EXHIBIT 10.5
LINE OF CREDIT LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 3rd day of June, 2 002, by and
among BWY HOLDINGS LLC, a Delaware limited liability company,
having a principal place of business at 000 Xxxxx Xxx Xxxxxx, Xxxxxxxx
Xxxxx, Xxxxx Xxxxxxxx 00000 (hereinafter referred to as "Lender"),
BOROUGH CORPORATION, a Delaware corporation, having a principal place of
business at 0000 X Xxxxxx XX, Xxxxxxxxxx, X.X. 00000
(hereinafter referred to as the "Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make available
to it a line of credit Loan in the amount up to Four Hundred Thousand
($400,000.00) (the "Loan); and
WHEREAS, Lender is willing to make the Loan to Borrower, but
only on the terms and conditions set forth in this agreement;
NOW, THEREFORE, in consideration of the Loan evidenced
hereby and the covenants and agreements herein contained, it is mutually
agreed as follows:
1. Definitions.
(a) The term "Accounts" shall include (i) any right to payment
now or hereafter owing to Borrower by reason of any lease, sale,
manufacture, repair, processing or fabrication of personal property now or
hereafter owned or otherwise held by Borrower, by reason of any services
now or hereafter rendered by or on behalf of Borrower or by reason of
any existing or future contract for any said lease, sale, manufacture, repair,
processing, fabrication and/or services, whether such right to payment be
classified by law as an instrument, chattel paper, contract right, account,
general intangible or otherwise; (ii) the security, if any, for such right
to payment, (iii) Borrower's right, title and interest (including, without
limitation, any applicable right of stoppage in transit) in or to the
personal property, if any, which is the subject of such right to payment; and
(iv) all products and proceeds of the foregoing (including insurance proceeds),
irrespective of the form or kind thereof;
(b) The term "Account Debtor" shall include any person or
entity obligated to pay all or any part of any Account in any manner, and
includes (without limitation) any guarantor, surety, or endorser thereof;
(c) The term "Affiliate" shall mean any Person, directly or
indirectly, controlling, controlled by, or under common control with
Borrower. A Person shall be conclusively deemed to be in control of or to
be controlled by another Person if it holds 30% or more of the outstanding
equity interest in such other person or such other person holds 30% or
more of its outstanding equity interest. As used herein the term "equity
interest" in the case of a corporation shall mean the outstanding shares of
such corporation having voting power to elect a majority of its Board of
Directors, whether or not at the time the holders of any other class or
classes of securities of such corporation shall or might have such voting
power by reason of the happening of any contingency;
(d) The term "Chattel Paper" shall mean a writing or writings,
which evidence both a monetary obligation and a security interest in or a
lease of specific goods, whether now or hereafter held by the Borrower;
(e) The term "Collateral" shall include all of Borrower's
tangible and intangible personal property, together with the proceeds
thereof, whether now owned or hereafter acquired by the Borrower,
including without limitation Accounts, Chattel Paper, Equipment, General
Intangibles, Instruments and Inventory;
(f) The term "Equipment" shall have the same meaning as is
given to this term in the Uniform Commercial Code the State of Delaware,
including, without limitation, all machinery, equipment, furniture, tools and
other tangible personal property (including certain motor vehicles) now
owned or hereafter acquired by the Borrower; together with any and all
such property in replacement thereof or placed thereon which shall become
a component part thereof, and together with any and all products and
proceeds of all of the foregoing (including insurance proceeds), and any
and all after-acquired property of the like nature to that described herein;
(g) The term "Event of Default" shall have the meaning as set
forth in Paragraph 13 hereof;
(h) The term "General Intangibles" shall mean any intangible
personal property (including, without limitation, things in action,
trademarks, trade names, goodwill, patents, copyrights, and the Borrower's
corporate names) now or hereafter held by the Borrower, other than
Accounts, Chattel Paper and Instruments;
(i) The term "Instruments" shall mean a negotiable instrument
or a security, as defined in the Uniform Commercial Code of the State of
Delaware, or any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which,
in the ordinary course of business, is transferred by delivery with any
necessary endorsement or assignment, whether now or hereafter held by
the Borrower;
(j) The term "Inventory" shall have the same meaning as is
given to this term in the Uniform Commercial Code of Delaware, and also
including all goods, supplies, merchandise, raw materials, work in process,
finished goods and products and other tangible personal property now
owned or hereafter acquired by the Borrower and held for sale or lease or
furnished or to be furnished under contracts of service or used or
consumed in the Borrower's business, including Borrower's right of
stoppage in transit with respect thereto; and products and proceeds
(including insurance proceeds) of all of the foregoing and any and all after-
acquired property of the like nature to that described herein; and
(k) The term "Obligations" shall mean all debts, liabilities, and
obligations of Borrower, its sureties, and endorsers, to the Lender of every
kind and description, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, whether under this
Agreement or under any other agreement or instrument, past, present or
future, and whether or not of the same class of debt as that originally
contemplated by the parties hereto, including, without limiting the
generality of the foregoing, any debt, liability or obligation of Borrower,
its sureties, or endorsers, to others, which the Lender may have obtained by
assignment or otherwise, and also including, without limitation, all interest,
fees, charges and expenses, including expenses of the Lender's counsel,
connected with or related to the preservation, realization, enforcement,
protection or defense of the Collateral, this Agreement, the Note (as
hereinafter defined) or the Loan Documents (as hereinafter defined), and
the rights and remedies hereunder or thereunder.
