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EXHIBIT 10.19
MORTGAGE, ASSIGNMENT OF LEASES, RENTS, INCOME
AND PROFITS, SECURITY AGREEMENT AND FIXTURE FILING
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE
MAY
ALLOW THE LENDER (i.e., the MORTGAGEE) TO TAKE THE MORTGAGED
PROPERTY AND
SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT
BY THE
BORROWER (i.e., the MORTGAGOR UNDER THIS MORTGAGE).
THIS MORTGAGE, ASSIGNMENT OF LEASES, RENTS, INCOME AND PROFITS,
SECURITY
AGREEMENT AND FIXTURE FILING (the "Mortgage") is executed actually
and delivered
effective as of the 28th day of June, 2006, by and between AMS
HEALTH
SCIENCES, INC., an Oklahoma corporation (referred to herein as the
"Borrower"),
having a mailing address of 711 N.E. 39th, Oklahoma City, Oklahoma
73105, and
LAURUS MASTER FUND, LTD., a Cayman Island company (referred to
herein as the
"Lender"), having a mailing address in care of Laurus Capital
Management, LLC,
825 Third Avenue, 14th Floor, New York, New York County, NY
10022.
W I T N E S S E T H:
Borrower is justly indebted to Lender for the indebtedness and
Obligations
(hereinafter defined);
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of
which are hereby acknowledged, Borrower does hereby MORTGAGE,
WARRANT, GRANT,
CONVEY AND ASSIGN to Lender, with power of sale, all right, title
and interest
of Borrower in and to:
A. The real estate located in Oklahoma County, Oklahoma, described
in
Exhibit A attached hereto and incorporated herein by this reference
(the
"Land");
B. All right, title and interest of Borrower in all buildings,
foundations,
structures and improvements now or hereafter located on or in the
Land, and all
materials now or hereafter intended for construction,
reconstruction, alteration
or repair thereof, all of which shall be deemed a part thereof
immediately upon
being delivered to the Land (collectively, the "Improvements");
C. All right, title and interest of Borrower now and hereafter in
and to
the streets and roads, opened or proposed, abutting the Land, all
strips and
gores within or adjoining the Land, the air space and right to use
the air space
above the Land, all rights of ingress and egress to and from the
Land, all
easements, rights of way, reversions, remainders, hereditaments,
and
appurtenances now or hereafter affecting the Land or the
Improvements, all
royalties and rights and privileges appertaining to the use and
enjoyment of the
Land or the Improvements, including all air, lateral support,
alley, drainage,
water, riparian, oil, gas and mineral rights, options to purchase
or lease, and
all other interests, estates or claims, in law or in equity, which
Borrower now
has or hereafter may acquire in or with respect to the Land or the
Improvements
(collectively, the "Appurtenances"; the Land, the Improvements and
the
Appurtenances are hereinafter sometimes collectively referred to as
the
"Premises");
D. All right, title and interest of Borrower in all fixtures,
equipment
(including but not limited to office equipment, motors, elevators,
radiators,
gas and electric ranges, refrigerators, freezers, and plumbing,
heating,
lighting, ventilating, refrigerating, incinerating, air
conditioning, central
energy, sprinklering and fire suppression, waste disposal and theft
protection
equipment), fittings, furniture, furnishings (including, but not
limited to
awnings, shades, screens, blinds and carpets), appliances,
apparatus, and
machinery now existing or hereafter installed in the Premises, and
all building
materials, supplies and equipment now existing or hereafter
delivered to the
Premises and intended to be installed therein, and all renewals or
replacements
of any of the foregoing property or articles in substitution
thereof
(collectively, the "Equipment");
E. All right, title and interest of Borrower whether now existing
or
hereafter acquired in, to and under all accounts, documents,
instruments,
chattel paper, and general intangibles, as the foregoing terms are
defined in
the Uniform Commercial Code in effect in the state in which the
