Exhibit 10.7.1
THIS PROMISSORY NOTE IS AND SHALL AT ALL TIMES BE AND REMAIN SUBORDINATED AND
SUBJECT IN RIGHT OF PAYMENT AND ENFORCEMENT, TO THE EXTENT AND IN THE MANNER SET
FORTH IN SECTION 11 OF THIS PROMISSORY NOTE, TO THE PRIOR PAYMENT IN FULL OF ALL
SENIOR DEBT, AS SUCH TERM IS HEREINAFTER DEFINED.
PROMISSORY NOTE
$1,500,000 Houston, Texas As of May 23, 2006
FOR VALUE RECEIVED, the undersigned, TRADESTAR SERVICES, INC. ("Maker"),
hereby unconditionally promises to pay to the order of LARRY M. WRIGHT ("Payee")
at 911 Creek Wood, Houston, Harris County, Texas 77024, or such other address
given to Maker by Payee, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS AND NO/100 ($1,500,000.00), in lawful money of the United States of
America, together with interest (calculated on the basis of a 360-day year) on
the unpaid principal balance from the date hereof until maturity (or
acceleration of maturity) at the rate of ten percent (10%) per annum.
1. Definitions. When used in this Note, the following terms shall have the
respective meanings specified herein or in the Section referred to:
"Business Day" means a day upon which business is transacted by national
banks in Dallas, Texas.
"Default" has the meaning ascribed to it in Section 5 hereof.
"Indemnification Agreement" means that certain Assumption and
Indemnification Agreement of even date herewith by and among Maker, Tradestar
Acquisition Sub, L.L.C., The CYMRI Corporation, Payee, Robert G. Wonish,
Franklin M. Cantrell, Jr., Petroleum Engineers, Inc. and Triumph Energy, Inc
"Maximum Rate" means, with respect to the holder hereof, the maximum
non-usurious rate of interest which, under all legal requirements, such holder
is permitted to contract for, charge, take, reserve, or receive on this Note. If
the laws of the State of Texas are applicable for purposes of determining the
"Maximum Rate," then such term means the "weekly ceiling" from time to time in
effect under Texas Finance Code ss.303.001, as amended, as limited by Texas
Finance Code ss.303.009.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated
of even date herewith, by and among Maker, Tradestar Acquisition Sub, L.L.C.,
The CYMRI Corporation, Payee, Franklin M. Cantrell, Jr., Robert G. Wonish, and
Michael W. Hopkins.
"Pledge" means that certain Pledge and Security Agreement, dated of even
date herewith, by and among Maker, Payee and Franklin M. Cantrell, Jr.
"Senior Debt" means all amounts outstanding under the Credit Agreement
dated May 23, 2006, by and among Petroleum Engineers, Inc. and Tradestar
Construction Services, Inc., as debtors, and Wells Fargo, as lender, including
that certain Revolving Note payable to Wells Fargo in the original principal
amount of $5,000,000.
"Senior Debt Event of Default" means any event, the occurrence of which
permits the termination or acceleration of the Senior Debt.
"Wells Fargo" means Wells Fargo, National Association, the lender of the
Senior Debt, and any of its assigns and any other holders of the Senior Debt.
2. Payment. The principal and interest on this Note shall be due and
payable in eleven (11) equal monthly installments in the amount of THIRTY-ONE
THOUSAND EIGHT HUNDRED SEVENTY DOLLARS AND 57/100 ($31,870.57) each, the first
monthly payment in such amount being due and payable on 1st day of June, 2006
and thereafter in the same amount of principal and interest on the same day of
each calendar month until eleven (11) payments of principal and interest have
been made, and on one (1) final installment due and payable on the 1st day of
May, 2007 in an amount equal to the then outstanding principal and accrued and
unpaid interest due on this Note. MAKER ACKNOWLEDGES AND AGREES THAT THIS NOTE
SHALL MATURE ON THE 1st DAY OF MAY, 2007 AND THAT ON MATURITY A BALLOON PAYMENT
EQUAL TO ALL OUTSTANDING PRINCIPAL AND ACCRUED AND UNPAID INTEREST HEREUNDER
SHALL BE DUE AND PAYABLE.
All payments of principal and interest of this Note shall be made by Maker
to Payee in federal or other immediately available funds. Payments made to Payee
by Maker hereunder shall be applied first to accrued interest and then to
principal.
Should the principal of, or any installment of the principal of or interest
upon, this Note become due and payable on any day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day, and
interest shall be payable with respect to such extension.
3. Security. The payment of this Note is secured by the Pledge pursuant to
which the Maker has pledged and granted a security interest in 100% of the
membership interests of Tradestar Acquisition Sub, L.L.C., a Nevada limited
liability company, as collateral for this Note.
4. Waivers. Maker and each surety, endorser, guarantor, and other party
ever liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
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or other notice of default, notice of acceleration, and intention to accelerate,
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, and hereby consent to any and all renewals, extensions,
indulgences, releases, or changes, regardless of the number of such renewals,
extensions, indulgences, releases, or changes.
