EXHIBIT 10.26
MEMORANDUM OF UNDERSTANDING REGARDING PURCHASES, INVOICING AND PAYMENTS UNDER
MASTER AGREEMENT FOR PRODUCTS AND SERVICES FOR THE DALLAS INDEPENDENT SCHOOL
DISTRICT
THIS MEMORANDUM OF UNDERSTANDING REGARDING PURCHASES, INVOICING AND
PAYMENTS UNDER MASTER AGREEMENT FOR PRODUCTS AND SERVICES FOR THE DALLAS
INDEPENDENT SCHOOL DISTRICT (this "Memorandum") among (1) MICRO SYSTEM
ENTERPRISES, INC., a Texas corporation ("MSE"), (2) TEXTRON FINANCIAL
CORPORATION, a Delaware corporation ("TFC"), and (3) the entities listed on
Schedule A attached to this Memorandum (each such entity is referred to in this
Memorandum as a "Consortium Member").
Background:
A. MSE and each of the Consortium Members are members of that certain
group (the "Consortium") of contractors and suppliers providing products and
services to the Dallas Independent School District ("DISD") pursuant to that
certain Master Agreement for Products and Services between the DISD and MSE
dated as of January 31, 2003, as amended (the "Master DISD Agreement").
B. MSE has entered into a Letter Agreement (the "Letter Agreement(s)")
with each of the Consortium Members providing for, among other things, (1) MSE's
acting on behalf of the Consortium and the Consortium Members as the designated
central ordering entity, central invoicing entity and central payment receiving
entity under the Master DISD Agreement and (2) how payments are to be made by
MSE to the Consortium Members upon receipt by MSE of payments under the Master
DISD Agreement from DISD and/or the Universal Service Administrative Company,
Schools and Libraries Division ("USAC").
C. DISD and USAC have agreed with MSE that all payments by each of them
for invoices under the Master DISD Agreement will be in ACH electronic funds and
made to the account described on Schedule B to this Memorandum or to any other
account which may replace such account (the "Special Account").
D. MSE will not allow any other funds to be sent to or otherwise deposited
into the Special Account; the Special Account will be exclusively for the
receipt of payments on invoices from DISD and USAC under the Master DISD
Agreement; funds received in the Special Account will be disbursed as provided
below.
E. MSE has entered into that certain Loan and Security Agreement, dated
November 3, 2003 with TFC (as amended, the "LSA"), pursuant to which MSE is
expected to request, among other things, certain financing from TFC in
connection with MSE's performance under the Master DISD Agreement for E-rate
Year 6 and the DISD Budget Year 2004/2005.
F. Proceeds of loans obtained by MSE from TFC under and pursuant to the
terms of the LSA in respect of eligible inventory acquired by MSE from a
Consortium Member or in respect of eligible invoices based on services rendered
by a Consortium Member, in each case, under the Master DISD Agreement for E-rate
year 6 and the DISD budget year 2004/2005, will be paid to such Consortium
Member as directed by MSE and otherwise in accordance with the LSA, as provided
below.
G. MSE has pledged the Special Account to TFC and has given TFC exclusive
control over the same subject to the payment procedures set forth herein.
H. This Memorandum is, among other things, to establish the payment
procedures for payments to be made to Consortium Members from funds received
from DISD and/or USAC under the Master DISD Agreement.
Procedures and Agreements:
1. The background statements above are made a part of this Memorandum.
2. All goods and services to be supplied to the DISD under the Master DISD
Agreement by MSE and the Consortium Members will be ordered by DISD through MSE,
as the central ordering entity, and MSE will, as provided in the Letter
Agreements and other agreements and ordering arrangements between MSE and each
Consortium Member, order such goods and services from the Consortium Members
and/or supply the same itself.
3. Goods and services ordered by MSE from the Consortium Members will be
supplied by the Consortium Members to the DISD as provided for in the Master
DISD Agreement and pursuant to the Letter Agreements and other agreements
between MSE and the Consortium Members.
4. All goods and services supplied directly to the DISD under the Master DISD
Agreement by any Consortium Member will be invoiced by such Consortium Member to
MSE. MSE will re-invoice such goods and services to DISD and USAC, as provided
in paragraph 5 below, and, upon MSE's receiving payment for such re-invoices
from the DISD or USAC as contemplated in paragraph 8 below (or otherwise from
TFC under the LSA as contemplated in paragraph 7 below), MSE will use such
funds, or cause such funds to be used, as provided herein to pay the underlying
invoices of such Consortium Member.
