[BANK ONE LOGO] EXHIBIT 4.1
PROMISSORY NOTE
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Borrower: TERAFORCE TECHNOLOGY CORPORATION Lender: BANK ONE, N.A., WITH ITS MAIN OFFICE AT CHICAGO,
1240 E. CAMPBELL ROAD ILLINOIS
RICHARDSON, TX 75081 HOUSTON PRIVATE CLIENT SERVICES LPO
910 TRAVIS
HOUSTON, TX 77002
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PRINCIPAL AMOUNT: $1,500,000.00 DATE OF NOTE: OCTOBER 12, 2001
PROMISE TO PAY. TERAFORCE TECHNOLOGY CORPORATION ("Borrower") promises to pay to
Bank One, N.A., with its main office at Chicago, Illinois ("Lender"), or order,
in lawful money of the United States of America, the principal amount of One
Million Five Hundred Thousand & 00/100 Dollars ($1,500,000.00) or so much as may
be outstanding, together with interest on the unpaid outstanding principal
balance of each advance. Interest shall be calculated from the date of each
advance until repayment of each advance or maturity, whichever occurs first.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on May 31, 2002. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning November 12, 2001, with all subsequent interest payments to be
due on the same day of each month after that. Payments and any other credits
shall be allocated among principal, interest and fees at the discretion of
Lender unless otherwise required by applicable law. The annual interest rate for
this Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding, unless such calculation would result in a usurious rate, in
which case interest shall be calculated on a per diem basis of a year of 365 or
366 days, as the case may be. Borrower will pay Lender at Lender's address shown
on loan account statements sent to the Borrower, Lender's address shown in any
payment coupon book provided to the Borrower, or at such other place as Lender
may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Prime Rate (the
"Index"). "Prime Rate" shall mean the rate announced from time to time by
Lender as its prime rate (which rate may not be the lowest, best or most
favorable rate of interest which Lender may charge on loans to its customers).
Each change in the rate to be charged on this Note will become effective
without notice on the same day as the Index changes. The interest rate to be
applied prior to maturity to the unpaid principal balance of this Note will be
at a rate equal to the Index. NOTICE: Under no circumstances will the interest
rate on this Note be more than the maximum rate allowed by applicable law. For
purposes of this Note, the "maximum rate allowed by applicable law" means the
greater of (A) the maximum rate of interest permitted under federal or other
law applicable to the indebtedness evidenced by this Note, or (B) the "Weekly
Ceiling", as of the date of this Note, as referred to in Chapter 303 of the
Texas Finance Code.
PREPAYMENT. Borrower may pay without fee all or a portion of the principal
amount owed hereunder earlier than it is due. All prepayments shall be applied
to the indebtedness in such order and manner as Lender may from time to time
determine in its sole discretion. Borrower agrees not to send Lender payments
marked "paid in full", "without recourse", or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lender's rights
under this Note, and Borrower will remain obligated to pay any further amount
owed to Lender. All written communications concerning disputed amounts,
including any check or other payment instrument that indicates that the payment
constitutes "payment in full" of the amount owed or that is tendered with other
conditions or limitations or as full satisfaction of a disputed amount must be
mailed or delivered to: Wealth Management Loan Servicing, P.O. Box 36648
Louisville, KY 40233-6648.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $25.00, whichever is greater.
POST MATURITY RATE. Upon the occurrence of any Event of Default, or if this Note
is not paid at final maturity, Lender, at Lender's option, may add any unpaid
accrued interest to principal and such sum will bear interest therefrom until
paid, at the Post Maturity Rate provided in this Note. The Post Maturity Rate on
this Note is the lesser of the maximum rate allowed by applicable law or 3.000
percentage points over the variable interest rate. Borrower will pay interest on
all sums due after final maturity, whether by acceleration or otherwise, at that
rate, Borrower also will pay interest at the Post Maturity Rate on the principal
amount of each past due installment from the due date until paid.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note;
Payment Default. Borrower fails to make any payment when due under this
Note.
Other Defaults. Borrower fails to comply with or to pay or perform any
other term, obligation, covenant or condition contained in this Note or in
any of the Related Documents or to comply with or to pay or perform any
term, obligation, covenant or condition contained in any other agreement
between Lender and Borrower or between Borrower and any affiliate of BANK
ONE CORPORATION.
