EXHIBIT 10.1

 

SUMMIT BANK

 

PROMISSORY NOTE

 

Principal

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   Loan Date

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   Maturity

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   Loan No.

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   Call/Coll

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   Account

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   Officer

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   Initials

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$900,000.00    12-05-2005    12-05-2006    14749501    4A/420         JBM     

 

References in the shaded area are for Lender’s use only and do not limited the
applicability of this document to any

particular loan or item. Any item above containing “***” has been omitted due to
text length limitations.

 

Borrower:   

Royal BodyCare, Inc.

2301 Crown Court

Irving, TX 75038-4305

   Lender:           

Summit Bank N.A.

Euless

350 Westpark Way, Suite 202

Euless, TX 76040

Principal Amount:    $900,000.00         Date of Note: December 5, 2005

 

PROMISE TO PAY. ROYAL BODYCARE, INC. (“Borrower”) promises to pay to SUMMIT BANK
N.A. (“Lender”), or order, in lawful money of the United Stales of America, the
principal amount of Nine Hundred Thousand & 00/100 Dollars ($900,000.00) 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 or maturity, whichever occurs
first. The interest rate will not increase above 18.000%.

 

CHOICE OF USURY CEILING AND INTEREST RATE. The interest rate on this Note has
been implemented under the “Quarterly Ceiling” as referred to in Section 303.006
of the Texas Finance Code. The terms, including the rate, or index, formula, or
provision of law used to compute the rate on the Note, will be subject to
revision as to current and future balances, from time to time by notice from
Lender in compliance with Section 303.103 of the Texas Finance Code.

 

PAYMENT. Borrower will pay this loan in full immediately upon Lender’s demand.
If no demand is made, Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on December 5, 2006. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning January 5, 2006, with all
subsequent interest payments to be due on the same day of each month after that.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any accrued unpaid interest; then to principal; and then to any unpaid
collection costs. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over a
year of 360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding, unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on a per diem basis of a year of 365 or 366 days, as the case may be.
Borrower will pay Lender at Lender’s address shown above or at such other place
as Lender may designate in writing. Notwithstanding any other provision of this
Note, Lender will not charge interest on any undisbursed loan proceeds. No
scheduled payment, whether of principal or interest or both, will be due unless
sufficient loan funds have been disbursed by the scheduled payment date to
justify the payment.

 

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Wall Street
Prime Rate as published in the Wall Street Journal (the “Index”). The Index is
not necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the current
Index rate upon Borrower’s request. The interest rate change will not occur more
often than each day. Borrower understands that Lender may make loans based on
other rates as well. The interest rate to be applied prior to maturity to the
unpaid principal balance of this Note will be at a rate of 1.000 percentage
point over the Index. Notwithstanding the foregoing, the variable interest rate
or rates provided for in this Note will be subject to the following maximum
rate. NOTICE: Under no circumstances will the interest rate on this Note be more
than (except for any higher default rate or Post Maturity Rate shown below) the
lesser of 18.000% per annum or the maximum rate allowed by applicable law. For
purposes of this Note, the “maximum rate allowed by applicable law” means the
greater of (A) the maximum rate of interest permitted under federal or other law
applicable to the indebtedness evidenced by this Note, or (B) the “Quarterly
Ceiling” as referred to in Section 303.006 of the Texas Finance Code.

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PROMISSORY NOTE

(Continued)

 

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. Prepayment
in full shall consist of payment of the remaining unpaid principal balance
together with all accrued and unpaid interest and all other amounts, costs and
expenses for which Borrower is responsible under this Note or any other
agreement with Lender pertaining to this loan, and in no event will Borrower
ever be required to pay any unearned interest. 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, early payments
will reduce the principal balance due. Borrower agrees not to send Lender
payments marked “paid in full”, “without recourse”, or similar language. If
Borrower sends such a payment, Lender may accept it without losing any of
Lender’s rights under this Note, and Borrower will remain obligated to pay any
further amount owed to Lender. All written communications concerning disputed
amounts, including any check or other payment instrument that indicates that the
payment constitutes “payment in full” of the amount owed or that is tendered
with other conditions or limitations or as full satisfaction of a disputed
amount must be mailed or delivered to: SUMMIT BANK N.A., P0 BOX 2348, FORT
WORTH, TX 76113.

 

POST MATURITY RATE. The Post Maturity Rate on this Note is the lesser of the
maximum rate allowed by law or 18.000% per annum. Borrower will pay interest on
all sums due after final maturity, whether by acceleration or otherwise, at that
rate.

 

LENDER’S RIGHTS. Upon default, Lender may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount.

 

ATTORNEYS’ FEES; EXPENSES. Lender may hire an attorney to help collect this Note
if Borrower does not pay, and Borrower will pay Lender’s reasonable attorneys’
fees. Borrower also will pay Lender all other amounts Lender actually incurs as
court costs, lawful fees for filing, recording, releasing to any public office
any instrument securing this Note; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor vehicle
offered as security for this Note, or premiums or identifiable charges received
in connection with the sale of authorized insurance.

 

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of Texas
without regard to its conflicts of law provisions. This Note has been accepted
by Lender in the State of Texas.

 

CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced by this
Note occurred in TARRANT County, Borrower agrees upon Lender’s request to submit
to the jurisdiction of the courts of TARRANT County, State of Texas.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

 

COLLATERAL. Borrower acknowledges this Note is secured by the following
collateral described in the security instruments listed herein: inventory,
chattel paper, accounts, equipment and general intangibles described in
Commercial Security Agreements dated December 5, 2005.

 

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 by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for at 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

 

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PROMISSORY NOTE

(Continued)

 

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; or (D) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender. This revolving line of credit shall not be subject to Ch. 346 of the
Texas Finance Code.

 

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower’s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

 

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as “charge or collect”), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Texas
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. The right to accelerate maturity of sums due under this Note does
not include the right to accelerate any interest which has not otherwise accrued
on the date of such acceleration, and Lender does not intend to charge or
collect any unearned interest in the event of acceleration. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the loan evidenced by
this Note until payment in full so that the rate or amount of interest on
account of the loan evidenced hereby does not exceed the applicable usury
ceiling. 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, notice of dishonor, notice of intent to
accelerate the maturity of this Note, and notice of acceleration of the maturity
of this Note. 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 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. The obligations
under this Note are joint and several.

 

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.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

BORROWER: ROYAL BODYCARE, INC. By:   /s/    STEVEN E. BROWN             STEVEN
E. BROWN, VICE PRESIDENT-FINANCE of     ROYAL BODYCARE, INC.

 

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