SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 27, 2000
MEDICORE, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-6906 59-0941551
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2337 West 76th Street, Hialeah, Florida 33016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 558-4000
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<PAGE>
Item 5. Other Events
Linux Fund Investment
The Company has formed a new division with the intended purpose of
incubating and investing in new technologies, including Internet technology.
In this connection, the Company has acquired a 6% interest in The Linux Fund
and has loaned that company $1,500,000 at an annual interest rate of 10%. The
financing to The Linux Fund may be increased an additional $500,000 at the
Company's discretion, with the Company having the right to acquire an addi-
tional 2% ownership.
The Linux Fund is a private holding company investing in Linux related
software companies. The financing provided to The Linux Fund is being used
to secure its position and ownership interests in these Linux software
companies. The Company's financing is secured by those ownership interests,
together with other Linux investors.
Linux is a freely distributable, independent operating system with
stability and scalability. Linux is the only operating system that has the
ability to work fluently with other computers using outdated processors.
Therefore, the Linux system is ideal for applications within school systems
and governments, and for individual desktop users and businesses which are
financially unable to upgrade their operating system every time a new
processor becomes available. The Linux system greatly enhances the life of
a computer. The Linux process is also used in a multitude of chips and other
technologies.
The Linux Fund has identified the five primary Linux software areas:
applications, utilities, embedded systems, developer's tools, and games, and
it currently holds equity positions in each area. The Linux Fund offers our
Company the ability to become involved in an exciting and potentially
lucrative area with all the attendant risks of investing in new develop-
mental enterprises. The Linux Fund, through its investments, intends to
expand Linux applications and make Linux accessible to millions of qualified
individuals who would otherwise not have the knowledge or ability to be
involved in this revolutionary operating system.
Recently, The Linux Fund established an equity investment in Helix Code,
Inc., a company led by two of the industry's more talented programmers, Miguel
de Icaza and Nat Friedman, and includes an assembled group of some of the top
Linux programmers. Helix Code believes it is creating an application suite
capable of surpassing Microsoft Office in features, stability, and ease of
use, and is one of the key software companies that The Linux Fund believes
will radically alter the current computer marketplace.
The Company borrowed the funding it provided to The Linux Fund from its
68% owned public subsidiary, Dialysis Corporation of America ("DCA") at an
interest rate of 10% per annum. DCA has a proposed merger with an Internet
company, MainStreet IPO.com Inc. ("MainStreet"), which company has a website
to provide issuers with the facilities to make direct public offerings (self-
underwritten) of their securities to the public via a Dutch Auction, a
process that allows the public to bid on initial public offerings at the
prices they believe worth investing. MainStreet and The Linux Fund have a
joint venture, The Linux Fund IPO.com, which will provide the website
facilities for the Linux companies in which The Linux Fund has invested to
offer their securities in direct public offerings under a Dutch Auction at
such time as they may determine to engage in public financing. There are
pending discussions with the Securities and Exchange Commission as to whether
MainStreet is subject to registration as a broker-dealer under the Securities
Exchange Act of 1934, and, if so, whether MainStreet would have to restruc-
ture its operations if it wished to proceed without such registration.
<PAGE>
Revolving Line
The Company entered into a $350,000 line of credit at an interest rate
of 1% over the prime rate through April 22, 2001. The loan is secured by
the accounts receivable and inventory of the Company's medical products
division. Initial funding was approximately $58,000 on February 10, 2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Not Applicable
(b) Pro Forma Financial Information
Not Applicable
(c) Exhibits
(10) Material Contracts
10.1 Secured Promissory Note for $1,500,000 from The Linux
Fund, Inc. to Medicore, Inc. dated January 27, 2000.
10.2 Investment and Loan Agreement between Medicore, Inc. and
The Linux Fund, Inc. dated January 27, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDICORE, INC.
/s/ Thomas K. Langbein
By----------------------------------
THOMAS K. LANGBEIN, Chairman
of the Board, CEO and President
Dated: February 10, 2000
SECURED PROMISSORY NOTE
$1,500,000.00 January 27, 2000
FOR VALUE RECEIVED, the undersigned, The Linux Fund, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of Medicore,
Inc., a Florida corporation, or its successors and assigns (hereinafter, with
any subsequent holder, the "Holder"), at its principal offices located at
2337 West 76th Street, Hialeah, Florida 33016, or at such other place or to
such other party as the holder of this Note may from time to time designate
in writing, the principal sum of One Million Five Hundred Thousand Dollars
($1,500,000.00) together with interest on the principal balance outstanding
from time to time at the fixed rate of ten percent (10%) per annum, computed
daily. All payments hereunder shall be made in lawful currency of the United
States and in immediately available funds. Interest shall be calculated on
the basis of the actual number of days elapsed over a 360-day year. Except
as otherwise defined herein, all capitalized terms shall have the meanings
ascribed to them in the Loan Agreement (as herein defined).
1. Loan Agreement. This Secured Promissory Note (the "Note") is being
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issued under and is entitled to the benefits of the Investment and Loan
Agreement dated as of January 27, 2000 (the "Loan Agreement"), to which
Loan Agreement reference is hereby made for a statement of the rights in
respect thereto of the Holder of this Note.
This Note will be secured by the collateral identified and described in
Section 1.2 of the Loan Agreement (the "Collateral"), to which section
reference is hereby made for a statement of the rights in respect thereto of
the Holder of this Note.
2. Payments/Maturity Date. Unless sooner paid in full, the entire
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unpaid principal of this Note, together with all accrued, but unpaid,
interest and all other fees, costs, and charges, if any, shall be due and
payable in full on January 26, 2001 (the "Maturity Date"). No payments of
principal or interest are required hereunder until the Maturity Date except
as otherwise provided herein. If any amounts due under this Note are due on
a day which is not a business day, then such amounts shall be due on the next
following day which is a regular business day.
3. Purpose. The Company shall use the principal of the loan solely
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for the purpose of perfecting its interest and investment in Helix Code, Inc.
("Helix") and for no other purpose except upon prior written approval of the
Holder.
