PROMISSORY NOTE
$12,550,000.00 Houston, Texas August 29, 1996
1. FOR VALUE RECEIVED, the undersigned IPOP MANAGEMENT, INC., a Delaware
corporation (hereinafter called "MAKER"), with offices at 11104 West Airport
Boulevard, Suite 200, Stafford, Texas 77477, hereby agrees and promises to pay
to the order of THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, a Texas
corporation, (which along with subsequent holders of this Note, and their
successors or assigns, is hereinafter called "PAYEE"), at 2929 Allen Parkway,
34th Floor, Houston, Harris County, Texas 77019, Attention: Director - Mortgage
Loans, or at such other place as Payee may from time to time designate in
writing, the principal sum of TWELVE MILLION FIVE HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($12,550,000.00) in lawful money of the United States of America,
with interest on the principal balance from time to time remaining unpaid from
the date of advancement until maturity at the rate of seven and seven-eights
percent (7.875%) per annum, said principal and interest being payable in the
manner and form as follows:
a. An installment of interest on the unpaid principal balance hereof from
the date of funding through August 31, 1996, shall be due and
payable at the funding of this Note.
b. Thereafter, this Note shall be payable in one hundred nineteen (119)
consecutive monthly installments of principal and interest in the
amount of $151,439.00 each (calculated on the basis of a 360-day year
and an amortization period of ten (10) years); the first installment
shall be due and payable on October 1, 1996, and a like installment
shall be due and payable on the first day of each of the next one
hundred eighteen (118) calendar months.
c. A FINAL INSTALLMENT IN THE AMOUNT OF THE ENTIRE UNPAID PRINCIPAL
BALANCE HEREOF TOGETHER WITH ACCRUED AND UNPAID INTEREST THEREON SHALL
BE DUE AND PAYABLE ON SEPTEMBER 1, 2006 (THE "MATURITY DATE").
2. Each payment shall be credited first to prepayment fees or other
charges hereunder (other than interest), then to accrued interest and the
remainder to the unpaid principal on this Note, and interest shall thereupon
cease upon the principal so credited.
3. Should default be made in payment of any of the indebtedness evidenced
hereby, after the entire principal amount hereof shall have become due and
payable, whether by acceleration, at maturity or otherwise, the entire unpaid
principal balance and accrued, but unpaid, interest on this Note shall bear
interest at the lesser of (i) the Maximum Lawful Rate (as hereinafter defined)
or (ii) the rate of eighteen percent (18%) per annum.
4. In the event that any payment required hereunder or under the
"SECURITY INSTRUMENTS" (as hereinafter defined) shall not be made within ten
(10) days after the date due, a late charge equal to the lesser of (i) an amount
which, when added to all other amounts constituting "interest" under applicable
state or federal law, does not exceed the Maximum Lawful Rate or (ii) four
percent (4%) of the amount of any such delinquent payment so overdue, may be
charged by Payee for the purpose of defraying the expense incident to handling
such delinquent payment. Such late charge represents the reasonable estimate of
Payee and Maker of a fair average compensation for the loss that may be
sustained by Payee due to the failure of Maker to make timely payments. Such
late charge shall be paid without prejudice to the right of Payee to collect any
other amounts provided to be paid or to declare a default hereunder or under the
Security Instruments.
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5. Prepayment of this Note shall be permitted only in accordance with the
following terms and conditions:
(1) Maker shall have the right to prepay the entire outstanding
principal balance (but not any lesser amount) of this Note on any regular
monthly installment date for the payment of principal and interest hereunder,
provided that (i) Payee shall have received at least sixty (60) days' prior
written notice (the "NOTICE") of such full prepayment, (ii) at the time
specified in the Notice for any prepayment there shall be no default under this
Note or under any of the other Security Instruments, and (iii) such prepayment
is accompanied by a prepayment fee in an amount equal to the lesser of (x) an
amount which, when added to all other sums received, charged, or contracted for
by Payee which are interest or are deemed to be interest by applicable laws,
does not exceed the maximum non-usurious rate that may be received, charged, or
contracted for by Payee under applicable laws from time to time in effect (the
"MAXIMUM LAWFUL RATE") or (y) the greater of an amount calculated as set forth
in Paragraphs (a) or (b) (as applicable), below:
(a) at the time of receipt by Payee of the Notice, the
difference between (i) the then present value of all unpaid installments of
principal and interest due and payable under this Note, calculated from the date
of the proposed prepayment to the Maturity Date, discounted at the "Reinvestment
Rate" (as hereinafter defined), and (ii) the outstanding principal balance under
this Note on the date of the proposed prepayment; or
(b) one percent (1%) of the then outstanding principal balance
of this Note.
