UNITED STATES
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): May 21, 2001
Commission file number 000-28753
iChargeit, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0880427
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
2340 Sawtelle Blvd,
Los Angeles, CA 90064
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 782-1122
2184 West 190th Street
Torrance, California 90504
(Former name or former address,
if changed since last report)
ITEM 5. OTHER EVENTS
Silicon Mountain Memory Agreement.
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On April 27, 2001 we. reported the following information in our 10-QSB
for the quarter ended December 31, 2000. On February 22, 2001, Bay Micro entered
into a loan agreement, two promissory notes and a security agreement with
Silicon Mountain Memory, Incorporated, a Colorado corporation ("SMM"). As part
of this transaction, we entered into a guaranty of Bay Micro's indebtedness
under the loan agreement and promissory notes. The loan agreement requires Bay
Micro to pay SMM an initial sum of $10,000 in cash, provides for a term loan in
the principal amount of $85,000 (the "Term Note"), and a revolving loan not to
exceed $200,000 (the "Revolving Note"). The Term Note represents credit
previously extended to Bay Micro in the form of products and services, while the
Revolving Note represents credit available to Bay Micro solely for the purchase
and acquisition for resale of products and services of SMM. The loan agreement
specifies the terms of the credit, including default and termination provisions.
Each of the Term Note and Revolving Note bear interest at the rate of
10% per annum. The Term Note requires payments of $7,000 per month, beginning on
March 1, 2001, and on the first day of each month thereafter until paid in full.
Any default under the Term Note or any default under the security agreement or
loan agreement causes the entire principal amount outstanding and accrued
interest to become due and payable immediately, and such amount will bear
interest at the rate of 18% per annum. The loan agreement provides Bay Micro
credit on an incremental basis, based on qualified purchases made by Bay Micro
of SMM goods and payments made to SMM.
The guaranty we entered into unconditionally guarantees the payment
when due, either upon maturity or acceleration, of all of Bay Micro's
indebtedness to SMM. In addition, the guaranty subordinates all of Bay Micro's
indebtedness to us to amounts owed by Bay Micro to SMM. Bay Micro has
outstanding an aggregate of approximately $300,000 in indebtedness to us, which
amount therefor is subordinated to the indebtedness of Bay Micro to SMM.
Bay Micro granted a security interest to SMM for the amounts owed under
the Term Note and the Revolving Note, as well as future debts Bay Micro may
incur to SMM. The security agreement grants a security interest in all property
of Bay Micro, including inventory, accounts receivable, general intangibles and
equipment. The Security Agreement contains both affirmative and negative
covenants, and specifies events of default. All of the agreements contain
attorneys' fees clauses.
Nicom Agreement.
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On May 1, 2001, our wholly-owned subsidiary Bay Micro Computers vacated
its then-current business location at 2184 W. 190th Street, Torrance California
and entered into a verbal fulfillment center agreement with Nicom Computers
Inc., a California corporation.
Our management expects a formal agreement to be signed within sixty
(60) days that will formalize certain cost and revenue-sharing arrangements
between Bay Micro and Nicom. Bay Micro and iChargeit are currently using Nicom's
facility, located at 2340 Sawtelle Blvd, Los Angeles, California, 90064, as
their business location and address. We are also using Nicom's phone system.
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Bay Micro Computers no longer has any salaried employees. IChargeit's
two remaining employees, Jesse Cohen and James Carroll, have agreed to work for
deferred compensation and are no longer receiving salary.
Amendment to Silicon Mountain Memory Agreement.
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In early May 2001 SMM verbally agreed to amend to its loan agreement
with us pursuant to which the monthly payments under the Term Note will be
reduced to $3,000 plus 30% of the gross profits earned from sales of Bay Micro's
current inventory. SMM also accepted the changes in Bay Micro's business
operations which include the utilization of order fulfillment services. On May
16, 2001, SMM notified us that until they spoke with the management of Nicom and
reviewed a copy of the signed fulfillment agreement with Nicom, Bay Micro would
remain in default on the original SMM agreement. We are attempting to resolve
SMM's concerns and hope to obtain a signed amendment containing the terms noted
above as soon as possible.
Debt; Bankruptcy; Delisting of Stock.
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On May 1, 2001 both iChargeit and Bay Micro exhausted their cash
reserves. The companies have combined debts totaling approximately $850,000.
Although we are actively working to settle our debts with our creditors, we
cannot guaranty that these debts can be settled given our current financial
condition. If we are unable to reach workable settlement arrangements with our
creditors we could be forced to file for bankruptcy protection.
Our ability to continue as a going concern depends on our ability to
obtain additional equity and/or debt financing to fund our operations. We are
actively seeking additional financing, and have received inquiries from two
companies regarding possible mergers. Management is currently investigating
these and other options. Without a new financing or a merger we will not be able
to continue our operations. If we are unable to raise additional funds
immediately or enter into a definitive strategic relationship with a fulfillment
service, we will have to cease or curtail our and/or Bay Micro's operations.
Due to our current financial condition we may be unable to meet the
requirements needed to maintain our listing on the Over-the-Counter Bulletin
Board. If we fail to meet these requirements, iChargeit Common Stock could be
delisted from the Over-the-Counter Bulletin Board. Such delisting would likely
have an adverse impact on the price and liquidity of our publicly traded stock.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit
Number Description
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10.1 Loan Agreement, dated February 22, 2001, by and between Silicon
Mountain Memory, Inc., Bay Micro Computers, Inc., iChargeit,
Inc., and Saied R. Akavan.
10.2 Promissory Note (term note), dated February 22, 2001, by and
between Silicon Mountain Memory, Inc. and Bay Micro Computers,
Inc.
10.3 Promissory Note (revolving note), dated February 22, 2001, by and
between Silicon Mountain Memory, Inc. and Bay Micro Computers,
Inc.
10.4 Security Agreement, dated February 22, 2001, by and among Bay
Micro Computers, Inc., iChargeit, Inc. and Silicon Mountain
Memory, Inc.
10.5 Continuing Guaranty, dated February 22, 2001, made by Saied R.
Akavan and iChargeit, Inc., in favor of Bay Micro Computers, Inc.
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SIGNATURE
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.
Dated May 24, 2001 iChargeit Inc.
By: /s/ Jesse Cohen
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Name: Jesse Cohen
Title: Chief Executive Officer
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EXHIBIT INDEX
Exhibit
Number Description
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10.1 Loan Agreement, dated February 22, 2001, by and between Silicon
Mountain Memory, Inc., Bay Micro Computers, Inc., iChargeit,
Inc., and Saied R. Akavan.
10.2 Promissory Note (term note), dated February 22, 2001, by and
between Silicon Mountain Memory, Inc. and Bay Micro Computers,
Inc.
10.3 Promissory Note (revolving note), dated February 22, 2001, by and
between Silicon Mountain Memory, Inc. and Bay Micro Computers,
Inc.
10.4 Security Agreement, dated February 22, 2001, by and among Bay
Micro Computers, Inc., iChargeit, Inc. and Silicon Mountain
Memory, Inc.