4. Application of Payments. All payments on account of the indebted-
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ness evidenced by this Note prior to demand or acceleration shall be applied
first, to any and all costs, expenses, or charges then owed the Holder by
the Company, including but not limited to any costs incurred by the Holder
under any other document executed as Collateral security for this Note;
second, to accrued and unpaid interest; third, to the payment of late
charges provided herein; and the balance to the unpaid principal until the
full amount of principal and interest has been paid in
<PAGE>
full. All payments so received after demand or acceleration shall be
applied in such manner as the Holder may determine in its sole and absolute
discretion.
5. Costs of Collections. If all sums due under this Note are not paid
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in full when due, Company agrees to pay, in addition to the sums due here-
under, all costs of collection (including reasonable attorneys' fees and
expenses), whether suit be brought or not.
6. No Reborrowing. All amounts that are borrowed and repaid by the
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Company hereunder shall not be available for reborrowing.
7. Prepayment/Acceleration.
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(a) Amounts borrowed hereunder together with all accrued interest
thereon may be prepaid at any time prior to the Maturity Date.
(b) In addition, the principal and accrued interest hereunder
shall, at Holder's option, become immediately due and payable if, prior to
the Maturity Date, there is either (i) a closing of an initial public
offering of the Company's Common Stock pursuant to a registration statement
declared effective or other qualified public offering under the Securities
Act of 1933, as amended, or (ii) a completion by the Company of a financing
transaction in which the aggregate proceeds to the Company exceed $8,000,000.
8. Certain Default Remedies.
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(a) Upon the occurrence of any event constituting an Event of
Default under the terms of the Loan Agreement, the entire balance of the
principal and interest upon this Note then owing and unpaid, at the option
of the Holder, shall immediately become due and payable. Delay on the part
of the Holder of this Note in execution of the right to declare this obliga-
tion due shall not be a waiver thereof. In addition, Holder shall have all
other rights and remedies available under law.
(b) Following an acceleration in accordance with this section, the
Company shall pay, in addition to the principal and interest due and payable
hereon, all costs and expenses of any nature, whether incurred in or out of
court, whether incurred before or after the Note becomes due at its Maturity
Date or otherwise, whether in law, equity, or in bankruptcy, receivership or
any other proceeding (including, but not limited to, reasonable attorneys'
fees and expenses) which Holder may deem necessary or proper in connection
with the collection of any of the sums due Holder under this Note and the Loan
Agreement, or any related documents and transactions.
(c) In connection with an Event of Default and an action by the
Holder with respect to the Collateral (an "Action"), the Collateral shall be
valued at fair market value at the Date of Default, and subject to subpara-
graph (d), Holder shall be entitled to receive such number of shares of the
Company's interests in each of the companies represented in the Collateral,
pro rata among such companies, as is equivalent to all amounts due hereunder.
If the Company and the Holder are unable to agree on the fair market value of
any of the Collateral, the parties shall
<PAGE> 2
submit such dispute to binding arbitration under the rules of the American
Arbitration Association.
(d) Notwithstanding anything contained herein to the contrary, upon
an Event of Default, the Holder shall be entitled to receive the greater of
(i) all sums due under this Note and the Loan Agreement, whether in the form
of cash, Collateral or any combination thereof, or (ii) 50% of the interest
of the Company's holdings of each of the companies represented within the
Collateral. The Collateral shall be free and clear of all liens, encum-
brances and security interests of any kind whatsoever ("Liens"), and shall
not be subject to any options, warrants or rights ("Rights") in and to any
other party; and the Company shall take whatever action is necessary to
remove any Liens and Rights with respect to the Collateral at its sole
expense and cost, and to the extent necessary, the Holder may but is not
obligated to take any and all action to obtain the Collateral free of any
Liens and Rights, and any such costs and expenses to accomplish that result,
including attorney's fees and expenses, will be included in the indebtedness
due Holder from the Company under this Note; provided, Holder acknowledges
that the Company may borrow additional funds from other parties, who will
also have an interest in the Collateral, which may be reflected by a col-
lateralized pool with such other prospective lenders, but such sharing of
interests in the Collateral shall not be of greater priority than the Holder
has, and only shall be effective up to the Company's borrowing of an addi-
tional $8,000,000, and Holder shall have a superior Lien to any lender's
financing and/or liens in excess of $8,000,000.
9. Default Interest Rate. Upon the occurrence, and during the contin-
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uance of, an Event of Default, the rate of interest accruing on the unpaid
principal balance hereof and accrued interest thereon shall be increased to
a fixed rate of fifteen percent (15%) per annum.
10. Maximum Rate of Interest. This Note is subject to the express
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condition that at no time shall the Company be obligated or required to pay
interest hereunder at a rate that could subject the Company to either civil
or criminal liability as a result of being in excess of the maximum rate
which the Company is permitted by law to contract or agree to pay. If, by
the terms of this Note, the Company is at any time required or obligated to
pay interest at a rate in excess of such maximum rate, the rate of interest
under this Note shall be deemed to be immediately reduced to such maximum
rate and interest payable hereunder shall be computed at such maximum rate
and the portion of all prior interest payments in excess of such maximum
rate shall be applied and shall be deemed to have been payments in reduction
of the principal balance of this Note.
11. Waivers. All parties to the transaction evidenced by this Note
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hereby jointly and severally waive all exemption rights, whether under any
state constitution, homestead exemption or otherwise, and also jointly and
severally waive demand, presentment for payment, notice of dishonor, protest
valuation and appraisal, notice of protest, notice of dishonor, and any
other notice required to be given by law in connection with the delivery,
acceptance, performance, default or enforcement of this Note, and consent to
all forbearance or waiver of any term hereof or release or discharge by the
Holder hereof of the Company, substitution or exchange of any security for
the payment hereof or the failure to act on the part of the Holder or any
other
<PAGE> 3
indulgence shown by the Holder from time to time, in one or more instances
(without notice to or further assent from the Company) and the Company agrees
that no such action, failure to act or failure to exercise any right or
remedy on the part of the Holder shall in any way affect or impair the obli-
gations of the Company hereunder or be construed as a waiver by the Holder of
or otherwise affect any of the Holder's rights under this Note, under any
endorsement or guaranty of this Note, or under any document or instrument
evidencing any security for payment of this Note, and the Company expressly
agrees that the Maturity Date hereof may be extended from time to time by the
written consent of the Holder without in any way affecting the liability of
the Company.
12. Governing Law. This Note shall be governed by, and construed in
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accordance with, the laws of the State of New York.