2. Amount and Terms of Loan.
Lender shall loan to Borrower the sum of up to $400,000.00 in
connection with the Loan or so much thereof as may be disbursed to, or for
the benefit of the Borrower by the Lender in the Lender's sole and absolute
discretion. It is the intent of the Borrower and Lender hereunder to create
a line of credit agreement between Borrower and Lender whereby
Borrower may borrow up to $400,000.00 from Lender; provided however
that Lender has no obligation to lend Borrower any amounts hereunder and
the decision to lend such money lies in the sole and complete discretion of
the Lender.
Any disbursements shall to be applied as provided in Schedule A hereto,
upon the following terms and conditions:
(a) Borrower shall execute and deliver to Lender a promissory
note in the amount of $400,000.00 and in the form of
Exhibit A annexed hereto and made a part hereof (the "Note").
(b) The Loan shall bear interest and be payable in accordance
with the terms of the Note.
(c) The Loan shall be used for the purposes specified in Exhibit
B hereto.
(d) The Loan shall mature and be paid in full on or before
September 15, 2002.
(e) The maturity of the Loan shall accelerate upon a qualified
equity placement of Borough yielding $10,000,000 or more
or the acquisition of 50% or more ownership of a targeted
company including Impact Diagnostics, Inc. and subject to
the approval of the Lender.
3. Security.
(a) The Borrower hereby grants to Lender a first priority
security interest in all of its tangible and intangible personal property,
together in each instance with the renewals, substitutions, replacements,
additions, products and proceeds thereof, whether now owned or hereafter
acquired by said Borrowers including Accounts, Chattel Paper, Equipment,
General Intangibles, instruments and Inventory (excluding Motor
Vehicles); and
(b) Borrower also hereby grants to Lender a lien on and a right
of set-off against all monies, deposits and securities, and the proceeds
thereof, now or hereafter held or received by, or in transit to, Lender from
or for Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all deposits (general or special), balances,
sums and credits with and all claims of Borrower against Lender at any time
existing. Lender may at any time after the occurrence of an Event of
Default hereunder and five (5) business days' notice thereof to Borrower,
apply the same or any part thereof to the Obligations, or any part thereof,
whether or not matured at the time of such application.
(c) The security interests granted in this Paragraph 3 shall
secure payment and performance of the Obligations of Borrower to
Lender, specifically including, but without limitation, the Note.
(d) Notwithstanding anything contained herein to the contrary,
no additional financing shall be obtained by Borrower at any time in
connection with the, Collateral until the Loan is paid in full, with the
following exceptions: the Borrower's existing agreement with BWY
Holdings LLC for sale of common stock and the stock exchange
agreements with Impact Diagnostics, Inc. shareholders of up to 49.99% or
more of Impact.
5. Collection of Accounts.
(a) On and after the occurrence of any Event of Default
hereunder, any and all proceeds from its Accounts received by Borrower
shall be held in trust by the Borrower for Lender, shall not be commingled
with any other funds or property of the Borrower, and Borrower shall turn
over such proceeds to Lender daily in the exact form in which they are
received, together with a collection report in form satisfactory to Lender.
Lender shall thereafter promptly apply, subject to collection, all or such
portion (as Lender may determine in its discretion) of such proceeds from
Accounts, and all or such portion of any proceeds of Accounts otherwise
received by it pursuant hereto, to the payment of the Obligations in such
order of application as Lender, in its sole discretion, may determine, and
Lender shall deposit the balance, if any, of such proceeds into Borrower's
operating account.
(b) Borrower shall, when requested by Lender after the
occurrence of an Event of Default:
(i) Assign or endorse the Accounts to Lender and
notify Account Debtors that the Accounts have been assigned and should
be paid directly to Lender,
(ii) Xxxx or stamp each of its individual ledger sheets or
cards pertaining to its Accounts with the legend "Assigned to BWY
Holdings LLC" and stamp or otherwise xxxx and keep its books, records,
documents and instruments relating to the Accounts in such manner as
Lender may require; and/or
(iii) Xxxx or stamp all invoices with a legend satisfactory
to Lender so as to indicate that the same should be paid directly to Lender.
(c) Notwithstanding the foregoing, Lender shall have the right,
at any time after the occurrence of an Event of Default, or a state of facts
which but for the passage of time, giving of notice, or both, would
constitute an Event of Default, to itself so notify such Account Debtors to
make such payments of the Accounts directly to Lender and Lender shall
have the further right to notify the post office authorities to change the
address for delivery of mail of Borrower to an address designated by
Lender and to receive, open and dispose of all mail addressed to Borrower
relating to the Accounts.