10.5 Continuing Guaranty, dated February 22, 2001, made by Saied R.
Akavan and iChargeit, Inc., in favor of Bay Micro Computers, Inc.
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Exhibit 10.1
LOAN AGREEMENT
AGREEMENT made and entered this ____ day of _______________, 2001, by
and between Silicon Mountain Memory, Inc., a Colorado corporation ("Lender"),
Bay Micro Computers, Inc., a California corporation, ("Borrower"), and
iChargeit, Inc., a Delaware corporation and Saeid R. Akavan, (collectively
"Guarantors") subject to the following:
A. Borrower has applied to Lender for extensions of
loans, credit and other financial accommodations, ("Accommodations").
B. Guarantors have agreed to personally and unconditionally
guarantee said Accommodations.
C. Lender will not extend said Accommodations unless and only
pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the Accommodations given and to be
given to Borrower by Lender and to induce Lender to extend the Accommodations
and for the mutual considerations to be derived hereby, the parties agree as
follows:
1. Return of Item: Lender shall return to Borrower that unpaid item in
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the amount of $10,500.00. Lender shall return to Borrower that unpaid item in
the amount of $10,500.00, upon payment of that "Term Note" of even date, and
shall forbear all actions on said item as long as Borrower complies with all
terms, conditions, representations, warranties, covenants and agreements
contained in this Agreement, the Term Note, the Revolving Note, the Security
Agreement and the Continuing Guaranty.
2. Pay Down: Upon the execution of this Agreement, Borrower shall
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pay Lender the sum of $10,000.00, in cash, by cashier's check or by
certified funds. Said amount shall be applied by Lender in reduction of
Borrower's current indebtedness for past goods sold.
3. Term Loan: Upon the execution of this Loan Agreement:
---------
a. Borrower shall execute that "Term Note" in the principal
amount of $85,000.00, attached hereto and incorporated herein as Exhibit A,
representing the balance of credit supplied prior to the date of this Loan
Agreement from Lender to Borrower.
b. Guarantors shall execute and deliver that Continuing
Guaranty, attached hereto and incorporated herein as Exhibit B.
c. Borrower and Guarantor iChargeit, Inc., shall
execute and deliver that Security Agreement, attached hereto and incorporated
herein as Exhibit C, and shall comply with all terms, conditions,
representations and agreements therein.
4. Revolving Credit:
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a. Preconditions: In the event and for so long as
Borrower and Guarantors comply with all terms, conditions, representations,
warranties, covenants and agreements contained in said Term Note, Continuing
Guaranty and Security Agreement, then Borrower may further avail itself of that
Revolving Credit, per the terms and as described below.
b. Maximum Credit: Lender hereby establishes a Revolving
Credit in favor of Borrower per the terms hereof in an aggregate principal
amount at any one time outstanding not exceeding $200,000.00; provided, however,
that in no event shall the total outstanding balance exceed 75% of the sum of
Borrower's current cash balances, account receivables and inventory (at book
value), per the books and records of the Borrower as reflected on Borrower's
most recent financial statements, records, or information.
c. Qualified Purchases: Revolving Credit is afforded to
Borrower solely to purchase and acquire for resale products and services of
Lender. Borrower may avail itself of the Revolving Credit only to the extent
necessary to provide it with funds to finance current or expected valid purchase
orders from its customers, or to retain sufficient inventory for reasonably
expected business purposes.
d. Increasing Credit: The Revolving Credit shall be afforded
to Borrower on an incremental increasing basis. Upon the execution of this
Agreement, Lender shall afford Borrower credit for Qualified Purchases in the
amount of $15,000.00, all said purchases to be invoiced by Lender, net 30. Upon
receipt and acceptance of Lender's goods, the Borrower shall immediately pay
Lender the amount of its invoice via a post-dated check due 30 days subsequent
to Borrower's receipt and acceptance of the goods. Upon use and payment in full
of said $15,000.00 in credit (including reasonable return credits), and upon at
least one $7,000.00 payment under the parties' Term Note, Lender shall
thereafter re-extend $15,000.00 in credit to Borrower, together with an
additional $15,000.00 in credit for a total of $30,000.00 in credit, all upon
similar terms. Upon use and payment in full of said $30,000.00 in credit, and
upon at least two payments of $7,000.00 each under the parties' Term Note,
Lender shall thereafter re-extend said credit amount with an additional
$15,000.00, proceeding, as before, until Borrower shall have maximized its
credit per paragraph 4(b), above; provided, again, that for each additional
$15,000.00 in credit extended by Lender to Borrower, Borrower shall have timely
paid Lender at least $7,000.00 against the parties' Term Note.
e. Revolving Note: At the time of executing this Loan
Agreement, Borrower shall execute and deliver to Lender that Revolving Note,
payable to the order of Lender in the maximum amount of its loan hereunder,
attached hereto and incorporated herein as Exhibit D. Any Lender invoice not
paid upon terms, net 30 days, shall thereafter be subject and applied to the
terms of the Revolving Note.
f. Ledger: Lender shall maintain a written ledger of the
amounts credited to and repaid by Borrower under the terms of this Agreement.
The aggregate unpaid principal amount shown on such ledger shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on the Revolving
Note; provided, however, neither Lender's failure to record the date and amount
of any credit or advance on such ledger, nor Borrower's failure to object to
such ledger shall limit or otherwise effect the obligations of the Borrower to
repay the principal amount of all credits or advances, together with all
financing charges accruing thereon if not paid pursuant to the net 30 terms.
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g. Termination of Revolving Credit: In no event shall Lender
be required to continue or re-extend any credit or advances pursuant to this
paragraph 4 if (a) Borrower is in default under any of the terms of this
Agreement; (b) Borrower is in default under any of the terms of any Promissory
Note; (c) Borrower is in default under any of the terms of the Security
Agreement; (d) Guarantor iChargeit is in violation of any of the terms of the
Security Agreement; (e) iChargeit is in default under or has sought termination
of any of the terms of its Continuing Guaranty; or (f) Guarantor Saeid R. Akavan
is in default under or has sought termination of any of the terms of his
Continuing Guaranty.
5. General Provisions:
------------------
a. The failure of Lender at any time or times hereafter to
require strict performance by Borrower or Guarantors of any of the provisions,
warranties, terms, and conditions in this Agreement or in any other agreement,
guaranty, note, instrument, or document now or at any time or times hereafter
executed by Borrower or Guarantors and delivered to Lender shall not waive,
affect, or diminish any right of Lender at any time or times hereafter to demand
strict performance thereof. No rights of Lender hereunder shall be deemed to
have been waived by any act or knowledge of Lender, its agents, officers or
employees, unless such waiver is contained in an instrument signed by an officer
of Lender. No waiver by Lender of any of its rights shall operate as a waiver of
any other of its present or future rights.
b. Any demand or notice hereunder shall be deemed effective
when deposited in the United States mail, and sent by certified mail, return
receipt requested, postage prepaid, addressed to Lender or to Borrower or
Guarantors at the address shown, or to any other address provided in writing
prior to the giving of such notice by the party to be notified.
c. This Agreement with all contemporaneously executed notes
and other agreements constitutes the entire understanding between the parties
with regard to the subject matter hereof, and may not be modified or amended
except by an instrument signed by the party against which the enforcement of
such modification or amendment is sought.
d. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law.