13. Severability. In the event any one or more of the provisions
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contained in this Note shall, for any reason, be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or unenforce-
ability shall not affect any other provision of this Note and this Note shall
be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein.
14. No Oral Modifications or Waivers. This Note may not be changed
--------------------------------
orally, but only by an agreement in writing signed by the parties against
whom enforcement of any waiver, change, modification or discharge is sought.
15. Due Authority and Enforceability. The representative of the Company
--------------------------------
subscribing below represents that he or she has full power, authority and
legal right to execute and deliver this Note and that the debt hereunder con-
stitutes a valid and binding obligation of Company.
16. CONFESSION OF JUDGMENT. IF THIS NOTE IS NOT PAID WHEN DUE AND AFTER
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THE EXPIRATION WITHOUT CURE OF ANY GRACE PERIODS, THE COMPANY HEREBY IRRE-
VOCABLY AUTHORIZES ANY CLERK OF ANY COURT OF RECORD OR ANY ATTORNEY TO ENTER
IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, OR ANY OTHER
STATE OR TERRITORY OF THE UNITED STATES, JUDGMENT BY CONFESSION AGAINST THE
COMPANY AND IN FAVOR OF THE HOLDER OF THIS NOTE FOR THE ENTIRE AMOUNT OF THIS
NOTE THEN REMAINING UNPAID (INCLUDING PRINCIPAL, ACCRUED INTEREST AND LATE
CHARGES), TOGETHER WITH REASONABLE ATTORNEY'S FEES AND COURT COSTS, WITHOUT
ISSUANCE OR SERVICE OF PROCESS, STAY OF EXECUTION OR RIGHT OF APPEAL, AND
EXPRESSLY WAIVING THE BENEFIT OF ALL EXEMPTION LAWS (WHETHER BY STATE CONSTI-
TUTION, HOMESTEAD EXEMPTION OR OTHERWISE) AND ALL IRREGULARITY OR ERROR IN
ENTERING SAID JUDGMENT OR THE EXECUTION THEREON AND ALL RIGHTS OF APPEAL AND
STAYS OF EXECUTION, AND WILL REPRESENT A DEBT JUSTLY DUE THE HOLDER. NO
SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT SHALL BE DEEMED
TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY
COURT TO BE INVALID, VOIDABLE OR
<PAGE> 4
VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED, AND IT MAY BE EXERCISED FROM
TIME TO TIME AS OFTEN AS THE HOLDER OF THIS NOTE SHALL ELECT, UNTIL SUCH TIME
AS THE HOLDER OF THIS NOTE SHALL HAVE RECEIVED PAYMENT IN FULL OF ALL INDEBT-
EDNESS OF THE COMPANY TO THE HOLDER OF THIS NOTE UNDER THE TERMS HEREOF. THE
EXECUTION OF THIS NOTE WILL BE DEEMED THE EXECUTION OF THE AFFIDAVIT OF
CONFESSION OF JUDGMENT FOR ENTRY OF THE JUDGMENT WHICH HOLDER MAY ENFORCE IN
ANY COURT OF COMPETENT JURISDICTION.
17. WAIVER OF JURY TRIAL. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
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AND INTENTIONALLY WAIVES THE RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, OR IN CONNECTION WITH THIS NOTE,
THE LOAN AGREEMENT AND RELATED DOCUMENTS. THIS PROVISION WAS SPECIFICALLY
BARGAINED FOR AND IS A MATERIAL INDUCEMENT FOR THE HOLDER TO EXTEND CREDIT
AND MAKE THE LOAN TO THE COMPANY.
18. Assignment. This Note and the obligations hereunder may not be
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assigned by the Company without the prior written consent of the Holder.
19. Binding Effect. This Note shall be binding upon the Company and
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its successors and assigns and shall inure to the benefit of the Holder and
its successors and assigns.
20. Headings. The headings in this Note are for convenience of
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reference only and shall not define or limit any terms or provisions hereof.
{signature on next page}
<PAGE> 5
IN WITNESS WHEREOF, the Company has duly executed this Note as of the
day and year first above written.
ATTEST: COMPANY:
THE LINUX FUND, INC., a Delaware
corporation
/s/ Lawrence E. Jaffe /s/ Wm. Jay Roseman
- --------------------------------- By:---------------------------(SEAL)
Name: Wm. Jay Roseman
Title: Co-chairman
STATE OF NEW JERSEY )
) SS:
COUNTY OF BERGEN )
The foregoing instrument was acknowledged before me this 27 day of
January, 2000 by Wm. Jay Roseman, the Co-Chairman of Linux Fund, Inc., a
Delaware corporation, on behalf of the corporation.
/s/ Nancy A. Cox
---------------------------------
Notary Public
NANCY A. COX
Notary Public of New Jersey
My Commission Expires march 6, 2000
INVESTMENT AND LOAN AGREEMENT
THIS INVESTMENT AND LOAN AGREEMENT ("Agreement"), dated January 27, 2000, is
between THE LINUX FUND, INC., a Delaware corporation ("Borrower"), whose
mailing address is 177 East 79th Street, New York, New York 10021, and
MEDICORE, INC., a Florida corporation ("Lender"), whose mailing address is
2337 West 76th Street, Hialeah, Florida 33016.
1. Definitions. As used herein, the following terms, when initial
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capital letters are used, shall have the respective meanings set forth
below. In addition, all terms defined in the Uniform Commercial Code as
adopted in New York shall have the meanings given therein unless otherwise
defined herein.
1.1 Affiliate shall mean any person, company or business entity con-
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trolling, controlled by or under common control with, Borrower, whether such
common control is direct or indirect, including all of the partners,
officers, directors and principal shareholders of Borrower.
1.2 Collateral shall mean (a) all of the Borrower's right, title and
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interest in and to all securities of Helix Code, Inc., Linux Utility Company,
GNU Money, Inc., TreLOS, Inc., Heimdall, Codeweavers, Inc., KT Tech, and
Linux Magazines, and any other entity, corporation and business in which
Borrower shall hereinafter obtain any such right, title and interest of any
kind; (b) all instruments, documents, securities, and the proceeds of any of
the foregoing, owned by the Borrower or in which it has or may hereafter
acquire an interest; (c) all ledger sheets, files, records, documents,
blueprints, drawings and instruments (including, without limitation, computer
programs, tapes and related electronic data processing software) evidencing
an interest in or relating to the foregoing; and (d) all proceeds and
products of the collateral described above, including, without limitation,
all claims against third parties for damage to or loss or destruction of any
of the foregoing, including insurance proceeds, and accounts, contract rights,
chattel paper and general intangibles arising out of any sale, lease or other
disposition of any of the foregoing.
