Document:

ex10-4.htm

Exhibit 10.4

 

REVOLVING PROMISSORY DEMAND NOTE

	  	  
	
$1,062,000.00

	
Ashland, Kentucky

	  	
April 30, 2012

 

FOR VALUE RECEIVED, the undersigned, TX HOLDINGS, INC., herein referred to as “Debtor”, promises to pay to the order of WILLIAM L. SHREWSBURY, of 9413 Collier Road, Catlettsburg, KY 41129, herein referred to as “Lender”, the principal sum of ONE MILLION SIXTY-TWO THOUSAND and NO/100 DOLLARS ($1,062,000.00) (or, if less, the unpaid principal balance shown on an attachment to this note or on Lender’s loan account records, this Note evidencing a revolving credit line and the aggregate unpaid principal amount of all advances and/or re-advances to Debtor), together with interest thereon at the rate of FIVE PERCENT (5%) per annum, the entire outstanding indebtedness, together with all interest accrued thereon and other amounts that may then be owing hereunder, shall mature and become due and payable on DEMAND or on April 30, 2015, whichever shall first occur.

 

Debtor reserves the right to prepay the whole or any part of this Note at any time without penalty or premium.

 

This Note represents and evidences an arrangement that allows the Debtor to obtain advances without giving Lender a separate note for each advance. Lender will record the date and amount of each advance on an attachment to this Note or on Lender’s loan account records. Debtor agrees that each advance so recorded shall be prima facie evidence that an advance was made on the date and in the amount indicated. The number of advances and the amount of each advance are not limited, except that the principal balance outstanding at any time shall not exceed the face amount of this Note. However, in no event shall Lender be obligated to advance or loan any funds to Debtor. Rather, this Note sets forth the terms of Debtor’s obligations to repay Lender for advances or loans made by Lender to Debtor. Amounts once borrowed and repaid under this Note may be re-borrowed. Debtor acknowledges Lender has advanced the sum of ONE MILLION SIXTY-TWO THOUSAND and NO/100 DOLLARS ($1,062,000.00) to Debtor in accordance with Debtor’s request and Debtor agrees to repay, in accordance with the terms of this Note, said sum as well as any additional advances made by Lender to Debtor after the date hereof, not to exceed the total principal sum of ONE MILLION SIXTY-TWO THOUSAND and NO/100 DOLLARS ($1,062,000.00), including all sums advanced to Debtor by Lender prior to the date hereof.

 

Prior to maturity, principal and any overdue interest shall bear interest computed daily (on the basis of a 360-day year and actual days elapsed) as herein set forth.

 

Concurrently with any prepayment of the principal of this Note, Debtor shall pay the unpaid interest accrued on the principal being prepaid.

  

  

  

 

If Debtor fails to pay any amount due hereunder, or any fee in connection herewith, in full within ten (10) days after its due date, Debtor, in each case, will incur and shall pay a late fee equal to the greater of Twenty Five and No/100 Dollars ($25.00) or Five Percent (5%) of the unpaid amount. The payment of a late charge will not cure or constitute a waiver of any Event of Default under this Note.

 

Except as otherwise agreed in writing, payments will be applied first to accrued but unpaid interest and fees, in that order, in the order of their respective due dates, until paid in full, then to late charges and then to principal; provided, however, that if a payment so applied would pay the principal of this Note in full, but leave late charges outstanding, such payment shall instead be applied to the principal portion of the final installment.

 

In its discretion, Lender may, from time to time, unilaterally change any provision for the application of payments by mailing a written notice to Debtor of the change. The notice shall be mailed to the address indicated herein or such other address that Debtor may furnish in writing to Lender and shall be mailed not less than fifteen (15) days prior to the effective date of such change.

 

If this Note is not paid in full at maturity (whether by Lender’s demand for payment, lapse of time, acceleration of maturity or otherwise), the interest rate otherwise in effect hereunder shall be increased by Three Percent (3%) per annum.

 

The occurrence of any of the following shall constitute an Event of Default hereunder: (a) this Debt or any part thereof shall not be paid in full promptly when due (whether by Lender’s demand for payment, lapse of time, acceleration of maturity or otherwise); (b) any Obligor shall be dissolved; (c) any representation or warranty made by any Obligor in this Note or any Related Writing shall be false or erroneous in any material respect; (d) any Obligor shall fail or omit to perform or observe any agreement made by that Obligor in this Note or any Related Writing; (e) a judgment shall be entered against any Obligor in any court of record; (f) any deposit account of any Obligor is attached or levied upon; (g) any voluntary petition by or involuntary petition against any Obligor shall be filed pursuant to any chapter of any bankruptcy code or any Obligor shall make an assignment for the benefit of creditors, or there shall be any other marshalling of the assets and liabilities of any Obligor for the benefit of the Obligor’s creditors; or, (h) any Obligor enters into any merger or consolidation or sells, leases or otherwise disposes of all or substantially all of such Obligor’s assets in any manner other than in the ordinary course of business. Upon the occurrence of an Event of Default, the holder of this Note may, in its sole discretion, declare this Note to be due and payable and, if applicable, that Debtor no longer be permitted to obtain advances; and the principal of and interest on this Note shall thereupon become immediately payable in full, without any presentment, demand or notice of any kind, which Debtor hereby waives. Debtor will pay to Lender all costs and expenses of collection of this Note, including, without limitation, attorneys’ fees.

