EXHIBIT 10.2

 

PROMISSORY NOTE   [ex10-2logo_001.jpg]    International Bank of Commerce

 

Principal   Loan Date  Maturity  Loan Number  Officer  Initial $4,000,000.00  
12/28/2018  1/31/2020  1602937869  Andrew Levinson 

 

Borrower(s):

Greystone Logistics, Inc.
Greystone Manufacturing, L.L.C.

Lender: International Bank of Commerce

 

 

For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the undersigned, jointly and severally, (hereinafter
“Borrower”, whether one or more) promise to pay to the order of International
Bank of Commerce (hereinafter “Lender”), at 3817 NW Expressway, Suite 100,
Oklahoma City, Oklahoma 73112, or such other address as Lender may specify from
time to time, the sum of Four Million Dollars and No Cents ($4,000,000.00), in
legal and lawful money of the United States of America, with interest as it
accrues on the outstanding principal balance from date of advance of such
principal until paid.

 

The interest rate shall be floating at 0.5% per annum above the New York Prime
Rate (Prime Rate) (as described below) as it fluctuates from time to time;
provided, however, that in no event shall the rate of interest to be paid on the
unpaid principal of this Note be less than 4.75% per annum, nor more than the
lesser of (i) 45% per annum, or (ii) the maximum legal rate allowed by
applicable law. The starting interest rate on this Note shall be 5.75% per
annum. The rate of interest due hereunder shall be recomputed as of the date of
any change in the Prime Rate.

 

The NEW YORK PRIME RATE shall mean the annual lending rate of interest announced
from time to time by the JP Morgan Chase & Co., New York, New York, as its prime
rate. If the New York Prime Rate has been selected as the Prime Rate and if,
thereafter, a prime rate is not announced by JP Morgan Chase & Co., New York,
New York, then the International Bank of Commerce Prime Rate minus one percent
(1%) shall be the Prime Rate.

 

The INTERNATIONAL BANK OF COMMERCE PRIME RATE shall mean the annual lending rate
of interest announced from time to time by International Bank of Commerce, as
its prime rate.

 

Use of the term Prime Rate is not to be construed as a warranty or
representation that such rate is more favorable than another rate or index, that
rates on other loans or credit facilities may not be based on other indices or
that rates on loans to others may not be made below such prime rate.

 

At Lenders sole discretion, any interest rate increase will take the form of
higher periodic payments, a greater balloon payment (if applicable), and/or an
increase in the number of periodic payments. The periodic payment amount will
not increase more than once per month, with no limitation on such increase. Any
new periodic payment amount will be due and payable only after timely and proper
notice of such new payment amount from Lender. This paragraph is inapplicable if
the maturity of the outstanding indebtedness under this Note is accelerated
and/or demanded in full.

 

REVOLVING LINE OF CREDIT

 

1. Note. This Note is a multiple advance revolving line of credit for the
Borrower as provided herein and in some of the other Loan Documents. The term
Loan Documents means, collectively, this Note and any other document or
instrument executed in connection with this Note by Borrower, any guarantor of
this Note, and any party pledging property as security for the repayment of this
Note (Pledgor).

 

2. Principal and Interest. The principal of this Note represents funds which
Lender may advance to Borrower from time to time upon request of Borrower
pursuant to the terms of the Loan Documents. Any part of the principal may be
repaid by Borrower and thereafter reborrowed, subject to the conditions set out
below. Each advance shall constitute a part of the principal hereof and shall
bear interest from the date of the advance.

 

3. Advances. The advances of principal shall be made pursuant to and subject to
the terms and conditions hereof and of the other Loan Documents and agreements
between the parties, and if and only if (i) all conditions precedent to an
advance have been fulfilled, (ii) there has been no Event of Default which is
continuing, and (iii) the aggregate amount of the outstanding unpaid principal
on this Note, plus the amount of any and all pending requests for an advance,
plus the amount of any and all advances in process, plus the amount of any and
all advances that have been authorized, plus all accrued and unpaid interest and
accrued and unpaid late charges, and plus any amounts advanced by Lender on
Borrower’s behalf, does not exceed the original principal balance of this Note.
Borrower may, at any time, and from time to time, pay the outstanding unpaid
balance of this Note, or a portion thereof, and all accrued and unpaid interest
due. The revolving feature of this Note expires on, and no additional advances
of principal will be made after, Final Maturity.

 

4. Continuation of Lien. Lender and Borrower contemplate that by reason of
payments of this Note, there may be times when no indebtedness is owing on this
Note, but notwithstanding such occurrences, this Note, all liens securing this
Note, and the other Loan Documents shall remain in full force and effect unless
same be released in writing by Lender, at the request of Borrower or the Pledgor
of the property subject to the lien or liens; otherwise this Note and the other
Loan Documents and all liens securing same shall remain in full force and effect
to secure any and all advances, and any other indebtedness of Borrower,
regardless of any additional security that may be taken as collateral for the
repayment of any future indebtedness, and shall be unaffected by any renewals,
extensions, rearrangements, modifications and/or partial releases hereunder.

 

Page 1 of 9

 

 

The indebtedness evidenced by this Note was evaluated, analyzed and ultimately
priced based upon (i) Borrower‘s representation that it would establish and
maintain its primary deposit relationship with Lender, and/or (ii) the entire
banking relationship between Borrower and Lender. Therefore, (i) if Borrower’s
primary deposit relationship is not established and maintained with Lender,
and/or (ii) if there is a material adverse change in the deposit relationship
between Borrower and Lender, then Lender, in its sole and absolute discretion,
may, after ninety (90) days written notice, increase the interest rate charged
in connection with this credit facility by up to 2% above the interest rate as
set forth above, as it may float from time to time.

 

To secure payment of this Note, and, to the extent allowed by law, all other
indebtedness which may at any time be owing by the Borrower, or any of them,
Borrower hereby grants to Lender a security interest and lien on the following
collateral (collectively, the “Collateral”): All Borrowers’ assets, wherever
located, however arising or created, and whether now owned or existing or
hereafter arising, created or acquired, including without limitation Borrowers’
collectively right title and interest in and to the Collateral under, and as
described in the Security Agreement dated as of January 31, 2014 made by
Borrowers in favor of Lender’s precedecessor in interest.

 

Borrower agrees to take adequate care of the Collateral and to insure the
Collateral with a company satisfactory to Lender, for such risks and/or hazards,
and in such amounts as Lender directs. If Borrower fails to furnish Lender with
proof of required insurance coverage, Lender shall have the authority to
purchase insurance (including single interest insurance, which may provide
protection only for Lender) and add the premium for such insurance, together
with interest at the rate set forth above, to the balance of this Note.

