Court Opinion

ID: 2963831
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:15:51.468243+00
Date Added: 2024-06-11T11:42:47.117507
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                                     
                                 ____________________

        No. 95-1359

                                  LAURA THORN, LTD.,

                                Plaintiff, Appellant,

                                          v.

                               ALBERT J. ALLETZHAUSER,

                                 Defendant, Appellee.

                                                     
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Edward F. Harrington, U.S. District Judge]
                                               ___________________

                                                     
                                 ____________________

                                 Cyr, Circuit Judge,
                                      _____________

                            Bownes, Senior Circuit Judge,
                                    ____________________

                              and Boudin, Circuit Judge.
                                          _____________

                                                     
                                 ____________________

             Charles L. Glerum, with whom Roberto C. Quinones and Choate, Hall
             _________________            ___________________     ____________
        & Stewart were on brief for appellant.
        _________
             Harry C. Beach, with whom Leonard F. Clarkin, Paul B. Bottino and
             ______________            __________________  _______________
        Clarkin, Sawyer & Phillips, P.C. were on brief for appellee.
        ________________________________

                                                     
                                 ____________________

                                  December 21, 1995
                                                     
                                 ____________________

         

                    CYR,  Circuit  Judge.    Plaintiff  Laura  Thorn,  Ltd.
                    CYR,  Circuit  Judge.
                          ______________

          ("Thorn, Ltd.") appeals a  summary judgment order disallowing its

          claim  for breach  of  a loan  guaranty  by defendant  Albert  J.

          Alletzhauser ("Alletzhauser").  As we conclude  that Alletzhauser

          is not  entitled to judgment  pursuant to  Fed. R. Civ.  P. 56(c)

          under Massachusetts  law, we vacate  the judgment and  remand for
                                    

          further proceedings. 

                                          I
                                          I

                                     BACKGROUND1
                                     BACKGROUND1
                                     __________

                    On  April 14,  1989,  an individual  named Laura  Thorn

          loaned $250,000 to  Hamilton/Thorn Research Associates  ("HTRA").

          At that time, Laura Thorn was the principal shareholder in Thorn,

          Ltd., and  Thorn, Ltd.  in turn  was a  general partner  in HTRA.

          Under the  terms of  a Subordinated Loan  Agreement ("Agreement")

          and a Subordinated Promissory  Note ("Note"), HTRA's loan obliga-

          tion to Laura Thorn  was subordinated to all existing  and future

          HTRA  obligations to  Beverly National  Bank or  its successors.2

          On December 31, 1990,  Laura Thorn assigned all her  rights under

          the Agreement and Note to Thorn, Ltd.

                    In July 1991, Thorn, Ltd. negotiated  a transfer of its

          general  partnership interest in  HTRA to  Hamilton Laboratories,

                              
          ____________________

               1Jurisdiction is based on 28 U.S.C.   1332(a)(2) (diversity)
          and 28 U.S.C.   1291.  We recount the material facts in the light
          most favorable  to Thorn, Ltd.,  the party against  which summary
          judgment was granted.  Velez-Gomez v. SMA Life Assur. Co., 8 F.3d
                                 ___________    ___________________
          873, 874 (1st Cir. 1993). 

               2The Note is set out in the appendix.  See infra pp. i-ii. 
                                                      ___ _____

                                          2

          Inc.  ("HLI"), a  corporation partly owned  by Alletzhauser.   To

          induce  the  transfer,  Alletzhauser  (as  guarantor),  HTRA  (as

          maker), and Thorn, Ltd. (as subordinated lender), entered  into a

          loan  guaranty  agreement  ("the  Guaranty") on  July  11,  1991,

          whereby Alletzhauser guaranteed prompt  payment of HTRA's debt to

          Thorn, Ltd.  "when and as the Subordinated Obligations become due

          and payable in accordance with their terms. . . ."3   Pursuant to

          section 1  of the Note and the Guaranty, on April 8, 1994, Thorn,

          Ltd. demanded full  payment from Alletzhauser.   HTRA and Alletz-

          hauser declined on the ground that payment was not due.  

