DEBENTURE COMMITMENT AGREEMENT
February , 1998
Initio, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This is to set forth the agreement and understanding between Initio,
Inc. (the "Company") and the Pioneer Ventures Associates Limited Partnership,
having an address at ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Limited
Partnership") and the Limited Partnership's General Partner, Ventures Management
Partners LLC (the "General Partner") as follows:
1. The Limited Partnership hereby agrees to lend to the Company the
sum of $3,000,000 which shall be evidenced by and repaid by the Company in
accordance with the Convertible Subordinated Debenture attached hereto as
Exhibit A (the "First Subordinated Debenture"), which will be executed and
delivered by the Company to the Limited Partnership concurrently with the
funding of the loan evidenced thereby. Such loan shall be made by the Limited
Partnership to the Company within 15 business days of the date hereof by wire
transfer of immediately available funds to an account(s) specified by the
Company. The proceeds of such loan shall be used to repay in full the Company's
indebtedness to Summit Bank and for general working capital purposes.
2. In addition, the Limited Partnership hereby commits to lend to
the Company the sum of $2,000,000, which shall be evidenced by and repaid by the
Company in accordance with a second series of convertible subordinated
debentures (collectively, the "Second Subordinated Debenture") having the same
terms and conditions as the First Subordinated Debenture except that (a) the
maturity date thereof shall be five years from the date such loan is made and
(b) the amount of $3.00 per share in Section 5.1 shall be changed to $5.00 per
share (retaining all other terms). The $2,000,000 loan shall be made in
accordance with certain notice provisions, but such commitment shall expire at
5:00 p.m. New York time on February 28, 1999. This second and subsequent loan
may be made in minimum increments of $500,000. As a condition precedent to
closing of each Second Subordinated Debenture (i) the Limited Partnership and
the Company shall each make the representations set forth in Sections 7, 8 and
satisfy all of the conditions set forth in Section 10 hereof with respect to the
Second Subordinated
Page 2
Debenture, provided, however, that the term "Financial Statements" used in
Section 8(f) shall be deemed to refer to the most recent audited and unaudited
financial statements of the Company and the date in Section 8(g) shall be
changed to the date of the most recent quarterly or annual report of the
Company, whichever is later and (ii) all of the closing documents delivered in
connection with the First Subordinated Debenture shall be updated and delivered
in connection with the closing of each Second Subordinated Debenture. Such loan
shall be made by the Limited Partnership to the Company by wire transfer of
immediately available funds to an account(s) specified by the Company within 15
business days of the Company's written request made on or before February 28,
1999, which request shall set forth in reasonable detail the proposed
application of the proceeds of such Second Subordinated Debenture for
acquisitions (including working capital for an acquisition) and/or development
of an Internet site, provided, however, that the undersigned shall not be
required to make the loan contemplated by this paragraph if there shall then
exist an Event of Default (as that term is defined in the First Subordinated
Debenture). It is understood and agreed that a condition to the Limited Partner-
ship's funding the Second Subordinated Debenture is that the funds be used for
the purposes set forth herein. Each Second Subordinated Debenture will be
executed and delivered by the Company to the Limited Partnership concurrently
with the funding of the loan evidenced thereby.
3. Fees.
(a) Legal Fees. The Company shall pay at the First Subordinated
Debenture closing the attorneys fees and out-of-pocket expenses of counsel for
the Limited Partnership in connection with the transactions contemplated hereby;
such attorneys fees and out-of-pocket expenses shall equal $15,000. This fee
shall be all inclusive for any subsequent closing of the Second Subordinated
Debenture. In addition, the Company shall pay its own counsel's fees and all of
the expenses of the closing, including all search fees, filing fees,
governmental certification fees, third party investigation or other due
diligence fees for reports, filings or certifications reasonably requested to
effect the closing.
(b) Expenses. The Company will reimburse the General Partner of the
Limited Partnership for its out-of-pocket expenses incurred in connection with
visits to the Company's facilities and other costs and expenses actually
incurred in connection with its due diligence investigation of the Company,
provided, however, that in no event shall the Company be required to pay more
than $5,000 in connection therewith. The General Partner of
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the Limited Partnership hereby acknowledges receipt from the Company of a check
in the amount of $20,000 in payment of the fees and expenses set forth in
Sections 3(a) and 3(b).