If any provision hereof is held to be invalid, illegal or unenforceable, such
determination shall not affect the validity of the remaining provisions of this
Agreement, which shall continue in full force and effect as if the invalid
portions had been deleted or never written.
e. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective legal representatives,
successors and assigns. Borrower or Guarantors, however, may not assign any of
its or their rights or delegate any of its or their obligations hereunder
without Lender's prior written consent.
f. This Agreement is entered into in the State of Colorado and
shall be construed in accordance with and governed by the laws thereof. If
Lender brings any action hereunder in any United States or Colorado court of
record, Borrower and Guarantors consent to personal jurisdiction over it and
them by such court. Service of process may be made upon Borrower or Guarantors
by mailing to it and them a copy of the summons, as provided in Section 5(b)
above. In any action hereunder, Borrower and Guarantors waive the right to
demand a trial by jury.
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g. Time is of the essence.
LENDER ATTEST
Silicon Mountain Memory, Inc. Secretary
5445 Conestoga Ct. #2B
Boulder, CO 80301 By:
--------------------------
BY:
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TITLE:
----------------------------------------------
STATE OF )
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) ss.
COUNTY OF
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Subscribe and sworn before me this ____ day of _______, 2001, by ___ .
My Commission expires: .
--------------------
Notary Public
BORROWER ATTEST
Bay Micro Computers, Inc. Secretary
2184 West 190th Street
Torrance, CA 90501 By:
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BY:
-------------------------------------------------
TITLE:
----------------------------------------------
STATE OF )
--------------------------------------------
) ss.
COUNTY OF
-------------------------------------------
Subscribe and sworn before me this ____ day of _______, 2001, by _____.
My Commission expires: .
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Notary Public
GUARANTOR ATTEST
Bay Micro Computers, Inc. Secretary
2184 West 190th Street
Torrance, CA 90501 By:
--------------
BY:
-------------------------------------------------
TITLE:
----------------------------------------------
STATE OF )
--------------------------------------------
) ss.
COUNTY OF
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Subscribe and sworn before me this ____ day of _____, 2001, by _______.
My Commission expires: .
--------------------
Notary Public
STATE OF )
--------------------------------------------
) ss.
COUNTY OF
-------------------------------------------
Subscribe and sworn before me this ____ day of ______, 2001, by ______.
My Commission expires: .
--------------------
Notary Public
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Exhibit 10.2
PROMISSORY NOTE
(TERM NOTE)
U.S. $85,000.00 Boulder, Colorado
______________, 2001
1. FOR VALUE RECEIVED, the undersigned (Borrower) promises to pay, Silicon
Mountain Memory, Incorporated, a Colorado corporation, or order, (Note
Holder) the principal sum of Eighty Five Thousand Dollars ($85,000.00)
U.S. Dollars, with interest on the unpaid balance at the rate of 10%
per annum, payable at $7,000.00 per month, beginning on March 1, 2001
and on the first day of each month thereafter until paid in full.
Principal and interest shall be payable at 3220 Prairie Drive, Building
C, Boulder, Colorado, 80301, or such other place as the Note Holder may
designate.
2. Payments received for application to this Note shall be applied first
to the payment of default interest at the rate specified below, if any,
second, interest charges, and the balance applied in reduction of the
principal amount hereof.
3. If any payment required by this Note is not paid when due, or if any
default under any Security Agreement or other Loan Agreement securing
or referencing this Note occurs, the entire principal amount
outstanding and accrued interest thereon shall at once become due and
payable at the option of the Note Holder (Acceleration); and the
indebtedness shall bear interest at the rate of 18% per annum from the
date of default. The Note Holder shall be entitled to collect all
reasonable costs and expense of collection and/or suit, including, but
not limited to reasonable attorney's fees.
4. Borrower may prepay the principal amount outstanding under this Note in
whole or in part, at any time without penalty. Any partial prepayment
shall be applied against the principal amount outstanding and shall not
postpone the due date of any subsequent payments or change the amount
of such payments.
5. Borrower and all other makers, sureties, guarantors, and endorsers
hereby waive presentment, notice of dishonor and protest, and they
hereby agree to any extensions of time of payment and partial payments
before, at, or after maturity. This Note shall be the joint and several
obligation of Borrower and all other makers, sureties, guarantors and
endorsers, and their successors and assigns.
6. Any notice to Borrower provided for in this Note shall be in writing
and shall be given and be effective upon; (1) delivery to Borrower, or
(2) mailing such notice by first-class U.S. mail, addressed to Borrower
at the Borrower's address stated below, or to such other address as
Borrower may designate by notice to the Note Holder. Any notice to the
Note Holder shall be in writing and shall be given and be effective
upon (1) delivery to Note Holder or; (2) by mailing such notice by
first-class U.S. mail to the Note Holder at the address stated in the
first paragraph of this Note, or to such other address as Note Holder
may designate by notice to Borrower.
7. The indebtedness evidenced by this Note is secured by a Security
Agreement of even date and until released said Security Agreement
contains additional rights of the Note Holder. Such rights may cause
Acceleration of the indebtedness evidenced by this Note. Reference is
made to said Security Agreement for such additional terms.
1
8. This Note is issued pursuant and subject to that Loan Agreement of even
date.
9. Note Holder's forbearance from, or delay in, the exercise of any
rights, remedies, privileges or rights to insist upon strict
performance of any provisions contained in this Note, or any other
associated loan document, shall not be construed as a waiver by Note
Holder, unless any such waiver is in writing and signed by the Note
Holder.
10. This Note is governed by the laws of the State of Colorado, and to the
extent required, by the laws of the jurisdiction where any property,
given as security for this Note, is located. In the event of a dispute,
the exclusive forum, venue and place of jurisdiction will be in
Boulder, Colorado, unless otherwise required by law.
11. This Note may not be amended or modified by oral agreement. No
amendment or modification of this Note is effective unless made in
writing and executed by the parties hereto. If any provision of this
Note is unenforceable, then the unenforceable provision will be severed
and the remaining provisions will still be enforceable.
12. Borrower agrees to sign, deliver, and file any additional documents or
certifications that Note Holder may consider necessary to perfect,
continue and preserve Borrower's obligations under this Note, or any
other associated loan documents, and to confirm Note Holder's lien
status on any property securing this Note.
13. Borrower agrees that from time to time, Note Holder may obtain credit
information about Borrower from others, including other lenders and
credit reporting agencies.
14. Time is of the essence.
BORROWER ATTEST
Bay Micro Computers, Inc. Secretary
2184 West 190th Street
Torrance, CA 90501 By:
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BY:
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TITLE:
----------------------------------------------
STATE OF )
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) ss.
COUNTY OF
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Subscribe and sworn before me this ____ day of ______, 2001, by ______.
My Commission expires: .