 

Interest shall be calculated on a 360-day factor applied on a 365-day year or a
366-day year, in the event that the year is a leap year, on the unpaid principal
to the date of each installment paid; provided, however, that in the event the
interest rate reaches the maximum rate allowed by applicable law, said maximum
legal rate shall be computed on a full calendar year 365/365 days basis or on a
366/366 days basis, in the event that the year is a leap year. The interest
charged and herein contracted for will not exceed the maximum rate allowed by
law.

 

To the extent allowed by law, any and all matured unpaid amounts will bear
interest computed on a full calendar year 365/365 days basis, or on a 366/366
days basis in the event that the year is a leap year, at the maximum legal rate
of interest allowed by applicable state law, unless federal law allows a higher
interest rate, in which case Borrower agrees to pay the rate allowed by federal
law. If applicable state or federal law does not set a maximum rate of interest
for matured unpaid amounts, then Borrower agrees that the maximum rate for such
amounts shall be eighteen percent (18%) per annum.

 

To the extent allowed by law, as the late payment charge under this Note, Lender
may in its sole discretion (i) increase the interest on the principal portion of
any payment amount that is not received by the payment due date to the maximum
rate allowed by law, computed on a full calendar year basis from the payment due
date until paid, or (ii) should any payment not be made within ten (10) days
from the due date, require Borrower to pay a one time “late charge” per late
payment equal to five percent (5%) of the amount of the past due principal and
interest of such payment, with a minimum of $10.00 and a maximum of $1,500.00
per late payment. The “late charge” may be assessed without notice, and shall be
immediately due and payable. No late charge will be assessed on any payment
which is current and is a full payment of principal and/or interest then due
regardless of whether late charge(s) are due for any prior payments. This
paragraph is inapplicable if the outstanding indebtedness under the Note is
accelerated and/or demanded in full.

 

Notwithstanding anything contained herein to the contrary, if the Loan is
subject to the provisions of 24 Code of Federal Regulations Part 201 (Title 1
Property Improvement and Manufactured Home Loans), then the late charge
provisions of this paragraph shall be applicable to the exclusion of any other
late charge and/or default interest provisions in any instrument relating to any
past due installment of principal and/or interest due under this Note. Borrower
agrees to pay to Lender a late charge for installments of principal and interest
which are in arrears for fifteen (15) calendar days or more. The late charge
shall be in an amount equal to the lesser of: (a) five percent (5%) of each late
installment of principal and interest, up to a maximum of $10.00 per installment
for any property improvement loan and $15.00 per installment for any
manufactured home loan, or (b) the maximum amount permitted by applicable
federal or state law. The sum of such late charges plus the interest charged
under this Note and other charges deemed interest by law shall be limited to the
maximum nonusurious amount permitted by applicable federal or state law. This
paragraph is inapplicable if the outstanding indebtedness under this Note is
accelerated and/or demanded in full.

 

The outstanding and unpaid principal of this Note and all accrued and unpaid
interest are payable immediately upon demand, or if no demand is made, then such
sums are payable as follows:

 

NUMBER OF PAYMENTS   FREQUENCY   AMOUNT OF PAYMENTS   WHEN PAYMENTS ARE DUE    
          12   Monthly   Interest Only   Beginning December 31, 2018 1   Final  
Principal balance plus accrued and unpaid interest   At Final Maturity

 

FINAL MATURITY DATE: January 31, 2020

 

Each payment shall be applied as of its scheduled due date and in the order of
application as the Lender in its sole discretion may from time to time elect.

 

All outstanding unpaid principal, all accrued and unpaid interest, and all fees,
accrued and unpaid late charges, and/or other charges incurred by, or for the
benefit of, Borrower in connection with this Note which remain due and owing on
the Final Maturity Date are due and payable on such date.

 

Lender may, at its discretion, adjust the amount of periodic payments described
above to ensure that the remaining payments will fully amortize the principal of
this Note by the Final Maturity Date, or, if the payment schedule provides for a
Balloon Payment (as hereinafter defined), Lender may adjust the amounts of
remaining periodic payments so that the Agreed Amortization Amount (as
hereinafter defined) will not be reduced. As used herein, (i) the term “Balloon
Payment” means a payment of principal (together with any accrued unpaid
interest) required on the Final Maturity Date when the scheduled periodic
payments do not fully amortize the principal hereof by the Final Maturity Date,
and (ii) the term “Agreed Amortization Amount” means the amount of principal
that will be repaid prior to the Final Maturity Date assuming all initially
scheduled payments are made in a timely manner and the interest rate in effect
on the date hereof does not change. Any new monthly payment will be paid from
the first monthly payment date after the change date until the amount of the
monthly payment changes again.

 

Page 2 of 9

 

 

THIS OBLIGATION HAS THE FOLLOWING DEMAND FEATURE:

 

At any time, and from time to time, whether prior to and/or during said
scheduled payment dates, Lender may, in its sole and absolute discretion,
reschedule, rearrange and/or accelerate, in whole or in part, the outstanding
and unpaid principal balance, and all accrued and unpaid interest and all
accrued and unpaid late charges under this Note. Borrower agrees and promises to
pay Lender immediately all accelerated unpaid principal and all accrued and
unpaid interest on such principal, and all accrued and unpaid late charges. No
notice of intent to accelerate shall be required of Lender and Borrower
expressly waives any right to notice of Lender’s intent to accelerate. The
foregoing right to make demand for immediate payment of this Note, in whole or
in part, may be exercised by Lender for any reason whatsoever, whether or not
Borrower is in default hereunder and in advance of the Final Maturity Date.

 

THIS OBLIGATION HAS A BALLOON PAYMENT PROVISION:

 

THIS LOAN IS PAYABLE IN FULL ON THE FINAL MATURITY DATE SET FORTH HEREIN IF NO
PRIOR DEMAND HAS BEEN MADE. ON THE FINAL MATURITY DATE YOU MUST REPAY THE ENTIRE
OUTSTANDING UNPAID PRINCIPAL BALANCE, ALL ACCRUED AND UNPAID INTEREST, AND ALL
FEES, LATE CHARGES, AND/OR OTHER CHARGES INCURRED BY, OR ON BEHALF OF, BORROWER
IN CONNECTION WITH THIS LOAN, WHICH REMAIN UNPAID. LENDER IS UNDER NO OBLIGATION
TO REFINANCE THE LOAN, OR ANY PORTION THEREOF, AT THAT TIME. YOU WILL THEREFORE
BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WILL HAVE TO
FIND A LENDER, WHICH MAY BE THIS LENDER, WHICH AGREES TO LEND YOU THE MONEY TO
REFINANCE. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR
ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN, EVEN IF YOU OBTAIN
REFINANCING FROM THIS LENDER.