(c) Investment Banking Fees. The Company shall pay an investment
banking fee of $21,000 to the General Partner of the Limited Partnership
concurrently with its execution and delivery of the First Subordinated
Debenture. In the event that the entire $20,000 being delivered to the General
Partner of the Limited Partnership concurrently with the execution hereof is not
used for the purposes set forth in Sections 3(a) and 3(b) at the execution and
delivery of the Second Subordinated Debenture, the General Partner of the
Limited Partnership shall apply any excess to the investment banking fee payable
with respect to the Second Subordinated Debenture. Concurrently with the
Company's execution and delivery of the Second Subordinated Debenture, the
Company will pay an investment banking fee of $14,000 to the General Partner of
the Limited Partnership.
(d) Break-Up Fee. At any time prior to the funding of the First
Subordinated Debenture, the Company may terminate this Agreement by written
notice without any obligation or liability other than to deliver a payment of
$15,000 to the General Partner of the Limited Partnership concurrently with such
written notice.
4. Agreements Concerning Directors.
(a) Generally. Effective immediately prior to or concurrently with
the funding of the First Subordinated Debenture, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or the nominee
of the General Partner shall be elected a director of the Company for a three
year term. So long as any principal and/or interest payment shall remain
outstanding under either the First Subordinated Debenture or the Second
Subordinated Debenture (collectively, the "Debentures") and so long as the
Limited Partnership shall own any Conversion Shares (as that term is defined in
the Debentures), the Company shall nominate, include in the list of candidates
for directors recommended by the Board of Directors, and use its best efforts to
have elected either ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or the nominee of the General Partner. In
furtherance of the foregoing, ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and certain other
shareholders of the Company shall simultaneously execute and deliver to the
Limited Partnership a Voting Agreement in substantially the form of Exhibit B
attached hereto.
(b) On Default. In the event that the Company shall default in the
due and punctual payment of any installment of interest on the Debentures when
and as the same shall become due and payable and such default shall continue for
30 days, in
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addition to the other remedies available to the Limited Partnership, the Company
shall nominate, and use its best efforts to have promptly elected or appointed
such number of individuals as shall, when added to the director referred to in
Section 4(a), give the Limited Partnership a majority of the total number of
directors of the Company for so long as any principal amount shall remain
outstanding under the Debentures. To facilitate the foregoing, the Company has,
concurrently with the execution hereof, amended its by-laws in a manner
satisfactory to the Limited Partnership and the Company shall not change such
amended provision of its by-laws without the Limited Partnership's prior written
consent. Failure to obtain such prior written consent to any such change shall
constitute an Event of Default under the Debentures.
5. Indemnification of the Limited Partnership. The Company will indemnify
and hold harmless the Limited Partnership, the General Partner and each of its
managers, officers and agents and each person, if any, who controls the Limited
Partnership within the meaning of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (collectively, the "Indemnified Persons") against
any losses, claims, damages or liabilities, joint or several, to which the
Limited Partnership or the Indemnified Persons may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (a) any material inaccuracy or inadequacy in or
breach or default of any of the Company's representations, warranties, covenants
or agreements in this Agreement or the Debentures or any filings or press
releases made by the Company pursuant to the Exchange Act ("Exchange Act
Filings"), (b) any untrue statement of any material fact contained in any
registration statement contemplated by Section 6 of the Debentures (the
"Registration Statement") or any Exchange Act filings, (c) the omission or
alleged omission to state therein a material fact required to be stated in the
Registration Statement or any Exchange Act filings or necessary to make the
statements in the Registration Statement or any Exchange Act filings not
misleading, or (d) any violation by the Company of the Securities Act of 1933,
as amended (the "Securities Act") or the Exchange Act and will reimburse, within
30 days of incurring such expenses, the Limited Partnership and the Indemnified
Persons for any legal or other expenses reasonably incurred by the Limited
Partnership and the Indemnified Persons in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement or any
Page 5
Exchange Act filings in reliance upon and in conformity with written information
furnished by and with respect to the Limited Partnership specifically for use in
the preparation thereof. In the event that a claim is made hereunder, the
Company shall defend such claim at its own expense. The Company shall not be
required to indemnify the Limited Partnership and the Indemnified Persons for
any payment made to any claimant in settlement of any suit or claim made by the
Limited Partnership unless such payment is approved in writing by the Company.
