Exhibit 10.5
CONSTRUCTION LOAN AGREEMENT
DATE: April 4, 2006
BORROWERS: Atlantis Laboratories, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Xxxx Xxxxxx
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
LENDER: Xxxxxxx Advanced Aesthetics, Inc.
000 Xxxxxxx 0, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
MAXIMUM LOAN AMOUNT: $650,000
THIS CONSTRUCTION LOAN AGREEMENT is entered into as of the date set
forth above, by and between Borrowers and Lender, in connection with a
construction loan from Lender to Borrowers that is evidenced by a Loan
Promissory Note of even date herewith (the "NOTE") made by Borrowers in the
amount indicated above (the "LOAN") in favor of Lender or its order. The Note is
secured by a Construction Deed of Trust, Security Agreement, Assignment of
Leases and Rents, and Fixture Filing (the "CONSTRUCTION DEED OF TRUST") creating
a lien on the real property legally described on EXHIBIT A attached hereto and
incorporated herein by this reference (the "PROPERTY"). The Loan is for the
specific purposes set forth on SCHEDULE 1 attached hereto (the "PROJECT").
NOW, THEREFORE, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the meanings set forth below:
1.1 "BUDGET" means a budget or series of budgets that cover
all Eligible Costs for the Project that identify the source and use of all funds
necessary to pay Eligible Costs; and that have been reviewed and approved, in
its sole discretion, by Lender or any third-party consultant retained by Lender
to review such Budget prior to any Draws hereunder for construction of the
Project.
1.2 "CONSTRUCTION DOCUMENTS" means the general construction
contract between Borrowers and any general contractor for the rendering of all
services and the
furnishing of all materials for the construction of the Project,
together with any other or additional construction contracts entered
into in connection with the construction of the improvements on the
Property, and all subcontracts, Plans and Specifications, and related
documents, in all cases satisfactory in form and substance to Lender.
1.3 "DRAW" means a disbursement of funds hereunder in
accordance with Section 5 below and other applicable terms of the Loan
Documents.
1.4 "DRAW AFFIDAVIT" means the Affidavit for Construction Draw
in a form required by Lender that summarizes the status of construction and
identifies all unpaid invoices for the Project and sets forth such additional
information as Lender may require regarding Eligible Costs, percentage
completion, conformance with the applicable Budget, and other information
related to the Project
1.5 "ELIGIBLE COSTS" means, as applicable, the expenses of
improving the Property as set forth in the Budget, including, without
limitation: interest payments on the Loan, draw fees, development and
construction costs, recording fees, closing and sale costs, and any other costs
that Lender may approve in its sole discretion.
1.6 "LOAN DOCUMENTS" means the Note, the Deed of Trust, this
Agreement, and any other documents evidencing, securing, or otherwise governing
the Loan.
1.7 "MATURITY DATE" shall have the meaning ascribed to such
term in the Note.
1.8 "PLANS AND SPECIFICATIONS" means, as applicable, the final
development plans and specifications and the full set of engineering and
architectural plans and specifications for the construction of the Project, all
as reviewed and approved by Lender.
2. USE OF LOAN PROCEEDS. The proceeds of this Loan will be used for the
purposes set forth on SCHEDULE 1 attached hereto and incorporated herein and not
for any other purpose. Borrowers shall make requests for Draws available under
the Note in accordance with Section 5 below, which shall not at any time to
exceed the maximum Loan Amount. Lender will maintain records reflecting the
maximum amounts available under the Loan, amounts disbursed, payments received,
interest accrued, and other matters related to the Loan, which shall be
conclusive evidence of amounts owing thereunder absent manifest error.
3. CONSTRUCTION LOAN TERMS.
3.1 INTEREST AND PAYMENT PROVISIONS. The applicable interest
rate, loan term, and other payment provisions shall be as set forth in the Note,
as the Note may be amended.
3.2 LOAN COSTS. Borrowers shall pay to Lender on demand, all
out-of-pocket costs of Lender related to the Loan, including without limitation:
title insurance premiums, appraisal fees, recording costs, budget review fees,
third-party architect/engineer fees, fees for budget reviews, if any, by
third-party consultants, attorneys' fees, and all costs and expenses identified
in Section 10.3 below.
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4. CONDITIONS TO CLOSING. Lender's obligation to close the Loan and
allow any Draws hereunder shall be subject to the satisfaction, at Borrowers'
sole cost and expense, of each of the following conditions on or before closing
of the Loan and prior to each Draw, or as otherwise required herein:
4.1 RECORDING OF DEED OF TRUST. The Construction Deed of Trust
and any other documents necessary to perfect Lender's security interest in the
Property shall have been recorded in the appropriate jurisdiction and Borrowers
shall have paid all recording fees and removed all encumbrances necessary to
perfect the Deed of Trust as a first lien on the Property, subject only to the
Deed of Trust dated April 4, 2006 by Borrowers to Lender executed and filed in
connection with the acquisition of the Property.
