shares of "blank check" preferred stock. On August 21,
1998, Issuer filed a Certificate of Determination of Preferences of Series A
Convertible Preferred Stock, creating 3,000 shares of Series A Convertible
Preferred Stock which were then sold (together with 123,000 Common Stock
warrants) for $3,000,000 to persons not affiliated with the Reporting Persons.
The Series A Convertible Preferred Stock will be convertible, beginning on
January 19, 1999, at whichever of a Fixed Conversion Price (currently $2.70) and
a Floating Conversion Price is more favorable to the holder. In addition, the
holders received an option, beginning in February 1999 and subject to certain
conditions, to purchase at $1,000 per share up to 3,000 shares of Series B
Convertible Preferred Stock, which would be of like tenor as the Series A
Convertible Preferred Stock, except that its Fixed Conversion Price would be
115% of the average of the closing sale prices of Issuer Common Stock for the 10
trading days immediately preceding issuance of the Series B Convertible
Preferred Stock.
(b) None.
(c) None.
(d) None (see original Statement).
(e) See Item 4(a).
(f) None.
(g) See Item 4(a).
(h) None.
(i) None.
PAGE 10 OF 16
<PAGE> 11
(j) None.
The Members of LLC have no such plans or proposals, or purposes, apart
from LLC's or as stated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) LLC beneficially owns 2,243 shares of Common Stock outright, and
beneficially owns (by virtue of its sole voting power) an additional 4,022,247
shares of Common Stock owned by others which LLC holds irrevocable proxies to
vote. This is reduced by 500,000 from the number previously reported because LLC
has been informed that Dr. L.S. Smith and his affiliate Dallas Gold & Silver
Exchange, Inc. have, to date, sold to bona fide purchasers without notice
(thereby freeing them of the proxy restrictions) approximately 500,000 shares
which had been subject to a proxy in favor of LLC. LLC also beneficially owns,
by virtue of its right to acquire them from Issuer, 100,000 shares of Common
Stock issuable upon conversion of the Amended and Restated Secured Convertible
Promissory Note. Together, all this represents 12.8% of the Common Stock under
the Rule 13d-3(d)(1) calculation (with 32,113,743 shares outstanding at August
21, 1998).
Other than through LLC, the Members have no such beneficial ownership of
Common Stock except for 13,736,734 shares beneficially owned by Mr. Paulson,
3,838,654 shares beneficially owned by Mr. Gilstrap, 668,306 shares beneficially
owned by Mr. N. Diaco and 405,306 shares beneficially owned by Mr. J. Diaco.
Together, LLC and its Members beneficially own 70.2% of the Issuer's Common
Stock.
The total number of shares of Issuer Common Stock beneficially owned by
each respective Reporting Person, followed in parentheses by the percentage of
the class and the number of such shares--included in the total--which the
Reporting Person has the right to acquire, is:
<TABLE>
<S> <C> <C>
LLC: 4,124,490 (12.8%,100,000)
Allen Pauson: 17,861,224 (55.4%; 37,000 plus LLC's 100,000)
James Gilstrap: 7,963,144 (24.7%; 37,000 plus LLC's 100,000)
Nicholas Diaco: 4,792,796 (14.8%; 137,000 plus LLC's 100,000)
Joseph Diaco: 4,529,796 (14.1%; LLC's 100,000)
</TABLE>
Together, LLC and Mr. Paulson beneficially own 55.4% of the Issuer's
Common Stock.
(b) The Reporting Persons' voting and dispositive power is set forth
in the cover pages under items 7-10 on pages 2-6 of this Statement. Each of Mr.
Paulson, Mr. Gilstrap, Mr. N. Diaco and Mr. J. Diaco has sole voting power and
sole dispositive power for his respective Issuer shares. In addition, each
Member of LLC has given Mr. Paulson a proxy to vote his own respective LLC
interests. Mr. Paulson has a sufficient interest in the LLC, even without the
proxies, to control the disposition of LLC's Issuer shares.
PAGE 11 OF 16
<PAGE> 12
(c) No other transactions in the Common Stock were effected by LLC,
Mr. Paulson or any of the other Members since the filing of Amendment No. 6 to
Schedule 13D, except for the following:
(1) On December 9, 1997, James Gilstrap transferred
1,015,000 shares of Issuer Common Stock to the Jim and Sue Gilstrap Family
Limited Partnership. As Mr. Gilstrap and his wife are the sole general partners
of the partnership, and he is the managing general partner of the partnership,
he retains sole voting and dispositive power. However, the economic benefit of
95.0495% of the partnership, in the form of limited partner interests, was
donated later in December 1997 to the Jim and Sue Gilstrap Family Foundation,
which is a supporting organization for Scripps Research Institute. Accordingly,
Mr. Gilstrap disclaims any pecuniary interest in the 964,752 shares of Issuer
Common Stock (95.0495% of the partnership's 1,015,000 shares) corresponding to
the foundation's 95.0495% limited partner interest in the partnership.
(2) On December 9, 1997, James Gilstrap gifted a total of
5,000 shares of Issuer Common Stock to his three adult daughters.
(3) Pursuant to Issuer's 1995 Stock Option/Stock Issuance
Plan, each of Messrs. Paulson, Gilstrap and N. Diaco has, on the last day of
each month beginning August 1995, been automatically granted options to purchase
1,000 shares of Issuer Common Stock, with an exercise price equal to the fair
market value of such stock as of each such date, in respect of his service as a
non-employee director. Such automatic option grants were not considered to
constitute beneficial ownership of the underlying shares until June 12, 1996,
when Issuer's shareholders voted to approve such Plan. Through August 31, 1998,
each of Messrs. Paulson, Gilstrap and N. Diaco has received automatic option
grants for a per-person total of 37,000 shares. Beginning in October 1997, new
automatic option grants to 10% shareholders (i.e., Mr. Paulson and Mr. Gilstrap)
have had an exercise price equal to 110% of the fair market value of the stock
as of the grant date.
(4) On June 10, 1998, Nicholas Diaco gifted 30,000 shares of
Issuer Common Stock to Paul and Mary Moher.
(5) As of August 15, 1998, LLC and Issuer amended the
Secured Convertible Promissory Note held by LLC to eliminate provisions which
would, as of specified points in time, increase the conversion price of the
Common Stock underlying the Note, and which would thereby have reduced the
number of shares issued to LLC upon any conversion of the Note after such
time(s); and also to eliminate provisions which granted LLC a "a matching right"
option to purchase, at prices ranging from $0.25 to $0.36 per share, the same
number of shares of Common Stock as the Issuer issued (at any price) to any
other person. LLC never exercised this "matching right."
(d) No other person is known to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the securities.
(e) Not applicable.
PAGE 12 OF 16
<PAGE> 13
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
(a) The relationship among the Members of LLC is governed by the
Operating Agreement of LLC, as amended from time to time.
(b) Purchase Agreement. See Item 7(c).
(c) Amendment of Purchase Agreement. See Item 7(m).
(d) Sixth Amended and Restated Secured Convertible Promissory Note
(convertible into Common Stock $0.25 per share).
(e) Agreement and Irrevocable Proxy (five-year proxy to LLC from
DaVinci Scientific Corporation -- 3,902,956 shares of Common Stock; includes an
agreement to vote such shares so as to cause the election of one nominee of
DaVinci Scientific Corporation as a director of Issuer). See Item 7(e). Now
applicable to those shares in the hands of various transferees.
(f) Agreement and Irrevocable Proxy (five-year proxy to LLC from Dr.
L.S. Smith -- 96,291 shares of Common Stock currently outstanding and 120,365
shares of Common Stock issuable upon exercise of warrants). See Item 5(a). See
Item 7(f).
(g) Agreement and Irrevocable Proxy (five-year proxy to LLC from
Dallas Gold & Silver Exchange, Inc. -- 523,000 shares of Common Stock). See Item
5(a). See Item 7(g).
(h) Agreement of Right of First Refusal (Dr. L.S. Smith in favor of
LLC for three years). See Item 7(h).
(i) Agreement of Right of First Refusal (Dallas Gold & Silver
Exchange, Inc. in favor of LLC for three years). See Item 7(i).
(j) Investment Agreement. See Item 7(l).
(k) 1995 Stock Option/Stock Issuance Plan of Issuer, as amended
through October 8, 1997 (entitling each non-employee director of Issuer to
automatic grants of 1,000 stock options on the last day of each month of service
beginning August 1995). Messrs. Paulson, Gilstrap and N. Diaco are non-employee
directors of Issuer. See Item 7(r).
(l) Pledge Agreement (Allen Paulson, in favor of Madeleine,
L.L.C.--13,310,734 shares of Common Stock). See Item 7(s).
(m) Limited Partnership Agreement of Jim and Sue Gilstrap Family
Limited Partnership. See Item 7(t).
(n) On March 11, 1998, Mr. Paulson and Mr. Gilstrap entered into a
Private Line of Credit Agreement with Issuer pursuant to which they agreed to,
upon requests by Issuer, lend to Issuer up to $3,000,000. All of such loans
would be funded 85% by Mr. Paulson and 15% by
PAGE 13 OF 16
<PAGE> 14
Mr. Gilstrap, would bear interest at 10% per annum, and would mature on
September 30, 1999. See Items 7(u), 7(v) and 7(w).
(o) On May 14, 1998, Mr. Paulson and Mr. Gilstrap guaranteed the
repayment of loans of up to $4,000,000 from Imperial Bank to Issuer. See Items
7(x) and 7(y).
On August 19, 1998, upon Issuer's request, Mr. Paulson and Mr.
Gilstrap loaned Issuer $1,000,000 under the Private Line of Credit Agreement.
This was used to pay down a portion of the guaranteed Imperial Bank loan which
was thereafter capped at a principal balance of $2,000,000.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(a) Letter dated January 6, 1995 from Messrs. Paulson, Gilstrap and
Walters to Messrs. Tate and Schmeltzer (previously filed).
(b) Letter dated February 6, 1995 from Arter & Hadden to Messrs.
Paulson, Gilstrap and Walters (previously filed).
(c) Purchase Agreement dated February 7, 1995 between LLC and Issuer
(previously filed).
(d) Secured Convertible Promissory Note dated February 7, 1995 from
Issuer to LLC (previously filed).
(e) Agreement and Irrevocable Proxy dated February 2, 1995 between
LLC and DaVinci Scientific Corporation (previously filed).
(f) Agreement and Irrevocable Proxy dated February 7, 1995 between
LLC and Dr. L.S. Smith (previously filed).
(g) Agreement and Irrevocable Proxy dated February 7, 1995 between
LLC and Dallas Gold & Silver Exchange, Inc. (previously filed).
(h) Agreement of Right of First Refusal dated February 7, 1995
between LLC and Dr. L.S. Smith (previously filed).
(i) Agreement of Right of First Refusal dated February 7, 1995
between LLC and Dallas Gold & Silver Exchange, Inc. (previously filed).
(j) First Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended March 30, 1995 (previously filed).
(k) Second Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended May 19, 1995 (previously filed).
(l) Investment Agreement, as amended, dated as of April 12, 1995
between Issuer and LLC (previously filed).
PAGE 14 OF 16
<PAGE> 15
(m) Amendment of Purchase Agreement, dated March 31, 1996 between
LLC and Issuer (previously filed).
(n) Third Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended March 31, 1996 (previously filed).
(o) Fourth Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended as of June 30, 1996 (previously filed).