 

The occurrence of any of the following events shall constitute an event of
default (“Event of Default”) under this Note:

 

(a) Borrower fails to pay any of the indebtedness evidenced by this Note when
the same shall become due and payable; or

 

(b) Borrower (i) fails to perform any of Borrower’s other obligations under this
Note or the other Loan Documents, or any other event of default or breach occurs
under this Note or the other Loan Documents, or (ii) to the extent allowed by
law, and except as to loans for homestead, homestead equity, home equity lines
of credit, and/or household or other consumer goods, fails to perform any of
Borrower’s obligations under any other promissory note, security agreement, loan
agreement or other agreement between Lender and Borrower or any other event of
default or breach occurs thereunder; or

 

(c) any (i) statement, representation or warranty made by Borrower in this Note,
the other Loan Documents, or in any other agreement between Lender and Borrower,
or (ii) any information contained in any financial statement or other document
delivered to Lender by or on behalf of Borrower contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statement, representation or warranty therein not misleading in light of the
circumstances in which they were made; or

 

(d) Borrower: (i) dies or becomes physically or mentally incapacitated; or (ii)
in the case of a Borrower who is not a natural person, dissolves, terminates or
in any other way ceases to legally exist or has its entity powers or privileges
suspended or revoked for any reason; or (iii) makes an assignment for the
benefit of creditors, or enters into any composition, marshalling of assets or
similar arrangement in respect of its creditors generally; or (iv) becomes
insolvent or generally does not pay its debts as such debts become due; or (v)
conceals, removes, or permits to be concealed or removed, any part of Borrower’s
property, with intent to hinder, delay or defraud its creditors or any of them,
or makes or suffers a transfer of any of Borrower’s property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law, or makes
any transfer of Borrower’s property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid; or

 

(e) a trustee, receiver, agent or custodian is appointed or authorized to take
charge of any property of Borrower for the purpose of enforcing a lien against
such property or for the purpose of administering such property for the benefit
of its creditors; or

 

(f) an order (i) for relief as to Borrower is granted under Title 11 of the
United States Code or any similar law, or (ii) declaring Borrower to be
incompetent is entered by any court; or

 

(g) Borrower files any pleading seeking, or authorizes or consents to, any
appointment or order described in subsections (e) or (f) of this paragraph
above, whether by formal action or by the admission of the material allegations
of a pleading or otherwise; or

 

(h) application is made for or there is an enforcement of any lien, levy,
seizure, garnishment or attachment of any property of the Borrower for the
purposes of collecting a lawful debt; or

 

(i) any action or proceeding seeking any appointment or order described in
subsections (e) or (f) of this paragraph above is commenced without the
authority or consent of Borrower, and is not dismissed within thirty (30) days
after its commencement; or

 

(j) Borrower shall become involved (whether as plaintiff or defendant) in any
material litigation (including, without limitation, matrimonial litigation) or
arbitral or regulatory proceedings that, if determined adversely to Borrower,
could materially and adversely affect Borrower’s financial position, or could
affect Borrower’s ability to repay the indebtedness evidenced by this Note, or
could adversely affect the Collateral or any portion thereof or Lender’s
security interest therein; or

 

(k) Borrower, in Lender’s opinion, has suffered a material change in financial
condition which, in Lender’s opinion, impairs the ability of Borrower to repay
the indebtedness evidenced by this Note or to properly perform Borrower’s
obligations under this Note or the other Loan Documents; or

 

(l) any of the events or conditions described in subsections (d) through (k) of
this paragraph above happen to, by or with respect to any pledge or of the
Collateral or to any guarantor or other Obligor of the Note; or

 

(m) Lender believes, as a result of any material change in condition whether or
not described herein, that Lender will be adversely affected, that this Note is
inadequately secured, or that the prospect of payment of any of the indebtedness
evidenced by this Note or performance of any of Borrower’s obligations under the
Loan Documents is impaired, or

 

(n) to the extent allowed by law, and except as to loans for homestead,
homestead equity, home equity lines of credit, and/or household or other
consumer goods, as to each Borrower with regard to any other credit facility
with any other lender, any monetary default and/or any non-monetary default
occurs which results in acceleration of the indebtedness by any such other
lender; and each Borrower agrees to notify Lender of any such default within
fifteen (15) days after the occurrence of the default.

 

Upon the occurrence of an Event of Default, Lender may, at its option, without
notice to Borrower or any other Obligor except as otherwise expressly agreed by
Lender in writing, declare the following amounts (or any portion thereof) at
once due and payable (and upon such declaration, the same shall be at once
immediately due and payable and may be collected forthwith), whether or not
there has been a prior demand for payment and regardless of the stipulated date
of maturity: (i) the remaining unpaid principal balance of this Note
outstanding, (ii) the accrued and unpaid interest under this Note, (iii) the
accrued and unpaid late charges under this Note, (iv) any Swap Related Loss
Lender is entitled to collect as hereinafter provided, (v) all other sums
advanced or otherwise payable under this Note or any other Loan Document and
owed by Borrower to Lender and all interest thereon, and (vi) any other
indebtedness of Obligor the repayment of which is secured by one or more of the
Loan Documents.

 

Page 3 of 9

 

 

Borrower and Lender intend that the loan evidenced by this Note (the “Loan”)
shall be in strict compliance with applicable usury laws. If at any time any
interest contracted for, charged, or received under this Note or otherwise in
connection with the Loan would be usurious under applicable law, then regardless
of the provisions of this Note or the documents and instruments evidencing,
securing or otherwise executed in connection with the Loan or any action or
event (including, without limitation, prepayment of principal hereunder or
acceleration of maturity by the Lender) which may occur with respect to this
Note or the Loan, it is agreed that all sums determined to be usurious shall be
immediately credited by the Lender as a payment of principal hereunder, or if
this Note has already been paid, immediately refunded to the Borrower. All
compensation which constitutes interest under applicable law in connection with
the Loan shall be amortized, prorated, allocated and spread over the full period
of time any indebtedness is owing by Borrower and/or of the term of the Loan,
whichever is longer, to the greatest extent permissible without exceeding the
applicable maximum rate allowed by applicable law in effect from time to time
during such period.

 

IN THE EVENT ANY ITEM, ITEMS, TERMS OR PROVISIONS CONTAINED IN THIS INSTRUMENT
ARE IN CONFLICT WITH THE APPLICABLE STATE OR FEDERAL LAW, THIS INSTRUMENT SHALL
BE AFFECTED ONLY AS TO ITS APPLICATION TO SUCH ITEM, ITEMS, TERMS OR PROVISIONS,
AND SHALL IN ALL OTHER RESPECTS REMAIN IN FULL FORCE AND EFFECT. IT IS
UNDERSTOOD AND AGREED THAT IN NO EVENT AND UPON NO CONTINGENCY SHALL THE
BORROWER OR ANY PARTY LIABLE HEREON, OR HEREFOR BE REQUIRED TO PAY INTEREST IN
EXCESS OF THE RATE ALLOWED BY THE APPLICABLE STATE LAW OR FEDERAL LAW, IF SUCH
FEDERAL LAW PERMITS A GREATER RATE OF INTEREST. THE INTENTION OF THE PARTIES IS
TO CONFORM STRICTLY TO THE APPLICABLE USURY LAWS AS NOW OR HEREINAFTER CONSTRUED
BY THE COURTS HAVING JURISDICTION.

