EXHIBIT 10.31
THIRD AMENDMENT TO EXIM GUARANTEED LOAN AGREEMENT
THIS THIRD AMENDMENT TO EXIM GUARANTEED LOAN AGREEMENT (this "Amendment"),
dated as of July 31, 1997, is between SCIENTIFIC MEASUREMENT SYSTEMS, INC., a
Texas corporation ("Borrower"), and XXXXX FARGO HSBC TRADE BANK, N.A.
("Lender").
RECITALS:
A. Borrower and Lender entered into that certain EXIM Guaranteed Loan
Agreement dated as of June 15, 1996, as amended by First Amendment to EXIM
Guaranteed Loan Agreement dated as of August 1, 1996 and Second Amendment to
EXIM Guaranteed Loan Agreement dated as of June 15, 1997 (the "Agreement").
B. Borrower and Lender now desire to amend the Agreement as herein set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment, to
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the extent not otherwise defined herein, shall have the meanings given to such
terms in the Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.01. Amendment to Certain Definitions. (a) Effective as of date
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hereof, the definition of the following term contained in Section 1.01 of the
Agreement is amended to read in its respective entirety as follows:
"Commitment" means the obligation of Lender to make Advances in an
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aggregate principal amount at any time outstanding up to but not exceeding
$629,223.94.
"Default Rate" means the lesser of (a) the sum of the Prime Rate plus
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seven percent (7%) or (b) the Maximum Rate.
"Frost Bank Debt" means Debt of Borrower to Frost Bank in a principal
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amount which does not exceed $60,000.00 and which Debt is secured only by
Borrower's domestic accounts receivable.
"Termination Date" means 11:00 a.m., Houston, Texas time on January
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31, 1998 or such earlier date on which the Commitment terminates as
provided in this Agreement.
(b) Effective as of the date hereof, clause (c) of the definition of the
term "Permitted Encumbrances" is amended to read in its entirety as follows:
(c) Liens securing Debt permitted by Section 7.10(e), provided that
such Liens do not encumber the inventory, accounts, accounts receivable,
contract rights or general intangibles of Borrower,
(c) Effective as of the date hereof, the following definitions are added
to Section 1.01 of the Agreement and shall read in their entireties as follows:
"Payment Account" means a non-interest bearing collateral account at
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Lender to which deposits shall be made by wire as follows:
Xxxxx Fargo Bank (Texas), National Association
San Francisco, California
ABA# 000-000-000
BNF = LAG Operations Admin\AC
2714507209
OBI = Scientific Measurement Systems, Inc.
6975209491.
(d) Effective as of the date hereof, the definitions of the terms "Payment
Account-Continental", "Payment Account-Main" and "Payment Accounts" are deleted
from the Agreement.
Section 2.02. Amendment to Section 2.01. Effective as of the date hereof,
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the fourth sentence of Section 2.01 shall be deleted from the Agreement.
Section 2.03. Amendment to Section 2.03. Effective as of the date hereof,
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Section 2.03 is amended to read in its entirety as follows:
Section 2.03. Payment Account; Payment of Advances. (a) Lender
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shall establish and maintain the Payment Account. Borrower shall cause all
payments made by the Contract Parties with respect to the Contracts to be
paid by wire transfer to the Payment Account.
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(b) The Advances shall be due and payable on the day on which
Borrower receives any payment under the Fiat-Italy Contract in a principal
amount equal to the amount of such Fiat-Italy Contract payment, plus
accrued interest on the principal amount so paid.
(c) In the event that Borrower receives a purchase order for a
"SMARTSCAN System" from (i) Chrysler, Twenty-Five Thousand and No/100
Dollars ($25,000.00) of the Advances plus accrued interest thereon shall be
due and payable on the date on which such purchase order is received by
Borrower, or (ii) Xxxxxxxx Governor, Twenty-Five Thousand and No/100
Dollars ($25,000.00) of the Advances plus accrued interest thereon shall be
due and payable on the date on which such purchase order is received by
Borrower.