As used in this Note, "REINVESTMENT RATE" shall be the yield to maturity on a
United States treasury bond or note (the choice of which security to be used for
such purposes being in the sole discretion of Payee) having maturity date of
September 1, 2006 (or the maturity date closest thereto if no such bond or note
has a maturity date of September 1, 2006).
(2) If Payee shall at any time come into possession of proceeds
resulting from an acceleration of the maturity of this Note, tender prior to
foreclosure, foreclosure, or any other reason, (other than application of
insurance or condemnation proceeds) such possession shall be deemed to be and
shall be treated as a voluntary prepayment hereunder and consequently there
shall be added to the outstanding unpaid principal sum of this Note as
additional indebtedness immediately due and payable hereunder and secured by the
Security Instruments, a prepayment fee calculated pursuant to Paragraph 5.(1)
above. There shall be no prepayment penalty or premium in connection with the
application of insurance proceeds or condemnation awards.
(3) Upon receipt by Payee of the Notice, Payee shall, within thirty
(30) days thereafter, give notice to Maker of the Reinvestment Rate and, if
applicable, the amount of the prepayment fee payable under Paragraph 5.(1)
above. Determination of the Reinvestment Rate and the amount of any such
prepayment fee by Payee shall be binding on Maker absent manifest mathematical
error.
(4) If Maker gives Payee the Notice as herein provided and thereafter
fails to prepay this Note (with payment of the applicable prepayment fee) at the
time specified in the Notice, such failure shall constitute a default hereunder
and, without further notice by Payee, entitle Payee, at its option, to
accelerate the maturity of this Note and exercise any and all remedies available
to Payee under the Security Instruments.
(5) Notwithstanding any provisions to the contrary contained herein,
there shall be no prepayment premium or fee payable hereunder with respect to
prepayments made in accordance with the
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terms hereof during the last ninety (90) days prior to the Maturity Date
provided that Payee shall have timely received the Notice.
6. This Note is secured by all security interests, rights, titles, liens,
assignments, claims and equities, whether expressed or implied (the "SECURITY
INSTRUMENTS") executed by Maker (or any other party) in favor of Payee
pertaining to and securing this Note, including those executed simultaneously
herewith, those executed heretofore and those executed hereafter, and including
specifically, and without limitation, that certain Deed of Trust and Security
Agreement of even date herewith (the "DEED OF TRUST") executed by Maker covering
approximately 15.26 acres of land in Stafford, Fort Bend County, Texas, together
with all buildings and improvements now or hereafter erected thereon
(hereinafter called the "MORTGAGED PROPERTY"), all as more fully set forth and
described in such instrument. This Note is additionally secured by that certain
Limited Guaranty of even date herewith executed by Input/Output, Inc. (the
"Guarantor").
7. It is expressly agreed that time is of the essence of this agreement,
and this Note shall become immediately due and payable at the option of Payee,
without presentment or demand or any notice (including, without limitation,
notice of intent to accelerate or notice of acceleration) to Maker, (i) on
Maker's failure to pay any installment hereon on the date such installment is
due, (ii) upon an event of default under the terms of any Security Instrument,
or (iii) if any event occurs or condition exists which authorizes the
acceleration of maturity hereof under any agreement made by Maker in connection
with the Security Instruments. Upon the occurrence of any such event, Payee
shall also have the right to exercise any and all other rights, remedies and
recourses now or hereafter existing under any Security Instrument, in equity or
at law, by virtue of statute or otherwise, including, but not limited to, the
right to foreclose any and all liens securing this Note. Failure to exercise
any such option, rights or remedies shall not constitute a waiver on the part of
Payee of the right to exercise said option, right or remedy at any other time.
