Exhibit 10.01
PROMISSORY NOTE
$10,000,000.00 June 13, 2002
FOR VALUE RECEIVED, the undersigned ("Borrower"), promise(s) to pay to the order
of EDWARD MIKE DAVIS ("Lender"), at 200 Rancho Circle, Las Vegas, Nevada 89107,
or at such other place as Lender may direct, in lawful money of the United
States of America, without grace or offset, the principal sum of TEN MILLION AND
NO/100 DOLLARS ($10,000,000.00), with interest thereon at the rate provided
below until fully paid.
1. PAYMENT TERMS
The entire principal balance, with accrued interest thereon, shall be
due and payable on January 3, 2003 (the "Maturity Date") and is subject to
section 17 hereof.
2. INTEREST
Interest on the outstanding principal amount of this Note shall accrue
at a rate equal to one percent (1%) in excess of the "Reference Rate" in effect
on the date of this Promissory Note, but in no event shall this be less than six
percent (6%) per annum (the "Contract Rate"). As used herein, the term
"Reference Rate" means the rate of interest from time to time publicly announced
by Bank of America, N.A. ("Bank"), as its reference rate, even though Bank may
lend to its customers at rates that are at, below or above the reference rate.
Interest hereunder shall be calculated for the actual number of days elapsed on
the basis of a 360-day year.
3. DEFAULT INTEREST
If the entire unpaid principal balance of this Promissory Note,
together with accrued and unpaid interest thereon, is not paid when due, whether
on the Maturity Date or any earlier date as a result of acceleration of this
Promissory Note after a default hereunder (after passage of any applicable grace
or cure period), then the amount unpaid shall bear interest from the Maturity
Date or such earlier date, as the case may be, at the per annum interest rate
(the "Default Rate") equal to the sum of ten percent (10%) plus the Contract
Rate. The Default Rate shall continue until payment in full of any sums due
hereunder.
4. APPLICATION OF PAYMENTS
Each payment received by Lender shall be applied in the following
order:
A. First, to attorney's fees, costs and expenses or any other amount due
hereunder save for the amounts described in (B) and (C) immediately below;
B. Next, to accrued interest due hereunder; and
C. Finally, to the principal balance hereof.
Notwithstanding the foregoing, in the event that Borrower does not pay the
outstanding principal balance and accrued interest due under this Promissory
Note, when due, whether on the Maturity Date or on any earlier date as a result
of acceleration of this Promissory Note, the Lender at its option shall apply
any payments it then receives in such order as Lender deems appropriate in its
sole discretion.
[Initials: JWS & KE]
5. DEFAULT AND ACCELERATION
Upon the Borrower's failure to make any payment required under this
Promissory Note, as and when due, or the failure of Borrower to comply with any
term, covenant or condition of that certain Acquisition Agreement and Plan of
Merger, of even date herewith between Borrower, Red Star, Inc. and Mid-Power
Resources Corporation (the "Acquisition Agreement") within the time provided,
Lender may, at any time thereafter, together or singly,
(i) declare the entire outstanding principal balance due hereunder,
together with all accrued and unpaid interest thereon, to be
immediately due and payable, thereby accelerating this Promissory Note;
and
(ii) exercise immediately and without notice, any and all other rights
and remedies available under this Note or the Acquisition Agreement or
at law or in equity.
6. DEFINITIONS
Any terms used in this Promissory Note requiring a definition shall
have the definition given in this Section, unless elsewhere defined in this
Promissory Note. The term "Business Day" as used herein shall mean any day other
than a Saturday, Sunday or other day on which national banks in the State of
Nevada are not open for business.
7. PREPAYMENT
There are no full or partial prepayment privileges of the principal amount due
under this Promissory Note.
8. WAIVERS AND EXTENSIONS
Borrower and all endorsers and guarantors and any and all others who
may at any time be or become liable for payment of all or any part of the loan
evidenced hereby severally waive presentment for payment, demand, notice of
dishonor or nonpayment, protest and notice of protest, notice of acceleration
and of intention to accelerate the Maturity Date, and any and all lack of
diligence or delays in collection or enforcement hereof, and agree that Lender
from time to time may extend the time for payment of any sums due under this
Promissory Note and grant releases to all endorsers and guarantors hereof,
without in any way affecting the liability of such parties hereunder.
9. USURY
No amounts under this Promissory Note shall be charged, paid or
collected from Borrower if the result of such charge payment or collection would
be to cause the loan evidenced hereby to be usurious under applicable law. If,
however, an amount is paid or collected which would otherwise cause the loan to
be usurious, such excess causing the Loan to be usurious shall be deemed a
payment of principal and shall be applied against and shall reduce the then
outstanding principal balance of the loan by a corresponding amount, and no
Prepayment Premium shall be charged on any such excess amount applied to
principal.