(d) For the purpose of this Paragraph 5, Borrower hereby
irrevocably constitutes Lender as its attorney-in-fact, coupled with an
interest, to issue in the name and execute or endorse on behalf of Borrower
each and every notice, instrument and document necessary to carry out the
purpose of the provisions of this Paragraph 5, and to take such action in
connection with the collection of the Accounts, including, without
limitation, suing thereon, compromising or adjusting the same, as Lender,
in its sole discretion, deems necessary. The power of attorney granted
hereby shall be self-executing, but Borrower shall promptly execute and
deliver to Lender, upon written request of Lender, such additional separate
powers of attorney, as Lender may from time to time reasonably request.
6. Representations and Warranties.
Borrower gives the following representations and warranties to the
Lender as an inducement to Lender to make the Loan contemplated by this
Agreement, and understands that Lender is relying on the foregoing
representations and warranties, and agrees further that the following
representations shall survive bankruptcy, insolvency, reorganization and
rehabilitation proceedings:
(a) All of the financial statements and information of Borrower,
previously furnished by Borrower to Lender, are accurate in every material
respect; there has not been any material adverse change in the financial
condition of Borrower since the date of said financial statements; nor does
Borrower have any material liabilities fixed or contingent which are not
fully shown or provided for in said financial statements as at the date
thereof, except obligations to perform after that date under contracts,
purchase orders and other commitments incurred in the ordinary course of
business, none of which materially and adversely affect the ability of
Borrower to perform hereunder. There is no fact that Borrower has not
disclosed to Lender in writing which could materially adversely affect the
properties, business, or financial condition of Borrower, or of the
Collateral;
(b) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware; having all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted and it is
duly qualified and in good standing in every jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary;
(c) There is no litigation or governmental proceeding pending,
or to the knowledge of the officers of Borrower, threatened against
Borrower which in either case might materially and adversely affect
Borrower's financial position, which has not been disclosed to Lender.
Borrower has filed all tax returns and reports required to be filed with the
United States Government and with all other state and local governments
requiring the same to be filed, and have paid in full or made adequate
provision for the payment of all taxes, interest, penalties, assessments or
deficiencies shown to be due or claimed to be due or in respect of such tax
returns and reports;
(d) The execution, delivery and performance of the Note, this
Agreement, and all other agreements and instruments delivered by
Borrower pursuant to the terms thereof or in connection therewith
(hereinafter sometimes referred to as the "Loan Documents"), have been
duly authorized, are within the corporate powers of Borrower, are not in
contravention of any statute or regulation to which Borrower is subject, or
any provisions of Borrower's Certificate of Incorporation or By-laws, or
Articles of Organization and Operating Agreement, as the case may be, or
any amendments thereto, or of any agreement or undertaking to which
Borrower is a party or by which it or they are bound, and no action of,
filing with, or consent by, any person, entity, or any governmental or public
body or authority, is required to authorize or is otherwise required in
connection with the execution, delivery and performance of this Agreement
or any of the instruments or documents to be delivered pursuant to this
Agreement. The execution, delivery and performance of this Agreement,
the Note, or any one or more of the Loan Documents will not result in the
creation of any lien, charge or encumbrance upon any Borrower's assets
(other than the security interest granted to Lender hereunder) pursuant to
any of the terms, conditions or provisions of any agreement, instrument or
other undertaking to which Borrower is a party or by which Borrower is
bound;
(e) Subject to any limitations stated therein or in connection
therewith, all information furnished or to be furnished by Borrower
pursuant to the terms hereof, or of the Note is, or will be at the time the
same is furnished, accurate and complete in all material respects;
(f) Except as otherwise disclosed in writing to Lender,
Borrower has as of the effective date of this Agreement, or will have when
acquired by it, good and marketable title to the Collateral free from any
adverse claims, liens, security interests or encumbrances except as
permitted under Paragraph 9(g) hereof; and except as otherwise disclosed
in writing to Lender, no financing statements of Borrower covering all or
any part of the Collateral are on file in the office of the Secretary of State
of the State of Delaware, or the office of any town clerk, or in any other
proper governmental office;
(g) There are no liens or encumbrances on any of the other
properties of Borrower, except as otherwise disclosed to Lender as
described on Exhibit C;
(h) The Collateral is located at the Borrower's offices and
plants at the addresses first hereinabove set forth. The Borrower will not
remove any of the Collateral from said locations without the prior written
consent of Lender, which shall not be unreasonably withheld or delayed,
except as otherwise provided in Paragraph 11 hereof;
(i) The offices where the Borrower keeps its records
concerning the Accounts and relating to the Inventory are located at the
address of the Borrower first hereinabove set forth. The Borrower will not
remove any such records from said offices without the prior written
consent of Lender;
(j) Each of the Accounts is valid, enforceable, and in full force
and effect, and arises or will arise out of the sale or delivery of merchandise
or the performance of labor or services; the due date stated on any Account
or on any report reciting any Account is or shall be correct; each Account
Debtor is justly indebted to the Borrower in the amount indicated by the
Borrower subject to no offsets or credits except as has been disclosed to
Lender; and no agreement has been made, nor will be made, with any
Account Debtor for any reduction, discount, compromise, credit or
settlement of any Account reported to Lender in excess of $50,000.00
without Lender's prior written consent;
(k) To the best of its knowledge, Borrower is in compliance
with all laws, ordinances, rules or regulations, applicable to it, of all
federal, state or local governments or any instrumentality or agency
thereof, including without limitation, pharmaceutical drug laws and
regulations, the Employee Retirement Income Security Act (hereinafter
referred to as "ERISA"), the United States Occupational Safety and Health
Act (hereinafter referred to as "OSHA") and all federal, state and municipal
laws, ordinances, rules and regulations relating to health, safety and the
environment, nor has Borrowers received any notice, order, petition or
similar document evidencing the basis for any claim for such a violation or
of any threat thereof.
