Revolving Line of Credit Agreement; dated as of February 15, 2008, between the Company, as Borrower, and Boston Avenue Capital, LLC, as Lender
EXHIBIT 10.19
REVOLVING LINE OF CREDIT AGREEMENT
This Revolving Line of Credit Agreement (the "Agreement") is made and entered into in this 15th day of February, 2008, by and between Boston Avenue Capital, LLC, an Oklahoma limited liability company ("Lender"), and CompuMed, Inc., a Delaware corporation ("Borrower").
In consideration of the mutual covenants and agreements contained herein, the parties agree as follows:
1. LINE OF CREDIT. Lender hereby establishes for a period extending to December 31, 2017 (the "Maturity Date") a revolving line of credit (the "Credit Line") for Borrower in the principal amount of Four Million Dollars ($4,000,000.00) (the "Credit Limit"). In connection herewith, Borrower shall execute and deliver to Lender a Promissory Note in the amount of the Credit Limit in form and content of Exhibit A attached hereto. All sums advanced on the Credit Line or pursuant to the terms of this Agreement (each an "Advance") shall become part of the principal of said Promissory Note.
2. ADVANCES. Any request for an Advance may be made from time to time in writing (in substantially the form attached hereto as Exhibit B) to the Lender in such amounts as Borrower may choose; provided, however, (i) any requested Advance will not, when added to the outstanding principal balance of all previous Advances, exceed the Credit Limit; (ii) no Advances shall be made in the event Simon James, Charles Gillman, and Mark Stolper or any individuals in replacement of, or in addition to, Messrs. James, Gillman and Stolper who are approved in writing by Lender (in Lender’s discretion without any obligation to provide an explanation for the exercise of that discretion) are the only members of the board of directors of Borrower (a “Board Member Event”); (iii) no Advances shall be made without the unanimous approval of the members of the Board of Directors of the Borrower; (iv) n o Advances shall be made in the event of the discovery of a material liability not disclosed in the Company’s From 10Q or 10K filings with the Securities and Exchange Commission; and (v) no Advances shall be made without the prior written consent of Lender (which Lender may deny in its sole discretion without any obligation to provide an explanation for its exercise of its discretion) if Borrower or any of its officers, directors, employees, shareholders or affiliates become a party to a legal cause of action (whether it be local, state, federal, administrative or otherwise) related to the Borrower and/or its affiliates. Borrower shall notify the Lender of the cause of action within three (3) business days of its knowledge of the cause of action, such notice to include reasonably sufficient detail to explain the cause of action (a “Cause of Action”). Requests for Advances may be made orally or in writing by such officer of Borrower authorized by it to request such Advances. Until such time as Lender may be notified otherwise, Borrower hereby authorizes its president to request Advances. Lender may refuse to make any requested Advance if an event of default has occurred and is continuing hereunder either at the time the request is given or the date the Advance is to be made, or if an event has occurred or condition exists which, with the giving of notice or passing of time or both, would constitute an event of default hereunder as of such dates. The funds from the Advances will be used by the Borrower for acquisitions and operating expenses in connection with the operations of the Borrower.
3. INTEREST. All Advances made pursuant to this Agreement shall bear simple interest from the date each Advance is made until the Advance is paid in full at a rate per annum during each
1
quarterly interest period equal to the rate per annum of the London interbank offered rate (LIBOR) for three-month deposits (as published in the Dow Jones Markets Telerate Page or such other commercially accepted publication), determined as of 11:00 a.m. London time on the second business day prior to the start of such quarterly interest period (the “Principal Interest”). All sums up to the Credit Limit which have not been advanced shall bear interest until such time as such funds are Advanced to Borrower at a rate of one percent (1%) per annum compounded annually on the first business day of each calendar year (the “Commitment Interest”). Borrower may, at any time reduce the total amount of the Letter of Credit (as hereafter provided) by written notice to the Lender and the issuer thereof and no Commitment Interest or other fee or charge shall be due or payable by Borrower in respe ct of the amount by which the Letter of Credit is so reduced.
4. REPAYMENT. Borrower shall pay Principal Interest accrued as the first day of each calendar quarter in arrears on the principal balance of Advances outstanding during the prior quarter commencing on April __, 2008 and continuing thereafter with such payments of Principal Interest being due on the fifth business day of each July, October, January and April thereafter. The entire unpaid principal balance, together with any accrued interest and other unpaid charges or fees hereunder, shall be due and payable on the Maturity Date. All payments shall be made to Lender at such place as Lender may, from time to time, designate. All payments received hereunder shall be applied, first, to any costs or expenses incurred by Lender in collecting such payment or to any other unpaid charges or expenses due hereunder; second, to accrued interest; and third, to principal. Borrower may prepay principal at any time with out penalty. Any Advances which are prepaid shall bear Commitment Interest until the Maturity Date or until again Advanced (“Readvanced Funds”), at which point the Readvanced Funds shall bear Principal Interest from the date of Readvance until paid in full.
5. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter into this Agreement and to make the advances provided for herein, Borrower represents and warrants to Lender as follows:
a. Borrower is a duly organized, validly existing, and in good standing under the laws of the State of Delaware with the power to own its assets and to transact business in states where its business is conducted.
b. Borrower has the authority and power to execute and deliver any document required hereunder and to perform any condition or obligation imposed under the terms of such documents.
c. The execution, delivery and performance of this Agreement and each document incident hereto will not violate any provision of any applicable law, regulation, order, judgment, decree, article of incorporation, by-law, indenture, contract, agreement, or other undertaking to which Borrower is a party, or which purports to be binding on Borrower or its assets and will not result in the creation or imposition of a lien on any of its assets.
d. There is no action, suit, investigation, or proceeding pending or, to the knowledge of Borrower, threatened, against or affecting Borrower or any of its assets which, if adversely determined, would have a material adverse affect on the financial condition of Borrower or the operation of its business.
2
6. EVENTS OF DEFAULT. An event of default will occur if any of the following events occurs:
a.
Failure to pay any principal or interest hereunder within ten (10) days after the same becomes due.
b.
Any representation or warranty made by Borrower in this Agreement or in connection with any borrowing or request for an Advance hereunder, or in any certificate, financial statement, or other statement furnished by Borrower to Lender is untrue in any material respect at the time when made.
c.
Default by Borrower in the observance or performance of any other covenant or agreement contained in this Agreement, other than a default constituting a separate and distinct event of default under this Paragraph 6.
d.
Filing by Borrower of a voluntary petition in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended or under any other insolvency act or law, state or federal, now or hereafter existing.
e.
Filing of an involuntary petition against Borrower in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended, or under any other insolvency act or law, state or federal, now or hereafter existing, and the continuance thereof for sixty (60) days undismissed, unbonded, or undischarged.
7. REMEDIES. Upon the occurrence of an event of default as defined above, Lender may declare the entire unpaid principal balance, together with accrued interest thereon, to be immediately due and payable without presentment, demand, protest, or other notice of any kind. Upon an event of default, including failure to pay on the Maturity Date, Lender, at its option, may also, if permitted under applicable law, increase the interest rate on Advanced funds and any interest due thereon to a default rate equal to US National Prime plus 4% per annum [compounded annually on the first day of each calendar quarter]. Lender may suspend or terminate any obligation it may have hereunder to make additional Advances. To the extent permitted by law, Borrower waives any rights to presentment, demand, protest, or notice of any kind in connection with this Agreement. No failure or delay on the part of Lender in exerc ising any right, power, or privilege hereunder will preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies provided herein are cumulative and not exclusive of any other rights or remedies provided at law or in equity.
8.
LETTER OF CREDIT. During the period of the Line of Credit, Lender shall provide to Borrower a letter of credit issued by Chase Bank (the “Letter of Credit”) in an amount at all times equal to $4,000,000 less the total amount of all Advances. The Letter of Credit shall be in Chase Bank’s usual and customary form and shall provide that the Borrower may draw against the Line of Credit upon the receipt by Chase Bank of the certificate of Borrower in the form and content of Exhibit C attached hereto.
9.
WARRANT ISSUANCE. The Borrower shall issue a Common Stock Purchase Warrant (the “Warrant”) in usual and customary form and content reasonably (including anti-dilution provisions) accept to Lender to the Lender contemporaneously with the execution and delivery of
3
this Agreement entitling the Lender to purchase all or some of 16,000,000 shares of the Borrower’s Common Stock at any time and from time to time during a period ending on the twentieth anniversary of this Agreement at a price equal to the average of the closing price as reported on the OTC Bulletin Board on each trading day during the period commencing on the date of this Agreement and ending one hundre eighty (180) trading days following the date of this Agreement, when and if such shares are authorized for issuance by the stockholders of Borrower (the “Warrant Share Authorization”). The Company shall use its best efforts to obtain the Warrant Share Authorization at the next meeting of such stockholders and on or before the first anniversary of this Agreement.