6. [INTENTIONALLY OMITTED].
7. Representations of the Limited Partnership. The Limited Partnership
hereby represents and warrants the following to the Company:
(a) Accredited Investor. It is an accredited investor within the
meaning of Rule 501 of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act").
(b) Investment Purpose. It is acquiring the Debentures and any
shares of the Company's Common Stock which it may acquire upon the conversion of
Debentures (the Debentures and such shares are hereinafter referred to as the
"Securities") for investment and not with a view to the sale or distribution
thereof, for its own account and not on behalf of others (except its limited
partners) and has not granted any other person any right or option or any
participation or beneficial interest in any of the Securities. The Limited
Partnership acknowledges its understanding that the Securities constitute
restricted securities within the meaning of Rule 144 of the Commission under the
Securities Act, and that none of the Securities may be sold except pursuant to
an effective registration statement under the Securities Act or in a transaction
exempt from registration under the Securities Act, and acknowledges that it
understands the meaning and effect of such restriction. The Limited Partnership
is aware that no federal or state regulatory agency or authority has passed upon
the sale of the Securities or the terms of the sale or the accuracy or adequacy
of any material being provided to the Limited Partnership and that the price of
the Securities was negotiated between the Company and the Limited Partnership
and does not necessarily bear any relationship to the underlying assets or value
of the Company. The Limited Partnership understands that an investment in the
Securities involves a high degree of risk.
(c) Opportunity to Meet with Management. The General Partner on
behalf of the Limited Partnership acknowledges that it
Page 6
has had an opportunity to meet with and ask questions of the Company's
management.
(d) Authorization; Validity. This Agreement has been duly authorized
and constitutes the valid and legally binding obligation of the Limited
Partnership in accordance with its terms except as enforcement may be limited by
applicable bankruptcy, insolvency and other laws relating to or affecting
creditors' rights generally and subject also to general principles of equity
affecting the right to specific performance and injunctive relief.
(e) Approvals. No authorization or approval of, or filing with, or
compliance with any applicable order, judgment, decree, statute, rule or
regulation of, any court or governmental authority, or approval, consent,
release or action of any third party, is required in connection with the
execution and delivery by the Limited Partnership of, or the performance or
satisfaction of any agreement of the Limited Partnership contained in or
contemplated by, this Agreement.
8. Representations of the Company. The Company hereby represents and
warrants the following to the Limited Partnership:
(a) Corporate Organization, Standing and Subsidiaries. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power, legal right
and authority to conduct its business and own, lease and operate its properties
as and in the places where such business is now conducted and such properties
are now owned, leased or operated. The Company has no subsidiaries except as set
forth in the 1997 10-KSB (as that term is hereinafter defined). Such
subsidiaries are hereinafter referred to as the "Subsidiaries". Each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power, legal right and authority to conduct its business and own,
lease and operate its properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated. Each of the
Subsidiaries is wholly owned by the Company.
(b) Property. The Company, either directly or indirectly through the
Subsidiaries, has good and marketable title to all its material assets in each
case free and clear of all liens, except (i) liens disclosed in Exhibit C
attached hereto, (ii) the lien, if any, of current taxes not yet due and
payable, (iii) such minor imperfections in title and encumbrances, if any, as do
not materially detract from the value
Page 7
or interfere with the present use thereof and (iv) liens created pursuant to
equipment finance leases.
(c) Default. The Company and the Subsidiaries are not in violation
of, breach of or default under, and no event (including, without limitation,
execution of and consummation of the transactions provided for in this
Agreement) has occurred which with the passage of time or notice from or action
by any party thereto or otherwise could result in a violation of or default
under, or give any other person the right to terminate, as the case may be, any
indenture, mortgage, security, loan, lease or other material agreement to which
the Company or any of the Subsidiaries is a party or by which it is bound or
result in the creation, imposition or acceleration of any material lien of any
nature in favor of any other person.