1.3 Event of Default shall mean any event described in Section 10.
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1.4 Loan shall have the meaning set forth in Section 3.1.
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1.5 Loan Documents shall mean this Agreement and the Note (as defined
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herein), and all other documents executed in connection with the Loan.
1.6 Note shall mean the Secured Promissory Note dated January 27, 2000
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evidencing the Loan under this Agreement.
1.7 Obligations shall mean, without limitation, the Loan (as defined in
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Section 3) and all other debts, obligations, or liabilities of every kind and
description of Borrower to Lender, now due or to become due, direct or
indirect, absolute or contingent, presently existing or hereafter arising,
joint or several, secured or unsecured, including, without limitation, any
Loan by renewal or extension, all payments of principal, interest and other
amounts due under the Note, all indebtedness
<PAGE>
of Borrower to Lender, all undertakings to take or refrain from taking any
action and all indebtedness, liabilities and obligations owing from Borrower
to others which Lender may obtain by purchase, negotiation, discount, assign-
ment or otherwise, all costs incurred by Lender to obtain, preserve and/or
enforce the security interests granted by this Agreement, to collect the
Obligations, and to maintain and preserve the Collateral, with such costs
including, but not limited to, expenditures made by the Lender for taxes,
assessments, insurance premiums, reasonable attorneys' fees and other legal
expenses, and expenses of sale, together with interest on the above amounts
at the highest rate being paid by Borrower on any of its Obligations, all of
which Borrower agrees to pay to Lender. Obligations shall also include all
interest and other charges chargeable to the Borrower or due from the
Borrower to the Lender from time to time and all costs and expenses referred
to in Section 11.
2. Investment.
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2.1 Investment in Borrower. Lender hereby acquires 90 shares of
----------------------
Borrower's common stock ("Shares") at $1.00 per share for an aggregate
purchase price of $90.00 ("Investment"), representing a 6% ownership
interest in the Borrower; and in consideration for which Investment the
Lender is making the Loan under this Agreement. Should Lender increase the
Loan in accordance with Section 3.4 of this Agreement, Lender shall be
entitled to acquire and Borrower shall sell, transfer, assign and convey to
Lender, subject to Section 9, an additional 30 shares representing an
additional 2% of Borrower at $1.00 per share for an aggregate purchase price
of $30.00, thereby providing Lender with an 8% ownership interest in Borrower.
3. Loan and Interest.
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3.1 Loan. The Lender hereby makes a loan of $1,500,000 to the Borrower
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for a term of one (1) year at an annual interest rate of 10%, as more par-
ticularly defined in the Note and in this Agreement.
3.2 Loan Payments. All payments of the Obligations shall be made by the
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Borrower to the Lender in immediately available funds at its principal office
in Hialeah, Florida, or at such other place as the Lender may designate in
writing, at such times as shall be set forth herein or in the Note.
3.3 Loan Purpose. Borrower agrees to use the proceeds of the Loan solely
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for the purpose of perfecting its interest and investment in Helix Code, Inc.,
and for no other purpose except upon prior written approval of the Lender.
3.4 Option to Increase the Loan. Lender, at its sole option, shall
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have the right within ninety (90) days from the date of this Agreement to
increase the amount of the Loan by an amount up to $500,000 for an aggregate
credit facility to Borrower of $2,000,000. Any exercise of such option by
Lender will require Borrower to sell an additional 30 Shares to Lender at
$1.00 per share in accordance with Section 2.1 of this Agreement.
<PAGE> 2
4. Security.
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4.1 Grant of Security Interest. To secure the payment and performance
--------------------------
of all of the Obligations, as herein defined, the Borrower hereby grants,
assigns, pledges and transfers to the Lender a continuing security interest
in and assigns to the Lender all of the Collateral. The security interest
granted hereby shall constitute a first and best lien on the Collateral;
provided, Lender acknowledges that the Borrower may borrow additional funds
from other parties, who will also have an interest in the Collateral, which
may be reflected by a collateralized pool with such other prospective lenders,
but such sharing of interests in the Collateral shall not be of greater
priority than the Lender has, and only shall be effective up to the
Borrower's borrowing of an additional $8,000,000, and Lender shall have a
superior Lien to any lender's financing and/or liens in excess of $8,000,000.
The security interest may be evidenced by certain UCC-1 Financing Statements
to be recorded by Lender with the applicable filing offices.
5. Representations and Warranties of the Borrower. The Borrower hereby
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represents and warrants to the Lender that:
5.1 Organization and Authority. (a) The Borrower is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State
of its incorporation and has the corporate power and authority to conduct its
business as now conducted and as proposed to be conducted while this Agree-
ment is in effect; (b) the execution and delivery of this Agreement and the
Note and other Loan Documents and the performance of the transactions contem-
plated hereby and thereby are within the corporate authority of the Borrower
and have been duly authorized by all proper and necessary corporate action;
(c) the execution and delivery of this Agreement, the Note, and other Loan
Documents and the performance of the transactions contemplated hereby and
thereby will not violate or contravene any provisions of law or the articles
of incorporation or bylaws of the Borrower, or result in a breach or default
in respect of the terms of any other agreement to which the Borrower is a
party or by which it is bound, which breach or default would result in the
creation, imposition or enforcement of any lien against any of the Collateral,
or would have a material adverse affect on the conduct of the Borrower's
business as it is now being conducted and proposed to be conducted while
this Agreement is in effect, or would otherwise impair the value of the
security interest granted to the Lender hereunder; and (d) the Borrower is
duly qualified as a foreign corporation and is in good standing and duly
authorized to do business in every jurisdiction where the nature of its
properties or the conduct of its business requires such qualification and
authorization.
5.2 Binding Effect of Documents. The Loan Documents are legal and
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binding obligations of the Borrower enforceable in accordance with their
terms.