--------------------
Notary Public
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Exhibit 10.3
PROMISSORY NOTE
(REVOLVING NOTE)
U.S. $200,000.00 Boulder, Colorado
___________, 2001
1. FOR VALUE RECEIVED, the undersigned (Borrower) promises to pay, Silicon
Mountain Memory, Incorporated, a Colorado corporation, or order, (Note
Holder), amounts advanced from time to time under the terms of this
Note up to a maximum outstanding principal of Two Hundred Thousand
Dollars ($200,000.00.) U.S. Dollars, with interest on the unpaid
balance at 10% per annum, payable on demand. Principal and interest
shall be payable at 3220 Prairie Drive, Building C, Boulder, Colorado,
80301, or such other place as the Note Holder may designate.
2. Payments received for application to this Note shall be applied first
to the payment of default interest at the rate specified below, if any,
second, interest charges, and the balance applied in reduction of the
principal amount hereof.
3. If any payment required by this Note is not paid when due, or if any
default under any Security Agreement or other Loan Agreement securing
or referencing this Note occurs, the entire principal amount
outstanding and accrued interest thereon shall at once become due and
payable at the option of the Note Holder (Acceleration); and the
indebtedness shall bear interest at the rate of 18% per annum from the
date of default. The Note Holder shall be entitled to collect all
reasonable costs and expense of collection and/or suit, including, but
not limited to reasonable attorney's fees.
4. Borrower may prepay the principal amount outstanding under this Note in
whole or in part, at any time without penalty. Any partial prepayment
shall be applied against the principal amount outstanding and shall not
postpone the due date of any subsequent payments or change the amount
of such payments.
5. Borrower and all other makers, sureties, guarantors, and endorsers
hereby waive presentment, notice of dishonor and protest, and they
hereby agree to any extensions of time of payment and partial payments
before, at, or after maturity. This Note shall be the joint and several
obligation of Borrower and all other makers, sureties, guarantors and
endorsers, and their successors and assigns.
6. Any notice to Borrower provided for in this Note shall be in writing
and shall be given and be effective upon (1) delivery to Borrower, or
(2) mailing such notice by first-class U.S. mail, addressed to Borrower
at the Borrower's address stated below, or to such other address as
Borrower may designate by notice to the Note Holder. Any notice to the
Note Holder shall be in writing and shall be given and be effective
upon (1) delivery to Note Holder or; (2) by mailing such notice by
first-class U.S. mail, to the Note Holder at the address stated in the
first paragraph of this Note, or to such other address as Note Holder
may designate by notice to Borrower.
7. Any indebtedness evidenced by this Note is secured by a Security
Agreement of even date and until released said Security Agreement
contains additional rights of the Note Holder. Such rights may cause
Acceleration of the indebtedness evidenced by this Note. Reference is
made to said Security Agreement for such additional terms.
1
8. This Note is issued pursuant and subject to that Loan Agreement of even
date.
9. Note Holder's forbearance from, or delay in, the exercise of any
rights, remedies, privileges or rights to insist upon strict
performance of any provisions contained in this Note, or any other
associated loan document, shall not be construed as a waiver by Note
Holder, unless any such waiver is in writing and signed by the Note
Holder.
10. This Note is governed by the laws of the State of Colorado, and to the
extent required, by the laws of the jurisdiction where any property,
given as security for this Note, is located. In the event of a dispute,
the exclusive forum, venue and place of jurisdiction will be in
Boulder, Colorado, unless otherwise required by law.
11. This Note may not be amended or modified by oral agreement. No
amendment or modification of this Note is effective unless made in
writing and executed by the parties hereto. If any provision of this
Note is unenforceable, then the unenforceable provision will be severed
and the remaining provisions will still be enforceable.
12. Borrower agrees to sign, deliver, and file any additional documents or
certifications that Note Holder may consider necessary to perfect,
continue and preserve Borrower's obligations under this Note, or any
other associated loan documents, and to confirm Note Holder's lien
status on any property securing this Note.
13. Borrower agrees that from time to time, Note Holder may obtain credit
information about Borrower from others, including other lenders and
credit reporting agencies.
14. Time is of the essence.
BORROWER ATTEST
Bay Micro Computers, Inc. Secretary
2184 West 190th Street
Torrance, CA 90501 By:
--------------
BY:
-------------------------------------------------
TITLE:
----------------------------------------------
STATE OF )
--------------------------------------------
) ss.
COUNTY OF
-------------------------------------------
Subscribe and sworn before me this ____ day of ______, 2001, by ______.
My Commission expires: .
--------------------
Notary Public
2
SECURITY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that Bay Micro Computers, Inc., a
California corporation ("Borrower"); and, iChargeit, Inc., a Delaware
corporation ("Guarantor") for good and valuable consideration, do hereby grant
unto Silicon Mountain Memory Incorporated, a Colorado corporation ("Lender") a
security interest per the following terms and conditions:
1. Secured Debts: This Agreement will secure the following
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debts ("Secured Debts"):
a. Specific Debts: Those Promissory Notes dated ________________
____, 2001, in the principal amount of $85,000.00, and
$200,000.00, respectively, including all extensions, renewals,
refinancings, modifications and replacements.
b. All Debts: All present and future debts due from Borrower to
Lender, whether direct or indirect, absolute or contingent, and
even if this Agreement is not specifically referenced, or if the
future debt is unrelated to or of a different type than this
debt. Nothing in this Agreement constitutes a commitment to make
additional or future loans or advance, and any such commitment
must be in writing.
c. Sums Advanced: All sums advanced and expenses incurred by Lender
under the terms of this Agreement.
2. Security Interest: To secure the payment and performance of the
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Secured Debts, Borrower grants a security interest in all of the
Property described in this Agreement, that Lender now owns or in
the future will own (including, but not limited to, all parts,
accessories, repairs, improvements, and accessions to the
Property), wherever the Property is or will be located, and all
proceeds and products from the Property. Property is all the
collateral given as security for the Secured Debts as described
in this Agreement. Promptly, upon satisfaction of this Agreement,
Borrower will join with Lender in executing one or more financing
statements pursuant to the Uniform Commercial Code in form
satisfactory to Lender and will pay the cost of filing the same
in all public offices wherever filing is deemed by Lender to be
necessary or desirable. Borrower shall do, make, execute and
deliver all such additional and further acts, things, deeds,
assurances and instruments as Lender may reasonably require for
the purpose of more completely vesting in and insuring to Lender
its rights hereunder in or to the Property.
3. Property Description: The Property is described as follows:
---------------------
a. Inventory: All inventory which Borrower holds for ultimate sale
or lease, or which has been or will be supplied under
contracts of service, or which are raw materials, work in
process, or materials used or consumed in Borrower's business.
b. Accounts and Other Rights to Payment: All rights which Borrower
now has or in the future may have to payments including, but not
limited to, payment for goods and other properties sold or leased
or for services rendered, whether or not Borrower has earned such
payment by performance. This includes any rights and interests
(including all liens and security interests) which Borrower may
have by law or agreement against any debtor or obligor of
Borrower.
c. General Intangibles: All general intangibles including, but not
limited to, tax refunds, applications for patents, patents,
copyrights, trade marks, trade secrets, good will, trade names,
customer lists, permits and franchises, the rights to use any
corporate name or trade names, and all web-sites and associated
software, including all source and object codes therefore.
d. Equipment: All equipment including but not limited to, all
machinery, vehicles, furniture, fixtures, manufacturing
equipment, shop equipment, office and record keeping equipment
3
and parts and tools. Any and all equipment described in a list
or schedule which Borrower gives Lender will also be included
in the Property, but such list is not necessary for a valid
security interest in Borrower's equipment.