No waiver by Payee of any of its rights or remedies hereunder or under any
other document evidencing or securing this Note or otherwise, shall be
considered a waiver of any other subsequent right or remedy of Payee; no delay
or omission in the exercise or enforcement by Payee of any rights or remedies
shall ever be construed as a waiver of any right or remedy of Payee; and no
exercise or enforcement of any such rights or remedies shall ever be held to
exhaust any right or remedy of Payee.
5. Representations and Warranties. Maker hereby represents and warrants to
Payee as follows:
(a) Maker is a corporation, duly organized, validly existing and in
good standing under the laws of Nevada and has the power and authority to
own its property and to carry on its business in each jurisdiction in which
it does business.
(b) Maker has full power and authority to execute and deliver this
Note and Pledge and to incur and perform the obligations provided for
therein, all of which have been duly authorized by all proper and necessary
action of the appropriate governing body of Maker. No consent or approval
of any public authority or other third party is required as a condition to
the validity of this Note and the Pledge, and Maker is in compliance with
all laws and regulatory requirements to which it is subject.
(c) There is no event that is, or with notice or passage of time, or
both, would be a Default under this Note and the Pledge.
(d) This Note and the Pledge constitutes the valid and legally binding
obligation of Maker, enforceable in accordance with its terms.
(e) There is no charter, bylaw, stock provision, partnership agreement
or other document pertaining to the organization, power or authority of
Maker and no provision of any existing agreement, mortgage, indenture or
contract binding on Maker or affecting Maker's property, which would
conflict with or in any way prevent the execution, delivery or carrying out
of the terms of this Note and the Pledge.
(f) All representations and warranties made under this Note shall be
deemed to be made at and as of the date hereof.
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6. Default and Remedies.
(a) A "Default" shall exist hereunder if any one or more of the
following events shall occur and be continuing: (i) Maker shall fail to pay
when due any principal of, or interest upon, this Note; (ii) any
representation or warranty made by Maker to Payee herein shall prove to be
untrue or inaccurate in any material respect; (iii) default shall occur in
the performance of any covenants or agreements of Maker contained in the
Pledge; (iv) default shall occur in the performance of any of the covenants
and agreements of Maker contained in the Indemnification Agreement; (v)
default shall occur in the performance of any of the covenants or
agreements of Maker contained herein on in the Merger Agreement; (vi)
default shall occur in the payment of the Senior Debt, or the Senior Debt
shall become due before its stated maturity by acceleration of the maturity
thereof or otherwise or shall become due by its terms and shall not be
promptly paid or extended; (vii) this Note shall cease to be legal, valid,
binding agreements enforceable against any party executing the same in
accordance with the respective terms thereof or shall in any way be
terminated or become or be declared ineffective or inoperative or shall in
any way whatsoever cease to give or provide the respective rights, titles,
interests, remedies, powers or privileges intended to be created thereby;
(viii) Maker shall (A) apply for or consent to the appointment of a
receiver, trustee, intervenor, custodian or liquidator of itself or of all
or a substantial part of its assets, (B) be adjudicated a bankrupt or
insolvent or file a voluntary petition for bankruptcy or admit in writing
that it is unable to pay its debts as they become due, (C) make a general
assignment for the benefit of creditors, (D) file a petition or answer
seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency laws, or (E) file an answer
admitting the material allegations of, or consent to, or default in
answering, a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or take corporate action for the purpose of
effecting any of the foregoing; (ix) an order, judgment or decree shall be
entered by any court of competent jurisdiction or other competent authority
approving a petition seeking reorganization of Maker or appointing a
receiver, trustee, intervenor or liquidator of any such person, or of all
or substantially all of its or their assets, and such order, judgment or
decree shall continue unstayed and in effect for a period of sixty (60)
days; or (x) any final judgment(s) for the payment of money shall be
rendered against Maker and such judgment or judgments shall not be
satisfied or discharged at least ten (10) days prior to the date on which
any of its assets could be lawfully sold to satisfy such judgments.
(b) If Maker fails or refuses to pay any part of the principal of or
interest upon this Note as the same become due, or upon the occurrence of
any Default hereunder, the Pledge or under any other agreement or
instrument securing or assuring the payment of this Note or executed in
connection herewith, then in any such event the holder hereof may, at its
option, (i) declare the entire unpaid balance of principal and accrued
interest of the Note to be immediately due and payable without presentment
or notice of any kind which Maker waives pursuant to Section 3 herein, (ii)
reduce any claim to judgment, and/or (iii) pursue and enforce any of
Payee's rights and remedies under the Pledge or available pursuant to any
applicable law or agreement.