(p) Fifth Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended as of February 1, 1997 (previously filed).
(q) Sixth Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended as of August 15, 1998.
(r) 1995 Stock Option/Stock Issuance Plan of Issuer, as amended
through October 8, 1997 (previously filed)
(s) Pledge Agreement between Allen Paulson and Madeleine, L.L.C.,
dated September 18, 1997 (previously filed)
(t) Agreement of Limited Partnership of Jim and Sue Gilstrap Family
Limited Partnership.
(u) Private Line of Credit Agreement, dated March 11, 1998, among
Allen Paulson, James Gilstrap and Issuer. (Incorporated by reference to Issuer's
Form 10-QSB for the quarter ended May 31, 1998.)
(v) Optional Advance Note dated March 11, 1998 (Paulson).
(w) Optional Advance Note dated March 11, 1998 (Gilstrap).
(x) Commercial Guaranty dated May 14, 1998 (Paulson).
(y) Commercial Guaranty dated May 14, 1998 (Gilstrap).
(yy) Certificate of Amendment of Issuer's Restated Articles of
Incorporation, as filed July 24, 1998. (Incorporated by reference to Issuer's
Form 8-K for an event of August 21, 1998, filed September 3, 1998.)
(yyy) Certificate of Determination of Preferences of Series A
Convertible Preferred Stock, as filed August 21, 1998. (Incorporated by
reference to Issuer's Form 8-K for an event of August 21, 1998, filed
September 3, 1998.)
(z) Agreement of Joint Filing, dated September 29, 1998 among LLC
and Messrs. A. Paulson, J. Gilstrap, N. Diaco and J. Diaco.
PAGE 15 OF 16
<PAGE> 16
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
September 29, 1998 CARDIODYNAMICS HOLDINGS, LLC
By: /s/ Allen Paulson
------------------------------------
Allen Paulson, Member
By: /s/ James Gilstrap
------------------------------------
James Gilstrap, Member
/s/ Allen Paulson
----------------------------------------
ALLEN PAULSON
/s/ James Gilstrap
----------------------------------------
JAMES GILSTRAP
/s/ Nicholas Diaco
----------------------------------------
NICHOLAS DIACO
/s/ Joseph Diaco
----------------------------------------
JOSEPH DIACO
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (see 18 U.S.C. 1001).
PAGE 16 OF 16
<PAGE> 17
EXHIBIT INDEX
7(q) Sixth Amended and Restated Secured Convertible Promissory Note
from Issuer to CardioDynamics Holdings, LLC, as amended as of August 15, 1998.
7(t) Agreement of Limited Partnership of Jim and Sue Gilstrap Family
Limited Partnership dated December 9, 1997.
7(v) Optional Advance Note dated March 11, 1998 (Paulson).
7(w) Optional Advance Note dated March 11, 1998 (Gilstrap).
7(x) Commercial Guaranty dated May 14, 1998 (Paulson).
7(y) Commercial Guaranty dated May 14, 1998 (Gilstrap).
7(z) Agreement of Joint Filing.
<PAGE> 1
EXHIBIT 7.q
SIXTH AMENDED AND RESTATED
SECURED CONVERTIBLE
PROMISSORY NOTE
$25,000.00 February 7, 1995, as
amended March 30, 1995,
May 19, 1995,
March 31, 1996
June 30, 1996,
February 1, 1997,
and August 15, 1998
FOR VALUE RECEIVED, CardioDynamics International Corporation, a
California corporation ("Maker"), 6175 Nancy Ridge Drive, Suite 300, San Diego,
California 92121, hereby promises to pay to the order of CardioDynamics
Holdings, LLC, a California limited liability company ("Lender"), 5067 Shore
Drive, Carlsbad, California 92008, TWENTY-FIVE THOUSAND DOLLARS ($25,000.00), at
such address of Lender, in lawful money of the United States together with
interest on the principal balance outstanding at the lesser of (a) seven and
one-half percent per annum, or (b) if less, the maximum rate permissible by
applicable law. Interest shall be calculated on the basis of a 360-day year for
the actual number of days elapsed, and shall be payable in arrears on each March
31, June 30, September 30 and December 31. The principal amount of and all
unpaid accrued interest under the Note shall become due and payable in full on
March 31, 2000. This Note is an amendment and restatement of a certain Secured
Convertible Promissory Note dated February 7, 1995 in the original principal
amount of $100,000.
1. Additional Provisions Relating to Debt Characteristics.
This Note may not be prepaid in full or in part.
This Note is secured by the collateral identified and described as
security therefor in that certain Security Agreement, dated as of February 7,
1995, by and between Maker and Lender and the collateral identified and
described as security therefor in that certain Patent Security Agreement, dated
as of February 7, 1995, by and between Maker and Lender (collectively, the
"Security Agreement").
Upon the happening of any of the following events, Lender may, at its
option, declare immediately due and payable the entire unpaid principal amount
of this Note, together with all interest thereon, plus any other amounts payable
at the time of such declaration pursuant to this Note. Such events are the
following: (1) failure to make any interest payment as it falls due, (2) Maker
shall admit in writing its inability to pay its debts as they become due, shall
make a general assignment for the benefit of creditors or shall file any
petition or action for relief under any bankruptcy, reorganization, insolvency
or moratorium law, or any other law or laws for the relief of, or relating to,
debtors; or (3) an involuntary petition shall be filed against Maker under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors unless such petition shall be
dismissed or vacated within sixty
EXHIBIT 7.q - 1
<PAGE> 2
(60) days of the date thereof. Lender shall further be entitled to the remedies
provided in the event of default provided in the Security Agreement.
Maker hereby waives diligence, presentment, demand, protest or other
notice of any kind.
2. Conversion.
2.1 Conversion Privilege. Lender has the right, at Lender's
option, at any time after February 6, 1996 and prior to payment in full of the
principal balance of this Note, to convert this Note, in accordance with the
provisions hereof, in whole or in part, into fully paid and nonassessable shares
of Common Stock of Maker. The number of shares of Common Stock into which this
Note may be converted shall be determined by dividing the aggregate principal
amount together with all accrued interest to the date of conversion by the
Conversion Price (as defined below) in effect at the time of such conversion.
The initial Conversion Price shall be equal to $0.50. On March 31, 1996, the
Conversion Price shall decrease to $0.25, subject to further possible adjustment
under subsection 2.2 hereof.
Before Lender shall be entitled to convert this Note into shares of
Common Stock, it shall surrender this Note at the office of Maker and shall give
written notice by mail, postage prepaid, to Maker at its principal corporate
office, of the election to convert the same, and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. Maker shall, as soon as practicable thereafter, issue and deliver at
such office to the holder of this Note a certificate or certificates for the
number of shares of Common Stock to which the holder of this Note shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of this
Note, and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date.
Upon the conversion of this Note, Lender shall surrender this Note, duly
endorsed, at the principal office of Maker. At its expense, Maker shall, as soon
as practicable thereafter, issue and deliver to such Lender at such principal
office a certificate or certificates for the number of shares of such Common
Stock to which the Lender shall be entitled upon such conversion (bearing such
legends as may be required by applicable state and federal securities laws in
the opinion of counsel to Maker), together with any other securities and
property to which Lender is entitled upon such conversion under the terms of
this Note. If less than the entire Note is converted, Maker shall issue to
Lender a new Note, of like tenor, for the remaining principal amount.
2.2 Conversion Price Adjustments. In the event Maker should at
any time or from time to time after the date of issuance hereof fix a record
date for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record
EXHIBIT 7.q - 2
<PAGE> 3
date (or the date of such dividend distribution, split or subdivision if no
record date is fixed), the Conversion Price of this Note shall be appropriately
decreased so that the number of shares of Common Stock issuable upon conversion
of this Note shall be increased in proportion to such increase of outstanding
shares.
If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price for this Note shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion hereof shall be
decreased in proportion to such decrease in outstanding shares.
In the event Maker shall declare a distribution payable in securities of
other persons, evidences of indebtedness issued by Maker or other persons,
assets (excluding cash dividends) or options or rights, then, in each such case
for the purpose of this subsection 2.2, the holder hereof shall be entitled to a
proportionate share of any such distribution as though such holder was the
holder of the number of shares of Common Stock of Maker into which this Note is
convertible as of the record date fixed for the determination of the holders of
Common Stock of Maker entitled to receive such distribution.
2.3 Notices of Record Date, etc. In the event of:
o any taking by Maker of a record of the holders of any
class of securities of Maker for the purpose of
determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend payable
out of earned surplus at the same rate as that of the last
such cash dividend theretofore paid) or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other
right; or
o any capital reorganization of Maker, any reclassification
or recapitalization of the capital stock of Maker or any
transfer of all or substantially all of the assets of
Maker to any other person or any consolidation or merger
involving Maker; or
o any voluntary or involuntary dissolution, liquidation or
winding-up of Maker,
Maker will mail to the holder of this Note at least ten (10) days prior to the
earliest date specified therein, a notice specifying:
(a) The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and,
(b) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the record
date for determining shareholders entitled to vote thereon.
EXHIBIT 7.q - 3
<PAGE> 4
2.4 Reservation of Stock Issuable Upon Conversion. Maker shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purpose of effecting the conversion of the Note such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of the Note; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the entire outstanding principal amount of this Note, in addition
to such other remedies as shall be available to the holder of this Note, Maker
will use its reasonable best efforts to take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
3. Miscellaneous.
The rights and obligations of Maker and Lender shall be binding upon and
benefit the successors, assigns, heirs, administrators, and transferees of Maker
and Lender.
Lender shall not be deemed by any act or omission or commission to have
waived any of its rights or remedies hereunder unless such waiver is in writing
and expressly stated as such and signed by Lender and then only to the extent
specifically set forth in the writing. A waiver of one event shall not be
construed as continuing or a bar to or waiver of any right or remedy as to a
subsequent event. Maker expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and consents to the acceptance of
security, if any, or the release of security, if any, from this Note, all
without in any way affecting the liability of Maker.
Any notice that Maker or Lender desires to give to the other related to
this Note shall be in writing and shall be deemed delivered when personally
delivered by any courier service which obtains a receipt upon delivery to an
officer or registered agent of the respective corporation, or two business days
after deposit in the United States mail, certified mail, return receipt
requested, postage prepaid, addressed to the party being notified at its
respective address specified in this Note.
If Lender should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Maker on this Note or under the Security Agreement, or any other efforts to
enforce any of its rights under this Note, Maker shall be liable to pay to
Lender immediately and without demand all reasonable costs and expenses of
collection incurred by Lender, including without limitation reasonable attorneys
fees, whether or not suit or other action or proceeding be instituted and
specifically including but not limited to collection efforts that may be made on
appeal or through a bankruptcy court, and all such sums shall be fully secured
by all instruments securing this Note.
The provisions of this Note are intended by Maker to be severable and
divisible and the invalidity or unenforceability of a provision or term herein
shall not invalidate or render unenforceable the remainder of this Note or any
part thereof.
EXHIBIT 7.q - 4
<PAGE> 5
This Note shall be construed in accordance with the laws of the State of
California without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, Maker has executed this instrument in San Diego,
California.