4. Warranties and Representations: Borrower makes the following
------------------------------
warranties and representations which will continue as long as this Agreementis
in effect:
a. Power: That Borrower is duly organized, validly existing and in
good standing in all jurisdictions in which Borrower operates.
That Borrower has the power and authority to enter into this
transaction and to carry on its business activities as is now
being conducted and, as applicable, is qualified to do so in each
jurisdiction in which it operates.
b. Authority: That the execution, delivery and performance of this
Agreement and the obligation evidenced by this Agreement, are
within Borrower's powers, have been duly authorized, have
received all necessary governmental approval, will not violate
any provision of law, or order of court or governmental agency,
and will not violate any agreement to which Borrower is a party
or to which Borrower or any of its Property is subject.
c. Ownership of Property: That Borrower is the owner of the
Property, with good and marketable title, free from any lien,
security interest or encumbrance, and that Borrower shall defend
the Property and its proceeds and products against all claims and
demands of all persons at any time claiming the same or any
interest therein adverse to Lender.
d. Financial Information: Subject to any limitations stated therein
or in connection therewith, that all balance sheets, earning
statements and other financial data which have been or may
hereafter be furnished to Lender do or shall fairly represent
Borrower's financial condition as of the dates and the results of
its operations for the periods for which the same are furnished,
and all other information, reports, and other papers furnished to
Lender are or shall be at the time the same are so furnished
accurate and correct in all material respects and complete in so
far as completeness may be necessary to give Lender a true and
accurate knowledge of the subject matter.
e. That Borrower has filed all required Federal, State and local tax
returns and other reports and has paid or made adequate provision
for payment of all such taxes, assessments and other governmental
charges.
f. That Borrower has complied with all applicable federal, state and
local statutes, regulations, ordinances, decrees and directives
with respect to the manufacture and sale of its goods, the
rendition of its services and the conduct of its business.
g. That no representation, warranty, or statement by Borrower
contained herein or in any certificate or other document
furnished or to be furnished by Borrower pursuant hereto contains
or at any time of delivery shall contain any untrue statement of
material fact, or omits, or shall omit at the time of delivery,
to state a material fact necessary to make it not misleading.
h. That Bay Micro Computers, Inc., is a wholly owned subsidiary of
iChargeit, Inc., and that Borrower contemporaneously with this
Agreement has caused all securities or security entitlements in
Bay Micro Computers, Inc., and owned by iChargeit, Inc., to be
held by Lender, under and per the terms of this Agreement, as
collateral and for perfection of Lender's security interest
therein.
5. Affirmative Covenants: Borrower hereby covenants and
----------------------
agrees with Lender that it will, during the term of this Agreement and for so
long thereafter as any Secured Debts remain outstanding:
a. Furnish Lender:
4
1. Within ninety (90) days after the last day of each
fiscal year of Borrower, a balance sheet and related
statements of income, retained earnings, and changes in
financial position, each prepared in reasonable detail and
in accordance with generally accepted accounting principles
consistently applied certified by an independent certified
public accountant or officer of Borrower;
2. Within thirty (30) days after the end of each of the
first three quarters of each fiscal year of the Borrower, a
balance sheet as at the end of such quarter and statements
of income and retained earnings for the period from the
beginning of the fiscal year to the end of such quarter,
certified by an authorized financial or accounting officer
of Borrower;
3. Within ten (10) days after the end of each calendar
month, an aged analysis of all outstanding account
receivables in form and substance satisfactory to Lender,
and information concerning quantities, costs and fair market
value of inventory; and
4. Promptly, and in form satisfactory to Lender, all
other information reasonably requested by Lender from time
to time.
b. Maintain casualty insurance coverage on its physical assets and
other insurance against other risks, including public liability
and product liability insurance in the amounts and of the types
requested by Lender from time to time, and in any event, as are
ordinarily carried by similar businesses. In the case of all
policies insuring property in which Lender shall have a security
interest of any kind whatsoever, all such insurance policies
shall provide that the proceeds thereof shall be payable to
Borrower and Lender, as their respective interests may appear.
All said policies or certificates thereof, including all
endorsements thereof and those required hereunder, shall contain
provisions that no such insurance may be canceled or decreased
without 10 days prior written notice to Lender. In the event of
acquisition of additional property, real or personal, or of
incurrence of additional risks of any nature, Borrower shall
cause such insurance coverage to be increased or amended in such
manner and to such extent as prudent business judgment would
dictate. If Borrower at any time or times hereafter shall fail to
obtain and maintain any required policy of insurance or to pay
any premium in whole or in part relating to any such policy,
Lender may obtain and/or cause to be maintained insurance
coverage with respect to the assets of Borrower, including, at
Lender's option, the coverage provided by all or any of
Borrower's policies and pay all or any part of the premium
thereunder, and any sums disbursed by Lender shall be additional
Secured Debt of Borrower to Lender, payable on demand. Lender
shall have the right to settle and compromise all claims under
any policy required to be maintained by Borrower hereunder, to
demand, receive, and receipt for all monies payable thereunder,
and to execute in the name of Borrower or Lender or both any
proof of loss, notice, or other instruments in connection with
such policies or any loss thereunder.
c. Permit Lender, through its authorized attorneys, accountants, and
representatives, to examine the inventory and the books,
accounts, records, ledgers, and assets of every kind and
description of Borrower at all reasonable times.
d. Promptly notify Lender of any condition or event which
constitutes or would constitute with the passage of time or
giving of notice or both, a default under this Agreement, and
promptly inform Lender of any events or changes in Borrower's
business, properties, or condition, financial or otherwise, which
individually or cumulatively when viewed in light of prior
financial statements, may result in a material adverse change in
Borrower's financial condition.
e. Maintain in good standing its corporate existence in its
jurisdiction of incorporation and its status as a foreign
corporation qualified to do business in those jurisdiction where
it is required to be qualified.
f. Notify Lender not less than 30 days prior to (i) the change of
5
its name or use of any trade names, or (ii) any change in the
address of Borrower's principal place of business, the location
of any records pertaining to the Property, and the address where
any Property is or may be stored.
g. Promptly notify Lender of any disputes which arise in connection
with its Property.
h. Keep complete and accurate books and records with respect to the
business of the Borrower and the Property consistent with good
business practice.
i. At any time and from time to time upon request of Lender,
execute and deliver to Lender, in form and substance
satisfactory to Lender, negotiable promissory notes for any
or all of the Secured Debt and/or such documents in respect
of the Secured Debts as Lender shall deem necessary or
desirable to evidence the Secured Debt or perfect or
maintain perfected the security interest of Lender in the
Property or which may be necessary to comply with the
provisions of the law of any jurisdiction in which Borrower
is then conducting business or in which any of the Property
is located.
