Document:

exv10w47

 

Exhibit 10.47

CONSTRUCTION AND SEMI-PERMANENT

LOAN AGREEMENT

     THIS CONSTRUCTION AND SEMI-PERMANENT LOAN AGREEMENT, dated as of the 28th day of
September, 2005 (the “Loan Agreement”), is made by and among LIBERTY BANK OF ARKANSAS, an
Arkansas state chartered bank whose local mailing address is 4706 South Thompson, Suite 101,
Springdale, Arkansas 72764, attention P. Douglas Lynch, President Fayetteville/Springdale, Arkansas
markets (“Lender”) and ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., a Delaware
corporation whose local mailing address is Post Office Box 1237, Springdale, Arkansas 72765
(“Borrower”).

     WHEREAS, Borrower is the owner of certain land consisting of nine and 99/100 (9.99) acres,
more or less, located in Washington County, Arkansas (the “Mortgaged Property”); and

     WHEREAS, Borrower desires to refinance existing indebtedness on the Mortgaged Property to
construct and develop an extension of Borrower’s manufacturing facility currently existing on the
Mortgaged Property (collectively, the “Loan Purposes”); and

     WHEREAS, for the purpose of financing the Loan Purposes, Borrower has made application to
borrow from Lender an amount not to exceed the lesser of (i) One Million Nine Hundred Thirty Two
Thousand and No/100 Dollars ($1,932,000) or (ii) so much thereof as may be advanced by Lender to
Borrower (the “Loan”).

     NOW, THEREFORE, in consideration of the premises recited above and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, each of
the parties, intending to be legally bound by the provisions hereof, agrees as follows:

ARTICLE I

DEFINITIONS

     For purposes of this Loan Agreement, the following terms shall have the respective meanings
assigned to them.

     Advance. The term “Advance” shall mean a disbursement by Lender of any unused
and available proceeds of the Loan and/or Borrower’s Deposit. Each Advance of Loan proceeds shall
be conclusively deemed and considered to have been made against the Note.

     Affidavit of Borrower. The term “Affidavit of Borrower” shall mean a sworn
affidavit of Borrower (and such other parties as Lender or the Title Company may require) to the
effect that all statements, invoices, bills, and other expenses incident to the construction of the Improvements
incurred to a specified date, whether or not specified in the Approved Budget, have been paid in
full, except for (a) amounts retained pursuant to the Construction Contract, and (b) items to be paid
from the proceeds of an Advance then being requested or in another manner satisfactory to Lender.

 

 

     Application for Advance. The term “Application for Advance” shall mean a
written application by Borrower (and such other parties as Lender may require) on the Standard
Application and Certificate for Payment Form, ALA Document G702, or such other form acceptable to Lender,
specifying by name, current address, and amount all parties to whom Borrower is obligated for
labor, materials, or services supplied or rendered for the construction of the Improvements and all other
expenses incident to the Loan and the Land, whether or not specified in the Approved Budget,
requesting an Advance under the Loan for the payment of such items, and containing, if requested
by Lender, an Affidavit of Borrower, and such schedules, affidavits, releases, waivers, statements,
invoices, bills, and other documents as Lender may reasonably request; provided, however, that if
lien waivers are requested, such lien claimants shall be required to waive lien rights only with
respect to all amounts paid by Lender through the immediately preceding Advance, although lien claimants
may be required to state the amount then due them and agree to waive lien rights upon receipt of
said sum. Borrower shall certify in the Application for Advance as to all such Applications (other than
for final payment of retainage after completion of the Improvements), that retainage of at least
ten percent (10%) of the amount of the total work completed and materials stored to date has been
deducted in calculating the “current payment due.”

     Appraisal. The term “Appraisal” shall mean an appraisal of the Land and
Improvements prepared by an independent appraiser who shall be a member of the American Institute
of Real Estate Appraisers selected by or satisfactory to Lender, which shows that the value of the Land and
Improvements, when completed, will be not less than one hundred twenty five percent (125%) of the
principal amount of the Note.

     Approved Budget. The term “Approved Budget” shall mean a budget or cost
itemization prepared by Borrower specifying the cost by item of (a) all labor, materials, and
services necessary for the construction of the Improvements in accordance with the Plans and all Governmental
Requirements, and (b) all other expenses anticipated by Borrower incident to the Loan, the Land,
and the construction of the Improvements. Borrower may not reallocate items of cost or change the
Approved Budget without the prior written consent of Lender; provided, however, that Borrower shall
have the right to reallocate items of cost if it can demonstrate, to the satisfaction of Lender,
that it has achieved a cost saving in a particular designated item in the Approved Budget.

     Assignment of Leases and Rents. The term “Assignment of Leases and Rents”
shall mean the Assignment of Leases and Rents dated of even date herewith securing the payment of the Note and
the payment and performance of all obligations specified in the Assignment of Leases and Rents and
this Loan Agreement, and evidencing a valid and enforceable lien on the Land.

     Borrower. The term “Borrower” shall mean the party named Borrower in the
introductory paragraph of this Loan Agreement.

     Borrower’s Deposit. The term “Borrower’s Deposit” shall mean such cash
sums as Lender may deem necessary, from time to time until the Loan is paid in full, in addition to
the Loan, for the payment of the costs of labor, materials, and services required for the
construction of the

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Improvements, other costs and expenses specified in the Approved Budget, and such other costs
and expenses as may be required to be paid in connection with the construction of the Improvements in
accordance with the Plans, any Governmental Requirements, and the requirements of any lessee, if
applicable.

     Certificate of Occupancy. The term “Certificate of Occupancy” shall mean an
unconditional and unlimited certificate of occupancy issued by the City of Springdale, Arkansas,
stating that the Improvements are suitable for human occupancy as commercial office space and
parking facilities, as planned.

     Completion Deadline. The term “Completion Deadline” shall mean twelve (12)
months after the date hereof, which is the date by which all construction, landscaping and other
work financed with the proceeds of the Note must be complete and the Certificate of Occupancy must
be issued.

     Contractor. The term “Contractor” shall mean the contractor, whether one or
more, approved by Lender, named in Exhibit A attached hereto.

     Conversion Date. The term “Conversion Date” shall mean the date which is the
earlier of (i) twelve (12) months after the date hereof or (ii) the date on which Borrower elects
to commence making monthly payments of principal and interest based upon a twenty five (25) year
amortization period.

     Debtor Relief Laws. The term “Debtor Relief Laws” shall mean any applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization,
fraudulent conveyance or similar laws affecting the rights or remedies of creditors generally, as
in effect from time to time.

     Default Rate. 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.

     Environmental Laws. The term “Environmental Laws” shall mean any and all
federal, state and local statutes, ordinances, laws, common law, regulations, rules, orders,
decrees or codes relating to any Hazardous Substance, or otherwise relating to pollution or
protection of the environment including but not limited to the Federal Environmental Pesticide
Control Act, the Resource Conservation Recovery Act of 1976 as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended, the Clean Air Act as
amended, the Endangered Species Act, the Clean Water Act, the Toxic Substances Control Act, any
“Superlien” laws, and the Safe Drinking Water Act, as now or any time hereafter in effect, provided
that none of the specific statutes cited herein shall be construed to limit the broad scope of this
definition.

     Event of Default. The term “Event of Default” shall mean:

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          (a) A failure by Borrower to make any payment of principal or interest on the Note within ten
(10) days after such payment is due;

          (b) A failure by Borrower to comply with any of the other terms or conditions specified herein
or in any other Loan Instrument;

          (c) A failure by Borrower to perform, observe or comply with any of the terms, covenants,
conditions, or provisions of the Construction Contract subject to the applicable cure periods as
may be set forth in such contract;

          (d) The incorrectness in any material respect of any representation or warranty made by
Borrower to Lender in any of the Loan Instruments;

          (e) The cessation of the construction of the Improvements, other than for Force Majeure Events
(as defined in Section 4.03), for more than fifteen (15) consecutive days without the
written consent of Lender;

          (f) A failure of any of the materials incorporated into the Improvements to substantially
comply with the Plans, any Governmental Requirements, or the requirements of any
lessee, if applicable;

          (g) A survey or plat shall show that (i) any Improvement is not entirely within the boundary
lines of the Land and any setback lines pertaining thereto, (ii) any Improvement encroaches upon
any public road or waterway (except as authorized by permit or competent Governmental Authority),
easement (except as approved by the owner of such easement and any Governmental Authority having
jurisdiction), right-of-way, street or any adjoining property, (iii) any Governmental Requirement
has been breached;

          (h) An inability of Borrower to satisfy any condition specified herein as precedent to the
obligation of Lender to make an Advance after an Application for Advance has been submitted
by Borrower to Lender, except for such unsatisfied conditions which the making of the Advance would
allow Borrower to satisfy;

          (i) The Inspecting Architect/Engineer if any, shall at any time certify to Lender in writing
that the Improvements are not, at the date of such certificate, being constructed with reasonable
diligence in a good and workmanlike manner in accordance with the Plans;

          (j) Any Governmental Authority shall commence proceedings to condemn all or any material part
of the Premises;

          (k) Borrower shall generally not pay its debts as they become due or shall admit in
writing its inability to pay its debts, or shall make a general assignment for the benefit of
creditors;

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          (l) Borrower shall commence any case, proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of Borrower or its debts under any
Debtor Relief Laws;

          (m) Any case, proceeding or other action is commenced against Borrower seeking to have an
order for relief entered against Borrower, as debtor, or seeking a reorganization, arrangement,
adjustment, liquidation, dissolution or composition of Borrower or its debts under Debtor Relief
Laws, or seeking an appointment of a receiver, trustee, custodian, conservator, or liquidator or
other similar official for Borrower or for all or any of the Premises, or any other property of
Borrower, and such case, proceeding or other action (i) results in the entry of an order for relief
against Borrower or (ii) is not dismissed within sixty (60) days;

          (n) Borrower shall have concealed, removed, or permitted to be concealed or removed, any part
of its property, with intent to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or shall have made any transfer of any part of its property to or for
the benefit of a creditor at a time when other creditors similarly situated have not been paid; or
shall have suffered or permitted, while insolvent, any creditor to obtain a lien upon any of its
property through legal proceedings or distraint which is not vacated within sixty (60) days from
the date thereof;

          (o) The liquidation, termination, or dissolution of Borrower; or

          (p) Borrower shall maintain operating accounts or other depository relationships with a
financial institution other than Lender.

