Exhibit 10.20
INTEREST ONLY
NONRECOURSE PROMISSORY NOTE
AND SECURITY AGREEMENT
$400,000.00 2/27/03
Portsmouth, Virginia
FOR VALUE RECEIVED, H.E.R.C. Products Incorporated, a Delaware corporation,
("Maker" or "Debtor") promises to pay to R. Xxxx Xxxxxxxxx ("Holder" or "Secured
Party"), or order, the principal sum of Four Hundred Thousand Dollars
($400,000.00) with interest from the date of this Note on unpaid principal owing
from time to time at the rate of eight percent (8.0%) per annum until fully
paid. Maker shall make interest only payments on the first day of each month
from the date of this Note until the date one (1) year from the date of this
Note ("Maturity Date"). Principal plus all accrued and unpaid interest on such
principal shall be due and payable on the Maturity Date.
Maker shall make all payments in lawful money of the United States of
America and in immediately available funds. Computations of interest shall be
based on a year of 360 days but shall be calculated for the actual number of
days in the period for which interest is charged.
This Note may be prepaid in whole or in part, without penalty, at the
option of Maker and without the consent of Holder. All payments shall be applied
first to accrued and unpaid interest and then to the principal balance
outstanding. All payments under this Note shall be paid to Holder at Seaward
Marine Services, Inc., Attention: R. Xxxx Xxxxxxxxx, 0000 Xxxxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 marked "PERSONAL and CONFIDENTIAL", or at
such other address as Holder shall direct Maker in writing.
This Note is nonrecourse as to Maker, except as to those assets of Maker
described in the Security Agreement between Maker as Debtor and Holder as
Secured Party ("Security Agreement") included herein and made a part hereof and
a UCC-1 Financing Statement, both dated the same date as this Note
("Collateral"). In the event Holder is entitled to proceed against Maker,
Holder's sole recourse shall be to proceed against the Collateral pursuant to
the terms set forth in the Security Agreement. Holder shall have no other
recourse against Maker or any assets of Maker other than the Collateral. This
provision is not intended to constitute a discharge or release of any obligation
contained in this Note or security that secures such obligations, but is a
covenant by Holder not to xxx Maker for a deficiency.
In the event of any failure to pay when due any installment of interest
under this note, and the continuance of that failure to pay for a period of ten
(10) days after written notice, by certified or registered mail or by hand
delivery, of this failure, this promissory note shall be considered to be in
default and the entire unpaid principal sum, together with accrued interest,
shall at the option of the holder become immediately due and payable in full.
The laws of the State of Virginia excluding its conflict of laws rules
shall govern this Note. The exclusive jurisdiction and venue of any legal action
instituted by any party to this Note shall be Fairfax, Virginia.
Maker waives presentment, protest and demand, notice of protest, notice of
demand and dishonor, and notice of nonpayment of this Note. Maker expressly
agrees that Holder may extend this Note or any payment under this Note from time
to time without in any way affecting the liability of Maker.
Maker shall pay all costs and expenses, including attorney fees, incurred
(i) in collecting payment on this Note, (ii) in connection with any dispute that
arises as to its enforcement, validity, or interpretation, whether or not legal
action is instituted or prosecuted to judgment, or (iii) in enforcing any
judgment obtained in any related legal proceeding.
If any provision or any word, term, clause, or part of any provision of
this Note shall be invalid for any reason, the same shall be ineffective, but
the remainder of this Note and of the provision shall not be affected and shall
remain in full force and effect.
Any of the terms and conditions of this Note may be waived by Holder, but
no such waiver shall affect or impair the rights of Holder to require
observance, performance, or satisfaction, either of that term or condition as it
applies on a subsequent occasion or of any other term or condition of this Note.
This Note shall be secured by Collateral in the Security Agreement made a
part hereof as follows:
SECTION ONE
CREATION OF SECURITY INTEREST
Debtor grants, and secured party retains a security interest in all of
company's present and future inventory, accounts, account and contract rights,
contracts, drafts, acceptances, documents, instruments, chattel paper, deposit
accounts, general intangibles and all products and proceeds therefrom, all of
which are in this instrument referred to as "collateral," subject to prior
encumbrance and security interest under that certain agreement by and between
debtor and KBK Financial, Inc. dated September 22, 1997, as amended, to secure
payment of the following:
A. The debt evidenced by this instrument.
B. All costs and expenses incurred by secured party in the collection of
the debt.
