PROMISSORY NOTE
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$1,722,000.12
August 16, 2001
For value received, Stockton Feed and Milling, Inc. and Ranchers Feed Yards,
Inc. (hereinafter collectively referred to as "Borrower"), promise to pay to the
order of Xxxxx Xxxxxxx, Xx. ("Lender") at Dublin, Texas, or at such other
address as Lender shall from time to time specify in writing, the principal sum
of $1,722,000.12, in the manner as herein provided, with interest on the
outstanding principal from the date hereof until paid at the rate set out below.
Interest shall be computed on a per annum basis of a year of 365 days or 366
days in a leap year, as the case may be.
1. Payment Terms. Principal and interest shall be due and payable as
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follows. To the extent that the proceeds from the sale of any of the 4,819,674
shares of the common stock of Loch Xxxxxx, Inc. ("Loch") previously received by
Lender in connection with the purchase by Loch of Borrower from Lender, plus the
proceeds from the sale of any spin-offs, stock dividends, cash dividends or any
other payment or item of value paid in connection with such shares (all the
foregoing collectively referred to as "Stock Related Property"), plus the value
of any Stock Related Property remaining after such sales, exceed an amount equal
to the principal, plus interest at seven percent (7%) simple interest per annum
from the date hereof, plus any amount due to Lender pursuant to a Consulting
Agreement, this Note shall be considered paid in full and Lender shall
immediately release any lien or claim Lender has against the Property, the
Borrower and Loch. In addition, if the value of the Stock Related Property,
plus the proceeds received by Lender from the sale of any Stock Related
Property, exceeds such an amount, Lender shall sell such Stock Related Property
and pay any excess to Loch. Value for the Loch stock, as well as any other
stock included in the Stock Related Property shall mean the highest mean average
of the closing bid and asked price on any date prior to February 28, 2002 that
such stock becomes negotiable and eligible to be sold by Xxxxxx or Xxxxxx's
agents. If such value, plus the proceeds from the sale of any Stock Related
Property, does not equal or exceed the remaining principal, plus accrued
interest, plus accrued consulting fee by February 28, 2002, but does equal or
exceed a value of at least one-half of such amount, then such amount shall be
credited against the remaining principal, accrued interest and consulting fee,
this Note shall be renewed for one (1) year and the interest rate shall be
reduced to five percent (5%) simple interest per annum on the remaining balance.
If such value, plus any proceeds received by Xxxxxx from the sale of any Stock
Related Property does not equal or exceed at least one-half the amount of the
remaining principal, accrued interest, plus the consulting fee, then the
remaining shares of Loch stock, plus any spin-offs, split-offs, stock dividends,
cash dividends or any other payment or item of value paid in connection with
such shares shall be returned immediately to Loch or Loch's designee and
Lender's sole recourse shall be to the Property secured by the Deed of Trust.
If the real or personal property secured by the Deed of Trust/Security
Agreement/Financing Statement is sold as discussed in Paragraph 13 of the Loan
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Agreement, the collateral and Stock Related Property shall be disposed of as
therein provided. Xxxxxx further agrees that when and if any of the Stock
Related Property becomes negotiable, Xxxxxx shall use his best efforts to sell
such shares to maximize value and sale proceeds. Xxxxxx agrees to sell such
shares in such a manner that will not unreasonably disrupt the market for such
shares and that from the first $450,000 in proceeds from the sale of such
shares, fifty percent (50%) of such proceeds shall be promptly paid to Loch in
connection with funds previously advanced to Borrower by Xxxx and Lender shall
retain fifty percent (50%) of such proceeds which shall be credited against sums
due pursuant to this Note.
2. Interest Rate. The unpaid principal balance of this Note shall bear
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interest prior to maturity (however such maturity is brought about) at a fixed
rate of seven (7%) percent simple interest per annum, unless the Note is renewed
as provided herein, at which point the interest rate shall be reduced to a fixed
rate of five percent (5%) simple interest per annum.