5.3 Government Consent. The execution and delivery of this Agreement
------------------
and the Note, and other Loan Documents and the performance of the transac-
tions contemplated hereby and thereby do not require any approval or consent
of any governmental agency or authority, or of any other party.
<PAGE> 3
5.4 Financial Statements. The Borrower has delivered to the Lender
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copies of its balance sheet as of January 19, 2000, prepared by The Linux
Fund, Inc. ("Financial Statements"). All of these Financial Statements are
true and correct, present fairly and completely the financial condition of
Borrower and its subsidiaries in all material respects for the periods
covered therein and are in accordance with the respective books of account
and records of the business which are not reflected in the Financial
Statements described in this Section 5.4.
5.5 No Change in Financial Condition. Since the ending date of the
--------------------------------
Financial Statements described in Section 5.4, there has been no change in
the assets, liabilities, financial condition or operations of the Borrower,
other than changes in the ordinary course of business.
5.6 No Other Liabilities. Except to the extent reflected in the
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Financial Statements described in Section 5.4, the Borrower, as of the date
of this Agreement, does not know or have reasonable grounds to know of any
basis for the assertion against it of any liabilities or obligations of any
nature, direct or indirect, accrued, absolute or contingent, including,
without limitation, liabilities for taxes then due or to become due whether
incurred in respect of or measured by the income of Borrower for any period
prior to the date of this Agreement or arising out of transactions entered
into, or any state of facts existing prior thereto.
5.7 Taxes. The Borrower has filed all federal, state, local and other
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tax returns and reports required to be filed by it, and such returns and
reports are true and correct. The Borrower has paid all taxes, assessments
and other governmental charges lawfully levied or imposed on or against it
or its properties, other than those presently payable without penalty or
interest.
5.8 No Litigation. There is no litigation or proceeding or governmental
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investigation pending or, to the knowledge of the Borrower, threatened
against or relating to the Borrower, its properties or business which is
not reflected in the Financial Statements described in Section 5.4.
5.9 Compliance with Laws. The Borrower is not in violation of or
--------------------
default under any statute, regulation, license, permit, order, writ, injunc-
tion or decree of any government, governmental department, commission, board,
bureau, agency, instrumentality or court, which violation or default would
have a material adverse effect on the business, properties or condition,
financial or otherwise, of the Borrower.
5.10 No Default. The Borrower is not in default under a material order,
----------
writ, judgment, injunction, decree, indenture, agreement, lease or other
instrument or contract, which default would have a material adverse effect
on the business, properties or condition, financial or otherwise, of the
Borrower, or in the performance of any covenants or conditions respecting any
of its indebtedness, and no holder of any indebtedness of the Borrower has
given notice of any asserted default thereunder, and no liquidation or
dissolution of the Borrower and no receivership, insolvency, bankruptcy,
reorganization or other similar proceedings relative to the Borrower or its
properties is pending or, to the knowledge of the Borrower, is threatened
against Borrower.
5.11 Location of Collateral. The Borrower maintains its place of
----------------------
business at 177 East 79th Street, New York, New York 10021, and maintains
its books of account and records, including all records concerning the
Collateral, and maintains its chief executive office only at that address.
The
<PAGE> 4
Collateral shall be held by Lender's Secretary and counsel, Lawrence E. Jaffe,
Esq., in escrow at his offices at 777 Terrace Avenue, Hasbrouck Heights, New
Jersey 07604. Borrower shall provide Lender with executed stock powers
relating to the Collateral transferable to Lender, which shall also be held
in escrow by Mr. Jaffe.
5.12 Title to Collateral. Subject to Section 4.1, the Borrower is and
-------------------
at all times during the term of this Agreement will be the sole owner of
and have good and marketable title to the Collateral, free from all liens,
encumbrances and security interests in favor of any person other than the
Lender, and has full right and power to grant the Lender a security interest
therein, and the security interest granted in the Collateral is a valid
first security interest and will inure to the benefit of the Lender without
further action. All information furnished to Lender concerning the Col-
lateral is and will be complete, accurate and correct in all material
respects when furnished.
5.13 Borrower's Capitalization.
-------------------------
(A) The authorized capital stock of Borrower consists of 1,500 shares
of common stock, no par value per share (the "Common Stock") of which 1,500
shares of Common Stock are issued and outstanding.
(B) The Investment and all of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable, and Borrower has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any shares of its capital stock or
any interest therein or to pay any dividend or make any other distribution
in respect thereof. No person or entity is entitled to any preemptive or
similar right with respect to the issuance of any capital stock of the
Borrower. The Investment and all of the issued and outstanding shares of
Common Stock have been offered, issued and sold by the Borrower in compliance
with applicable federal and state securities laws.
(C) The Shares representing Lender's Investment are free and clear of
all liens, encumbrances and security interests of any kind whatsoever, and
no contemplated subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any of the Shares is
authorized or outstanding; and this representation shall continue and be
deemed made and reconfirmed with respect to any additional Investment and
acquisition of additional Shares by Lender in accordance with Section 2.1 of
this Agreement.
5.14 Name Rights, Licenses, Franchises, etc. Borrower possesses and,
--------------------------------------
so long as any Obligations hereunder remain unpaid, Borrower will continue
to possess all permits, trade memberships, franchises, contracts and
licenses required and all trade mark rights, trade names, trade name rights,
patents, patent rights, and fictitious name rights, domain names, web pages
and Linux IPO.com, all necessary to enable it to conduct the business in
which it is now engaged without conflict with the rights of others. Nothing
in this Section, however, shall prevent Borrower from failing to renew or
from entering into additional permits, trade memberships, franchises,
contracts and licenses or trademark rights, trade names, trade name rights,
patents, patent rights and fictitious name rights if in the judgment of
Borrower reasonably exercised such action is advisable for business purposes
and will not materially and adversely affect the business in which it is
then engaged.
<PAGE> 5
5.15 Accuracy of Representations. No representation or warranty by or
---------------------------
with respect to the Borrower contained herein or in any certificate or other
document furnished by the Borrower pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary to
make such representation or warranty not misleading in light of the circum-
stances under which it was made.
5.16 Representations as Inducement to Lender. The foregoing represen-
tations and warranties are made by the Borrower with the knowledge and
intention that the Lender will rely thereon, and shall survive the execution
and delivery of this Agreement and the making of the Investment and Loan; and
shall be deemed made and reconfirmed and continue to be accurate and true at
such time Lender exercises its option, if at all, to increase its Investment
by acquiring additional Shares and increasing its financing of Borrower in
accordance with Sections 2.1 and 3.4 of this Agreement.