MAKER:
CARDIODYNAMICS INTERNATIONAL CORPORATION
By: /s/ Michael K. Perry
-----------------------------------------
Michael K. Perry, Chief Executive Officer
By: /s/ Steve P. Loomis
-----------------------------------------
Steve P. Loomis, Secretary
EXHIBIT 7.q - 5
<PAGE> 1
EXHIBIT 7.t
JIM AND SUE GILSTRAP FAMILY LIMITED PARTNERSHIP
This Agreement of Limited Partnership (Agreement) is made and entered
into as of this 9th day of December, 1997, by James C. Gilstrap and Melody Sue
Gilstrap as the initial general partners (together with any subsequently
admitted general partner, the General Partners) and the persons listed on
Schedule A as the initial limited partners (together with any subsequently
admitted limited partner, the Limited Partners). The General Partners and
Limited Partners are referred to collectively as Partners.
ARTICLE 1
ORGANIZATION
1.1 Formation. The Partners hereby form a limited partnership (the
Partnership) pursuant to the California Revised Limited Partnership Act. The
Managing General Partner shall cause to be recorded a Certificate of Limited
Partnership and any amendments thereto or additional documents as may be
appropriate to form a limited partnership pursuant to California law. The
General Partners shall not be required to deliver or mail to any Limited Partner
a copy of the Certificate of Limited Partnership or any Certificate of
Amendment.
1.2 Name. The Partnership shall operate under the name Jim and Sue
Gilstrap Family Limited Partnership, or such other name as the Managing General
Partner from time to time may select.
1.3 Principal Office. The principal office of the Partnership shall
be located at 5067 Shore Drive, Carlsbad, California 92008, or such other
location as the Managing General Partner may determine.
EXHIBIT 7.t - 1
<PAGE> 2
1.4 Purposes. The purposes of the Partnership are to acquire, own,
manage and sell or otherwise dispose of property for investment purposes.
1.5 Term. The Partnership shall commence as a limited partnership
upon the filing of its Certificate of Limited Partnership and shall continue
until terminated as provided below.
1.6 Definitions. Defined words or phrases are in italics the first
time they appear. Except as otherwise specified, definitions are contained in
Article 9.
ARTICLE 2
MANAGEMENT
2.1 Management of Partnership Affairs. The General Partners hereby
select James C. Gilstrap as the initial Managing General Partner. The Managing
General Partner shall be responsible for the administration and management of
the Partnership. The Managing General Partner's signature shall be sufficient to
bind the Partnership, and no third party shall have a duty to inquire into the
authority of the Managing General Partner to bind the Partnership. Except as
otherwise specifically provided, the General Partners other than the Managing
General Partner shall not be responsible for the management of the Partnership,
shall not have authority to bind the Partnership, and agree not to take any
action to bind the Partnership. A Managing General Partner shall be selected and
removed by Partners owning more than 50% of the General Partner Units owned by
Partners. Except as otherwise specifically provided, the decision of Partners
owning more than 50% of the General Partner Units owned by Partners shall be
deemed a decision of all of the General Partners. Unless the General Partners
elect a new Managing Partner, on the occurrence of an Event of Withdrawal (see
paragraph 6.7 below) of the Managing General Partner, the
EXHIBIT 7.t - 2
<PAGE> 3
General Partner holding the greatest number of General Partner Units shall
become the Managing General Partner.
2.2 Authority of Managing General Partner. The Managing General
Partner is authorized:
(a) To invest and reinvest available funds in investments
that, in the judgment of the Managing General Partner, are consistent
with the purposes of the Partnership.
(b) To vote or give proxies to vote any stock or other voting
security, to exercise management rights as a general partner or as a
manager or member of a limited liability company, and to enter into or
oppose, alone or with others, voting trusts, mergers, consolidations,
foreclosures, liquidations, reorganizations or other changes in the
financial structure of any business organization or buy-sell, stock
restriction or stock redemption agreement.
(c) To expend Partnership funds or to borrow as the Managing
General Partner deems appropriate.
(d) To collect obligations payable to the Partnership and take
any lawful means for the recovery thereof by legal process or otherwise,
and to execute and deliver a satisfaction and release therefor, together
with the right to compromise any claim.
(e) To lease, sell, exchange, pledge, encumber or grant an
option for the sale of all or any portion of the real and personal
property of the Partnership, at such rental, price or amount for each,
and upon such other terms, as the Managing General Partner deems proper.
(f) To perform all of the Partnership's obligations under any
agreement entered into by the Partnership.
(g) To select and retain accountants, attorneys and other
advisers (including investment advisers) to provide services for the
Partnership.
(h) To execute, acknowledge and deliver any and all
instruments to effectuate the foregoing.
EXHIBIT 7.t - 3
<PAGE> 4
(i) To take any other action deemed desirable by the Managing
General Partner to further the purposes of the Partnership.
2.3 Compensation. The Managing General Partner may be paid reasonable
compensation for services rendered to the Partnership and shall be reimbursed
for any expense properly incurred on behalf of the Partnership.
2.4 Related Party Transactions. The Managing General Partner may
cause the Partnership to obtain products or services from entities controlling,
controlled by or under common control with any General Partner and to pay such
entities reasonable fees for such products and services.
2.5 Books and Records. The Partnership's books and records shall be
maintained by the Managing General Partner at the principal office of the
Partnership and shall reflect clearly and accurately all transactions and other
matters relative to the Partnership's activities as are usually maintained for
similar activities.
2.6 Registration of Assets. Partnership cash and equivalents shall be
held in one or more bank, brokerage or other investment accounts established in
the name of the Partnership. Any other Partnership asset may be held either in
the name of the Partnership or in the name of any Partner as nominee, provided,
that the nominee Partner first files a written statement with the books and
records of the Partnership acknowledging the nominee relationship and describing
the Partnership asset to be held in the nominee Partner's name. If the statement
is properly filed, the Partnership shall be responsible to the nominee Partner
for any action, payment or liability incurred by the nominee Partner in holding
legal title to the asset.
2.7 Tax Matters Partner. The Managing General Partner shall be the
Partnership's Tax Matters Partner as defined in Code Section 6231(a)(7). The
Managing
EXHIBIT 7.t - 4
<PAGE> 5
General Partner may appoint a new Tax Matters Partner who shall act at the
direction of the Managing General Partner.
2.8 Accounting Conventions. The Partnership shall keep its accounting
records and shall report its income for income tax purposes on a calendar year
basis using such method of accounting as the Managing General Partner shall
determine.
ARTICLE 3
ADMISSIONS AND CAPITAL CONTRIBUTIONS
3.1 Partnership Units. The Partnership shall have two classes of
Units, General Partner Units and Limited Partner Units. Only a General Partner
may hold General Partner Units. Both General and Limited Partners may hold
Limited Partner Units.
3.2 Initial Capital Contributions. The initial Partners shall make
capital contributions and receive Units as shown on Schedule A.
3.3 Admission of New Limited Partners. A person may be admitted to
the Partnership as a Limited Partner as follows:
(a) Transferee of Units. A Family Member who receives Units in
a Transfer permitted under Article 6 shall be admitted on signing a
Joinder Agreement. A transferee who is not a Family Member who receives
Units in a Transfer permitted under Article 6 shall be admitted only
after the Managing General Partner consents in writing (such consent
shall be completely within the Managing General Partner's discretion and
may be withheld for any reason) and the transferee signs a Joinder
Agreement.
(b) Additional Capital Contributions. If the Managing General
Partner determines that a Family Member should be admitted and issued
Limited Partner Units in exchange for a capital contribution, the
Managing General Partner shall notify all Partners of the capital
contribution proposed to be made by the Family Member. After the
procedures of paragraph 3.5 have been completed, the Family Member shall
be admitted on contributing only that portion, if any, of the capital
contribution not contributed by Partners in exchange for an appropriate
number of Units and signing a Joinder Agreement.
EXHIBIT 7.t - 5
<PAGE> 6
Any other person may be admitted as a Limited Partner with the approval of all
Partners and completion of the procedures of paragraph 3.5, on contributing that
portion, if any, of the capital contribution not contributed by Partners in
exchange for an appropriate number of Units and signing a Joinder Agreement.
3.4 Admission of New General Partner. Any Family Member may be
admitted to the Partnership as a General Partner, with the approval of Partners
owning more than 50% of the Units owned by Partners in each class, on acquiring
one or more General Partner Units and signing a Joinder Agreement. Any other
person may be admitted as a General Partner with the approval of all Partners,
on acquiring one or more General Partner Units and signing a Joinder Agreement.
3.5 Additional Contributions. No Limited Partner shall be required to
make any capital contribution in addition to that Partner's initial capital
contribution. If the Managing General Partner determines that an additional
capital contribution is required, each Partner owning Limited Partner Units
shall have the right to contribute the same proportion of the additional capital
as the number of the Partner's Limited Partner Units bears to the total number
of Limited Partner Units then outstanding. The Partnership shall issue an
appropriate number of Limited Partner Units in exchange for such contribution.
3.6 General Partner Ownership. The General Partners shall in the
aggregate own 1% of the capital of the Partnership. If an additional capital
contribution is made and Limited Partner Units are issued, then simultaneously
with the contribution the General Partners shall in the aggregate contribute 1%
of the total additional capital contribution by Partners and shall receive an
appropriate number of General Partner Units in exchange for
EXHIBIT 7.t - 6
<PAGE> 7
such contribution. If capital is distributed and Limited Partner Units are
redeemed, then simultaneously with the redemption the General Partners shall in
the aggregate receive 1% of the total capital distributed and an appropriate
number of their General Partner Units shall be redeemed in exchange for such
distribution. Each such General Partner's additional receipt or redemption of
General Partner Units shall be in the same proportion as the number of the
General Partner's General Partner Units bears to the total number of General
Partner Units owned by the Managing General Partner and all other General
Partners, unless they agree otherwise.
ARTICLE 4
DISTRIBUTIONS
4.1 Income Flow. The Partnership shall distribute the Income Flow of
the Partnership as the Managing General Partner decides.
4.2 Distributions for Taxes. If the Managing General Partner
determines that distributions under the preceding paragraph 4.2 are insufficient
to enable the Partners to pay federal and state income taxes attributable to
Partnership items, then the Partnership shall make additional distributions as
the Managing General Partner decides for that purpose.
4.3 Other Distributions. The Partnership may make other distributions
with the approval of the Partners owning all of the Units owned by Partners in
each class.
4.4 Division of Distributions. Of any distribution, 1% shall go
ratably to the General Partners, as such, and 99% shall go ratably to the
holders of Limited Partner Units.
EXHIBIT 7.t - 7
<PAGE> 8
ARTICLE 5
ALLOCATIONS
5.1 Capital Accounts. The Partnership shall maintain a capital
account for each Partner according to the regulations under Code Section 704. A
Partner's capital account initially shall be the agreed value of initial capital
contributed by such Partner as shown on Schedule A. Each Partner's capital
account shall thereafter be credited with the amount of the Partner's additional
cash contributions (if any), the agreed value of the Partner's additional
contributions of property (if any), and the Partner's share of Tax Profits
excluding Built-in Gains and Built-in Losses and shall be debited with the
amount of cash withdrawals and distributions, the agreed value of property
distributions and the Partner's share of Tax Losses excluding Built-in Gains and
Built-in Losses. If Units are Transferred, the portion of the transferor's
capital account attributable to the transferred Units shall be added to the
transferee's capital account (and subtracted from the transferor's capital
account), together with any increase appropriate pursuant to an election under
Code Section 754. If there is a redemption or additional capital contribution,
the Managing General Partner may elect to revalue the Partnership's property
according to the principles of Treasury Regulations Section 1.704-1(b)(2)(iv)(f)
and maintain the capital accounts consistent with that revaluation according to
the principles of Treasury Regulations Section 1.704-1(b)(2)(iv)(g).