4.2 TITLE POLICY. After recordation of the Deed of Trust and
before any Draw is made hereunder, Borrowers shall have procured an TLTA
extended coverage lender's policy of title insurance (or its equivalent) in a
form and issued by a title company satisfactory to Lender for the principal
amount of the Loan, insuring the Construction Deed of Trust as a first lien on
the Property subject only to the Deed of Trust dated April 4, 2006 by Borrowers
to Lender executed and filed in connection with the acquisition of the Property,
without exception for mechanics' or materialmen's liens. The final policy shall
be subject only to such exceptions as may be approved in writing by Lender and
include such endorsements as Lender may require. No work of any character is to
be commenced or materials delivered before such title policy is furnished to
Lender and Lender has advised Borrowers that such policy has been received and
is acceptable to Lender, except to the extent that any title policy or
endorsement provided to Lender insures the lien priority of Lender's deed of
trust despite any such prior work and without exception for mechanics' or
materialmen's liens. The intention of the parties hereto is that the
Construction Deed of Trust is and shall continue to be prior to any labor or
materialmen's liens. If any material is delivered or work performed before
Lender has received such policy, and exceptions for mechanics' or materialmen's
liens appear in the final policy, Lender may, at its option, refuse to make any
Draws hereunder other than to pay all expenses incurred in connection with the
Loan and proceed to exercise any and all remedies available to Lender under the
Loan Documents upon the occurrence of an Event of Default.
4.3 PLANS/PERMITS. Borrowers shall have provided Lender with a
complete set of Plans and Specifications for the Project, together with evidence
satisfactory to Lender that Borrowers have obtained all permits and approvals
necessary to allow Borrowers to proceed with the construction of the Project in
accordance with the Plans and Specifications.
4.4 INSURANCE. Borrowers shall have provided Lender with
evidence acceptable to Lender of the insurance required to be maintained under
any of the Loan Documents, which insurance shall be in form and amount, and
issued by companies satisfactory to Lender.
4.5 THIRD PARTY CONTRACTS. Lender shall have received and
approved all engineer's or architects' contracts, the general contractor's
contract, and such other contracts as Lender may require relating to
construction of the Project, and a list of all known and contemplated
contractors used for development of the Project.
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4.6 UTILITIES. Borrowers shall have delivered to Lender
evidence satisfactory to Lender that all utilities, including water, electric,
gas and telephone, and all storm and sanitary sewer drainage facilities are
available at the Property for utilization by Borrowers for the development and
use of the Project, and that the respective lines and treatment or generating
plants are of adequate size and capacity to serve the Project.
4.7 SURVEY. At Lender's request, Borrowers shall have
delivered to Lender a current survey, in a form acceptable to Lender, showing
the Property to be free from encroachment and otherwise acceptable to Lender.
4.8 SOIL TESTS, ENVIRONMENTAL REPORT. Borrowers shall have
delivered to Lender copies of all soil analysis reports, all soil compaction
tests, all environmental reports or statements, and all other tests prepared or
performed with respect to the Project, all of which shall be satisfactory to
Lender in form and content.
4.9 FEES AND EXPENSES. Borrowers shall have paid all legal,
appraisal, and inspection fees; title insurance and survey costs; recording and
filing fees; real estate commissions; hazard and liability insurance and
property taxes on the Property; and any and all other charges or expenses
incurred by Lender in connection with the Loan or the preparation of the Loan
Documents. Borrowers shall indemnify and hold Lender harmless against any and
all claims for such fees, charges, commissions, taxes, or other expenses of any
kind in any way connected with the Loan.
5. AUTHORITY DOCUMENTS.
5.1 ORGANIZATIONAL DOCUMENTS. Atlantis shall have provided
Lender with a certified copy of its charter documents and bylaws.
5.2 GOOD STANDING CERTIFICATES. Atlantis shall have provided
Lender with a good standing certificate issued by the Secretary of State of
Texas.
5.3 RESOLUTIONS AND CONSENTS. Borrowers shall have provided
Lender with a certified resolutions and/or consents authorizing Atlantis to
enter into the Loan Documents.
5.4 REPRESENTATIONS. All representations and warranties
contained in this Agreement and all of the other Loan Documents shall be true,
correct and complete.
5.5 DELIVERY OF LOAN DOCUMENTS. Borrowers shall have executed
and delivered to Lender all Loan Documents required by Lender, including,
without limitation, an indemnity regarding hazardous substances and building
laws, and such other documentation as Lender may require to carry out the
provisions and purposes of this Agreement and the Loan.
5.6 OTHER CONDITIONS. Borrowers shall have fulfilled each and
every other condition to closing set forth in SCHEDULE 1 attached hereto, or of
which Borrowers were otherwise advised by Lender.
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6. CONSTRUCTION DRAWS.
6.1 DRAW PROCEDURES. Borrowers shall make periodic Draw
requests at such frequency as Lender, in its sole discretion, may allow, which
shall cover all amounts being requested hereunder, by providing Lender with all
necessary Draw Affidavits, accompanied by all information, authorizations, and
documents as Lender may request. If Lender is satisfied, based on its own
inspections and other reliable information, that the development of the Project
is progressing satisfactorily and in conformance with all applicable Laws and
other requirements, and all other conditions to Draws set forth in this
Agreement have been satisfied, including each of the conditions set forth in
Section 4 above, Lender will disburse the requested Draw into an account of
Borrowers. Lender shall not be required to fund any Draw unless, on the date
such Draw is requested and to be made, Borrowers has fulfilled the following
requirements to the satisfaction of Lender: (i) all other funds that are to be
contributed or obtained from parties other than Lender and Borrowers have been
funded as is provided for in the Budget; (ii) all representations and warranties
contained herein or in any of the other applicable Loan Documents shall be true
and correct; and (iii) Borrowers shall be in full compliance with all terms,
conditions and covenants herein and in all of the applicable Loan Documents.
