Exhibit 10.1
 
LOAN AGREEMENT
 
(Revolving Loan and Equipment Term Loan)
 
This Loan Agreement (this “Agreement”) is made as of January 31, 2014, among
INTERNATIONAL BANK OF COMMERCE, a Texas state banking association (together with
its successors and assigns, “Lender”), and GREYSTONE LOGISTICS, INC., an
Oklahoma corporation (“Greystone Logistics”), and GREYSTONE MANUFACTURING,
L.L.C., an Oklahoma limited liability company (“Greystone Manufacturing” and,
together with Greystone Logistics, the “Borrowers”).
 
NOW THEREFORE, the Lender and the Borrowers agree as follows:
 
ARTICLE I
 
DEFINED TERMS; CONSTRUCTION
 
Section 1.1. Definitions.  Capitalized terms used but not otherwise defined in
this Agreement have the meanings set forth below:
 
“Affiliate” means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, The term “control” (including the terms “controlled by” and
“under common control with”) means the possession, directly or indirectly, of
the actual power to direct or cause the direction of the management policies of
a Person, whether through the ownership of stock, by contract, credit
arrangement or otherwise.
 
“Borrowers” has the meaning assigned to such term in the preamble.
 
“Borrowing Base” means the sum of (a) 80% of the balance due on Eligible
Receivables, and (b) the lesser of (i) 50% of the value of Eligible Inventory,
and (ii) $1,250,000.  The balance due on Eligible Receivables shall not include
the amount of any counterclaims or offsets that have been or may be asserted
against one or more Borrowers by the account debtor (including offsets for any
“contra accounts” owed by any Borrower to the account debtor for goods purchased
by any Borrower or for services performed for any Borrower) or to the extent any
counterclaims, offsets or contra accounts exist in favor of the account debtor,
such amounts shall be deducted from the account balance.  The account balance
shall exclude the amount of any finance or service charges payable by the
account debtor.
 
“Cash Flow” means, as to the Borrowers for any period, on a consolidated basis,
(a) net income, after the current portion of income tax, for such period, (b)
less gain or plus loss from discontinued operations and extraordinary items for
such period, (c) plus depreciation, depletion, and amortization expense for such
period, (d) plus interest expense on all Debt for such period, (e) minus
dividends, redemptions, and similar distributions made or paid by a Borrower on
common or preferred equity during such period (excluding the Closing Dividend),
(f) minus capital expenditures, for such period (excluding the Yorktown
Equipment Acquisition).
 
“Change of Control” means (a) any change in capital ownership such that there is
a material change, as determined by Lender in its sole discretion, in the direct
or indirect ownership of (i) Greystone Logistics’ outstanding preferred stock,
and (ii) any equity interest in Greystone Manufacturing, or (b) Kruger ceasing
to be actively involved in the management of Greystone Logistics as President
and/or Chief Executive Officer.
 
“Closing Dividend” means a one-time payment of accrued preferred dividends to
holders of Greystone Logistics’ shares of preferred stock in an amount not to
exceed $3,470,000.00 at, or within ten (10) days of, the date of this Agreement.
 
“Collateral” has the meaning assigned to such term in Section 4.1.
 
 “Collateral Access Agreement” means any agreement, in form and substance
satisfactory to the Lender, between the Lender and any third party (including
any bailee, consignee, customs broker, or other similar party) in possession of
any Collateral or any landlord of any real property where any Collateral is
located, pursuant to which such third party acknowledges the Lender’s security
interest in such Collateral and agrees to provide the Lender with access to such
Collateral upon the occurrence and during the continuation of any Event of
Default, as such agreement may be amended, restated, or otherwise modified from
time to time.
 
 
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“Debt” means any indebtedness, liabilities and obligations, whether matured or
unmatured, liquidated or unliquidated, primary or secondary, direct or indirect,
absolute, fixed or contingent, and that is required to be classified as debt on
the balance sheet of the Borrowers pursuant to GAAP.
 
“Debt Service Coverage Ratio” means, as of any calculation date, the ratio of
Cash Flow for the four trailing quarters ending on such calculation date, to the
sum of the current portion of the Borrowers’ long-term Debt as of such
calculation date, plus interest expense of the Borrowers on all Debt for the
four trailing quarters ending on such calculation date.
 
“Default” means any event or circumstance that with notice or the passage of
time (or both) would constitute an Event of Default.
 
“EBIDA” means, as to the Borrowers for any period, net income after income tax
for such period, less gain or plus loss from discontinued operations and
extraordinary items for such period, plus interest expense for such period, plus
depreciation for such period, depletion for such period, and amortization for
such period.
 
 “Eligible Inventory” means inventory  that satisfies the following
requirements:
 
(A) The inventory is owned by any Borrower free of any title defects or any
Liens or interests of others except the Liens in favor of Lender and Permitted
Liens.
 
(B) The inventory is located at locations (i) that Borrowers have disclosed to
Lender, (ii) that are reasonably acceptable to Lender and (iii) if leased or
otherwise not owned by any Borrower, as to which the applicable landlord or
sublessor or the like, has executed a Collateral Access Agreement in favor of
Lender.  If the inventory is covered by a negotiable document of title (such as
a warehouse receipt), that document has been delivered to the Lender.
 