10. NOTICE. Any written notice will be deemed effective on the date such notice is placed, first class, postage prepaid, in the United States mail, addressed to the party to which notice is being given as follows:
Lender:
Boston Avenue Capital, LLC
15th East 5th Street
Suite 2660
Tulsa, Oklahoma 74103
With copy to:
Frederic Dorwart
124 E. 4th Street
Tulsa, Oklahoma 74103
Borrower:
CompuMed, Inc.
5777 W. Century Boulevard
Suite 1285
Los Angeles, California 90045
With copy to:
Jones Day
555 South Flower Street
50th Floor
Los Angeles, California 90071
Att: John A. St Clair
11. GENERAL PROVISIONS. All representations and warranties made in this Agreement and the Promissory Note and in any certificate delivered pursuant thereto shall survive the execution and delivery of this Agreement and the making of any loans hereunder. This Agreement will be binding upon and inure to the benefit of Borrower and Lender, their respective successors and assigns, except that Borrower may not assign or transfer its rights or delegate its duties hereunder without the prior written consent of Lender. This Agreement, the Promissory Note, and all documents and instruments associated herewith will be governed by and construed and interpreted in accordance with the laws of the State of Delaware. Any cause of action for a breach or enforcement of, or a declaratory judgment respecting, this Agreement shall be commenced and maintained only in the United States District Court for the Northern District of Oklahoma or the appl icable Oklahoma state trial court sitting in Tulsa, Oklahoma and having subject matter jurisdiction. Time is of the essence hereof. This Agreement will be deemed to express, embody, and supersede any previous understanding, agreements, or commitments, whether written or oral, between the parties with respect to the general subject matter hereof. This Agreement may not be amended or modified
4
except in writing signed by the parties. In any action brought by Lender hereto to enforce this Agreement, Lender shall be entitled to collect from Borrower, Lender’s reasonable litigation costs and attorneys fees and expenses (including court costs, reasonable fees of accountants and experts, and other expenses incidental to the litigation).
EXECUTED on the day and year first written above.
LENDER: BOSTON AVENUE CAPITAL, LLC
By: ___________________________
Name: ________________________
Title: _________________________
BORROWER: COMPUMED, INC.
By: ___________________________
Name: ________________________
Title: _________________________
5
EXHIBIT A
Promissory Note
$4,000,000.00
Tulsa, Oklahoma
February 15, 2008
This Promissory Note (the "Note") is made and executed as of the date referred to above, by and between Boston Avenue Capital, an Oklahoma Limited Liability Company (the " Lender Borrower"), and CompuMed, Inc., a Delaware corporation ("Borrower"). By this Note, the Borrower promises and agrees to pay to the order of Lender, at 15th East 5th Street, Suite 2660 Tulsa, Oklahoma 74103 or at such other place as Lender may designate in writing, the principal sum of Four Million and 00/100 Dollars ($4,000,000.00), or the aggregate unpaid principal amount of all advances made by Lender to Borrower pursuant to the terms of a Revolving Line of Credit Agreement (the "Loan Agreement") of even date herewith, whichever is less, together with interest thereon from the date each advance is made until paid in full, both before and after judgment at the interest rates specified in paragraph 3 of the Loan Agreement.
Borrower shall pay accrued interest on the outstanding principal balance under the Note during the prior calendar quarter commencing on April __, 2008, and continuing thereafter on the fifth business day of each July, October, January and April thereafter until the Note is paid in full. The entire unpaid principal balance, together with any accrued interest and other unpaid charges or fees hereunder, shall be due and payable on December 31, 2017 (the "Maturity Date").
Prepayment in whole or part may occur at any time hereunder without penalty; provided that the Lender shall be provided with not less than ten (10) days notice of the Borrower's intent to pre-pay; and provided further that any such partial prepayment shall not operate to postpone or suspend the obligation to make, and shall not have the effect of altering the time for payment of the remaining balance of the Note as provided for above, unless and until the entire obligation is paid in full. All payments received hereunder shall be applied, first, to any costs or expenses incurred by Lender in collecting such payment or to any other unpaid charges or expenses due hereunder; second, to accrued interest; and third, to principal.