5.2 Allocations of Tax Profits and Tax Losses.
(a) Built-in Gains and Built-in Losses. Built-in Gains and
Built-in Losses shall be allocated to the contributing Partners
according to the principles of Code Section 704(c) and the regulations
thereunder. If a contributing Partner has made a gift of some part or
all of the Partner's Units, a ratable portion of the Built-in Gains or
Built-in Losses otherwise allocable to the contributing Partner
hereunder shall instead be allocated to the current
EXHIBIT 7.t - 8
<PAGE> 9
holder of such Units. The portion of the Built-in Gains and Built-in
Losses to be allocated to each Unit received in exchange for a capital
contribution shall be in the same proportion as the value of that Unit
bears to the total value of all Units received in such exchange.
(b) Remaining Tax Profits and Tax Losses. Of Tax Profits and
Tax Losses remaining after the allocations, if any, required by
subparagraph (a) above, 1% shall be allocated ratably to the General
Partners, as such, and 99% shall be allocated ratably to the holders of
Limited Partner Units.
(c) Allocations Following a Revaluation. In the event that the
Managing General Partner elects to revalue the Partnership's property as
provided in paragraph 5.1, subsequent allocations of Tax Profits and Tax
Losses shall be made according to the principles of Treasury Regulations
Section 1.704-1(b)(4).
(d) Authority to Vary Allocations. The Managing General
Partner has the authority to vary these allocations to the extent
necessary to comply with federal income tax laws.
ARTICLE 6
TRANSFERS AND WITHDRAWALS
6.1 Transfers to Partners. Any Limited Partner Unit may be
Transferred to any Partner at any time. Any General Partner Unit may be
Transferred only to another General Partner or to any person who in conjunction
with such Transfer is admitted as a General Partner.
6.2 Transfers to Family Members. Any Limited Partner Unit may be
Transferred at any time to any Family Member who is not already a Partner. The
transferee Family Member shall in conjunction with such Transfer be admitted to
the Partnership as a Limited Partner on signing a Joinder Agreement.
6.3 Restricted Transfers to Others. Any Limited Partner Unit may be
Transferred to any transferee other than a Partner or a Family Member only after
the Managing General Partner consents in writing (such consent shall be
completely within
EXHIBIT 7.t - 9
<PAGE> 10
the Managing General Partner's discretion and may be withheld for any reason);
and if such consent is withheld, only if the transferor first offers to the
Partnership and then to the other Partners the right to purchase all such Units
proposed to be Transferred (Offered Units) at the price and terms set forth
below:
(a) Third Party Sales. If the proposed Transfer is a third
party sale, the seller shall provide written notice (Original Notice) to
the Managing General Partner of the identity of the proposed transferee
and the date, price and terms of the proposed Transfer at least 120 days
before the date of the proposed sale. The Managing General Partner then
may cause the Partnership to purchase all, but not less than all, of the
Offered Units on the same terms and conditions, or, within 60 days of
receiving the Original Notice, provide all the Partners written notice
of their option to purchase among any one or more of the Partners all,
but not less than all, of the Offered Units and the terms and conditions
of sale. The Partnership or the Partners may exercise their options to
purchase Offered Units by giving written notice to the seller within 90
days after the Managing General Partner receives the Original Notice. If
the Partners offer to purchase more than the Offered Units, the Offered
Units shall be purchased by each such purchasing Partner in the same
proportion as that Partner's number of Units of the same class, if any,
otherwise of all classes, bears to the aggregate number of Units of the
same class or of all classes, as the case may be, owned by the Partners
exercising their options to purchase under this subparagraph. The
purchase price of the Offered Units shall be the price specified in the
Original Notice to be paid on the date or dates specified in the
Original Notice.
(b) Other Transfers. If the proposed Transfer is not a third
party sale, then the transferor (or the Managing General Partner on the
transferor's behalf) shall provide written notice (Original Notice) to
the Managing General Partner of the identity of the proposed transferee
and the date and terms of the proposed Transfer. Within 45 days after
receipt of the Original Notice, the Managing General Partner shall
determine the fair value of the Offered Units (as described in
subparagraph 6.3(c)) and shall give the Partners written notice thereof
(Value Notice). The Managing General Partner then may cause the
Partnership to elect to purchase all, but not less than all, of the
Offered Units on the terms and conditions set forth below, or, within 15
days after the date of the Value Notice, provide all the Partners (other
than the transferor) written notice of their option to purchase among
any one or more of those Partners all, but not less than all, of the
Offered Units at the Units' fair value. The Partnership or the Partners
may exercise their options to purchase the Offered Units by giving
written notice to the transferor within 45 days after the date of the
Value Notice. If the Partners offer to purchase more than the Offered
Units, the Offered Units shall be purchased by each such purchasing
Partner in the same proportion as that
EXHIBIT 7.t - 10
<PAGE> 11
Partner's number of Units of the same class, if any, otherwise of all
classes, bears to the aggregate number of Units of the same class or of
all classes, as the case may be, owned by the Partners exercising their
options to purchase under this subparagraph, or as they otherwise may
agree. The purchase price shall be the fair value of the Units
determined as provided in subparagraph 6.3(c) to be paid within 120 days
of the Original Notice.
(c) Fair Value. The fair value of a Unit for purposes of this
Article 6 shall be the amount agreed upon between the holder and the
Partnership or, in the absence of agreement, the amount determined to be
the value of the distribution rights with respect to the Unit by an
independent appraiser selected by the Partnership and reasonably
acceptable to the holder.
(d) Installment Payments. Notwithstanding the above, that
portion of the purchase price under subparagraph 6.3(a) or 6.3(b)
payable by any purchaser may be paid by a note from any purchaser in an
amount equal to that portion payable in 15 or less (as determined by the
purchaser) equal annual installments commencing on the date of closing
evidenced by such note bearing interest at the minimum rate necessary to
avoid the imputation of income or gift for federal tax purposes. Each
such note shall contain full rights of prepayment without penalty or
premium, and such other terms and conditions as the maker and the payee
of the note shall determine.
(e) Completion of Proposed Transfer. If the options described
above are not exercised, the proposed Transfer of the Units may occur on
the date and on the same terms and conditions as set forth in the
Original Notice. Subsequent Transfers of those Units shall be subject to
the provisions of this Article 6.
(f) Rights of Transferees. A transferee of Units who is not a
Partner or a Family Member shall become a Partner only with the approval
of all Partners and on signing a Joinder Agreement. A Partner who ceases
to be a Family Member, but whose Units are not purchased under this
paragraph 6.3, shall be considered a transferee not admitted as a
Partner and may not exercise any of the rights of a Partner.
6.4 Securities Law Transfer Restrictions. All Partners acknowledge
that the Units have not been registered under the Securities Act of 1933, as
amended (the 1933 Act), in reliance on applicable exemptions. Therefore, the
Partners hereby agree that Units shall be nontransferable, except in compliance
with the 1933 Act and applicable state securities laws, and any attempted
Transfer not in compliance shall be void. As an
EXHIBIT 7.t - 11
<PAGE> 12
additional condition precedent to the Transfer of any Units, the Managing
General Partner may require an opinion of counsel satisfactory to the Managing
General Partner that such Transfer will be made in compliance with the 1933 Act
and applicable state securities laws, and such transferor shall be responsible
for paying any attorneys' fees incurred in connection with the opinion.
6.5 Unauthorized Transfers. If a Partner attempts to make a Transfer
which is not authorized hereunder, the transferor shall be deemed to have
provided the Original Notice as described in subparagraph 6.3(b) on the date on
which the Managing General Partner receives written or actual notice of the
unauthorized Transfer.
6.6 Rights of Assignees. A transferee who is not admitted as a
Partner shall have only the rights of an assignee. An assignee of Units who is
not a Partner shall not be entitled to interfere in the management of the
Partnership's affairs, vote, receive any information of Partnership transactions
or inspect the Partnership books. The assignee shall merely be entitled to
receive, in accordance with the terms of the assignment, the distributions to
which the assignor otherwise would be entitled.
6.7 Withdrawal of General Partner. On the occurrence of an Event of
Withdrawal of a General Partner, any remaining General Partner may elect to
continue the Partnership. Each remaining General Partner will be deemed to have
elected to continue the Partnership following an Event of Withdrawal of a
General Partner unless all remaining General Partners give written notice to the
Partners within 30 days of such Event of Withdrawal that the remaining General
Partners do not elect to continue the Partnership. If the Partnership is
continued, the General Partner Units held by any withdrawn General Partner not
otherwise passing to a General Partner shall be purchased
EXHIBIT 7.t - 12
<PAGE> 13
by any one or more of the continuing or new General Partners (but as to the
continuing General Partners, in the same proportion as that General Partner's
number of General Partner Units bears to the aggregate number of General Partner
Units owned by all continuing General Partners, unless they agree otherwise) at
fair value as described in subparagraph 6.3(c) payable within 90 days of the
Notice of Withdrawal. For purposes of this paragraph, except as specifically
provided in subparagraph 6.7(b), a withdrawing General Partner shall be deemed
to have given Notice of Withdrawal on the date on which the Managing General
Partner receives written or actual notice of an Event of Withdrawal described
below with respect to such Partner, or, if the Managing General Partner is the
withdrawing General Partner, then on the date on which any General Partner
receives written or actual notice of an Event of Withdrawal with respect to the
Managing General Partner. A withdrawn General Partner that owns Limited Partner
Units shall continue as a Limited Partner with the rights and obligations
provided Limited Partners under this Agreement. The following shall constitute
Events of Withdrawal:
(a) The death, bankruptcy, adjudicated incompetency,
dissolution or termination (in the case of an entity) of a General
Partner.
(b) The voluntary withdrawal of a General Partner or attempted
Transfer of a General Partner's interest in violation of paragraph 6.1.
Each General Partner agrees not to withdraw as General Partner without
giving 60 days' prior written notice of withdrawal to the Partners.
6.8 Withdrawal of Limited Partners. No Limited Partner may withdraw
prior to the liquidation of the Partnership except by following the procedures
of this paragraph 6.8.
(a) A Limited Partner has five opportunities to withdraw
completely from the Partnership prior to the termination of the
Partnership, in 2003, 2013, 2028, 2048 and 2073, each of which is
referred to in this paragraph 6.8 as a "withdrawal year." By March 1st
of each withdrawal year, the Managing General Partner shall provide
written notice to each Limited Partner of the purchase price for that
withdrawal year described in
EXHIBIT 7.t - 13
<PAGE> 14
subparagraph 6.8(b). A Limited Partner thereafter may elect to withdraw
from the Partnership in that withdrawal year by giving written notice to
the Managing General Partner on or before May 1st of that withdrawal
year.
(b) The Partnership shall purchase all of the Units of a
Limited Partner who has withdrawn. The purchase price per Unit shall be
determined by multiplying the value of the assets of the Partnership on
January 1st of that withdrawal year, as determined by appraisal, by the
percentage listed below for that withdrawal year and then dividing that
product by the aggregate number of General and Limited Partner Units
then outstanding. The appraisals shall be prepared by a person or
business entity experienced in appraising partnerships selected by the
Managing General Partner for the purpose of valuing the assets of the
Partnership.