(C) The inventory is not in transit (other than inventory in transit between
locations of Borrowers).
 
(D) The inventory is held for sale or use in the ordinary course of Borrower’s
business and is of good quality.  Display items, work-in-process, parts, raw
materials, samples, and packing and shipping materials are not
acceptable.  Inventory that is obsolete, unsalable, damaged, defective, used,
discontinued or slow-moving, or that has been returned by the buyer, is not
acceptable.
 
(E) The inventory is covered by insurance as required by this Agreement.
 
(F) The inventory is not subject to any licensing or other agreements that would
prohibit or restrict in any way the ability of Lender to sell the inventory to
third parties.
 
(G) The inventory has been produced in compliance with the requirements of the
U.S. Fair Labor Standards Act (29 U.S.C. §§201 et seq.).
 
(H) The inventory is not placed on consignment.
 
 “Eligible Receivable” means an account receivable that satisfies the following
requirements:
 
(A) The account has resulted from the sale of inventory by any Borrower in the
ordinary course of business and without any further obligation on the part of
any Borrower to service, repair, or maintain any such goods sold other than
pursuant to any applicable warranty.
 
(B) There are no conditions that must be satisfied before the applicable
Borrower is entitled to receive payment of the account.  Accounts arising from
COD sales, consignments or guaranteed sales are not acceptable.
 
(C) The debtor upon the account does not claim any defense to payment of the
account, whether well founded or otherwise.
 
(D) The account represents a genuine obligation of the account debtor for goods
sold to and accepted by the account debtor, and to the extent any credit
balances exist in favor of the account debtor, such credit balances shall be
deducted from the account balance.
 
 
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(E) One or more Borrowers has sent an invoice to the account debtor in the
amount of the account.
 
(F) Borrowers are not prohibited by the laws of the state where the account
debtor is located from bringing an action in the courts of that state to enforce
the account debtor’s obligation to pay the account.
 
(G) The account is owned by one or more Borrowers free of any title defects,
Liens or interests of others except the Liens in favor of Lender and Permitted
Liens.
 
(H) The account debtor upon the account is not any of the following:
 
(i) an Affiliate of any Borrower, or an entity that has common officers or
directors with any Borrower;
 
(ii) the U.S. government or any agency or department of the U.S. government
unless Lender agrees in writing to accept the obligation, Borrowers comply with
the procedures in the Federal Assignment of Claims Act of 1940 (41 U.S.C. §15)
with respect to the obligation, and the underlying contract expressly provides
that neither the U.S. government nor any agency or department thereof shall have
the right of set-off against Borrowers;
 
(iii) any state, county, city, town or municipality or any agency thereof; or
 
(iv) Any Person located in a foreign country unless (A) the account is covered
by foreign credit insurance policy issued by the Export Import Bank of the
United States and (B) the account is otherwise an Eligible Receivable.
 
(I) The account is not in default.  An account will be considered in default if
any of the following occur:
 
(i) the account is not paid (A) in the case of any account owing by Anheuser
Busch Companies, LLC, or any subsidiary thereof, within one-hundred twenty (120)
days from its invoice date, or (B) in the case of all other accounts, within
sixty (60) days from its invoice date;
 
(ii) the account debtor makes a general assignment for the benefit of creditors,
or fails to pay its debts generally as they come due; or
 
(iii) any petition is filed by or against the account debtor under any
bankruptcy law or any other law or laws for the relief of debtors.
 
(J) The account is not the obligation of an account debtor who is in default (as
defined in clause (I) above) on twenty percent (20%) or more of the accounts (as
measured by account balance) upon which such account debtor is obligated.
 
(K) The account does not arise from the sale of goods that remain in any
Borrower’s possession or under any Borrower’s control.
 
(L) The account is not evidenced by a promissory note or chattel paper, nor is
the account debtor obligated to any Borrower under any other obligation that is
evidenced by a promissory note.
 
“Equipment Term Loan” has the meaning assigned to such term in Section 2.2.
 
“Equipment Term Note” has the meaning assigned to such term in Section 2.4(b).
 
“ERISA” means the Federal Employee Retirement Income Security Act of 1974, as
amended, together with all regulations and rulings promulgated thereunder.
 
“Event of Default” has the meaning assigned to such term in Section 9.1.
 
 
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“F&M Debt” means all Debt owed to The F&M Bank & Trust Company by the Borrowers.
 
“Funded Debt” means all Obligations.
 
“GAAP” means generally accepted accounting principles in the United States
applicable to commercial entities as set forth in the U.S. GAAP Accounting
Standards Codification issued by the Financial Accounting Standards Board or
such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the
circumstances as of the date of determination, consistently applied.
 
“Greystone Logistics” has the meaning assigned to such term in the preamble.
 
“Greystone Manufacturing” has the meaning assigned to such term in the preamble.
 
“Greystone Real Estate” means Greystone Real Estate, L.L.C., an Oklahoma limited
liability company.
 
“Greystone Real Estate Loan Agreement” means the Loan Agreement of even date
herewith between Greystone Real Estate and Lender, whereby the Lender has agreed
to extend to Greystone Real Estate a term loan in the amount of Three Million
Five Hundred Thousand Dollars ($3,500,000.00), subject to the terms and
conditions set forth therein, as the same may be amended, extended or restated
from time to time.
 