Transfer of Assets. Borrower leases, sells, or otherwise conveys, or agrees
to lease, sell, or otherwise convey, a material part of its assets or
business outside of the ordinary course of business.
Defaults with Respect to Third Parties. Borrower fails to make any payment
when due or fails to comply with or to perform any term, obligation,
covenant or condition contained in any agreement between any other person
and Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the Related Documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
Judgments or Decrees. One or more judgments or decrees shall be entered
against the Borrower and such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure, replevin,
repossession, attachment, levy, execution, or forfeiture proceedings,
whether by judicial proceeding, self-help, or any other method, by any
creditor of Borrower, or by any governmental agency against the Collateral
or any other assets of Borrower. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by
Borrower as to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding and if Borrower gives Lender
written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding,
in an amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Failure to Comply with Laws. Borrower fails to comply with all applicable
statutes, laws, ordinances and governmental rules, regulations and orders
to which it is subject or which are applicable to its business, property
and assets.
Change in Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
this Note is impaired.
Events Affecting Guarantor. Any of the preceding Events of Default occurs
with respect to any guarantor of the indebtedness as if the word
"guarantor" were substituted for the word "Borrower" in such Event of
Default, or any guarantor dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any guaranty.
Insecurity. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon the occurrence of any Event of Default, Lender may
declare the entire unpaid principal balance on this Note and the indebtedness
and all accrued unpaid interest immediately due, without notice (except that in
the case of any Event of Default of the type described in the DEFAULT -
Insolvency section herein, such acceleration shall be automatic and not at
Lender's option), and then Borrower will pay that amount. Borrower shall be
liable for any deficiency remaining after disposition of any collateral which
Lender may choose to realize upon.
ATTORNEYS' FEES; EXPENSES. Lender may hire an attorney to help collect this Note
if Borrower does not pay, and Borrower will pay Lender's reasonable attorneys'
fees. Borrower also will pay Lender all other amounts Lender actually incurs as
court costs, lawful fees for filing, recording, releasing to any public office
any instrument securing this Note; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor vehicle
offered as security for this Note, or premiums or identifiable charges received
in connection with the sale of authorized insurance.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Texas.
Signed in the presence of:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
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Witness Borrower TERAFORCE TECHNOLOGY
CORPORATION HERMAN FRIETSCH, CEO
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Witness Borrower
GUARANTY
We the undersigned jointly and severally guaranty the prompt and punctual
payment of all moneys due under the aforesaid note and agree to remain bound
until fully paid.
In the presence of:
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Witness Guarantor
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Witness Guarantor
(c) 1992-2000 E-Z Legal Forms, Inc. Rev. 6/00
This product does not constitute the rendering of leal advise or services. This
product is intended for informational use only and is not a substitute for
legal advice. State laws vary, so consult any attorney on all legal matters.
This product was not necessarily prepared by a person licensed to practice law
in this state.
AFAA
PROMISSORY NOTE
Loan No: _________ (Continued) Page 2
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This Note has been accepted by Lender in the State of Texas.
CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced by
this Note occurred in Harris County, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Harris County, State of Texas.
DISHONORED CHECK CHARGE. Borrower will pay a processing fee of $25.00 if any
check given by Borrower to Lender as a payment on this loan is dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a security interest in, as well as a
right of setoff against, and hereby assigns, conveys, delivers, pledges and
transfers to Lender, as security for repayment of the indebtedness, all
Borrower's right, title and interest in and to all Borrower's accounts (whether
checking, savings, or some other account) with Lender or any subsidiary or
affiliate of BANK ONE CORPORATION (each hereinafter referred to as a "Lender
Affiliate") and all other obligations at any time owing by Lender or any Lender
Affiliate to Borrower. This includes all accounts Borrower holds jointly with
someone else and all accounts Borrower may open in the future. However, this
does not include any IRA or Keogh accounts, or any trust accounts for which the
grant of a security interest would be prohibited by law. Borrower authorizes
Lender, without prior notice to Borrower and irrespective of (i) whether or not
Lender has made any demand under this Note or the Related Documents or (ii)
whether such Indebtedness is contingent, matured or unmatured, to the extent
permitted by law, to collect, charge and/or setoff all sums owing on the
Indebtedness against any and all such accounts and other obligations, and, at
Lender's option, to administratively freeze or direct a Lender Affiliate to
administratively freeze all such accounts and other obligations to allow Lender
to protect Lender's security interest, collection, charge and setoff rights
provided in this paragraph.