<TABLE>
<CAPTION>
Withdrawal Year Percentage
--------------- ----------
<S> <C>
2003 25%
2013 30%
2028 40%
2048 50%
2073 75%
</TABLE>
(c) The aggregate purchase price shall be paid in cash or
property on the July 1st of the withdrawal year in which a Limited
Partner withdraws. Any part or all of the purchase price may be paid by
a note from the Partnership in an amount equal to that portion payable
in 5 or less (as determined by the Managing General Partner) equal
annual installments commencing on the July 1st of that withdrawal year
and evidenced by such note bearing interest at the minimum rate
necessary to avoid the imputation of income and gift for federal tax
purposes. Each such note shall contain full rights of prepayment without
penalty or premium, and such other terms and conditions as the maker and
the payee of the note shall determine.
ARTICLE 7
RIGHTS AND OBLIGATIONS OF PARTNERS
7.1 Liability of Partners. The General Partners, as such, shall have
unlimited liability for the satisfaction of all obligations of the Partnership
in excess of its assets, except as otherwise agreed with creditors. No Limited
Partner, as such, shall be liable for the satisfaction of Partnership
obligations.
EXHIBIT 7.t - 14
<PAGE> 15
7.2 Management Responsibility. No Limited Partner, as such, shall
take part in the management of the activities of the Partnership. Except as
otherwise specifically provided, all management responsibility is vested in the
Managing General Partner.
7.3 Authority to Act. No Limited Partner, as such, shall have the
power to act on behalf of or bind the Partnership. Except as otherwise
specifically provided, all authority to act on behalf of the Partnership is
vested in the Managing General Partner.
7.4 Partners' Meeting. A meeting of the Partners may be held at any
time by written notice to the Partners by the Managing General Partner (or
within 10 days after receipt of a written request of Partners owning more than
30% of the Units owned by Partners in either class) at a reasonably convenient
date, time and place determined by the Managing General Partner. The purpose of
the meeting shall be for the Managing General Partner to inform the Partners of
the results of operations, the status of Partnership investments and the
Managing General Partner's plans for the future operation of the Partnership.
7.5 Fiduciaries as Partners. A Partner may own one or more Units in a
fiduciary capacity, such as a trustee under a trust instrument, as executor or
as a personal representative of an estate or as custodian. Such fiduciary shall
have no interest or obligation individually with respect to any such Units, but
shall be considered as acting solely in such fiduciary capacity. If a Partner
acting in a fiduciary capacity ceases to act as such, the successor fiduciary
shall be a Partner in the same fiduciary capacity with the same rights and
obligations as the predecessor fiduciary. A person may be a Partner in an
individual capacity and a Partner in one or more fiduciary capacities.
EXHIBIT 7.t - 15
<PAGE> 16
7.6 Exculpation. No General Partner shall be liable to any of the
Partners for Good Faith Errors (meaning mistakes of judgment or losses due to
such mistakes or to the negligence or bad faith of any employee, broker, adviser
or other agent or representative of the Partnership, provided that such agent or
representative was selected with reasonable care). The General Partners may
consult with legal counsel selected by the Managing General Partner and shall
have no liability for the consequences of any action or omission resulting from
good faith reliance on the advice of such counsel. The exculpation provided in
this paragraph 7.6 also shall apply to the agents, employees and other legal
representatives of each General Partner.
7.7 Indemnification. The Partnership shall indemnify and hold
harmless each General Partner from and against any loss or expense incurred by
reason of the fact that the General Partner is or was a General Partner of the
Partnership, including without limitation any judgment, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action or proceeding, provided such loss or
expense resulted from Good Faith Errors or from action or inaction taken in good
faith for a purpose which the General Partner reasonably believed to be in, or
not opposed to, the best interests of the Partnership. The indemnification
provided in this paragraph 7.7 also shall apply to the agents, employees and
other legal representatives of each General Partner.
ARTICLE 8
PARTNERSHIP DISSOLUTION AND LIQUIDATION
8.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the first to occur of the following:
EXHIBIT 7.t - 16
<PAGE> 17
(a) December 31, 2096.
(b) The vote of Partners owning all of the Units owned by
Partners in each class.
(c) An Event of Withdrawal with respect to the last remaining
General Partner; provided, however, that the Partnership may be
continued under the terms and conditions of this Agreement if Partners
owning more than 50% of the Limited Partner Units owned by Partners
agree by written consent within 90 days of such terminating event to
elect a new General Partner. All Limited Partners agree to elect the
General Partner selected by such majority.
8.2 Disposition of Assets. On dissolution of the Partnership, the
Managing General Partner or, if there is no General Partner, a liquidator
selected by Partners owning more than 50% of the Limited Partner Units owned by
Partners, shall immediately commence to wind up the Partnership's affairs.
Partnership assets shall first be used to pay or provide for the payment of any
obligations, and the balance shall be distributed to the Partners as provided in
Article 4.
ARTICLE 9
DEFINITIONS
The terms set forth below shall have the following meanings in this
Agreement:
Built-in Gains means allocations pursuant to Code Section 704(c)
taken into account in determining Tax Profits or Tax Losses, to the extent such
allocations are attributable to the excess of the agreed value over the tax
basis, both as shown on Schedule A, of property contributed to the Partnership.
Built-In Losses means allocations pursuant to Code Section 704(c)
taken into account in determining Tax Profits or Tax Losses, to the extent such
allocations are attributable to the excess of tax basis over agreed value, both
as shown on Schedule A, of property contributed to the Partnership.
Code means the Internal Revenue Code of 1986, as from time to
time amended. A reference to a Section of the Code shall refer to the
corresponding provision of any successor statute.
EXHIBIT 7.t - 17
<PAGE> 18
Family Member means (i) James C. Gilstrap and Melody Sue
Gilstrap; (ii) a descendant of James C. Gilstrap and Melody Sue Gilstrap; (iii)
any estate, trust, guardianship, custodianship or other fiduciary arrangement
for the primary benefit of any one or more individuals named or described in (i)
and (ii) above; (iv) a trust for the benefit of a spouse or surviving spouse of
a descendant of James C. Gilstrap and Melody Sue Gilstrap if such spouse or
surviving spouse is entitled only to income distributions during such spouse's
or surviving spouse's lifetime and, on termination of the trust, its principal
(other than any portion of the principal subject to the right of recovery
available to the spouse's estate under Code Section 2207A, to the extent such
right of recovery is actually exercised) is distributed to one or more
individuals or entities named or described in (i), (ii) and (iii) above; and (v)
any corporation, partnership, limited liability company or other business
organization controlled by and substantially all of the interests in which are
owned, directly or indirectly, by any one or more individuals or entities named
or described in (i), (ii), (iii) and (iv) above. The determination of whether an
individual or entity is a Family Member shall be made by the Managing General
Partner and, if made in good faith, shall bind all persons.
Income Flow for a period means the amount of all cash receipts of
the Partnership during the period (other than capital contributions, borrowings,
dispositions of investments, and similar items ordinarily credited to principal
under California fiduciary accounting principles), plus the amount of all
reductions during the period in reserves established by the Managing General
Partner from cash receipts that otherwise would have been Income Flow during
prior periods, minus the amount of (i) operating and other recurring expenses
and all expenses ordinarily charged to income under California fiduciary
accounting principles, (ii) nonrecurring expenses ordinarily charged to
principal under California fiduciary accounting principles to the extent the
other cash of the Partnership is insufficient to pay such expenses and (iii) the
amount of all increases during the period in reserves established by the
Managing General Partner from cash receipts that otherwise would have been
included in Income Flow. In determining Income Flow, the Managing General
Partner shall establish reasonable reserves for necessary purposes of the
Partnership and shall adjust the levels of such reserves each time Income Flow
is determined.
Joinder Agreement means an agreement substantially in the form of
the attached Schedule B.
Notice of Withdrawal means notice of an Event of Withdrawal of a
General Partner delivered to or deemed received by the Partnership.
Tax Profits and Tax Losses for any taxable year means the net
income or loss of the Partnership as reported for federal income tax purposes as
to such taxable year, calculated by (i) including all amounts allocated to all
Unit holders under Sections 702(a)(1) through 702(a)(8) of the Code, (ii)
increased by tax-exempt income and (iii) decreased by expenditures described in
Code Section 705(a)(2)(B).
EXHIBIT 7.t - 18
<PAGE> 19
Transfer means (i) any disposition, directly or indirectly, by
operation of law or otherwise, voluntarily or involuntarily, by intestacy, will,
trust or estate distribution, or inter vivos action, including any sale, gift,
pledge, encumbrance or other creation of a security interest, attachment, the
creation of any interest in the Partnership or distribution from the Partnership
for the benefit of creditors, and (ii) any event that results in a holder of one
or more Units ceasing to be a Family Member, including a change in family
relationship due to divorce, adoption, a change in beneficiaries (in the case of
a fiduciary arrangement), and a change in ownership or control (in the case of a
business organization). Transfer shall not include (i) the creation or
acquisition of a community or marital property interest in a Unit by a spouse of
a Unit holder as long as the spouse is not a registered owner and exercises no
management, dominion, or control over such Unit, (ii) a transfer to (but not
from) the executor, administrator, or other legal representative of the estate
of a deceased Unit holder, or (iii) a transfer to the guardian or conservator
for a legally adjudicated incompetent Unit holder.
Unit means an interest in the Partnership.
ARTICLE 10
MISCELLANEOUS
10.1 Waiver of Partition. Each Partner hereby waives any right to seek
a court decree of dissolution or partition or to seek the appointment by a court
of a liquidator for the Partnership.
10.2 Right to Distribution In Kind. No Partner shall have any right to
demand or receive any particular property on liquidation of the Partnership or
to demand the return of the Partner's capital contribution to the Partnership.
The property to be received by any Unit holder on liquidation of the Partnership
shall be determined by the Managing General Partner, except that no holder shall
be required to accept a distribution in kind in excess of the holder's
fractional interest in the Partnership (Units owned by such holder divided by
total Units outstanding) without the holder's consent.
EXHIBIT 7.t - 19
<PAGE> 20
10.3 Integrated Agreement. This Agreement constitutes the entire
agreement among the parties. It supersedes any prior agreements, negotiations or
understandings among them, and it may be amended only as provided in Article 11.
10.4 Binding Agreement. This Agreement shall bind the executors,
administrators, estates, heirs and legal successors of the parties hereto.
10.5 Governing Law. Except as otherwise specifically provided,
California law shall govern this Agreement and all questions arising hereunder.
10.6 Notices. All notices, offers and acceptances and other
communications hereunder required to be in writing shall be delivered in person,
by telecopy with confirmation or by overnight delivery service with receipt, or
shall be deposited in the United States Mail, postage prepaid, by certified or
registered mail, return receipt requested, to the address shown on Schedule A. A
communication shall be deemed received: (i) if by personal delivery, on the date
delivered, (ii) if by telecopy, on the date confirmed, (iii) if by overnight
delivery service, on the date delivered and (iv) if by mail, five days after
mailing.
10.7 Power of Attorney. Each of the Partners does hereby irrevocably
appoint the Managing General Partner or the Managing General Partner's legal
representative with full power of substitution, as the Partner's attorney with
full power and authority for such Partner to execute, swear to, acknowledge,
deliver and file or record in the appropriate public offices (i) all
certificates and other instruments (including counterparts of this Agreement)
and all amendments thereto which the Managing General Partner deems appropriate
to qualify, or continue the qualification of, the Partnership as a limited
partnership in any jurisdiction in which the Partnership has operations, (ii)
all instruments
EXHIBIT 7.t - 20
<PAGE> 21
that the Managing General Partner deems appropriate to reflect any modification
of this Agreement, (iii) all conveyances and other instruments that the Managing
General Partner deems appropriate to reflect the dissolution and liquidation of
the Partnership, and (iv) all forms of consent that may be appropriate to admit
a new Partner and all other instruments that the Managing General Partner deems
appropriate relating to the admission of a new Partner. The foregoing power of
attorney is irrevocable and a power coupled with an interest and shall survive
the death, dissolution or legal termination of a Partner.