“Hazardous Substance” means any substance, material or waste that is or becomes
designated or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant”
or a similar designation or regulation under any current or future federal,
state or local law (whether under common law, statute, regulation or otherwise)
or judicial or administrative interpretation of such, including without
limitation petroleum or natural gas.
 
“Kruger” means Warren F. Kruger, an individual.
 
“Law” means all statutes, laws, ordinances, regulations, orders, writs,
injunctions, or decrees of the United States, any state or commonwealth, any
municipality, any foreign country, any territory or possession, or any Tribunal.
 
“Lender” has the meaning assigned to such term in the preamble.
 
“Lien” means, with respect to any property or assets, any right or interest
therein of a creditor to secure Debt owed to it or any other arrangement with
such creditor that provides for the payment of such Debt out of such property or
assets or that allows it to have such Debt satisfied out of such property or
assets before the satisfaction of general creditors of the owner of such
property or assets, including any lien, mortgage, security interest, pledge,
deposit, production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto, tax lien,
mechanic’s or materialman’s lien, or any other charge or encumbrance for
security purposes, whether arising by Law or agreement or otherwise, but
excluding any right of offset which arises without agreement in the ordinary
course of business.  “Lien” also means any filed financing statement, any
registration of a pledge (such as with an issuer of unregistered securities), or
any other arrangement or action that could serve to perfect a Lien described in
the preceding sentence, regardless of whether such financing statement is filed,
such registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
 
“Loans” means the Revolving Loan and the Equipment Term Loan.
 
“Loan Documents” means this Agreement, the Notes, the Security Agreement, the
Mortgage, all guaranties, and all other agreements, instruments, documents and
certificates executed and delivered to, or in favor of, Lender, and all other
pledges, powers of attorney, consents, assignments, contracts, notices, letter
of credit agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Borrower or any Obligor and delivered
to Lender in connection with this Agreement or the transactions contemplated
hereby.  Any reference in this Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to the Agreement or such Loan Document as the same may be in effect at any
and all times such reference becomes operative.  The term “Loan Documents” as
used in this Agreement does not include the Greystone Real Estate Loan
Agreement.
 
 
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“Mortgage” has the meaning assigned to such term in Section 4.1(b).
 
“Notes” means the Revolving Note and the Equipment Term Note.
 
“Obligations” means all Debt from time to time owing from any Borrower or any
Obligor to Lender under or pursuant to any of the Loan Documents or any
transaction contemplated thereby, including without limitation, all principal,
interest, fees, expenses, costs, indemnities, performance obligations, and all
amounts necessary to repay or prepay the Loans.
 
“Obligor” means any guarantor or any party, other than Greystone Real Estate,
pledging Collateral to Lender.
 
“Permitted Liens” means (i) mechanics’ and materialmen’s liens (and other
similar Liens), and Liens under operating and similar agreements, to the extent
the same relate to expenses incurred in the ordinary course of business and
which are not yet due, (ii) statutory liens for taxes that are not yet
delinquent, (iii) the Liens evidenced by the Security Instruments, (iv) other
Liens (if any) in favor of Lender, (v) Liens in existence on the date hereof and
disclosed to the Lender in writing, (vi) any other Liens consented to by Lender
in writing, and (vii) Liens securing Debt permitted by Section 8.10(d) or
Section 8.10(e).
 
“Person” means an individual, corporation, limited liability company, limited
partnership, partnership, association, joint stock company, trust or trustee
thereof, estate or executor thereof, unincorporated organization or joint
venture, court or governmental unit or any agency or subdivision thereof, or any
other legally recognizable entity.
 
“Plan” means any plan subject to Title IV of ERISA and maintained for employees
of any or all Borrowers, or of any member of a controlled group of corporations,
as the term “controlled group of corporations” is defined in Section 1563 of the
Internal Revenue Code of 1986, as amended, of which any Borrower is a part.
 
“Real Property” means the real property subject to the Lien of the Mortgage.
 
“Reportable Event” means an event described in Section 4043(b) of ERISA.
 
“Revolving Commitment” has the meaning assigned to such term in Section 2.1.
 
“Revolving Loan” has the meaning assigned to such term in Section 2.1.
 
“Revolving Note” has the meaning assigned to such term in Section 2.4(a).
 
“Rosene” means Robert B. Rosene, Jr., an individual.
 
“Security Agreement” has the meaning assigned to such term in Section 4.1(a).
 
“Security Instruments” means, collectively, the Security Agreement, the Mortgage
and any other security agreement, mortgage, pledge, deed of trust that is
executed by any Borrower or any Obligor in favor of the Lender.
 
“Tribunal” means any municipal, state, commonwealth, federal, foreign,
territorial or other sovereign, governmental entity, governmental department,
court, commission, board, bureau, agency or instrumentality.
 
“Yorktown” means Yorktown Management and Financial Services, L.L.C., an Oklahoma
limited liability company.
 
“Yorktown Equipment Acquisition” means the acquisition by Greystone
Manufacturing of certain equipment from Yorktown with the proceeds of the
Equipment Term Loan.
 