Land is located
(the "UCC"), that are derived from the Premises or Equipment,
including, to the
extent assignable, all contract rights (including, without
limitation, under
contracts with all contractors, architects, engineers or
subcontractors relating
to the construction or renovation of the Improvements or Equipment,
including
payment, performance and materialmen's bonds), franchises, books,
records,
plans, specifications, permits, licenses, approvals, actions and
causes of
action, which in the case of any of the foregoing now or hereafter
relate to,
are derived from or used in connection with the Premises or
Equipment or the
use, operation, maintenance, occupancy or enjoyment thereof or the
conduct of
any business or activities thereon (collectively, the
"Intangibles");
F. All right, title and interest of Borrower, whether now existing
or
hereafter acquired and wherever located, in, to and under all
leases, lettings,
tenancies and licenses of the Premises or Equipment or any part
thereof now or
hereafter entered into and all amendments, extensions, renewals and
guaranties
thereof, all security therefor, and all moneys payable thereunder
(each a
"Lease" and collectively, the "Leases");
G. All rents, income, issues and profits, security deposits and
other
benefits to which Borrower may now or hereafter be entitled from
the Premises,
the Equipment or the Intangibles or under or in connection with the
Leases,
including, without limitation, all income received from tenants,
lessees,
licensees and concessionaires and other persons occupying space at
the Premises
and/or rendering services to tenants thereat (collectively, the
"Property
Income"); and
H. All proceeds, judgments, claims, compensation, awards of damages
and
settlements with respect to or hereafter made as a result of or in
lieu of any
condemnation or taking of the Premises and/or Equipment by eminent
domain
(including severance and consequential damages and change in grade
of streets)
or any casualty loss of or damage to any of the Premises, the
Equipment, the
Intangibles, the Leases or the Property Income, all refunds with
respect to the
payment of property taxes and assessments, and all other proceeds
of the
conversion, voluntary or involuntary, of the Premises, the
Equipment, the
Intangibles, the Leases or the Property Income, or any part
thereof, into cash
or liquidated claims (collectively, the "Proceeds"; the Equipment,
the
Intangibles, the Leases, the Property Income and the Proceeds are
hereinafter
collectively referred to as the "Collateral"; the Premises and the
Collateral
being hereinafter sometimes collectively referred to as the
"Mortgaged
Property").
TO HAVE AND TO HOLD the Mortgaged Property with all the privileges
and
appurtenances to the same belonging, and with the possession and
right of
possession thereof, unto Lender, its successors and assigns
forever, upon the
terms and conditions set forth herein. Further, Borrower hereby
grants to Lender
and confers upon Lender the power to sell the Mortgaged Property
and the
interests of Borrower and all persons having any interest by,
through or under
Borrower in the manner provided in the "Oklahoma Power of Sale
Mortgage
Foreclosure Act" (46 O.S. ss.ss. 40-48), as the same may be amended
from time to
time (the "Power of Sale Act").
The foregoing grant is expressly SUBJECT TO the lien of that
certain
Mortgage dated December ___, 2005 from Borrower, as mortgagor, to
Farmers State
Bank, recorded in Book 9945 at Page 1903 in the office of the
County Clerk of
Oklahoma County, Oklahoma, covering the land and improvements (the
"Prior
Mortgage") and securing the payment of that certain Promissory Note
dated
November 11, 2003 executed by Heartland Cup, Inc. and payable to
Farmers State
Bank in the original principal amount of $650,000.000, as modified
by that
certain Assumption Agreement dated November 7, 2005 by, between and
among
Farmers State Bank, Heartland Cup, Inc. and Borrower (collectively,
the "Prior
Note").
