Restore, Inc. - Page 12

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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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