 
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Section 1.2. Construction.  The following rules of construction shall apply to
this Agreement, unless the context otherwise requires:  (a) all terms defined
herein in the singular shall include the plural, as the context requires, and
vice-versa; (b) the descriptive headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not be used in the
construction of the content of this Agreement; (c) the term “or” is not
exclusive; (d) the term “including” (or any form thereof) shall not be limiting
or exclusive; and (e) references to any Article, Section, subsections or
paragraph are to a numbered or lettered Article, Section, subsection or
paragraph of this Agreement unless indicated otherwise.
 
ARTICLE II
 
THE LOANS
 
Section 2.1. Revolving Loan.  Subject to the terms and conditions of this
Agreement, during the availability period described below, the Lender will
provide a revolving line of credit to the Borrowers (the “Revolving Loan”), and
make cash advances thereunder from time to time during the availability period
set forth in Section 2.3(a).  The amount of the Revolving Loan (the “Revolving
Commitment”) shall be up to Two Million Five Hundred Thousand Dollars
($2,500,000.00).  The Borrowers agree not to permit the principal balance of
cash advances under the Revolving Loan to exceed the lesser of (a) the Revolving
Commitment, and (b) the Borrowing Base.  If the Borrowers at any time exceed
either of these limits, the Borrowers will immediately pay the excess to the
Lender.
 
Section 2.2. Equipment Term Loan.  Subject to the terms and conditions of this
Agreement, Lender agrees to provide a term loan to the Borrowers in the amount
of Nine Million Two Hundred Thousand Dollars ($9,200,000.00) (the “Equipment
Term Loan”).
 
Section 2.3. Availability Period.
 
(a) The Revolving Loan is available in multiple disbursements from Lender
between the date of this Agreement and January 31, 2016, unless a Default or
Event of Default has occurred and is then in existence.  During the availability
period, the Borrowers may repay principal amounts under the Revolving Loan and
reborrow them as provided herein.
 
(b) The Equipment Term Loan is available in one disbursement from Lender on the
date of this Agreement, unless a Default or Event of Default has occurred.
 
Section 2.4. Repayment of Loans; Interest.
 
(a) The Revolving Loan will be evidenced by, and the Borrowers shall repay the
Revolving Loan in accordance with, the Revolving Promissory Note of even date
herewith executed by the Borrowers in the maximum principal amount of the
Revolving Loan (as amended, modified, replaced, restated, extended or renewed
from time to time, the “Revolving Note”).  Interest will accrue on the
outstanding principal balance of the Revolving Loan as described in the
Revolving Note, except as otherwise provided in this Agreement.
 
(b) The Equipment Term Loan will be evidenced by, and the Borrowers shall repay
the Equipment Term Loan in accordance with, the Equipment Term Promissory Note
of even date herewith executed by the Borrowers in the original principal amount
of the Equipment Term Loan (as amended, modified, replaced, restated, extended
or renewed from time to time, the “Equipment Term Note”).  Interest will accrue
on the outstanding principal balance of the Equipment Term Loan as described in
the Equipment Term Note, except as otherwise provided in this Agreement.
 
Section 2.5. Joint and Several Liability of Borrowers.
 
(a) Each of the Borrowers hereby irrevocably and unconditionally accepts, not
merely as a surety but also as a co-debtor, joint and several liability with the
other Borrowers with respect to the payment and performance of all of the
Obligations, it being the intention of the parties that all the Obligations are
the joint and several obligations of each of the Borrowers without preferences
or distinction among them.  If and to the extent that a Borrower fails to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance with the terms thereof, then in each such
event, the other Borrowers will make such payment with respect to, or perform,
such Obligation.
 
 
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(b) Except as otherwise expressly provided herein, each Borrower hereby waives
notice of acceptance of its joint and several liability, notice of occurrence of
any Default or Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by the Lender under
or in respect of any of the Obligations, any requirement of diligence and,
generally, all demands, notices and other formalities of every kind in
connection with this Agreement.  Each Borrower hereby assents to, and waives
notice of, any extension or postponement of the time for the payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by the Lender at any time or times in
respect of any default by any Borrower in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by the Lender in respect of any of the Obligations, and
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower.  Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or any failure to act on the part of the Lender, including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable laws or regulations
thereunder that, but for the provisions of this Section 2.5, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this Section 2.5, it being the intention of each
Borrower that, so long as any of the Obligations hereunder remain unsatisfied,
the obligations of such Borrower under this Section 2.5 shall not be discharged
except by performance and then only to the extent of such performance. The
obligations of each Borrower under this Section 2.5 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any
reconstruction or similar proceeding with respect to any Borrower or the
Lender.  The Borrowers’ joint and several liability hereunder shall continue in
full force and effect notwithstanding any absorption, merger, amalgamation or
any other change whatsoever in the name, membership, constitution or place of
formation of any Borrower or the Lender.
 
(c) The provisions of this Section 2.5 shall remain in effect until all the
Obligations have been paid in full or otherwise fully satisfied.  If at any
time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by the
Lender upon the insolvency, bankruptcy or reorganization of any of the
Borrowers, or otherwise, the provisions of this Section 2.5 will forthwith be
reinstated and in effect as though such payment had not been
made.  Notwithstanding any provision to the contrary contained herein or in any
other of the Loan Documents, the obligations of each Borrower hereunder shall be
limited to an aggregate amount equal to the largest amount that would not render
its obligations hereunder subject to avoidance under Section 548 of the
Bankruptcy Code of the United States or any comparable provisions of any
applicable bankruptcy, insolvency, assignment for the benefit of creditors or
other debtor-relief Law.
 