 

THE BORROWER, ENDORSERS, SURETIES, GUARANTORS AND ALL PERSONS TO BECOME LIABLE
ON THIS NOTE (THE “OBLIGORS”) HEREBY, JOINTLY AND SEVERALLY, WAIVE EXPRESSLY ALL
NOTICES OF OVERDUE INSTALLMENT PAYMENTS AND DEMANDS FOR PAYMENT THEREOF, NOTICES
OF INTENTION TO ACCELERATE MATURITY, NOTICES OF ACTUAL ACCELERATION OF MATURITY,
PRESENTMENT, DEMAND FOR PAYMENT, NOTICES OF DISHONOR, DISHONOR, PROTEST, NOTICES
OF PROTEST, AND DILIGENCE IN COLLECTION HEREOF. EACH OBLIGOR AGREES THAT THE
LENDER MAY AT ANY TIME, AND FROM TIME TO TIME, UPON REQUEST OF OR BY AGREEMENT
WITH ANY OF THEM, RENEW THIS NOTE AND/OR EXTEND THE DATE OF MATURITY HEREOF OR
CHANGE AND/OR REARRANGE THE TIME OR METHOD OF PAYMENTS WITHOUT NOTICE TO ANY OF
THE OTHER OBLIGORS, WHO SHALL REMAIN LIABLE FOR THE PAYMENT HEREOF. OBLIGORS
WAIVE EXPRESSLY THE LATE FILING OF ANY SUIT OR PRECEDING OR CAUSE OF ACTION
HEREON, OR ANY DELAY IN THE HANDLING OF ANY COLLATERAL. OBLIGORS AGREE THAT
LENDER’S ACCEPTANCE OF PARTIAL OR DELINQUENT PAYMENTS OR FAILURE OF LENDER TO
EXERCISE ANY RIGHT OR REMEDY CONTAINED HEREIN OR IN ANY INSTRUMENT GIVEN AS
SECURITY FOR THE PAYMENT OF THIS NOTE SHALL NOT BE A WAIVER OF ANY OBLIGATION OF
THE OBLIGORS OR CONSTITUTE A WAIVER OF ANY PRIOR OR SUBSEQUENT DEFAULT. THE
LENDER MAY REMEDY ANY DEFAULT WITHOUT WAIVING THE DEFAULT REMEDIED AND MAY WAIVE
ANY DEFAULT WITHOUT WAIVING ANY OTHER PRIOR OR SUBSEQUENT DEFAULT.

 

To the extent allowed by law, as security for this Note and all other
indebtedness which may at any time be owing by Borrower (and any endorsers
and/or guarantors hereof) to Lender, Borrower (and any endorsers and/or
guarantors hereof) grants to Lender (i) a security interest and contractual lien
in and to all of the Borrower’s (and any such endorser’s and/or guarantor’s )
collateral securing other indebtedness of Borrower (or of any such endorsers
and/or guarantors) to Lender, and (ii) a security interest, contractual lien and
contractual right of set-off in and to all of the Borrower’s (and any such
endorser’s and/or guarantor’s) money, credits, accounts and/or other property
including repurchase agreements and other non-depository obligations, now in, or
at any time hereafter coming within, the custody or control of Lender, or any
member Bank or branch Bank of International BancShares Corporation, whether held
in a general or special account or deposit, or for safekeeping or otherwise,
excluding however, all IRA, KEOGH and trust accounts upon which the grant of
security interest or right of set-off would be prohibited. Every such security
interest, lien and right of set-off may be exercised without demand or notice to
Borrower (or to any endorsers and/or guarantors hereof). No security interest,
lien or right of set-off to enforce such security interest or lien shall be
deemed to have been waived by any act or conduct on the part of Lender, or by
any failure to exercise such right of set-off or to enforce such security
interest or lien, or by any delay in so doing. Every right of set-off security
interest shall continue in full force and effect until such right of set-off,
security interest or lien is specifically waived or released by an instrument in
writing executed by Lender. The foregoing provisions of this paragraph are in
addition to and not in lieu of any rights of set-off allowed by law.

 

To the extent allowed by law, in connection with any transaction between
Borrower and Lender at any time in the past, present or future, in the event
Borrower, individually or jointly with others, has granted or grants Lender a
lien on any real and/or personal property, Borrower agrees that the lien on such
real and/or personal property, to the extent of Borrower’s interest therein,
shall also secure the indebtedness of Borrower to Lender evidenced by this Note
and all renewals, extensions, rearrangements and modifications hereof.

 

If this Note, or any part hereof, is not paid according to its terms, is placed
in the hands of an attorney for collection, or is collected through probate,
bankruptcy or other judicial or non-judicial proceedings, whether matured by
expiration of time or by the exercise of the option given to the Lender to
mature it, Borrower and all parties now or hereafter liable hereon hereby agree
to pay an additional amount equal to a reasonable and necessary attorney’s fees
and associated costs for collection. Said attorney’s fees and costs of
collection, once liquidated and paid by Lender, will bear interest at the rate
of interest applied to the matured and past-due principal balance of this Note
as such rate may change from time to time from the date advanced by Lender until
paid.

 

Subject to the provisions of this Note pertaining to Swap Transactions as
hereinafter set out, Borrower reserves the right to prepay, prior to maturity,
all or any part of the principal of this Note without penalty, and interest
shall immediately cease on any amount so prepaid. All prepayments shall be
applied to the last maturing installments of principal, without interrupting the
regular installment payments. Borrower will provide Lender written notice of any
prepayment of principal together with such prepayment.

 

Any assumption, if permitted by Lender, by any other person or persons,
partnership, corporation, organization or any other entity without an express
written release signed by Lender, shall not release the liability of Borrower or
any other Obligors for the payment of this Note.

 

In the event that the Collateral is sold, conveyed, or otherwise disposed of
without the prior written consent of the Lender, the maturity of this Note may,
at the option of the Lender, be accelerated and Lender may immediately demand
payment of the then outstanding principal sum, together with all accrued and
unpaid interest and late charges due thereon.

 

Borrower shall be obligated to repay only that portion of the principal amount
which has actually been advanced and not repaid, and interest shall accrue on
the unpaid outstanding principal balance from the date of the advance until
paid.

 

Borrower agrees to provide to Lender, at least on an annual basis, a Financial
Statement, a Profit And Loss/Net Income Statement, copies of U.S. Tax Returns,
and any other information that may be reasonably requested by Lender.