     Notwithstanding the foregoing, none of the events listed above except those listed in
subsections (a), (e), (h), (i), (j), (k), (1), (m), (n), (o) or (p), or the failure of Borrower to
insure the Premises, shall constitute an Event of Default until Lender shall have given Borrower
written notice of the occurrence of such event, and Borrower shall have failed to cure same to
Lender’s satisfaction within thirty (30) days after the date of such notice; provided, if the event
is not reasonably susceptible to cure within such thirty (30) day period and Borrower diligently
pursues the cure of such event, Lender shall extend the cure period as is reasonably necessary for
the completion of the cure.

     Financial Statements. The term “Financial Statements” shall mean such
balance sheets, profit and loss statements, statements of cash flows, reconciliations of capital
and surplus, changes in financial condition, schedules of sources and applications of funds,
operating statements with respect to the Premises, rent rolls, statements of changes in equity, tax
returns, and other financial information of Borrower, as shall be reasonably required by Lender,
from time to time, which statements, if required by Lender, shall be certified to and/or audited by
an independent certified public accountant.

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     Financing Statements. The term “Financing Statements” shall mean and include
all such Uniform Commercial Code financing statements and continuation statements as Lender shall
require, duly executed by Borrower or others, to give notice of and perfect or to continue
perfection of Lender’s security interest in all personal property and fixtures constituting a part
of the Premises or otherwise constituting security for the Loan.

     Governmental Authority. The term “Governmental Authority” shall mean the
United States, the State of Arkansas, Washington County, the City of Springdale, or any other
political subdivision in which the Land is located, and any other political subdivision, agency,
department, commission, board, court or instrumentality which now or hereafter has jurisdiction
over Lender, Borrower, or the Premises.

     Governmental Permits. The term “Governmental Permits” shall mean all
certificates, licenses, permits, approvals and no-action letters from any Governmental Authority
acquired to evidence full compliance by Borrower and conformance of the Premises with all
Governmental Requirements applicable to the Premises, construction of the Improvements and the
promotion, management, operation, occupancy and use of the Premises as a warehouse facility or
otherwise in furtherance of the business purposes of Borrower.

     Governmental Requirements. The term “Governmental Requirements” shall mean
all laws, ordinances, rules, regulations, orders and decrees of any Governmental Authority
applicable to Borrower, or the Premises, including but not limited to, those related to zoning,
building restrictions, safety, environmental protection, and accessibility to the disabled.

     Hazardous Substance. The term “Hazardous Substance” shall mean any toxic
substance or waste pollutant, hazardous substance or waste, contaminant, special waste, industrial
substance or waste, petroleum or petroleum derived substance or waste, or any toxic or hazardous
constituent of any such substance or waste, including without limitation any such substance
regulated under or defined by Environmental Laws (as defined herein) and including but not limited
to: (i) any “hazardous waste” as defined by the Resource Conservation Recovery Act of 1976 (42
U.S.C. Section 6901 et seq., as amended from time to time, and regulations promulgated thereunder;
(ii) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Section 9601 et seq., (“CERCLA” or “Superfund”), as amended
from time to time, and regulations promulgated thereunder; (iii) asbestos; (iv) polychlorinated
biphenyls; (v) any petroleum-derived products; (vi) underground storage tanks, whether empty,
filled or partially filled with any substance; (vi) materials to be reclaimed, recycled, and
reconditioned; and (vii) any other materials which would be considered detrimental to the value,
safety or usefulness of the Mortgaged Property if spilled, released, leaked, or disposed of
thereon.

     Improvements. The term “Improvements” shall mean all structural
components and permanent enhancements of the Land, including but not limited to warehouse and
warehouses, buildings, additions, parking facilities, equipment to be installed in or on the Land
or buildings so as

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to become a fixture, all finish-out, paving, landscaping, fencing and other enhancements of
whatever nature situated, placed or constructed on the Land, the construction of which is required
to properly develop the Land as contemplated in the Plans, and any other improvements the parties
determine to erect.

     Indemnification Agreement. The term “Indemnification Agreement” shall mean
the Indemnification Agreement (Environmental, ADA and Other Governmental Requirements) dated of
even date herewith, executed and delivered by Borrower for the benefit of Lender.

     Inspecting Architect/Engineer. The term “Inspecting Architect/Engineer” shall
mean the Inspecting Architect/Engineer named on Exhibit A attached hereto. If an
Inspecting Architect/Engineer is not named in Exhibit A, the designation of such Inspecting
Architect, and its (his) approval by Lender, shall be an additional condition precedent to any
Advance after the initial Advance, whether initial or subsequent.

     Land. The term “Land” shall mean the real property described in Exhibit
B attached hereto and incorporated herein by reference.

     Lender. The term “Lender” shall mean the Lender named in the introductory
paragraph of this Loan Agreement.

     Loan. The term “Loan” shall mean the loan contemplated by this Agreement in
the maximum principal amount of the lesser of (i) One Million Nine Hundred Thirty Two Thousand and
No/100 Dollars ($1,932,000) or (ii) so much thereof as may be advanced by Lender to Borrower as
evidenced by the Note.

     Loan Instruments. The term “Loan Instruments” shall include this Agreement,
the Note including all renewals, extensions and modifications thereof), the Mortgage, each
Application for Advance, the Assignment of Leases and Rents, the Financing Statements, and all
other documents and security instruments executed pursuant hereto or in connection herewith, or as
evidence of or security for payment of the Loan or of performance of Borrower’s obligations under
this Loan Agreement or other Loan Instruments.

     Loan/Value Ratio. The term “Loan/Value Ratio” shall mean the ratio of the
amount of the Loan to the value of the Land and Improvements which is shown on the Appraisal, which
ratio will not exceed the percentage set forth on Exhibit A hereto; at no time shall Lender
be required to make any Advance which would cause the Loan to exceed such percentage times the
value of the Land and Improvements shown on the Appraisal or cause Lender to violate any law, rule
or regulation to which Lender is subject, limiting the amount that may be advanced by Lender as
contemplated by this Agreement.

     Mortgage. The term “Mortgage” shall mean the Construction Mortgage,
Security Agreement and Fixture Filing (Secures Future Advances) dated of even date herewith
covering and encumbering the Premises and securing the payment of the Note and the payment and
performance

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of all obligations specified in the Mortgage and this Loan Agreement, and evidencing a valid
and enforceable lien on the Land.

     Note. The term “Note” shall mean the Promissory Note from Borrower to Lender
dated of even date herewith, in the amount of and evidencing the Loan, bearing interest as therein
set forth.

     Plans. The term “Plans” shall mean the final drawings and specifications for
the construction of the Improvements, approved in writing by Lender and Borrower.

     Preliminary Budget. The term “Preliminary Budget” shall mean a schedule
prepared by Borrower and approved by Lender (once approved, the “Approved Budget”)
reflecting the estimated cost of each item of work or material required to complete the
Improvements, together with all related costs and expenses, including interest and professional
fees, and together with any and all amendments or supplements to such budget approved in writing by
Lender. If not attached hereto, approval of the Preliminary Budget by Lender shall be an
additional condition precedent to an Advance, whether first or subsequent.

     Premises. The term “Premises” shall mean the Land, the Improvements, and all
fixtures, equipment and other associated personal property, tangible or intangible, including all
property defined as “Mortgaged Property” as that term is defined in the Mortgage.

     Survey. The term “Survey” shall mean a current on the ground ALTA certified
survey of the Land performed by a surveyor duly licensed as such in the State of Arkansas,
acceptable to Lender, with such requirements as may be requested by Lender, and/or a recorded plat
or map of the Land, as required by Lender, which such plat or map shall be approved and accepted by
the Title Company and all Governmental Authorities having jurisdiction of the Land.

     Title Company. The term “Title Company” shall mean the Title Company named on
Exhibit A attached hereto.

     Title Insurance. The term “Title Insurance” shall mean a title insurance
commitment, binder, or policy and any endorsements thereto as Lender may require, in the amount of
the Loan, insuring that the Mortgage constitutes a valid first priority lien covering the Land and
the Improvements, subject only to those exceptions and encumbrances which Lender may approve,
issued by the Title Company.

     Title Insurance Policy. The term “Title Insurance Policy” shall mean
an ALTA Loan Policy in the amount of the Loan insuring that the Mortgage constitutes a valid first
and prior lien covering the Land and the Improvements and is subject to only those exceptions and
encumbrances which Lender may approve in writing, issued by the Title Company, such Title Insurance
Policy to provide Lender with gap, survey and lien coverage, and include such endorsements and
additional coverage as Lender shall reasonably request.