6. Representations and Warranties of the Lender.
--------------------------------------------
6.1 Investment. The Lender is acquiring the Shares for its own account
----------
for investment and not with a view to, or for sale in connection with, any
distribution thereof, or with any present intention of distributing or
selling the same; and, except as contemplated by this Agreement, Lender has
no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. This
representation shall be applicable to any further Investment in Borrower's
Shares in accordance with Section 2.1 of this Agreement.
6.2 Authority. Lender has full power and authority to enter into and to
---------
perform this Agreement in accordance with its terms. Lender represents that
it has not been organized, reorganized or recapitalized specifically for the
purpose of investing in Borrower.
7. Affirmative Covenants. The Borrower covenants and agrees that until
---------------------
all of the Obligations have been paid in full, unless the Lender shall other-
wise consent in writing, it shall:
7.1 Books and Records. Maintain complete and accurate books of account
-----------------
and records pertaining to the Collateral and the operations of the Borrower,
and all such books of account and records shall be kept and maintained at the
location specified in Section 5.11. The Borrower shall not move such books
of account and records or change its chief executive office without giving
the Lender at least 30 days prior written notice.
7.2 Access to Information. Grant the Lender, or its representatives,
---------------------
full and complete access to the Collateral and to all books of account,
records, correspondence and other papers relating to the Collateral during
normal business hours and the right to inspect, examine, verify and make
abstracts from the copies of such books of account, records, correspondence
and other papers, and to investigate such other records, activities and
business of the Borrower as it may deem necessary or appropriate at the time.
<PAGE> 6
7.3 Certificates of CEO. The Chief Executive Officer of Borrower shall
-------------------
provide, within thirty (30) days after the end of each quarterly period, the
following certificates:
(a) A certificate stating that the current financial statements are
complete and correct and fairly represent the financial position of Borrower
as of their respective dates and the results of Borrower's operations for the
periods then ended; and
(b) A certificate stating (i) that Borrower has complied with and is
then in compliance with all terms and covenants of this Agreement, and (ii)
that there exists no Event of Default as defined in this Agreement or in any
Loan Documents, and no event which, with the giving of notice or the lapse of
time, or both, would constitute such an Event of Default.
7.4 Other Information. Furnish to the Lender such other financial and
-----------------
business information and reports in form and substance satisfactory to the
Lender as and when the Lender may from time to time request.
7.5 Maintenance of Existence and Licenses. While this Agreement remains
-------------------------------------
in effect and until the Obligations have been paid in full, (a) maintain its
corporate existence in good standing; (b) make no change in the nature or
character of its business or engage in any business in which it was not
engaged on the date of this Agreement; (c) maintain and keep in full force
and effect all licenses and permits necessary to the proper conduct of its
business; and (d) at the request of Lender, qualify as a foreign corporation
and obtain all requisite licenses and permits in each state (other than the
state of its incorporation) where the Borrower does business.
7.6 Notice of Certain Events. Give prompt notice in writing to the
------------------------
Lender of any Event of Default hereunder, or of any condition which with the
passage of time or the giving of notice or both would give rise to an Event
of Default, and of any development, financial or otherwise, which would
materially adversely affect its business, properties or affairs or the
ability of the Borrower to perform its obligations under this Agreement or
the Note.
7.7 Payment of Taxes. Pay all taxes, assessments or governmental charges
----------------
lawfully levied or imposed on or against it and its properties prior to the
date when such taxes, assessments or charges shall become delinquent, unless
the Borrower shall contest the validity thereof in good faith and shall post
any bond or other security required by applicable law or by the Lender against
the payment thereof.
7.8 Claims Against Borrower. Immediately upon learning thereof, report
-----------------------
to the Lender any matter affecting the value and enforceability or collecti-
bility of any of the Collateral.
7.9 Defense of Collateral. Defend the Collateral and all proceeds
---------------------
therefrom against all claims and demands of all persons at any time claiming
the same or any interest therein and preserve the Collateral free from any
subsequent liens, encumbrances or security interests, and Borrower shall pay
all costs and expenses (including attorneys' fees) incurred in connection
with such defense and preservation.
<PAGE> 7
7.10 Financing Statements. At the request of the Lender, execute and
--------------------
deliver such financing statements, documents and instruments, and perform all
other acts as the Lender deems necessary or desirable, to carry out and
perform the intent and purpose of this Agreement, and pay, upon demand, all
expenses (including attorneys' fees) incurred by the Lender in connection
therewith. A photocopy of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.
7.11 Directorship. At the request of the Lender, elect and appoint
------------
Thomas K. Langbein, Chairman of the Board, CEO and President of the Lender,
as a director of the Borrower.
8. Negative Covenants. The Borrower covenants and agrees that so long
------------------
as this Agreement shall remain in effect and until the Obligations have been
paid in full, unless the Lender shall consent in advance in writing, it shall
not:
8.1 Sale of Assets or Merger. Discontinue its business or liquidate,
------------------------
sell, transfer, directly or indirectly, assign or otherwise dispose of a
material part of its assets or of the Collateral, by sale, merger, consolida-
tion or otherwise.
8.2 Liens and Encumbrances. Sell, assign, pledge, grant or suffer to
----------------------
exist a security interest, lien, mortgage or other encumbrance on any of the
Collateral to any person other than the Lender, or permit any lien, encum-
brance or security interest to attach to any of the Collateral, except in
favor of the Lender.
8.3 Distributions and Dividends. Declare or pay any dividends or make
---------------------------
any other payments on its capital stock, redeem, repurchase or retire any of
its capital stock, or make any other distribution to its stockholders.
8.4 Change in Management or Business. Change its management or make
--------------------------------
any material change in any of its business objectives, purposes and opera-
tions which might in any way adversely affect the repayment of the Loan.
8.5 Change in Ownership. Permit to occur a change in record or bene-
-------------------
ficial ownership of voting stock of Borrower which Lender, in its sole
discretion, deems material with respect to the control over Borrower.
