Document:

Exhibit 10.39 Gateway Acceptance Company Accounts Receivable Factor Agreement

                           GATEWAY ACCEPTANCE COMPANY
                 3189 Danville Blvd., Suite 230. Alamo, CA 94507

                               SECURITY AGREEMENT
                      Pacific Printing and Embroidery, LLC
                             DBA Pacific Print Works
                              2035 NE 181st Street
                                Portland OR 97230

                           27th Day of November, 2000

Gentlemen:

         We are  pleased  to submit the terms upon which we shall make loans and
advances to you upon the security set forth below. For ease of reference you are
hereinafter  referred to as the "Borrower" and we are hereinafter referred to as
"Gateway" and this Security Agreement shall be referred to as the "Agreement."

1.       SECURITY

         Borrower  desires to borrow  money from time to time from  Gateway.  As
security  for all  present and future  obligations  and  liabilities  (direct or
indirect,  absolute or contingent, due or to become due) of Borrower to Gateway,
Borrower  hereby  grants  to  Gateway  a  continuing  security  interest  in the
following collateral whether now owned or hereafter acquired: all of its present
and future accounts (including but not limited to open accounts receivable, book
debts, notes, acceptance, drafts, contracts, contract rights, chooses in action,
and all other rights to the payment of money),  goods,  equipment (including but
not  limited  to plant  and  office  equipment,  machinery  and all  attachments
appurtenant  thereto,  tools,  dies, molds, jigs, bores,  patterns,  appliances,
trade  fixtures,  furniture  and  furnishings),  fixtures,  computers,  computer
programs, discs, and tapes and peripheral equipment,  purchase orders, insurance
policies of any nature and all proceeds whatsoever thereof,  general intangibles
(including,  but not  Ijinited to,  Borrower's  name and  goodwill,  trademarks,
tradenames,  copyrights, processes, patents, patent rights, patent applications,
licenses,  inventions,  royalfies and/or commissions,  customer lists),  chattel
paper,  instruments,  documents and deposit  accounts,  fixtures,  and inventory
(including  but not limited to (a) raw  materials,  work in process and finished
goods in all stages of production,  and (b) packing and shipping material, books
and  records  relating  to  inventory,  and (c)  property  as  described  in any
schedules  attached  hereto)  as  those  terms  are  defmed  in  the  California
Commercial Code, aircraft, motor vehicles (including not limited to automobiles,
trucks,   off-road   vehicles,   and  forklifts)   and  additions,   accessions,
attachments, replacements,  substitutions, proceeds, products, repossessions and
returns of any of the  foregoing  and any such other  security or  Collateral as
shown by written instrument of Borrower which Borrower now or hereafter gives to
Gateway and any and all other  property of Borrower 5 coming into the possession
of Gateway or under Gateway's control (all collectively hereafter referred to as
"Collateral").

         This  Agreement is expressly  declared to be a secured  transaction  as
defmed in the  California  Commercial  Code. In  furtherance  of the  continuing
security  interest herein provided for,  Borrower will, upon the creation of all
accounts,  provide Gateway with confirmatory  assignment  schedules  (1}ereafter
"the  schedules") in form  satisfactory to Gateway,  provided  however,  Gateway
shall have a security interest in all of Borrower's accounts,  without regard to
whether such schedules are provided.

                                  Page 1 of 10
<PAGE>

Security Agreement Continued

2.       WARRANTIES AND REPRESENTATIONS

The foflowing  warranties and  representations  are made by Borrower to Gateway,
now and at the  time of  each  assignment,  with  reference  to the  Collateral,
including each and every account in which Gateway shall have a security interest
whether or not the account is listed in the schedules:

A. The account  evidences bona fide sales and deliveries of personal property of
the sort and kind usual and normal to the business of Borrower and usually dealt
in by Borrower.

B.  The  account  is  actual,  genuine,  existing,   absolute,  bona  fide,  and
collectible  indebtedness of the customers named therein to Borrower and payable
at the time and in the manner set forth in the assignment thereof unto Gateway.

C. No  express  or  implied  warranties  or  representations  or  guaranties  or
agreements  have been made to or with any customer,  except those  extended with
Borrower's  product in the ordinary course of business,  that the product is fit
for its particular purpose and meets specifications.

D. The  property  sold or work,  labor or  services  performed  will  have  been
actually  delivered  into the  possession of and accepted  before the account is
included on the  schedules,  by the  customer  who is and will be liable for and
will make payment of the amount  stated in each invoice  according to its terms,
without offset, defense or counterclaim of any kind whatever.

E.  Borrower  shall not assign,  sell,  transfer,  pledge,  encumber,  mortgage,
hypothecate  or  otherwise  create or give any  security  interest on any of its
property  or the  Collateral  except  to  Gateway.

F. The terms of sale on the account  provide  for payment  within 30 days of the
date of the  invoice,  no change of the terms  shall be made  except  with prior
written  consent  of  Gateway,  and no  account  will be past due at the time of
assignment to Gateway.

G. The account is assignable  and has not been assigned or transferred to anyone
other than Gateway, and is not subject to any third party claim.

H. All facts, figures, signatures,  names, addresses, and representations given,
or caused to be given,  by Borrower to Gateway  regarding each and every account
are true, complete and correct.

I. Borrower's  books and records fully and accurately  reflect all of its assets
and liabilities  (absolute and  contingent),  are kept in the ordinary course of
business  in  accordance   with   generally   accepted   accounting   principles
consistently applied, and all information contained therein is true and correct.

J. The fair  market  value of the  Collateral  is and  shall at all  times be as
represented to Gateway.

K. All taxes of any  governmental  or taxing  authority  due or  payable  by, or
imposed,  levied  or  assessed  against  Borrower  shall be pald in full  before
delinquency.

L. There are no actions or proceedings pending by or against Borrower before any
court or administrative agency, and there are no pending,  threatened,  or known
to be jaiminent litigation,  governmental investigation,  or claims, complaints,
or prosecutions  involving Borrower except as heretofore disclosed in writing to
Gateway.

M.  Borrower  has the power and  authority to enter into this  Agreement  and to
perform and discharge its obligations hereunder.