ARTICLE III
 
FEES AND EXPENSES
 
Section 3.1. Fees.
 
(a) The Borrowers agree to pay a loan fee in the amount of One Hundred Thousand
Dollars ($100,000.00).  This fee is due on the date of this Agreement.  If
Lender, in its discretion, agrees to waive or amend any terms of this Agreement,
Borrowers shall, at Lender’s option, pay Lender a fee for each waiver or
amendment in an amount advised by Lender at the time Borrowers request the
waiver or amendment.  Nothing in this paragraph obligates Lender to agree to any
waiver or amendment requested by Borrowers.  Lender may impose additional
requirements as a condition to any waiver or amendment.
 
(b) The Borrowers agree to pay a fee on any difference between the Revolving
Commitment and the amount of credit the Borrowers actually use, determined by
the average of the daily amount of credit outstanding during the specified
period.  The fee will be calculated at 0.5% per year.  This fee is due quarterly
in arrears on March 31, 2014, and on the last day of each following fiscal
quarter until the expiration of the availability period for the Revolving Loan.
 
Section 3.2. Expenses.  The Borrowers agree to pay all reasonable costs and
expenses incurred by Lender in connection with making the Loans and to reimburse
Lender for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement.  Such costs and expenses
include, but are not limited to, reasonable attorneys’ fees, charges for title
reports, recording and escrow charges, appraisal fees, fees for engineering or
environmental services, and any other reasonable fees and costs for services,
regardless of whether such services are furnished by Lender’s employees or by
independent contractors.
 
ARTICLE IV
 
COLLATERAL
 
Section 4.1. Collateral.  All Obligations, including without limitation
Borrowers’ obligations and indebtedness under this Agreement and the other Loan
Documents, shall be secured by the following (collectively, together with any
other collateral or security provided for the Obligations now or in the future,
the “Collateral”):
 
(a) The assets of the Borrowers described in the Security Agreement and
Assignment of even date herewith by Borrowers in favor of Lender (the “Security
Agreement”); and
 
 
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(b) the real property, personal property and other property belonging to
Greystone Real Estate located in Scott County, Iowa, as described in the
Mortgage, Security Agreement, Assignment of Rents and Leases, and Fixture Filing
of even date herewith from Greystone Real Estate in favor of Lender (the
“Mortgage”).
 
Section 4.2. Third-Party Reports; Inspections.  At any time and from time to
time Lender may obtain third-party reviews and reports pertaining to any or all
of the Collateral, but unless a Default or Event of Default exists, Lender may
only obtain one (1) third-party review and/or report pertaining to any or all of
the Collateral per calendar year.  Borrowers shall permit representatives
appointed by Lender (including independent accountants, agents, attorneys,
engineers, appraisers and any other Persons) to visit and inspect, during
reasonable business hours, any of Borrowers’ property, including books of
account, other books and records, and any facilities or other business
assets.  Borrowers shall permit representatives appointed by Lender (including
independent accountants, agents, attorneys, appraisers and any other Persons) to
make extra copies therefrom and photocopies and photographs thereof, and to
write down and record any information such representatives obtain.  Borrowers
shall permit Lender or its representatives to investigate and verify the
accuracy of the information furnished to Lender in connection with the Loans and
to discuss all such matters with its officers, employees and representatives.
 
Section 4.3. Marshalling, Etc.  Each Borrower hereby waives any right it may
have to require marshaling of assets or collateral for repayment of the
Obligations or indebtedness under any other agreement with Lender if an Event of
Default occurs.  Upon any Event of Default, Lender may, at its option, realize
or foreclose upon any of the Collateral or any portion or part of the Collateral
in any order including, but not limited to, the property encumbered by the
Security Instruments.  Each Borrower waives any and all rights it may have under
12 Okla. Stat. § 686 or any other applicable Law that may require or arguably
require Lender to proceed first against any Collateral or portion of the
Collateral in lieu of or before proceeding upon any Collateral or portion
thereof Lender may choose upon which to proceed first for satisfaction or
partial satisfaction of the Obligations.  Each Borrower also waives any right
under 12 Okla. Stat. § 686 or under any other applicable Law to obtain credit
for the fair market value of any Collateral, even if any or all of the Security
Instruments are released by Lender, unless Lender forecloses any of the Security
Instruments and any of the Collateral is sold at sheriff’s sale or by power of
sale.  The terms of this Section 4.3 shall survive any release of any or all of
the Security Instruments and shall remain in effect among Lender and Borrowers
as long as any Obligations are outstanding in any form.
 
Section 4.4. Cross-Collateralization.  The Borrowers agree that the Collateral
secures not only the Obligations but also all other debt and obligations of any
or all Borrowers to Lender of every kind and character now existing or arising
in the future in favor of Lender, whether of a like nature of those described in
the Security Instruments or not, whether voluntary or otherwise, whether due or
not due, direct or indirect, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether as maker, guarantor, surety,
accommodation party or otherwise, and any renewals or extensions thereof, as
well as any future advances made by Lender to any of them or by Lender on
account of any of them or the property described in any security instrument,
including without limitation any future advances made pursuant to the terms and
provisions of any security instrument.
 