The foregoing grant is for the purpose of securing to Lender the
following
(the "Obligations"):
A. The repayment of the indebtedness evidenced by Borrower's
Secured
Convertible Term Note of even date herewith, in the original
principal sum of
Two Million and No/100 Dollars ($2,000,000.00) with interest
thereon at the rate
stated therein (the "Contract Rate") with the balance of the
principal sum, if
not sooner paid, to be due and payable on ____________, 2009, and
all
modifications, extensions, renewals, replacements and restatements
therein
(collectively, the "Note"), the terms of which are incorporated
herein as if set
forth in full;
B. The payment of all other sums, with interest at the Default Rate
set
forth in the Note, advanced in accordance with this Mortgage to
protect the
security of this Mortgage;
C. The payment of all future advances and any additional amounts,
with
interest thereon, that may hereafter be loaned by Lender to
Borrower, which
additional loans are evidenced by a promissory note or notes
containing a
recitation that this Mortgage secures the payment of such note or
notes;
D. The payment and performance of all obligations of Borrower
arising from
and set forth in (i) that certain Securities Purchase Agreement
between Lender
and Borrower, (ii) that certain Master Security Agreement between
Lender and
Borrower, (iii) that certain Stock Pledge Agreement between
Borrower, Lender and
AMS Manufacturing, Inc., an affiliate of Borrower, (iv) that
certain Common
Stock Purchase Agreement between Borrower and lender, (v) that
certain
Registration Rights Agreement between Borrower and Lender, (vi)
that certain
Funds Escrow Agreement between Lender, Borrower and Loeb &
Loeb, (vii) that
certain Grant of Security Interest in Patents and Trademarks
between Lender and
Borrow; and (viii) that certain Stock Purchase Warrant between
Lender and
Borrower, all dated of even date herewith (all of which, together
with the Note
and this Mortgage and any other present or future agreement
executed in
connection with the transactions reflected in this Mortgage, are
sometimes
collectively called the "Loan Documents").
AND BORROWER COVENANTS AND WARRANTS lawful seizure of an
indefeasible
estate in fee simple of the Mortgaged Property; that the same are
free from all
encumbrances and liens whatsoever, except for (i) easements and
restrictions of
record on the date hereof, none of which materially interfere with
the use of
the Mortgaged Property for the operation thereof intended by
Borrower, (ii) the
lien of ad valorem real estate taxes and any assessments for which
payment is
not delinquent in either case, and (iii) any liens expressly
permitted by the
express terms of the Loan Documents, and (iii) the Prior Mortgage
(the
encumbrances and liens described in the foregoing subsections (i) -
(iii) are
referred to collectively as the "Permitted Exceptions"); that
Borrower has the
legal right, power and authority to encumber the Mortgaged Property
pursuant to
this Mortgage, the execution and delivery and the performance of
which will not,
either immediately or with notice and/or passage of time, violate
any agreement
to which Borrower is a party or by which Borrower is bound; and
that Borrower
and the successors in interest of Borrower will forever WARRANT AND
DEFEND the
title to the Mortgaged Property and the lien and priority of this
Mortgage
against the claims and demands of all persons whomsoever. All such
covenants and
warranties shall run with the land.
Borrower additionally represents and warrants to Lender that:
A. Borrower is a validly existing corporation organized under the
laws of
the State of Oklahoma and is duly qualified to do business in
Oklahoma and in
all other jurisdictions in which qualification is necessary in
order to conduct
the business and affairs of Borrower.
B. The Guarantor is a validly existing corporation organized under
the laws
of the State of Oklahoma and is duly qualified to do business in
Oklahoma and in
all other jurisdictions in which qualification is necessary in
order to conduct
the business and affairs of Guarantor.
C. The execution, delivery and performance by Borrower of this
Mortgage (i)
are authorized by all documents (organizational and otherwise),
agreements and
stipulations limiting the activities of Borrower, (ii) do not
require approval
of any governmental authority, (iii) will not violate any provision
of law, any
order of any court or any governmental authority, or any indenture,
agreement or
other instrument to which Borrower is a party or by which Borrower
or any of the
property of Borrower is bound.
D. There is no action, suit or proceeding pending or threatened
against or
affecting Borrower or Guarantor or involving the validity of
enforceability of
this Mortgage, including before or by any governmental authority,
and neither
Guarantor nor Borrower is in default with respect to any order,
writ, judgment,
decree or demand of any court or other governmental authority
except as
previously disclosed in writing by Borrower to Lender.
E. If applicable, the financial statements of each Borrower and
Guarantor
most recently delivered to Lender (i) are complete and correct in
all material
respects, (ii) accurately represent the financial condition of
Borrower or
Guarantor, as the case may be, as of their date and (iii) disclose
all of
Borrower's material liabilities, direct or contingent, as of such
date. There
has been no Adverse Change in Financial Condition of Borrower or
Guarantor since
the date of such financial statement. The term "Adverse Change in
Financial
Condition" means a decrease of twenty percent (20%) or more in
aggregate net
worth; insolvency; bankruptcy; or prospective failure to meet
current
liabilities as they come due.