 

Page 4 of 9

 

 

The parties intend to conform strictly to the applicable federal, state, and
local laws as now or hereafter construed by the courts having jurisdiction. All
agreements between the parties hereto (or any other party liable with respect to
any portion of the indebtedness under this Note or any instrument executed in
connection herewith) are hereby limited by the provisions of this paragraph,
which shall override and control all such agreements, whether now existing or
thereafter arising and whether written or oral. If from a construction of any
document related to any agreement between the parties hereto (or any other party
liable with respect to any portion of the indebtedness under this Note or any
instrument executed in connection herewith ), any term(s) or provision(s) of the
document is in conflict with, or in violation of, applicable laws, any such
construction shall be subject to the provisions of this paragraph and such
document shall be automatically reformed as to comply with applicable law,
without the necessity of execution of any amendment or new document.

 

Financing Statements: At Lender’s request Borrower will promptly sign all other
documents, including financing statements and certificates of title, to perfect,
protect, and continue Lender’s security interest in the Collateral at the sole
cost of Borrower. Borrower hereby authorizes Lender to file a Financing
Statement, an Amended Financing Statement and a Continuation Financing Statement
(collectively referred to as the “Financing Statement”) describing the
Collateral. Where Collateral is in the possession of a third party, Borrower
will join with Lender in notifying the third party of Lender’s security interest
and obtaining a Control Agreement from the third party that it is holding the
Collateral for the benefit of Lender.

 

In the event any legal action or proceeding, by arbitration or otherwise, is
commenced in connection with the enforcement of, or declaration of rights under,
this Note and/or any instrument or written agreement required or delivered
under, in connection with, or pursuant to the terms of this Note (collectively,
the “Loan Documents”), and/or any controversy or claim, whether sounding in
contract, tort or statute, legal or equitable, involving in any way the
financing or the transaction(s)evidenced by this Note, or any other proposed or
actual loan or extension of credit, the prevailing party shall be entitled to
recover reasonable and necessary attorney’s fees and paralegal costs (including
allocated costs for in-house legal services), costs, expenses, expert witness
fees and costs, and other necessary disbursements made in connection with any
such action or proceeding, in the amount determined by the fact-finder.

 

Lender, in its sole discretion and without obligation on Lender to do so, may
advance and pay sums on behalf and for the benefit of Borrower for costs
necessary for the protection and preservation of the Collateral and other costs
that may be appropriate, in Lender’s sole discretion, including but not limited
to insurance premiums, ad valorem taxes, and attorney’s fees. Any sums which may
be so paid out by Lender and all sums paid for insurance premiums, as aforesaid,
including the costs, expenses and attorney’s fees paid in any suit affecting
said property when necessary to protect Lender’s lien therein shall bear
interest from the dates of such payments at the interest rate applied to the
matured and past-due principal balance of this Note and shall be paid by
Borrower to Lender upon demand, at the same place at which this Note is payable,
and shall be deemed a part of the debt evidenced hereby and recoverable as such
in all aspects.

 

Borrower and Lender hereby expressly acknowledge and agree that in the event of
a default under this Note, or under any document executed by Borrower in
connection with, or to secure the payment of, this Note (1) Lender shall not be
required to comply with Article 6132b-3.05(d) of the Texas Revised Partnership
Act or Subsection 152.306 of the Texas Business Organizations Code, if
applicable, and (2) Lender shall not be required to proceed against or exhaust
the assets of Borrower before pursuing any remedy directly against one or more
of the partners of Borrower or the property of such partners.

 

If Borrower is an entity formed under and/or governed by the Texas Business
Organizations Code (“BOC”) the following shall apply: (i) Notice to known
claimants under BOC Section 11.052(a)(2) [or any similar statute of Borrower’s
domiciliary state if Borrower is not domiciled in the State of Texas] shall not
be effective with respect to Lender unless it is delivered by certified mail,
return receipt requested and addressed to Dennis E. Nixon, President, at
International Bancshares Corporation, P.O. Drawer 1359, Laredo, Texas 78042-1359
within thirty (30) days following the occurrence of the event requiring the
winding up of Borrower, (ii) to the extent allowed by applicable law, Borrower
agrees that BOC Section 11.359 [or any similar statute of Borrower’s domiciliary
state if Borrower is not domiciled in the State of Texas] shall have no force or
effect on the existence or validity of the indebtedness evidenced by the Loan
Documents and Borrower hereby waives all rights under said statutory provision,
and (iii) in the event any portion of the indebtedness evidenced by the Loan
Documents shall be deemed to be extinguished pursuant to the provisions of BOC
Section 11.359 [or any similar statute of Borrower’s domiciliary state if
Borrower is not domiciled in the State of Texas], such extinguishment shall have
no effect on the existence, validity, or enforceability of the Loan Documents
other than Lender’s ability to obtain a judgment against Borrower for repayment
of the extinguished portion of such indebtedness.

 

Swap Transactions and Swap Related Loss: The term “Swap Transaction”, as used
herein, means (i) any transaction effected pursuant to one or more agreements
now existing or hereafter entered into between Borrower and Lender and/or any
financial institution affiliated with International BancShares Corporation (a
“Lender Affiliate”) which is a rate swap, swap option, interest rate option or
other financial instrument or interest (including one or more options with
respect to any such transaction), (ii) any type of transaction that is similar
to any transaction referred to in clause (i) above that is currently, or in the
future becomes, recurrently entered into in the financial markets and which is a
forward swap, future, option or other derivative on one or more rates, or any
combination of the foregoing transactions, or (iii) any transaction that is
similar to any transaction referred to in clause (i) or (ii) above except that
it is between Lender and/or a Lender Affiliate and any party or entity other
than Borrower and is entered into by Lender and/or such Lender Affiliate on
account of a corresponding Swap Transaction that is described in clause (i) or
(ii) above.

 

Notwithstanding anything to the contrary contained in this Note or any other
Loan Document, during any time that any Swap Transaction is in effect, Borrower
shall have no right whatsoever to make any prepayment of all or any part of the
principal owing under this Note without Lender’s prior written approval, which
Lender may grant or withhold in Lender’s sole and absolute discretion,

 

For purposes hereof, “prepayment” shall mean any instance wherein the principal
under this Note is satisfied in full or in part in advance and/or in excess of
scheduled installments in any manner prior to the Final Maturity Date, whether
voluntarily or involuntarily. Prepayment shall include, but not be limited to:
(i) payment upon or following acceleration of the maturity of this Note by
Lender pursuant to any applicable provision of this Note or any of the other
Loan Documents, (ii) any payment of principal made prior to the Final Maturity
Date pursuant to any demand provisions of this Note, (iii) application of
insurance or condemnation proceeds to discharge all or any portion of the
outstanding principal of this Note, (iv) payment of principal to Lender by any
holder of a subordinate or superior interest in the Collateral, or (v) any
payment of principal after the Final Maturity Date is accelerated for any reason
permitted hereunder or under any of the other Loan Documents, including, without
limitation, any acceleration of the Final Maturity Date resulting from any sale
or transfer of the Collateral pursuant to foreclosure, sale under power of sale,
judicial order or trustee’s sale under the Loan Documents; any payment of
principal by sale, transfer or offsetting credit in connection with or under any
bankruptcy, insolvency, reorganization, assignment for the benefit of creditors,
or receivership proceedings under any statute of the United States or any State
thereof involving Borrower and/or the Collateral

 

In the event of any prepayment during any time that any Swap Transaction is in
effect, whether or not approved by Lender, Borrower shall be obligated to pay to
Lender upon demand, in addition to all other amounts due and payable to Lender
under the Loan Documents at the time of such prepayment, an amount determined by
Lender to be the loss, cost and expense incurred by Lender and/or a Lender
Affiliate under, related to or arising from such Swap Transaction that is
attributable to such prepayment (the “Swap Related Loss”). Lender’s
determination of the Swap Related Loss incurred by Lender or a Lender Affiliate
shall be conclusive and binding upon Borrower absent manifest error.