6.2 PROJECT INFORMATION. Borrowers shall provide all
information requested by Lender, in form and content satisfactory to Lender,
prior to any Draw hereunder, including without limitation: appraisals, surveys,
recorded plats, Plans and Specifications, copies of all applicable permits and
governmental approvals obtained for the Project, copies of all recorded
declarations or covenants affecting the Project, insurance policies in form and
amount acceptable to Lender and issued by insurance companies acceptable to
Lender, environmental audits, project budgets, borrowing resolutions, evidence
of corporate or other status; current contractor's licenses; lien waivers or
subordinations; evidence of all required surety bonding and insurance coverages,
and all other documents and information that Lender may require.
6.3 DRAW AMOUNTS. The allowed amount of each Draw shall be
determined, at Lender's option: (i) by Lender's review of receipted invoices
provided by Borrowers and Lender's confirming physical inspection, (ii) on a
percentage completion basis with reference to the schedules included in the
applicable approved budget, as established by a physical inspection of the
construction conducted by Lender or its agent (or, at Lender's sole discretion,
as disclosed by the information provided by Borrowers in the Draw Affidavit), or
(iii) by a combination of the foregoing methods. Lender shall make Draws only
for the categories and line items set forth in the Budget. Borrowers shall have
no right to reallocate costs or Loan proceeds between different line items or
between categories without Lender's specific written approval. Lender shall
require that Borrowers contribute any funds necessary to pay any portion of
Eligible Costs incurred to the date of Borrowers' Draw request that are not
covered by the applicable Draw. Draw inspections will be made by Lender
personnel or by a third-party architect/engineer, as required by Lender.
Borrowers shall pay inspection costs on demand. Date down endorsements to title
insurance policies and/or lien releases may be required as a condition to making
any Draw. Lender may also require the establishment or replenishment of any
interest reserve account prior to making any Draw.
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6.4 APPLICATION OF DRAWS. Lender shall have the right, but not
the obligation, to disburse Loan proceeds directly to any unpaid supplier of
labor, materials, equipment, services, or supplies whose claim has or may become
a lien against the Property, or to require that Draws be made in the form of
dual-payee checks or other restricted form of transfer.
6.5 INSPECTIONS. Borrowers will cooperate with Lender in
arranging for inspections by representatives of Lender or any third-party
consultant retained by Lender of the progress of the construction from time to
time, including an examination of (i) the improvements, (ii) all materials to be
used in the construction, (iii) all Plans and Specifications that are or may be
kept at the construction site, (iv) any contracts, bills of sale, statements,
receipts or vouchers in connection with the improvements, (v) all work done,
labor performed, materials furnished in and about the Project, (vi) all books,
contracts and records with respect to the Project, and (vii) any other
Construction Documents. Borrowers shall cooperate with Lender to enable Lender
to perform its functions hereunder and will promptly comply with Lender's
requirements and correct any deficiency regarding the construction of the
Project or the progress thereof. Borrowers shall pay a reasonable and customary
inspection fee for each inspection conducted by Lender or any third-party
consultant retained by Lender. The inspection fees shall be payable with the
Draw for which the inspection is conducted.
6.6 PROJECT COMPLETION AND DEADLINE FOR DRAWS. The Project
must be substantially completed within twelve (12) months from the date hereof
and Lender shall not be obligated to fund any Draw requests which are submitted
after April 1, 2007.
7. MANNER OF CONSTRUCTION.
7.1 CONFORMANCE WITH PLANS AND LAWS. All work shall be
performed and the Project be constructed in a good and workmanlike manner, free
from all material defects in materials or workmanship. Construction shall
conform to the Plans and Specifications and all federal, state, and local laws,
ordinances, regulations, and rules relating to the construction and operation of
the Property ("LAWS"), including, without limitation, all building, zoning,
planning, subdivision, fire, traffic, safety, health, disability, labor,
discrimination, environmental, air quality, wetlands, shoreline, and flood plain
laws, ordinances, regulations and rules. The Laws shall also include all
government and private covenants, conditions and restrictions applicable to the
Property. Prior to any Draw hereunder, Lender may require Borrowers to supply
evidence satisfactory to Lender that it has complied with the Plans and
Specifications and the requirements of all Laws.
7.2 RIGHT OF ENTRY. Lender or its agents shall at all times
have the right to enter upon the Property during the period of construction. If
the construction work is not satisfactory to Lender, Lender shall have the right
to stop such work and order its replacement, whether or not the unsatisfactory
work has theretofore been incorporated in the improvements.
7.3 RIGHTS IN PERSONAL PROPERTY. No materials, equipment,
fixtures, or any other part of such improvements or apparatus to be used in
connection therewith shall be purchased and/or installed under conditional sale
agreements or other arrangements wherein the right is reserved or may accrue to
anyone to remove and/or to repossess any such items.
