August 13, 2009
Exhibit 10.1
August 13, 2009
Moore, Oklahoma
THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW (COLLECTIVELY, THE "SECURITIES LAWS"), AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS IT (I) IS REGISTERED OR QUALIFIED UNDER ALL APPLICABLE SECURITIES LAWS OR (II) IS EXEMPT FROM REGISTRATION OR QUALIFICATION UNDER SUCH LAWS AND THE ISSUER IS PROVIDED WITH AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
FOR VALUE RECEIVED, Xxxxxxx Foods, Inc., an Oklahoma corporation (“Debtor”), promises to pay to Xxxxxxx X. Xxxxxx (“Lender”), at the offices of the Debtor, on the dates listed in Schedule A (the “Maturity Dates”) the principal sum of EIGHT HUNDRED EIGHTY TWO THOUSAND, SEVEN HUNDRED FIFTY DOLLARS ($882,750.00), together with interest thereon at the rate of ten percent (10%) per annum, compounded daily. Lender may, at his option, elect to defer some or all of any scheduled payments listed in Schedule A. This Promissory Note replaces that certain Promissory Note dated June 30, 2008 in the amount of $802,500.00, and is given in satisfaction of that Promissory Note dated, June 30, 2008. This Promissory Note is executed on the date noted above and is effective as of June 30, 2009.
Xxxxxx understands and agrees that the scheduled payments listed Schedule A include negative amortization provisions, such that some payments are not sufficient to satisfy all accrued interest through the dates of the payments, and that such insufficiencies shall be added to the principal balances, as necessary.
If this Note, or any payment hereunder, falls due on a Saturday, Sunday or a day that is a public holiday in the State of Oklahoma, this Note shall become due or such payment hereunder, shall be made on the next succeeding business day and such additional time shall be included in the computation of any interest payable hereunder.
Debtor may at its option prepay all or any part of the unpaid principal amount of this Note and accrued interest thereon, without premium or penalty. Any partial prepayment shall be applied first to interest and the remaining balance of such payment, if any, to principal. If any provision of this Note would require Debtor to pay interest hereon at a rate exceeding the highest rate allowed by applicable law, Debtor shall instead pay interest under this Note at the highest rate permitted by applicable law.
Further agreed that the Lender and Xxxxxx will review the review the prospects, liquidity position, projected cash flows and EBITDA position of the Debtor by June 1, 2010, for the purpose of evaluating the Debtor’s ability to meet the payments referred to in Schedule A without undue burden on the ability of the Debtor to continue as a going concern. If it is mutually determined that the Debtor is unable to meet the payment plan referred to in Schedule A, then the Lender and Debtor hereby agree to mutually determine an alternative payment plan.
“EBITDA” means (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, if any. Income tax benefit shall not be considered in the determination of EBITDA.
This Note and the indebtedness evidenced thereby is and shall be junior and subordinate in all respects to the payment of all indebtedness of the Debtor for borrowed money, including without limitation, indebtedness evidenced by that certain Loan And Security Agreement entered into as of March 6, 2009, by and between Peninsula Bank Business Funding, a division of The Private Bank of the Peninsula (“Bank”) and Xxxxxxx Foods, Inc. and Wild About Food – Oklahoma LLC., and related loan agreements, as the same may be renewed, amended or extended after the date hereof.
Xxxxxx has represented that he has treated the sale of Xxxxxxx’x on the installment method of accounting for income tax purposes. Under the installment method, Xxxxxx would be taxed when he receives the principal payment s for the sale. At the time of the sale in 2007, the long term capital gains tax rate was 15%. However, if capital gains tax rates are adjusted such that , Xxxxxx would be assessed a higher tax due solely to the deferral, then Xxxxxx agrees to “gross up” to Lender to make him whole for the additional potential taxes.
The following is an example of a gross up scenario, assuming a capital gains rate of 20% and a combined marginal income tax rate and Medicare tax rate of 50% - this table is shown as an example only, and does not necessarily represent the actual gross up that would be paid to Lender, but merely serves to illustrate the methodology under which a gross up would be paid.
Prior to any gross up being paid by Xxxxxx, Xxxxxx agrees to engage a Certified Public Accountant that is competent in federal tax law and who understands Xxxxxx’s tax situation that will provide written representation to Debtor that the proposed gross up is materially correct, and generally serves to make Lender whole as a result of any adjustments to the federal capital gains tax rates.
Xxxx Xxxxxx Pro Forma Tax Gross Up Example for Xxxxxxx'x Transaction
| Tax gain on sale of Xxxxxxx'x interest that has been deferred | $ | 802,500 |
|
| Long term capital gains rate at transaction time - 2007 | 15 |
% | |
| Pro forma tax - as if tax was paid at the time of the transaction - tax year 2007 | 120,375 |
||
| Pro forma (adjusted) capital gains rate at payment time | 20 |
% | |
| Pro forma tax that would be paid under adjusted tax rate | 160,500 |
||
| Difference in tax | 40,125 |
||
| Additional net amount to be paid to Xxxxxx to pay the difference in taxes | 40,125 |
||
| Assumed combined income tax and medicare tax rate at time of payment | 50 |
% | |
| Amount to be paid to Xx. Xxxxxx to get net amount required to pay additional taxes | $ | 80,250 |
|
| Proof | |||
| Gross amount to be paid to Xxxxxx | $ | 80,250 |
|
| Tax on gross amount | (40,125 |
) | |
| Net amount to Xx. Xxxxxx to pay additional capital gains taxes | $ | 40,125 |
IN WITNESS WHEREOF, Xxxxxx has executed this Promissory Note as of the date first above written.