 

Page 5 of 9

 

 

ARBITRATION.

 

BINDING ARBITRATION AGREEMENT

PLEASE READ THIS CAREFULLY. IT AFFECTS YOUR RIGHTS.

 

BORROWER AND LENDER AGREE TO ARBITRATION AS FOLLOWS (hereinafter referred to as
the “Arbitration Provisions”):

 

I. Special Provisions and Definitions applicable to both CONSUMER DISPUTES and
BUSINESS DISPUTES:

 

  (a) Informal Resolution of Customer Concerns. Most customer concerns can be
resolved quickly and to the customer’s satisfaction by contacting your account
officer, branch manager or by calling the Customer Service Department in your
region. The region and numbers are:

 

  1. Laredo 956-722-7611   2. Austin 512-397-4506   3. Brownsville 956-547-1000
  4. Commerce Bank 956-724-1616   5. Corpus Christi 361-888-4000   6. Eagle Pass
830-773-2313   7. Houston 713-526-1211   8. McAllen 956-686-0263   9. Oklahoma
405-841-2100   10. Port Lavaca 361-552-9771   11. San Antonio 210-518-2500   12.
Zapata  956-765-8361

 

   

In the unlikely event that your account officer, branch manager or the customer
service department is unable to resolve a complaint to your satisfaction or if
the Lender has not been able to resolve a dispute it has with you after
attempting to do so informally, you and the Lender agree to resolve those
disputes through binding arbitration or small claims court instead of in courts
of general jurisdiction.

        (b) Sending Notice of Dispute. If either you or the Lender intend to
seek arbitration, then you or the Lender must first send to the other by
certified mail, return receipt requested, a written Notice of Dispute. The
Notice of Dispute to the Lender should be addressed to: Dennis E. Nixon,
President, at International Bancshares Corporation, P.O. Drawer 1359, Laredo,
Texas 78042-1359 or if by email, ibcchairman@ibc.com. The Notice of Dispute must
(a) describe the nature and basis of the claim or dispute; and (b) explain
specifically what relief is sought. You may download a copy of the Notice of
Dispute at www.ibc.com or you may obtain a copy from your account officer or
branch manager.         (c) If the Dispute is not Informally Resolved. If you
and the Lender do not reach an agreement to resolve the claim or dispute within
thirty (30) days after the Notice of Dispute is received, you or the Lender may
commence a binding arbitration proceeding. During the binding arbitration
proceeding, any settlement offers made by you or the Lender shall not be
disclosed to the Arbitrator.         (d) “DISPUTE(S)”. As used herein, the word
“DISPUTE(S)” includes any and all controversies or claims between the PARTIES of
whatever type or manner, including without limitation, any and all claims
arising out of or relating to this Note, compliance with applicable laws and/or
regulations, any and all services or products provided by the Lender, any and
all past, present and/or future loans, lines of credit, letters of credit,
credit facilities or other form of indebtedness and/or agreements involving the
PARTIES, any and all transactions between or involving the PARTIES, and/or any
and all aspects of any past or present relationship of the PARTIES, whether
banking or otherwise, specifically including but not limited to any claim
founded in contract, tort, fraud, fraudulent inducement, misrepresentation or
otherwise, whether based on statute, regulation, common law or equity.        
(e) “CONSUMER DISPUTE” and “BUSINESS DISPUTE”. As used herein, “CONSUMER
DISPUTE” means a DISPUTE relating to an account (including a deposit account),
agreement, extension of credit, loan, service or product provided by the Lender
that is primarily for personal, family or household purposes. “BUSINESS DISPUTE”
means any DISPUTE that is not a CONSUMER DISPUTE.         (f) “PARTIES” or
“PARTY”. As used in these Arbitration Provisions, the term “PARTIES” or “PARTY”
means Borrower, Lender, and each and all persons and entities signing this Note
or any other agreements between or among any of the PARTIES as part of this
transaction. “PARTIES” or “PARTY” shall be broadly construed and include
individuals, beneficiaries, partners, limited partners, limited liability
members, shareholders, subsidiaries, parent companies, affiliates, officers,
directors, employees, heirs, agents and/or representatives of any party to such
documents, any other person or entity claiming by or through one of the
foregoing and/or any person or beneficiary who receives products or services
from the Lender and shall include any other owner and holder of this Note.
Throughout these Arbitration Provisions, the term “you” and “your” refer to
Borrower, and the term “Arbitrator” refers to the individual arbitrator or panel
of arbitrators, as the case may be, before which the DISPUTE is arbitrated.    
    (g) BINDING ARBITRATION. The PARTIES agree that any DISPUTE between the
PARTIES shall be resolved by mandatory binding arbitration pursuant to these
Arbitration Provisions at the election of either PARTY. BY AGREEING TO RESOLVE A
DISPUTE IN ARBITRATION, THE PARTIES ARE WAIVING THEIR RIGHT TO A JURY TRIAL OR
TO LITIGATE IN COURT (except for matters that may be taken to small claims court
for a CONSUMER DISPUTE as provided below).

 

Page 6 of 9

 

 

  (h) CLASS ACTION WAIVER. The PARTIES agree that (i) no arbitration proceeding
hereunder whether a CONSUMER DISPUTE or a BUSINESS DISPUTE shall be certified as
a class action or proceed as a class action, or on a basis involving claims
brought in a purported representative capacity on behalf of the general public,
other customers or potential customers or persons similarly situated, and (ii)
no arbitration proceeding hereunder shall be consolidated with, or joined in any
way with, any other arbitration proceeding. THE PARTIES AGREE TO ARBITRATE A
CONSUMER DISPUTE OR BUSINESS DISPUTE ON AN INDIVIDUAL BASIS AND EACH WAIVES THE
RIGHT TO PARTICIPATE IN A CLASS ACTION.         (i) FEDERAL ARBITRATION ACT AND
TEXAS LAW. The PARTIES acknowledge that this Note evidences a transaction
involving interstate commerce. The Federal Arbitration Act shall govern (i) the
interpretation and enforcement of these Arbitration Provisions, and (ii) all
arbitration proceedings that take place pursuant to these Arbitration
Provisions. THE PARTIES AGREE THAT, EXCEPT AS OTHERWISE EXPRESSLY AGREED TO BY
THE PARTIES IN WRITING, OR UNLESS EXPRESSLY PROHIBITED BY LAW, TEXAS SUBSTANTIVE
LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) WILL APPLY IN ANY
BINDING ARBITRATION PROCEEDING OR SMALL CLAIMS COURT ACTION REGARDLESS OF WHO
INITIATES THE PROCEEDING, WHERE YOU RESIDE OR WHERE THE DISPUTE AROSE.