                    In  September 1994, Thorn,  Ltd. commenced  this action

          against  Alletzhauser in  federal district  court to  enforce its

          Guaranty.   Alletzhauser  denied  liability, and  asserted as  an

          affirmative defense that legal action on the Guaranty was "prema-

          ture."   Ultimately, the district court  entered summary judgment

          against Thorn, Ltd. on the ground that it had no present right to

          enforce the Guaranty against Alletzhauser since HTRA, the primary

          obligor, was not in default on its loan obligation to Thorn, Ltd.
                              
          ____________________

               3The relevant Guaranty provisions are set out below:

          Section 2 - Guaranty of Payment and Performance
          _______________________________________________
          The Guarantor unconditionally guarantees . . . the prompt payment
          by the  Borrower to  the Lender of  the Subordinated  Obligations
          when  and as the Subordinated  Obligations become due and payable
          in accordance with their terms . . . .

          Section 3 - Obligations Unconditional
          _____________________________________
          . . . This  Agreement shall not, however, be construed to require
                ____  _________ _____ ___           __ _________ __ _______
          the Guarantor  to make any  payment .  . . (b)  which the  Lender
          ___ _________  __ ____ ___  _______             _____ ___  ______
          either would not be entitled to receive or  would be obligated to
          ______ _____ ___ __ ________ __ _______ __  _____ __ _________ __
          hold in trust for the benefit  of, or otherwise turn over to, any
          ____ __ _____ ___                                             ___
          senior lender pursuant to the terms of an Intercreditor Agreement
          ______ ______ ________ __ ___ _____ __ __ _____________ _________
          or the Subordinated Note.  (Emphasis added.)
          __ ___ ____________ ____

                                          3

          Thorn, Ltd. contends on  appeal that the district court  erred in

          granting summary  judgment and abused its  discretion in refusing

          to  strike certain  affidavits  submitted in  support of  Alletz-

          hauser's motion for summary judgment.

                                          II
                                          II

                                     DISCUSSION4
                                     DISCUSSION4
                                     __________

                    Alletzhauser acknowledges the validity of the Guaranty,

          but  contends that the present attempt to enforce it is premature

          since the  loan obligation itself  is not yet  due.  Thorn,  Ltd.

          responds  that the loan obligation  became due on  April 1, 1994,

          and  since HTRA has not paid, Alletzhauser must honor the Guaran-

          ty.   The  parties agree  that  Massachusetts law  governs  their

          dispute.

                    Under  Massachusetts  law, a  guarantor's  liability is

          determined by the terms  of the guaranty agreement; as  a general

          rule, the terms  of the  guaranty are not  construed against  the

          guarantor.   See Merrimack Valley Nat'l Bank v. Baird, 363 N.E.2d
                       ___ ___________________________    _____

          688, 690-91 (Mass. 1977).  The operative provision in the Guaran-

          ty states that Alletzhauser "unconditionally guarantees . . . the

          prompt  payment by the Borrower to the Lender of the Subordinated

          Obligations when  and as the Subordinated  Obligations become due
                      ____  ___ __ ___ ____________  ___________ ______ ___

          and payable in accordance with their terms  . . . . "  See  supra
          ___ _______ __ __________ ____ _____ _____             ___  _____

          note 3,   2 (emphasis added).  No other provision in the Guaranty
                              
          ____________________

               4The summary judgment ruling  is reviewed de novo  under the
                                                         __ ____
          identical criteria incumbent upon the district court.   Alexis v.
                                                                  ______
          McDonald's Restaurants of Mass., Inc., 67 F.3d 341, 346 (1st Cir.
          _____________________________________
          1995). 

                                          4

          expressly states when  Thorn, Ltd. may  look to Alletzhauser  for

          payment  under the Guaranty, and the parties agree that the court

          must examine the Note to determine when Alletzhauser is obligated

          to make good on the Guaranty.         

                    The district court ruled that HTRA was not obligated to

          repay  the Note  as  long as  senior  debt remained  outstanding.