F. Borrower has the right to enter into this Mortgage, the
execution and
performance of which will not, either immediately, or with notice
and/or passage
of time, result in the creation or imposition of any encumbrance
upon any of the
Mortgaged Property except as granted hereby.
G. Borrower has obtained and there remain in full force and effect
all
licenses, permits, consents, approvals and authorizations necessary
or
appropriate for the management and operation of the
Improvements.
AND BORROWER, IN ORDER MORE FULLY TO PROTECT THE SECURITY OF THIS
MORTGAGE,
COVENANTS AND AGREES AS FOLLOWS:
1. Obligations Secured. This Mortgage is granted to secure the
payment and
performance of the Obligations strictly in accordance with the
terms thereof in
each case.
2. Payment and Performance of Obligations. Principal of, interest
on, and
all other indebtedness and sums constituted by the Obligations
shall be paid at
the times and in the manner provided herein and in the other Loan
Documents.
3. Payment of Taxes and other Impositions. Borrower shall keep
the
Mortgaged Property free from statutory liens of every kind; shall
pay, before
delinquency and before any penalty for nonpayment attaches thereto,
all taxes,
assessments and governmental or municipal or public levies, fees,
charges, fines
or impositions of any nature whatsoever (collectively, the
"Impositions") which
are or may be levied or imposed against or in connection with the
Mortgaged
Property or any part thereof, except when payment for such items
has theretofore
been made under the Section of this Mortgage entitled "Monthly
Installments of
Taxes and Insurance"; shall deliver to Lender, on or before ten
(10) days after
request made by Lender therefor, receipted bills evidencing payment
therefor.
Notwithstanding the foregoing, so long as no default, and no
circumstance which,
with any required notice and/or opportunity to cure would
constitute a default
under the Obligations is subsisting, Borrower shall have the right
to contest
the validity of any Imposition by appropriate legal proceedings
provided (i)
Borrower notifies Lender of Borrower's intention to contest the
same prior to
commencing such contest, (ii) such contest shall preclude
enforcement of
collection out of or pursuant to the sale of any of the Mortgaged
Property in
satisfaction of any Imposition, (iii) Borrower shall furnish Lender
with, at the
option of Lender, a bond or title insurance or other security for
the Imposition
satisfactory to Lender in Lender's sole discretion, (iv) such
contest shall not
otherwise create a failure on the part of Borrower to comply with
any other
provision or condition of the Loan Documents, and (iv) upon a final
and
nonappealable determination of the contest that is adverse to the
Borrower,
Borrower shall pay the amount of the Imposition.
4. Monthly Installments of Taxes and Insurance. If requested by
Lender at
any time (i) after the occurrence of an Event of Default as defined
in the
Security and Purchase Agreement of even date herewith between
Borrower and
certain co-borrowers and Lender (including after any applicable
requirement for
notice and an opportunity to cure) in any of the Obligations or
(ii) after
payment of taxes or insurance in respect of the Mortgaged Property
have become
delinquent (whether or not thereafter cured), Borrower shall pay to
Lender, in
addition to the amounts of principal and interest and any other
sums due under
the terms of the applicable instruments evidencing the Obligations,
monthly on
or before the first day of each calendar month, until the
Obligations are paid
in full, the following:
A sum equal to all taxes, assessments and all other impositions
next due on
the Mortgaged Property, all as estimated in good faith by Lender,
plus the
premiums that will next become due and payable on policies of fire
and
other insurance covering the Mortgaged Property and required under
the
terms of this Mortgage, less all sums already paid therefor in each
case,
divided by the number of complete calendar months to elapse prior
to the
date when such taxes, assessments, impositions and premiums shall
be due
and payable.
All such payments described in this Section shall be held by Lender
without
accruing and without any obligation arising for the payment of
interest thereon
and Borrower waives any right, to the extent permitted by law, to
demand or
receive any interest, income or profits on any of the payments so
deposited with
Lender. Lender is hereby granted a security interest in all such
amounts as
collateral for the Obligations and such sums shall be subject to
setoff by
Lender following any default by Borrower (including after any
applicable
requirement for notice and/or opportunity to cure) under this
Mortgage or the
other Obligations.