 

II. Provisions applicable only to a CONSUMER DISPUTE:

 

  (a) Any and all CONSUMER DISPUTES shall be resolved by arbitration
administered by the American Arbitration Association (“AAA”) under the
Commercial Arbitration Rules and the Supplemental Procedures for Resolution of
Consumer Disputes and Consumer Due Process Protocol (which are incorporated
herein for all purposes). It is intended by the PARTIES that these Arbitration
Provisions meet and include all fairness standards and principles of the
American Arbitration Association’s Consumer Due Process Protocol and due process
in predispute arbitration. If a CONSUMER DISPUTE is for a claim of actual
damages above $250,000 it shall be administered by the AAA before three neutral
arbitrators at the request of any PARTY.         (b) Instead of proceeding in
arbitration, any PARTY hereto may pursue its claim in your local small claims
court, if the CONSUMER DISPUTE meets the small claims court’s jurisdictional
limits. If the small claims court option is chosen, the PARTY pursuing the claim
must contact the small claims court directly. The PARTIES agree that the class
action waiver provision also applies to any CONSUMER DISPUTE brought in small
claims court.         (c) For any claim for actual damages that does not exceed
$2,500, the Lender will pay all arbitration fees and costs provided you
submitted a Notice of Dispute with regard to the CONSUMER DISPUTE prior to
initiation of arbitration. For any claim for actual damages that does not exceed
$5,000, the Lender also agrees to pay your reasonable attorney’s fees and
reasonable expenses your attorney charges you in connection with the arbitration
(even if the Arbitrator does not award those to you) plus an additional $2,500
if you obtain a favorable arbitration award for your actual damages which is
greater than any written settlement offer for your actual damages made by the
Lender to you prior to the selection of the Arbitrator.         (d) Under the
AAA’s Supplemental Procedures for Consumer Disputes, if your claim for actual
damages does not exceed $10,000, you shall only be responsible for paying up to
a maximum of $125 in arbitration fees and costs. If your claim for actual
damages exceeds $10,000 but does not exceed $75,000, you shall only be
responsible for paying up to a maximum of $375 in arbitration fees and costs.
For any claim for actual damages that does not exceed $75,000, the Lender will
pay all other arbitrator’s fees and costs imposed by the administrator of the
arbitration. With regard to a CONSUMER DISPUTE for a claim of actual damages
that exceeds $75,000, or if the claim is a non-monetary claim, the Lender agrees
to pay all arbitration fees and costs you would otherwise be responsible for
that exceed $1,000. The fees and costs stated above are subject to any
amendments to the fee and cost schedules of the AAA. The fee and cost schedule
in effect at the time you submit your claim shall apply. The AAA rules also
permit you to request a waiver or deferral of the administrative fees and costs
of arbitration if paying them would cause you financial hardship.         (e)
Although under some laws, the Lender may have a right to an award of attorney’s
fees and expenses if it prevails in arbitration, the Lender agrees that it will
not seek such an award in a binding arbitration proceeding with regard to a
CONSUMER DISPUTE for a claim of actual damages that does not exceed $75,000.    
    (f) To request information on how to submit an arbitration claim, or to
request a copy of the AAA rules or fee schedule, you may contact the AAA at
1-800-778-7879 (toll free) or at www.adr.org.

 

III. Provisions applicable only to a BUSINESS DISPUTE:

 

  (a) Any and all BUSINESS DISPUTES between the PARTIES shall be resolved by
arbitration in accordance with the Commercial Arbitration Rules of the AAA in
effect at the time of filing, as modified by, and subject to, these Arbitration
Provisions. A BUSINESS DISPUTE for a claim of actual damages that exceeds
$250,000 shall be administered by AAA before at least three (3) neutral
arbitrators at the request of any PARTY. In the event the aggregate of all
affirmative claims asserted exceeds $500,000, exclusive of interest and
attorney’s fees, or upon the written request of any PARTY, the arbitration shall
be conducted under the AAA Procedures for Large, Complex Commercial Disputes. If
the payment of arbitration fees and costs will cause you extreme financial
hardship you may request that AAA defer or reduce the administrative fees or
request the Lender to cover some of the arbitration fees and costs that would be
your responsibility.         (b) The PARTIES shall have the right to (i) invoke
self-help remedies (such as setoff, notification of account debtors, seizure
and/or foreclosure of collateral, and nonjudicial sale of personal property and
real property collateral) before, during or after any arbitration, and/or (ii)
request ancillary or provisional judicial remedies (such as garnishment,
attachment, specific performance, receiver, injunction or restraining order, and
sequestration) before or after the commencement of any arbitration proceeding
(individually, and not on behalf of a class). The PARTIES need not await the
outcome of the arbitration proceeding before using self-help remedies. Use of
self-help or ancillary and/or provisional judicial remedies shall not operate as
a waiver of either PARTY’s right to compel arbitration. Any ancillary or
provisional judicial remedy which would be available from a court at law shall
be available from the Arbitrator. The PARTIES agree that the AAA Optional Rules
for Emergency Measures of Protection shall apply in an arbitration proceeding
where emergency interim relief is requested.

 

Page 7 of 9

 

 

  (c) Except to the extent the recovery of any type or types of damages or
penalties may not by waived under applicable law, the Arbitrator shall not have
the authority to award either PARTY (i) punitive, exemplary, special or indirect
damages, (ii) statutory multiple damages, or (iii) penalties, statutory or
otherwise.         (d) The Arbitrator may award attorney’s fees and costs
including the fees, costs and expenses of arbitration and of the Arbitrator as
the Arbitrator deems appropriate to the prevailing PARTY. The Arbitrator shall
retain jurisdiction over questions of attorney’s fees for fourteen (14) days
after entry of the decision.