6. Negative Covenants: Borrower agrees that during the term of
-------------------
this Agreement and so long thereafter as any Secured Debts remain outstanding,
it will not, without Lender's prior written consent:
a. Enter into any merger of consolidation or effect any
reorganization or recapitalization.
b. Mortgage, pledge, grant or permit to exist a security interest
in, or lien or encumbrance upon, any of its Property, now owned
or hereafter acquired except: (i) liens in favor of Lender and
(ii) liens arising by operation of law with respect to
obligations of Borrower not yet due and payable.
c. Assume, endorse, guarantee, or otherwise become liable for or
upon the obligations of any person, partnership, corporation or
other entity (other than endorsements for deposit in the ordinary
course of business).
d. Incur, create, assume, or permit to exist any indebtedness or
liability for borrowed money except: (i) indebtedness to Lender;
and (ii) accounts payable incurred in the ordinary course of
business.
e. Redeem, purchase, or retire any of Borrower's capital stock or
declare or pay any dividends (other than stock dividends), or
make any other payment or distribution upon any of such capital
stock.
f. Make any investment in, or make any loan or advance to, any
person, partnership, or corporation, including Borrower's
officers, stockholders, or directors.
g. Purchase or otherwise invest in or hold securities, nonoperating
real estate, or other nonoperating assets, except direct
obligations of the United States of America or certificates of
deposit or equivalent securities issued by banking financial
institutions.
h. Enter into any sale-leaseback transaction, or sell, lease,
transfer, or otherwise dispose or offer to dispose of all or any
material portion of its Property, except that Borrower may sell
inventory in the ordinary course of business, provided, however,
that the transfer of inventory in total or partial satisfaction
of a debt shall not be considered a sale in the ordinary course
of business.
i. Make or permit any substantial change in, or cease in whole or in
part, its present business, or engage in any other activities
apart from its present business.
j. Make any change for any reason whatsoever in the executive
management, majority ownership, or control of Borrower without
Lender's prior written consent.
7. Events of Default: Any or all of the Secured Debts of Borrower to
------------------
6
Lender shall, at the option of Lender, and not withstanding any time or credit
allowed by any instrument evidencing a Secured Debt, be immediately due and
payable without notice or demand upon the occurrence of any of the following
events of default ("Events of Default"):
a. Default in the payment or performance, when due or payable, of
any liability of Borrower, or of any endorser, guarantor or
surety, to Lender.
b. The making of an assignment for the benefit of creditors or upon
a petition for protection under federal, state or local
bankruptcy, insolvency or debtor relief laws, whether made
voluntarily or involuntarily, and including any appointment of or
taking of possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of
Borrower, or for any part of its Property.
c. A merger, dissolution, reorganization or termination of
Borrower's business or existence.
d. Borrower's failure to pay or perform any condition or to keep any
promise or covenant on this or any debt or agreement with Lender.
e. The making of any verbal or written statement or the providing of
any financial information that is untrue, inaccurate, or conceals
a material fact at the time it is made or provided.
f. The failure to pay or discharge any judgement against Borrower
for the payment of money, unless, within ten (10) days of its
entry, the judgement is satisfied or a stay of enforcement is
granted pending an appeal. g. A substantial loss, theft, damage
or destruction of any of the Property, or the use of Property in
any manner or for any purpose which threatens confiscation by a
legal authority.
h. A change in Borrower's name or the assumption of an additional
name absent notification to Lender before making such a change.
i. The transfer of all or a material portion of Borrower's Property.
j. Any change in the condition or affairs (financial or otherwise)
of Borrower, or of any endorser, guarantor or surety for any
liability of Borrower to Lender, as in Lender's opinion impairs
Lender's security or increases its risk.
8. Remedies: If any of the above Events of Default shall occur
--------
and be continuing, Lender at any time shall have, in addition to all other
rights and remedies, the remedies of a secured party under the Uniform
Commercial Code, including, without limitation, the right to take possession of
the Property. For that purpose, Lender may, so far as Borrower can give
authority therefore, enter upon any premises on which the Property is situated
and remove it therefrom. Unless the Property is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender shall give Borrower at least five (5) days prior written notice
of the time and place of any public sale of Property or of the time after which
any private sale or any other intended disposition is to be made. Lender may at
any time in its discretion transfer any securities or other property
constituting collateral into its own name or that of its nominee and receive the
income thereon and hold the same as security for liabilities or apply it on
principal or interest due on Secured Debts. In so far as Property shall consist
of accounts receivable, insurance policies, instruments, chattel paper, choses
in action, or the like, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize same, as Lender determines.
For the purposes of realizing its rights in Property as collateral, Lender may
receive, open, and dispose of mail addressed to Borrower and endorse notes,
checks, drafts, money orders, documents of title, or other evidences of payment,
shipment or storage or any form of collateral on behalf of and in the name of
Borrower. Lender may further discharge taxes, liens or other security interests,
or other encumbrances at any time levied or placed upon the Property, may pay
for insurance on the Property, and may pay for the maintenance and preservation
of the Property. Any such payments made or expenses incurred by Lender pursuant
to this provision shall be payable on demand and shall be secured by this
Agreement. In the event any Property sought to be included as collateral herein
shall not be determined to be subject to a lien under the Uniform Commercial
Code, Borrower shall, upon an Event of Default, promptly execute any and all
7
assignments and transfer documents as requested by Lender and necessary to vest
Lender with title to same. Lender may exercise its rights hereunder without
giving Borrower any opportunity for hearing to be held before Lender, through
judicial process or otherwise, takes possession of the Property upon the
occurrence of any Event of Default, and Borrower expressly waives the right, if
any, to such prior hearing.
9. Waivers: Borrower waives demand, notice, protest, notice
-------
of acceptance of this Agreement, notice of loans made, credit extended,
collateral received or delivered, or other action taken in reliance hereon and
all other demands and notices of any description. With respect both to
liabilities and collateral, Borrower assents to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange, or
release of collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments thereon
and the settlement, compromising, or adjusting of any thereof, all in such
manner and at such time or times as Lender deems advisable. Lender shall have no
duty as to the collection or protection of collateral or any income thereon, nor
as to the preservation of rights against prior parties, or as to the
preservation of any rights pertaining thereto beyond the safe custody thereof.
Lender may exercise its rights with respect to collateral without resorting or
regard to other collateral or sources of reimbursement for liability. Lender
shall not be deemed to have waived any of its rights upon or under liabilities
or collateral unless such waiver is in writing and signed by Lender. No delay or
omission by Lender in exercising any right shall operate as a waiver of such
right or any other right. A waiver on any one occasion shall not be construed as
a bar to or waiver of any right on any future occasion. All rights and remedies
of Lender on liabilities or collateral, whether evidenced by this agreement or
by any other instrument or papers, shall be cumulative and may be exercised
singularly or concurrently.