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7.4 NO CHANGES IN THE CONSTRUCTION DOCUMENTS. Borrowers shall
make no changes in the Plans and Specifications or the other Construction
Documents after the same have been approved by Lender without first obtaining
the written consent of Lender to such changes.
7.5 LENDER'S RIGHT TO COMPLETE CONSTRUCTION. If (i)
construction is at any time abandoned, discontinued, or not carried on with
reasonable dispatch; (ii) the work is not properly performed as determined by
Lender and such failure is not corrected within fifteen (15) days from the date
of written notice from Lender (both (i) and (ii) constituting additional Events
of Default hereunder); or (iii) an Event of Default otherwise occurs under the
Loan Documents, then Lender may, at its option and in addition to any and all
other remedies available to Lender under the Loan Documents, without further
notice, take possession of the Property and enter into contracts for or proceed
with the finishing of such improvements according to the Plans and
Specifications and pay the cost thereof.
7.6 RECORDED COVENANTS. Borrowers shall submit to Lender a
copy of any declaration of covenants, conditions, and restrictions, or any other
restrictive covenants or amendments thereto affecting the Property and obtain
Lender's approval of any such declarations, covenants, or amendments prior to
recording.
7.7 ACTIONS REQUIRED BY LIEN LAWS. Borrowers shall take all
steps necessary under the laws of Texas to prevent or shorten the time for the
assertion of claims or liens against property securing Borrowers' obligations to
Lender or any part thereof or right or interest appurtenant thereto, or of
claims against Lender or any Loans made hereunder.
7.8 COSTS INCURRED BY LENDER. Borrowers shall be liable to
Lender for all sums paid or incurred by Lender in finishing the improvements or
otherwise protecting its security hereunder, whether the same shall be paid or
incurred pursuant to the provisions of this Section 6 or otherwise in accordance
with the Loan Documents, and all payments made or liabilities incurred by Lender
of any kind whatsoever shall be paid by Borrowers to Lender upon demand,
together with interest at the default rate under the Note to the date of payment
to Lender, and all of the foregoing sums, including interest thereon, shall be
deemed advances by Lender to protect its security, separate and distinct from
advances of proceeds of the Loan, and shall be evidenced and secured by the Deed
of Trust and the other Loan Documents.
8. GENERAL REPRESENTATIONS AND WARRANTIES. Borrowers, as of the date of
execution hereof and as of the date of each request for a Draw hereunder,
represent and warrant to Lender that:
8.1 PAYMENT OF TAXES AND PROPER BOOKS AND RECORDS. Borrowers
have filed all required tax returns and paid all federal and state taxes, FICA
payments, and similar taxes now due and owing, and maintains proper books and
records relating to all Borrowers' operations.
8.2 NO LIENS OR ENCUMBRANCES. There are no claims for social
security, unemployment compensation, unpaid taxes, construction work or
materials, or other obligations
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to or claims by any governmental body or any private person, firm, corporation,
or other entity that are or could become liens upon the Property.
8.3 CONDEMNATION. Borrowers have not received any notice of
any eminent domain or condemnation proceeding that in any way affects the
Property or the Project and, to the best of Borrowers' knowledge, no such action
or proceeding is pending or threatened.
8.4 IMPROVEMENT DISTRICT. The Property is not situated within
any metropolitan, local, special, or other improvement district and Borrowers
have no knowledge of any proposal under which the Property or the Project is to
be placed in any such improvement district. Borrowers shall not consent or agree
to the inclusion of the Property in an improvement district of any kind without
the written consent of Lender so long as any portion of the Loan remains unpaid.
8.5 ACCESS. The Property has full and free access to and from
public highways, streets, and/or roads, and Borrowers have no knowledge of any
fact or condition that would result in the termination of such access.
8.6 EXISTENCE AND AUTHORITY. Atlantis is duly organized,
validly existing, and in good standing under the laws of Texas. Borrowers have
taken all necessary action relating to the authorization, execution, delivery
and performance of this Agreement and the other Loan Documents, and this
Agreement and all related documents, when executed and delivered, will be valid
and enforceable against Borrowers in accordance with their terms.
8.7 LITIGATION. There are no pending or threatened actions or
proceedings by or against Borrowers before any court or administrative agency,
federal, state, or local, that might have a material adverse effect on Borrowers
or their ability to perform under this Agreement or the related Loan Documents.
8.8 FINANCIAL STATEMENTS; TAXES; INDEBTEDNESS. Borrowers have
furnished to Lender (i) current financial statements and (ii) such other
financial information as may be required hereunder, and such information fairly
presents the financial condition of Borrowers as of the applicable date and the
results of their operations for the applicable period, and since such date there
has been no material change in such Borrowers' condition or operations.
Borrowers have filed all federal, state, and other tax returns required to be
filed by them. The IRS has not asserted any liability for taxes in excess of
those already paid by each Borrowers and their assets are free of any federal or
state tax liens. Neither Borrower has indebtedness in existence as of the
applicable date other than the indebtedness reflected on the financial
statements referred to above, except as has been disclosed in writing to Lender.