(d) Permits; Compliance with Laws. The Company and the Subsidiaries
possess all necessary valid licenses, permits, franchises, consents,
authorizations and approvals of or from governmental departments, agencies and
instrumentalities for the business and operations of the Company and the
Subsidiaries as presently conducted and is not in material default with respect
to nor in violation of, and has not received notice of any violation of or of
any proceedings for the termination or revocation of, any such license, permit,
franchise, consent, authorization or approval or, to the best of its knowledge,
any applicable Federal, state, local or foreign law, statute, ordinance,
regulation, order or requirement relating to its business, operations or assets,
or the use thereof, which default or violation could have a materially adverse
affect upon its business or operations. Without limiting the generality of the
foregoing, the Company has not received any notice of delisting from Nasdaq.
(e) Litigation. Except as set forth in a separate letter from the
Company to the Limited Partnership, there are no actions, suits, claims,
arbitrations, administrative or other proceedings or governmental investigations
seeking $10,000 or more in damages pending or, to the best of the Company's
knowledge, threatened against, relating to or affecting the Company or any of
the Subsidiaries, or their respective business, operations or assets, whether or
not fully covered by insurance, or which question or seek to prevent
consummation of the transactions provided for in this Agreement, whether at law
or in equity, or before or by any Federal, state, local, foreign or other
governmental department, agency or instrumentality nor to the best of its
knowledge is there any basis therefor. The Company and the Subsidiaries are not
bound or adversely affected by or in default with respect to any judgment,
order, writ,
Page 8
injunction or decree of any court or of any governmental department, agency or
instrumentality.
(f) Financial Statements. The Financial Statements (as that term is
hereinafter defined) are true, correct and complete in all material respects and
in conformity with the books and records of the Company, have been prepared in
accordance with generally accepted accounting principles and practices
consistently applied through the periods covered (except as otherwise stated
therein) and fairly present in all material respects the financial condition and
results of operations of the Company, as at the dates thereof and for the
periods covered thereby.
(g) No Adverse Changes. Since October 31, 1997 there have been no
changes in the financial condition, assets, liabilities, operating results or
business of the Company or the Subsidiaries, other than changes in the ordinary
course of business, which has been, individually or in the aggregate, materially
adverse, nor has there been any material damage, destruction or loss of any of
its property, and the business and operations of the Company and each of the
Subsidiaries has been conducted only in the usual, regular and ordinary course.
(h) Taxes. The Company and each of the Subsidiaries (i) has filed
all applicable federal, state, county and local tax and franchise returns and
reports required to be filed by it and has paid (or, as to taxes not currently
due and payable, has made adequate provision in accordance with generally
accepted accounting principles for the payment of) all income and other taxes,
assessments, franchise fees and other governmental charges required by law
(including, without limitation, withholding, social security, payroll and
similar taxes) and all interest and penalties, if any, thereon and (ii) is not a
party to any pending action or proceeding by any governmental authority for the
assessment or collection of any taxes, assessments, franchise fees or other
governmental charges and no claim for any thereof is pending.
(i) Authorization; Validity. This Agreement has been duly authorized
and constitutes the valid and legally binding obligations of the Company in
accordance with its terms except as enforcement may be limited by applicable
bankruptcy, insolvency and other laws relating to or affecting creditors' rights
generally and subject also to general principles of equity affecting the right
to specific performance and injunctive relief.
Page 9
(j) Approvals. No authorization or approval of, or filing with, or
compliance with any applicable order, judgment, decree, statute, rule or
regulation of, any court or governmental authority, or approval, consent,
release or action of any third party, is required in connection with the
execution and delivery by the Company of, or the performance or satisfaction of
any agreement of the Company contained in or contemplated by, this Agreement.
(k) Capital Stock; Ownership. The authorized securities of the
Company consists of 10,000,000 shares of Common Stock, $.01 par value, of which,
as of the date hereof, 4,850,398 are outstanding. The Company has reserved
596,400 shares of Common Stock for issuance pursuant to stock options which are
either outstanding but not yet exercised, or authorized under a stock option
plan but not subject to a grant. The Company has no other outstanding stock
options, warrants or other convertible securities. Set forth as Exhibit D
attached hereto is a list of certain shareholders of the Company.
(l) Complete Disclosure. No representation, warranty or statement,
written or oral, made by the Company in this Agreement or in any schedule,
exhibit, certificate or other document furnished or to be furnished to the
Limited Partnership, including any and all documents filed with the Securities
and Exchange Commission within the past 12 months, pursuant hereto or otherwise,
in connection with the transactions contemplated hereby, has contained, contains
or will contain at the closing date any untrue statement of a material fact or
has omitted, omits or will omit at the closing date a material fact required to
be stated therein or necessary to make the statements contained therein not
misleading. Without limiting the generality of the foregoing, the Company is
current in all filings required under the Exchange Act.
