PROMISSORY NOTE
(Revolving Line of Credit)
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Springdale,
Arkansas January 16, 2006
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$15,000,000.00
or so much thereof
as may have been advanced, to or for
the benefit of Maker
FOR VALUE
RECEIVED, ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES,
INC. , a Delaware corporation whose local mailing address is
Post Office Box 1237, Springdale, Arkansas 72765, (“
Maker ”), promises to pay LIBERTY BANK OF
ARKANSAS , an Arkansas state chartered bank whose local mailing
address is 4706 South Thompson, Suite 101, Springdale,
Arkansas 72764, Attn: P. Douglas Lynch, its successors and/or
assigns (“ Holder ”), or to order, a principal
sum not to exceed the lessor of (i) Fifteen Million and No/100
Dollars ($15,000,000.00) and (ii) an amount that would be in
excess of the Borrowing Base (as defined in the Loan Agreement (as
defined below)), together with interest thereon from the date
hereof, calculated at the Interest Rate as payable as set forth
below. Maker agrees and acknowledges that Holder is obligated to
advance funds to Maker pursuant to this Note only for the sole,
absolute and limited purpose of providing a revolving line of
credit for Maker for working capital in connection with the
operation of its business. Holder shall have no obligation to
advance funds under this Note for any other purpose.
1.
Definitions . The following definitions are applicable to
the words, phrases or terms used in this Note:
(a) The
term “ Default Rate ” shall mean the highest
rate of interest permitted under Arkansas law at the time of the
occurrence of the Event of Default or immediately following
Maturity.
(b) The
term “ Event of Default ” shall mean the
occurrence of any of the following:
(i) A
failure by Maker to make any payment of principal or interest on
the Note within ten (10) days after such payment is
due;
(ii) The
failure of Maker to comply with any condition or covenant set forth
herein or in any of the Loan Instruments after the expiration of
any applicable notice and cure period; or
(iii) The
occurrence of any Event of Default, as that term is defined in the
Loan Agreement.
(c) The
term “ Guarantor ” shall mean Marjorie S.
Brooks, an individual and resident of the State of
Arkansas.
(d) The
term “ Guaranty ” shall mean that certain
Guaranty Agreement, of even date herewith, executed by the
Guarantor for the benefit of Holder, guaranteeing, as set forth
therein, among other things, this Note.
(e) The
term “ Interest Rate ” shall mean:
(1) From
the date hereof through and until January 16, 2007, that being
Scheduled Maturity, a rate equal to the Wall Street Journal Prime
Rate plus one hundred (100) basis points, adjusted daily;
and
(2) On
and after Maturity, the Default Rate.
(f) The
term “ Loan Agreement ” shall mean that certain
Loan Agreement executed of even date herewith by Maker as borrower
and Holder as lender.
(g) The
term “ Loan Instruments ” shall mean this Note,
the Guaranty, the Loan Agreement, the Security Agreement executed
of even date herewith with Maker as grantor and Holder as lender
(the “ Security Agreement ”), and any and all
other documents, instruments, agreements or certificates relating
to the indebtedness evidenced by this Note, whether any such
documents presently exist or are hereafter created.
(h) The
term “ Maturity ” shall mean the earlier to
occur of:
(1) January 16,
2007 (“ Scheduled Maturity ”); or
(2) the
date on which Holder declares all sums due and payable hereunder
after an Event of Default.
(i) The
term “ Note ” shall mean this Promissory
Note.
(j) The
term “ Per Annum ” with respect to the Interest
Rate shall mean a year consisting of three hundred sixty
(360) days.
(k) The
term “ Wall Street Journal Prime Rate ”
shall mean the rate of interest equal to the prime rate on
corporate loans posted by at least seventy-five percent (75%) of
the nation’s thirty (30) largest banks as published
daily in the Wall Street Journal , Southwest Edition, or, in
the absence of such published rate, such other reference or
benchmark rate of interest that is established by the Holder as its
index rate to be in effect from time to time, whether or not such
rate is otherwise published, and which is used for its customers
previously tied to a Wall Street Journal Prime Rate of
interest.
2.
Advancement Terms . Advances under this Note shall be made
consistent with the procedures set forth in the Loan Agreement, up
to an aggregate principal balance not to exceed the lessor
(i) Fifteen Million and No/100 Dollars ($15,000,000.00) and
(ii) an amount that would be in excess of the Borrowing Base
(as defined in the Loan Agreement), it being expressly understood,
acknowledged, and agreed that Lender shall have the sole and
absolute discretion to approve or disapprove of applications for
advances made by Maker
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3.
Repayment Terms . Maker promises to pay all sums advanced to
or for the benefit of Maker under this Note as follows:
(a) Commencing
on February 16, 2006, and continuing on the same day of each
successive month thereafter until Scheduled Maturity, consecutive
payments of accrued but unpaid interest calculated on principal
advanced and outstanding hereunder from time to time, said interest
to be calculated at the Interest Rate;
(b) The
Borrower must pay upon DEMAND the amount by which at any time the
unpaid principal balance of this Note, plus all accrued but unpaid
interest, cost, fees, and other charges, exceeds the Borrowing Base
(as defined in the Loan Agreement); and
(c) The
balance of unpaid principal of this Note with all accrued but
unpaid interest and all other fees, costs, charges and expenses
shall be due and payable on Scheduled Maturity. It is understood
that a balloon payment of all outstanding principal, plus accrued
interest, will be due at Scheduled Maturity, and that Holder is not
obligated to finance that balloon payment.
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