C. All future advances made by secured party for taxes, levies, insurance
and repairs to or maintenance of collateral.
D. All other future advances that may, at the option of secured party, be
made or given by secured party to or for the account of debtor.
E. All other past, present, future, direct or contingent liabilities of
debtor to secured party.
SECTION TWO
PURPOSE OF LOAN
Secured party has loaned the above sum to debtor to enable debtor to
provide operational working capital to expand its business, and other general
corporate purposes.
SECTION THREE
PERFECTION OF SECURITY INTEREST
Debtor shall pay all filing fees with respect to the security interest
created by this agreement, and secured party is by this agreement appointed the
attorney-in-fact of debtor to perform all acts that secured party may deem
necessary to perfect and continue perfecting such security interest.
SECTION FOUR
LOCATION OF BUSINESS OF DEBTOR
The place of business of debtor is at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000. Debtor has no other place of business in Virginia. Debtor shall
promptly notify secured party in writing of:
A. Any change in location of any place of business.
B. Establishment of any new place of business.
C. Discontinuance of any established place of business.
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SECTION FIVE
PROTECTION OF COLLATERAL
Debtor shall maintain collateral in good condition and repair and shall pay
and discharge all taxes, levies and other impositions levied on collateral, as
well as the cost of repairs to or maintenance of collateral. If debtor fails to
do so, secured party may pay the cost of such maintenance or repairs and such
taxes, levies and impositions for the account of debtor, adding the amount of
the same to the debt secured by this agreement. Debtor shall permit secured
party to inspect collateral and the books and records of debtor pertaining to
the collateral at any reasonable time. Debtor shall not lease, mortgage, pledge
or encumber collateral, permit its identity to be lost, permit it to be levied
on or attached under any legal process, or create any security interest in the
collateral other than the security interest created by this agreement, subject
to prior encumbrance and security interest referenced in Section One hereof.
SECTION SIX
RISK OF LOSS
Risk of loss, damage to or destruction of collateral is on debtor.
SECTION SEVEN
RIGHTS AND REMEDIES UNDER STATUTE
In addition to all rights given to secured party by this promissory note
and security agreement, secured party shall have all the rights and remedies of
a secured party under VA ST T. 8.9A and otherwise accorded by the law in
Virginia.
SECTION EIGHT
CONFESSION OF JUDGMENT
Debtor empowers any attorney of any court of record within the United
States to appear for debtor and, with or without one or more complaints or
declarations filed, confess a judgment or judgments against debtor in favor of
the holder of this note and agreement, as of any term, for the above sum plus
accrued interest, together with costs of suit and attorney fees of 1.0%. Debtor
waives all errors and stays of execution. The exemption of all property from
levy and sale on any execution is also waived, and no benefit of exemption shall
be claimed under or by virtue of any exemption law now in force or that may
later be enacted.
SECTION NINE
SEVERABILITY
If any provision of this instrument shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this instrument, but this promissory note and security agreement
shall be construed as if such invalid or unenforceable provision had never been
contained in this instrument.
SECTION TEN
EFFECT OF INSTRUMENT
The rights and privileges of secured party under this instrument shall
inure to the benefit of the successors and assigns of secured party, and the
duties and obligations of debtor under this instrument shall bind the heirs,
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personal representatives, successors and assigns of debtor. If there is more
than one debtor, the warranties, covenants and agreements of debtor contained in
this instrument, including the foregoing confession of judgment, shall be joint
and several.
Executed at Portsmouth, Virginia the day and year first above written.
MAKER/DEBTOR
H.E.R.C. Products, Incorporated,
a Delaware corporation
BY: S. Xxxxxx Xxxx, CEO
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[SIGNATURE]
/s/ S. Xxxxxx Xxxx
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