5. All goods and services supplied to the DISD under the Master DISD Agreement
by MSE and the Consortium Members will be invoiced by MSE, as the central
invoicing entity, to the DISD and USAC, as the case may be, in accordance with
the terms and provisions of the Master DISD Agreement. MSE agrees that invoices
that it generates to DISD and/or USAC as a result of its re-invoicing of
invoices from any particular Consortium Member will be invoiced separate from
invoices from other Consortium Members and will be re-invoiced by MSE to the
DISD and/or USAC in a manner which will enable MSE to provide each Consortium
Member and TFC with detailed, segregated reporting of its accounts receivables
from the DISD and USAC, segregating the accounts receivables that resulted from
each particular Consortium Member's invoices to MSE, as required in section 11.
hereof.
6. MSE has pledged the Special Account to TFC under the LSA and given TFC
exclusive control over it, and MSE has pledged all inventory and other goods
acquired by MSE from the Consortium Members under the Master DISD Agreement to
TFC as collateral under the LSA. Subject to the rights of each Consortium Member
under paragraphs 7 and 8 below (including, without limitation, the rights of
each such Consortium Member to receive payments under and as provided for in
paragraph 8 below), each such Consortium Member acknowledges and agrees to those
pledges and further agrees that its rights and interests in and to the Special
Account and such inventory and goods are junior and subordinate to those of TFC.
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7. MSE and TFC agree that the proceeds of any loans actually obtained by MSE
under the LSA (which loans are obtainable from TFC under the LSA at the sole
discretion of TFC) in respect of inventory acquired by MSE from a Consortium
Member under the Master DISD Agreement or in respect of invoices issued by MSE
to the DISD or USAC for services provided by a Consortium Member will be paid by
TFC directly to such Consortium Member in satisfaction (in whole or part, as the
case may be) of any invoices for such inventory or services issued by such
Consortium Member to MSE. The only conditions to such payments are that (i) MSE
must inform TFC in writing of such outstanding invoices and the unpaid amounts
thereunder and deliver a copy of such invoices to TFC and (ii) each Consortium
Member must deliver to TFC a written confirmation (which may be made via fax or
e-mail) of the unpaid amounts owing to it under such invoices and of the release
of any security interest or lien of such Consortium Member to the extent of the
payment to be received from TFC. TFC may in good faith rely on the information
provided to it in clauses (i) and (ii) above, and each of the parties hereto
agrees that TFC shall have no liability for any payments made under this
Memorandum in accordance with such information.
8. To the extent that invoices from a Consortium Member for goods and services
supplied under the Master DISD Agreement have not been previously paid by MSE to
such Consortium Member, MSE agrees to pay the same to such Consortium Member to
the extent of payments received by MSE in the Special Account from DISD and/or
USAC in respect of such invoices of such Consortium Member TFC Agrees to make or
otherwise direct (or cause to be made or otherwise directed) to such Consortium
Member each of such payments made by DISD and/or USAC into the Special Account
in respect of invoices of such Consortium Member. The only conditions to such
payments by TFC are that (i) MSE must inform TFC in writing of such outstanding
invoices and the unpaid amounts thereunder and deliver a copy of such invoices
to TFC, (ii) each Consortium Member must deliver to TFC a written confirmation
(which may be made via fax or e-mail) of the unpaid amounts owing to it under
such invoices and of the release of any security interest or lien of such
Consortium Member to the extent of payment to be received from TFC, and (iii)
TFC must be satisfied with all of such deliveries. Payments owing under this
paragraph are to be made within 5 days after funds have been electronically
transferred into the Special Account by DISD or USAC and become available for
withdrawal in immediately available funds, however, TFC shall not be obligated
to disburse funds to Consortium Members from the Special Account until TFC has
determined, in good faith, which Consortium Members are rightfully entitled to
such For administrative purposes, TFC may transfer any funds in the Special
Account to one or more other accounts in order to effectuate electronic fund
transfers of the same. TFC may in good faith rely on the information provided to
it in clauses (i) and (ii) above, and each of the parties hereto agrees that TFC
shall have no liability for any payments made under this Memorandum in
accordance with such information.
9. TFC agrees not to offset or otherwise claim as proceeds of collateral any
funds from the Special Account that are to be used by it to make payments to the
Consortium Members under paragraph 8 above. Nothing in this paragraph will
impair or limit the rights of TFC with respect to funds in or from the Special
Account owing to MSE for goods and services provided by MSE on its own behalf
(i.e., not originating from a Consortium Member) to DISD under the Master DISD
Agreement or with respect to funds in or from the Special Account owing to MSE
for goods and services provided by Consortium Members to the extent that
invoices for such goods and services have been paid with proceeds of loans made
by TFC under the LSA or otherwise by MSE; all of such funds owing to MSE and the
portion of such funds equal to such loans will be paid to TFC for application to
obligations of MSE under the LSA.