(l) Borrower has not, during the preceding five (5) years, been
known as or used any corporate or fictitious name other than that first
hereinabove set forth;
(m) Borrower has sufficient capital to carry on its businesses,
and each is solvent and able to pay its debts as they mature, and is generally
paying such debts, and Borrower owns property whose fair market value
exceeds the dollar amount required to pay Borrower's debts;
(n) Borrower possesses all the trademarks, trade names,
copyrights, licenses and governmental permits, licenses, orders and
approvals, or rights in any thereof, necessary for the conduct of its business
as now conducted and presently proposed to be conducted, without
conflict of the rights or claimed rights of others.
All representations and warranties set forth in this
Paragraph 6 shall be true and correct in all material respects as of the
execution of this Agreement and on and as of the time of each advance
made pursuant to this Agreement, to the same effect as though such
representations and warranties had been made on and as of such time.
7. Affirmative Covenants.
Borrower covenants and agrees that from the effective date hereof
until the termination of this Agreement and full payment of all sums due,
and the performance of all other obligations, under the Loan Documents
unless Lender otherwise agrees in writing, they shall:
(a) File all required federal, state and local tax returns and pay
and discharge all taxes, general and special, charges and assessments, and
other governmental obligations, which may have been or shall be levied,
charged or assessed on or against Borrower (including its subsidiaries), its
property, or the income and profits thereof, before they become delinquent;
and pay and discharge on or before their due date any and all other lawful
claims and demands whatsoever, provided, however, Borrower shall have
the right to contest the validity or amount of the foregoing, provided such
contest is in good faith and is diligently pursued, and Borrower, upon
Lender's request, maintain reserves therefore in amount and form
satisfactory to Lender;
(b) Keep its properties insured against loss by fire or other
casualty customarily covered by a comprehensive policy and such other
risks as Lender may reasonably request, and in such amounts and with such
insurers as may be satisfactory to Lender, which insurance, insofar as it
insures property pledged or mortgaged to Lender, or in which Lender may
have a security interest, shall be first payable in case of loss to Lender as
its interest may appear.
(c) Maintain and preserve the Collateral in good order and
condition and not permit or suffer the Collateral to be wasted or destroyed,
ordinary wear and tear excepted and replace said Collateral in the ordinary
course of business;
(d) Immediately notify Lender of any event causing material
loss or depreciation in the value of the Collateral and the amount of such
loss or depreciation. In the event any Accounts due and owing in excess of
$50,000 are in dispute between any Account Debtor and Borrower,
Borrower shall provide Lender with written notice thereof, explaining in
detail the reason for the dispute, all claims related thereto and the amount
in controversy. In the event any Account becomes evidenced by a
promissory note, trade acceptance, or any other instrument for the payment
of money, Borrower will immediately thereafter deliver such instruments to
Lender, appropriately endorsed to Lender, regardless of the form of
presentment, demand, notice of dishonor, protest, and notice of protest
with respect thereto;
(e) Give immediate notice to Lender of, and copies of all
relevant documents concerning: (1) any litigation or proceeding in which
Borrower is a party if an adverse decision therein would require Borrower
to pay over more than $50,000 or deliver assets the value of which exceeds
such sum (whether or not the claim is considered to be covered by
insurance); and (2) the institution of any other suit or proceeding involving
Borrower that might materially and adversely affect Borrower's operations,
financial condition, property or business;
(f) Allow Lender by or through any of its officers, agents,
attorneys, or accountants designated by it, for the purpose of ascertaining
whether or not each and every provision hereof and of any related
instrument is being performed and for the purpose of examining the
Collateral and the records relating thereto, upon reasonable notice to enter
the offices and plants of Borrower to examine, inspect or make copies of
any of the corporate books and financial records of Borrower, and to
inspect the Collateral, and to discuss the affairs, finances and accounts
thereof with the principal officers thereof, all during normal business hours
and as often as Lender may reasonably request;
(g) Maintain general public liability insurance against claims for
personal injury, death or property damage in such amounts as are
satisfactory to Lender, and Worker's Compensation insurance in statutory
amounts, with such companies as are licensed to do business in the State of
Delaware;
(h) Defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein, it being
understood and agreed, however, that Lender may contest any such claims
or demands made against Borrower, in the name of Borrower, if Lender's
security interest in the Collateral would be impaired; and pay, upon
demand, Lender's reasonable costs, charges and expenses, including
reasonable attorney's fees, in defending any such claim or demand; and
cause the security interest of Lender to be properly noted on all certificates
of title issued or outstanding with respect to any of the Collateral and
deposit the same with Lender;
(i) Pay to Lender, on demand, any and all reasonable expenses,
including reasonable attorneys' fees, incurred or expended by Lender in the
collection of the Obligations, including all sums due under the Loan
Documents, the collection or attempted collection of the Accounts and in
protecting and enforcing the rights of Lender and sustaining the security
interests granted to Lender under the Loan Documents, including this
Agreement.