10.8 Counterparts. This Agreement may be executed in multiple
counterparts.
ARTICLE 11
AMENDMENTS
This Agreement shall not be amended to change any Unit holder's share of
liabilities or distributions without the consent of such holder. Subject to the
preceding sentence, this Agreement may be amended with the consent of Partners
owning all of the Units owned by Partners in each class. The Managing General
Partner shall amend Schedule A of this Agreement to reflect admissions and
withdrawals of Partners, Transfers of Units, capital contributions (including
tax basis and agreed value) and redemptions of Units.
EXHIBIT 7.t - 21
<PAGE> 22
This Agreement is executed as of the date first written above by the
Partners.
GENERAL PARTNER LIMITED PARTNER
/s/ James C. Gilstrap /s/ James C. Gilstrap
- --------------------------------- ---------------------------------
James C. Gilstrap James C. Gilstrap
/s/ Melody Sue Gilstrap /s/ Melody Sue Gilstrap
- --------------------------------- ---------------------------------
Melody Sue Gilstrap Melody Sue Gilstrap
EXHIBIT 7.t - 22
<PAGE> 23
SCHEDULE A
INITIAL CAPITALIZATION
<TABLE>
<CAPTION>
Initial Capital Contribution Units Issued
---------------------------- ------------
Partner Tax Basis Agreed Value General Partner Limited Partner
--------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
James C. Gilstrap 500 49,500
5067 Shore Drive
Carlsbad, California 92008
SSN:
Melody Sue Gilstrap 500 49,500
5067 Shore Drive
Carlsbad, California 92008
SSN:
------- ------- ------- --------
Totals 1,000 99,000
</TABLE>
EXHIBIT 7.t - 23
<PAGE> 24
SCHEDULE B
JOINDER AGREEMENT
This Agreement is made and entered into this _____ day of __________, by
and between James C. Gilstrap (the Managing General Partner) acting on behalf of
Jim and Sue Gilstrap Family Limited Partnership (the Partnership), and the
person whose signature appears below (New Partner).
1. Admission. The New Partner, who is a Family Member as
defined in the agreement evidencing the Partnership (Partnership Agreement) or
whose admission to the Partnership is approved by the Managing General Partner
pursuant to the Partnership Agreement, is hereby admitted to the Partnership as
a limited/general partner and shall have all the rights and be subject to all
the obligations of limited/general partner under the Partnership Agreement.
2. Agreement to Be Bound By Partnership Agreement. The New
Partner acknowledges receipt of a copy of the Partnership Agreement as currently
amended. The New Partner agrees to be bound by all the terms and conditions of
the Partnership Agreement.
3. Capital Contribution. The New Partner shall make a
contribution to capital (if any) as shown on an amendment to Schedule A to the
Partnership Agreement.
4. Counterparts. This Agreement may be executed in multiple
counterparts.
This Agreement is executed as of the date first written above.
Managing General Partner
--------------------------------------
New Partner
--------------------------------------
EXHIBIT 7.t - 24
<PAGE> 1
EXHIBIT 7.v
OPTIONAL ADVANCE NOTE
$2,550,000.00 San Diego, California
March 11, 1998
The undersigned promises to pay on September 30, 1999 to the order of
Allen Paulson ("Lender") at 6175 Nancy Ridge Drive, San Diego, California, the
sum of eighty-five dollars (receipt of which is hereby acknowledged by the
undersigned) plus such other and further sums up to an aggregate total of two
million five hundred fifty thousand dollars ($2,550,000) as the holder hereof
may hereafter from time to time loan or advance to or for the benefit of the
undersigned in accordance with the terms hereof, together with simple interest
thereon from the date of the respective advances hereunder at the rate of 10%
per annum, computed on a basis of a 365-day year and actual days elapsed.
Accrued interest through the last day of each calendar month shall be due and
payable on the 15th day of the succeeding calendar month. Any principal or
interest not paid when due hereunder shall bear interest from its due date at
the interest rate specified above. The unpaid balance of this obligation at any
time shall be the total amounts advanced hereunder by Lender, less the amount of
payments made hereon by or for the undersigned, which balance may be endorsed
hereon from time to time by Lender.
Advances hereunder may be made by Lender at the oral or written request
of its President or its Chief Financial Officer, each of whom is authorized to
request advances and direct the disposition of any such advances until written
notice of the revocation of such authority is received by Lender at the address
written above. Any such advance shall be conclusively presumed to have been made
to or for the benefit of the undersigned when made in accordance with such
requests and directions.
Upon the happening of any of the following events, Lender may, at its
option, declare immediately due and payable the entire unpaid principal amount
of this Note, together with all interest thereon, plus any other amounts payable
at the time of such declaration pursuant to this Note. Such events are the
following: (1) failure to make any payment of interest as it falls due; (2) the
maker of this Note ("Maker") shall admit in writing its inability to pay its
debts as they become due, shall make a general assignment for the benefit of
creditors or shall file any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws for the
relief of, or relating to, debtors; or (3) an involuntary petition shall be
filed against Maker under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors unless such petition shall be dismissed or vacated within sixty (60)
days of the date thereof.
The Maker of this Note waives diligence, presentment, protest and demand
and also notice of protest, demand, dishonor and nonpayment of this Note.
This Note may be prepaid at any time, in whole or in part, without
penalty or premium. In addition, the Maker shall forthwith prepay this Note to
the extent of and with 85% of the net proceeds of any future-arranged debt or
equity financing of the Maker (or, if less, all outstanding principal of and
accrued interest on this Note).
If Lender should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Maker, Maker shall be liable to pay to Lender immediately and without demand all
reasonable costs and expenses of collection incurred by Lender, including
without limitation reasonable attorneys fees, whether or not suit or other
action or proceeding be instituted and specifically including but not limited to
collection efforts that may be made through a bankruptcy court, and all such
sums shall be fully secured by all instruments, if any, securing this Note.
The provisions of this Note are intended by Maker to be severable and
divisible and the invalidity or unenforceability of a provision or term herein
shall not invalidate or render unenforceable the remainder of this Note or any
part thereof.
EXHIBIT 7.v - 1
<PAGE> 2
This Note shall be deemed to be pari passu with and part of the same
single series as the other Optional Advance Note issued by Maker on this day
pursuant to a certain Private Line of Credit Agreement. This Note is subject to
such Private Line of Credit Agreement.
This Note shall be governed by and construed and interpreted in
accordance with the internal laws of the State of California.
CARDIODYNAMICS INTERNATIONAL
CORPORATION
By:/s/ Rhonda Pederson
--------------------------------
President
By:/s/ Steve Loomis
--------------------------------
Secretary
EXHIBIT 7.v - 2
<PAGE> 3
TRANSACTIONS ON WITHIN NOTE
Interest Interest
Date Paid To Paid Advances Payments Balance Approved
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EXHIBIT 7.v - 3
<PAGE> 1
EXHIBIT 7.w
OPTIONAL ADVANCE NOTE
$450,000.00 San Diego, California
March 11, 1998
The undersigned promises to pay on September 30, 1999 to the order of
James Gilstrap ("Lender") at 6175 Nancy Ridge Drive, San Diego, California, the
sum of fifteen dollars (receipt of which is hereby acknowledged by the
undersigned) plus such other and further sums up to an aggregate total of four
hundred fifty thousand dollars ($450,000) as the holder hereof may hereafter
from time to time loan or advance to or for the benefit of the undersigned in
accordance with the terms hereof, together with simple interest thereon from the
date of the respective advances hereunder at the rate of 10% per annum, computed
on a basis of a 365-day year and actual days elapsed. Accrued interest through
the last day of each calendar month shall be due and payable on the 15th day of
the succeeding calendar month. Any principal or interest not paid when due
hereunder shall bear interest from its due date at the interest rate specified
above. The unpaid balance of this obligation at any time shall be the total
amounts advanced hereunder by Lender, less the amount of payments made hereon by
or for the undersigned, which balance may be endorsed hereon from time to time
by Lender.
Advances hereunder may be made by Lender at the oral or written request
of its President or its Chief Financial Officer, each of whom is authorized to
request advances and direct the disposition of any such advances until written
notice of the revocation of such authority is received by Lender at the address
written above. Any such advance shall be conclusively presumed to have been made
to or for the benefit of the undersigned when made in accordance with such
requests and directions.
Upon the happening of any of the following events, Lender may, at its
option, declare immediately due and payable the entire unpaid principal amount
of this Note, together with all interest thereon, plus any other amounts payable
at the time of such declaration pursuant to this Note. Such events are the
following: (1) failure to make any payment of interest as it falls due; (2) the
maker of this Note ("Maker") shall admit in writing its inability to pay its
debts as they become due, shall make a general assignment for the benefit of
creditors or shall file any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws for the
relief of, or relating to, debtors; or (3) an involuntary petition shall be
filed against Maker under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors unless such petition shall be dismissed or vacated within sixty (60)
days of the date thereof.
The Maker of this Note waives diligence, presentment, protest and demand
and also notice of protest, demand, dishonor and nonpayment of this Note.
This Note may be prepaid at any time, in whole or in part, without
penalty or premium. In addition, the Maker shall forthwith prepay this Note to
the extent of and with 85% of the net proceeds of any future-arranged debt or
equity financing of the Maker (or, if less, all outstanding principal of and
accrued interest on this Note).
If Lender should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Maker, Maker shall be liable to pay to Lender immediately and without demand all
reasonable costs and expenses of collection incurred by Lender, including
without limitation reasonable attorneys fees, whether or not suit or other
action or proceeding be instituted and specifically including but not limited to
collection efforts that may be made through a bankruptcy court, and all such
sums shall be fully secured by all instruments, if any, securing this Note.
The provisions of this Note are intended by Maker to be severable and
divisible and the invalidity or unenforceability of a provision or term herein
shall not invalidate or render unenforceable the remainder of this Note or any
part thereof.
EXHIBIT 7.w - 1
<PAGE> 2
This Note shall be deemed to be pari passu with and part of the same
single series as the other Optional Advance Note issued by Maker on this day
pursuant to a certain Private Line of Credit Agreement. This Note is subject to
such Private Line of Credit Agreement.
This Note shall be governed by and construed and interpreted in
accordance with the internal laws of the State of California.
CARDIODYNAMICS INTERNATIONAL
CORPORATION
By:/s/ Rhonda Pederson
------------------------------------
President
By:/s/ Steve Loomis
------------------------------------
Secretary
EXHIBIT 7.w - 2
<PAGE> 3
TRANSACTIONS ON WITHIN NOTE
Interest Interest
Date Paid To Paid Advances Payments Balance Approved
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EXHIBIT 7.w - 3
<PAGE> 1
PAGE 1
EXHIBIT 7.x
COMMERCIAL GUARANTY
<TABLE>
<S> <C> <C>
BORROWER: CARDIODYNAMICS INTERNATIONAL LENDER: Imperial Bank
CORPORATION Emerging Growth Industries Group
6175 Nancy Ridge Drive, Suite 300 Southern California Regional Office
San Diego, CA 92121 701 B Street, Suite 600
San Diego, CA 92101-8120
GUARANTOR: ALLEN PAULSON
P.O. BOX 9660
RANCHO SANTA FE, CA 92067
</TABLE>
================================================================================
AMOUNT OF GUARANTY. The principal amount of this Guaranty is Three Million Four
Hundred Thousand & 00/100 Dollars ($3,400,000.00).