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10. TFC is not assuming and, except as set forth in this Memorandum, has not
agreed to perform, any of the duties and obligations of MSE under the Letter
Agreements owing to the Consortium Members. TFC has no obligation or duty to
collect any amounts owing to MSE by the DISD or USAC under the Master DISD
Agreement. TFC may request and prepare for each Consortium Member formal
releases from security interests and liens confirmed to TFC in any fax or e-mail
and each Consortium Member will execute and return the same promptly to TFC. TFC
has no fiduciary duty to MSE or the Consortium Members. MSE will continue to
have the fiduciary duties owing to the Consortium Members provided in the Letter
Agreements. No Consortium Member will have any rights or benefits under the LSA.
Nothing herein will limit any right of set-off or counterclaim of MSE against
any Consortium Member or the DISD against MSE or any Consortium Member and TFC
will be entitled to take all such offsets into consideration in connection with
any payments made under this Memorandum. TFC may in good faith rely on any
statements and/or directions supplied by MSE with respect to such offsets, and
each of the parties hereto agrees that TFC shall not have any liability in
respect of any such offsets in connection with the performance of its duties
under this Memorandum. To the extent of any inconsistency between this
Memorandum and the Letter Agreements, the terms of this Memorandum will govern.
11. MSE will deliver, on the first business day of each week, to TFC and to each
Consortium Member that has requested the same a report substantially in the form
of Schedule C attached hereto. Such report may form the basis of payments to be
made by TFC under paragraphs 7 and 8 above and any Consortium Member may comply
with the requirements of subclause (ii) of paragraph 7 or subclause (ii) of
paragraph 8 by initialing such report and sending the same to TFC (which may be
via facsimile transmission or as a PDF attachment to an e-mail). TFC may in good
faith rely on the information provided to it in such reports, and each of the
parties hereto agrees that TFC shall have no liability for any payments made
under this Memorandum in accordance with such information. The report will
include, at miniumum, MSE's invoice number, date and invoice amount to DISD
and/or USAC, and provide the information required to reconcile such reported MSE
invoices to the invoice(s) from the Consortium Member that were re-invoiced by
MSE to DISD or USAC. MSE agrees that TFC shall be allowed to share the
above-referenced reported information with the Consortium Members that such
reporting pertains to.
12. This Memorandum will be governed by Texas law. Any dispute concerning this
Memorandum must be brought in a court of competent jurisdiction in Houston,
Harris County, Texas and the parties hereto consent to such jurisdiction and
venue. This Memorandum may be executed by each party in a separate counterpart
of this Memorandum, each of which will be deemed an original but all of which
together will constitute one and the same instrument. For the avoidance of
doubt, this Memorandum shall be binding on the signatories hereto even if less
than all of the Consortium Members set forth on Schedule A attached to this
Memorandum shall become signatories hereto. If any provision of this Memorandum
is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be impaired
thereby.
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MICRO SYSTEM ENTERPRISES, INC. TEXTRON FINANCIAL CORPORATION
By ___________________________ By __________________________
Name: Name:
Title: Title:
Date: ____________________ Date: ________________
[Signature Page to Memorandum of Understanding]
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CONSORTIUM MEMBER
InterNetwork Experts, Inc.
By /s/ James H. Long
------------------------------------------
Name: James H. Long
Title: Chairman of the Board of Directors
Date: 12-29-04
[Signature Page to Memorandum of Understanding]
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Schedule A
List of Consortium Members
Technology Cabling Solutions, Inc.
Advanced Technology Solutions
Woodlands Network Solutions, Inc.
Analytical Computer Services
Communications Supply Corporation
Novell, Inc.
Avizon Technologies Group
Hill Professional Services
Internetwork Experts
Lazo Technologies, Ltd.
[Others]
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Schedule B
Special Account
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Schedule C
Form of Report
[Insert Spreadsheet]
The undersigned Consortium Member hereby represents that the amounts set forth
above opposite its name in Column U above are true and correct and owing to such
Consortium Member, have not been previously paid to such Consortium Member (are
anticipated to be paid as provided in Column U above) and are not subject to
offset, and the undersigned Consortium Member, to the extent of the payment of
such amounts to it, releases and discharges any security interest or lien it may
have in respect of such amounts by virtue of any Letter Agreement or pursuant to
applicable law. The undersigned Consortium Member agrees that TFC may rely on
this paragraph in performing its duties under the Memorandum of Understanding
Regarding Purchases, Invoicing And Payments under Master Agreement for Products
and Services for the Dallas Independent School District dated________, 2004____.
_____________________________ [Print Name of Consortium Member]
By________________________
Name:
Title:
Date:____________
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