(j) From time to time, at the request of Lender, execute, deliver
and file one or more financing statements on Form UCC-1 and other
instruments, and do all other acts as Lender deems necessary or desirable
to create, maintain and perfect fully its first priority security interest in
the Collateral and pay, upon demand, all reasonable expenses, including
reasonable attorneys' fees, incurred by Lender in connection therewith;
(k) Keep complete and accurate books and records reflecting all
facts and concerning the Collateral (including each of the Accounts) and
pertaining to the Note and Borrower's covenants under this Agreement, all
in accordance with generally accepted accounting principles. Borrower
shall provide Lender, at its reasonable request, from time to time with:
copies of all invoices relating to the Accounts; names and addresses of
customers; collection reports; lists of Inventory; and such further
information and/or schedules concerning the Collateral as Lender may
reasonably require, all in form satisfactory to Lender;
(l) Comply with all laws, orders, rules and regulations
applicable to Borrower of any governmental body or agency, including
without limitation, pharmaceutical drug laws and regulations,
environmental and health and safety laws, orders, rules and regulations and
fully indemnify, defend and hold Lender harmless from and against any
loss, claim or damage arising as a consequence of any failure by Borrower,
or by Borrower's officers, employees or agents to so comply.
(m) Give prompt written notice to Lender upon the occurrence
of an Event of Default, or of any state of facts which would constitute an
Event of Default hereunder or, which, but for the giving of notice or
passage of time, or both, would constitute an Event of Default;
(n) Give prompt written notice to Lender of the commencement
of litigation, including arbitration proceedings, and any proceedings before
any governmental agency, or the occurrence of any other event, which, if
decided adversely to Borrower could have a material adverse effect upon
the condition, operations or prospects (financial or otherwise) of
Borrower.
(o) Give prompt written notice to Lender of any labor dispute
or controversy resulting or likely to result in a strike or work stoppage
against Borrower;
(p) Maintain at all times a principal place of business in the
District of Columbia, as the case may be.
8. Negative Covenants.
Borrower covenants and agrees that at all times during the term
hereof and so long as the Note issued hereunder shall remain unpaid, it will
not, without prior written consent of Lender:
(a) Except as specifically permitted in Paragraph 3(d) herein,
create or assume any obligations for money borrowed from any person
other than Lender, except for purchase money obligations;
(b) Mortgage, pledge or otherwise voluntarily subject to any
lien, any assets or property now or hereafter owned by it, nor permit any of
its assets or property to become subject to any liens or charges other than
(i) liens for taxes, assessments or other governmental charges not then
delinquent, (ii) other liens arising in the usual course of business which
shall be inchoate and shall not have been perfected, (iii) liens for alleged
claims, the validity or amount of which is being contested in good faith by
the Borrower or Borrower, provided that to the extent permitted by law, the
Borrower shall immediately bond or otherwise lift such lien, and (iv)
purchase money security interests for fixed assets;
(c) Enter into any merger or consolidation, nor dissolve or
liquidate, nor enter into any proceedings preliminary to any of the
foregoing, nor assign, sell, transfer, lease or otherwise dispose of any or
all of its assets, except in the normal course of its business, nor change its
name;
9. Payments by Lender.
At its option, but without any liability for failure to do so, Lender
may pay for insurance on the Collateral and taxes, assessments or other
charges which Borrower fails to pay in accordance with the provisions
hereof, and may discharge any security interest in or lien upon the
Collateral. No such payment or discharge of any such security interest or
lien shall be deemed to constitute a waiver by Lender of the violation of
any covenant hereunder by Borrower as a result of Borrower's failure to
make any such payment or Borrower's suffering of any such security
interest or lien. Any payment made or expense incurred by Lender pursuant
to this or any other provision hereof shall be added to the indebtedness of
Borrower to Lender, and shall bear interest at the highest rate payable
under the Note and shall be payable on demand.
10. Use of Inventory.
Until the occurrence of an Event of Default by Borrower
hereunder, Borrower may use the Inventory in any lawful manner not
inconsistent with this Agreement, or with the terms or conditions of any
policy of insurance thereon and may also sell, lease or otherwise dispose of
the Inventory in the ordinary course of business. A sale in the ordinary
course of business does not include a transfer in partial or total satisfaction
of a debt.
