exv10w48



 






Exhibit 10.48




PROMISSORY NOTE




$1,932,000 or so much thereof

as may have been advanced, to or

for the benefit of Maker




September 28, 2005




     FOR VALUE RECEIVED, the undersigned, ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., a
Delaware corporation whose local mailing address is Post Office Box 1237, Springdale, Arkansas
72765 (“Maker”), promise to pay to LIBERTY BANK OF ARKANSAS, an Arkansas state chartered
bank whose local mailing address is 4706 South Thompson, Suite 101, Springdale, Arkansas 72764
(“Holder”), or order, the principal sum of One Million Nine Hundred Thirty Two Thousand and
No/100 Dollars ($1,932,000), or so much thereof as may have been advanced, to or for the benefit of
Maker pursuant to the terms of a Construction and Semi-Permanent Loan Agreement of even date
herewith (the “Loan Agreement”), together with interest thereon calculated from the date or
dates of advancement until paid, upon advanced and unpaid principal balances, at the Interest Rate
set forth below, payable as set forth below.



     Definitions. The following definitions are applicable to the words, phrases or terms
used in this Note and all other capitalized terms shall have the meaning set forth in the Loan
Agreement:




	 	(a)	 	The term “Completion Deadline” shall mean twelve (12) months
after the date hereof, which is the date by which all development, construction
of any and all Improvements, landscaping and other work with regard to the
Premises financed with proceeds of this Note must be complete, as certified to
Holder by the Inspecting Architect/Engineer.
	 
	 	(b)	 	The term “Conversion Date” shall mean the date which is the
earlier to occur of: 1) the Completion Deadline, or 2) Maker elects to commence
making equal monthly payments of principal and interest based upon a twenty
five (25) year amortization period.
	 
	 	(c)	 	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.
	 
	 	(d)	 	The term “Event of Default” shall mean the occurrence of any of
the following:






	 	(1)	 	A failure by Maker to make any payment of principal or interest on the
Note within ten (10) days after such payment is due provided that in the event
a payment was actually made but such payment is deficient as a result of a
change in the interest rate, Holder shall provide to




 









 






	 	 	 	Maker a notice of any Interest Rate Change applicable to such payment and
Maker shall have ten (10) calendar days in which to pay and cure such
deficiency;
	 
	 	(2)	 	A failure by Maker to comply with any of the other terms or
conditions specified herein this Note or in any of the other Loan Instruments
after any applicable periods of notice or cure;
	 
	 	(3)	 	The occurrence of any Event of Default, as defined in Article I
of the Loan Agreement.






	 	(e)	 	The term “Holder” shall mean Liberty Bank of Arkansas and all of its
successors and assigns and any subsequent owner or holder of this Note.
	 
	 	(f)	 	The term “Interest Rate” shall mean:






	 	(1)	 	from the date hereof until the Conversion Date, a fixed rate
equal to the Wall Street Journal Prime Rate of Interest plus Twenty Five (25)
basis points determined on the Conversion Date. The actual Interest Rate,
therefore, will change as the Wall Street Journal Prime Rate changes;
	 
	 	(2)	 	from the Conversion Date until the Maturity, a floating rate
equal to the Wall Street Journal Prime Rate of Interest plus One Hundred (100)
basis points. The actual Interest Rate, therefore, will change as the Wall
Street Journal Prime Rate changes; and
	 
	 	(3)	 	on and after Maturity, the Default Rate.






	 	(g)	 	The term “Loan Instruments” shall mean this Note, the Loan Agreement,
the Construction Mortgage, Security Agreement and Fixture Filing (Secures Future
Advances) of even date herewith (the “Mortgage”), the Assignment of Leases and
Rents, and the other documents relating to the indebtedness evidenced by this Note,
whether any such documents presently exist or are hereafter created.
	 
	 	(h)	 	The term “Maker” shall mean Advanced Environmental Recycling
Technologies, Inc., a Delaware corporation.
	 
	 	(i)	 	The term “Maturity” shall mean the earlier of the date that is exactly
three (3) years after the Conversion Date (the “Scheduled Maturity”), or the
date on which Holder declares all sums due and payable hereunder after an Event of
Default, or such later date if consented to in writing by both Maker and Holder, which
consent may be withheld for any or no reason by either party. For




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	 	 	 	clarification purposes, in the event the Conversion Date is the same date as the
Completion Deadline, the Scheduled Maturity would be September 28, 2009.
	 
	 	(j)	 	The term “Note” shall mean this Promissory Note.
	 
	 	(k)	 	The term “Per Annum” with respect to the Interest Rate shall mean a
calendar year consisting of three hundred sixty five (365) days.
	 
	 	(l)	 	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.