N. If Borrower is a corporation, it will do all things necessary to preserve its
good standing as a corporation under the laws of the State of California and the
state of its incorporation.

0. All Collateral given or caused to be given by Borrower to Gateway is and will
be a fir st security  interest on the  Collateral,  and is and will be kept free
and clear of all liens,  encumbrances,  security  interests  and adverse  claims
other than those created herein.

P. The Collateral is owned solely by the Borrower.

Q. The  Collateral  is and shall be in good  condition  and  repair and will not
(except for sales of  inventory  in the  ordinary  course of  business) be sold,
transferred  or assigned or removed from the premises  described  herein without
first obtairfing Gateway's written consent.

                                  Page 2 of 10
<PAGE>

                          Security Agreement Continued

         R. All Collateral not  specifically  identified by schedules  hereto as
fixtures shall remain  personal  property and not become part of the real estate
regardless of the manner of affixation.

         S.  Borrower  agrees to comply with the  requirements  of all state and
federal laws in order to grant Gateway a valid lien upon and a security interest
in the Collateral.

         T.  Borrower  agrees  to do  whatever  Gateway  may  request  by way of
executing and obtaining from others  warehouse  leases,  subordinations,  filing
financing   statements,   amendments,   renewals  and   continuations   thereof,
cooperating with Gateway's custodian,  keeping records,  transferring Collateral
to Gateway's  possession,  obtaining waivers from landlords and mortgagees,  and
performing  such  further  acts as  Gateway  may  require in order to effect the
purposes of this Agreement.

         U.  Borrower  shall  accept no  returns m excess of 3 % of sales in any
given month and shall grant no  allowances or credit in excess of that amount to
account  debtors  without  Gateway's  prior  written  approval.  If any property
referred to or covered by any account  assigned to Gateway  shall  remain in, or
revert to, Borrower's possession,  Borrower will imrnediately set it apart, mark
and designate it as Gateway's property, and promptly notify Gateway.

3.       ADVANCES AND CHARGES THEREON

         A. Upon receipt of the  schedule of  assignments  of accounts,  Gateway
will credit Borrower with an amount up to eighty-five  percent (8.5%) of the net
face amount of all qualified  accounts.  Gateway shall determine in its sole and
exclusive  discretion  the  percentage  amount of the credit  and what  accounts
qualify. Gateway will also credit Borrower with the remainder of the face amount
of such assigned  accounts on payment  thereof to Gateway,  less  deductions and
plus overpayments by account debtors. All amounts so credited,  as adjusted from
time shall be the "amount available for advance."

         Gateway will  advance to Borrower on request,  such amounts so credited
or a part thereof as requested.  No advances or payments need be made by Gateway
hereunder if the  financial  condition  of Borrower  becomes  unsatisfactory  to
Gateway or if Borrower is in default in the payment or performance of any of its
obligations  to  Gateway.  Each  advance  by Gateway  to the  Borrower  is to be
evidenced by a note signed by the Borrower if so request by Gateway.

         B. Gateway  shall charge the Borrower  interest on such advances at the
rate of Prime Plus Eight Percent (P+8%) per annum from the date of each advance.
Said interest will be computed the last day of each month upon the average daily
balance of advances  outstanding  during said month, based on a 365-day year for
days actually elapsed.  Said interest will be paid by the Borrower no later than
the first day of the following  month.  Amounts not paid when due shall be added
to principal  and shall bear  interest at the above rate,  and shall be deducted
from the amount available for advance.  Payments received by Gateway,  unless in
cash,  will not be  credited  for 3 business  days to allow for,  and subject to
collection of the payment.

         Borrower has represented  and does represent that it will generate,  in
the regular  course of its business,  accounts  receivable  which will aggregate
some $1,000,000.00 quarterly.

         Each  monthly  accounting  rendered  by Gateway to Borrower of interest
charges,  other  charges,  advances,  and payments  shall be deemed  correct and
binding unless  borrower  notifies  Gateway in writing to the contrary within 30
days after the date that said accounting is delivered to Borrower.

         C. Prime Rate is deEmed for purposes of this  Agreement as the prime or
base or reference rate on prime  commercial loans as announced from time to time
by the Bank of  America.  In the event the Bank of America  ceases to announce a
prime rate,  Gateway may  substitute  any sintiar  index  published  in the Wall
Street  Journal or other  newspaper,  or the prime or base rate published by the
Federal  Reserve Bank in San Francisco,  or any similar  published prime or base
rate,  including  that of any  commercial  bank, or any other  reasonable  index
commorily used by financial institutions, provided that such substitute index is
readily  verifiable  by  Borrower  and is beyond  the  control of  Gateway,  and
Borrower is notified  within a  reasonable  time which index is being used.  The
prime or base rate is not  necessarily a rate  commonly  charged to any class of
borrowers,  nor is it  necessarily  the lowest rate offered by any lender (e.g.,
Bank of America's lowest rates may be lower or higher than Prime Rate).

                                  Page 3 of 10
<PAGE>

                         Security Agreement - Continued

         D. Prime Rate as of the date of this  Agreement  is 9.5% per annum.  If
the Prime Rate as announced by Bank of America from time to time increases,  the
Daily  Loan Rate  shall  increase  by an  amount  equal to 100  percent  of such
increases  calculated  on a daily basis  using a 365-day  year as of the date of
such increase.  Decreases in Bank of America's Prime Rate shall reduce the Daily
Loan Rate by an amount equal to 100 percent of such  decreases as of the date of
such decreases calculated on a daily basis using a 365-day year.

         E. The minimum charge by Gateway to the Borrower shall be $3,000.00 per
month for the term of this  Agreement  and  during  any  extension  or  renewals
thereof.  This  charge  shall  be  paid by  borrower  even  if  Borrower  has no
outstanding obligations to Gateway during that month, and even if the account is
terminated  by Gateway  pursuant to Paragraph  15, until the end of the term set
forth in Paragraph 15B.