11. Financial Information and Statements.
The Borrower shall furnish to the Lender annually, on or before April
30th of each calendar year, a profit and loss statement and balance sheet,
including all supporting schedules and comments reported on by the certified
public accountant of Borrower, together with a complete, signed copy of the
Borrower's Federal Income Tax Returns, including all schedules, for the prior
year. In the event that the Borrower's has obtained an extension for the filing
of its tax returns, the Borrower shall provide Lender with a copy of such
extension and will submit a copy of the complete tax return to Lender
immediately upon filing.
12. Omitted.
13. Events of Default.
Lender shall have the right at its option to terminate the Loan and
in connection therewith to declare any or all of the Obligations to be
immediately due and payable without notice upon the occurrence of any
one of the following events (each being an "Event of Default"):
(a) The failure by Borrower to pay any of the Obligations for a
period of ten (10) days after the same shall be due and payable, or such
failure by the Borrower to pay any of the Obligations upon demand
pursuant to the Guaranties;
(b) The failure by Borrower to observe, perform or comply
with any condition or covenant in this Agreement, the Note or any of the
other Loan Documents that is not cured within a period of thirty (30) days
after written notice of any such default has been given;
(c) The existence of an Event of Default under the Note or
under any of the other Loan Documents;
(d) If any representation or warranty made by Borrower in this
Agreement or in any of the other Loan Documents, or any statement,
certificate or other data furnished by Borrower in connection with any of
the Obligations proves to be incorrect or untrue in any material respect
when made;
(e) The entry of a judgment for the payment of money in excess
of $10,000.00 against Borrower, which remains unsatisfied and in effect for
any period of thirty (30) consecutive days without a stay of execution, or
appeal;
(f) The insolvency of Borrower (the term "insolvency" shall
mean either a negative tangible net worth or an inability to pay Borrower's
debts as they mature);
(g) The filing by or against Borrower of any petition seeking an
arrangement, reorganization or the like, the commencement of any
proceedings under any bankruptcy or insolvency law by or against
Borrower, the appointment of a receiver for all or any part of Borrower's
assets, or the making of an assignment for the benefit of creditors, or the
calling of a meeting of creditors, or the appointment of a committee of
creditors or liquidating agents, by, for, or of any one or more of them;
provided, however, in the event of any involuntary petition or proceedings
commenced against Borrower, there shall be a ninety (90) day grace period
during which such petition or proceedings may be discharged or vacated;
(h) The dissolution, liquidation, insolvency, or termination of
legal existence, death, of Borrower, or merger or consolidation of
Borrower, with or into any other person or entity;
(i) The failure by Borrower, to pay when due (including
applicable grace periods) any other material indebtedness or obligations
owed to others for borrowed money, or if any such other indebtedness (or
obligation shall be accelerated);
14. Remedies of Lender.
(a) Upon the occurrence of an Event of Default, and thereafter
so long as such Event of Default remains uncured, Lender may, in addition
to and not in limitation of Lender's rights under this Agreement, pursue any
legal remedy available to it to collect the Obligations outstanding at that
time, and to enforce its rights hereunder and under the Loan Documents
and/or the Guaranties, and to seek all of the rights and remedies of a
secured party as provided in the Uniform Commercial Code, including but
not limited to:
(1) the right to require Borrower to assemble the
Collateral and make it available to Lender at a place designated by Lender
which is reasonably convenient to both parties;
(2) the right to take immediate possession and remove
all Collateral, and for this purpose the Lender is authorized to enter upon
the premises where the Collateral is kept;
(3) the right to take exclusive possession of the
premises on which the Collateral is stored and to conduct any sale on those
premises in a commercially reasonable manner and/or to store the
Collateral free of rent on the premises, and Borrower expressly agrees to
pay any rents due on the premises while the Lender is in possession thereof
pursuant to this Agreement; and
(4) the right to apply the proceeds of any sale or
disposition to the payment in whole or in part of any amounts owing to
Lender from Borrower, or the Borrower's surety, or endorser, whether
principal or interest, all at the sole discretion of Lender, after deducting
therefrom the following expenses (together with interest thereon if
applicable), with respect to any of such Obligations: the reasonable
expenses of retaking and storing the Collateral, transporting the Collateral
from the place of possession to the place of sale, preparation for the sale,
including court costs, bond premiums and reasonable attorneys' fees.
(b) Borrower agrees that the requirements of reasonable
notification to Borrower of the time and place of any public sale or of the
time after which any private sale or other intended disposition is to be made
shall be met if such notification is sent by certified mail, postage prepaid, at
least seven (7) days prior to the date of sale or other disposition, addressed
to Borrower at its principal place of business, such address being the place
held out by Borrower for the receipt of all communications relative to this
Agreement. No change of such address shall be effective until specific
written notice thereof is received by the Lender;
(c) Borrower will be liable for all reasonable attorneys' fees
incurred in enforcing this Agreement. Borrower agrees to hold the Lender
harmless from any damages or other costs incurred by the Lender by
reason of the breach of any provision of this Agreement by Borrower;
(d) On request by Lender, Borrower shall deliver to Lender all
original and other documents evidencing and relating to the sale and
delivery of any merchandise or the performance of labor or services, which
created any part of the Accounts, including, without limitation, contracts,
orders, invoices, bills of lading, warehouse receipts and shipping receipts,
together with appropriate written endorsements and/or assignments of the
same to Lender.