          Thorn, Ltd.  insists that  the district court  misinterpreted the

          plain  language of the Note, which includes a payment schedule in

          section  1.   This  provides for  periodic  payments by  HTRA and

          further provides  that all outstanding principal  and accrued but

          unpaid interest "shall be due and payable on April 1, 1994."  See
                                                                        ___

          infra Appendix p. i,   1.  
          _____

                    Alletzhauser responds that the court must interpret the

          Note as a whole, and that the  unconditional subordination provi-

          sions  in section  4 plainly  supersede the payment  schedule set

          forth in section 1.5   Section 4 contains the  following subordi-
                             5

          nation  provision:  "Notwithstanding any  other provision  of the

                              
          ____________________

               5See Culp v. Tri-County Tractor, Inc., 736 P.2d 1348,  1350-
                ___ ____    ________________________
          53 (Idaho Ct. App. 1987) (ruling that subordination provisions in
          notes superseded schedule for annual interest payments).  Alletz-
          hauser suggests that the  Note provides for "complete" subordina-
          tion, which  is not uncommon  in circumstances  where the  junior
          lender is a parent company or an officer, director, or stockhold-
          er  of  the borrower.    Carl D.  Lobell &  Sharon  B. Applegate,
          Lending To Troubled Companies- Special Considerations: Fraudulent
          _________________________________________________________________
          Transfers,  Substantive  Consolidation, Subordinated  Debt Treat-
          _________________________________________________________________
          ment; Developing  Theories  of  Lender  Liability  And  Equitable
          _________________________________________________________________
          Subordination, PLI  Corp. Law & Practice  Course Handbook Series,
          _____________
          Apr. 1991,    III.D.(1),  available in  Westlaw at  733 PLI/Corp.
                                    _________ __
          175; see also Culp,  736 P.2d at 1350-52  (complete subordination
               ___ ____ ____
          of  officers' loans to company).  The transaction at bar involved
          just such a junior loan from a corporate insider of the borrowing
          company.

                                          5

          Subordinated Loan  Documents,6 the Maker [HTRA],  and each holder

          of this note [Thorn, Ltd.] . . . agree that the Subordinated Debt

          shall be  subordinated  as set  forth in  this Section  4 to  all

          present  and  future extensions  of credit  to  the Maker  by The

          Beverly National  Bank [or  its successors].  . .  ."   See infra
                                                                  ___ _____

          Appendix p.  i,   4.   More to the present  point, subsection 4.4

          expressly  restricts the right of Thorn, Ltd. to enforce the Note

          against HTRA.  "Notwithstanding any contrary term or provision of
                          _______________ ___ ________ ____ __ _________ __

          the Subordinated  Debt Documents, (i) no  Subordinated Debt shall
          ___ ____________  ____ _________

          become or be  declared to be due and payable prior to the date on

          which  the  Senior Debt  becomes  or is  declared to  be  due and
                                   _______  __ __  ________ __  __  ___ ___

          payable .  . . ."   See  infra Appendix  p. ii,    4.4  (emphasis
          _______             ___  _____

          added).   Since there is no  dispute that senior debt  to Bank of

          Boston remains outstanding, Alletzhauser argues that the district

          court  correctly ruled  that  HTRA's primary  loan obligation  to

          Thorn, Ltd.  is not yet due,  and therefore, he presently  has no

          obligation on the Guaranty.7  

                    Thorn,  Ltd.  contends  that  subsection  4.4 does  not
                              
          ____________________

               6According to  section 2 of the Note, the term "Subordinated
          Loan  Documents"  includes the  Note,  the  Agreement, and  other
          security agreements related to the loan.

               7At  common law, the obligation of a guarantor is collateral
          to the primary  debt.  "'[The  guarantor's] obligation was  based
          not  on the note but upon  the contract expressed in the guaranty
          that
          [he] would  pay the principal sum  of the note  with interest, if
          the maker of the note failed  to pay at maturity.'"  D'Annolfo v.
                                                               _________
          D'Annolfo  Constr. Co., 654 N.E.2d  82, 83 (Mass.  App. Ct. 1995)
          ______________________
          (quoting Charlestown Five Cents Sav. Bank v. Wolf, 36 N.E.2d 390,
                   ________________________________    ____
          392 (Mass. 1941)).  The Uniform Commercial Code does not abrogate
          the common law rule here because the Guaranty is not inscribed on
          the Note.  D'Annolfo, 654 N.E.2d at 84.
                     _________

                                          6

          affect its right to enforce its Guaranty against Alletzhauser, as

          distinguished  from  its  rights  against HTRA  under  the  Note.