CONTINUING GUARANTY. For good and valuable consideration, JAMES GILSTRAP
("Guarantor") absolutely and unconditionally guarantees and promises to pay to
Imperial Bank ("Lender"), or its order, in legal tender of the United States of
America, the indebtedness (as that term is defined below) of CARDIODYNAMICS
INTERNATIONAL CORPORATION ("Borrower") to Lender on the terms and conditions set
forth in this Guaranty. The obligations of Guarantor under this Guaranty are
continuing.
DEFINITIONS:. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means CARDIODYNAMICS INTERNATIONAL
CORPORATION.
GUARANTOR. The word "Guarantor" means ALLEN PAULSON.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated May 14, 1998.
INDEBTEDNESS. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts and indebtedness to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans, advances,
interest, costs, debts, overdraft indebtedness, credit card indebtedness,
lease obligations, other obligations, and liabilities of Borrower, or any
of them, and any present or future judgments against Borrower, or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the Indebtedness arises from transactions which may be voidable
on account of infancy, insanity, ultra vires, or otherwise.
LENDER. The word "Lender" means Imperial Bank, its successors and assigns.
EXHIBIT 7.x - 1
<PAGE> 2
PAGE 2
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $3,400,000.00,
plus all interest thereon, plus 85% of Lender's costs, expenses and attorneys'
fees incurred in connection with or relating to (a) the collection of the
Indebtedness, (b) the collection and sale of any collateral for the Indebtedness
or this Guaranty, or (c) the enforcement of this Guaranty. Attorneys' fees
include, without limitation, attorneys' fees whether or not there is a lawsuit,
and if there is a lawsuit, any fees and costs for trial and appeals.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of BorrOwer to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, all of the
Indebtedness within the limits set forth in the preceding section of this
Guaranty. Accordingly, no payments made upon the Indebtedness will discharge or
diminish the continuing liability of Guarantor in connection with any remaining
portions of the Indebtedness or any of the Indebtedness which subsequently
arises or is thereafter incurred or contracted. Any married person who signs
this Guaranty hereby expressly agrees that recourse may be had against both his
or her separate property and community property.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be
EXHIBIT 7.x - 2
<PAGE> 3
PAGE 3
considered to be new Indebtedness. This Guaranty shall bind the estate of
Guarantor as to Indebtedness created both before and after the death or
incapacity of Guarantor, regardless of Lender's actual notice of Guarantor's
death. Subject to the foregoing, Guarantor's executor or administrator or other
legal representative may terminate this Guaranty in the same manner in which
Guarantor might have terminated it and with the same effect. Release of any
other guarantor or termination of any other guaranty of the Indebtedness shall
not affect the liability of Guarantor under this Guaranty. A revocation received
by Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty. It is anticipated that fluctuations
may occur in the aggregate amount of Indebtedness covered by this Guaranty, and
it is specifically acknowledged and agreed by Guarantor that reductions in the
amount of Indebtedness, even to zero dollars ($0.00), prior to written
revocation of this Guaranty by Guarantor shall not constitute a termination of
this Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed Indebtedness remains
unpaid and even though the Indebtedness guaranteed may from time to time be zero
dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the Indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or
substantially all interest therein; (f) upon Lender's request, Guarantor will
provide to Lender financial and credit information in form acceptable to Lender,
and all such financial information which currently has been, and all future
financial information which will be
EXHIBIT 7.x - 3
<PAGE> 4
PAGE 4
provided to Lender is and will be true and correct in all material respects and
fairly present the financial condition of Guarantor as of the dates the
financial information is provided; (g) no material adverse change has occurred
in Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (h) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender to (a) make any presentment, protest, demand, or
notice of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional Indebtedness; (b) proceed against
any person, including Borrower, before proceeding against Guarantor; (c) proceed
against any collateral for the Indebtedness, including Borrower's collateral,
before proceeding against Guarantor; (d) apply any payments or proceeds received
against the Indebtedness in any order; (e) give notice of the terms, time and
place of any sale of the collateral pursuant to the Uniform Commercial Code or
any other law governing such sale; (f) disclose any information about the
Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or
about any action or nonaction of Lender; or (g) pursue any remedy or course of
action in Lender's power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (h)
any disability or other defense of Borrower, any other guarantor or surety or
any other person; (i) the cessation from any cause whatsoever, other than
payment in full, of the Indebtedness; (j) the application of proceeds of the
Indebtedness by Borrower for purposes other than purposes understood and
intended by Guarantor and Lender; (k) any act of omission or commission by
Lender which directly or indirectly results in or contributes to the discharge
of Borrower or any other guarantor or surety, or the Indebtedness, or the loss
or release of any collateral by operation of law or otherwise; (l) any statute
of limitations in any action under this Guaranty or on the Indebtedness; or (m)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time payment of the Indebtedness is due and any change in the interest rate, and
including any such modification or change in terms after revocation of this
Guaranty on Indebtedness incurred prior to such revocation.
Guarantor waives all rights and any 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
operation of Section 580d of the California Code of Civil Procedure or
otherwise.
EXHIBIT 7.x - 4
<PAGE> 5
PAGE 5
Guarantor waives all rights and defenses that Guarantor may have because
Borrower's obligation is secured by real property. This means among other
things: (1) Lender may collect from Guarantor without first foreclosing on any
real or personal property collateral pledged by Borrower. (2) If Lender
forecloses on any real property collateral pledged by Borrower: (A) The amount
of Borrower's obligation may be reduced only by the price for which the
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price. (B) Lender may collect from Guarantor even if Lender, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Borrower. This is an unconditional waiver of any rights
and defenses Guarantor may have because Borrower's obligation is secured by real
property. These rights and defenses include, but are not limited to, any rights
and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil
Procedure.
Guarantor understands and agrees that the foregoing waivers are waivers of
substantive rights and defenses to which Guarantor might otherwise be entitled
under state and federal law. The rights and defenses waived include, without
limitation, those provided by California laws of suretyship and guaranty,
anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges
that Guarantor has provided these waivers of rights and defenses with the
intention that they be fully relied upon by Lender. Until all Indebtedness is
paid in full, Guarantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety, or other person, and further,
Guarantor waives any right to participate in any collateral for the Indebtedness
now or hereafter held by Lender.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or
EXHIBIT 7.x - 5
<PAGE> 6
PAGE 6
by any delay in so doing. Every right of setoff and security interest shall
continue in full force and effect until such right of setoff or security
interest is specifically waived or released by an instrument in writing executed
by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
INTEGRATION, AMENDMENT. Guarantor warrants, represents and agrees that
this Guaranty, together with any exhibits or schedules incorporated
herein, fully incorporates the agreements and understandings of
Guarantor with Lender with respect to the subject matter hereof and all
prior negotiations, drafts, and other extrinsic communications between
Guarantor and Lender shall have no evidentiary effect whatsoever.
Guarantor further agrees that Guarantor has read and fully understands
the terms of this Guaranty; Guarantor has had the opportunity to be
advised by Guarantor's attorney with respect to this Guaranty; the
Guaranty fully reflects Guarantor's intentions and parol evidence is not
required to interpret the terms of this Guaranty. Guarantor hereby
indemnifies and holds Lender harmless from all losses, claims, damages,
and costs (including Lender's attorneys' fees) suffered or incurred by
Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph. No alteration or
amendment to this Guaranty shall be effective unless given in writing
and signed by the parties sought to be charged or bound by the
alteration or amendment.
APPLICABLE Law. This Guaranty has been delivered to Lender in the State
of California. If there is a lawsuit, Guarantor agrees upon Lender's
request to submit to the jurisdiction of the courts of Los Angeles
County, State of California. Lender and Guarantor hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Guarantor against the other. (Initial Here AP) This
Guaranty shall be governed by and construed in accordance with the laws
of the State of California.
EXHIBIT 7.x - 6
<PAGE> 7
PAGE 7
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Guaranty. Lender may pay someone else to help enforce this Guaranty, and
Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's attorneys' fees and legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court
costs and such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and, except for revocation notices
by Guarantor, shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier, or when
deposited in the United States mail, first class postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above or to such other addresses as either party may designate to
the other in writing. All revocation notices by Guarantor shall be in
writing and shall be effective only upon delivery to Lender as provided
above in the section titled "DURATION OF GUARANTY." If there is more
than one Guarantor, notice to any Guarantor will constitute notice to
all Guarantors. For notice purposes, Guarantor agrees to keep Lender
informed at all times of Guarantor's current address.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named
in this Guaranty or when this Guaranty is executed by more than one
Guarantor, the words "Borrower" and "Guarantor" respectively shall mean
all and any one or more of them. The words "Guarantor," "Borrower," and
"Lender" include the heirs, successors, assigns, and transferees of each
of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of
this Guaranty. If a court of competent jurisdiction finds any provision
of this Guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and all
provisions of this Guaranty in all other respects shall remain valid and
enforceable. If any one or more of Borrower or Guarantor are
corporations or partnerships, it is not necessary for Lender to inquire
into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
Lender, nor any course of dealing between Lender and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such
EXHIBIT 7.x - 7
<PAGE> 8
PAGE 8
consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the sole discretion
of Lender.
REFERENCE PROVISION. 1. Other than (i) non-judicial foreclosure and all matters
in connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties arising
out of or relating to this document ("Agreement"), which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
(defined as the date on which a party subject to the Agreement gives written
notice to all other parties that a controversy, dispute or claim exists), will
be settled by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
their successor section ("CCP"), which shall constitute the exclusive remedy for
the settlement of any controversy, dispute or claim concerning this Agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP 170.6. The
referee shall (a) be requested to set the matter for hearing within sixty (60)
days after the Claim Date and (b) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final, binding
and conclusive and judgment shall be entered pursuant to CCP 644 in any court in
the State of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for
EXHIBIT 7.x - 8
<PAGE> 9
PAGE 9
trial, shall be conducted without a court reporter, except that when any party
so requests, a court reporter will be used at any hearing conducted before the
referee. The party making such a request shall have the obligation to arrange
for and pay for the court reporter. The costs of the court reporter at the trial
shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
4. In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, 1280 through 1294.2 of the CCP as amended
from time to time. The limitations with respect to discovery as set forth
hereinabove shall apply to any such arbitration proceeding.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED MAY 14, 1998.
GUARANTOR:
/S/ ALLEN PAULSON
- ------------------------------------
ALLEN PAULSON
EXHIBIT 7.x - 9
<PAGE> 1
EXHIBIT 7.y
COMMERCIAL GUARANTY
<TABLE>
<S> <C> <C>
BORROWER: CARDIODYNAMICS INTERNATIONAL LENDER:Imperial Bank
CORPORATION Emerging Growth Industries Group
6175 Nancy Ridge Drive, Suite 300 Southern California Regional Office
San Diego, CA 92121 701 B Street, Suite 600
San Diego, CA 92101-8120
GUARANTOR: JAMES GILSTRAP
5067 SHORE DRIVE
CARLSBAD, CA 92008
</TABLE>
================================================================================
AMOUNT OF GUARANTY. The principal amount of this Guaranty is Six Hundred
Thousand & 00/100 Dollars ($600,000.00).