8.9 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement and all other Loan Documents will not violate
the provisions of any applicable law, order or regulation of any governmental
authority having jurisdiction over Borrowers, and will not conflict with or
result in a breach of any of the terms, conditions or provisions of Atlantis's
organizational documents or any other agreement or instrument to which Borrowers
are a party, or result in the creation or imposition of any lien, charge or
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encumbrance of any nature whatsoever upon any of the properties or assets of
Borrowers, except for the security interests created hereunder.
8.10 BUSINESS LOCATION. Borrowers keep all of their records
pertaining to their assets and accounts at the office located at the address
indicated on page one of this Agreement, which address is either Borrowers'
principal place of business or the place of business from which Borrowers manage
the main part of their business operations. Borrowers shall give Lender prior
written notice of any change in such location or the location of any asset in
which Lender has a security interest.
8.11 OFAC. Neither Borrower is (or will be) a person with whom
Lender is restricted from doing business under regulations of the Office of
Foreign Asset Control ("OFAC") of the Department of the Treasury of the United
States of America (including, those Persons named on OFAC's Specially Designated
and Blocked Persons list) or under any statute, executive order (including, the
September 24, 2001 Executive Order Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism),
or other governmental action and is not and shall not engage in any dealings or
transactions or otherwise be associated with such persons. In addition,
Borrowers hereby agree to provide Lender with any additional information that
Lender may deem necessary from time to time in order to ensure compliance with
all applicable laws concerning money laundering and similar activities.
9. AFFIRMATIVE COVENANTS. While any sums remain outstanding hereunder,
Borrowers will:
9.1 NO LIENS. Make all necessary payments so that at all times
the Property shall be completely free of any lien or claim of any governmental
department or agency or of any private person, firm, or corporation not
specifically permitted by Lender in writing and that no stop notice is served
upon Lender. Borrowers shall, upon request, furnish full information to Lender
and permit inspection of its books and records by Lender, so as to satisfy
Lender of full compliance with the provisions of this paragraph.
9.2 LEGAL ENTITY, BUSINESS, ETC. (a) Maintain the existence of
Atlantis as a corporation and preserve in full force and effect all its rights
and franchises having a material effect upon its business or the ownership of
its properties; and (b) give prompt notice to Lender of any material change in
Borrowers' business or financial position, any change in any location where
Borrowers' accounts and/or assets are to be maintained, the location of any new
places of business of Borrowers and the changing or closing of any of their
existing places of business, and any change in Borrowers' name.
9.3 FINANCIAL REPORTS, INFORMATION. Furnish to Lender all
reasonably available information concerning the condition of Borrowers and their
current operations, including balance sheets and income statements and such
other financial information at such reasonable times as Lender may require, but
in no instance less often than annually. Such information shall be certified by
a duly authorized officer or agent of Borrowers
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9.4 INSPECTION. Permit any authorized representative of Lender
to visit Borrowers' business location and project sites and to inspect and make
copies of its books, accounts, and records and to discuss its business,
finances, and accounts with its officers and authorized representatives.
Borrowers acknowledge that Lender has the right to perform collateral audits on
a regular basis.
9.5 PAYMENT OF TAXES. Pay all taxes, assessments, and
governmental charges upon Borrowers or levied against any of its properties
prior to the date on which penalties will attach, unless and to the extent the
same shall be contested in good faith and by appropriate lawful proceedings by
Borrowers.
9.6 USE OF PROCEEDS. Use each Draw hereunder only for payment
of the Eligible Costs on the Project for which that Draw is approved and for no
other purpose.
9.7 COMPLIANCE WITH LAWS. Comply with all applicable
requirements (including applicable Laws) of any governmental authority having
jurisdiction over Borrowers, the Project, and the Property.
9.8 FURNISHING NOTICES. Provide Lender with copies of all
material notices pertaining to the Project or the Property that are received by
Borrowers, including notices from any governmental authority or insurance
company, within seven (7) days after such notice is received.
10. NEGATIVE COVENANTS. While any sums remain outstanding hereunder,
Borrowers will not, without Lender's prior written consent:
10.1 INDEBTEDNESS. Incur indebtedness other than: (i)
indebtedness owed to Lender or to any affiliate of Lender; (ii) unsecured
current indebtedness incurred in the ordinary course of business; (iii) purchase
money secured indebtedness for equipment acquired in the ordinary course of
business; (iv) indebtedness secured by liens permitted hereby; and (v)
indebtedness for taxes, assessments, and governmental charges permitted hereby.
10.2 LIENS AND ENCUMBRANCES. Create or permit to exist any
mortgage, pledge, lien, or other encumbrance with respect to any of its assets,
or acquire any property subject to or upon any conditional sales or other title
retention contract, except as contemplated hereunder or otherwise agreed to by
Lender in writing, and except for the following permitted liens: (i) liens for
taxes, assessments, and governmental charges not delinquent or being contested
in good faith; (ii) liens of the kinds arising in the ordinary course of
business of Borrowers in respect to obligations unrelated to the Project that
are not due or being contested in good faith; (iii) liens in respect to
judgments against Borrowers for which Borrowers have posted a bond or otherwise
secured payment in a manner acceptable to Lender as provided in Section 10.4
below and with respect to which Borrowers shall, in good faith, be prosecuting
an appeal or proceeding for review, and a stay of execution shall have been
secured; (iv) liens in respect of indebtedness owed to Lender or to any
affiliate of Lender; and (v) liens that do not affect property securing any
indebtedness to Lender.