  

2

  

 

In this Note, (a) Debt means, collectively, all monetary liabilities, and any charges or expenses incurred in connection therewith, now or hereafter owing by the Debtor or Obligor in question, including, without limitation, every such liability whether owing by such Person or one (1) of such Persons alone or jointly, severally or jointly and severally, whether owing absolutely or contingently, or directly or indirectly, and whether created by loan, guaranty or other contract or by quasi-contract, tort, statute or other operation of law; (b) Obligor means any Person who is, or shall become, obligated, or whose property is, or shall serve as, collateral for the payment of the debt evidenced by this Note, or any part hereof in any manner and, in addition to Debtor, includes, without limitation, any maker, endorser, guarantor, subordinating creditor, assignor, pledgor, mortgagor or hypothecator of property; (c) Related Writing means a writing of any form or substance signed by any Obligor (whether as principal or agent) or by any attorney, accountant or other representative of any Obligor and received by Lender in respect of Debtor’s Lender Debt or any part thereof, including, without limitation, the resolution of Debtor’s Board of Directors dated December 10, 2011, all documentation evidencing Lender’s advances made to Debtor since December 12, 2011, and thereafter, any credit application, credit agreement, request for advance, reimbursement agreement, financial statement, promissory note, guaranty, indenture, mortgage, security agreement, authorization, subordination agreement, certificate, opinion or any similar writing, but shall not include any commitment letter issued by Lender, without regard to whether Debtor or any other Person signed or acknowledged receipt thereof; and, (d) Person means a natural person or entity of any kind, including, without limitation, any corporation, partnership, trust, governmental body or any other form or kind of entity.

 

Debtor hereby authorizes Lender to share all information, including, without limitation, all credit and financial information, and all loan applications and information provided in connection therewith, pertaining or relating to Debtor, with Lender, or with any actual or proposed participant in or assignee of all or any part of Lender’s interest in or rights under this Note, or with any other person or entity reasonably deemed incidental by Lender to the administration of the indebtedness evidenced hereby. Debtor expressly waives, releases and relinquishes any and all claims, demands and/or causes of action against Lender, his successors and/or assigns arising from or pertaining in any way to any such disclosure of information.

 

In no event shall the interest rate in effect on this Note exceed the maximum rate permissible under the law governing this Note.

 

If Debtor consists of more than one Person, Debtor shall be jointly and severally liable on this Note.

 

Any holder’s delay or omission in the exercise of any right under this Note shall not operate as a waiver of that right or of any other right under this Note.

 

If any provision of this Note is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that determination shall not affect any other provision of this Note, and each such other provision shall be construed and enforced as if the invalid, illegal or unenforceable provision were not contained herein.

  

3

  

 

This Note and the Related Writings set forth the entire agreement between the parties regarding the transactions contemplated hereby, and supercede all prior agreements, commitments, discussions, representations and understandings, whether written or oral, and any and all contemporaneous oral agreements, commitments, discussions, representations and understandings between the parties relating to the subject matter hereof.

 

No amendment, modification or supplement to this Note or any Related Writing shall be binding unless executed in writing by all parties thereto, and this provision shall not be subject to waiver by any party and shall be strictly enforced.

 

This Note shall be governed by the laws of the Commonwealth of Kentucky.

	  	  
	  	
DEBTOR:

	  	  
	  	
TX HOLDINGS, INC.

	  	  	  
	  	
By

	
/s/ Richard Novack

	  	  	
Richard Novack

	  	
Its President

 

4ex10-5.htm

Exhibit 10.5

 

SECURITY AGREEMENT

 

This Security Agreement made and entered into this 30th day of April, 2012, between WILLIAM L. SHREWSBURY of 9413 Collier Road, Catlettsburg, KY 41129 (“Lender”) and TX HOLDINGS, INC., a Georgia corporation authorized to do business in and doing business in the Commonwealth of Kentucky, of 12080 Virginia Boulevard, Ashland, KY 41102 (“Debtor”).