(d) The unpaid principal amount of all Advances shall also be due and
payable on the earlier of (i) the Termination Date or (ii) such other dates
on which the Advances are or may be required to be paid pursuant to this
Agreement.
(e) Borrower agrees that immediately upon deposit of any amounts in
the Payment Account Lender may and shall apply such amounts to the payment
of the Obligations in such order as Lender may determine in its sole
discretion.
(f) In the event that prior to the payment of the Obligations in
full, Borrower should receive additional funding in an amount in excess of
$1,000,000.00, whether as the result of a private placement of debt or
other securities of Borrower or from any other source, the Advances shall
be immediately due and payable and, immediately upon receipt of the
proceeds of such funding, Borrower will use such proceeds to pay the
Obligations in full.
Section 2.04. Amendment to Section 2.04. Effective as of the date hereof,
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the phrase "The unpaid principal amount of the Advances shall bear interest
prior to maturity at a varying rate per annum equal from day to day to the
lesser of (a) the Maximum Rate or (b) the sum of the Prime Rate in effect from
day to day plus two percent (2.0%)" contained in Section 2.04 of the Agreement
shall be amended to read "The unpaid principal amount of the Advances shall bear
interest prior to maturity at a varying rate per annum equal from day to day to
the lesser of (a) the Maximum Rate or (b) the sum of the Prime Rate in effect
from day to day plus five percent (5.0%)".
Section 2.05. Amendment to Section 7.10. Effective as of the date hereof
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clause (f) is deleted from Section 7.10.
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Section 2.06. Amendment to Section 7.17. Effective as of the date hereof,
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Section 7.17 of the Agreement is amended to read in its entirety as follows:
Section 7.17. Representations and Agreements Regarding Debt to Frost
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Bank and Additional Debt. (a) Borrower represents and warrants to Lender
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that its accounts, accounts receivable, inventory contract rights and
general intangibles are subject to no security interests other than (i)
security interests in favor of Lender and (ii) a security interest in favor
of Frost Bank in Borrower's domestic accounts receivable.
(b) As of November 1, 1997, the outstanding principal amount of the
indebtedness of Borrower to Frost Bank was $60,000.00 and accrued interest
on such indebtedness was approximately $2,000.00.
(c) Borrower will not borrow any additional amounts from Frost Bank
or any affiliate thereof. Borrower will not incur any Debt to any Person
if such Debt is or is to be secured by the inventory, accounts, accounts
receivable contract rights or general intangibles of Borrower.
Section 2.07. Addition of Section 7.19. Effective as of the date hereof,
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Section 7.19 shall be added to the Agreement and shall read in its entirety as
follows:
Section 7.19. Payment of Legal Fees. On the earlier of (i) the date
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on which Borrower receives a purchase order from Chrysler or (ii) the date
on which Borrower receives a purchase order from Xxxxxxxx Governor,
Borrower shall pay to Lender legal fees incurred by Lender in the amount of
$7,449.50.
Section 2.08. Amendment to Section 8.01. Effective as of the date hereof,
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clause (h) is added to Section 8.01 of the Agreement and shall read as follows:
(h) Payment on any Contract shall be made to any account other than
the Payment Account or by any means other than wire transfer to Lender.
Section 2.09. Amendments to Exhibits. Effective as of the date hereof
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Exhibit "A" to the Agreement (Note) is amended to conform in its entirety to
Annex "A" to this Amendment.
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ARTICLE III
Conditions Precedent
Section 3.01. Conditions. The effectiveness of this Amendment is subject
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to the receipt by Lender of the following in form and substance satisfactory to
Lender:
(a) Resolutions. Resolutions of the Board of Directors of Borrower
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certified by its Secretary or an Assistant Secretary which authorize the
execution, delivery and performance by Borrower of this Amendment and the
other Loan Documents to which Borrower is or is to be a party hereunder.
(b) Note. The Note executed by Borrower.
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(c) Amendment to Security Agreement. A Second Amendment to Security
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Agreement executed by Borrower in substantially the form of Annex "B"
hereto.
(d) Borrower Agreement. A Borrower Agreement executed by Borrower.