15. Rights of Lender.
Lender shall have no duty as to the collection or protection of the
Collateral, nor as to the preservation of any rights against prior parties, nor
as to the preservation of any rights pertaining thereto. Lender may exercise
its rights with respect to the Collateral, without resorting or regard to other
collateral or sources of reimbursement for the Obligations. Lender shall not
be deemed to have waived any of its rights under the Loan Documents or
upon or under the Obligations unless such waiver is in writing and signed
by Lender. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right on any future occasion. Lender may revoke any
permission or waiver previously granted to Borrower and such revocation
shall be effective whether given orally or in writing. All rights and remedies
of Lender with respect to the Obligations or the Collateral whether
evidenced hereby or by any other document, shall be cumulative and may
be exercised singularly or concurrently.
16. General Provisions.
(a) No delay or failure of Lender in exercising any right, power
or privilege hereunder shall affect such right, power or privilege, nor shall
any single or partial exercise preclude any further exercise thereof or the
exercise of any other rights, powers or privileges;
(b) This Agreement and every representation, warranty,
covenant, promise and other terms herein contained, including without
limitation, the security interests granted hereby, shall survive until all
amounts due hereunder have been paid in full;
(c) This Agreement is an integrated document, and all terms
and provisions are embodied herein and shall not be varied by parol
evidence;
(d) This Agreement is made and executed and is to be
construed under the laws of the State of Florida, without giving effect to
any conflict of laws principles.
(e) The captions for the paragraphs contained in this Agreement
have been inserted for convenience only, and form no part of this
Agreement, and shall not be deemed to affect the meaning or construction
of any of the covenants, agreements, conditions or terms hereof;
(f) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns;
provided, however, that Borrower may not assign, whether voluntarily or
by operation of law or otherwise, any of its rights hereunder without the
prior written consent of Lender which may be withheld at their sole
discretion, any such attempted assignment without consent shall be null and
void. This Agreement shall be the joint and several obligation of all makers,
and each provision hereof shall apply to each and all jointly and severally;
(g) Any notice or statement required hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
upon deposit in the United States mails, with proper postage prepaid, and
addressed to the party to be notified as follows unless either party shall
hereafter instruct the other to direct notices to another address:
If to Lender, at:
000 Xxxxx Xxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
If to Borrower, at:
0000 X Xxxxxx XX
Xxxxxxxxxx, X.X. 00000
(h) If any provision of this Agreement is invalid or
unenforceable under applicable law, such provision is and will be totally
ineffective to that extent, but the remaining provisions shall be unaffected.
(i) This Agreement shall be governed by Delaware law,
without giving effect to any conflict of laws principles
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals, and to a duplicate instrument of the same tenor, at Lender
day and year first above written.
Signed, sealed and delivered:
"Lender"
BWY HOLDINGS, LLC
On behalf of: Wentworth Advisors, LLC, Managing Member
By_________________________ ___________________________
Xxxx X. Xxxxxx, Chief Executive Witness
Signed, sealed and delivered:
"Borrower"
BOROUGH CORPORATION
By _________________________ ___________________________
Xxxxx X. Xxxxxxx, Xx. Witness
Exhibit A
PROMISSORY NOTE
(Line of Credit Loan)
$400,000.00
June 3, 0000
Xxxxxxxxxx, XX
FOR VALUE RECEIVED, the undersigned, Borough Corporation,
a Delaware corporation, having its principal office at 0000 X Xxxxxx X.X.,
Xxxxxxxxxx, X.X., hereinafter called "MAKER," promises to pay to the
order of BWY Holdings LLC, or successor(s) or assign(s) (collectively
"LENDER"), at it's principal office, or such other place in The District of
Colombia as the holder hereof may from time to time designate in writing,
the principal sum of FOUR HUNDRED THOUSAND AND NO/100
DOLLARS ($400,000.00), or so much thereof as may have been advanced
and outstanding from time to time, together with interest thereon from the
date or dates of disbursement of the aforesaid principal sum as hereinafter
provided to be paid in lawful money of the United State of America, which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment.
Interest on this Promissory Note ("Note") shall bear simple interest
at a rate of ten percent (10%) per annum, and shall be calculated based on
the principal balance as may be adjusted from time to time to reflect
additional advances made hereunder. Interest on the unpaid balance of this
Note shall accrue monthly but shall not be due and payable until such time
as when the principal balance of this Note becomes due and payable. This
Note shall become due and payable in full on September 15, 2002 at which
time all the outstanding principal and accrued but unpaid interest thereon
shall become due and payable in full. There shall be no penalty for early
repayment of all or part of the principal.
This Note is executed pursuant to the LINE OF CREDIT LOAN
AND SECURITY AGREEMENT of even date herewith between the
undersigned MAKER and LENDER and referred to as the "Agreement".
The terms and provisions of the Agreement are incorporated by this
reference as though set forth in full herein, and any default under the
Agreement shall constitute a default under this Note. In the event of any
conflict or inconsistency between the terms and provisions of this Note and
those of the Agreement, the terms and provisions of this Note shall in all
respects govern and control.