     UCC. The term “UCC” shall mean the Uniform Commercial Code as currently in
force in

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the State of Arkansas, as it may be subsequently amended or superseded.

     The following terms shall have the respective meanings ascribed to them in the Uniform
Commercial Code as enacted and in force in the State of Arkansas: accessions, accounts,
continuation statement, equipment, financing statement, fixtures, general intangibles, personal
property, proceeds, security interest and security agreement.

ARTICLE II

ADVANCES OF THE LOAN

     2.01 Commitment of Lender. In reliance upon and induced by the representations,
warranties and covenants of Borrower contained in the Loan Instruments and subject to the
conditions hereof, in accordance with this Agreement and provided that an Event of Default has not
occurred, Lender will make Advances to Borrower in accordance with the terms of this Loan
Agreement. Borrower will not under any circumstances be entitled to request, and Lender will not
under any circumstances be obligated to advance funds in excess of the principal amount of the
Loan.

     2.02 Interest on the Loan. Interest on the Loan, at the rate(s) specified in the
Note, shall be computed on the unpaid principal balance which exists from time to time and shall be
computed with respect to each Advance only from the date of such Advance and only as to the portion
of each Advance which does not constitute any portion of Borrower’s Deposit.

     2.03 Advances.

          (a) Advances for the payment of costs of labor, materials, and services supplied for the
construction of the Improvements and the other items shown in the Approved Budget for the Loan
shall be made by Lender to Borrower from time to time as construction of the Improvements
progresses, but in no event more frequently than specified on Exhibit A attached hereto.
It is hereby specifically provided and Lender hereby reserves the right to make Advances which are
allocated to any of the designated items in such Preliminary Budget or Approved Budget for such
other purposes or in such other proportions as Lender may, in its reasonable discretion and in
accordance with the approved Plans and Specifications, deem necessary or desirable. Borrower may
not reallocate items of cost or change the Approved Budget without the prior written consent of
Lender; provided, however, that Borrower shall have the right to reallocate items of cost if it can
demonstrate, to the satisfaction of Lender, that it has achieved a cost saving in a particular
designated item in the Approved Budget. In no event shall Lender be required to make any Advance
for payment of any item not included in the Preliminary Budget or the Approved Budget.

          (b) Each time Borrower shall desire to receive an Advance, Borrower shall deliver to
Lender an Application for Advance in respect thereto. Each item to be paid from such Advance shall
be fully described, itemized and categorized in such Application for Advance, or in the explanation
or documents attached thereto. If Lender requires disbursement and Advances under the

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Loan through the Title Company, the Application for Advance with accompanying Certificate for
Payment, shall be directed to the Title Company at the address shown on Exhibit A hereto,
with a copy to Lender. If Lender makes disbursements directly to Borrower, each such Application
for Advance shall be submitted directly to Lender at the address appearing in the introductory
paragraph of this Loan Agreement.

          (c) The Advances which Lender is obligated to make under the Loan shall not at any time exceed
ninety percent (90%) of the gross aggregate amount theretofore payable to the Contractor as shown
on the latest application for payment for work done and materials furnished by the Contractor (as
provided under the Construction Contract) and only to the extent that payment has been approved as
due and payable to the Contractor by the Architect.

          (d) Lender shall have ten (10) business days after receipt of an Application for Advance
within which to conduct inspections to satisfy itself that the work covered by the Application for
Advance has been or is being accomplished in a satisfactory manner; provided, Lender shall not be
obligated to make any Advance until such time as the Inspecting Architect/Engineer has inspected
and approved the work covered by an Application for Advance.

     If all conditions precedent to the requested Advance have been complied with to the
satisfaction of Lender and the Title Company, Lender shall advance the amount set forth in such
Application for Advance either directly to Borrower or through the Title Company, at its
discretion, within said ten (10) day period. Each Advance made pursuant to an Application for
Advance for payment of any other items set forth in the Approved Budget shall be advanced to
Borrower (or through the Title Company, at Lender’s discretion) unless an Event of Default has
occurred and is continuing hereunder, in which event Advances may be paid to Borrower (or through
the Title Company, at Lender’s discretion) or expended for Borrower’s account, as Lender shall
elect.

          (e) The payment of an Advance by Lender and/or the Title Company pursuant to any Application
for Advance shall not constitute an approval or acceptance of the work or materials, nor be binding
upon Lender, except to the extent that the facts actually are as represented in such Application
for Advance when so approved, nor shall such approval give rise to, and Borrower hereby agrees that
Lender shall be relieved from, any liability or responsibility relating to: (1) the quality of the
work, the quantity of the work, the rate of progress in completion of the work, or the sufficiency
of materials or labor being supplied in connection therewith; and (2) any errors, omissions,
inconsistences or other defects of any nature in the Plans or the Improvements.

          (f) Any and each Advance of the proceeds of the Loan shall be made only in accordance
with the terms and conditions of the Construction Contract and the Approved Budget, and subject to
the terms and conditions of this Loan Agreement. All expenses of making any Advance through the
Title Company shall be borne by Borrower.

     2.04 Intentionally Deleted.

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     2.05 Conditions Precedent to the First Advance. As a condition precedent to the first
Advance hereunder, Borrower must have confirmed and agreed to and executed and/or delivered (or
cause to have been delivered) all of the following to Lender:

          (a) A copy of Borrower’s Articles of Incorporation, along with a copy of Borrower’s Bylaws and
any other company governance agreements of Borrower, and a certified copy of a resolution of
Borrower authorizing the Loan, the transactions in furtherance of the Loan and the execution and
delivery of the Loan Instruments, and stating the names of the persons authorized to execute the
Loan Instruments;

          (b) The Note;

          (c) The Mortgage, the Assignment of Leases and Rents, the Financing Statements and the
Indemnification Agreement;

          (d) The Mortgage and the Assignment of Leases and Rents have been recorded in the office of
the Circuit Clerk and Ex-Officio Recorder for Washington County, Arkansas, with all filing fees
therefor paid, all prior to the commencement of any construction or site development on any part of
the Land or the placing of any equipment, supplies or material on the Land, and appropriate
Financing Statements have also been filed in the office of the Arkansas Secretary of State;

          (e) A paid Title Insurance Policy;

          (f) Insurance Policies covering builder’s risk, fire and extended coverage risks, and general
comprehensive public liability, with loss payable certificates in favor of Lender, in accordance
with the terms of this Agreement and the Mortgage;

          (g) The Plans;

          (h) The Appraisal;

          (i) The Approved Budget (the Preliminary Budget);

          (j) A Compliance Letter;

          (k) A flood hazard letter, in form satisfactory to Lender, completed by Borrower’s
surveyor or Architect, certifying that no part of the Premises lies within a flood hazard or flood
prone area or, alternatively, a certificate of flood insurance in accordance with Section
4.26 hereof;

          (l) Application for Advance;

          (m) Affidavits for indemnity agreements and any and all affidavits required by the

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Title Company to issue the Title Insurance Policy;

          (n) Evidence that all necessary action on the part of Borrower has been taken with
respect to the execution and delivery of Loan Instruments and the consummation of the transactions
contemplated thereby so that the Loan Instruments provide binding and enforceable obligations upon
Borrower and all other persons or entities executing and delivering the Loan Instruments;

          (o) A copy of all leases or letters of intent of the Improvements, if any, certified by
Borrower as being true and correct, and in all respects acceptable to Lender in form and substance;

          (p) Borrower shall transfer to Lender and continuously maintain thereafter a depository
relationship with Lender;

          (q) The Survey;

          (r) A copy of the most recently prepared Phase I Environmental Site Assessment with respect to
the Land and existing Improvements thereon;

          (s) Evidence of approval by the City of Springdale, Arkansas of the large scale development
plans with respect to the Land, the Improvements and the Loan Purposes;

          (t) All documents in connection with this Loan shall be in a form and context acceptable to
Lender’s counsel, including without limitation, an opinion of Borrower’s counsel. All legal fees
for document preparation are at Borrower’s expense.

          (u) Borrower shall furnish to Lender annual operating statements and a rent roll,
if any, on the Premises. Furthermore, Borrower shall also furnish annual financial statements and
Federal income tax returns; and

          (v) Prior to the Completion Date, Lender shall be allowed to display and place on site a
construction sign with cost of said sign being paid by Lender.