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10.3 GUARANTEES. Guarantee or otherwise become a surety with
respect to the obligations of any other person, firm, or corporation, except by
endorsement of negotiable instruments for collection in the ordinary course of
business.
10.4 ASSIGNMENT OR SALE OF ASSETS. Assign or sell any of their
assets, except in the ordinary course of its business consistent with past
practices or in connection with any indebtedness consented to by Lender.
11. EVENTS OF DEFAULT.
11.1 EVENTS OF DEFAULT DEFINED. Borrowers shall be in default
under this Agreement upon the occurrence of any one or more of the events of
default described below (each an "EVENT OF DEFAULT"): (i) failure to pay any
principal reduction or interest payment when and as the same shall become due
and payable under any of the Loan Documents or under any other indebtedness of
Borrowers to Lender, whether at its scheduled payment date or otherwise; (ii)
any representation or warranty made now or hereafter by any Borrowers pursuant
to this Agreement or any other Loan Document, or any statement, report, or
certificate provided to Lender by any Borrowers in connection therewith, proves
to be false in any material respect, (iii) Borrowers fail to perform any other
term, provision, or covenant in this Agreement or in any other Loan Document and
any applicable cure period for such non-performance has elapsed, or an Event of
Default otherwise occurs as defined under any of the other Loan Documents; (iv)
any individual Borrower shall die or become incapacitated; (v) Borrowers shall
become involved in financial difficulties as evidenced by failing generally to
pay debts as they become due, or filing a petition under any chapter of the
Bankruptcy Code, or filing any answer or admission asking for such relief, or
making an assignment for the benefit of creditors, or consenting to the
appointment of a trustee or receiver for all or a major portion of such party's
assets, or the entry of an order for relief against such party as a debtor under
any chapter of the Bankruptcy Code, or the entry of a court order appointing a
receiver or trustee for all or a major portion of such party's property without
its consent, which order shall not be vacated or stayed within forty-five (45)
days of its entry; or (vi) Borrowers shall fail within 90 days from the date
hereof to deposit pursuant to an escrow agreement approved by Lender all of the
formulas, manufacturing procedures and specifications, including details on all
raw material suppliers and specifications for the raw materials relating to the
skin care products described in the Consulting Agreement between Lender and
Borrowers.
11.2 REMEDIES. Upon the occurrence of any Event of Default,
Lender shall have no obligation to make further disbursements hereunder and any
and all liabilities of Borrowers to Lender may be accelerated and the
outstanding principal balance of the Loan become immediately due and payable, at
Lender's option, without presentment, demand, protest, notice of acceleration,
notice of intent to accelerate or notice of any kind, all of which are hereby
expressly waived by Borrowers (unless prohibited by applicable law). Lender may
exercise, at its option, any of the rights and remedies available to it
hereunder or otherwise available under law or equity, including without
limitation, electing (i) to perform any defaulted covenant or provision to such
extent as Lender shall elect in its sole discretion, and/or to disburse funds
under any Note for such purpose (including, without limitation, payment of
insurance premiums, taxes, or assessments), which amounts, together with
interest thereon from the disbursement date until paid at a rate per annum equal
to the rate of interest payable for the
11
same period applicable to the Note, shall be secured by the Construction Deed of
Trust; (ii) to take control of any or all collateral; (iii) to exercise all
rights and remedies of Lender under this Agreement, under any other Loan
Documents, and under applicable law.
11.3 PAYMENT OF EXPENSES. Borrowers shall pay all costs and
expenses of Lender in connection with the closing, and funding of the Loan and
the preparation, negotiation, execution, and delivery of the Loan Documents or
otherwise related to the Loan,, as well as any amendments, modifications,
consents, or waivers relating thereto, including, without limitation, attorneys'
fees and costs, upon demand by Lender. In addition, Lender shall be entitled to
recover any reasonable costs and expenses incurred in connection with the
preservation of rights under and enforcement of the Loan Documents, or the
protection of its collateral thereunder, whether or not any lawsuit is
commenced, in all such cases including, without limitation, reasonable
attorneys' fees and costs, and all such fees and costs incurred by Lender in
connection with any bankruptcy proceeding affecting the Loan or Lender's
security therefor in any manner.