         F. The interest  charges and other  charges  provided for herein may be
added to the principal of Borrower's account.  Past due accrued interest may, at
Gateway's  option,  and without  notice to Borrower,  be added to principal  and
shall bear interest at the above rate thereafter, as adjusted from time to time.
Borrower  acknowledges  that  this  constitutes   compounding  of  interest  and
expressly consents and agrees thereto.

4.       ASSIGNMENT AND PLEDGE; POWER OF ATTORNEY; AUTHORIZ~ON RE THIRD PARTIES

         A.  Contemporaneously  with  the  making  of each  loan by  Gateway  to
Borrower and in addition to the assignment  contained herein and in confirmation
thereof,  Borrower  will,  upon demand by Gateway,  assign in writing to Gateway
with full recourse as security for the loan and for all  obligations of Borrower
to Gateway,  accounts  created by Borrower in the ordinary and normal  course of
its business,  and accounts will conform to all of the  warranties  set forth in
Paragraph 2 of this Agreement;  provided, however, Gateway shall have a security
interest in such accounts without regard to whether such assignment is requested
by or delivered  to Gateway.  All  documents  to be delivered by Borrower  shall
contain such terms and be in such form as Gateway may from time to time require.
Gateway shall have a security  interest in all of Borrower's  books and records,
including;  but not limited  to:  minute  books,  ledgers,  records  indicating,
summarizing or evidencing  Borrower's assets,  accounts,  business operations or
financial  condition;  computer  programs,  computer cards, discs or tape files,
computer printouts,  computer runs, and other computer-prepared  information and
equipment of any kind,  whether in  Borrower's  possession or in a third party's
possession.  Gateway  shall have  access  during  business  hours to all of such
records and may at any time remove from  Borrower's  premises or the premises of
any third  person  who holds  such  records  all such  records  relating  to the
Collateral  given  hereunder  or in any  other  agreement  between  Gateway  and
Borrower.  Gateway may demand of any third person access and  possession to such
records in their control in Borrower's  name.  Borrower will prepare and deliver
to Gateway balance sheets,  profit and loss statements,  and such other reports,
analyses and operating data as Gateway may from time to time reasonably request.

         B. The foregoing  assignment shall confirm the transfer of the accounts
to Gateway as security so as to vest in Gateway the rights of an absolute  owner
thereof;  and accordingly  Gateway shall have the full power to exercise any and
all  rights  pertaining  thereto,  including  but not  limited to  stoppages  in
transit,  replevin and reclamation,  repossession and the filing of suit thereon
to enforce payment.

         C. Borrower likewise shall mark its books and records so as to evidence
the transfer of the accounts as security pursuant to this Agreement.

         D. From and after the date of the assignment of such accounts, Borrower
shall  neither  have  nor  exercise,  nor  attempt  to  exercise,  any  right to
compromise,  compound, settle or adjust any such accounts or renew or extend the
time or time of  payment  thereof  without  the  consent  of  Gateway  firstt in
writing.  Such  consent,  if given,  shall not  constitute a waiver of Gateway's
right hereunder as to any other account.

         E.   Borrower   does   hereby    irrevocably    appoint   Gateway   its
attorney-in-fact  and authorizes  and empowers  Gateway or any of Gateway's duly
authorized  agents to  endorse  and sign its name or names on any and all checks
drafts,  money  orders,  or other  media of  payment,  and  endorse  any and all
instruments  concerning  any  accounts;  and  such  endorsements  shall  for all
purposes  be  considered  to have been made by  Borrower,  and to make demand in
Borrower's name for access and possession on any third parties having

                                  Page 4 of 10
<PAGE>

                          Security Agreement Continued

control of any of  Borrower's  books and  records.  Said  power-of  attorney and
endorsement  right  is  irrevocable  and  coupled  with an  interest  (that is a
security  interest in Borrowerts  books and records  described  above) and shall
also apply to invoices, freight or express bills, or bills of lading, concerning
the accounts or the property or  merchandise  which is the subject matter of any
of the same,  and likewise  shall apply to any written  instruments or documents
deemed  by  Gateway  necessary  for  its  proper  protection  to  carry  out the
intentions of this Agreement. Borrower irrevocably authorizes Gateway to receive
and to open all mail addressed to Borrower and to direct the postal  authorities
concerning the transmission or delivery thereof. With reference to all accounts,
Gateway is hereby expresly  authorized and empowered with notice to Borrower and
from and after the date  hereof and  without  regard to whether  Borrower  is in
default  hereunder to exercise  all rights as the owner  thereof  including  the
right to notify account  debtors of this Agreement and to direct account debtors
to make payment directly to Gateway;  to renew and/or extend the time of payment
thereon and to compound,  compromise,  settle or adjust any or all claims due or
to become due on any of the accounts and is likewise  authorized  and  empowered
(but shall not be  obligated) to (1) ask,  demand,  collect and receive and give
acquittance  for any and all monies due or  thereafter  becoming due on any such
accounts,  and (2) make and enforce in Gateway's name or in Borrower's  name any
and all claims and demands of any of said  accounts,  and (3)  prosecute any and
all suits and proceedings in connection with or to enforce  collection of any of
said accounts.

         F. Borrower agrees to furnish to Gateway from time to time upon request
written  statements and schedules  identifying and describing the Collateral and
any additions  thereto and  substitutions  thereof in such detail as Gateway may
require.

5.       GUARANTY; FULL RECOURSE

         Borrower guarantees the prompt payment of each account when due.

In the event that any account  listed in a schedule of assignment of accounts is
not paid by the  account  debtor  from whom the same is due within the period of
time  prescribed for payment on the  assignment  therefor (not to exceed 30 days
from the date of the invoice) plus an additional 60 day period,  or in the event
there is any breach of  warranty  with  respect to any such  account,  then upon
demand  Borrower  shall pay Gateway cash equal to the net face value of account,
less any payments received thereunder from such account debtor by Gateway.  Upon
payment thereof,  Gateway will reassign the account to Borrower without recourse
or warranty by Gateway provided Borrower is not in default  hereunder.  Borrower
agrees that its guaranty shall not be impaired by any modification,  alteration,
extension, allowance,  compromise, release of (1) any account by Gateway and the
customer thereon,  (2) of any obligation herein guaranteed or of any Collateral,
or (3) of any guarantee,  or Collateral for any guarantee,  and further that the
liability of Borrower on this  guaranty is direct and  unconditional  and may be
enforced without requiring Gateway first to resort to any other right, remedy or
security and that this  guaranty  shall  continue in full force and effect,  and
Borrower shall not claim subrogation, until Gateway has received payment in full
of all  debts  and  obligations  of every  kind,  sum,  nature  and  description
whatsoever,  due it from Borrower.  Borrower further waives notice of acceptance
hereof,  presentment,  demand,  protest of any  instrument  and notice  thereof,
notice of dishonor,  notice of default,  and all other notices to which Borrower
might otherwise be entitled in connection with its guaranty.