8.6 Transaction with Affiliates. Enter into, or be a party to, any
---------------------------
transaction with any of Borrower's Affiliates, except in the ordinary course
of business and pursuant to the reasonable requirements of Borrower's
business, and upon fair and reasonable terms which are fully disclosed to
Lender and are no less favorable to Borrower than Borrower could obtain in a
comparable arm's length transaction with a person not an Affiliate of
Borrower.
<PAGE> 8
9. Antidilution.
------------
9.1 Maintaining Lender's Interest. Until the Borrower effects a
-----------------------------
registered public offering of any of its securities under the Securities Act
of 1933 ("Public Offering"), the Lender is to continue to have and Borrower
agrees to maintain for Lender a 6% interest (8% interest if the Loan is
increased to $2,000,000 as per Section 3.4) in Borrower. Should Borrower
effect any financing (equity or debt) other than a Public Offering, any
interest representing such financing shall come from the existing outstanding
securities of Borrower as of the date of this Agreement, exclusive of
Lender's interest, as opposed to being derived from Borrower's capital
account, or any other source that would dilute Lender's 6% interest (8%
interest if the Loan is increased to $2,000,000 as per Section 3.4); provided,
to the extent there is any issuance of securities and financings by the
Borrower that dilutes Lender, Borrower and/or its Affiliates shall provide,
transfer, assign, and deliver to Lender sufficient additional interest in
Borrower to maintain Lender's 6% ownership in Borrower (8% interest if the
Loan is increased to $2,000,000 as per Section 3.4).
9.2 Priority Investment Advantage. Notwithstanding anything herein to
-----------------------------
the contrary, and in consideration of Lender making the initial Investment
in and Loan to Borrower, it is agreed and understood as a material inducement
for the Investment and Loan that any financing by the Borrower from the date
of this Agreement until and other than a Public Offering, no matter the
source of the interest accrued in Borrower for such financing, to wit,
whether from Borrower's capital account or the existing owner's or Affiliates
of Borrower as of the date of this Agreement, the financing and issuance of
interest in Borrower shall be deemed dilutive to Lender to the extent the
issuance of an interest in Borrower is equivalent to any percentage excess of
a 3% interest in Borrower for every $1,000,000 of such financing invested in
or loaned to Borrower. The Lender, in such case, will be entitled to an
increase percentage interest in Borrower equivalent to 133% of such percentage
interest from such financing, and Borrower and/or its Affiliates shall use all
due diligence to immediately, upon such non-Public Offering financing,
provide, transfer, assign and convey to Lender such of Borrower's securities
to satisfy the additional interest in Borrower due to Lender as provided
herein.
Example if Lender has 6% of the Shares: Borrower effects a private
financing of $1,500,000 for 8% of Borrower's capital.
Allowable non-dilutive percent is 3% per $1,000,000, or 4.5% for this
example.
Excessive grant of interest: 3.5% (8% - 4.5%)
Lender's interest in Borrower increases to 10.7% (133% x 8%)
Example if Lender has 8% of the Shares: Borrower effects a private
financing of $2,000,000 for 12% of Borrower's capital.
Allowable non-dilutive percent is 3% per $1,000,000, or 6% for this
example.
Excessive grant of interest: 6% (12% - 6%)
Lender's interest in Borrower increases to 16% (133% x 12%)
<PAGE> 9
10. Events of Default and Remedies.
------------------------------
10.1 Event of Default. The following shall constitute Events of Default
----------------
under this Agreement, it being agreed that time is of the essence hereof:
(a) failure of the Borrower to pay when due any of the Obligations; (b) fail-
ure of the Borrower to observe or perform any covenant contained in this
Agreement or in any other agreement between the Borrower and the Lender;
(c) any representation or warranty at any time made by the Borrower to the
Lender orally or in this Agreement or in any other agreement between the
Borrower and the Lender, or in any document or instrument delivered to the
Lender pursuant to this Agreement or any such other agreement is, or becomes,
untrue or misleading in any material respect; (d) acceleration of the
maturity of any of the Obligations; (e) failure of the Borrower after request
by the Lender to furnish financial information or to permit the inspection of
Borrower's books of accounts and records; (g) suspension by the Borrower of
the operation of its present business, or the insolvency of the Borrower, or
the inability of the Borrower to meet its debts as they mature, or its
admission in writing to such effect, or its calling any meeting of all or any
of its creditors or committing any act of bankruptcy, or the filing by or
against the Borrower of any petition under any provision of the Bankruptcy
Act, as amended, or the entry of any judgment or filing of any lien against
the Borrower; (h) there shall occur any material adverse change in the
Borrower's condition or affairs (financial or otherwise); (i) loss, theft,
damage, destruction or encumbrance of any of the Collateral or any levy,
seizure or attachment thereof.
10.2 Rights of Lender upon Default. Upon the occurrence of an Event of
-----------------------------
Default described in Section 10.1, the Lender at its option may: (a) declare
the Obligations of the Borrower immediately due and payable, without
presentment, notice, protest or demand of any kind for the payment of all or
any part of the Obligations (all of which are expressly waived by Borrower)
and exercise all of its rights and remedies against the Borrower and any
Collateral provided herein, in any other agreement between Borrower and
Lender, at law or in equity; and (b) exercise all rights granted to a secured
party under the Florida Uniform Commercial Code or otherwise. Upon the
occurrence of an Event of Default, Lender may take possession of the
Collateral, or any part thereof, and Borrower hereby grants Lender authority
to enter upon any premises on which the Collateral may be situated, and
remove the Collateral from such premises or use such premises, together with
the books and records of Borrower, to maintain possession and/or the condi-
tion of the Collateral and to prepare the Collateral for sale. Unless the
Collateral threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender will give Borrower reasonable notice of
the time and place of any public sale thereof or of the time after which any
private sales or other intended disposition thereof is to be made. The
requirement of reasonable notice shall be met if such notice is mailed,
postage prepaid, to the address of the Borrower shown at the beginning of
this Agreement at least 5 days prior to the time of such sale or disposition.
10.3 Application of Proceeds. The Lender shall have the right to apply
-----------------------
the proceeds of any disposition of the Collateral to the payment of the
Obligations in such order of application as the Lender may, in its sole
discretion, elect. The Lender shall have no obligation to marshal any assets
in favor of the Borrower or any other party.