11.4 UNAUTHORIZED LIENS OR ENCUMBRANCES. If any claim of lien
is filed or recorded, or any stop notice or other notice of lien is served upon
Lender, in connection with any other portion of the Property, or if a judgment
or other encumbrance is placed against any such property, it shall constitute an
Event of Default unless Borrowers, within twenty (20) days of written notice by
Lender to Borrowers of the existence of such claim, lien or encumbrance: (i) pay
the related judgment or claim and obtains the release and satisfaction of such
lien, claim of lien, judgment or encumbrance, (ii) obtains the release of such
lien, judgment or other encumbrance by recording and/or serving a surety bond in
accordance with applicable law; or (iii) provide Lender with a bond or such
other security or assurance as Lender, in its sole discretion, may require, in
an amount equal to at least 150% of the amount of the lien, claim of lien,
judgment or other encumbrance, to ensure payment of the lien, claim of lien,
judgment or other encumbrance or otherwise protect Lender and the affected
property. If Borrowers do not resolve the lien, claim, stop notice, judgment, or
other encumbrance in a manner satisfactory to Lender within said twenty (20)
days, Lender may, at its option, disburse proceeds from the Loan to pay such
lien, claim of lien, judgment or other encumbrance; withhold from subsequent
Draws an amount equal to up to 150% of the amount of the encumbrance; or
exercise any other rights and remedies available to Lender upon the occurrence
of an Event of Default. Lender's rights under this paragraph shall not be
affected by any claim of Borrowers that the lien, claim, stop notice, judgment
or other encumbrance is invalid, it being understood that the decision of the
Lender to pay or withhold is to be made by Lender in its sole discretion,
subject only to Borrowers' right to provide a bond or other security
satisfactory to Lender as provided above.
11.5 OFFSET RIGHTS. Lender may take from any funds of
Borrowers in their possession at any time or, at the option of Lender, from any
of the proceeds of the Loan, any amounts that Borrowers has agreed to pay or is
liable for under any of the Loan Documents, but Borrowers shall nevertheless
remain liable to Lender until all obligations provided for in this Agreement
have been fully paid and discharged, notwithstanding Lender may not have elected
to take payment from such funds. In addition, the Borrowers hereby grant to
Lender a contractual security interest in and hereby assign, convey, pledge or
transfer to Lender all Borrowers' right, title and interest in and to Borrowers'
accounts with Lender and any and all
12
other obligations of Borrowers to Lender including, but not limited to, all
obligations under that certain Consulting Agreement among the parties dated
March ___, 2006 ("Consulting Agreement") and Borrowers authorize Lender to the
extent permitted by applicable law to charge or set off all funds against any
and all such accounts and Consulting Agreement.
11.6 DISCLAIMER OF LIABILITY. The execution of this Agreement
or any of the other Loan Documents by Lender and Borrowers does not constitute a
joint venture and no provision of this Agreement or any of the other Loan
Documents is made or shall be construed for the benefit of any third party.
Borrowers have accepted and hereby accepts the sole responsibility for the
selection of its own contractors, subcontractors, and all materials, supplies,
and equipment to be used in the development and construction work at the
Property, and Lender assumes no responsibility to Borrowers, any contractors,
subcontractors, or any other person for the completion of the improvements or
for the quality thereof, nor does Lender assume any responsibility for the
application of Draws or payment of contractors, subcontractors, or suppliers.
Inspection by Lender of development and construction work is for the purpose of
protecting the security of Lender and is not to be construed as a representation
by Lender that such work will be free from faulty material or workmanship. In no
event shall Lender be liable to Borrowers for punitive, exemplary or
consequential damages, including, without limitation, lost profits, whatever the
nature of a breach by Lender of its obligations under this Agreement or any of
the Loan Documents, and Borrowers waive all claims for punitive damages.
11.7 REQUIRED NOTICE OF DEFAULT TO LENDER. Lender shall not be
in default under this Agreement, or under any other Loan Documents, unless a
written notice specifically setting forth the claim of Borrowers shall have been
given to Lender within three (3) months after Borrowers first had knowledge of
the occurrence of the event that Borrowers allege gave rise to such claim and
Lender does not remedy or cure the default, if any, promptly thereafter.
Borrowers waive any claim, set-off or defense against Lender arising by reason
of any alleged default by Lender as to which Borrowers do not give such notice
as set forth herein. Borrowers acknowledge that such waiver is or may be
essential to Lender's ability to enforce its remedies without delay and that
such waiver therefore constitutes a substantial part of the bargain between
Lender and Borrowers with regard to the Loan.
11.8 CONSENT TO LOAN PARTICIPATION AND/OR TRANSFER AS
SECURITY. Borrowers agree and consent to Lender's sale or transfer, whether now
or later, of one or more participation interests in the Loan to one or more
purchasers, whether related or unrelated to Lender and/or the assignment of all
of Lender's rights to any other party as security for Lender's obligations to
such third party. Lender may provide, without any limitation whatsoever, to any
one or more potential purchasers or transferees, any information or knowledge
Lender may have about Borrowers or about any other matter relating to the Loan,
and Borrowers hereby waive any rights to privacy either may have with respect to
such matters. Borrowers also agree that the purchasers of any such participation
interests or transferees will be considered as the absolute owners of such
interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such participation
interests or other agreements with any transferees. Borrowers further waive all
rights of offset or counterclaim that they may have now or later against Lender
or against any purchaser of such a participation interest or other transferee
and unconditionally agrees that
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either Lender or such purchaser or other transferee may enforce Borrowers'
obligations under the Loan irrespective of the failure or insolvency of any
holder of any interest in the Loan. Borrowers further agree that the purchaser
of any such participation interests or transferees may enforce its interests
irrespective of any personal claims or defenses that Borrowers may have against
Lender.
12. GENERAL PROVISIONS.
12.1 CAPTIONS, SEVERABILITY. Captions and headings are used
for convenience only and are not intended to modify or limit the textual
provisions of this Agreement. If any one or more provisions of this Agreement
are determined to be invalid, illegal, or unenforceable, such unenforceability
shall not affect the other provisions thereof.