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(e) Fee. A fee payable to Lender in the amount of $2,412.03.
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(f) Principal Payment. Payment of principal of the Note in the
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amount of $25,000.00, such payment to be made in immediately available
funds.
(g) Additional Information. Such additional documents, instruments
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and information as Lender may request.
Section 3.02. Additional Conditions. The effectiveness of this Amendment
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is also subject to the satisfaction of the additional conditions precedent that
(a) the representations and warranties contained herein and in all other Loan
Documents, as amended hereby, shall be true and correct as of the date hereof as
if made on the date hereof, (b) all proceedings, corporate or otherwise, taken
in connection with the transactions contemplated by this Amendment and all
documents, instruments and other legal matters incident thereto shall be
satisfactory to Lender, and (c) no Event of Default shall have occurred and be
continuing and no event or condition shall have occurred that with the giving of
notice or lapse of time or both would be an Event of Default.
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ARTICLE IV
Ratifications, Representations, and Warranties
Section 4.01. Ratifications. The terms and provisions set forth in this
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Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement are ratified and confirmed
and shall continue in full force and effect. Borrower and Lender agree that the
Agreement as amended hereby shall continue to be the legal, valid and binding
obligation of such Persons enforceable against such Persons in accordance with
its terms.
Section 4.02. Representations, Warranties and Agreements. Borrower hereby
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represents and warrants to Lender that (a) the execution, delivery, and
performance of this Amendment and any and all other Loan Documents executed or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of Borrower and will not violate the articles of
incorporation or bylaws of Borrower, (b) the representations and warranties
contained in the Agreement as amended hereby, and all other Loan Documents are
true and correct on and as of the date hereof as though made on and as of the
date hereof, (c) except as disclosed in writing to Lender, no Event of Default
has occurred and is continuing and no event or condition has occurred that with
the giving of notice or lapse of time or both would be an Event of Default, (d)
except as disclosed in writing to Lender, Borrower is in full compliance with
all covenants and agreements contained in the Agreement as amended hereby, (e)
Borrower is indebted to Lender pursuant to the terms of the Note, as the same
may have been renewed, modified, extended and rearranged, including, without
limitation, renewals, modifications, increases and extensions made pursuant to
this Amendment, (f) the liens, security interests, encumbrances and assignments
created and evidenced by the Loan Documents are, respectively, valid and
subsisting liens, security interests, encumbrances and assignments and secure
the Note as the same may have been renewed, modified or rearranged, including,
without limitation, renewals, modifications, increases and extensions made
pursuant to this Amendment, and (g) Borrower has no claims, credits, offsets,
defenses or counterclaims arising from the Loan Documents or Lender's
performance under the Loan Documents.
ARTICLE V
Miscellaneous
Section 5.01. Survival of Representations and Warranties. All
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representations and warranties made in this Amendment or any other Loan
Documents including any Loan Document furnished in
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connection with this Amendment shall fully survive the execution and delivery of
this Amendment and the other Loan Documents, and no investigation by Lender or
any closing shall affect the representations and warranties or the right of
Lender to rely on them.
Section 5.02. Reference to Agreement. Each of the Loan Documents,
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including the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement, as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement, as amended hereby.
Section 5.03. Expenses of Lender. As provided in the Agreement, Borrower
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agrees to pay on demand all costs and expenses incurred by Lender in connection
with the preparation, negotiation and execution of this Amendment and the other
documents and instruments executed pursuant hereto and any and all amendments,
modifications and supplements thereto, including, without limitation, the costs
and fees of Lender's legal counsel, and all costs and expenses incurred by
Lender in connection with the enforcement or preservation of any rights under
the Agreement, as amended hereby, or any other Loan Document, including, without
limitation, the costs and fees of Lender's legal counsel.
Section 5.04. Severability. Any provision of this Amendment held by a
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court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.05. Applicable Law. This Amendment and all other Loan Documents
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executed pursuant hereto shall be deemed to have been made and to be performable
in Houston, Xxxxxx County, Texas and shall be governed by and construed in
accordance with the laws of the State of Texas.