     2.06 Conditions to Subsequent Advances After the First Advance. As a condition
precedent to each Advance under the Loan other than the first Advance, in addition to all other
requirements herein, Borrower must satisfy the following requirements and, if required by Lender,
deliver to Lender evidence of such satisfaction:

          (a) All conditions precedent to the first Advance shall have been satisfied;

          (b) There shall then exist no Event of Default;

          (c) The representations and warranties made in this Loan Agreement shall be true

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and correct in all material respects on and as of the date of each Advance, with the same effect as
if made on that date;

          (d) Borrower will procure and deliver to Lender, if required by Lender, releases or waivers of
mechanic’s liens and receipted bills with respect to the preceding month’s disbursement showing
payment of all parties who have furnished materials or services or performed labor of any kind in
connection with the construction of any of the Improvements;

          (e) The Title Insurance shall be endorsed and extended, if available under local rules, to
cover each Advance with no additional title exceptions objectionable to Lender;

          (f) There shall have been delivered to Lender evidence satisfactory to Lender that the Loan
proceeds not yet advanced will be sufficient to pay for completion of all the Improvements by the
Completion Deadline in accordance with the Plans, or if such proceeds are not adequate,
arrangements currently satisfactory to Lender, by the making of a Borrower’s Deposit or otherwise,
shall have been made to provide sufficient funds necessary to complete the Improvements by the
Completion Deadline in accordance with the Plans. It is expressly understood and agreed that the
Loan shall at all times be “in balance.” The Loan shall be deemed in balance only when the total
amount of the Loan not yet advanced, plus the retainage and any Borrower’s Deposit or other agreed
reserves, shall equal or exceed the estimated cost to complete the Improvements, and it is
estimated that upon completion of the Improvements, the Land and the Improvements will together
have a value that satisfies the Loan/Value Ratio;

          (g) The work covered by each Application for Advance and all work preliminary thereto, shall
have been accomplished or be in the process of accomplishment to the satisfaction of Lender, and
the Inspecting Architect/Engineer, if any; and

          (h) All Improvements are constructed in compliance with Title III of the Americans with
Disabilities Act (ADA). environmental laws and all local building and zoning ordinances.

     2.07 Final Advance. The ten percent (10%) of the Loan proceeds not advanced during the
course of construction (i.e., the retainage) shall not be paid to Borrower until Lender has
determined that the provisions of Section 2.06 have been satisfied in all respects and Lender has
received the following:

          (a) A written certification by the Contractor, that the Improvements required or
contemplated by the Plans and the Approved Budget have been fully completed in accordance
therewith, that direct connection has been made to all appropriate utility facilities, and that the
Improvements are ready for occupancy; and

          (b) Evidence that all laborer’s and materialman’s claims for labor or materials rendered or
delivered in connection with the construction of the Improvements have been paid (or that adequate
provision for the payment of same has been made), including an Affidavit of Borrower

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and the Contractor to the effect that all amounts due including, all subcontracts, have been
paid in full (or that adequate provision, satisfactory to Lender, for the payment of same has been
made), and a final date down to the Title Policy for the full amount of the Loan, or so much
thereof as will be advanced to pay all costs associated with the construction of the Improvements.

     2.08 Reallocation of Approved Budget. Lender reserves the right to make Advances
which are allocated to any of the designated items in the Approved Budget for such other purposes
or in such different proportions as Lender may, in its reasonable discretion, deem necessary or
advisable. Borrower may not reallocate items of cost or change the Approved Budget without the
prior written consent of Lender, which consent shall not be unreasonably withheld.

     2.09 No Waiver. No Advance shall constitute a waiver of any condition precedent to
the obligation of Lender to make any further Advance or preclude Lender from thereafter declaring
the failure of Borrower to satisfy such condition precedent to be an Event of Default.

     2.10 Conditions Precedent for the Benefit of Lender. All conditions precedent to the
obligation of Lender to make any Advance are imposed hereby solely for the benefit of Lender, and
no other party may require satisfaction of any such condition precedent or be entitled to assume
that Lender will refuse to make any Advance in the absence of strict compliance with such
conditions precedent. All requirements of this Loan Agreement may be waived by Lender, in whole or
in part, at any time.

     2.11 Subordination. Lender shall not be obligated to make, nor shall Borrower be
entitled to request, any Advance until such time as Lender shall have received, to the extent
requested by Lender, subordination agreements from the Contractor and all other persons furnishing
labor, materials, or services for the design or construction of the Improvements, subordinating to
the lien of the Mortgage any lien, claim, or charge they and those contracting with them may have
against Borrower or the Land.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BORROWER

     Borrower hereby represents and warrants to Lender as follows:

     3.01 Financial Statements. Any Financial Statements of Borrower which maybe
delivered to Lender pursuant to this Loan Agreement will be true, correct, and complete in all
material respects as of the dates specified therein and fully and accurately present the financial
condition of Borrower as of the dates specified.

     3.02 Due Organization. Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has authority to transact business and
is in good standing in the State of Arkansas. Borrower has the power and authority to carry on its
business and to enter into and perform its obligations under the Loan Instruments;

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     3.03 Authority to Execute Documents. The execution, delivery and performance by
Borrower of this Loan Agreement and the other Loan Instruments to which Borrower is a party have
been duly authorized by Borrower, and such execution, delivery and performance have not and will
not contravene or violate Borrower’s Articles of Incorporation, Bylaws or any other governing
agreement.

     3.04 No Pending or Threatened Litigation, Suits. Actions. Etc. Except as may be
disclosed in the Borrower’s most recent annual or quarterly reports on file with the Securities and
Exchange Commission, there are no material actions, suits, or proceedings pending or threatened in
any court or before or by any Governmental Authority against or affecting Borrower, the Land or the
Improvements, or involving the validity, enforceability, or priority of any of the Loan
Instruments, at law or in equity. The consummation of the transactions contemplated hereby, and the
performance of any of the terms and conditions hereof and of the other Loan Instruments, will not
result in a breach of, or constitute a default in, any mortgage, deed of trust, lease, promissory
note, loan agreement, credit agreement, partnership agreement, or other agreement to which Borrower
is a party or by which Borrower or the Land may be bound or affected.

     3.05 Valid and Binding Obligation. All of the Loan Instruments, and all other
documents referred to herein to which Borrower is a party, upon execution and delivery will
constitute valid and binding obligations of Borrower, enforceable in accordance with their terms.

     3.06 Title to the Land. Borrower holds full legal and equitable title to the Land,
subject only to title exceptions set forth in the Title Insurance accepted by Lender in Lender’s
sole discretion.

     3.07 COMMENCEMENT OF CONSTRUCTION. AS OF THE DATE HEREOF, NO WORK OF ANY KIND
(INCLUDING THE DESTRUCTION OR REMOVAL OF ANY EXISTING IMPROVEMENTS, SITE WORK, CLEARING, GRUBBING,
DRAINING, OR FENCING OF THE LAND), AND INCLUDING BUT NOT LIMITED TO ACTIVITY DESCRIBED IN ARK. CODE
ANN. §18-44-101 (A)(2), HAS COMMENCED OR HAS BEEN PERFORMED ON THE LAND, NO EQUIPMENT OR MATERIAL
HAS BEEN DELIVERED TO OR UPON THE LAND FOR ANY PURPOSE WHATSOEVER, NO OTHER ACTIVITY HAS TAKEN
PLACE ON THE LAND WHICH WOULD INDICATE THAT CONSTRUCTION HAS BEGUN OR WILL SOON BEGIN, AND NO
CONTRACT (OR MEMORANDUM THEREOF) FOR THE SUPPLYING OF LABOR, MATERIALS, OR SERVICES FOR THE
CONSTRUCTION OF THE IMPROVEMENTS HAS BEEN RECORDED IN THE MECHANIC’S LIEN OR OTHER APPROPRIATE
RECORDS IN THE COUNTY WHERE THE LAND IS LOCATED, EXCEPT AS DISCLOSED IN WRITING BY BORROWER TO
LENDER AND THE TITLE COMPANY.

     3.08 Disclosure. There is no fact known to Borrower that Borrower has not disclosed
to Lender in writing or in the Borrower’s most recent annual or quarterly reports on file with the
Securities and Exchange Commission that could adversely affect the Land, or the business or

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financial condition of Borrower.

     3.09 Inducement to Lender. The representations and warranties contained in the Loan
Instruments are made by Borrower as an inducement to Lender to make the Loan and Borrower
understands that Lender is relying on such representations and warranties and that such
representations and warranties shall survive any bankruptcy proceedings involving Borrower or the
Premises.

     3.10 Environmental, Safety and ADA Matters. With respect to the operations of
Borrower on the Premises, Borrower hereby represents and warrants to Lender that:

          (a) Such operations comply in all material respects with all applicable Environmental Laws,
and all health and safety statutes and regulations, including but not limited to Title Ill of the
Americans with Disabilities Act (the “ADA”);

          (b) None of such operations are subject to any judicial or administrative proceedings
alleging the violation of any applicable Environmental Laws, or any health or safety statute or
regulation;

          (c) None of such operations are the subject of investigation by any Governmental Authority
regarding the improper transportation, storage, disposal, generation or release into the
environment of any Hazardous Substances, the results of which may adversely affect Borrower’s
business, operations, financial condition, property, or adversely affect the value of the
collateral security;

          (d) No notice or report under any applicable law or regulation indicating a past or present
spill or release into the environment of any Hazardous Substance has been filed or is required to
be filed by Borrower; and

          (e) Neither Borrower, nor to the best of Borrower’s knowledge, any other person or entity
whatsoever, has at any time transported, stored, disposed of generated or released any Hazardous
Substance into, upon, over or under the Land.

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ARTICLE IV

COVENANTS AND AGREEMENTS OF BORROWER

     Borrower hereby covenants and agrees as follows:

     4.01 Compliance with Governmental Requirements. Borrower shall timely comply with all
Governmental Requirements and deliver to Lender evidence thereof; if available, in the ordinary
course of business. Borrower assumes full responsibility for the compliance of the Plans and the
Premises with all Governmental Requirements and with sound building and engineering practices, and,
notwithstanding any approvals by Lender, Lender shall have no obligation or responsibility
whatsoever for the Plans or any other matter incident to the Land or the construction of the
Improvements.