6.       NO DUTY OF GATEWAY TO ENFORCE COLLECTION OF ACCOUNTS

         No duty is imposed on Gateway  hereunder to enforce  collection  of any
account  unless it elects to do so;  and,  in such  event  Gateway  shall not be
liable to Borrower in  connection  with suit or  collection  act or  proceedings
except for willful misconduct therein.

7.       REMITTANCES RECEIVED IN TRUUST

         Borrower  agrees that should any monies or  remittances  or property or
merchandise  be received by it on account of any  accounts  that it will receive
the same in trust for and as the  property  of Gateway  and it will  immediately
deliver  and  transmit  the same to Gateway in the  original  form  received  by
Borrower. Until so delivered to Gateway, Borrower will not deposit the same with
any other  money,  fund or  property.  Borrower  will  furnish  Gateway with all
remittance advices received from account debtors.

                                  Page 5 of 10
<PAGE>

                         Security Agreement - Continued

8.       DEFAULT

         Upon  breach of any  warranty  contained  herein or upon any default by
Borrower in the  performance  of any of the terms,  obligations or provisions of
this Agreement or of any note or other agreement  delivered to Gateway  pursuant
hereto or upon  default in payment and  discharge of any of its  obligations  or
liabilities to Gateway, in whole or in part, or upon termination of any guaranty
of any obligation  owing to Gateway,  or upon any material adverse change in the
business or financial  condition of Borrower or any guarantor,  or upon material
loss,  secretion,  destruction,  or decline  in value of any of the  Collateral,
which  causes  Gateway to deem  itself  insecure,  or upon  termination  of this
Agreement,  Gateway may at its sole option  declare  any or all  obligations  of
Borrower to be  immediately  due and payable and Gateway may exercise all rights
of a secured party under the California  Commercial Code and may without demand,
advertisement  or other  notice to Borrower,  all of which are hereby  expressly
waived,  commence an action for the recovery of any and all of the  obligations,
commence proceedings to sell, lease, assign,  transfer, or otherwise dispose, in
lots or in bulk and in whatever order Gateway sees fit, retail or wholesale, any
or  all  of  the  accounts  or  other  Collateral  for  the  obligations  or any
substitutes therefor or additions thereto or any property or merchandise related
to or connected in any way therewith or, without legal  proceedings,  enter such
places  as any of such  Collateral  may be  found  and take  possession  of such
Collateral and sell the same. Such Collateral may be sold where it is located at
the time of the breach or default, or elsewhere,  at public or private sale, for
cash, upon credit or otherwise at Gateway's sole option and discretion.  Gateway
may, but is not obligated to ship, reclaim,  recover, finish, maintain,  repair,
advertise for sale, or otherwise  prepare for sale  Collateral  prior to sale or
other  disposition.  Borrower  hereby  further waives all notices of seizure and
sale, and requirements that such property be physically  present at the place of
sale; and Gateway shall have the right at any such sale,  public or private,  to
purchase  the  whole or any part  thereof  free  form any  rights  or  equity of
redemption in Borrower which equity of redemption is expressly waived.

         Gateway shall have no liability by reason of or in connection  with any
of the foregoing or for  inadequacy of price or  irregularities  of sale whether
such sale be public or private.  In case of any such sale,  after  deducting all
costs and expenses,  including attorneys' fees incurred or expended,  in taking,
removing,  holding,  repairing, and selling the Collateral and including payment
of any liens and claims against the Collateral, Gateway may apply the residue of
the proceeds  thereof to pay any one or more of the  obligations and liabilities
of Borrower to Gateway, whether then due or thereafter to become due, as Gateway
shall deem proper;  and Borrower  agrees it shall remain liable for and will pay
Gateway the balance due on all of its obligations to Gateway after crediting the
amount  applied  thereto  as  aforesaid.   Borrower  shall  pay  the  deficiency
forthwith.  All rights and  remedies of Gateway  granted in this  Agreement  and
other agreements between Borrower and Gateway are cumulative.

         Gateway  shall have the right to exercise any one or more of the rights
and  remedies at the same time or  otherwise,  and any choice made by Gateway of
any such right or remedy shall not constitute or be deemed to be a wavier of any
other remedy to which it might otherwise be entitled  hereunder.  In any and all
events,  Gateway shall have the right to proceed  directly  against the Borrower
without the necessity of prior recourse to any of the Collateral.

9.       REIMBURSEMENT OF EXPENSES; ATTORNEYS' FEES

         Borrower shall  promptly pay upon demand any and all expenses  incurred
by Gateway in connection with the transactions contemplated herein as follows:

         A. All of Gateway's  out-of-pocket  expenses  incurred in entering into
this transaction,  including,  without  limitation,  the cost of title searches,
title reports,  recording  fees, and  attorneys'  fees actually  incurred in the
preparation of the documentation  and review of this  transaction,  fees charged
for the  searching  of liens  against the  property  being  given as  Collateral
hereunder, and all other expenses similar to the foregoing;

                                  Page 6 of 10
<PAGE>

                         Security Agreement - Continued

         B. any  expenses  incurred  by  Gateway  in the  storing,  warehousing,
insuring,  handling  and  shipping  of the  Collateral,  and any and all excise,
property,  sales and other taxes,  encumbrances and liens,  levied or imposed by
any  governmental  or  taxing  authority  on  Borrower  or on any of  Borrower's
property or any property  caused to be given to Gateway as  Collateral,  any and
all sums  expended by Gateway in  connection  with the filing of any third party
claims as to the Collateral or any part thereof which Gateway may deem necessary
or  desirable,  and any  attorneys'  fees  incurred  by  Gateway  in  connection
therewith~,

         C.  all  office  and  other  expenses  and  costs,  including,  without
limitation,  fees for third  party  experts,  appraisers,  trustees,  receivers,
keepers, masters, arbitrators,  investigators,  and documents search, recording,
publication, service of process and filing fees, court and court reporter costs,
and the cost of any bonds,  whether  otherwise  taxable or not, the expenses and
costs in enforcing any judgment which may be obtained,  or any appeal that might
be  prosecuted,  reasonable  attorneys'  fees,  whether  suit is brought or not,
incurred by Gateway in enforcing or defending any of Gateway's rights under this
Agreement or the Collateral given to Gateway.