          Thorn,  Ltd. finds  support  for this  contention in   subsection
                                                                 

          4.5(a):

               The  provisions of this Section 4 are solely for the purpose
                                                     ______
          of   defining the  relative rights of the holders  of Senior Debt
          on   the  one hand, and the  holders of Subordinated  Debt on the
               other  hand, and  none of  such provisions  shall impair  as
                                 ____ __  ____ __________  _____ ______
               between the Maker  and any holder  of Subordinated Debt  the
               obligation of  the Maker [HTRA], which  is unconditional and
                                                _____  __ _____________ ___
               absolute, to  pay to  such holder of  Subordinated Debt  the
               ________
               principal and premium, if any, thereof and interest thereon,
               and all other amounts in  respect thereof, all in accordance
                                                          ___ __ __________
               with  the  terms  thereof,  nor shall  any  such  provisions
               ____  ___  _____  _______
          prevent   any  holder  of Subordinated  Debt from  exercising all
          remedies  otherwise  permitted  by  applicable law  or  under the
          terms of  such  Subordinated  Debt  upon  a  default  thereunder,
          subject to     the rights,  if any, under the  provisions of this
          _______ __     ___ ______   __ ___  _____ ___  __________ __ ____
          Section 4 of   holders of Senior Debt.  
          _______ _ __   _______ __ ______ ____

          See infra Appendix p. ii,   4.5(a) (emphasis added).  Thorn, Ltd.
          ___ _____

          insists that the subordination  provisions, interpreted in  light

          of subsection  4.5(a), reflected  the overarching concern  of the

          original senior lender (Beverly  National Bank) that its priority

          right  to  payments from  HTRA not  be  jeopardized by  any right

          Thorn,  Ltd. had  to payment  from HTRA;  and, further,  that any

          attempt  by Thorn,  Ltd. to proceed  against Alletzhauser  on the

          Guaranty  not be permitted to affect the senior lender's right to

          priority payment,  nor undermine  HTRA's ability to  repay senior

          debt according to its  terms.  As this lawsuit  only contemplates

          recovery  from Alletzhauser and not HTRA, Thorn, Ltd. urges us to

          disregard  section 4, and instead  give full effect  to the April

          1994 due date specified in section 1. 

                    In addition  to subsection 4.5(a),  Thorn, Ltd.  points

                                          7

          out that the unquestioned  purpose of the Guaranty was  to induce

          Thorn, Ltd. to transfer its  general partnership interest in HTRA

          to HLI, a company partly owned by Alletzhauser.   With the resul-

          tant transfer of control, Thorn, Ltd. lost all ability to require

          HTRA to satisfy its senior debt to Bank of Boston, as well as any

          power  to control  the  timing of  its  own recovery  from  HTRA.

          Thorn,  Ltd. maintains, therefore, that section 1 of the Note was

          meant  to offset  its loss  of control  by prescribing  a payment

          schedule  which would  continue to  govern the  ongoing repayment

          relationship between Thorn,  Ltd. and  Alletzhauser.   Otherwise,

          Thorn, Ltd.  might never be able to collect on either the Note or

          the Guaranty. 

                    Confronted with these mutually incompatible interpreta-

          tions,  we conclude  that neither  satisfactorily  reconciles the

          conflicting contract language so as to enable summary judgment on

          the  present record.   The  Alletzhauser interpretation  comports

          with  the classic construct of a  loan guaranty,8 as well as with

          the  parties' "course of performance."9   On the  other hand, the
                                                                        
                              
          ____________________

               8Indeed,  permitting  recovery   from  Alletzhauser  on  the
          Guaranty  would result  in  a corresponding  depletion of  HTRA's
          assets  prior to repayment of  the senior debt  in the event that
          Alletzhauser is entitled to indemnification from HTRA, see 38 Am.
                                                                 ___
          Jur. 2d Guaranty   127 (1968); Restatement (Second) of Security  
                  ________               ________________________________
          104(1) (1941),  notwithstanding the  fact that  the subordination
          provisions are designed to protect  senior lenders from just such
          an occurrence. 