     4.02 Construction Contract. Borrower shall become a party to no contract for the
performance of any work on the Land or for the supplying of any labor, materials, or services for
the construction of the Improvements except upon such terms and with such parties as shall be
approved in writing by Lender, such approval not to be unreasonably withheld or delayed. Copies of
all such contracts will be promptly delivered by Borrower to Lender. The construction contract
shall also provide that no change orders shall be effective without the prior written approval of
Lender, except for such changes which do not increase the cost of construction by more than Fifty
Thousand and No/l00 Dollars ($50,000.00) as to any one change, or One Hundred Thousand and No/l00
Dollars ($100,000.00) in the aggregate.

     4.03 Construction of the Improvements. Borrower shall commence construction of the
Improvements within thirty (30) days from the date hereof; and the construction of the Improvements
shall be prosecuted with diligence and continuity, in a good and workmanlike manner, and in
accordance with sound building and engineering practices, all applicable Governmental
Requirements, the Plans, and the requirements of any lessee or purchaser, if applicable. Borrower
shall not permit cessation of work for a period in excess of fifteen (15) consecutive days without
the prior written consent of Lender and shall complete construction of the Improvements on or
before the Completion Deadline, free and clear of all liens (except those as to which Borrower has
furnished a bond or other security acceptable to Lender and otherwise complied with the
requirements of Section 4.21). Notwithstanding anything which may be interpreted herein to
the contrary, if any (a) strikes, lockouts or labor disputes; (b) inability (other than financial
inability) to obtain labor or materials or reasonable substitutes therefor; or (c) acts of God,
unusual weather conditions, enemy or hostile action, governmental action, civil commotion, fire or
other casualty, condemnation or other conditions similar to those enumerated in this item (c)
beyond the reasonable control of Borrower occur (such items in (a)-(c) hereof being collectively
called “Force Majeure Events”) and no Event of Default exists under any of the Loan
Instruments, the occurrence of such Force Majeure Events shall not constitute an Event of Default
hereunder provided Borrower gives Lender written notice of any such Force Majeure Event within ten
(10) days after the occurrence thereof; provided, however, Borrower shall, regardless of the
occurrence of any Force Majeure Event, complete the Improvements on or before the Completion
Deadline.

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     4.04 Correction of Defects. Borrower shall correct or cause to be corrected (a) any
material defect in the Improvements, (b) any material departure in the construction of the
Improvements from the Plans, Governmental Requirements, or the requirements of any lessee or
purchaser, if applicable, or (c) any encroachment by any part of the Improvements, or any structure
located on the Land, on any easement, property line, or restricted area, or any encroachment by any
such structure on any building or setback line.

     4.05 Storage of Materials. Borrower shall cause all materials supplied for, or
intended to be utilized in, the construction of the Improvements, but not affixed to or
incorporated into the Improvements or the Land, to be stored on the Land or on Borrower’s adjacent
property or at such other location as may be reasonably approved by Lender in writing, with
adequate safeguards, as reasonably required by Lender, to prevent loss, theft, damage, or
commingling with other materials or projects.

     4.06 Inspection of the Land and Improvements. Borrower shall permit Lender, and its
agents and representatives, to enter upon the Land, the Improvements, and any location where
materials intended to be utilized in the construction of the Improvements are stored, during normal
business hours, for the purpose of inspection of the Land, the Improvements, and such materials.

     4.07 Notices by Governmental Authority; Fire and Casualty Losses, Etc. Borrower shall
timely comply with and promptly furnish to Lender true and complete copies of any official notice
or claim by any Governmental Authority pertaining to the Land or the Improvements. Borrower shall
promptly notify Lender of any fire or other casualty or any notice of taking or eminent domain
action or proceeding affecting the Land or Improvements.

     4.08 Special Account. Borrower shall maintain a special account with Lender, into
which all Advances and any Borrower’s Deposit (but no other funds), and excluding direct
disbursements made by Lender pursuant to Section 4.11 hereof; shall be deposited by
Borrower, and against which checks shall be drawn only for the payment of or reimbursement to
Borrower of: (a) costs of labor, materials, and services supplied for the construction of the
Improvements specified in the Approved Budget, and (b) other costs and expenses incident to the
Loan, the Land, the construction of the Improvements and acquisition of equipment to be attached to
the Land or Improvements so as to become a fixture, as specified in the Approved Budget.

     4.09 Application of Advances. Borrower shall disburse all Advances for payment of
costs and expenses specified in the Approved Budget, and for no other purpose.

     4.10 Borrower’s Deposit. If Lender reasonably determines at any time that the
unadvanced portion of the Loan will be insufficient for payment in full of (a) costs of labor,
materials, and services required for the construction of the Improvements, (b) other costs and
expenses specified in the Approved Budget, and (c) other costs and expenses required to be paid in
connection with the construction of the Improvements in accordance with the Plans, any Governmental
Requirements, or the requirements of any lessee or purchaser, if applicable, then Lender may
require Borrower to make

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a Borrower’s Deposit into the special account provided for in Section 4.08 above.

     4.11 Direct Disbursement and Application by Lender. Upon the occurrence of an Event
of Default and during the continuance thereof; Lender shall have the right, but not the obligation,
to disburse and directly apply the proceeds of any Advance to the satisfaction of any of Borrower’s
obligations hereunder or under the construction contract. Any Advance by Lender for such purpose
shall be part of the Loan and shall be secured by the Mortgage. Borrower hereby authorizes Lender
to hold, use, disburse, and apply the proceeds of the Loan and Borrower’s Deposit for payment of
costs of construction of the Improvements, expenses incident to the Loan and the Land, and the
payment or performance of any obligation of Borrower hereunder. Borrower hereby assigns and pledges
the proceeds of the Loan and the Borrower’s Deposit to Lender for such purposes. Lender may
advance and incur such expenses as Lender deems necessary for the completion of construction of the
Improvements and to preserve the Premises and any other security for the Loan, and such expenses,
even though in excess of the amount of the Loan, shall be secured by the Mortgage and be payable to
Lender upon demand. Lender may disburse any portion of any Advance at any time, and from time to
time, to persons other than Borrower for the purposes specified in this Section 4.11
irrespective of the provisions of Section 2.03 hereof; and the amount of Advances to which
Borrower shall thereafter be entitled shall be correspondingly reduced.

     4.12 Costs and Expenses. Borrower shall pay when due all costs and expenses required
by this Loan Agreement, including, without limitation, (a) all taxes and assessments applicable to
the Premises, (b) all fees for filing or recording the Loan Instruments, (c) all fees and
commissions lawfully due to brokers, salesmen, and agents in connection with the Loan or the
Premises, (d) all Title Insurance and title examination charges, including premiums for the Title
Insurance, (e) all survey costs and expenses, including the cost of the Survey, (f) all premiums
for the insurance policies, (g) the expenses and charges of any Inspecting Architect/Engineer,
appraiser or other professional appointed by Lender to make inspections of the Improvements in
connection with requests for Advances, and (h) all other reasonable costs and expenses, including
attorney’s fees, payable to third parties incurred by Lender and which Lender is herein authorized
or permitted to incur in connection with the consummation of the transactions contemplated by this
Loan Agreement.

     4.13 Additional Documents. Borrower shall execute and deliver to Lender, from time to
time as requested by Lender, such other documents as shall reasonably be necessary to provide the
rights and remedies to Lender granted or provided for by the Loan Instruments.

     4.14 Maintenance and Inspection of Books and Records. Borrower will maintain its
books and records in accordance with generally accepted accounting principles, consistently applied
Borrower shall permit Lender, at all reasonable times, to examine and copy the books and records of
Borrower pertaining to the Loan and the Premises, and all contracts, statements, invoices, bills,
and claims for labor, materials, and services supplied for the construction of the Improvements.

     4.15 No Liability of Lender. Lender shall have no liability, obligation, or
responsibility

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whatsoever with respect to the construction of the Improvements except to advance the Loan and
the Borrower’s Deposit pursuant to this Loan Agreement. Lender shall not be obligated to inspect
the Land or the construction of the Improvements, nor be liable for the performance or default of
Borrower, Architect, the Inspecting Architects/Engineers, Contractor, or any other party, or for
any failure to construct, complete, protect, or insure the Improvements, or for the payment of
costs of labor, materials, or services supplied for the construction of the Improvements, or for
the performance of any obligation of Borrower whatsoever. Nothing, including without limitation
the approval by Lender of the Approved Budget or the making of any Advance or acceptance of any
document or instrument, shall be construed as a representation or warranty, express or implied, to
any party by Lender.

     4.16 No Conditional Sale Contracts, Etc. Except for extruders that may be attached to
any of the Improvements, no fixtures shall be supplied, purchased, or installed for the
construction or operation of the Improvements pursuant to security agreements, conditional sale
contracts, lease agreements, or other arrangements or understandings whereby a security interest,
lien or title is retained by any party or the right is reserved or accrues to any party to remove
or repossess any materials, equipment, or fixtures intended to be utilized in the construction or
operation of the Improvements.

     4.17 Defense of Actions. Lender may (but shall not be obligated to) commence, appear
in, and defend any action or proceeding purporting to affect the Loan, the Premises, or the
respective rights and obligations of Lender and Borrower pursuant to this Loan Agreement. Lender
may (but shall not be obligated to) pay all necessary and reasonable expenses, including reasonable
attorneys’ fees and expenses incurred in connection with such proceedings or actions, which
Borrower agrees to repay to Lender upon demand.