An event of default will occur if any of the following events occurs: (a) failure to pay any principal or interest hereunder within ten (10) days after the same becomes due; (b) if any representation or warranty made by Borrower in the Loan Agreement or in connection with any borrowing or request for an advance thereunder, or in any certificate, financial statement, or other statement furnished by Borrower to Lender is untrue in any material respect at the time when made; (c) default by Borrower in the observance or performance of any other covenant or agreement contained in the Loan Agreement, other than a default constituting a separate and distinct event of default under Paragraph 7 of the Loan Agreement; (d) filing by Borrower of a voluntary petition in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended or under any other insolvency act or law, state or fede ral, now or hereafter existing; (e) filing of an involuntary petition against Borrower in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended, or under any other insolvency act or law, state or federal, now or hereafter existing, and the continuance thereof for sixty (60) days undismissed, unbonded, or undischarged or (f) if
6
Borrower, or any of its officers, directors, employees, shareholders or affiliates become a party to a legal cause of action (whether it be local, state, federal, administrative or otherwise) related to the Borrower and/or its affiliates, Borrower shall notify the Lender of the cause of action within three (3) business days of its knowledge of the cause of action, such notice to include reasonably sufficient detail to explain the cause of action (a “Cause of Action”), and Lender may, at its option and in its sole discretion, declare that the Cause of Action is an event of default for purposes of this Agreement, entitling Lender to the remedies provide in paragraph 7 of the Revolving Line of Credit Agreement (as defined below).
Any notice or demand to be given to the parties hereunder shall be deemed to have been given to and received by them and shall be effective when personally delivered or when deposited in the U.S. mail, certified or registered mail, return receipt requested, postage prepaid, and addressed to the party at his or its last known address, or at such other address as the one of the parties may hereafter designate in writing to the other party.
The Borrower hereof waives presentment for payment, protest, demand, notice of protest, notice of dishonor, and notice of nonpayment, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time by the Lender without in any way affecting its liability hereunder.
In the event any payment under this Note is not made at the time and in the manner required, the Borrower agrees to pay any and all costs and expenses which may be incurred by the Lender hereof in connection with the enforcement of any of its rights under this Note or under any such other instrument, including court costs and reasonable attorneys' fees. Upon an event of default, including failure to pay on the Maturity Date, Lender, at its option, may also, if permitted under applicable law, increase the interest rate on Advanced funds and any interest due thereon to a default rate equal to US National Prime plus 4% per annum compounded on the first day of each calendar year.
This Note shall be governed by and construed and enforced in accordance with the laws of Delaware. This Note is governed by the Revolving Line of Credit Agreement between the parties of even date herewith (the “Revolving Line of Credit Agreement”). In the event of a conflict between this Note and the Revolving Line of Credit Agreement, the Revolving Line of Credit Agreement shall prevail.
Borrower: CompuMed, Inc.
By: ___________________________
Name: ________________________
Title: _________________________
7
EXHIBIT B
Request for an Advance
Reference: Revolving Line of Credit between Boston Avenue Capital, LLC and CompuMed, Inc. dated February 15, 2008 (the “Credit Agreement”).
To:
Boston Avenue Capital, LLC
From:
CompuMed, Inc.
NOTICE
Pursuant to paragraph 2 of the Credit Agreement, CompuMed, Inc. hereby requests an advance of $ _________________________________ ($__________).
The Undersigned here by certifies that the provisos of paragraph 2 of the Credit Agreement are met and that prior the Advance hereby requested, the total of all Advances is $______________________________ ($______________).
CompuMed, Inc.
By _______________________________
Signature
__________________________________
Printed Name
__________________________________
Title
__________________________________
Dated
8
EXHIBIT C
COMPUMED, INC.
CERTIFICATE
The undersigned hereby certifies to Chase Bank (the “Bank”) that: (a) he or she is the President or Vice-President of CompuMed, Inc. and (b) he or she is fully authorized by CompuMed, Inc. to execute and deliver this Certificate to the Bank. Reference is hereby made to that certain Revolving Line of Credit Agreement between CompuMed, Inc. (the “Borrower”) and Boston Avenue Capital, LLC (the “Lender”) dated February 15, 2008 (the “LOC Agreement”). All defined terms used in this Certificate have the meaning given to them in the LOC Agreement.
Reference is hereby made to Bank’s Irrevocable Standby Letter of Credit Number ________________ (the “Standby Letter of Credit”) issued by Bank to CompuMed, Inc., Each draw under the Standby Letter of Credit Each Advance shall be deemed an Advance under the LOC Agreement.
The undersigned hereby certifies to the Bank and Lender that:
(1)
Borrower is entitled to an Advance from Lender in the amount of $________________________ (the “Draw”). At least two business days have passed since Borrower has requested such Advance and Lender has failed to make such Advance.
(2)
The Draw, together with all outstanding and unpaid Advances from Lender to Borrower does not exceed the total sum of $4,000,000.
(3)
Without limiting the generality of Paragraph (1) above, the Draw is not prohibited by any of the provisos of Paragraph 2 of the LOC Agreement.
(4)
No Event of Default has occurred.
________________________
President ___ or Vice-President ___
COMPUMED, INC.
Printed Name:
________________________
9