               9Thorn,  Ltd. does  not explain  why it  made no  attempt to
          enforce its rights sooner despite the fact that HTRA had not made
          a  single payment of interest or principal in accordance with the
          payment schedule in section 1 of the Note, either before or after
          Thorn, Ltd. transferred control  to HLI in July 1991.   See Rosen
                                                                  ___ _____
          v.  A-H Inc., 456 N.E.2d 477, 479  n.5, 480 (Mass. App. Ct. 1983)
              ________

                                          8

          context in which the  execution of the Guaranty took  place gives

          no  indication as  to why  Thorn, Ltd.  would permit  a virtually

          perpetual loan repayment extension to an enterprise it  no longer

          owned.10   Both parties  represent that  substantial negotiations

          attended  the drafting  of  the Note  and  Guaranty.   Yet  their

          affidavits provide little information concerning the actual terms

          of their negotiations and each party draws a different conclusion

          as to their import.  Were  we to approve summary judgment without

          more information, the  result reached might well  fail to reflect

          the  aims and intentions of  the parties.   See Merrimack Valley,
                                                      ___ ________________

          363  N.E.2d at  690 ("[W]hen  a contract  term is  ambiguous, its

          import  is ascertained from the parties'  intent as manifested by

          the  guaranty's  terms  and  the  circumstances  surrounding  its

          creation, such as [the] relationship  of the parties, actions  of

          the parties and established business usages.").

                    Normally, we would not  press for further record devel-

          opment  absent a clearer indication that further evidence will be

          forthcoming.   We  are convinced  nonetheless that  a remand  for

          further proceedings  is appropriate here:   the contract language

                              
          ____________________

          (noting that junior lender's  performance conformed with  court's
          broad construction of subordination  provision in favor of senior
          lenders), rev. denied, 459 N.E.2d 824 (Mass. 1984).
                    ____ ______

               10Neither the parol evidence rule nor the integration clause
          in the  Guaranty prevents the court from  considering the circum-
          stances  surrounding  the  execution  of the  Guaranty.    First,
          extrinsic evidence  may inform  an ambiguity determination.   See
                                                                        ___
          Robert  Indus., Inc. v. Spence, 291 N.E.2d 407, 409 (Mass. 1973).
          _______________ ____    ______
          Second, the court  need not look  beyond the four corners  of the
          Guaranty in this appeal,  since section 1 of the  Guaranty itself
          supplies the context to which Thorn, Ltd. adverts. 

                                          9

          is  in conflict; there is  no public policy  consideration to tip

          the balance; and  there is  a much better  prospect of  resolving

          this  private conflict as the  parties intended, if  an effort is

          made  to discern their intentions  based on their actual negotia-

          tions and the events that led up to and followed the Guaranty.

                                          10

                                         III
                                         III

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                    Given the  unresolved conflict  in the language  of the

          guaranty and loan documents and  the dearth of evidence  relating

          to the parties' intent,  we conclude that Alletzhauser failed  to

          establish  an entitlement to summary judgment as a matter of law.

                    We therefore  vacate the  judgment and remand  for pro-
                    _______________________________________________________

          ceedings consistent with  this opinion.   The parties shall  bear
          ______________________________________    _______________________

          their own costs.  SO ORDERED.
                            SO ORDERED
          _______________   __________

                                          11

                                      APPENDIX11
                                      APPENDIX
                                      ________

          1.   Payment.  On each October 1  and April 1 occurring while any
               _______
          principal amount of this note is outstanding, [HTRA] shall pay to
          [Laura]  all  accrued  but  unpaid interest  on  the  outstanding
          principal balance of this note.  Commencing April 1, 1991, [HTRA]
          shall pay to [Laura] a principal payment as follows:

                    Date of Payment               Principal Payment
                    _______________               _________________

                    April 1, 1991                      $25,000
                    October 1, 1991                    $25,000
                    April 1, 1992                      $25,000
                    October 1, 1992                    $25,000
                    April 1, 1993                      $37,500
                    October 1, 1993                    $37,500

          The entire  remaining outstanding  principal balance of,  and all
          ___ ______                                   _______      ___ ___
          accrued  but unpaid  interest  on, this  note  shall be  due  and
                       ______  ________                  _____ __  ___  ___
          payable on April 1, 1994.  
          _______ __ _____ __ ____

          . . . .