 

WITNESSETH:

 

WHEREAS, by resolution of the Board of Directors of Debtor approved December 10, 2011, Debtor has requested that Lender provide certain financing to Debtor to be secured by the granting of a security interest in Debtor’s assets, and

 

WHEREAS, Lender has provided certain financing in consideration of Debtor’s agreement to grant a security interest in Debtor’s assets to secure the debt arising from Lender’s providing said financing; and

 

WHEREAS, Lender has to date loaned the following sums to Debtor:

	  	  	  
	
$100,000

	
on

	
December 12, 2011

	  	  	  
	
$100,000

	
on

	
December 16, 2011

	  	  	  
	
$200,000

	
on

	
December 29, 2011

	  	  	  
	
$200,000

	
on

	
January 6, 2012

	  	  	  
	
$150,000

	
on

	
January 20, 2012

	  	  	  
	
$    2,000

	
on

	
February 27, 2012

	  	  	  
	
$  10,000

	
on

	
February 28, 2012

	  	  	  
	
$150,000

	
on

	
March 26, 2012

	  	  	  
	
$150,000

	
on

	
April 10, 2012

  

  

  

 

for a total of ONE MILLION SIXTY-TWO THOUSAND and NO/100 DOLLARS ($1,062,000.00); and

 

WHEREAS, Debtor may request that Lender make additional advances to Debtor and Lender may choose to make additional advances to Debtor in accordance with the Revolving Promissory Demand Note (“Note”) of even date:

 

NOW, THEREFORE, for the purpose of further documenting the granting of the security interest in and to the Debtor’s assets, and for other valuable consideration, the receipt and sufficiency of which is acknowledged, and in consideration of Lender’s having extended certain financial accommodations to Debtor, and to induce Lender, at his option, to extend additional financial accommodations to or for the account of Debtor, with or without additional security, Debtor has executed the Note of even date payable to Lender; and, as security for the obligations of Debtor under said Note of even date herewith, and under this Security Agreement, Debtor hereby grants to Lender a security interest in and a continuing security interest in: all money, goods, equipment, inventory, instruments, securities, documents, chattel paper, accounts, accounts receivable, proceeds, advance payments, general intangibles, credits, bank accounts, deposits, claims, demands and any other property, rights and interests of Debtor, including the proceeds, products and accessions of the same, owned by Debtor or in which Debtor has an interest or in which Debtor hereafter acquires an interest. The right is granted to Lender, at his discretion, to file one or more financing statements under the Uniform Commercial Code of the Commonwealth of Kentucky naming Debtor as debtor and Lender as secured party, and indicating in the statement the types or describing the items of security specified in this agreement. Without the prior written consent of Lender, Debtor shall not file or authorize or permit to be filed in any jurisdiction any such financing or like statement in which Lender is not named as the sole secured party. Lender shall not be required to take any action to preserve any rights against prior parties to any of the security.

  

  

  

 

	
1.

	
REMEDIES ON DEFAULT

 

In the event of default under this Security Agreement, the Note, or any other obligation of Debtor to Lender, Debtor shall, at the request of Lender, assemble the security at such place or places as Lender designates in his request. Lender shall have the rights and remedies with respect to the security of a secured party under the Uniform Commercial Code of Commonwealth of Kentucky and all other applicable law. In addition, with respect to the security, or any part of the security, that shall then be or shall subsequently come into the possession or custody of Lender or any of his agents, Lender may sell or cause to be sold, in one or more sales or parcels, at such price as Lender may deem best and for cash or on credit or for future delivery, without assumption of any credit risk, all or any of the security (including any further collateral furnished under Section B), at public or private sale, without demand of performance or notice of intention to sell or of time or place of sale (except such notice as is required by applicable statute and cannot be waived), and Lender or any other person may be the purchaser of any or all of the security so sold and subsequently hold the same absolutely, free from any claim or right of whatsoever kind, including any equity of redemption, any such demand, notice or right and equity being waived and released. Lender shall be deemed to have possession of any of the security in transit to or set apart for it, or to or set apart for any of his agents.

  

  

  

	
2.

	
FURTHER COLLATERAL

 

Debtor shall be obligated, on demand, to furnish such further collateral or to make such payments on account of Debtor’s liabilities under this Security Agreement as Lender shall request. Lender will hold such further collateral as a part of the security for the obligations secured by this instrument, and Debtor shall remain liable for the amount of the guaranteed obligations, and the interest on the same and costs and expenses.

 

This instrument has been executed at the place and on the date first above mentioned.

	  	  	  
	  	
LENDER:

	  	  
	  	
WILLIAM L. SHREWSBURY

	  	  
	  	
/s/ William L. Shrewsbury

	  	
William L. Shrewsbury

	  	  
	  	
DEBTOR:

	  	  
	  	
TX HOLDINGS, INC., a Georgia

	  	
corporation

	  	  
	  	
By

	
/s/ Richard Novack

	  	  	
Richard Novack

	  	
Its President

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