 

IV. General provisions applicable to both CONSUMER DISPUTES and BUSINESS
DISPUTES:

 

  (a) The Arbitrator is bound by the terms of these Arbitration Provisions. The
Arbitrator shall have exclusive authority to resolve any DISPUTES relating to
the scope or enforceability of these Arbitration Provisions, including (i) all
arbitrability questions, and (ii) any claim that all or a part of these
Arbitration Provisions are void or voidable (including any claims that they are
unconscionable in whole or in part).         (b) These Arbitration Provisions
shall survive any modification, renewal, extension, repayment (whether partial
or full), or discharge (whether partial or full) of this Note, unless all of the
PARTIES otherwise expressly agree in writing.         (c) If a PARTY initiates
legal proceedings, the failure of the initiating PARTY to request arbitration
pursuant to these Arbitration Provisions within 180 days after the filing of the
lawsuit shall be deemed a waiver of the initiating PARTY’S right to compel
arbitration with respect to the claims asserted in the litigation. The failure
of the defending PARTY in such litigation to request arbitration pursuant to
these Arbitration Provisions within 180 days after the defending PARTY’S receipt
of service of judicial process, shall be deemed a waiver of the right of the
defending PARTY to compel arbitration with respect to the claims asserted in the
litigation. If a counterclaim, cross-claim or third party action is filed and
properly served on a PARTY in connection with such litigation, the failure of
such PARTY to request arbitration pursuant to these Arbitration Provisions
within ninety (90) days after such PARTY’S receipt of service of the
counterclaim, cross-claim or third party claim shall be deemed a waiver of such
PARTY’S right to compel arbitration with respect to the claims asserted therein.
The issue of waiver pursuant to these Arbitration Provisions is an arbitrable
dispute. Active participation in any pending litigation described above by a
PARTY shall not in any event be deemed a waiver of such PARTY’S right to compel
arbitration. All discovery obtained in the pending litigation may be used in any
subsequent arbitration proceeding.         (d) Any PARTY seeking to arbitrate
shall serve a written notice of intent to any and all opposing PARTIES after a
DISPUTE has arisen. The PARTIES agree a timely written notice of intent to
arbitrate by either PARTY pursuant to these Arbitration Provisions shall stay
and/or abate any and all action in a trial court, save and except a hearing on a
motion to compel arbitration and/or the entry of an order compelling arbitration
and staying and/or abating the litigation pending the filing of the final award
of the Arbitrator.         (e) Any Arbitrator selected shall be knowledgeable in
the subject matter of the DISPUTE and be licensed to practice law.         (f)
For a one (1) member arbitration panel, the PARTIES are limited to an equal
number of strikes in selecting the arbitrator from the AAA neutral list, such
that at least one arbitrator remains after the PARTIES exercise all of their
respective strikes. For a three (3) member arbitration panel, the PARTIES are
limited to an equal number of strikes in selecting the arbitrators from the AAA
neutral list, such that at least three arbitrators remain after the PARTIES
exercise all of their respective strikes. After exercising all of their allotted
respective strikes, the PARTIES shall rank those potential arbitrators remaining
numerically in order of preference (with “1” designating the most preferred).
The AAA shall review the PARTIES rankings and assign a score to each potential
arbitrator by adding together the ranking given to such potential arbitrator by
each PARTY. The arbitrator(s) with the lowest score total(s) will be selected.
In the event of a tie or ties for lowest score total and if the selection of
both or all of such potential arbitrators is not possible due to the required
panel size, the AAA shall select the arbitrator(s) it believes to be best
qualified.         (g) The PARTIES and the Arbitrator shall treat all aspects of
the arbitration proceedings, including, without limitation, any documents
exchanged, testimony and other evidence, briefs and the award, as strictly
confidential; provided, however, that a written award or order from the
Arbitrator may be filed with any court having jurisdiction to confirm and/or
enforce such award or order.         (h) Any statute of limitation which would
otherwise be applicable shall apply to any claim asserted in any arbitration
proceeding under these Arbitration Provisions, and the commencement of any
arbitration proceeding tolls such statute of limitations.         (i) If the AAA
is unable for any reason to provide arbitration services, then the PARTIES agree
to select another arbitration service provider that has the ability to arbitrate
the DISPUTE pursuant to and consistent with these Arbitration Provisions. If the
PARTIES are unable to agree on another arbitration service provider, any PARTY
may petition a court of competent jurisdiction to appoint an Arbitrator to
administer the arbitration proceeding pursuant to and consistent with these
Arbitration Provisions.         (j) The award of the Arbitrator shall be final
and Judgment upon any such award may be entered in any court of competent
jurisdiction. The arbitration award shall be in the form of a written reasoned
decision and shall be based on and consistent with applicable law.         (k)
Unless the PARTIES mutually agree to hold the binding arbitration proceeding
elsewhere, venue of any arbitration proceeding under these Arbitration
Provisions shall be in the county and state where Lender is located, which is
Lender’s address set out in the first paragraph on page 1 hereof.         (l) If
any of these Arbitration Provisions are held to be invalid or unenforceable, the
remaining provisions shall be enforced without regard to the invalid or
unenforceable term or provision.

 

Page 8 of 9

 

 

JURY WAIVER: IF A DISPUTE BETWEEN YOU AND LENDER PROCEEDS IN COURT RATHER THAN
THROUGH MANDATORY BINDING ARBITRATION, THEN YOU AND LENDER BOTH WAIVE THE RIGHT
TO A JURY TRIAL, AND SUCH DISPUTE WILL BE TRIED BEFORE A JUDGE ONLY.

 

THE TERM LENDER INCLUDES ANY OTHER OWNER AND HOLDER OF THIS NOTE AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS. THIS NOTE IS GOVERNED BY OKLAHOMA LAW, EXCEPT
TO THE EXTENT THE USURY LAWS OF THE STATE OF OKLAHOMA ARE PRE-EMPTED BY FEDERAL
LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL APPLY. VENUE OF ALL ACTIONS ON THIS
NOTE, SHALL LIE IN OKLAHOMA COUNTY, OKLAHOMA, AND ALL OBLIGATIONS REQUIRED
HEREIN ARE PERFORMABLE IN OKLAHOMA COUNTY, OKLAHOMA.

 

This Note has been accepted by Lender in the State where Lender is located as
set forth in the first paragraph of page 1 hereof.

 

Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: International
Bank of Commerce, 3817 NW Expressway, Suite 100, Oklahoma City, Oklahoma 73112,
ATTN: William P. Schonacher.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

BORROWER ACKNOWLEDGES EXECUTION OF THIS NOTE, AND HAVING READ AND UNDERSTOOD ALL
OF ITS PROVISIONS, BORROWER AGREES TO ITS TERMS.

 

NO ORAL AGREEMENTS

THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

BORROWER(S):         Greystone Logistics, Inc.   An Oklahoma Corporation        
By: /s/ Warren F. Kruger   Name: Warren F. Kruger   Title: President        
Address: 1613 East 15th     Tulsa, Oklahoma 74120         Greystone
Manufacturing, L.L.C.   An Oklahoma Limited Liability Company         By: /s/
Warren F. Kruger   Name: Warren F. Kruger   Title: Manager         Address: 1613
East 15th Street     Tulsa, Oklahoma 74120  

 

Page 9 of 9