     4.18 Assignment of Construction Contract. As additional security for the payment of
the Loan, Borrower hereby transfers and assigns to Lender all of Borrower’s right, title and
interest, but not its obligations, in, under, and to the construction contract, upon the following
terms and conditions:

          (a) Neither this assignment nor any action by Lender shall constitute an assumption by Lender
of any obligation under the construction contract, and Borrower shall continue to be liable for all
obligations of Borrower thereunder, Borrower hereby agreeing to perform all of its obligations
under the construction contract so long as Contractor is not in default thereunder; provided,
however, that regardless of whether Contractor is in default under the construction contract,
Borrower is still obligated to complete the Improvements according to the Plans and this Loan
Agreement. Borrower agrees to indemnify and hold Lender harmless against and from any loss, cost,
liability, or expense (including, but not limited to, reasonable attorneys fees) resulting from any
failure of Borrower to so perform;

          (b) For so long as an Event of Default has occurred and is continuing, if Borrower
fails to promptly take any action pertaining to the Premises after requested by Lender, Lender
shall

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have the right at any time (but shall have no obligation) to take in its name or in the name
of Borrower such action as Lender may at any time determine to be necessary or advisable to cure
any default under the construction contract or to protect the rights of Borrower or Lender
thereunder. Lender shall incur no liability if any action so taken by it or in its behalf shall
prove to be inadequate or invalid, if such action does not constitute negligence or, wilful
misconduct on Lender’s part, and Borrower agrees to hold Lender free and harmless against and from
any loss, cost, liability or expense (including, but not limited to, reasonable attorneys’ fees)
incurred in connection with any such action;

          (c) Borrower hereby irrevocably constitutes and appoints Lender as Borrowers attorney-in-fact,
in Borrower’s name or in Lender’s name, to enforce all rights of Borrower under the construction
contract, upon Borrower’s failure to promptly enforce the same, subject to the provisions of
paragraph (d) below;

          (d) Prior to an Event of Default, Borrower shall have the right to exercise its rights as
owner under the construction contract, provided that Borrower shall not cancel or amend the
construction contract or do or suffer to be done any act which would impair the security
constituted by this assignment without the prior written consent of Lender; and

          (e) This assignment shall inure to the benefit of Lender, its successors and assigns,
including any purchaser upon foreclosure of the Mortgage, any receiver in possession of the Land,
and any corporation formed by or on behalf of Lender which assumes Lender’s rights and obligations
under this Loan Agreement.

     4.19 Assignment of Plans. As additional security for the payment of the Loan,
Borrower hereby transfers and assigns to Lender all of Borrower’s right, title, and interest in and
to, but not its obligations under, the Plans and hereby represents and warrants to and agrees with
Lender as follows:

          (a) The schedule of the Plans delivered to Lender is a complete and accurate description of
the Plans;

          (b) The Plans are complete and adequate for the construction of the Improvements and there
have been no modifications thereof except as described in such schedule. The Plans shall not be
modified without the prior written consent of Lender, which consent by Lender shall not be
unreasonably withheld;

          (c) If an Event of Default has occurred and is continuing, Lender may use the Plans for any
purpose relating to the Improvements, including but not limited to inspections of construction and
the completion of the Improvements;

          (d) Lender’s acceptance of this assignment shall not constitute approval of the Plans
by Lender. Lender has no liability or obligation whatsoever in connection with the Plans and

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no responsibility for the adequacy thereof or for the construction of the Improvements
contemplated by the Plans. Lender has no duty to inspect the Improvements, and, if Lender should
inspect the Improvements, Lender shall have no liability or obligation to Borrower arising out of
such inspection. No such inspection nor any failure by Lender to make objections after any such
inspection shall constitute a representation by Lender that the Improvements are in accordance with
the Plans or constitute a waiver of Lender’s right thereafter to insist that the Improvements be
constructed in accordance with the Plans; and

          (e) This assignment shall inure to the benefit of Lender, its successors and assigns,
including any purchaser upon foreclosure of the Mortgage, any receiver in possession of the Land,
and any legal entity formed by or on behalf of Lender which assumes Lender’s rights and obligations
under this Loan Agreement.

     4.20 Prohibition on Assignment of Borrower’s Interest. Borrower shall not assign or
encumber any interest of Borrower hereunder without the prior written consent of Lender.

     4.21 Payment of Claims. Borrower shall promptly pay or cause to be paid when due all
costs and expenses incurred in connection with the Premises and the construction of the
Improvements, and Borrower shall keep the Premises free and clear of any liens, charges, or claims
other than the lien of the Mortgage and other liens approved in writing by Lender. Notwithstanding
anything to the contrary contained in this Loan Agreement, Borrower may contest (a) the validity or
amount of any claim of any contractor, consultant, architect, or other person providing labor,
materials, or services with respect to the Premises, (b) any tax or special assessments levied by
any Governmental Authority, and (c) the enforcement of or compliance with any Governmental
Requirements, and such contest on the part of Borrower shall not be a default hereunder and shall
not release Lender from its obligations to make Advances hereunder; provided, however, that during
the pendency of any such contest Borrower shall furnish to Lender and Title Company an indemnity
bond with corporate surety satisfactory to Lender and Title Company or other security acceptable to
them in an amount equal to the amount being contested plus a reasonable additional sum to cover
possible costs, interest, and penalties, and provided further that Borrower shall pay any amount
adjudged by a court of competent jurisdiction to be due, with all costs, interest, and penalties
thereon, before such judgment becomes a lien on the Premises.

     4.22 Restrictions Affecting the Land. Borrower shall not impose any restrictive
covenants or encumbrances upon the Premises, or execute or file any subdivision plat, master deed
or other document, or any amendment thereto, affecting the Premises, without the prior written
approval of Lender, which approval may be granted or withheld by Lender in its sole and absolute
discretion.

     4.23 Financial Statements. Borrower shall deliver to Lender:

          (a) as soon as available and in any event within ninety (90) days after the end of each
fiscal year of Borrower, tax returns for Borrower prepared by a certified public accountant;

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          (b) forthwith upon the occurrence of any Default or Event of Default, and in any event within
five (5) days after knowledge of such occurrence, a certificate of an officer of Borrower setting
forth the details thereof and the action which Borrower is taking or proposes to take with respect
thereto;

          (c) promptly upon the filing thereof with the Securities and Exchange Commission, and in any
event within ten (10) days after such filing, copies of all financial statements, reports, and
other material information so filed; and

          (d) from time to time, with reasonable promptness, upon being informed by Lender of the
purpose of the inquiry, such further information regarding the business, affairs and financial
position of Borrower as Lender may reasonably request.

     4.24 Intentionally Deleted.

     4.25 Tax Receipts. Borrower shall furnish Lender with receipts or tax statements
marked “Paid” to evidence the payment of all taxes levied on the Land on or before fifteen (15)
days prior to the date such taxes become delinquent.

     4.26  Insurance. Borrower will deposit and maintain with Lender throughout the term
of the Loan the following insurance policies (the “Insurance Policies”), premiums prepaid,
with insurance companies satisfactory to Lender, in such amounts and against such risks as shall be
reasonably required by Lender, including, but not limited to, the following:

          (a) Builder’s risk insurance, and extended coverage insurance against loss or damage by fire,
lightning, windstorm, hail, explosion, riot, vandalism, malicious mischief; riot attending a
strike, civil commotion, aircraft, vehicles, smoke and other risks from time to time included under
“extended coverage” policies, in an amount not less than (i) the total construction costs reflected
in the Preliminary Budget, (ii) the outstanding principal amount of the Note, or (iii) or one
hundred percent (100%) of the then-appraised value of the Premises, whichever is greater, but in no
event less than the amount required to avoid co-insurance, and including, to the extent possible,
(A) an Agreed Amount Endorsement, (B) a Replacement Cost Endorsement, (C) a Standard Mortgagee
Clause (Lender and any party designated by Lender to be named as mortgagee and loss payee), and (D)
an Inflation Guard Endorsement. Provided there is not then existing any Event of Default hereunder
or under the Mortgage, Lender shall make the proceeds of such policy or policies available to
Borrower for repair and restoration of the Improvements in accordance with the terms of the
Mortgage.

          (b) Appropriate worker’s compensation or other insurance against liability arising from claims
or workers in respect of and during the period of any work on or about the Premises.

          (c) General public liability and property damage insurance applicable to the Premises
in amounts approved from time to time by Lender, which insurance shall provide coverage to Lender
and any other parties designated by Lender as additional insureds.

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          (d) Flood and mudslide insurance in an amount equal to the lesser of (i) the outstanding
principal balance of the Loan from time to time, or (ii) the maximum limit of coverage made
available with respect to the Premises under the Federal Flood (insurance Program; provided, that
such flood and mudslide insurance shall not be required if Borrower shall provide Lender with
evidence satisfactory to Lender that the Premises are not situated within an area identified by the
Secretary of Housing and Urban Development or by any other governmental department, agency, bureau,
board or instrumentality as an area having special flood or mudslide hazards, and that no flood
insurance is required on the building site by any regulations under which Lender is governed. All
insurance policies shall name Lender and parties designated by Lender as loss payee, as their
respective interests may appear, and shall contain an agreement to notify Lender in writing at
least thirty (30) days prior to cancellation or non-renewal of such policies.