LINE OF CREDIT. This Note evidences a revolving line of credit. The unpaid
principal balance of this Note shall increase and decrease with each new advance
and payment hereunder, as the case may be. Subject to the terms hereof, Borrower
may borrow, repay and reborrow hereunder. Advances under this Note, as well as
directions for payment from Borrower's accounts, may be requested orally or in
writing by Borrower or by an authorized person, Lender may, but need not,
require that all oral requests be confirmed in writing. Borrower agrees to be
liable for all sums either: (A) advanced in accordance with the instructions of
an authorized person or (B) credited to any of Borrower's accounts with Lender,
Lender will have no obligation to advance funds under this Note if: (A) Borrower
or any guarantor is in default under the terms of this Note or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) Borrower or any guarantor ceases
doing business or is insolvent; (C) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (D) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (E) Lender in
good faith believes itself insecure. This revolving line of credit shall not be
subject to Sec. 346 of the Texas Finance Code.
LATE CHARGES. In the "Late Charge" provision set forth above, the following
language is hereby added after the word "greater": "up to the maximum amount of
Two Hundred Fifty Dollars ($250.00) per late charge".
FINANCIAL STATEMENTS. Borrower shall furnish Lender with such financial
statements and other related information at such frequencies and in such detail
as Lender may reasonably request.
ENFORCEABILITY AND ORGANIZATION. Borrower is duly authorized to transact
business in all states in which Borrower is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
Borrower is doing business. Borrower's execution, delivery and performance of
this Note and all the Related Documents have been duly authorized by all
necessary action by Borrower. This Note and all the Related Documents constitute
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms. If applicable, Borrower is an entity
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the state of its organization.
INFORMATION WAIVER. Lender may provide, without any limitation whatsoever, to
any one or more purchasers, potential purchasers, or affiliates of BANK ONE
CORPORATION, any information or knowledge Lender may have about the undersigned
or about any matter relating to this document and the Related Documents, and the
undersigned hereby waives any right to privacy the undersigned may have with
respect to such matters.
INDEBTEDNESS. The word "Indebtedness" means all principal, interest, and other
amounts, costs and expenses payable under the Note or Related Documents,
together with all renewals of, extensions of, modifications of, consolidations
of and substitutions for the Note or Related Documents, together with interest
on such amounts as provided in this Note, and all obligations, debts and
liabilities, plus interest thereon, of Borrower or any one or more of them to
Lender, as well as all claims by Lender against Borrower or any one or more of
them, whether now existing or hereafter arising, whether related or unrelated to
the purpose of this Note, whether voluntary or otherwise, whether due or not
due, direct or indirect, absolute or contingent, liquidated or unliquidated and
whether Borrower may be liable individually or jointly with others, whether
obligated as guarantor, surety, accommodation party or otherwise and whether
recovery upon such amounts may be or hereafter become barred by any statute of
limitations, and whether the obligation to repay such amounts may be or
hereafter become otherwise unenforceable; and further includes, without
limitation, all principal, interest, and other amounts, costs and expenses
payable under the Related Documents, whether executed by the Borrower or by any
other person or entity, together with all renewals of, extensions of,
modifications of, consolidations of and substitutions for the Related Documents,
together with interest thereon as provided in the Related Documents.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now
existing or hereafter arising, executed in connection with the indebtedness.
LIABILITIES FOR OBLIGATIONS UNDER RELATED DOCUMENTS. Borrower also promises to
pay to Lender all of the indebtedness. Borrower acknowledges that some of the
Related Documents, pursuant to which indebtedness may arise, may be executed
only by persons or entities other than the Borrower.
PURPOSE. Borrower agrees that no advances under this Note shall be used for
personal, family or household purposes and that all advances hereunder shall be
used solely for business, commercial, agricultural or other similar purposes.