CONTINUING GUARANTY. For good and valuable consideration, JAMES GILSTRAP
("Guarantor") absolutely and unconditionally guarantees and promises to pay to
Imperial Bank ("Lender"), or its order, in legal tender of the United States of
America, the indebtedness (as that term is defined below) of CARDIODYNAMICS
INTERNATIONAL CORPORATION ("Borrower") to Lender on the terms and conditions set
forth in this Guaranty. The obligations of Guarantor under this Guaranty are
continuing.
DEFINITIONS:. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means CARDIODYNAMICS INTERNATIONAL
CORPORATION.
GUARANTOR. The word "Guarantor" means JAMES GILSTRAP.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated May 14, 1998.
INDEBTEDNESS. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts and indebtedness to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans, advances,
interest, costs, debts, overdraft indebtedness, credit card indebtedness,
lease obligations, other obligations, and liabilities of Borrower, or any
of them, and any present or future judgments against Borrower, or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the Indebtedness arises from transactions which may be voidable
on account of infancy, insanity, ultra vires, or otherwise.
LENDER. The word "Lender" means Imperial Bank, its successors and assigns.
EXHIBIT 7.y - 1
<PAGE> 2
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $600,000.00, plus
all interest thereon, plus 15% of Lender's costs, expenses and attorneys' fees
incurred in connection with or relating to (a) the collection of the
Indebtedness, (b) the collection and sale of any collateral for the Indebtedness
or this Guaranty, or (c) the enforcement of this Guaranty. Attorneys' fees
include, without limitation, attorneys' fees whether or not there is a lawsuit,
and if there is a lawsuit, any fees and costs for trial and appeals.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, all of the
Indebtedness within the limits set forth in the preceding section of this
Guaranty. Accordingly, no payments made upon the Indebtedness will discharge or
diminish the continuing liability of Guarantor in connection with any remaining
portions of the Indebtedness or any of the Indebtedness which subsequently
arises or is thereafter incurred or contracted. Any married person who signs
this Guaranty hereby expressly agrees that recourse may be had against both his
or her separate property and community property.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be
EXHIBIT 7.y - 2
<PAGE> 3
considered to be new Indebtedness. This Guaranty shall bind the estate of
Guarantor as to Indebtedness created both before and after the death or
incapacity of Guarantor, regardless of Lender's actual notice of Guarantor's
death. Subject to the foregoing, Guarantor's executor or administrator or other
legal representative may terminate this Guaranty in the same manner in which
Guarantor might have terminated it and with the same effect. Release of any
other guarantor or termination of any other guaranty of the Indebtedness shall
not affect the liability of Guarantor under this Guaranty. A revocation received
by Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty. It is anticipated that fluctuations
may occur in the aggregate amount of Indebtedness covered by this Guaranty, and
it is specifically acknowledged and agreed by Guarantor that reductions in the
amount of Indebtedness, even to zero dollars ($0.00), prior to written
revocation of this Guaranty by Guarantor shall not constitute a termination of
this Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed Indebtedness remains
unpaid and even though the Indebtedness guaranteed may from time to time be zero
dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the Indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or
substantially all interest therein; (f) upon Lender's request, Guarantor will
provide to Lender financial and credit information in form acceptable to Lender,
and all such financial information which currently has been, and all future
financial information which will be
EXHIBIT 7.y - 3
<PAGE> 4
provided to Lender is and will be true and correct in all material respects and
fairly present the financial condition of Guarantor as of the dates the
financial information is provided; (g) no material adverse change has occurred
in Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (h) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender to (a) make any presentment, protest, demand, or
notice of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional Indebtedness; (b) proceed against
any person, including Borrower, before proceeding against Guarantor; (c) proceed
against any collateral for the Indebtedness, including Borrower's collateral,
before proceeding against Guarantor; (d) apply any payments or proceeds received
against the Indebtedness in any order; (e) give notice of the terms, time and
place of any sale of the collateral pursuant to the Uniform Commercial Code or
any other law governing such sale; (f) disclose any information about the
Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or
about any action or nonaction of Lender; or (g) pursue any remedy or course of
action in Lender's power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (h)
any disability or other defense of Borrower, any other guarantor or surety or
any other person; (i) the cessation from any cause whatsoever, other than
payment in full, of the Indebtedness; (j) the application of proceeds of the
Indebtedness by Borrower for purposes other than purposes understood and
intended by Guarantor and Lender; (k) any act of omission or commission by
Lender which directly or indirectly results in or contributes to the discharge
of Borrower or any other guarantor or surety, or the Indebtedness, or the loss
or release of any collateral by operation of law or otherwise; (l) any statute
of limitations in any action under this Guaranty or on the Indebtedness; or (m)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time payment of the Indebtedness is due and any change in the interest rate, and
including any such modification or change in terms after revocation of this
Guaranty on Indebtedness incurred prior to such revocation.
Guarantor waives all rights and any 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
operation of Section 580d of the California Code of Civil Procedure or
otherwise.
EXHIBIT 7.y - 4
<PAGE> 5
Guarantor waives all rights and defenses that Guarantor may have because
Borrower's obligation is secured by real property. This means among other
things: (1) Lender may collect from Guarantor without first foreclosing on any
real or personal property collateral pledged by Borrower. (2) If Lender
forecloses on any real property collateral pledged by Borrower: (A) The amount
of Borrower's obligation may be reduced only by the price for which the
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price. (B) Lender may collect from Guarantor even if Lender, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Borrower. This is an unconditional waiver of any rights
and defenses Guarantor may have because Borrower's obligation is secured by real
property. These rights and defenses include, but are not limited to, any rights
and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil
Procedure.
Guarantor understands and agrees that the foregoing waivers are waivers of
substantive rights and defenses to which Guarantor might otherwise be entitled
under state and federal law. The rights and defenses waived include, without
limitation, those provided by California laws of suretyship and guaranty,
anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges
that Guarantor has provided these waivers of rights and defenses with the
intention that they be fully relied upon by Lender. Until all Indebtedness is
paid in full, Guarantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety, or other person, and further,
Guarantor waives any right to participate in any collateral for the Indebtedness
now or hereafter held by Lender.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or
EXHIBIT 7.y - 5
<PAGE> 6
by any delay in so doing. Every right of setoff and security interest shall
continue in full force and effect until such right of setoff or security
interest is specifically waived or released by an instrument in writing executed
by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
INTEGRATION, AMENDMENT. Guarantor warrants, represents and agrees that
this Guaranty, together with any exhibits or schedules incorporated
herein, fully incorporates the agreements and understandings of
Guarantor with Lender with respect to the subject matter hereof and all
prior negotiations, drafts, and other extrinsic communications between
Guarantor and Lender shall have no evidentiary effect whatsoever.
Guarantor further agrees that Guarantor has read and fully understands
the terms of this Guaranty; Guarantor has had the opportunity to be
advised by Guarantor's attorney with respect to this Guaranty; the
Guaranty fully reflects Guarantor's intentions and parol evidence is not
required to interpret the terms of this Guaranty. Guarantor hereby
indemnifies and holds Lender harmless from all losses, claims, damages,
and costs (including Lender's attorneys' fees) suffered or incurred by
Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph. No alteration or
amendment to this Guaranty shall be effective unless given in writing
and signed by the parties sought to be charged or bound by the
alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender in the State
of California. If there is a lawsuit, Guarantor agrees upon Lender's
request to submit to the jurisdiction of the courts of Los Angeles
County, State of California. Lender and Guarantor hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Guarantor against the other. (Initial Here JCG) This
Guaranty shall be governed by and construed in accordance with the laws
of the State of California.
EXHIBIT 7.y - 6
<PAGE> 7
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Guaranty. Lender may pay someone else to help enforce this Guaranty, and
Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's attorneys' fees and legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court
costs and such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and, except for revocation notices
by Guarantor, shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier, or when
deposited in the United States mail, first class postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above or to such other addresses as either party may designate to
the other in writing. All revocation notices by Guarantor shall be in
writing and shall be effective only upon delivery to Lender as provided
above in the section titled "DURATION OF GUARANTY." If there is more
than one Guarantor, notice to any Guarantor will constitute notice to
all Guarantors. For notice purposes, Guarantor agrees to keep Lender
informed at all times of Guarantor's current address.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named
in this Guaranty or when this Guaranty is executed by more than one
Guarantor, the words "Borrower" and "Guarantor" respectively shall mean
all and any one or more of them. The words "Guarantor," "Borrower," and
"Lender" include the heirs, successors, assigns, and transferees of each
of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of
this Guaranty. If a court of competent jurisdiction finds any provision
of this Guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and all
provisions of this Guaranty in all other respects shall remain valid and
enforceable. If any one or more of Borrower or Guarantor are
corporations or partnerships, it is not necessary for Lender to inquire
into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
Lender, nor any course of dealing between Lender and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such consent by
Lender in any instance shall not constitute continuing consent to
subsequent
EXHIBIT 7.y - 7
<PAGE> 8
instances where such consent is required and in all cases such consent
may be granted or withheld in the sole discretion of Lender.
REFERENCE PROVISION. 1. Other than (i) non-judicial foreclosure and all matters
in connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties arising
out of or relating to this document ("Agreement"), which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
(defined as the date on which a party subject to the Agreement gives written
notice to all other parties that a controversy, dispute or claim exists), will
be settled by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
their successor section ("CCP"), which shall constitute the exclusive remedy for
the settlement of any controversy, dispute or claim concerning this Agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP 170.6. The
referee shall (a) be requested to set the matter for hearing within sixty (60)
days after the Claim Date and (b) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final, binding
and conclusive and judgment shall be entered pursuant to CCP 644 in any court in
the State of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a
EXHIBIT 7.y - 8
<PAGE> 9
request shall have the obligation to arrange for and pay for the court reporter.
The costs of the court reporter at the trial shall be borne equally by the
parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
4. In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, 1280 through 1294.2 of the CCP as amended
from time to time. The limitations with respect to discovery as set forth
hereinabove shall apply to any such arbitration proceeding.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED MAY 14, 1998.
GUARANTOR:
/S/ JAMES GILSTRAP
- -------------------------------------
JAMES GILSTRAP
EXHIBIT 7.y - 9
<PAGE> 1
EXHIBIT 7.z
Agreement of Joint Filing
The undersigned hereby agree that they are filing jointly
pursuant to Rule 13d-1(f)(1) of the Securities Exchange Act of 1934, as amended,
the Statement dated September 29, 1998 containing the information required by
Schedule 13D, for the shares of Common Stock of CardioDynamics International
Corporation, held by CardioDynamics Holdings, LLC, a California limited
liability company, and by the undersigned individuals.
September 29, 1998 CARDIODYNAMICS HOLDINGS, LLC
By: /s/ Allen Paulson
--------------------------------------
Allen Paulson, Member
By: /s/ James Gilstrap
--------------------------------------
James Gilstrap, Member
/s/ Allen Paulson
--------------------------------------
ALLEN PAULSON
/s/ James Gilstrap
--------------------------------------
JAMES GILSTRAP
/s/ Nicholas Diaco
--------------------------------------
NICHOLAS DIACO
/s/ Joseph Diaco
--------------------------------------
JOSEPH DIACO
EXHIBIT 7.z - 1