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7. Voluntary Prepayment. Maker reserves the right to prepay the outstanding
principal balance of this Note, in whole or in part, at any time and from time
to time, without premium or penalty. Any such prepayment shall be made together
with payment of interest accrued on the amount of principal being prepaid
through the date of such prepayment in inverse order of maturity.
8. Usury Laws. Regardless of any provisions contained in this Note, the
Payee shall never be deemed to have contracted for or be entitled to receive,
collect, or apply as interest on the Note, any amount in excess of the Maximum
Rate, and, in the event Payee ever receives, collects, or applies as interest
any such excess, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance of this Note, and, if the
principal balance of this Note is paid in full, then any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable under any specific contingency exceeds the highest lawful rate, Maker
and Payee shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment (other than payments which are expressly
designated as interest payments hereunder) as an expense, fee, or premium,
rather than as interest, (b) exclude voluntary prepayments and the effect
thereof, and (c) spread the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is uniform throughout
such term.
9. Costs. If this Note is placed in the hands of an attorney for
collection, or if it is collected through any legal proceeding at law or in
equity, or in bankruptcy, receivership or other court proceedings, Maker agrees
to pay all costs of collection, including, but not limited to, court costs and
reasonable attorneys' fees, including all costs of appeal.
10. Notices. Any notice that may be given by either Maker or Payee shall be
in writing and shall be deemed given upon the earlier of the time of receipt
thereof by the person entitled to receive such notice, or if mailed by
registered or certified mail or with a recognized overnight mail courier upon
two (2) days after deposit with the United States Post Office or one (1) day
after deposit with such overnight mail courier, if postage is prepaid and
mailing is addressed to Maker or Payee, as the case may be, at the following
addresses, or to a different address previously given in a written notice to the
other party:
To Maker: Tradestar Services, Inc.
3451 Candelaria NE
Albuquerque, New Mexico 87107
Attention: Frederick A. Huttner, Chief Financial Officer
Facsimile: (213) 593-8727
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with a copy (which shall not constitute notice) to:
Haynes and Boone, LLP
One Houston Center
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attention: Bryce D. Linsenmayer, Esq.
Facsimile: (713) 236-5540
To Payee: Larry M. Wright
911 Creek Wood Way
Houston, Texas 77024
Facsimile: (713) 464-8048
With a copy (which shall not constitute notice) to:
Hirsch & Westheimer, P.C.
700 Louisiana Street, 25th Floor
Houston, Texas 77002-2728
Attention: Bradley E. Rauch, Esq. and Michael S. Wilk, Esq.
Facsimile: (713) 223-9319
11. Subordination.
(a) Maker agrees, and Payee, for itself and for its successors, by
accepting this Note agrees that the obligation represented by this Note
shall be subordinated in right of payment, to the extent and in the manner
provided in this Section 11, to the prior payment in full of all Senior
Debt.
(b) Except as provided in Section 11(c) below, from and after the date
hereof until maturity (or acceleration of maturity) of this Note, and
unless Wells Fargo expressly consents in writing to the contrary, no
payment on this Note shall be made or given by or on behalf of Maker or any
affiliate thereof and no payment on account of this Note shall be received,
accepted, or retained by Payee, nor shall Payee accelerate, make any demand
for, or attempt to receive, collect, or retain the same, whether by
collection, set-off, foreclosure, counterclaim, or otherwise.
(c) Notwithstanding anything contained herein to the contrary, so long
as Payee has not received notice from the holders of the Senior Debt that a
Senior Debt Event of Default has occurred and has not been cured in the
prescribed period of time, Maker may pay, and Payee may receive, payments
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of principal and interest and other amounts due under this Note; provided
that, following an the occurrence of a Senior Debt Event of Default, such
payments may and shall be resumed upon the date on which such Senior Debt
Event of Default is cured or waived.
(d) Payee agrees to execute any and all documents reasonably necessary
or reasonably required by any Senior Debt lender in order to evidence the
terms, agreements and conditions with respect to the subordination of
payments on this Note.
12. GOVERNING LAW. THIS INSTRUMENT AND ALL ISSUES AND CLAIMS ARISING IN
CONNECTION WITH OR RELATING TO THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
13. ENTIRETY. THE PROVISIONS OF THIS NOTE MAY BE AMENDED OR REVISED ONLY BY
AN INSTRUMENT IN WRITING SIGNED BY MAKER AND PAYEE. THIS NOTE EMBODIES THE
FINAL, ENTIRE AGREEMENT OF MAKER AND PAYEE AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF MAKER AND PAYEE. THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND
PAYEE.
14. WAIVER OF JURY TRIAL. MAKER, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY KNOWINGLY, INTENTIONALLY, IRREVOCABLY, UNCONDITIONALLY
AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES,
RELINQUISHES AND FOREVER FOREGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS NOTE OR
PLEDGE.
[Signature page follows]
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MAKER:
TRADESTAR SERVICES, INC.
By: /s/ Clarence J. Downs
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Clarence J. Downs
Chairman and Chief Executive Officer
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