          4.   Subordination.  Notwithstanding  any other provision  of the
               _____________   _______________  ___ _____ _________  __ ___
          Subordinated Loan Documents, [HTRA], and each holder of this note
          ____________ ____ _________   ____   ___
          [Thorn, Ltd.] .  . . agree  that the Subordinated  Debt shall  be
           ___________         _____  ____ ___ ____________  ____ _____  __
          subordinated  as set forth in  this Section 4  to all present and
          ____________  __ ___ _____ __  ____ _______ _  __ ___ _______ ___
          future extensions  of credit  to [HTRA]  by The  Beverly National
          ______ __________  __ ______  __  ____   __ ___  _______ ________
          Bank [or its successors] . . . .
          ____

               4.2   Limitation  on Payments.    Payments of  interest  and
                     __________  __ ________
          principal shall be made as they become due in accordance with the
          terms of  the Subordinated Loan Documents.  . . . So  long as any
                                                            __  ____ __ ___
          Senior Debt is outstanding, no  payment of principal or  interest
          ______ ____ __ ___________  __  _______ __ _________ __  ________
          on this note shall be  made prior to the date when due  in accor-
          __ ____ ____ _____ __  ____ _____ __ ___ ____ ____ ___  __ ______
          dance with the terms of the Subordinated Loan Documents.  
          _____ ____ ___ _____ __ ___ ____________ ____ _________

               4.3    Payments  Held in  Trust.    If, notwithstanding  the
                      ________  ____ __  _____
          foregoing, any payment or distribution of the assets of the Maker
          of any kind or character shall  be received, by set-off or other-
          wise, by any holder  of Subordinated Debt before all  Senior Debt
          is  paid in full, such payment  or distribution and the amount of
                            ____ _______  __ ____________ ___ ___ ______ __
          any such  set-off shall be held in trust by such holder of Subor-
          ___ ____  _______ _____ __ ____ __ _____
          dinated Debt for the benefit of the holders  of Senior Debt . . .
                       ___ ___ _______ __ ___ _______  __ ______ ____
          which shall  have the right  . . .  to the payment  of all Senior
          Debt  remaining unpaid until all such Senior Debt shall have been
                              
          ____________________

               11All brackets and  emphasis in  the text of  the Note  have
          been added. 

                                          i

          paid in full.  

               4.4  Limitation  on Enforcement.  No  holder of Subordinated
                    __________  __ ___________
          Debt shall, without the  prior written consent of the  holders of
          the Senior  Debt, accelerate the  maturity of, or  institute pro-
          ceedings to enforce, any  Subordinated Debt, notwithstanding  any
          term  or provision to the  contrary contained in the Subordinated
          Debt  Documents.  . .  .  Notwithstanding  any contrary  term  or
          provision of the Subordinated Debt Documents, (i) no Subordinated
          Debt  shall become or be declared to  be due and payable prior to
          the date  on which the Senior  Debt becomes or is  declared to be
          due and payable . . . . 

               4.5    Effect of  Provisions.   (a)  The provisions  of this
                      ______ __  __________
          Section 4 are  solely for  the purpose of  defining the  relative
          rights of the  holders of Senior  Debt on the  one hand, and  the
          holders of Subordinated Debt on the other hand, and none  of such
                                                              ____  __ ____
          provisions shall  impair  as between  the  Maker [HTRA]  and  any
          __________ _____  ______  __ _______  ___  _____         ___  ___
          holder of  Subordinated Debt [Thorn, Ltd.] the  obligation of the
          ______ __  ____________ ____               ___  __________ __ ___
          Maker [HTRA], which is unconditional and absolute, to pay to such
          _____  ____   _____ __ _____________ ___ _________ __ ___ __ ____
          holder of  Subordinated Debt the  principal and premium,  if any,
          ______ __  ____________ ____ ___  _________ ___ _______
          thereof and interest  thereon, and all  other amounts in  respect
                  ___ ________  _______
          thereof,  all in accordance with the terms thereof, nor shall any
                    ___ __ __________ ____ ___ _____ _______
          such  provisions prevent  any  holder of  Subordinated Debt  from
          exercising all remedies otherwise  permitted by applicable law or
          under the terms of such Subordinated Debt upon a default thereun-
          der, subject to the rights, if any, under  the provisions of this
          Section 4 of  holders of Senior  Debt.  The  Maker hereby  agrees
          that,  during any period in  which the Maker  is not permitted to
          make any payment by virtue of  the provisions of this Section  4,
          any applicable statute of limitations shall be tolled.  

                                          ii