5. Utilities. Borrower shall pay or cause to be paid all charges in
respect
of all water, sewer, electricity, natural gas, telecommunications
and all other
utilities consumed on the Mortgaged Property prior to the date when
the same
would become delinquent, and shall provide Lender promptly after
request is made
by Lender therefor with copies of paid receipts in respect of all
utility
charges assessed against the Mortgaged Property.
6. Liability Insurance. Borrower shall carry and maintain such
liability
and indemnity insurance as in good faith may be required from time
to time by
Lender in forms, amounts and with companies reasonably satisfactory
to Lender.
Certificates of such insurance, premiums prepaid, naming Lender as
an additional
insured, and copies of such policies, shall be deposited, if
requested by
Lender, by Borrower with Lender and shall contain provision for not
less than
ten (10) days' notice to Lender prior to any cancellation or
modification
thereof.
7. Hazard Insurance. Borrower shall keep or cause to be kept
all
Improvements and Equipment, whether now existing or hereafter
erected on the
Mortgaged Property, insured as may be required from time to time by
Lender
against loss or damage by fire, hazards included within the term
"broad form
coverage", rent loss, flood (if required by law), and such other
hazards,
casualties, liabilities and contingencies in such amounts (not
exceeding the
replacement value thereof except in all events sufficient to keep
Borrower from
becoming a co-insurer) and for such periods as may be required by
Lender
consistent with reasonable and customary commercial practice with
regard to
similar properties or as otherwise required in good faith by
Lender, and shall
pay promptly, when due, any premiums on such insurance policies.
Lender shall
not unreasonably withhold approval of a policy form acceptable to
the holder of
the Prior Note and Prior Mortgage.
All insurance policies shall be carried with companies having a
Best rating
of A- or better and approved by Lender and such policies shall name
Lender as a
lender loss payee pursuant to a "standard Oklahoma mortgage" or
"New York
mortgagee" clause. Evidence that such policies are in force shall
be delivered
to Lender on or before ten (10) days after request by Lender
therefor. All such
policies shall contain provision for at least ten (10) days notice
to Lender
prior to any cancellation or modification thereof.
Borrower shall not carry separate insurance, concurrent in kind or
form and
contributing, in the event of loss, with any insurance required
hereunder. In
the event of a change in the use and nature of occupancy of the
Mortgaged
Property, immediate notice thereof by mail shall be delivered to
all insurers
and Lender.
In the event of loss, Borrower will give immediate notice by mail
to
Lender. Borrower hereby authorizes Lender, at its option, to
collect, adjust and
compromise any losses under any of the insurance policies aforesaid
if such
actions are not taken by the holder of the Prior Note and Prior
Mortgage
(provided Lender in so adjusting and compromising any such losses
acts in good
faith and not in a manner which, under the circumstances,
diminishes the
recovery thereunder by an unreasonable amount), and after deducting
all costs of
collection to apply the proceeds of such insurance.
Provided that no Event of Default then exists and provided the
proceeds of
such insurance are not applied by the holder of the Prior Mortgage
to the
indebtedness secured by the Prior Note and are not made available
for repair and
restoration pursuant to applicable provisions and procedures set
forth in the
Prior Mortgage (together with any moneys which may be deposited by
Borrower with
Lender for the purpose of repair or restoration of the Mortgaged
Property
promptly upon Borrower's becoming aware of any deficiency between
the amount of
such insurance proceeds and the amount necessary to restore the
Mortgaged
Property as hereinafter provided in this sentence) are sufficient
to restore the
Mortgaged Property to the same or better condition as existed
immediately prior
to the loss, then the following procedure shall apply for
restoration and repair
of the Mortgaged Property: Lender shall disburse the proceeds of
the insurance
for the sole purpose of repairing and restoring the Mortgage
Property. If the
cost of such repair and restoration is reasonably estimated by
Lender to exceed
$150,000.00, such repair and restoration shall, at the option of
Lender, be
under the supervision of an architect or engineer reasonably
acceptable to
Lender, shall be made pursuant to plans and specifications
submitted to Lender
prior to the commencement thereof, and which shall be subject to
Lender's
approval and which proceeds shall be disbursed by Lender from time
to time only
upon certification by the architect or engineer that all of the
work theretofore
completed was done in compliance with the plans and specifications
approved by
Lender, that the sum requested is justly required to reimburse
Borrower for
payments by Borrower to persons performing such work, that the
amount of the
remaining proceeds shall be sufficient to pay for the repairs and
restoration
remaining to be completed pursuant to the approved plans and
specifications, and
containing such other certifications as Lender reasonably may
request.