3. Prepayment. Borrower reserves the right to prepay, prior to maturity,
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all or any part of the principal of this Note without penalty. Any prepayments
shall be applied first to accrued interest and then to principal. Borrower will
provide notice to the holder of this Note of any such prepayment of all or any
part of the principal at the time thereof. All payments and prepayments of
principal or interest on this Note shall be made as provided herein at the
address of Lender indicated above, or such other place as the holder of this
Note shall designate in writing to Borrower.
4. Default. It is expressly provided that upon default in the punctual
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payment of this Note or any part hereof, principal or interest, as the same
shall become due and payable, and such default continues for a period of thirty
(30) days after written notice to Borrower given in accordance with the
provisions of the Loan Agreement, or upon the occurrence of an event of default
and expiration of any notice and cure periods specified in any of the other Loan
Documents (as defined below), the holder of this Note may, at its option (i)
declare the outstanding principal balance of and accrued but unpaid interest on
this Note at once due and payable, (ii) foreclose all liens securing payment
hereof, (iii) pursue any and all other rights, remedies and recourse under the
Loan Documents, at law or in equity, or (iv) pursue any combination of the
foregoing.
5. No Usury; Usury Savings Clause. In no event shall interest contracted
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for, charged or received hereunder, plus any other charges in connection
herewith which constitute interest, exceed the maximum interest permitted by
applicable law. The amounts of such interest or other charges previously paid
to the holder of the Note in excess of the amounts permitted by applicable law
shall be applied by the holder of the Note to reduce the principal of the
indebtedness evidenced by the Note, or, at the option of the holder of the Note,
be refunded. To the extent permitted by applicable law, determination of the
legal maximum amount of interest shall at all times be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the full
stated term of the loan and indebtedness, all interest at any time contracted
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for, charged or received from the Borrower hereof in connection with the loan
and indebtedness evidenced hereby, so that the actual rate of interest on
account of such indebtedness is uniform throughout the term hereof.
6. Security and Credit. This Note has been executed and delivered pursuant
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to that certain Loan Agreement of even date herewith by and between the Borrower
and Lender ("Loan Agreement"), and is secured by, inter alia, a Deed of
Trust/Security Agreement/Financing Statement of even date herewith from Borrower
in favor of the trustee named therein for the benefit of the Lender, covering
certain real property and personal property situated in Pecos County, Texas as
more particularly described therein. In addition, the Stock Related Property
received or to be received by Lender shall be used as a credit against the Note
and for other purposes addressed herein and shall be dealt with by Lender as
provided herein and in the Loan Agreement. This Note, the Loan Agreement and
all other documents evidencing, securing, governing, guaranteeing and/or
pertaining to this Note, including but not limited to those documents described
above, collectively the "Loan Documents." The holder of this Note is entitled
to the benefits and security provided in the Loan Documents, subject to the
terms thereof.
7. Governing Law. This Note is being executed and delivered, and is
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intended to be performed and enforced in Xxxxxx County, Texas. Except to the
extent that the laws of the United States may apply to the terms hereof, the
substantive laws of the State of Texas shall govern the validity, construction,
enforcement and interpretation of this Note.
8. Captions. The captions in this Note are inserted for convenience only
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and are not to be used to limit the terms herein.
9. Recourse. Notwithstanding anything to the contrary contained herein or
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in any instrument securing this Note, the Borrower shall have no personal
liability for the payment of this Note or for the performance or observance of
the covenants, representations and warranties of the Borrower contained in this
Note or in any instrument now or hereafter securing this Note and the Lender and
each holder of this Note agree not to seek any damages or personal money
judgment against the Borrower or any other party for any default under this Note
or under any instrument now or hereafter securing this Note or for any other
matter related to this transaction, the operation of the Property or the
original sale of Borrower to Loch but in such event will look solely to the
security for the indebtedness evidenced by this Note.
10. Assignment. Neither this Note, the Loan Agreement, or the Deed of Trust
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or any other Loan Documents or any interest or right in the foregoing can be
assigned, transferred or otherwise conveyed by Xxxxxx to any other party without
the prior written consent of Borrower which consent can be withheld at its sole
discretion.
EXECUTED to be effective as of the date first written above.
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STOCKTON FEED AND MILLING, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
RANCHERS FEED YARDS, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
LENDER
_______________________________________
Xxxxx Xxxxxxx, Xx.
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