12.2 NOTICES. Any notice or demand to any Borrowers shall be
deemed to have been given when mailed, first class, postage prepaid, or
personally delivered to Borrowers at Borrowers' address set forth above, or to
such other address as Borrowers may furnish in writing to Lender for such
purpose.
12.3 GOVERNING LAW. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the state of Texas
without regard to its conflicts of law principles.
12.4 JURISDICTION AND VENUE. Each Borrower agrees that all
actions or proceedings arising in connection with this Note shall be tried and
litigated only in the state and federal courts located in the City of Dallas,
Texas. Each Borrower hereby waives any right he or it may have to assert the
doctrine of forum non conveniens or to object to venue to the extent any
proceeding is brought in accordance with this Paragraph 11.4 and stipulates that
the state and federal courts located in the City of Dallas, Texas shall have in
personam jurisdiction and venue over each Borrower for the purpose of litigating
any such dispute, controversy or proceeding arising out of or related to this
Note. To the extent permitted by law, service of process sufficient for personal
jurisdiction in any action against each Borrower may be made by registered or
certified mail, return receipt requested, to the addresses indicated in the Loan
Agreement. Nothing herein shall limit the right of Lender to maintain a legal
proceeding in the State of Texas at its option.
12.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement is intended
to set forth the entire and final agreement of the parties concerning the
subject matter hereof. This Agreement may not be amended or modified except by
written agreement of the Borrowers and Lender.
12.6 PUBLICITY. If Lender desires, it may announce and
publicize the fact that it is providing financing, and may (at Lender's expense)
place signs on the Property, as long as such property remains subject to the
Lender's security interest.
12.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which
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when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Lender Xxxxxxx Advanced Aesthetics, Inc.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Borrower Atlantis Laboratories, Inc.
By: /s/ Xxxx Xxxxxx, President
---------------------------
Xxxx Xxxxxx
Borrower /s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx, individually
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EXHIBIT "A"
LEGAL DESCRIPTION
BEING 9.000 ACRES OF LAND IN THE X.X. XXXXX SURVEY, A-2,
XXXXXXXXXX COUNTY, TEXAS, SAID 9.000 ACRES BEING OUT OF A
CERTAIN 82.10 ACRE TRACT OF LAND DEED OF WHICH IS RECORDED IN
VOLUME 524, PAGE 263, XXXXXXXXXX COUNTY DEED RECORDS, SAID
9.000 ACRES BEING DESCRIBED MORE PARITCULARY AS FOLLOWS:
BEGINNING at a 1" galvanized iron pipe found for the Southwest corner
of the said 82.10 acre tract, the Northwest corner of the First Christian Church
5.7225 acre tract of land deed of which is recorded under County Clerk's File
Number 8421004, Xxxxxxxxxx County Real Property Records, same being the
Southwest corner of the herein described tract, and being 0.60 feet East of the
East line of XxXxxx Estates, Section 1, a Subdivision, map of which is recorded
in Cabinet A, Sheet 12, Xxxxxxxxxx County Map Records;
THENCE N. 16(degree) 06' 00" W., along the West line of the said 82.10
acre tract, generally 0.60 feet East of the East line of said XxXxxx Estates for
a distance of 803.59 feet to a 1/2" iron rod set for the Northwest corner of the
herein described tract;
THENCE S. 74(degree) 20' 15E E., leaving the West line of the 82.10
acre tract, across the 82.10 acre tract for a distance of 851.68 feet to a 1/2"
iron rod set for the Northeast corner of the herein described tract, in the West
line of State Highway Loop 336, (varying width right of way Vol. 1045, Xx. 000,
X.X.X.X.);
THENCE S. 08(degree) 57' 38" W., along the West line of said Loop 336
for a distance of 400.00 feet to a 4" x 4" TXDOT concrete monument found for the
Southeast corner of the herein described tract, in the South line of the 82.10
acre tract, the North line of the said Church tract, from whence a 5/8" iron rod
found inside a 1" iron pipe for the Southeast corner of the 82.10 acre tract
bears N. 74(degree) 37' 54" E., 735.81 feet, a 4" x 4" TXDOT concrete monument
found for the Northeast corner of the Church tract bears N. 74(degree) 37' 54"
E., 5.55 feet;
THENCE S. 74(degree) 37' 54" W., leaving the West line of Loop 336,
along the South line of the 82.10 acre tract, the North line of the Church tract
for a distance of 554.75 feet to the POINT OF BEGINNING and containing in all
9.000 acres of land.
SCHEDULE 1
The construction loan is for the development of a laboratory and
manufacturing facility to be operated by Atlantis Laboratories, Inc. on certain
land owned by Xxxx Xxxxxx in Conroe, Texas.
It shall be a condition precedent to the obligation of Lender to honor
Draw requests under the construction loan that (i) a Consulting Agreement
between Lender and Borrowers has been duly executed, and (ii) all of the
formulas, manufacturing procedures, specifications and details of all raw
material suppliers and specifications for the raw materials relating to the skin
care products described in the Consulting Agreement have been deposited in
escrow, and verified pursuant to an Escrow Agreement approved by Lender.