     4.27 Payment of Taxes; Company Existence; Maintenance of Properties; Insurance.
Borrower will:

          (a) pay and discharge promptly all taxes, assessments and other governmental charges imposed
upon it or any of its property; provided, however, that Borrower shall not be required to pay any
such tax, assessment or other governmental charge the payment of which is being contested in good
faith and by appropriate proceedings and for which adequate reserves have been provided, except
that Borrower will pay or cause to be paid all such taxes, assessments and governmental charges
forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security
therefor, unless such foreclosure is stayed by the filing of an appropriate bond;

          (b) do all things necessary to preserve and keep in full force and effect its limited
liability company existence, rights and franchise and to be duly qualified to do business in all
jurisdictions where the nature of its business requires such qualification;

          (c) maintain and keep its properties as a whole in good repair, working order and condition;
and

          (d) insure with responsible and reputable insurance companies its assets and business in such
manner and to such extent as is customary with similar business enterprises of comparable size and
subject to comparable hazards.

     4.28 Current Survey. Borrower will furnish to Lender at any stage of
construction, upon request from Lender, a current Survey reflecting that the Improvements and all
other improvements on the Land are entirely within the boundary lines and setback lines of the Land
and do not encroach upon any public road or waterway (except only pursuant to a valid permit of
competent Governmental Authority), easement (except as approved by the owner of such easement and
any Governmental Authority having jurisdiction), right-of-way or adjoining property, or breach or
violate any covenant, condition, or restriction affecting the Land or any Governmental
Requirements, and that no adjoining structure encroaches upon the Land.

-24-

 

     4.29 Title Update. Borrower will furnish to Lender, as and when requested by Lender,
a certificate issued by the Title Company reflecting such changes in title to the Premises as have
occurred since the date of issuance of the Title Insurance Policy or binder.

     4.30 Subordination of Contractor’s Liens. Upon request of Lender, at any time and
from time to time, Borrower shall use its best efforts to cause any or all Contractors or
subcontractors to execute, acknowledge and deliver to Lender a recordable instrument subordinating
any present or future liens against all or any part of the Premises to all liens and security
interests securing payment of the Loan.

     4.31 Requests for Advances. Borrower shall request Advances for payment of costs and
expenses in the Approved Budget, and for no other purpose.

     4.32 Intentionally Deleted.

     4.33 Environmental, Safety and ADA Matters. With respect to the operations of
Borrower on the Premises, Borrower hereby covenants and agrees to and with Lender that:

          (a) such operations will comply in all material respects with all applicable Environmental
Laws, and health and safety statutes and regulations;

          (b) Borrower will not at any time transport, store, dispose of, generate or release any
Hazardous Substance into, upon, over or under the Land, except for substances commonly used or
reasonably necessary to the Premises’ operation; and

          (c) Borrower shall conduct its business operated on the Premises so as to comply in all
material respects with all Environmental Laws, and all health and safety laws and regulations of
any Governmental Authority having jurisdiction of said properties, including, without limitation,
the Federal Occupational Safety and Health Act and Title III of the Americans with Disabilities
Act; provided, however, that nothing herein contained shall prevent Borrower from contesting in
good faith, by appropriate legal proceedings, any such law, regulation, interpretation thereof or
application thereof provided that Borrower shall comply with the order of any court or other
governmental body of competent jurisdiction relating to such laws or regulations unless Borrower
shall currently be prosecuting an appeal or proceedings for review and shall have secured a stay of
enforcement or execution or other arrangement postponing enforcement or execution pending such
appeal or proceedings for review. Borrower shall take all actions necessary to comply with
existing law, clean up any Hazardous Substance and prevent any releases of contamination by the
same within or upon the Premises. If Borrower shall receive notice that any violation of any
federal, state or local environmental, health or safety law or regulation may have been committed
or is about to be committed by any business operated on the Premises, then Borrower shall promptly
provide Lender with a copy of such notice, and in no event later than within fifteen (15) days from
Borrower’s receipt thereof.

-25-

 

     4.34 Intentionally Deleted.

     4.35 Payment of Debt. Borrower will pay any and all debt payable or guaranteed by
Borrower, and any interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with the agreement or instrument
relating to such debt or guarantee.

     4.36 Consultations and Inspections. Solely for the purpose of permitting Lender to
determine compliance by Borrower with this Agreement, Borrower will permit Lender (and any person
or entity appointed by Lender to whom Borrower does not reasonably object) to discuss the affairs,
finances and accounts of Borrower with the members or officers of Borrower, all at such reasonable
times and as often as may reasonably be requested. Borrower will also permit inspection of its
properties, books and records by Lender during normal business hours or at other reasonable times.

     4.37 Intentionally Deleted.

     4.38 Transactions with Related Parties. Borrower will not engage in any Material
Transaction with any shareholder, officer or director of Borrower, or any family member or business
partner of a shareholder, officer or director of Borrower, or any entity controlled or managed by
such shareholder, officer or director, family member, partner, or other affiliated or related
person or entity, unless such transaction is upon fair market terms and is not disadvantageous in
any material respect to Borrower or Lender. A “Material Transaction” shall be deemed to be
any transaction or contract which, over the life of the transaction or contract, is expected to
cost Borrower $100,000 or more, without setoff against any income to be derived by Borrower from
that transaction or contract.

     4.39 Change in Fiscal Year. Borrower will not change its fiscal year without the
prior written consent of Lender.

     4.40 Notice of Subsequent Events. Forthwith upon a director or officer of
Borrower obtaining knowledge of (i) any material adverse change in the condition or operation,
financial or otherwise, of Borrower, (ii) any default by Borrower under or with respect to any
instrument, contract or agreement to which Borrower is a party or by which Borrower is bound, (iii)
any default by Borrower under or with respect to any order, writ, injunction, decision or decree of
any court, Governmental Authority or arbitral body to which Borrower is a party or by which
Borrower is bound which materially adversely affects Borrower’s condition or operation, financial
or otherwise, or (iv) any action or proceeding pending or, to the knowledge of a member of
Borrower, threatened against Borrower before any court, Governmental Authority or arbitral body
which, if decided adversely to Borrower, would result in any material adverse change in the
condition or operation, financial or otherwise, of Borrower, Borrower will deliver to Lender a
written certificate signed by the Chief Executive Officer of Borrower specifying the nature
thereof, the period of existence thereof and what action Borrower has taken and proposes to take
with respect thereto.

-26-

 

     4.41 Loans, Acquisitions and Investments. Borrower will not make any loans, advances
or extensions of credit to, or purchase any stocks, bonds, notes, debentures or other securities
of; make any investment in or any expenditures on behalf of; or in any manner assume liability
(direct, contingent or otherwise) for the indebtedness of any person or entity or make or suffer to
exist any acquisition of any entity.

     4.42 Use of Proceeds. Borrower agrees that the Loan proceeds will be used solely for
the Loan Purposes in accordance with the Plans and Approved Budget.

ARTICLE V

RIGHTS AND REMEDIES OF LENDER

     5.01 Rights of Lender. Upon the occurrence of an Event of Default, Lender shall have
the right, in addition to any other right or remedy of Lender, but not the obligation, in its own
name or in the name of Borrower, to enter into possession of the Premises; to perform all work
necessary to complete the construction of the Improvements substantially in accordance with the
Plans, Governmental Requirements, and the requirements of any lessee or purchaser, if applicable;
and to employ watchmen and other safeguards to protect the Premises and all materials intended
therefor. Borrower hereby appoints Lender as the attorney-in-fact of Borrower, with full power of
substitution, and in the name of Borrower, if Lender elects to do so, upon the occurrence of an
Event of Default, to (a) use such sums as are necessary, including any proceeds of the Loan and the
Borrower’s Deposit, make such changes or corrections in the Plans, and employ such architects,
engineers, and contractors as maybe required for the purpose of completing the construction of the
Improvements substantially in accordance with the Plans and Governmental Requirements, (b) execute
all applications and certificates in the name of Borrower which may be required for completion of
construction of the Improvements, (c) endorse the name of Borrower on any checks or drafts
representing proceeds of the Insurance Policies, or other checks or instruments payable to Borrower
with respect to the Premises, (d) do every act with respect to the construction of the Improvements
which Borrower may do, and (e) prosecute or defend any action or proceeding incident to the
Premises, in Lender’s name or in Borrower’s name, as Lender elects. The power of attorney granted
hereby is a power coupled with an interest and irrevocable. Lender shall have no obligation to
undertake any of the foregoing actions, and, if Lender should do so, it shall have no liability to
Borrower for the sufficiency or adequacy of any such actions taken by Lender, except if such
actions are determined by a court of competent jurisdiction to constitute wilful misconduct or
gross negligence on the part of Lender.

     5.02 Acceleration. Upon the occurrence of an Event of Default, Lender may, at its
option, declare the Loan immediately due and payable.

     5.03 Cessation of Advances. Upon the occurrence of an Event of Default, the
obligation of Lender to disburse the Loan and the Borrower’s Deposit and all other obligations of
Lender hereunder shall, at Lender’s option, immediately terminate.

-27-

 

     5.04 Funds of Lender. Any funds of Lender used for any purpose referred to in
this Article V or to perform any covenant or agreement of Borrower set forth in
Article IV hereof which Borrower failed or refused to perform, shall constitute Advances
secured by the Loan Instruments and shall bear interest at the Default Rate.