Section 5.06. Successors and Assigns. This Amendment is binding upon and
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shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of Lender.
Section 5.07. Counterparts. This Amendment may be executed in one or more
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counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
Section 5.08. Effect of Waiver. No consent or waiver, express or implied,
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by Lender to or for any breach of or deviation from any covenant, condition or
duty by Borrower shall be deemed a
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consent or waiver to or of any other breach of the same or any other covenant,
condition or duty.
Section 5.09. Headings. The headings, captions, and arrangements used in
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this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.10. ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
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DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THIS AMENDMENT AND THE OTHER INSTRUMENTS, DOCUMENTS AND
AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
SCIENTIFIC MEASUREMENT SYSTEMS, INC.
By:
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Xxxxxx Xxxxxx
Chief Executive Officer
LENDER:
XXXXX FARGO HSBC TRADE BANK, N.A.
By:
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Xxxxxx Xxx
Assistant Vice President
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LIST OF ANNEXES
Annex Document
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A Note
B Second Amendment to Security Agreement
C Borrower Agreement
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PROMISSORY NOTE
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$629,223.94 Houston, Texas July 31, 1997
FOR VALUE RECEIVED, the undersigned, SCIENTIFIC MEASUREMENT SYSTEMS,
INC., a Texas corporation ("Maker"), hereby promises to pay to the order of
XXXXX FARGO HSBC TRADE BANK, N.A., a national banking association ("Payee"),
at its offices at 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx, Xxxxxx Xxxxxx, Xxxxx, in
lawful money of the United States of America, the principal sum of SIX HUNDRED
TWENTY NINE THOUSAND TWO HUNDRED TWENTY-THREE AND 94/100 DOLLARS ($629,223.94),
or so much thereof as may be advanced and outstanding hereunder, together with
interest on the outstanding principal balance from day to day remaining, at a
varying rate per annum which shall from day to day be equal to the lesser of (a)
the Maximum Rate (hereinafter defined) or (b) the sum of the Prime Rate
(hereinafter defined) of Payee in effect from day to day plus five percent
(5.0%), and each change in the rate of interest charged hereunder shall become
effective, without notice to Maker, on the effective date of each change in the
Prime Rate or the Maximum Rate, as the case may be; provided, however, if at any
time the rate of interest specified in clause (b) preceding shall exceed the
Maximum Rate, thereby causing the interest rate hereon to be limited to the
Maximum Rate, then any subsequent reduction in the Prime Rate shall not reduce
the rate of interest hereon below the Maximum Rate until the total amount of
interest accrued hereon equals the amount of interest which would have accrued
hereon if the rate specified in clause (b) preceding had at all times been in
effect. All past due principal and interest on this Note shall bear interest at
the Default Rate (hereinafter defined).
Principal of and interest on this Note shall be due and payable as follows:
(a) Accrued and unpaid interest on this Note shall be due and payable
monthly, on the first (1st) day of each month commencing on November 1,
1997, and upon the maturity of this Note, however such maturity may be
brought about;
(b) Principal of this Note shall be due and payable on the day on
which Maker receives any payment under the Fiat-Italy Contract (as defined
in the Agreement, which is hereinafter defined) in an amount equal to the
amount of such Fiat-Italy Contract payment, plus accrued interest on the
principal amount so paid;
(c) In the event that Maker receives a purchase order for a
"SMARTSCAN System" from (i) Chrysler, Twenty-Five Thousand and No/100
Dollars ($25,000.00) of principal of this Note plus accrued interest
thereon shall be due and payable on the date on which such purchase order
is received by Maker, or (ii) Xxxxxxxx Governor, Twenty-Five Thousand and
No/100
Dollars ($25,000.00) of principal of this Note plus accrued interest
thereon shall be due and payable on the date on which such purchase order
is received by Maker; and
(d) All outstanding principal of this Note and all accrued interest
thereon shall be due and payable on January 31, 1998.
Principal of this Note shall be subject to mandatory prepayment at the
times described in Sections 2.03 and 2.06 of the Agreement (hereinafter
defined).