8. If (i) Payee retains an attorney to collect, enforce or defend this
Note or any of the other Security Instruments or (ii) Payee shall become a
party, either as plaintiff or as defendant, in any suit or legal proceeding in
relation to the Mortgaged Property or any of the other collateral securing
payment of this Note (the "OTHER COLLATERAL"), or (iii) Maker or any subsequent
owner of an interest in the Mortgaged Property or the Other Collateral is the
subject of any bankruptcy, probate or receivership proceeding, or (iv) Maker or
anyone claiming by, through, or under Maker (including without limitation any
subsequent owner of an interest in the Mortgaged Property or the Other
Collateral) sues Payee in connection with this Note or any of the Security
Instruments and does not prevail against Payee, then in any such event Maker
agrees to pay to Payee, in addition to principal and interest, all reasonable
costs and expenses incurred by Payee in connection with such collection,
enforcement, defense, suit or proceeding, including without limitation
reasonable attorneys' fees, regardless of whether incurred in connection with
any bankruptcy, probate, receivership or other court proceedings (whether at the
trial or the appellate level).
9. It is the intention of the parties hereto to comply with the usury
laws of the State of Texas and of the United States of America; accordingly, it
is agreed that notwithstanding any provision to the contrary in this Note or in
any Security Instrument, no such provision shall require the payment of or
permit the collection of interest in excess of the Maximum Lawful Rate. If any
excess of interest in such respect is provided for, or shall be adjudicated to
be so provided for, in this Note or in any Security Instrument, whether as a
result of prepayment, acceleration of maturity or otherwise, then in such event
(a) the provisions of this paragraph shall govern and control, (b) neither the
Maker nor its successors or assigns or any other party liable for the payment
hereof shall be obligated to pay the amount of such interest to the extent that
it is in excess of the Maximum Lawful Rate, and the same shall be construed as a
mutual mistake of the parties and, (c) any such excess which may have been
collected shall be, at the option of Payee, either applied as a credit against
the then unpaid principal amount hereof or refunded to Maker. Maker hereby
agrees to pay an
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effective rate of interest that is the sum of the interest rate provided for
herein, together with any additional rate of interest resulting from any
other charges of interest or in the nature of interest paid or to be paid in
connection with the loan evidenced hereby, including without limitation any
commitment fee and any other fees to be paid by Maker pursuant to the
provisions of the Security Instruments and any commitment relating to the
loan evidenced hereby. All sums paid or agreed to be paid the Payee or
holder of this Note for the use, forbearance or detention of the indebtedness
evidenced hereby shall, to the extent permitted by the usury laws applicable
to this loan transaction, be amortized, prorated, allocated and spread
throughout the full term of this Note.
10. Maker and all sureties, endorsers, and guarantors of this Note jointly
and severally (i) waive demand, presentment for payment, notice of non-payment,
protest, notice of protest, notice of intent to accelerate, notices of
acceleration and all other notice, filing of suit and diligence in collecting
this Note or enforcing any of the security herefor, (ii) agree to any
substitution, exchange or release of any party primarily or secondarily liable
hereon, (iii) agree that Payee shall not be required first to institute suit or
exhaust its remedies hereon against Maker or others liable or to become liable
hereon or to enforce its rights against any security hereof in order to enforce
payment of this Note by them, and (iv) consent to any extension or postponement
of time of payment of this Note and to any other indulgence with respect hereto
without notice thereof to any of them.
11. [Intentionally Deleted.]
12. By its execution of this Note, Maker warrants and represents to Payee
that the loan proceeds will be utilized exclusively for commercial, investment,
or business purposes, and no loan proceeds will be used for personal, family, or
household purposes.
13. THIS NOTE IS EXECUTED IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT AS
PREEMPTED OR CONTROLLED BY THE LAWS OF THE UNITED STATES OF AMERICA.
14. Maker acknowledges that the Deed of Trust securing this Note contains
certain provisions restricting the conveyance, transfer or further conveyance or
further encumbrance of the Mortgaged Property.
15. This Note is intended to be performed in accordance with and only to
the extent permitted by all applicable law. If any portion of this Note or the
application thereof to any person or circumstance shall, for any reason and to
any extent be invalid or unenforceable, neither the remainder of this instrument
nor the application of such provisions to other persons or circumstances shall
be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
16. The liability of Maker for failure to perform Maker's obligations
hereunder or under the Deed of Trust and the other Security Instruments is
expressly limited to the security for payment of this Note, the same being all
properties, rights, and estates subject to the Security Instruments, and Payee
agrees not to seek any damages or money judgment against Maker for any default
on the part of Maker under this Note or any of the Security Instruments.