     Advancement Terms. Maker shall be entitled to demand advances under this Note from
time to time until the earlier to occur of: 1) the Completion Deadline, or 2) five (5) days after
completion of development of the Mortgage Property (as defined in the Mortgage) and construction
of any and all Improvements financed with the proceeds of this Loan, as certified to Holder by the
Inspecting Architect/Engineer, as that term is defined in the Loan Agreement. Advances may be used
solely for the Loan Purposes (as such term is defined in the Loan Agreement) in accordance with the
terms of the Loan Instruments, but no more often than monthly, and only after complying with the
conditions precedent set forth in the Loan Agreement, up to an aggregate principal balance which
does not exceed the lesser of the then undistributed amount of the principal amount of this Note or
an amount not to exceed eighty percent (80%) loan to appraised value (as defined in the Loan
Agreement). Maker and Holder acknowledge and agree that the first advance under this Note shall be
in the amount of                                          and ___/100 Dollars
($                                        ).



     Repayment Terms. Maker promises to pay all sums advanced to or for the benefit of
Maker under this Note as follows:




	 	(a)	 	Commencing on October 28, 2005 and continuing on the same day of each calendar
month thereafter until the Conversion Date, consecutive payments of accrued interest
only calculated on principal advanced and outstanding hereunder from time to time; and
	 
	 	(b)	 	Commencing on the expiration of the first month following the Conversion Date and
on the same day of each calendar month thereafter until Maturity, Maker shall be
required to make to Holder consecutive monthly payments of




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	 	 	 	principal and interest amortized over a twenty five (25) year period with a final
payment of all outstanding sums due pursuant to this Note, including without
limitation, principal and accrued but unpaid interest due and payable at Maturity.
It is understood that a balloon payment of all outstanding principal, plus accrued
interest, will be due at Maturity, and that Holder is not obligated to finance that
balloon payment.





     Place for Payment. Unless otherwise designated in writing mailed or delivered to
Maker, the place for payment of the indebtedness evidenced by this Note shall be as follows:



Liberty Bank of Arkansas

Attn: P. Douglas Lynch, President Fayetteville/Springdale Markets

4706 South Thompson, Suite 101

Springdale, Arkansas 72764




     Application of Payments. Holder shall provide to Maker notice of any change to the
Interest Rate within thirty (30) business days following such change; provided that, a failure to
provide such notice shall not prevent such Interest Rate change from being effective. Payments
received on this Note shall be applied first to accrued interest, then to reimburse Holder for any
advances made to preserve or protect any property given as security for this Note or to protect or
maintain the priority of Holder’s lien on or security interest therein, and any costs and expenses
related thereto, and the balance shall be applied to principal. If any sum owed by Maker to Holder
is unsecured, the unsecured portion of the indebtedness shall be completely paid prior to the
payment of the secured portion of such indebtedness, and all payments made on account of the
indebtedness shall be considered to have been paid on and applied first to the complete payment of
the unsecured portion of the indebtedness. Similarly, if any sum advanced by Holder to or for the
benefit of Maker, or to protect Holder’s security for this Note, shall not be used for construction
of improvements on the land described in the Mortgage, or shall otherwise not be secured by a lien
entitled to the special priority accorded by A.C.A. § 18-44-110, that portion of the indebtedness
shall be completely paid prior to the payment of any portion of the indebtedness which is entitled
to such priority, and all payments made on account of the indebtedness shall be considered to have
been paid on and applied first to the complete payment of that portion of the indebtedness not
entitled to special priority.



     Acceleration of Maturity. Notwithstanding the terms and conditions of this Note in
respect to the payment of interest only prior to the Conversion Date, and principal and interest by
installments thereafter to Maturity, Holder shall have the right, upon the happening of any Event
of Default, to accelerate Scheduled Maturity for the payment of the indebtedness of this Note, and
the unpaid principal and interest evidenced hereby shall become due and payable to Holder
immediately upon Holder giving written notice thereof to Maker, which notice may be given via (a)
personal delivery, (b) certified or registered U.S. Mail, return receipt requested, postage
prepaid, (c) any reputable overnight mail



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courier for which a signed receipt is required, or (d) facsimile or electronic mail followed
by a hard copy sent via regular first class U.S. Mail.




     Prepayment. This Note may be prepaid in full or in part at any time without premium
or penalty.



     Limitation on Interest. In no contingency, whether by reason of acceleration
of the Scheduled Maturity of this Note or otherwise, shall the interest contracted for, charged or
received by Holder exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to Holder in excess of the maximum
lawful amount, the interest payable to Holder shall be reduced to the maximum amount permitted
under applicable law; and, if from any circumstance Holder shall ever receive anything of value
deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principal of this Note and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of principal of this
Note such excess shall be refunded to Maker. All interest paid or agreed to be paid to Holder
shall, to the extent permitted by applicable law, be amortized, pro-rated, allocated, and spread
throughout the full period until Scheduled Maturity (or the period of any renewal or extension
thereof by Holder) so that interest thereon for such full period shall not exceed the maximum
amount permitted by applicable law.