ARTICLE V
 
DISBURSEMENTS AND PAYMENTS
 
Section 5.1. Disbursements and Payments.
 
(a) Each payment by the Borrowers will be made in U.S. Dollars and immediately
available funds by debit to a deposit account, as described in this Agreement or
otherwise authorized by Borrowers.  For payments not made by direct debit,
payments will be made by mail to the address shown on Borrowers’ statement or by
such other method as may be permitted by Lender.
 
(b) Lender may honor instructions for repayments given by any one of the
individuals authorized to sign loan agreements on behalf of any of the
Borrowers, or any other individual designated by any one of such authorized
signers.
 
(c) For any payment under this Agreement made by debit to a deposit account,
Borrowers will maintain sufficient immediately available funds in the deposit
account to cover each debit.  If there are insufficient immediately available
funds in the deposit account on the date Lender enters any such debit authorized
by this Agreement, Lender may reverse the debit.
 
(d) Each disbursement by Lender and each payment by Borrowers will be evidenced
by records kept by Lender.
 
Section 5.2. Direct Debit.  The Borrowers agree that on the date each payment of
principal, interest, or both, and any fees from Borrowers becomes due (the “Due
Date”), Lender may debit the amounts that will be due on that Due Date (the
“Billed Amount”) from one or more of the Borrowers’ accounts with Lender as
designated in writing by Borrowers (the “Designated Account”).  If the Billed
Amount differs from the actual amount due on the Due Date (the “Accrued
Amount”), the discrepancy will be treated as follows:
 
(i) If the Billed Amount is less than the Accrued Amount, the Billed Amount for
the following Due Date will be increased by the amount of the
discrepancy.  Borrowers will not be in default by reason of any such
discrepancy.
 
 
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(ii) If the Billed Amount is more than the Accrued Amount, the Billed Amount for
the following Due Date will be decreased by the amount of the discrepancy.
 
(iii) Regardless of any such discrepancy, interest will continue to accrue based
on the actual amount of principal outstanding without compounding.  Lender will
not pay Borrowers interest on any overpayment.
 
Section 5.3. Banking Days.  Unless otherwise provided in this Agreement, a
banking day is a day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close, or are in fact closed, in the state
where Lender’s lending office is located, and, if such day relates to amounts
bearing interest at an offshore rate (if any), means any such day on which
dealings in dollar deposits are conducted among banks in the offshore dollar
interbank market.  All payments and disbursements which would be due on a day
which is not a banking day will be due on the next banking day.  All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.
 
ARTICLE VI
 
CONDITIONS
 
Before Lender is required to extend any credit to the Borrowers under this
Agreement, Lender must receive any documents and other items it reasonably
requires, in form and content acceptable to Lender, including any items
specifically listed below.
 
Section 6.1. Authorizations.  Evidence that the execution, delivery and
performance by each Borrower of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
 
Section 6.2. Governing Documents.  A copy of each Borrower’s organizational
documents.
 
Section 6.3. Good Standing.  Certificates of good standing for each Borrower
from their respective states of formation and from any other state in which any
Borrower is required to qualify to conduct its business.
 
Section 6.4. Notes.  Signed originals of each Note.
 
Section 6.5. Greystone Real Estate Loan.  The Greystone Real Estate Loan
Agreement executed by Greystone Real Estate and Lender, together with all
deliverables required thereunder.  It is a condition precedent to Lender’s
obligation to extend the Loans that all conditions to the extensions of credit
contemplated by the Greystone Real Estate Loan Agreement be satisfied.
 
Section 6.6. Guaranty.  A Combined Limited Guaranty Agreement in favor of Lender
signed by Kruger and Rosene, unconditionally guarantying all Obligations (and
all indebtedness and obligations of Greystone Real Estate under the Greystone
Real Estate Loan Agreement) up to a maximum amount of $6,500,000.00.
 
Section 6.7. Security Agreement.  A signed original of the Security Agreement.
 
Section 6.8. Mortgage.  A signed and acknowledged original of the Mortgage.
 
Section 6.9. SNDA; Collateral Access Agreement.  A subordination,
non-disturbance and attornment agreement and a Collateral Access Agreement in
favor of Lender signed by Greystone Real Estate and Greystone Manufacturing.
 
Section 6.10. Perfection and Evidence of Priority. Evidence that the Liens in
favor of the Lender are valid, enforceable, properly perfected in a manner
acceptable to the Lender and prior to all others’ rights and interests, except
Permitted Liens and those the Lender consents to in writing.
 
Section 6.11. Casualty Insurance.  Evidence of the casualty and other insurance
coverage as required under this Agreement or the Security Instruments.
 
Section 6.12. Due Diligence.  Completion satisfactory to Lender, in Lender’s
sole discretion, of technical, financial, operational, environmental, land and
legal due diligence regarding the Borrowers and the Collateral.
 
Section 6.13. Other Collateral Information.  Such other documents, property
information and other assurances as Lender may reasonably require concerning the
Collateral.
 
 
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Section 6.14. Legal Opinion.  A written opinion from the Borrowers’ legal
counsel, covering such matters as Lender reasonably requires.  The legal counsel
and the terms of the opinion must be acceptable to Lender.
 