         If Borrower  fails to promptly pay when due,  whether to Gateway or any
other person, monies which Borrower is required to pay under any portion of this
Agreement, Gateway may, but need not, pay the same and charge Borrower's account
therefor, and such charge shall become an additional advance. Borrower agrees to
promptly  reimburse  Gateway  for any such  advances,  and any and all such sums
shall become  additional  indebtedness  owing to Gateway and shall bear interest
charges at the rate  provided in  Paragraph 3 hereof and shall be secured by all
of the Collateral now or hereafter given by Borrower or which Borrower causes to
be given to  Gateway.  In the payment of any  expenses  as  provided  hereunder,
Gateway need not inquire as to, or contest the  validity,  or any such  expense,
tax,  encumbrance or lien, and the receipt of the usual official for the payment
thereof shall be conclusive evidence that the same was validly due and owing.

10.      TIME OF THE ESSENCE.

         Time is expressly made of the essence in this Agreement.

11.      TAXES AND ASSESSMENTS

         Borrower  will pay when due all taxes,  assessments  and other  charges
lawfully levied or assessed upon the Collateral. Borrower shall promptly pay and
discharge  in full its  liability  for federal and state  payroll  taxes and all
other taxes. If any such taxes or other assessments remain unpaid after the date
fixed for the  payment of the same,  or if any lien  shall be  claimed  which in
Gateway's  opinion might possibly create a valid obligation having priority over
the rights granted to Gateway herein, Gateway may, but is not obligated, without
notice to Borrower, pay such taxes, assessments, charges and any fees, costs and
expenses,  of whatever kind or nature,  including  any taxes of any kind,  which
Gateway may incur in filing public notices,  and the reasonable  attorneys' fees
incurred  by  Gateway  in  protecting,  maintaining,  preserving,  enforcing  or
foreclosing the security interest granted to Gateway hereunder,  whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions or
proceedings  arising out of or related to Gateway's  transactions  with Borrower
shall be borne and paid for by  Borrower  and until  paid by  Borrower  shall be
added to the Obligations  hereby secured,  and shall bear interest at the agreed
rate.

12.      INSURANCE

         Borrower shall bear all risk of loss,  damage to, or destruction of the
Collateral.  Borrower agrees to maintain  insurance at Borrower's expense on the
Collateral  under such  policies of  insurance  companies,  in such  amounts and
covering  such risks as are at all times  satisfactory  to Gateway.  All polices
covering  the  Collateral  are to be mad&  payable to Gateway,  in case of loss,
under a standard  non-contributory  "Mortgage," "Lender's or secured party" loss
payable  clause and are to contain  such  provisions  as Gateway  may require to
fully protect  Gateway's  interest in the  Collateral and to payments to be made
under such  policies.  All  policies  are to be  delivered  to Gateway,  premium
prepaid,  and shall  provide for not less than  thirty  (30) days prior  written
notice to Gateway of the exercise of any right of  cancellation.  Unless Gateway
shall  otherwise  agree with  Borrower in writing,  Gateway  shall have the sole
right, in Gateway' 5 own name or Borrower's name,

                                  Page 7 of 10
<PAGE>

                         Security Agreement - Continued

to file  claims  under any  insurance  policies,  to  receive,  receipt and give
acquittance for any payments that may be payable thereunder,  and to execute any
and all endorsements,  receipts, releases,  assignments,  reassignments or other
documents  that  may be  necessary  to  effect  the  collection,  compromise  or
settlement  of any claims  under any such  insurance  policies.  Gateway has the
right, but is not obligated,  to place insurance on the Collateral insuring only
Gateway's  interest,  in the event  Borrower  fails to maintain  insurance.  Any
advances by Gateway for this purpose shall bear interest at the note rate.

13.      BOOKS AM) RECORDS; EXAMINATION

         Borrower  agrees  that it will at all times  herein  keep and  maintain
proper and sufficient books of account showing and reflecting all sales,  claims
and allowances on merchandise and generally describing accurately and completely
all of its business  transactions.  Gateway shall at all times have the right by
its officers or duly authorized  agents to examine from time to time all of such
records during usual and normal  business hours and to make abstracts  therefrom
including,  without  limitation,  correspondence,  bank  records  and  books  of
account.

14.      GATEWAY'S RIGHT TO ASSIGN AND RIGHTS OF ASSIGNEE

         A. Gateway may sell or assign, for security purposes or otherwise, this
Agreement  and any and all of the accounts and other  Collateral  received  from
time to time by Gateway from Borrower, together with all notes executed in favor
of Gateway. Upon any such sale or assignment,  the assignee shall succeed to all
of the rights of Gateway  under this  Agreement  and under all loans,  notes and
security  agreements made pursuant hereto  including,  without  limitation,  the
right on the part of the assignee to exercise all powers of attorney  granted by
the Borrower to Gateway hereunder.