In the event of any default under the Agreement or under any other
documents or instruments executed in connection therewith, including a
failure to make any payment of principal or interest due hereunder on the
due date thereof, LENDER may, at his option, accelerate maturity, and the
unpaid principal balance hereof and all accrued interest shall thereupon
immediately become due and payable without demand or notice. Failure to
exercise this option with respect to any failure or breach by MAKER shall
not constitute a waiver of the right as to any subsequent failure or breach.
MAKER and all endorsers, guarantors, sureties and other parties
now or hereafter liable for the payment of any sum or sums due or to
become due under the terms of this Note waive presentment, protest and
demand, and notice of protest, demand and dishonor, and nonpayment of
this Note, and consent that the holder hereof shall have the right, without
notice, to deal in any way at any time with any party hereto, or to grant any
extension or extensions of time for payment of any of said indebtedness or
any other indulgences or forbearances whatsoever without in any way
affecting the liability of any other party for the payment of this Note.
MAKER further agrees to pay all reasonable costs of collection,
including reasonable attorney's fees and court costs (inclusive of any
bankruptcy or appellate proceedings), in case the principal of this Note or
any interest thereon is not paid when due whether suit be brought or not.
No delay or omission on the part of the holder hereof in exercising
any right hereunder shall operate as a waiver of such right or any other
right under this Note, nor shall any waiver on one occasion be construed as
a bar to or waiver of any such right on any future occasion. No waiver
shall be effective unless in writing and signed by the holder.
Interest hereunder shall be charged only on the sums advanced from
the date of advance to the date of repayment. MAKER hereof does not
intend or expect to pay, nor does LENDER intend or expect to charge,
accept or collect any interest which, when added to any other charge upon
the principal, shall be in excess of the highest lawful rate allowable under
applicable law. Should acceleration, prepayment or any other charges
upon the principal or any portion thereof result in the computation or
earning of interest in excess of the highest lawful rate allowable under
applicable law, then any and all such excess is hereby waived and shall be
applied against the remaining principal balance and/or refunded to MAKER
to the extent such excess exceeds the remaining principal balance.
This Note shall be governed as to validity, interpretation,
construction, effect and all other respects by the laws and decisions of the
District of Colombia.
The undersigned hereby specifically authorizes any action brought
upon the enforcement of this Note by LENDER to be instituted and
prosecuted in either the Circuit Court of Washington, District of Colombia,
or in the United States District Court for the city of Washington D.C, at
the election of LENDER.
All payments made hereunder shall be credited first to accrued
interest on the unpaid balance, and lastly to the payment of principal;
however, in the event of any default hereunder, LENDER may, in its sole
discretion, and in such order as it may choose, apply any payment to
interest, principal and/or lawful charges and expenses then accrued. If
principal or interest on the Loan is not paid when due, thereafter
the Borrower shall pay interest in respect of the unpaid principal amount of
the Loan at a rate per annum equal to 16%.
This Note is binding upon MAKER and its successors and assigns.
MAKER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR
INSTRUMENT EXECUTED IN CONJUNCTION HEREWITH, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR LENDER ACCEPTING THIS NOTE FROM
MAKER AND FOR LENDER ENTERING INTO THE AGREEMENT.
This Note is being executed and delivered in Washington, D.C.
(CORPORATE SEAL) Borough Corporation, a Delaware corporation
By:
_____________________________
Exhibit B
Application of Loan Proceeds
1. Prima Capital Growth Fund LLC Private
Equity Line of Credit Fee ..$330,000.00
2. Salaries & Expenses of President $20,000.00
3. Professional Fees, including
legal accounting, stock transfer, Associated with the
acquisition of Impact Diagnostics, Inc ..$45,000.00
4. Organizational cost associated with Borough
Filing a Form 211, including hiring a stock transfer
Agent, Standard & Poor listing, "Blue Sky" filings
And etc . $5,000.00
Exhibit C
CERTIFICATE
The undersigned, the Secretary of Borough Corporation does hereby
certify that the following resolutions were adopted at Board of Directors
meetings duly held on Monday, June 3, 2002 and are in full force and effect
on the date hereof:
RESOLVED, that the Line of Credit Loan and Security Agreement
between Borough Corporation, and BWY Holdings LLC. (providing,
among other matters, for the loan agreement and note in the amount of
$400,000 of June 3, 2002 and a new loan in like amount with interest at the
rate 10% per annum and due September 15, 2002. in the form presented to
this meeting is hereby adopted and approved;
FURTHER RESOLVED, that the appropriate officers of this
Corporation are hereby authorized and directed to execute the loan
agreement and promissory note, together with such other documents or
instruments necessary to consummate the transactions contemplated
thereby and to take such other action and make amendments to the
instruments as may be deemed necessary or advisable, with the approval of
counsel to the Corporation; and
FURTHER RESOLVED, that a copy of the loan agreement and form
of promissory note be filed with the minutes of this meeting.
IN WITNESS WHEREOF, the undersigned has signed this certificate
and affixed the seals of each for the Corporation this 3rd day of June, 2002.
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