ARBITRATION. Undersigned and Lender agree that all disputes, claims and
controversies between them whether individual, joint, or class in nature,
arising from this document or otherwise, including without limitation contract
and tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association in effect at the time the claim is filed, upon request
of either party. No act to take or dispose of any Collateral or Property (as
defined herein or in any Related Document) securing this document shall
constitute a waiver of this arbitration agreement or be prohibited by this
arbitration agreement. This includes, without limitation, obtaining injunctive
relief or a temporary restraining order; invoking a power of sale under any deed
of trust or mortgage; obtaining a writ of attachment or imposition of a
receiver; or exercising any rights relating to personal property, including
taking or disposing of such property with or without judicial process pursuant
to applicable law. Any disputes, claims, or controversies concerning the
lawfulness or reasonableness of any act, or exercise of any right, concerning
any Collateral or Property securing this document, including any claim to
rescind, reform, or otherwise modify any agreement relating to the Collateral or
Property securing this document, shall also be arbitrated, provided however that
no arbitrator shall have the right or the power to enjoin or restrain any act of
any party. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction. Nothing in this document shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of an action for these purposes. The
Federal Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
JURY WAIVER. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER ARISING OUT OF OR IN
ANY WAY RELATED TO THIS DOCUMENT, THE RELATED DOCUMENTS, OR ANY RELATIONSHIP
BETWEEN OR AMONG THE UNDERSIGNED AND LENDER. THIS PROVISION IS A MATERIAL
INDUCEMENT TO LENDER TO PROVIDE THE FINANCING EVIDENCED BY THIS DOCUMENT AND THE
RELATED DOCUMENTS.
BORROWER'S ACKNOWLEDGEMENT AND AGREEMENT REGARDING AFFILIATE BANKS. Borrower may
now or in the future have a borrowing relationship with Bank One, NA with its
main office in Columbus, Ohio (the "Bank Affiliate"). Lender and Borrower intend
that the terms, covenants, conditions, warranties and obligations of Borrower in
only one agreement in the nature of a loan or credit agreement ("Loan
Agreement") be applicable to the borrowing relationship of Borrower and Lender
and of Borrower and the Bank Affiliate. Therefore, if Borrower executes a Loan
Agreement with the Bank Affiliate, the Borrower agrees that the terms,
covenants, conditions, warranties and obligations of Borrower contained in that
Loan Agreement between Borrower and the Bank Affiliate shall also apply to this
Note.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Texas
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. The right to accelerate maturity of sums due under this Note does
not include the right to accelerate any interest which
PROMISSORY NOTE
Loan No: __________ (Continued) Page 3
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has not otherwise accrued on the date of such acceleration, and Lender does not
intend to charge or collect any unearned interest in the event of acceleration.
All sums paid or agreed to be paid to Lender for the use, forbearance or
detention of sums due hereunder shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
the loan evidenced by this Note until payment in full so that the rate or amount
of interest on account of the loan evidenced hereby does not exceed the
applicable usory calling. If any part of this Note cannot be enforced, this fact
will not affect the rest of this Note. It is agreed that any payment which would
otherwise for any reason be deemed unlawful interest under applicable law shall
be deemed to have been applied to the unpaid principal balance of this Note, or
to other indebtedness. The unpaid balance owing on this Note at any time may be
evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender may delay or forgo enforcing any of
its rights or remedies under this Note without losing them. Borrower and any
other person who signs, guarantees or endorses this Note, to the extent allowed
by law, waive presentment, demand for payment, notice of dishonor, notice of
intent to accelerate the maturity of this Note, and notice of acceleration of
the maturity of this Note. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. Unless specifically permitted otherwise by the terms and conditions
of this Note, no alteration of or amendment to this Note shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of this Note, or the Related
Documents or of any participation interest in this Note or Related Documents to
one or more purchasers, whether related or unrelated to Lender. Borrower waives
any and all notices of sale of this Note, the Related Documents or of any
participation interests, as well as any notices of any repurchases of this Note,
the Related Documents, or of any participation interests. The obligations under
this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
TERAFORCE TECHNOLOGY CORPORATION
By: /s/ Robert Capps
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ROBERT CAPPS, Exec. Vice President of TERAFORCE
TECHNOLOGY CORPORATION
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