         B. Upon notice of any such assignment from such assignee,  the Borrower
will make all payments due or to become due hereunder, including all payments on
all notes issued hereunder, directly to the assignee;

15.      TERMINATION OF THIS AGREEMENT

         A. Gateway may terminate this Agreement:

                  (1) If the borrower shall fail in or suspend business; or

                  (2) If Gateway  shall for any reason  conclude that any of the
         rights  granted to it under this  Agreement are in jeopardy or that its
         security is being impaired; or

                  (3) If  Borrower  makes  an  assignment  for  the  benefit  of
         creditors  or  applies  for  an  extension  or  composition   from  its
         creditors,  or  commits  any act of  bankruptcy,  or  insolvency,  or a
         receiver or trustee of its business is  appointed,  or if a petition in
         bankruptcy or for  reorganization  under the  Bankruptcy Act shall have
         been filed by or against  it, or in the event the  Borrower  shall seek
         relief under any insolvency statute whatsoever; or

                  (4) At any time with or without  cause upon 10 days  notice in
         writing to Borrower of an intention to terminate; or

                  (5) If Borrower  shall  default  hereunder  or under any other
         agreement with Gateway.

         B. This  Agreement  shall remain in full force and effect on a Month to
Month  basis from the date upon  which it is  executed.  Borrower  shall give to
Gateway  30 days  notice in  writing  by  registered  mail of its  intention  to
terminate  this  Agreement.  Such  termination  shall not  affect or impair  the
obligation  of the Borrower  with respect to accounts  pledged to Gateway  prior
thereto nor shall such  termination  effect or impair any of the  liabilities of
Borrower  to Gateway  with  respect  to any  transactions  arising  prior to the
effective date of the termination of this Agreement;

                                  Page 8 of 10
<PAGE>

Security Agreement - Continued

         C. Notwithstanding any such termination of this Agreement,  all rights,
powers and  privileges  granted to Gateway herein shall remain in full force and
effect until all of the liabilities, obligations and indebtedness of Borrower to
Gateway shall have been paid and  discharged  in full.  Until such time Borrower
will continue to perform all of the terms and provisions hereof.

16.      CONTINUING WARRANTIES AND REPRESENTATIONS

         Each warranty,  representation and agreement  contained herein shall be
automatically  deemed  repeated  with each  advance  and  shall be  conclusively
presumed to have been relied on by Gateway regardless of any investigation made,
or  information  possessed by Gateway.  These  warranties,  representations  and
agreements  as set  forth  herein  shall be  cumulative  and  continuing  and in
addition  to any  and  all  other  warranties,  representations  and  agreements
contained in any other document or instrument which Borrower shall give or cause
to be given to Gateway, either now or hereafter.

17.      MISCELLANEOUS

         A. This  Agreement is the final and  complete  Agreement of the parties
and  cannot  be  modified  except  by a writing  signed  by both  parties.  This
Agreement  shall run to the benefit of and be binding  upon the  parties,  their
heirs, executors, administrators, successors and assigns, and shall be construed
and governed by the laws of the State where it is accepted by Gateway.

         B. All litigation between the parties hereto arising or
connected with this Agreement,  or any other agreements between the parties,  or
the  Collateral  shall,  to the extent  permitted  by law,  be brought and tried
solely in the Superior  Court of Contra Costa  County,  California.  In any such
litigation between the parties, Borrower and Gateway waive any right to trial by
jury under federal and applicable state law in any action or proceeding relating
to this Agreement or any of the  transactions  hereunder,  and upon any event of
default,  Gateway  shall  have the right to have a  receiver  appointed  to take
possession of all the Collateral and to perform any and all of Gateway's  rights
with respect  thereto,  and apply all proceeds of said Collateral first to costs
and expenses of the receivership  and then to payment of Borrower's  obligations
to Gateway.  Gateway may bring all  proceedings for collection in Gateway's name
or in Borrower's name and may exercise  Borrower's right of stoppage in transit,
replevin and reclamation.

         C. All notices or demands hereunder shall be in writing.  They shall be
deemed  received when deposited  postage  prepaid in a United States Post Office
Box properly  addressed to Gateway or Borrower at the addresses set forth herein
or to such other address as Gateway or Borrower may from time to time specify in
writing.  D. If Borrower,  the undersigned,  are two or more in number, then (i)
regardless  of the  form of  Gateway's  check or other  papers,  Gateway's  loan
hereunder  (consisting  of each and every advance) shall be deemed to be made to
each  and all of the  undersigned  and the  undersigned  shall  be  jointly  and
severally  obligated to repay the same; (II) each of the undersigned jointly and
severally  makes,  and is liable for, each and every  warranty,  representation,
obligation,  covenant  and  undertaking  under  this  Agreement;  and (iii) when
permitted by the context,  the words referring to the undersigned borrower shall
include and mean all, or any one or more of the undersigned.

         E. Each and every  provision of this Agreement  shall be severable from
every other provision for the purposes of determining  legal  enforceability  of
any such provision or provisions.

         F.  All  loans  and  advances  heretofore,  now or at any time or times
hereafter  made by  Gateway  to  Borrower  under  this  Agreement  or any  other
agreement  between  Gateway and Borrower  shall  constitute  one loan secured by
Gateway's  security  interest  in  the  Collateral  and by  all  other  security
interests, liens and encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Gateway.

                                  Page 9 of 10
<PAGE>

                         Security Agreement - Continued

         G. Any  documents,  schedules,  invoices or other  papers  delivered to
Gateway may be  destroyed  or  otherwise  disposed of by Gateway five (5) months
after they are delivered to or received by Gateway,  unless Borrower requests in
writing the return of said  documents,  schedules,  invoices or other papers and
make such arrangements, at Borrower's expense, for their return.

         H. Paragraph numbers and paragraph  headings have been set forth herein
for  convenience  only;  unless  the  contrary  is  compelled  by  the  contest,
everything contained in each paragraph applied equally to all paragraphs herein.
Neither  this  Agreement  nor any  uncertainty  or  ambiguity  herein  shall  be
construed or resolved  against  Gateway or Borrower,  whether  under any rule of
construction or otherwise;  on the contrary, this Agreement has been prepared by
all parties and shall be  construed  and  interpreted  according to the ordinary
meaning  of the  words  used so far as to fairly  accomplish  the  purposes  and
intention of all parties herein.

         I. Borrower and Gateway intend and agree that their respective  rights,
duties, powers,  liabilities,  obligations,  and discretions shall be performed,
carried out, discharged, and exercised reasonably and in good faith.