10. Expenses and Proceeds of Collateral: Borrower shall pay
------------------------------------
to Lender on demand all expenses, including reasonable counsel fees, incurred or
paid by Lender in protection or enforcing its rights upon or under liabilities
or collateral. After deducting all such expenses the residue of any proceeds of
collection or sale of liabilities or collateral shall be applied to the payment
of principal or interest on Secured Debts in the order of preference determined
by Lender, proper allowance for interest on liabilities not then due being made,
and any excess shall be returned to Borrower, which shall remain liable for any
deficiency.
11. General Provisions:
------------------
a. The failure of Lender at any time or times hereafter to require
strict performance by Borrower of any of the provisions,
warranties, terms, and conditions in this Agreement or in any
other agreement, guaranty, note, instrument, or document now or
at any time or times hereafter executed by Borrower and delivered
to Lender shall not waive, affect, or diminish any right of
Lender at any time or times hereafter to demand strict
performance thereof. No rights of Lender hereunder shall be
deemed to have been waived by any act or knowledge of Lender, its
agents, officers or employees, unless such waiver is contained in
an instrument signed by an officer of Lender. No waiver by Lender
of any of its rights shall operate as a waiver of any other of
its present or future rights.
b. Any demand or notice hereunder shall be deemed effective when
deposited in the United States mail, and sent by certified mail,
return receipt requested, postage prepaid, addressed to Lender or
to Borrower at the address shown, or to any other address
provided in writing prior to the giving of such notice by the
party to be notified.
c. This Agreement with all contemporaneously executed notes and
other agreements constitutes the entire understanding between the
parties with regard to the subject matter hereof, and may not be
modified or amended except by an instrument signed by the party
against which the enforcement of such modification or amendment
is sought.
d. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law. If any provision hereof is held to be invalid,
illegal or unenforceable, such determination shall not affect the
validity of the remaining provisions of this Agreement, which
shall continue in full force and effect as if the invalid
portions had been deleted or never written.
e. If Lender seeks to take possession of any or all of the Property
by court process, Borrower hereby irrevocably waives any bonds
and any surety or security relating thereto required by any
statute, court rule or otherwise as an incident to such
possession, and waives any demand for possession prior to the
commencement of any suit or action to recover with respect
thereto.
f. This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective legal representatives,
successors and assigns. Borrower, however, may not assign any of
its rights or delegate any of its obligations hereunder without
Lender's prior written consent.
g. This Agreement is entered into in the State of Colorado and shall
be construed in accordance with and governed by the laws thereof.
If Lender brings any action hereunder in any United States or
Colorado court of record, Borrower consents to personal
jurisdiction over it by such court. Service of process may be
made upon Borrower by mailing to it a copy of the summons, as
provided in Section 11(b) above. In any action hereunder,
8
Borrower waives the right to demand a trial by jury.
h. If Lender at any time employs counsel to perform any of the
following services, all of the reasonable attorneys fees arising
from, and all expenses and charges relating to, such services
shall be part of the Secured Debts, payable on demand and secured
by the Property: to assist in the execution and completion of the
transactions provided for or contemplated by this Agreement; to
commence, defend or intervene, file a petition, complaint,
answer, motion or other pleadings; to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise)
relating to this Agreement, the Property or any other past,
present or future agreement, guaranty, note, instrument or
document executed by Borrower and delivered to Lender; to
protect, collect, lease, sell, take possession of, or liquidate
any Property; to attempt to enforce or to enforce any security
interest in the Property; to enforce any rights of Lender
hereunder, whether before or after an Event of Default occurs; or
to collect any Secured Debt.
i. Each reference herein to Lender shall be deemed to include its
successors and assigns, and each reference to Borrower and any
pronouns referring thereto as used herein shall be construed in
the masculine, feminine, neuter, singular or plural, as the
context may require, and shall be deemed to include the legal
representatives, successors and assigns of Borrower, all of whom
shall be bound by the provisions hereof.
j. The term "Borrower" as used herein shall, if this Agreement is
signed by more than one person or entity, or by any guarantor of
the Secured Debts, mean unless this Agreement otherwise provides
or unless the context otherwise requires, the "Borrower and each
of them," including all signatures, and each and every
representation, promise, agreement and undertaking shall be joint
and several except that the granting of the security interest
shall be by each in its respective properties. If there is more
than one borrower, any loan or advance hereunder shall be deemed
to be made at the request of and for the benefit of each Borrower
(since Borrowers are affiliates and/or their respective
businesses are closely integrated and interrelated).
k. The section headings herein are included for convenience only and
shall not be deemed to be a part of this Agreement.
9
BORROWER:
___________________________________ ATTEST:
Bay Micro Computers, Inc.
2184 West 190th Street
Torrance, CA 90501
------------------
Secretary
BY: _______________________________ BY: _______________________
TITLE: _____________________________
STATE OF __________________ )
) ss.
COUNTY OF _______________ )
Subscribed and sworn before me this _____ day of _____, 2001, by _____.
My Commission expires: _____________________.
------------------
Notary Public
GUARANTOR:
- --------------------------------------
iCHARGEIT, INC.
2184 West 190th Street
Torrance, CA 90501
BY: ___________________________________
TITLE:_________________________________
STATE OF _________________________ )
) ss.
COUNTY OF ______________________ )
Subscribed and sworn before me this _____ day of _____, 2001, by _____.
My Commission expires: _____________________.
------------------
Notary Public
10
CONTINUING GUARANTY
Re: Bay Micro Computers, Inc. ("Borrower")
1. For valuable consideration, the undersigned ("Guarantors") jointly
and severally unconditionally guarantee the payment when due, upon maturity,
acceleration, or otherwise, of all or any of Borrower's indebtedness to Lender.
If all or any of such indebtedness becomes due and payable hereunder, Guarantors
jointly and severally unconditionally promise to pay the debt to Lender, or
order, on demand, in lawful money of the United States. The word "indebtedness"
is used herein in its most comprehensive sense. It includes all or any of
Borrower's existing or future advances, debts, obligations, and liabilities,
whether voluntary or involuntary, and however arising, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether the indebtedness
is from time to time reduced or extinguished, and thereafter increased or
incurred, whether Borrower is liable individually or jointly with others,
whether recovery upon the indebtedness is now or later becomes barred by any
statute of limitations, or whether the indebtedness is now or later becomes
otherwise unenforceable.
2. Guarantors jointly and severally unconditionally guarantee the
payment of any and all of Borrower's indebtedness to Lender, regardless of when
or whether due or payable by Borrower. Guarantors also jointly and severally
guarantee payment upon dissolution, insolvency, or business failure of, or any
assignment for benefit of creditors by, or commencement of any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceedings by or
against, Borrower or Guarantors, or the appointment of a receiver for, or the
attachment, restraint of, or making or levying of any order of court or legal
process affecting Borrower's or Guarantors' property. Guarantors also jointly
and severally unconditionally promise to pay such indebtedness to Lender, or
order, on demand, in lawful money of the United States.
