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EXHIBIT 10(q)
Promissory Note
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Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$250,000.00 01-16-1997 01-16-1998 0123200548 76
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References in the shaded area are for Lender's use only and do not limit the applicability of this documents to any particular
loan or item.
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Borrower: Wellington Hall, Limited Lender: Lexington State Bank
Post Office Box 1354 Commercial Loan Department
Lexington, NC 27293-1354 One LSB Plaza
PO Box 867
Lexington, NC 27293-0867
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Principal Amount: $250,000.00 Initial Rate: 9.750% Date of Note: January 16, 1997
PROMISE TO PAY. WELLINGTON HALL, LIMITED ("BORROWER") PROMISES TO PAY TO
LEXINGTON STATE BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES
OF AMERICA, THE PRINCIPAL AMOUNT OF TWO HUNDRED FIFTY THOUSAND & 00/100 DOLLARS
($250,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE
UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN
ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON
JANUARY 16, 1998. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF
ACCRUED UNPAID INTEREST BEGINNING FEBRUARY 16, 1997, AND ALL SUBSEQUENT
INTEREST PAYMENTS ARE DUE ON THE SAME DAY OR EACH MONTH AFTER THAT. Interest
on this Note is computed on a 365/365 simple interest basis; that is, by
applying the ratio of the annual interest rate over the number of days in a
year (366 during leap years), multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may or
may not be the lowest rate available from Lender at any given time. Lender
will tell Borrower the current index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. THE INDEX
CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
BALANCE OF THIS NOTE WILL BE AT A RATE OF 1.500 PERCENTAGE POINTS OVER THE
INDEX, RESULTING IN AN INITIAL RATE OF 9.750% PER ANNUM. NOTICE: Under no
circumstances will the interest rate of this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT: Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrower may pay
without penalty all or a portion of the amount owed earlier than it is due.
Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT: Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced with by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest.
This includes a garnishment of any of Borrower's accounts with Lender. (f) Any
guarantor dies or any of the other events described in this default section
occurs with respect to any guarantor of this Note. (g) A material adverse
change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (h) Lender
in good faith deems itself insecure.
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If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15) days;
or (b) if the cure requires more than fifteen (15) days, immediately initiate
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, or if this Note
is not paid at final maturity, Lender, at its option, may add any unpaid
accrued interest to principal and such sum will bear interest therefrom until
paid, at the rate provided in this Note. Lender may hire or pay someone else
to help collect this Note if Borrower does not pay. Borrower also will pay
Lender that amount. This includes, subject to any limits under applicable law,
Lender's reasonable attorneys' fees and Lender's legal expenses whether or not
there is a lawsuit, including reasonable attorneys' fees and legal expenses of
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF NORTH CAROLINA. IF
THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF DAVIDSON COUNTY, THE STATE OF NORTH CAROLINA.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts Borrower may open in the future, excluding
however all IRA and Keogh accounts, and all trust accounts for which the grant
of a security interest would be prohibited by law. Borrower authorizes Lender,
to the extent permitted by applicable law, to charge or setoff all sums owing
on this Note against any and all such accounts.
COLLATERAL. This Note is secured by a Deed of Trust in the amount of
$650,000.00 dated April 15, 1987, Joe H. Leonard, Trustee.
This Note is secured by an Assignment of Life Insurance Policy No. VIYW004826
issued by the CNA/Valley Forge Life Insurance Company upon the life of Arthur
F. Bingham.
This Note is also secured by the Security Agreement provisions of Lexington
State Bank Loan Agreement dated July 27, 1990 covering accounts and notes
receivable, inventory, machinery and equipment, furniture and fixtures.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note, as well as directions for payment from Borrower's accounts, may
be requested orally or in writing by Borrower or as provided in this paragraph.
Lender may, but need not, require that all oral requests be confirmed in
writing. The following party or parties are authorized to request advances
under the line of credit until Lender receives from Borrower, at Lender's
address shown above, written notice of revocation of their authority: HOYT M.
HACKNEY, JR. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender and
Borrower.
ADVANCES UNDER LINE OF CREDIT. Unless otherwise instructed in writing by the
Borrower, funds advanced under this Note shall be credited to Borrower's
Lexington State Bank Checking Account No. 001-028103.
ADDITIONAL PROVISIONS. All terms and conditions of Lexington State Bank
Commitment Letter dated October 25, 1996 between Wellington Hall, Limited
(Borrower) and Lexington State Bank (Lender), and Addendum to same dated
November 8, 1996 shall remain in effect through the life of this loan and any
renewals or modifications to same.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether
as maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
WELLINGTON HALL, LIMITED ATTEST: /s/WILLIAM W. WOODRUFF
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WILLIAM W. WOODRUFF, SECRETARY
BY: /s/ HOYT M. HACKNEY, JR. BY: /s/ WILLIAM W. WOODRUFF
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HOYT M. HACKNEY, JR., PRESIDENT/TREASURER WILLIAM W. WOODRUFF, SECRETARY