         J. The validity of this Agreement, its construction, and interpretation
and enforcement shall be determined under and according to the laws of the State
of California.

         K. Interest  after breach by borrower  shall  continue to accrue at the
Daily Loan Rate as  adjusted  from time to time on all  amounts  owed to Gateway
without waiving such breach.

         If the  foregoing is in  accordance  with your  understanding  will you
please sign and return to us this Agreement for acceptance by us. This Agreement
shall  not be  effective  until  acceptance  by  Gateway  at  Alamo,  California
following Borrower's signature below.

                                           Very truly yours,

                                           GATEWAY ACCEPTANCE COMPANY

                                           /s/ Elvin Hill, Senior Credit Officer

         Read, Accepted and Agreed to This 27th Day of November, 2000:

         Pacific Printing and Embroidery, LLC
         DBA Pacific Print Works
         2035 NE 181st Street
         Portland OR 97230

/s/ Jeffrey D. Harden, President, Pacific Printing and Embroidery, LLCExhibit 10.40 Promissory Note and Settlement Agreement with Gregory McWade

                              SETTLEMENT AGREEMENT

THIS  SETTLEMENT  AGREEMENT  ("Agreement")  is made by and among Gregory  McWade
("Mcwade"),  Pacific Printing & Embroidery,  L.L.C.  ("PPE"),  Print Works, Inc.
("Print Works") and American Resources and Development Company ("ARDCO").

WHEREAS,  McWade filed a complaint  eventually  of venue in the Circuit Court of
the State of  Oregon  for the  County  of  Multnomah,  Case  No.9908-08692  (the
"Action")  against PPE,  Print Works,  and ARDCO alleging the failure of PPE and
Print Works to pay certain  amounts to McWade for a loan and wages,  and further
alleging  that the  payment  of such  amounts  were  guaranteed  by  ARDCO  (the
"Action"); and

WHEREAS,  PPE,  Print Works,  and ARDCO  alleged  counterclaims  against  McWade
arising  out of the  performance  of  services  provided  by McWade and  certain
actions taken by McWade;

WHEREAS,  PPE is the maker of a promissory  note dated September 1, 1996 payable
to the Pershing  Group, as Trustee of the Gregory McWade SEP IRA, a true copy of
which is attached as Exhibit "A" (the "Note"); and

WHEREAS,  the  parties  now  desire to fully and  finally  settle all claims and
counterclaims   made  in  the  Action,   and  such  other  actual  or  potential
controversies or disputes which do or might now exist, whether known or unknown,
that McWade may have against PPE, Print Works, and/or ARDCO, and that PPE, Print
Works, and/or ARDCO may have against McWade; and

                           Page 1 - SETTLEMENT AGREEMENT
<PAGE>

WHEREAS,  the  parties  further  desire to  supersede  the terms of the Note and
provide for a payment  schedule,  the bill  performance of which will constitute
hall satisfaction of the Note;

NOW,  THEREFORE,  in  consideration  of  the  premises,  mutual  covenants,  and
agreements  hereinafter set forth, and intending to be legally bound hereby, the
parues agree as follows;

1. PPE, Print Works, and ARDCO agree to pay McWade the sum of One Hundred Ninety
Thousand  Dollars  ($190,000.00),  which  shall be made in  installments  over a
nineteen month period in the following amounts at the following times: a payment
of  Five  Thousand  Dollars  ($5,000.00)  on the  twentieth  of  each of the six
consecutive  months  commencing  August 2000; a payment of Seven  Thousand  Five
Hundred  Dollars  ($7,500.00)  on the  twentieth of each of the six  consecutive
months commencing February 2001; a payment of Ten Thousand Dollars  ($10,000.00)
on the twentieth or each of the six consecutive  months  commencing August 2001;
and a final payment of Fifty-Five  Thousand Dollars on the twentieth of February
2002.  All  payments  shall be made payable to the Gregory J. McWade SEP IRA DLJ
IMS 376 003106,  and each payment shall be sent by certified mail return receipt
requested and addressed as follows,  Jensen Investment Management.  Attn, Robert
Zagunis,  1211 S.W. 5th Avenue,  Suite 2130,  Portland,  OR 97204.  Each payment
shall be deemed made on the date the payment is mailed by first class mail.

2. PPE,  Print  Works,  and ARDCO agree to execute a  confession  of judgment in
favor of McWade in the form attached as Exhibit "B". The  confession of judgment
shall be in the amount of $327,084.39 (the "Confession Amount").  The confession
of judgment shall

                          Page 2- SETTLEMENT AGREEMENT
<PAGE>

accrue  interest  at the rate of nine  percent  per annum  from the date of this
agreement.

3. The parties  agree that a payment  default shall occur only upon a failure to
make any  payment  within  five  business  days of the due date.  Upon a payment
default, McWade may at his option file the confession of judgment with the court
and act to collect the Confession amount plus accrued interest and less payments
made in accordance with paragraph 1.

4. The parties agree that so long as there has been no payment default,  neither
McWade nor any of his agents shall do any of the  following:  A)  Participate in
any  efforts  to  place  any of PPE,  Print  Works,  or ARDCO  into  involuntary
bankruptcy. B) Undertake any collection activities or seek to collect any amount
under the Note.

5.  McWade,  for himself  and on behalf of his  affiliates,  agents,  subrogees,
representatives,  predecessors,  successors,  assigns,  and other  businesses or
entities  in which he has an  interest,  including  but not  limited  to Graphic
Synergies,  Inc., dots hereby  generally  release and forever  discharge each of
PPE,  Print  Works,  and ARDCO and their  affiliates,  shareholders,  directors,
officers,  members,  managers,  employees,  agents, subrogees,  representatives,
predecessors7  successors,  assigns.  and  affiliated  entities from any and all
claims, demands, damages, actions, causes of action, or suits of any kind, known
or  unknown,  that were or could have been made in the Action or that  otherwise
may now exist.