Section 6.15. Payment of Fees.  Payment of all fees, expenses and other amounts
due and owing to Lender.  If any fee is not paid in cash, Lender may, in its
discretion, treat the fee as a principal advance under this Agreement or deduct
the fee from the proceeds of the Loans.
 
Section 6.16. Borrowing Base Certificate.  An initial Borrowing Base Certificate
setting forth the Borrowing Base as of the last day of the month before the date
of this Agreement.
 
Section 6.17. Payoff Letter.  Payoff letters in form acceptable to Lender
stating the full payoff amount of any Debt to be repaid from the proceeds of the
Loans (including without limitation the F&M Debt) and confirming that all Liens
securing such Debt upon any Collateral will be terminated concurrently with such
payment.
 
ARTICLE VII
 
REPRESENTATIONS AND WARRANTIES
 
When the Borrowers sign this Agreement, and until Lender is repaid in full, each
Borrower makes the following representations and warranties.  Each request for
an extension of credit constitutes a renewal of these representations and
warranties as of the date of the request:
 
Section 7.1. Formation.  Greystone Logistics is a corporation duly incorporated
and validly existing under the laws of the State of Oklahoma.  Greystone
Manufacturing is a limited liability company duly formed and validly existing
under the laws of the State of Oklahoma.  Greystone Real Estate is a limited
liability company duly formed and validly existing under the laws of the State
of Oklahoma.
 
Section 7.2. Authorization.  This Agreement, the other Loan Documents to which
the Borrowers are parties and any instrument or agreement required of the
Borrowers hereunder or thereunder, are within the Borrowers’ organizational
powers, have been duly authorized, and do not conflict with any of their
organizational or governing documents.
 
Section 7.3. Enforceable Agreement.  This Agreement is a legal, valid and
binding agreement of the Borrowers, enforceable against each Borrower in
accordance with its terms, and any instrument or agreement required of them
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable.
 
Section 7.4. Good Standing.  Each Borrower is properly licensed, in good
standing, and, where required, in compliance with fictitious name statutes, in
each state in which it does business.
 
Section 7.5. Financial Information.  All financial and other information that
has been or will be supplied to Lender is sufficiently complete to give Lender
accurate knowledge of each Borrower’s and any Obligor’s financial condition,
including all material contingent liabilities.  Since the date of the most
recent financial statement(s) provided to Lender, there has been no material
adverse change in the business condition (financial or otherwise), operations,
properties or prospects of any Borrower or any Obligor.
 
Section 7.6. Lawsuits.  There is no lawsuit, tax claim or other dispute pending
or threatened against any or all Borrowers that, if lost, would impair any or
all Borrowers’ financial condition or ability to repay the Loans.
 
Section 7.7. Collateral.  All Collateral required in this Agreement is owned by
the grantor of the Lien under the applicable Security Instruments free of any
title defects or any Liens or interests of others, except those that have been
approved by the Lender in writing.
 
Section 7.8. Other Obligations.  No Borrower is in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
 
 
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Section 7.9. Tax Matters.  No Borrower has any knowledge of any pending
assessments or adjustments of its income tax for any year and all taxes due have
been paid, except as have been disclosed in writing to Lender.
 
Section 7.10. No Event of Default.  There is no Default or Event of Default.
 
Section 7.11. Insurance.  The Borrowers have obtained, and maintained in effect,
the insurance coverage required in Section 8.22 and Section 8.23 of this
Agreement.
 
Section 7.12. Hazardous Substances.  Before signing this Agreement, the
Borrowers researched and inquired into the previous uses and ownership of the
Real Property.  Based on that due diligence, the Borrowers represent and warrant
that to the best of their knowledge, no Hazardous Substance has been disposed of
or released or otherwise exists in, on, under or onto the Real Property.
 
Section 7.13. ERISA.  Since the effective date of Title IV of ERISA, no
Reportable Event has occurred with respect to any Plan.  Each Plan established
or maintained by any or all Borrowers or any Affiliates is in material
compliance with the applicable provisions of ERISA, and all Borrowers and their
Affiliates have filed all reports required by ERISA and the Code to be filed
with respect to each Plan.  Borrowers and their Affiliates have met all
requirements with respect to funding Plans imposed by ERISA or the Code.  Since
the effective date of Title IV of ERISA there have not been any nor are there
now existing any events or conditions that would permit any Plan to be
terminated under circumstances which would cause the Lien provided under Section
4068 of ERISA to attach to the assets of the Borrowers or their Affiliates.  The
value of each Plan’s benefits guaranteed under Title IV of ERISA on the date
hereof does not exceed the value of such Plan’s assets allocable to such
benefits on the date hereof.
 
ARTICLE VIII
 
COVENANTS
 
The Borrowers agree, so long as credit is available under this Agreement and
until Lender is repaid in full, as follows:
 
Section 8.1. Use of Proceeds. To use the Revolving Loan proceeds only for
general working capital purposes, to use the Equipment Term Loan proceeds only
for repaying the F&M Debt, paying the Closing Dividend, and financing the
Yorktown Equipment Acquisition.
 
