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shareholders' subordinated loans until such time
when RESTORE's cash flow will become positive, or
its market and financial performance will have
enabled it to negotiate easier terms from the
same, or another bank in the U.S.A. [Emphasis
added.]
Witnesses presented at trial by both petitioner and respondent
confirmed that the parties intended that petitioner never
actually pay the royalty to Matrix until petitioner's financial
performance reached an unspecified level.7 Mr. Werner,
petitioner's president, testified that from the beginning, when
the agreement was first signed, the likelihood of petitioner's
making any significant profit was remote and that petitioner
would pay the royalties to Matrix as soon as the company began
developing a profit. Mr. Dugan, who succeeded Mr. Werner as
petitioner's president, testified it was his understanding that
petitioner would not pay the accrued royalties until it began to
show a profit. Mr. Fares, who along with Mr. Sultan founded
petitioner, testified that the royalties would only be paid to
Matrix when petitioner was profitable and that it was envisioned
from the beginning that petitioner would not be profitable for a
number of years. As of the date of trial, petitioner had not
made any royalty payments to Matrix.
7Although Mr. Sultan, a director, officer, and shareholder
of Matrix, testified there was no specific agreement that
petitioner did not have to pay royalties until it achieved
certain goals, we find that in fact there was such an intention
in the Marketing agreement.
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