6. Each of PPE,  Print Works,  and ARDCO,  for themselves and on behalf of their
affiliates,  shareholders,  directors,  officers,  employees, members, managers,
agents,  subrogees,  representatives,  predecessors,  successors,  assigns,  and
affiliated entities do hereby generally

                          Page 3 - SETTLEMENT AGREEMENT
<PAGE>

release and forever  discharge  McWade and his  affiliates,  agents,  subrogees,
representatives,  predecessors,  successors,  assigns,  and other  businesses or
entities in which McWade has an interest,  including  but not limited to Graphic
Synergies,  inc., from any and all claims, demands,  damages, actions, causes of
action,  or suits of any kind  whatsoever,  known or unknown  that were or could
have been made in the Action or that otherwise may now exist.

7.  Notwithstanding  any other  provision to this  Agreement,  the parties agree
that:

A. In the  event  McWade  is  named as a party  to any  litigation,  arbitration
proceeding,  or  administrative  proceeding  upon a claim that he is liable to a
third  party  because of or in any way  related to any act or omission by any of
PPE, Print Works, or ARDCO, or any of their shareholders,  officers,  directors,
managers, members, employees, agents subsidiaries,  or affiliated entities, then
McWade may seek contribution and/or indemnity from such responsible party.

B. In the event any of PPE, Print Works, or ARDCO, or any of their shareholders,
officers,  directors,  managers, members, employees,  agents,  subsidiaries,  or
affiliated  entities  is  named  as  a  party  to  any  litigation,  arbitration
proceeding,  or  administrative  proceeding  upon a claim that it, he, or she is
liable to a third party  because of or in any way related to any act or omission
by McWade,  then such entity or person may seek  contribution  and/or  indemnity
from McWade.

8. McWade  represents that he has disclosed and discussed the  modifications  to
and the new repayment terms for  satisfaction of the Note with the holder of the
Note,  and that the holder  agrees that the  payments  described  in paragraph 1
shall constitute full and total  satisfaction of the Note. McWade also agrees to
obtain the express approval of the holder of

                          Page 4 - SETTLEMENT AGREEMENT
<PAGE>

the Note by obtaining the signature of the Holder to this Agreement,  which will
constitute the agreement of the holder to the modified payment terms.

9. Upon  satisfaction  of all amounts  described  in  paragraph  1, McWade shall
immediately  return the  original  note  attached as Exhibit A and the  original
confession of judgment to PPE.

10. Upon execution of this Agreement by the parties, the parties shall execute a
stipulated notice of dismissal, dismissing the Action with prejudice and without
an award of costs, disbursements, or attorney fees to any party.

11. The parties  agree that until McWade is paid the full amount  identified  in
paragraph  1, no officer or director of PPW,  Print Works  and/or ARDCO shall be
paid any amount by PPW,  Print Works and/or ARDCO for the  repayment of any loan
or for the  redemption  of any stock.  McWade agrees and  understands  that this
paragraph  restricts  payments to directors  and  officers of PPW,  Print Works,
and/or ARDCO only, and no other creditor or equity owner,  and does not restrict
the payment of W-2  compensation to any officer or director.  McWade may, at his
expense, direct that a CPA, mutually agreeable to both parties and pursuant to a
confidentiality  agreement,  audit the books solely to determine compliance with
this section.  McWade may file the  confession of judgment upon a breach of this
section.

12.  The  parties  acknowledge  that this  agreement  involves a  Compromise  of
disputed claims, and that this agreement itself and its execution by the parties
is not to be  construed  as an  admission of liability to the claims made in the
Action by any party. All parties deny all liability to all opposing parties.

                          Page 5 - SETTLEMENT AGREEMENT
<PAGE>

13. In making  this  Agreement,  it is  understood  and agreed  that each of the
undersigned  specifically warrants and represents that in doing so, he or it has
been fully advised and represented by legal counsel of his or its own selection,
and in executing  this Agreement he or it does so relying wholly upon his or its
own judgment and advice of counsel of his or its own independent selection,  and
that he or it has been in no way influenced whatsoever regarding the matters set
forth  herein,  or  any  other  matter  made  by  any  person,   individual,  or
corporation, or any agent, employee, or servant thereof, who is hereby released,
or by any persons representing any of them.

14. If any clause or provision in this  Agreement is  determined  to be illegal,
invalid or  unenforceable  under any present or future law by the final judgment
of a court of competent  jurisdiction,  the remainder of this Agreement will not
be  affected  thereby.  It is the  intention  of the  parties  that if any  such
provision is held to be illegal, invalid, or unenforceable,  there will be added
in lieu thereof a provision as similar in terms to that provision as is possible
and be legal, valid, and enforceable.

15. This Agreement will be interpreted  and construed under the internal laws of
the State of Oregon, regardless of the domicile of any party, and will be deemed
for those  purposes to have been made,  executed,  and  performed  in  Portland,
Oregon.  All claims,  disputes,  and other matters in question arising out of or
relating  to this  Agreement,  or the  breach  thereof,  shall be decided by the
Circuit Court of Multnomah County, Oregon.

16. The parties agree that the prevailing party in any dispute arising out of or
in  any  way  related  to  this  Agreement  will  be  entitled  to  recover  its
investigation  costs,  expert witness fees and costs, and attorneys' fees at the
trial court or arbitration level or any level of appeal.

                          Page 6 - SETTLEMENT AGREEMENT
<PAGE>

(pound)ktAX

17.  Before and at all times  following  the  execution of this  Agreement,  the
parties agree to execute and deliver,  or to cause to be executed and delivered,
those  documents  and to do, or cause to be done,  such other acts and things as
might  reasonably be requested to assure that the benefits of this Agreement are
realized by the parties.

18. This  Agreement  is  personal  to the parties  herein and cannot be assigned
without the express written authorization of the other party.

19. This  constitutes the entire Agreement  between the parties,  supersedes all
prior or  contemporaneous  oral or written  agreements and shall not be modified
except by a document signed by the parties.

DATED:  August 18, 2000
        /s/  GREGORY MCWADE

Dated September 26, 2000.

PACIFIC PRINTING & EMBROIDERY, LLC
/s/ Jeffrey Harden, Manager

DATED: September 26, 2000.
PRINT WORKS, INC.
/s/ Jeffrey Harden, Manager

DATED: September 26, 2000.
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
/s/ B. Willes Papenfuss, President

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