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
"Agreement" means that certain EXIM Guaranteed Loan Agreement dated
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as of June 15, 1996 between Maker and Payee, as amended by First Amendment
to EXIM Guaranteed Loan Agreement dated as of August 1, 1996, Second
Amendment to EXIM Guaranteed Loan Agreement dated as of June 15, 1997 and
Third Amendment to EXIM Guaranteed Loan Agreement dated as of July 31,
1997, and as the same may be further amended or modified from time to time.
"Default Rate" shall mean the lesser of (a) the sum of the Prime
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Rate plus seven percent (7%) or (b) the Maximum Rate.
"Maximum Rate" means the maximum rate of nonusurious interest
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permitted from day to day by applicable law, including as to Article 5069-
1.04, Vernon's Texas Civil Statutes (and as the same may be incorporated by
reference in other Texas statutes), but otherwise without limitation, that
rate based upon the "indicated rate ceiling" and calculated after taking
into account any and all relevant fees, payments, and other charges in
respect of this Note which are deemed to be interest under applicable law.
"Prime Rate" shall mean that variable rate of interest per annum
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established by Xxxxx Fargo Bank from time to time as its prime rate which
shall vary from time to time. Such rate is set by Xxxxx Fargo Bank as a
general reference rate of interest, taking into account such factors as
Xxxxx Fargo Bank may deem appropriate, it being understood that many of
Xxxxx Fargo Bank's commercial or other loans are priced in relation to such
rate, that it is not necessarily the lowest or best rate charged to any
customer and that Xxxxx Fargo Bank may
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make various commercial or other loans at rates of interest having no
relationship to such rate.
This Note (a) is the Note provided for in the Agreement and (b) is
secured as provided in the Agreement, including by the security interests
created by the Security Agreement (as defined in the Agreement). Payment of this
Note is guaranteed by, among other things, the Export-Import Bank of the United
States pursuant to the EXIM Guaranty (as defined in the Agreement).
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker and Payee shall, to the extent permitted
by applicable law, (a) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (b) exclude voluntary prepayments and
the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for the
entire term does not exceed the Maximum Rate.
Upon the occurrence of any Event of Default, as such term is defined in
the Agreement, the holder hereof may, at its option, (a) declare the entire
unpaid principal of and accrued interest on this Note immediately due and
payable without notice, demand or presentment, all of which are hereby waived,
and upon such declaration, the same shall become and shall be immediately due
and payable, (b) foreclose or otherwise enforce all liens or security interests
securing payment hereof, or any part hereof, (c) offset against this Note any
sum or sums owed by the holder hereof to Maker, (d) exercise its rights under
the EXIM Guaranty and (e) take any and all other actions available to Payee
under this Note, the Agreement, the Loan Documents (as such term is defined in
the Agreement) at law, in equity or otherwise. Failure of the holder hereof to
exercise any of the foregoing options shall not constitute a waiver of the right
to exercise the same upon the occurrence of a subsequent Event of Default.
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If the holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including all reasonable attorneys'
fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS
NOTE IS PERFORMABLE IN XXXXXX COUNTY, TEXAS.
Maker and each surety, guarantor, endorser, and other party ever liable for
payment of any sums of money payable on this Note jointly and severally waive
notice, presentment, demand for payment, protest, notice of protest and
nonpayment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
This Note is executed in renewal, extension and decrease of, but not in
discharge or novation of, that certain promissory note in the original principal
amount of $629,775.00, dated June 15, 1997, executed by Maker and payable to the
order of Payee, which was executed in renewal, extension and decrease of, but
not in discharge or novation of, that certain promissory note in the original
principal amount of $1,250,000.00, dated August 1, 1996, executed by Maker and
payable to the order of Payee, which was executed in renewal, extension and
modification of, but not in discharge or novation of, that certain promissory
note in the original principal amount of $1,250,000.00, dated June 15, 1996,
executed by Maker and payable to the order of Payee.
SCIENTIFIC MEASUREMENT SYSTEMS, INC.
By:
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Xxxxxx Xxxxxx
Chief Executive Officer
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