10. SEVERABILITY
In the event any one or more of the provisions contained in this
Promissory Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Promissory Note, but this
Promissory Note
[Initials: JWS & KE]
Page 2
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
11. WAIVER OF TRIAL BY JURY
BORROWER AND LENDER, BY ACCEPTANCE OF THIS PROMISSORY NOTE, HEREBY
INTENTIONALLY, VOLUNTARILY AND KNOWINGLY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, WAIVE TRIAL BY JURY IN ANY COURT ACTION, PROCEEDING OR COUNTERCLAIM
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE
LOAN EVIDENCED BY THIS PROMISSORY NOTE, THIS PROMISSORY NOTE, OR ANY ACTS OR
OMISSIONS OF LENDER OR ITS AGENTS IN CONNECTION THEREWITH.
12. JOINT AND SEVERAL LIABILITY
If there shall be more than one Borrower named in this Promissory Note,
then the obligations and liabilities of such parties as Borrower shall be joint
and several.
13. REMEDIES CUMULATIVE
The rights, powers and remedies of Lender permitted by law, equity or
contract or as set forth herein or in the Acquisition Agreement shall be
cumulative and concurrent, and may be pursued singly, successively or together
against Borrower or the Collateral, at the sole discretion of the Lender, and to
the fullest extent permitted by law. Such rights, powers and remedies shall not
be exhausted by any exercise thereof but may be exercised as often as occasion
therefor shall occur. The failure to exercise any such right, power or remedy
shall in no event be construed as a waiver or release of the same. Lender shall
not by any act of omission or commission be deemed to have waived any of its
rights, powers or remedies under this Promissory Note or the Acquisition
Agreement unless such waiver be in writing and signed by Lender, and then only
to the extent specifically set forth therein. A waiver of a right in one event
shall not be construed as continuing or as a bar, or as a waiver of such right
on a subsequent event.
14. FEES AND COSTS
Borrower further promises to pay upon demand all reasonable attorney's
fees, costs and expenses (including, without limitation, court costs and
appraisal fees) incurred by Lender in connection with any default under this
Promissory Note and in any proceeding brought to enforce any of the provisions
of this Promissory Note or of the Acquisition Agreement (as applicable),
including probate, appellate and bankruptcy proceedings, any post-judgment
proceedings to collect or enforce any judgment or order relating to this
Promissory Note or the Acquisition Agreement (as applicable). This provision is
separate and several, and shall survive the merger of this provision into any
judgment.
15. TIME OF THE ESSENCE
Time shall be of the essence in performance of all obligations of
Borrower under this Promissory Note including, without limitation, the time
periods provided for the curing of defaults.
[Initials: JWS & KE]
Page 3
16. HEADINGS FOR CONVENIENCE
Headings and captions used in this Promissory Note are inserted for
convenience of reference only and neither constitute a part of this Promissory
Note nor are to be used to construe or interpret any of the provisions hereof.
17. PAYMENT THROUGH ESCROW
Escrow for the purposes of this Promissory Note shall mean Escrow #
02-06-0503-DTL at Nevada Title Company, 2500 North Buffalo, Las Vegas, Nevada
Attention: Troy Lochhead (251-5280). The principal and interest due on this
Promissory Note shall be paid in United States Treasury Obligations ("T-Bills").
On or before 12:00 noon on December 10, 2002, Borrower shall deposit T-Bills
into the Escrow in an amount sufficient to pay the principal and interest hereon
as of the Maturity Date. On such Maturity Date, Lender shall present this
Promissory Note, accepting payment hereof by accepting the T-Bills on deposit in
exchange for this Promissory Note marked "PAID IN FULL", with Nevada Title
Company delivering this Promissory Note, marked "PAID IN FULL" to Borrower.
18. NO ORAL CHANGE
This Promissory Note may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of the Borrower or Lender, but only by an agreement in writing, intended
for that specific purpose and signed by the party against whom enforcement of
any modification, amendment, waiver, extension, change, discharge or termination
is sought.
19. APPLICABLE STATE LAW
This Promissory Note shall be governed, construed, applied and enforced
in accordance with the laws of the State of Nevada.
Federal Taxpayer I.D. No. Borrower:
03 98403 MID-POWER SERVICE CORPORATION,
a Nevada corporation
By: /s/ James W. Scott
---------------------------
James W. Scott
Its President
By: /s/ Kenneth M. Emter
---------------------------
Kenneth M. Emter
Its Secretary
[Initials: JWS & KE]
Page 4