     Remedies; Nonwaiver. Failure of Holder to exercise any right or remedy available to
Holder upon the occurrence of an Event of Default shall not constitute a waiver on the part of
Holder of the right to exercise any such right or remedy for that Event of Default or any
subsequent Event of Default. The exercise of any remedy by Holder shall not constitute an election
of any such remedy to the exclusion of any other remedy afforded Holder at law or in equity, all
such remedies being nonexclusive and cumulative. If an Event of Default occurs under this Note and
this Note is referred to an attorney at law for collection, Maker agrees to pay all costs incurred
by Holder incident to collection, including but not limited to reasonable attorney fees in an
amount not to exceed ten percent (10%) of the principal and accrued interest then due hereunder,
enforceable as a contract of indemnity, plus all court costs and other expenses incurred at or
prior to trial and in connection with any and all appeals. If reasonable attorney fees exceed the
amount for which Maker is liable under this contract of indemnity, a court may, in its discretion,
award Holder additional attorneys fees pursuant to A.C.A. § 16-22-308, and such will also be
secured by all liens given as security for this Note.



     Waivers. Maker (i) waives presentment, protest and demand, (ii) waives notice of
protest, demand, dishonor and nonpayment of this Note, and (iii) expressly agrees that this Note
may be renewed in whole or in part, or any nonpayment hereunder may be extended, or a new note of
different form may be substituted for this Note, or the rate of interest may be changed, or changes
may be made in consideration of the extension of the maturity date hereof, or any combination
thereof, from time to time, but, in any singular event or any combination of such events, Maker
will not be released from liability by reason of the



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occurrence of any such event, nor shall Holder hereof be deemed by the occurrence of any such
event to have waived or surrendered, either in whole or in part, any right it otherwise might have.




     Security. Payment of the indebtedness evidenced by this Note is secured by (1)
the liens and encumbrances set forth in the Mortgage; (2) an Assignment of Leases and Rents evenly
dated herewith and filed of record in the Office of the Circuit Clerk and Ex-Officio Recorder for
Washington County, Arkansas, encumbering real property and leases more particularly described
therein (the “Assignment of Leases and Rents”); and (3) any UCC Financing Statements to be
filed by Holder. Additionally, except with respect to Maker’s depository account with Holder
referred to as Account Number                                         , Maker grants Holder a continuing lien to
secure payment of the indebtedness evidenced by this Note upon any and all deposits, monies or
other property of value owned or belonging to Maker, and the proceeds thereof, now or hereafter
held or received by, or in transit to, Holder from or for the account or benefit of Maker, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all
credits or other property of value due or to become due from Maker, and any and all claims of Maker
against Holder, at any time existing. Upon an Event of Default, Holder shall have the right and
privilege, without the necessity or requirement of notice to Maker or any endorsers or guarantors
hereof, to set off, appropriate and apply any and all property of Maker generally referred to in
this Note against the outstanding indebtedness evidenced by this Note.



     Controlling Law. This entire transaction and all terms and provisions in this Note
and the other Loan Instruments shall be governed by the laws of the State of Arkansas; provided
however, notwithstanding anything to the contrary herein, the interest rate to be charged by
Lender, including any fees or other charges which may be deemed to be interest, shall be governed
by federal law, specifically Section 731 of the Gramm-Leach-Bliley Act, Codified as 12 U.S.C. §
1831u(f), and the law of the state having the highest permissible interest rate which, as of the
date hereof, is the home state to an insured depository institution that has a branch in Arkansas.



     Late Charge. If any payment by Maker shall be received by Holder more than ten (10)
calendar days after it shall be due (provided however that with respect to any payment actually
made by maker to Holder which is less than the amount required to be paid as a result of a change
in the Interest Rate, Maker shall have ten (10) calendar days after Holder notifies Maker of the
amount of such deficiency in which to cure said deficiency before a late charge shall be imposed on
such deficient amount), Maker shall pay a late charge for each such late payment equal to five
percent (5%) of the late payment up to a maximum for each late payment of Two Hundred Fifty Dollars
($250.00) and a minimum of Five Dollars ($5.00) for each late payment.



     EXECUTED AND EFFECTIVE as of the 28th day of September, 2005.



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	 	MAKER:	ADVANCED ENVIRONMENTAL RECYCLING 

TECHNOLOGIES, INC., 
a Delaware corporation

 	 
	 	 	By:  	/S/ JOE
G. BROOKS	 
	 	 	 	Joe G. Brooks, Chairman of the Board 	 
	 	 	 	 
	 




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