Notwithstanding anything to the contrary contained in this Note or in any of the
Security Instruments, and notwithstanding any delay on the part of Payee in
exercising any right, power or remedy in connection with any default under this
Note, the Deed of Trust or any of the other Security Instruments, Payee shall
have full recourse against Maker, and Maker shall be personally liable for and
shall promptly account (by delivery of funds) to Payee for (a) all condemnation
awards and proceeds and insurance proceeds received by Maker or Guarantor (to
the extent same have not theretofore been applied toward
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payment of the sums due under this Note or used for repair of the Mortgaged
Property and, with respect to such insurance proceeds which represent
proceeds paid under any rent insurance, business interruption insurance or
other similar types of insurance, to the additional extent such rent,
business interruption or other similar insurance proceeds have not
theretofore been applied toward the payment of taxes and insurance premiums);
(b) all amounts necessary to repair any damage to the Mortgaged Property,
excluding normal wear and tear, caused by acts or omissions of Maker, its
agents, employees, or contractors (c) all security deposits; (d) failure to
pay, in accordance with the Deed of Trust, taxes, assessments or other
charges which can create liens on any portion of the Mortgaged Property or
the Other Collateral and are payable hereunder or under the Security
Instruments (to the full extent of any such taxes, assessments or other
charges); (e) failure to pay charges for labor or materials or other charges
which can create liens on any portion of the Mortgaged Property or the Other
Collateral (to the full extent of the amount rightfully claimed by any such
claimant); (f) prepaid rent and rental or other income derived from the
Mortgaged Property or the Other Collateral from and after the occurrence of a
default under this Note or the Security Instruments (whether any of such
condemnation awards, insurance proceeds, income or other funds derived from
the Mortgaged Property are held by Payee or received by Maker); (g) any loss
incurred by Payee as a result of Maker's forfeiture of the Mortgaged Property
resulting from criminal activity by any person whether or not such criminal
activity is conducted on or in any manner relates to the Mortgaged Property
or the Other Collateral; and (h) all sums due Payee, excluding payments of
principal and accrued interest due pursuant to this Note, following exercise
by Payee of its right to perform Maker's obligations under the Security
Instruments to preserve, protect or defend the Mortgaged Property as collateral
for this Note after notice and opportunity to cure, if any, as provided in
the Security Instruments. Additionally, Payee shall have the right to off-set
against any funds held by Payee (including, without limitation, escrows for
taxes and insurance) pursuant to this Note and any of the Security Instruments.
Nothing herein contained shall be construed to prevent Payee from exercising
and enforcing any other remedy allowed at law or in equity or by any statute
or by the terms of this Note or the Security Instruments nor shall anything
herein contained be deemed to be a release or impairment of the Deed of Trust,
any of the other Security Instruments or the indebtedness evidenced by this
Note or secured thereby or shall be deemed to prejudice the right of Payee as
against Maker or any other entity now or hereafter liable under any guaranty,
bond, or lease covering the Mortgaged Property, the Other Collateral or any
portion thereof, policy of insurance or other agreement which Maker may have
delivered to Payee in compliance with any of the terms, covenants, and
conditions of this Note or any of the Security Instruments, or preclude the
Payee from exercising its right to foreclose under the Deed of Trust or any
of the other Security Instruments (either by judicial means or non-judicial
means) in the event of a default under this Note or any of the Security
Instruments, or except as may be limited by the foregoing provisions of this
paragraph, from enforcing any of the Payee's rights under this Note or under
any of the Security Instruments including, without limitation, the right to the
appointment of a receiver for the Mortgaged Property or the Other Collateral, or
limit the rights or remedies which Payee would otherwise be entitled to at law
or in equity absent the limitation of liability provisions set forth in this
paragraph against Maker for fraud perpetrated by Maker against Payee. In
addition, notwithstanding any other provisions of this Note or the Security
Instruments, the Maker shall be personally liable for any loss, damage or
injury sustained by Payee arising from the breach of any warranty or
representation contained in any affidavit made by or on behalf of Maker or in
any of the Security Instruments regarding hazardous wastes or other hazardous or
toxic substances, including, but not limited to, any breach of the warranties,
representations, covenants or indemnities contained in Article 11 of the Deed of
Trust relating to "Hazardous Materials" (as therein defined).
IPOP MANAGEMENT, INC.,
a Delaware corporation
By: /s/ Robert P. Brindley
-----------------------------------
President/Secretary
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