Disbursements by Lender shall also be subject to such other
conditions,
including but not limited to waivers of lien and title insurance
coverage, as
Lender in good faith deems necessary or appropriate.
Any excess proceeds remaining after completion of restoration or
repair
shall be the property of and released to Borrower. Any proceeds
retained by
Lender pending completion of restoration or repair shall be
deposited by Lender
into an interest bearing account or invested in short term
governmental
obligations and all interest earned on such account or obligations
shall be the
property of and released to Borrower upon completion of such
restoration or
repair.
After the occurrence of and during the continuance of an Event of
Default,
or if any of the other conditions described above to the proceeds
being made
available for restoration or repair are not met, the proceeds shall
be applied
as a reduction upon all of the Obligations secured hereby, in such
order as
Lender may elect; with the balance of any proceeds remaining after
the
disposition of the proceeds as aforesaid to be paid to
Borrower.
Upon acquisition of the Mortgaged Property by Lender in the event
of
foreclosure of this Mortgage, or other transfer of title to the
Mortgaged
Property in extinguishment of all or part of the Obligations
secured hereby, all
right, title and interest of Borrower in and to any insurance
policies then in
force shall pass to the purchaser or grantee of said property.
8. Condemnation. Borrower shall give Lender immediate notice of the
actual
or threatened commencement of any proceedings under eminent domain
affecting all
or any part of the Mortgaged Property, including severance and
consequential
damage and change in grade of streets, and will deliver to Lender
copies of any
and all papers served in connection with any such proceedings.
Subject to the
provisions of the Prior Mortgage relating to the application of
awards or
payments arising from a condemnation, Borrower further covenants
and agrees to
make, execute and deliver to Lender, at any time or times upon
request of
Lender, free, clear and discharged of any encumbrances of any kind
whatsoever
(except for the rights of the holder of the Prior Mortgage), any
and all further
assignments and/or other instruments deemed necessary or
appropriate by Lender
for the purpose of validly and sufficiently assigning all awards
and other
compensation, heretofore and hereafter to be made to Borrower
(including the
assignment of any award from the United States Government at any
time after the
allowance of the claim therefor, the ascertainment of the amount
thereof and the
issuance of the warranty for payment thereof) for any taking,
either permanent
or temporary, under any such proceedings. In the event of a total
or partial
taking of the Mortgaged Property, the proceeds shall be applied
first to the
sums secured by the Prior Mortgage, secondly to the sums secured by
this
Mortgage, with the excess, if any, paid to Borrower, except that if
the taking
is a partial taking, then subject to the provisions of the Prior
Mortgage
relating to the application of such proceeds, Lender may apply the
proceeds, or
any part thereof, at Lender's option, to the restoration or repair
of the
Mortgaged Property.
9. Alterations; Repairs; Waste, Compliance with Laws; Inspection.
No
additional Improvements shall be constructed on the Land, and no
existing
Improvements shall be materially altered, or removed or demolished
without the
prior written consent of Lender in each case. No Equipment shall be
severed or
removed without the prior written consent of Lender except that
Borrower may
replace in the ordinary course of business any Equipment with other
Equipment at
least equal in quality and condition to that replaced, provided
such
replacements are free from any security interest in or encumbrance
thereon or
reservation of title thereto except for the lien of this Mortgage
and any other
encumbrance which may be permitted by the express terms of the Loan
Documents.
Borrower shall permit, commit, or suffer no waste, impairment or
deterioration
of the Mortgaged Property or any part thereof; shall keep and
maintain the same
in good repair and condition, reasonable wear and tear excepted;
shall effect
such repairs as Lender may reasonably require, and from time to
time to make all
needful and proper replacements so that said Mortgaged Property
will, at all
times, be in fit and proper condition for the respective purposes
for which they
were erected or installed. Borrower shall comply with or require
compliance with
all statutes, regulations, codes, orders, requirements or decrees
relating to
the Mortgaged Property (including but not limited to the Americans
with
Disabilities Act) by any federal, state or municipal authority and,
without
lim
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