Xxxxxxx Foods, Inc. (“Debtor”)
/s/ Xxxx X. Xxxxx
_______________________
By: Xxxx X. Xxxxx
Secretary, Treasurer and Chief Financial Officer
Schedule A
|
Payment |
Payment |
Interest |
Principal |
Principal |
7/1/2009 |
882,750 |
|||
|
8/14/2009 |
7,500 |
10,641 |
3,141.37- |
885,891 |
|
8/21/2009 |
5,000 |
1,699 |
3,301.00 |
882,590 |
|
8/28/2009 |
5,000 |
1,693 |
3,307.00 |
879,283 |
|
9/4/2009 |
5,000 |
1,686 |
3,314.00 |
875,969 |
|
9/11/2009 |
5,000 |
1,680 |
3,320.00 |
872,649 |
|
9/18/2009 |
1,500 |
1,674 |
173.57- |
872,823 |
|
9/25/2009 |
1,500 |
1,674 |
173.91- |
872,997 |
|
10/2/2009 |
1,500 |
1,674 |
174.24- |
873,171 |
|
10/9/2009 |
1,500 |
1,675 |
174.57- |
873,346 |
|
10/16/2009 |
1,500 |
1,675 |
174.91- |
873,520 |
|
10/23/2009 |
1,500 |
1,675 |
175.24- |
873,696 |
|
10/30/2009 |
1,500 |
1,676 |
175.58- |
873,871 |
|
11/6/2009 |
1,500 |
1,676 |
175.92- |
874,047 |
|
11/13/2009 |
1,500 |
1,676 |
176.25- |
874,223 |
|
11/20/2009 |
1,500 |
1,677 |
176.59- |
874,400 |
|
11/27/2009 |
1,500 |
1,677 |
176.93- |
874,577 |
|
12/4/2009 |
1,500 |
1,677 |
177.27- |
874,754 |
|
12/11/2009 |
1,500 |
1,678 |
177.61- |
874,932 |
|
12/18/2009 |
1,500 |
1,678 |
177.95- |
875,110 |
|
12/25/2009 |
1,500 |
1,678 |
178.29- |
875,288 |
|
1/1/2010 |
1,500 |
1,679 |
178.63- |
875,467 |
|
1/8/2010 |
1,500 |
1,679 |
178.98- |
875,646 |
|
1/15/2010 |
1,500 |
1,679 |
179.32- |
875,825 |
|
1/22/2010 |
1,500 |
1,680 |
179.66- |
876,005 |
|
1/29/2010 |
1,500 |
1,680 |
180.01- |
876,185 |
|
2/5/2010 |
1,500 |
1,680 |
180.35- |
876,365 |
|
2/12/2010 |
1,500 |
1,681 |
180.70- |
876,546 |
|
2/19/2010 |
1,500 |
1,681 |
181.05- |
876,727 |
|
2/26/2010 |
1,500 |
1,681 |
181.39- |
876,908 |
|
3/5/2010 |
1,500 |
1,682 |
181.74- |
877,090 |
|
3/12/2010 |
1,500 |
1,682 |
182.09- |
877,272 |
|
3/19/2010 |
1,500 |
1,682 |
182.44- |
877,454 |
|
3/26/2010 |
1,500 |
1,683 |
182.79- |
877,637 |
|
4/2/2010 |
1,500 |
1,683 |
183.14- |
877,820 |
|
4/9/2010 |
1,500 |
1,683 |
183.49- |
878,004 |
|
4/16/2010 |
1,500 |
1,684 |
183.84- |
878,188 |
|
4/23/2010 |
1,500 |
1,684 |
184.20- |
878,372 |
|
4/30/2010 |
1,500 |
1,685 |
184.55- |
878,556 |
|
5/7/2010 |
1,500 |
1,685 |
184.90- |
878,741 |
|
5/14/2010 |
1,500 |
1,685 |
185.26- |
878,927 |
|
5/21/2010 |
1,500 |
1,686 |
185.61- |
879,112 |
|
5/28/2010 |
1,500 |
1,686 |
185.97- |
879,298 |
|
6/4/2010 |
1,500 |
1,686 |
186.33- |
879,484 |
|
6/11/2010 |
1,500 |
1,687 |
186.68- |
879,671 |
|
6/18/2010 |
1,500 |
1,687 |
187.04- |
879,858 |
|
6/25/2010 |
1,500 |
1,687 |
187.40- |
880,046 |
|
6/30/2010 |
881,251 |
1,206 |
880,045.61 |
0 |
