EXHIBIT 10.11(h)
PROMISSORY NOTE
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
$1,000,000.00 07-26-2001 08-10-2002 400707337 016/6666 120144 019
- --------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
- --------------------------------------------------------------------------------------------------------
</Table>
BORROWER: FAFCO, INC. LENDER: BUTTE COMMUNITY BANK
435 OTTERSON DRIVE CHICO OFFICE
CHICO, CA 95928 2041 FOREST AVE.
CHICO, CA 95928
- --------------------------------------------------------------------------------
PRINCIPAL INITIAL DATE OF
AMOUNT: $1,000,000.00 RATE: 8.250% NOTE: JULY 26, 2001
PROMISE TO PAY. FAFCO, INC. ("BORROWER") PROMISES TO PAY TO BUTTE COMMUNITY
BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF ONE MILLION & 00/100 DOLLARS ($1,000,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND. PAYMENT IN FULL IS DUE
IMMEDIATELY UPON LENDER'S DEMAND. IF NO DEMAND IS MADE, BORROWER WILL PAY THIS
LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID
INTEREST ON AUGUST 10, 2002. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY
PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF EACH PAYMENT DATE, BEGINNING
SEPTEMBER 10, 2001, WITH ALL SUBSEQUENT INTEREST PAYMENTS TO BE DUE ON THE SAME
DAY OF EACH MONTH AFTER THAT. UNLESS OTHERWISE AGREED OR REQUIRED BY APPLICABLE
LAW, PAYMENTS WILL BE APPLIED FIRST TO ACCRUED UNPAID INTEREST, THEN TO
PRINCIPAL, AND ANY REMAINING AMOUNT TO ANY UNPAID COLLECTION COSTS AND LATE
CHARGES. THE ANNUAL INTEREST RATE FOR THIS NOTE IS COMPUTED ON A 365/360 BASIS;
THAT IS, BY APPLYING THE RATIO OF THE ANNUAL INTEREST RATE OVER A YEAR OF 360
DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL BALANCE, MULTIPLIED BY THE ACTUAL
NUMBER OF DAYS THE PRINCIPAL BALANCE IS OUTSTANDING. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may or
may not be the lowest rate available from Lender at any given time. Lender will
tell Borrower the current Index rate upon Borrower's request. The interest rate
change will not occur more often that each DAY. Borrower understands that
Lender may make loans based on other rates as well. THE INDEX CURRENTLY IS
6.750%. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS
NOTE WILL BE AT A RATE OF 1.500 PERCENTAGE POINTS OVER THE INDEX, RESULTING IN
AN INITIAL RATE OF 8.250%. NOTICE: Under no circumstances will the interest
rate on this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a MINIMUM INTEREST
CHARGE OF $50.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender's rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or
other payment instrument that indicates that the payment constitutes "payment
in full" of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Butte Community Bank, CHICO OFFICE, 2041 FOREST AVE, CHICO, CA
95928.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $5.00, WHICHEVER IS GREATER.
INTEREST AFTER DEFAULT. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, the
total sum due under this Note will bear interest from the date of acceleration
or maturity at the variable interest rate on this Note.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the load. This includes
a garnishment of any of Borrower's accounts, including deposit accounts,
with Lender. However, this Event of Default shall not apply if there is a
good faith dispute by Borrower as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in
its sole discretion, as being an adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the indebtedness evidenced by this Note.
In the event of a death, Lender, at its option, may, but shall not be
required to, permit the guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
this Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CURE PROVISIONS. If any default, other than a default in payment is curable
and if Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, it may be
cured (and no event of default will have occurred) if Borrower, after
receiving written notice from Lender demanding cure of such default: (1)
cures the default within fifteen (15) days; or (2) if the cure requires
more than fifteen (15) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA. THIS NOTE
HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of BUTTE County, State of
California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $10.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.
PROMISSORY NOTE
LOAN NO. 400707337 (CONTINUED) PAGE 2
================================================================================
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or as provided in this paragraph.
Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following persons currently are authorized to request advances and authorize
payments under the line of credit until Lender receives from Borrower, at
Lender's address shown above, written notice of revocation of their authority;
ALEX N. WATT, EXECUTIVE VP/SECRETARY OF FAFCO, INC.; NANCY L. GARVIN, VICE
PRESIDENT OF FINANCE OF FAFCO, INC.; AND FREEMAN A. FORD, PRESIDENT OF FAFCO,
INC. Borrower agrees to be liable for all sums either; (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (A) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with
the signing of this Note; (B) Borrower or any guarantor ceases doing business
or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such guarantor's guarantee of this Note or any other
loan with Lender; (D) Borrower has applied funds provided pursuant to this Note
for purposes other than those authorized by Lender; or (E) Lender in good faith
believes itself insecure.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successor and assigns.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing specific
inaccuracy(ies) should be sent to us at the following address: Butte Community
Bank 672 Pearson Rd Paradise, Ca 95969
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive any applicable statute of limitations, presentment,
demand for payment, and notice of dishonor. Upon any change in terms of this
Note, and unless otherwise expressly stated in writing, no party who signs
this Note, whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without consent of or
notice to anyone other than the party with whom the modification in made. The
obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
FAFCO, INC.
By:_____________________________________________
NANCY L. GARVIN, VICE PRESIDENT OF FINANCE OF
FAFCO, INC.