     5.05 No Waiver or Exhaustion. No waiver by Lender of any of its rights or remedies
hereunder, in the other Loan Instruments, or otherwise, shall be considered a waiver of any other
or subsequent right or remedy of Lender; no delay or omission in the exercise or enforcement by
Lender of any rights or remedies shall ever be construed as a waiver of any right or remedy of
Lender; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust
any right or remedy of Lender, or to constitute an election of remedies.

     5.06 Right of Setoff. Upon the occurrence of an Event of Default, Lender may, at its
option, set off and apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by Lender to or for the credit or
the account of Borrower against any and all of the obligations of Borrower then existing under this
Loan Agreement or any other Loan Instrument, irrespective of whether or not Lender shall have made
demand under this Loan Agreement or such Loan Instrument and although such obligations may be
unmatured.

ARTICLE VI

GENERAL TERMS AND CONDITIONS

     6.01 Notices. All written notices of any kind which either party may be required or
permitted to serve on the other in connection with this Loan Agreement shall be (a) delivered
personally, (b) served by U.S. mail, registered or certified, return receipt requested, postage
prepaid, (c) sent by reputable overnight courier service for which a signed receipt is required, or
(d) sent by facsimile or email with a hard copy by regular first class U.S. Mail, postage prepaid,
as follows:

	 	 	 
	if to Borrower, at:	 	and if to Lender, at:
	Advanced Environmental

	 	Liberty Bank of Arkansas
	Recycling Technologies, Inc.

	 	4706 South Thompson
	Post Office Box 1237

	 	Suite 101
	Springdale, Arkansas 72765

	 	Springdale, Arkansas 72764
	Attn:                     

	 	Attn: P. Douglas Lynch, President
	Facsimile: (479)                     

	 	Facsimile: (479) 927.2001

     6.02 Entire Agreement and Modifications. The Loan instruments constitute the
entire understanding and agreement between the undersigned with respect to the transactions arising
in connection with the Loan and supersede all prior written or oral understandings and agreements
between the undersigned in connection therewith. No provision of this Loan Agreement or the other
Loan Instruments may be modified, waived, or terminated except by instrument in writing executed

-28-

 

by the party against whom a modification, waiver, or termination is sought to be enforced,
with a specific reference to the provision being modified, waived or terminated and a clearly
expressed intention to do so.

     6.03 Severability. In case any of the provisions of this Loan Agreement shall for any
reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof; and this Loan Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

     6.04 Election of Remedies. Lender shall have all of the rights and remedies granted
in the Loan Instruments and available at law or in equity, and these same rights and remedies shall
be cumulative and may be pursued separately, successively, or concurrently against Borrower or any
property covered under the Loan Instruments, at the sole discretion of Lender. The exercise or
failure to exercise any of the same shall not constitute a waiver, release or exclusive election
thereof or of any other right or remedy.

     6.05 Form and Substance. All documents, certificates, insurance policies, and other
items required under this Loan Agreement to be executed and/or delivered to Lender shall be in form
and substance satisfactory to Lender.

     6.06 Limitation on Interest. All agreements between Borrower and Lender, whether now
existing or hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of any indebtedness governed hereby
or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum
amount permissible under applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to
Lender shall be reduced to the maximum amount permitted under applicable law; and, if from any
circumstance the Lender 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 the Loan and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal of the Loan such excess shall be refunded to
Borrower. All interest paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the full period until
payment in full of the principal of the Loan (including the period of any renewal or extension
thereof) so that interest thereon for such full period shall not exceed the maximum amount
permitted by applicable law. This Section shall control all agreements between the Borrower and
Lender.

     6.07 No Third Party Beneficiary. This Loan Agreement is for the sole benefit of
Lender and Borrower and is not for the benefit of any other party.

     6.08 Borrower In Control. In no event shall Lender’s rights and interests
under the Loan Instruments be construed to give Lender the right to control, or be deemed to
indicate that Lender is in control of; the business, management or properties of Borrower or has
power over the daily

-29-

 

management functions and operating decisions made by Borrower.

     6.09 Number and Gender. Whenever used herein, the singular number shall include the
plural and the plural the singular, and the use of any gender shall be applicable to all genders.
The duties, covenants, obligations, and warranties of Borrower in this Loan Agreement shall be
joint and several obligations of Borrower and of each Borrower if more than one.

     6.10 Captions. The captions, headings, and arrangements used in this Loan Agreement
are for convenience only and do not in any way affect, limit, amplify, or modify the terms and
provisions hereof.

     6.11 Applicable Law. This entire transaction and all terms and provisions in this
Loan Agreement and the other Loan Instruments shall be governed by the laws of the State of
Arkansas.

     6.12 Binding Affect. This Loan Agreement shall extend to and be binding upon and
inure to the benefit of the successors and assigns of the parties. Provided, however, that Borrower
shall not assign or transfer its rights or obligations hereunder without the prior written consent
of Lender.

     6.13 Participation. Lender shall have the exclusive option and privilege of selling
participating interests in the Loan to such persons or entities and on such terms and conditions as
Lender may determine; provided, Borrower will continue to be entitled to deal with Lender as though
no such participation had been sold.

     6.14 Counterparts. This Loan Agreement and the other Loan Instruments maybe executed
in two (2) or more counterparts which taken together shall constitute one original executed Loan
Agreement and other Loan Instruments.

[Remainder of Page Intentionally Blank; Signature Pages Follow]

-30-

 

     EXECUTED AND DELIVERED on the date first recited.

	 	 	 	 	 	 	 
	 	LENDER:	 	LIBERTY BANK OF ARKANSAS	
	 	 
	 	 	 	 	
	 	 

	 	By:	 	/S/ P. DOUGLAS LYNCH	
	 	 

	 	 	 	P. Douglas Lynch	
	 	 

	 	 	 	President Fayetteville/Springdale Markets
	 	 
	 	 	 	 	
	 	BORROWER:	 	ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.	
	 	 
	 	 	 	 	
	 	 

	 	By:	 	/S/ JOE G. BROOKS	
	 	 

	 	 	 	Joe G. Brooks, Chairman of the Board

-31-

 

ACKNOWLEDGMENT

STATE OF ARKANSAS                     )

                                                                ) ss:

COUNTY OF WASHINGTON          )

     On this 28th day of September, 2005, before me the undersigned Notary Public,
personally appeared P. Douglas Lynch, President of Liberty Bank of Arkansas Fayetteville/Springdale
Markets, designated by said banking institution to execute the foregoing instrument, to me
personally well known, who stated that he was the President of Liberty Bank of Arkansas
Fayetteville/Springdale Markets, and was duly authorized in that capacity to execute the foregoing
instrument for and in the name and behalf of said banking institution, and further stated and
acknowledged that he had so signed, executed and delivered said foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.

     IN WITNESS WHEREOF I have hereunto set my hand and official seal.

Notary Public

My Commission Expires:

                                        

-32-

 

ACKNOWLEDGMENT

STATE OF ARKANSAS                    )

                                                               ) ss:

COUNTY OF WASHINGTON          )

     On this 28th day of September, 2005, before me the undersigned, a Notary Public
duly commissioned, qualified and acting, within and for the County and State aforesaid, appeared in
person the within named Joe G. Brooks, the Chairman of the Board of Advanced Environmental
Recycling Technologies, Inc., a Delaware corporation, to me personally well known, who stated that
he was duly authorized in his capacity to execute the foregoing instrument for and in the name and
behalf of said corporation in his capacity as its Chairman of the Board, and further stated and
acknowledged that he had so signed, executed and delivered the foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.

     IN WITNESS WHEREOF I have hereunto set my hand and official seal.

Notary Public

My Commission Expires:

                                        

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EXHIBIT A

ATTACHED TO AND INCORPORATED BY REFERENCE

IN THAT CERTAIN

CONSTRUCTION AND SEMI-PERMANENT LOAN AGREEMENT

DATED: September 28, 2005

	1.	 	The Completion Deadline: Twelve (12) months after the date hereof.
	 
	2.	 	Loan to Value Ratio: Not to exceed eighty percent (80%).
	 
	3.	 	Developer:  None .
	 
	4.	 	The Contractor:
                                    .
	 
	5.	 	The Inspecting Architect/Engineer: [to be supplied by Borrower].
	 
	6.	 	The Title Company: WACO Title Company.
	 
	7.	 	Frequency of Advances: Not more frequently than monthly.

-34-

 

EXHIBIT B

ATTACHED TO AND INCORPORATED BY REFERENCE

IN THAT CERTAIN

CONSTRUCTION AND SEMI-PERMANENT LOAN AGREEMENT

DATED: September 28, 2005

LEGAL DESCRIPTION OF THE “LAND”

Part of the NE/4 of the NE/4 and part of the SE/4 of the NE/4, Section 36, Township
18 North, Range 30 West, being more particularly described as follows:

Beginning at the NE corner of said SE/4 of the NE/4, thence S 02°29’52” W
518.99 feet, thence N 87°06’28” W 669.09 feet, thence N 02°53’32” E
285.56 feet, thence N 87°49’51” W 315.03 feet, thence N 02°53’32” E
305.17 feet, thence S 83°20’34” E 309.15 feet, thence S 05°57’15” W
56.07 feet, thence S 87°49’51” E 675.08 feet to the point of beginning,
containing 9.99 acres, subject to the right-of-way of Jefferson Street along the
West end of said property, and subject to any and all easements of record or fact.

-35-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

-2-

 

	 	 	 	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

-3-

 

	 	 	 	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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