(m) Additional Representations. The Company represents and warrants
that:
(i) The Investment to be consummated by the Limited
Partnership in the Company is NOT opposed by its board of
directors;
(ii) The Company is NOT a real estate or real estate operating
company;
(iii) The Company is NOT undergoing a bankruptcy
liquidation;
Page 10
(iv) The securities to be issued upon consummation of the
Investment are either exercisable for, or convertible
into, equity securities at a pre-determined exercise
price or conversion ratio;
(v) The Company and its subsidiaries are NOT
domiciled in any country that is, at the time
of the closing of the Investment and will
ensure that, at the time of the conversion or
partial conversion of any of the Debentures, a
participant in an international boycott
illegal under United States law or opposed by
the United States government;
(vi) The Company is NOT an investment company registered or
required to be registered under the Investment Company
Act of 1940, as amended;
(vii) The Company conducts NO operations in Northern
Ireland and will ensure that at the time of
the conversion or partial conversion of any of
the Debentures that it conducts NO operations
in Northern Ireland unless the Company com-
plies with the ▇▇▇▇▇▇▇▇ principles and the
Limited Partnership agrees that the Company
complies with the ▇▇▇▇▇▇▇▇ principles. For
purposes of this Certificate, a corporation
will be considered to be "conducting opera-
tions in Northern Ireland" if it has facili-
ties and employees in Northern Ireland, either
directly or through one or more subsidiaries;
and
(viii) The Company is NOT and shall NOT be engaged in any form
of business in Iran which could be considered contrary to
the foreign policy or national interests of the United
States.
(n) Use of Proceeds. The Company represents it shall use and apply
the proceeds from the loan funded through the First (Second) Subordinated
Debenture only for such purpose as set forth in this Agreement.
(o) Summit Bank. The Company represents and warrants it shall pay in
full all loans issued by Summit Bank with the proceeds of the First Subordinated
Debenture.
Page 11
(p) Insurance. The Company represents and warrants that it has
general liability insurance with a maximum limit of $10,467,000 and a deductible
of 2% with a $25,000 minimum, which management of the Company believes is
sufficient to replace a substantial loss of its assets.
9. Receipt of Disclosure Documents. The General Partner of the Limited
Partnership acknowledges that it has received and reviewed copies of the
following (the "Financial Statements") from the Company: (i) its Annual Report
on Form 10-KSB for the fiscal year ended April 30, 1997 (the "1997 10-KSB"),
including, without limitation, its audited consolidated balance sheets as of
April 30, 1997 and 1996, the consolidated statements of operations,
stockholders' equity and cash flows for the fiscal years ended April 30, 1997
and 1996, and the related notes thereto, which have been certified by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, independent public accountants, and (ii) its Quarterly Report on
Form 10-QSB for the quarter ended October 31, 1997, including, without
limitation, its unaudited consolidated balance sheets as of October 31, 1997 and
the unaudited consolidated statements of operations, stockholders' equity and
cash flows for the six months ended October 31, 1997 and 1996 and notes thereto.
10. Conditions Precedent.
(a) Conditions Precedent to Obligation of the Limited Partnership.
The obligation of the Limited Partnership to consummate the transactions
provided for in this Agreement shall be subject to the fulfillment at or prior
to the closing of each of the following conditions (any or all of which may be
waived, in whole or in part, by the General Partner of the Limited Partnership
in its discretion):
(i) Each of the representations and warranties made by the
Company in this Agreement shall, except as otherwise contemplated or permitted
by this Agreement, be true and correct in all material respects on and as of the
date of closing as if made at and as of such time; the Company shall have each
duly performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the closing; and the Limited Partnership shall have
received the Company's certificates, dated the date of closing, to the foregoing
effect.
(ii) the Company shall execute and deliver to the Limited
Partnership such agreements, instruments and documents as the Limited
Partnership shall reasonably request to effectuate the transactions contemplated
by this Agreement.