3. This guaranty may be terminated as to future transactions only as to
those Guarantors that give written notice thereof to Lender. Such notice shall
be deemed effective as of noon of the next business day after received by
Lender. Regardless of whether notice is given, however, Guarantors shall not be
released from liability as to any indebtedness that is owing to or held by
Lender, in which Lender has an interest, or for which Lender is obligated at the
time notice is received, and all extensions and renewals thereof. Guarantors'
liability hereunder is exclusive and independent of any security for or other
guaranty of Borrower's indebtedness, whether executed by Guarantors or by any
other party. Guarantors' liability hereunder is not affected or impaired by the
following: (a) direction of application of payment by Borrower or any other
party; (b) any other continuing or other guaranty, undertaking, or liability of
Guarantors or of any other party as to Borrower's indebtedness; (c) any payment
on or in reduction of such guaranty or undertaking; (d) any notice of
termination hereof as to future transactions given by, or by the death or
termination, revocation, or release of any obligations hereunder of, any other
Guarantors; (e) any dissolution, termination, or increase, decrease, or change
in personnel of any Guarantors; or (f) any payment made to Lender on the
indebtedness Lender repays to Borrower under court order in a bankruptcy,
reorganization, arrangement, moratorium, or other debtor relief proceeding, and
Guarantors waive any right to the deferral or modification of their obligations
hereunder by reason of such proceedings.
4. Guarantors' obligations hereunder are joint and several, and
independent of Borrower's obligations. A separate action or actions may be
brought and prosecuted against Guarantors, regardless of whether action is
brought against Borrower or whether Borrower is joined in any such action or
actions. Guarantors waive, to the fullest extent permitted by law, the benefit
of any statute of limitations affecting their liability hereunder or the
enforcement thereof. Any payment by Borrower or other circumstance which
operates to toll any statute of limitations as to Borrower shall operate to toll
the statute of limitations as to Guarantors.
5. Guarantors authorize Lender (whether or not after revocation or
termination of this guaranty), without notice or demand (except as is required
by applicable statute and cannot be waived), and without affecting or impairing
their liability hereunder, from time to time to: (a) renew, compromise, extend,
increase, accelerate, or otherwise change the time for payment of, or otherwise
change the terms of the indebtedness or any part thereof, including increase or
decrease of the rate of interest thereon; (b) take and hold security for the
11
payment of this guaranty or the indebtedness and exchange, enforce, waive, and
release any such security; (c) apply such security and direct the order or
manner of sale thereof as Lender in its discretion determines; and (d) release
or substitute any one or more endorsers, Guarantors, Borrower, or other
obligors. Lender may without notice assign all or part of this guaranty.
6. It is not necessary for Lender to inquire into the capacity or
powers of Borrower or the officers, directors, partners, or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
7. Any indebtedness of Borrower now or hereafter held by Guarantors is
hereby subordinated to the indebtedness of Borrower to Lender; and such
indebtedness of Borrower to Guarantors, if Lender so requests, shall be
collected, enforced, and received by Guarantors as trustees for Lender and be
paid over to Lender on account of the indebtedness of Borrower to Lender but
without affecting or impairing in any manner the liability of Guarantors under
the other provisions of this guaranty. Any instruments now or hereafter
evidencing any indebtedness of Borrower to the undersigned shall be marked with
a legend that they are subject to this guaranty and, if Lender so requests,
shall be delivered to Lender.
8. Guarantors waive any right to require Lender to (a) proceed against
Borrower or any other party, (b) proceed against or exhaust any security held
from Borrower, or (c) pursue any other remedy in Lender's power. Guarantors
waive any defense based on or arising out of any defense of Borrower other than
payment in full of the indebtedness, including any defense based on or arising
out of Borrower's disability, or the unenforceability of all or any part of the
indebtedness from any cause, or the cessation from any cause of Borrower's
liability other than full payment of the indebtedness. Lender may foreclose on
any security held by it by one or more judicial or nonjudicial sales, regardless
of whether every aspect of any such sale is commercially reasonable, or exercise
any other right or remedy it has against Borrower, or any security, without
affecting or impairing in any way Guarantors' liability hereunder except to the
extent the indebtedness has been paid. Guarantors waive any defense arising out
of any election by Lender, even though the election operates to impair or
extinguish any right or reimbursement or subrogation or other right or remedy of
Guarantors against Borrower or any security. Until all of Borrower's
indebtedness to Lender has been paid in full, Guarantors shall have no right of
subrogation, and waive any right to enforce any remedy which Lender now has or
may hereafter have against Borrower, and waive any benefit of, and any right to
participate in any security now or hereafter held by Lender. Guarantors waive
all presentments, demands for performance, protests and notices, including
without limitation notices of nonperformance, notices of protest, notices of
dishonor, notices of acceptance of this guaranty, and notices of the existence,
creation or incurring of new or additional indebtedness. Guarantors assume all
responsibility for being and keeping themselves informed of Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the indebtedness and the nature, scope, and extent of the risks
which Guarantors assume and incur hereunder, and agree that Lender shall have no
duty to advise Guarantors of information known to it regarding such
circumstances or risks.
9. In addition to the amounts guaranteed hereunder, Guarantors jointly
and severally agree to pay reasonable attorney's fees and all other costs and
expenses incurred by Lender in enforcing this guaranty or in any action or
proceeding arising out of, or relating to, this guaranty. In all cases where
there is but a single Borrower or a single Guarantor, then all words used herein
in the plural shall be deemed to have been used in the singular where the
context and construction so require; and when there is more than one Borrower
named herein, or when this guaranty is executed by more than one Guarantor, the
word "Borrower" and the word "Guarantors" respectively shall mean all and any
one or more of them. This guaranty and the liability and obligations of
Guarantors hereunder are binding upon Guarantors and their respective heirs,
executors, administrators, successors, and assigns, and inures to the benefit of
and is enforceable by Lender and its successors, transferees, and assigns.
10. No right or power of Lender hereunder shall be deemed to have been
waived by any act or conduct by it, by any neglect to exercise such right or
power, or by any delay in so doing. Every right or power shall continue in full
force and effect until specifically waived or released by an instrument executed
by Lender.
11. This guaranty shall be deemed to be made under and shall be
governed by the laws of the State of Colorado in all respects. Its terms and
provisions may not be waived, altered, modified, or amended except in writing
12
duly signed by an authorized officer of Lender and by Guarantors. In the event
of a dispute, the exclusive forum, venue and jurisdiction will be in Boulder,
Colorado, unless otherwise required by law.
12. If any provision of this guaranty contravenes or is held invalid
under the laws of any jurisdiction, this guaranty shall be construed as if not
containing those provisions and the rights and obligations of the parties shall
be construed and enforced accordingly.
13. This Continuing Guaranty is executed and delivered
pursuant to that Loan Agreement between Lender and Borrower
dated ___________________, 2001.
IN WITNESS WHEREOF THE UNDERSIGNED GUARANTORS HAVE EXECUTED THIS GUARANTY ON
___________________, 2001.
GUARANTORS
i CHARGEIT, INC.
BY: ___________________________________ ATTEST:
TITLE: ________________________________ _______________________
Secretary
STATE OF _____________ ) BY: _______________________
) ss.
COUNTY OF __________ )
Subscribed and sworn before me this _____ day of ___, 2001, by _______.
My Commission expires: _____________________.
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Notary Public