10.4 Remedies Cumulative. The rights, options and remedies of the Lender
-------------------
shall be cumulative and no failure or delay by the Lender in exercising any
right, option or remedy shall be
<PAGE> 10
deemed a waiver thereof or of any other right, option or remedy, or waiver
of any Event of Default hereunder, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. Lender
shall not be deemed to have waived any of the Lender's rights hereunder or
under any other agreement, instrument or paper signed by Borrower unless such
waiver be in writing and signed by the Lender.
11. Miscellaneous
-------------
11.1 Governing Law, Jurisdiction and Venue. The provisions of this
-------------------------------------
Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York. The Lender and Borrower hereby designate all
courts of record sitting in New York County, New York, both state and
federal, as forums where any action, suit or proceeding in respect of or
arising out of this Agreement or the transactions contemplated by this
Agreement may be prosecuted as to all parties, their successors and assigns,
and by the foregoing designation the Lender and Borrower consent to the
jurisdiction and venue of such courts.
11.2 MUTUAL WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
---------------------------
FOR THE LENDER TO INVEST IN AND EXTEND CREDIT TO BORROWER AND FOR BORROWER TO
BORROWER FROM LENDER, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL,
BORROWER AND LENDER HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING IN ANY WAY FROM
THE OBLIGATIONS.
11.3 Other Waivers. The Borrower waives notice of nonpayment, demand,
-------------
notice of demand, presentment, protest and notice of protest with respect to
the Obligations, or notice of acceptance hereof, notice of the Loan made,
credit extended, Collateral received or delivered, or any other action taken
in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
11.4 Collection Costs. All costs and expenses incurred by the Lender to
----------------
obtain, enforce or preserve the security interests granted by this Agreement
and to collect the Obligations, including, without limitation, stationery and
postage, telephone and telegraph, secretarial and clerical expenses, the fees
or salaries of any collection agents utilized, all costs to maintain and
preserve the Collateral and all attorneys' fees and legal expenses incurred
in obtaining or enforcing payment of any of the Obligations or foreclosing
the Lender's security interest in any of the Collateral, whether through
judicial proceedings or otherwise, or in enforcing or protecting its rights
and interests under this Agreement or under any other instrument or document
delivered pursuant hereto, or in protecting the rights of any holder or
holders with respect thereto, or in defending or prosecuting any actions or
proceedings arising out of or relating to the Lender's transactions with the
Borrower, shall be paid by the Borrower to the Lender, upon demand, or, at the
Lender's election, added to the Obligations, and the Lender may take judgment
against the Borrower for all such costs, expense and fees in addition to all
other amounts due from the Borrower hereunder.
<PAGE> 11
11.5 Expenses. The Borrower shall reimburse the Lender for all out-of-
--------
pocket costs and expenses incurred by the Lender in connection with the
preparation of this Agreement and the making of the Investment and Loan
hereunder, including the reasonable fees and expenses of the Lender's counsel,
and for all UCC search, filing, recording and other costs connected with the
perfection of the Lender's security interest in the Collateral.
11.6 Notices. All notices, requests, directions, demands, waivers and
-------
other communications provided for herein shall be in writing and shall be
deemed to have been given or made when delivered personally, by telecopy, or
sent by registered or certified mail, postage prepaid and return receipt
requested, addressed to the Borrower or the Lender, as the case may be, at
their respective addresses set forth at the beginning of this Agreement.
Notices of changes of address shall be given in the same manner.
11.7 Severability. Any provision of this Agreement which is prohibited
------------
and unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.8 Entire Agreement, Modification, Benefit. This Agreement shall
---------------------------------------
constitute the entire agreement of the parties and no provision of this
Agreement, including the provisions of this Section, may be modified, deleted
or amended in any manner except by agreement in writing executed by the
parties. All terms of this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns, provided, however, that the Borrower shall not assign
or transfer its rights hereunder.
11.9 Construction. All references in this Agreement to the single
------------
number and neuter gender shall be deemed to mean and include the plural
number and all genders, and vice versa, unless the context shall otherwise
require.
11.10 Headings. The underlined headings contained herein are for
--------
convenience only and shall not affect the interpretation of this Agreement.
11.11 Counterparts. This Agreement may be executed in more than one
------------
counterpart, each of which shall be deemed an original.
11.12 Nonliability of Lender. The Lender shall not have any fiduciary
----------------------
responsibilities to the Borrower. The Lender undertakes no responsibility
to the Borrower to review or inform the Borrower of any matter in connection
with any phase of the Borrower's business or operations.
11.13 Limitation of Liability. No claim may be made by the Borrower
-----------------------
against the Lender, or the affiliates, directors, officers, employees,
attorneys or agents of Lender for any special consequential or punitive
damages in respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions contemplated by
this Agreement, or any act, omission or event occurring in connection there-
with; and the Borrower hereby waives, releases and agrees not to sue upon
any such claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
<PAGE> 12
11.14 Warrant of Attorney. The Borrower authorizes any attorney at law,
-------------------
including an attorney engaged by the Lender, to appear in any court of record
in the State of New York or any other State or Territory of the United States,
after the occurrence of an Event of Default hereunder and waive the issuance
and service of process and confess judgment against the Borrower in favor of
the Lender, for the amount of the Obligations then appearing due, together
with costs of suit, and thereupon to release all errors and waive all rights
of appeal and stay of execution. The Borrower hereby expressly waives any
conflict of interest that the Lender's attorney may have in confessing such
judgment against Borrower and expressly consents to the confessing attorney
receiving a legal fee from the holder for confessing such judgment against
Borrower. The foregoing warrant of attorney shall survive any judgment; and
if any judgment be vacated for any reason, the Lender nevertheless may
thereafter use the foregoing warrant of attorney to obtain an additional
judgment or judgments against the Borrower.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers.
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
- ---------------------------------------------------------------------------
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
- ----------------------------------------------------------------------------
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
- -----------------------------------------------------------------------------
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, INCLUDING
- ------------------------------------------------------------------------------
FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
- --------------------------------------------------------------------
THE LINUX FUND, INC. MEDICORE, INC.,
a Delaware corporation a Florida corporation
/s/ Wm. Jay Roseman /s/ Thomas K. Langbein
By ------------------------------- By --------------------------------
Co-chairman Chairman & CEO
Title ---------------------------- Title -----------------------------