Page 12
(b) Conditions Precedent to Obligation of the Company. The
obligation of the Company to consummate the transactions provided for in this
Agreement shall be subject to the fulfillment at or prior to the closing of each
of the following conditions (any or all of which may be waived, in whole or in
part, by the Company in its discretion):
(i) Each of the representations and warranties of the Limited
Partnership in, or in any instrument delivered in connection with or pursuant
to, this Agreement shall, except as otherwise contemplated or permitted by this
Agreement, be true and correct in all material respects on and as of the date of
closing as if made at and as of such time; the Limited Partnership shall have
duly performed and complied in all material respects with all agreements,
covenants, and conditions required by this Agreement to be performed or complied
with by it prior to or at the closing; and the Company shall have received the
General Partner's certificate on behalf of the Limited Partnership, dated the
date of closing, to the foregoing effect.
(ii) the General Partner on behalf of the Limited Partnership
shall execute and deliver to the Company such agreements, instruments and
documents as the Company shall reasonably request to effectuate the transactions
contemplated by this Agreement.
11. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement or the Debentures shall be in writing
and shall be deemed to have been duly given if delivered by overnight delivery
service and telecopier, addressed to the parties at their respective addresses
set forth or referred to on the first page of this Agreement, with copies to
their respective counsel, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Lerach LLP, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(telecopier no. (212) 868 - 1229), in the case of the Company and ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (telecopier no.
(860) 285 - 0139) in the case of the Limited Partnership, or to such other
person or address as may be designated by like notice hereunder. The current
telecopier numbers of the Company and the Limited Partnership are (201) 392 -
1118 and (860) 285 - 0139, respectively.
12. Modifications. This Agreement may not be modified or discharged
orally, but only in writing duly executed by the party to be charged.
13. Successors and Assigns. All the covenants, stipulations, promises and
agreements in this Agreement shall
Page 13
bind the parties' respective successors and assigns, whether so expressed or
not, provided, however, that the Company's agreements set forth in Section 4
hereof may not be assigned by the Limited Partnership.
14. Headings. The headings of the various sections of this Agreement are
for convenience of reference only and shall in no way modify any of the terms or
provisions of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.
If the foregoing is in accordance with your understanding, kindly so
indicate by signing this letter in the place provided below.
Very truly yours,
PIONEER VENTURES ASSOCIATES
LIMITED PARTNERSHIP
By: Ventures Management
Partners, LLC, Its
General Partner
By: Pioneer Ventures Corp.,
Its Managing Member
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
AGREED:
INITIO, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇, President
-----------------------------
▇▇▇▇▇▇ ▇▇▇, Pres.
EXHIBIT C
1. Substantially all of the Company's assets are subject to a
security interest granted to Summit Bank (as successor to United Jersey Bank),
which security interest will be released concurrently with the closing.
2. The Company's Carson City, Nevada property is subject to a
mortgage in favor of Sierra Bank of Nevada, securing a loan, the principal
amount and outstanding interest of which is less than $1,000,000.
3. The land on which the Company's Carson City, Nevada warehouse
facility is situated is leased from an unrelated third party. The lease expires
on September 30, 2037.
EXHIBIT D
Principal Shareholders
No. of %
Name Shares Ownership
---- ------ ---------
(1)▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 737,358 15.20
(1)▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 112,138 2.31
Retirement Plan Trust
Trustee: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Children Trust 530,546 10.94
c/o ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Trustees: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(1)▇▇▇▇▇▇ ▇▇▇ 1,170,808 21.56
(1)▇▇▇▇▇▇ ▇▇▇ Retirement 85,941 1.77
Plan Trust
(1)LFM Associates, Inc. 15,855 .33
Retirement Trust
(1)▇▇▇▇▇▇▇▇ ▇▇▇ Trust 80,449 1.66
Trustees: ▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(1)▇▇▇▇▇▇ ▇▇▇ Trust 56,535 1.16
Trustees: ▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------
(1) The address for these individuals and entities is c/o Initio, Inc.,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
Page 16
To facilitate the foregoing, each of the current directors is delivering to
________________ (the "Escrow Agent"), pursuant to the terms and conditions of
the Escrow Agreement between the Escrow Agent, the Company and the Limited
Partnership, dated the date hereof, undated, signed resignations. The Company
undertakes to deposit with the Escrow Agent undated, signed resignations from
each director who may hereafter be elected d director of the Company for so long
as any principal amount remains outstanding under the Debentures.