Section 8.2. Financial Information.  The Borrowers shall provide the following
financial information and statements in form and content acceptable to the
Lender, and such additional information as reasonably requested by the Lender
from time to time.  The Lender reserves the right, upon written notice to the
Borrowers, to require the Borrowers to deliver financial information and
statements to the Lender more frequently than otherwise provided below:
 
(a) Within 90 days of the fiscal year end, the annual financial statements for
each Borrower, certified and dated by an authorized financial officer.  These
financial statements may be internally-prepared.
 
(b) Within 60 days of the end of each fiscal quarter (including the last period
in each fiscal year), quarterly financial statements of for each Borrower,
certified and dated by an authorized financial officer.  These financial
statements may be internally-prepared, and must be accompanied by a compliance
certificate for the Borrowers, signed by an authorized financial officer and
setting forth (i) the information and computations (in sufficient detail) to
establish compliance with all financial covenants at the end of such fiscal
quarter and (ii) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate, any
Default or Event of Default under this Agreement and, if so, specifying the
nature thereof and the action the party is taking and proposes to take with
respect thereto.
 
(c) Within 20 days after the end of each month, a Borrowing Base Certificate
calculating the Borrowing Base as of the lasts day of such month, together with:
(i) a detailed aging of each Borrower’s receivables by invoice or a summary
aging by account debtor, (ii) a detailed aging of each Borrower’s accounts
payable or a summary aging by account creditor, and (iii) a schedule detailing
the value of inventory calculated as set forth herein, each in form and content
reasonably acceptable to Lender.
 
(d) Within 30 days of filing, copies of federal tax returns (filed either
individually or jointly) for each Borrower for the previous year.
 
Section 8.3. Debt Service Coverage Ratio.  The Borrowers shall maintain on a
consolidated basis a Debt Service Coverage Ratio of at least 1.25:1.00 tested as
of the last day of each fiscal quarter ending February 28, 2014, and
thereafter.  The Debt Service Coverage Ratio will be calculated on the last day
of each fiscal quarter using the results of the twelve-month period ending on
such date.
 
 
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Section 8.4. Funded Debt to EBIDA Ratio.  The Borrowers shall maintain on a
consolidated basis a ratio of Funded Debt to EBIDA not exceeding 3.00:1.0 tested
as of the last day of each fiscal quarter ending February 28, 2014, and
thereafter.  The Funded Debt to EBIDA Ratio will be calculated on the last day
of each fiscal quarter using the results of the twelve-month period ending on
such date.
 
Section 8.5. Capital Expenditures.  Borrowers will not spend or incur
obligations to acquire fixed assets for more than One Million Dollars
($1,000,000.00) in any single fiscal year on a consolidated basis, excluding (a)
the Yorktown Equipment Acquisition, and (b) fixed assets acquired from Kruger or
Yorktown pursuant to any Debt offset arrangement entered into on or before the
date of this Agreement.
 
Section 8.6. Dividends; Distributions.  Without Lender’s prior written consent,
Greystone Logistics shall not declare or pay any dividends, redemptions,
distributions and withdrawals (as applicable) with respect to its capital stock
or any other equity interests, other than (i) the Closing Dividend, and (ii)
additional distributions to holders of its preferred stock in amounts that in
the aggregate do not exceed Five Hundred Thousand Dollars ($500,000.00) in any
single fiscal year.
 
Section 8.7. Interest on Related Party Debt.  Without the Lender’s prior written
consent, the Borrowers, on a consolidated basis, shall not make payments of any
Debt owed to their Affiliates, Rosene and/or Kruger, other than (i) Greystone
Manufacturing may pay amounts due and owing to Greystone Real Estate under the
lease agreement between Greystone Manufacturing and Greystone Real Estate
pertaining to the Real Estate, (ii) the Borrower may make interest only payments
on Debt owed to their Affiliates, Rosene and/or Kruger in amounts that in the
aggregate do not exceed Five Hundred Thousand Dollars ($500,000) in any single
fiscal year, and (iii) Debt offset arrangements with Yorktown or Kruger entered
into on or before the date hereof for the purpose of acquiring fixed assets.
 
Section 8.8. Profitability.  The Borrowers, on a consolidated basis, will not
incur a net loss before taxes and extraordinary items in any two consecutive
fiscal quarters.
 
Section 8.9. Compliance with Law; Compliance Regarding Hazardous
Substances.  The Borrowers shall comply with the applicable Laws, and to cause
all occupants of the Real Property to comply, with all current and future Laws
relating to or imposing liability or standards of conduct concerning protection
of health or the environment or hazardous substances (“Environmental
Laws”).  The Borrowers shall promptly, at the Borrowers’ cost and expense, take
all reasonable actions with respect to any Hazardous Substance or other
environmental condition at, on, or under the Real Property necessary to (a)
comply with all applicable Environmental Laws; (b) allow continued use,
occupation or operation of the Real Property; or (c) maintain the fair market
value of the Real Property.
 
Section 8.10. Other Debts.  The Borrowers shall not have outstanding or incur
any direct or contingent Debt (other than those to Lender), or become liable for
the liabilities of others, without Lender’s prior written consent.  This does
not prohibit:
 
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
 
(b) Endorsing negotiable instruments received in the usual course of business.
 
(c) Obtaining surety bonds in the usual course of business.
 
(d) Additional Debt and lease obligations for the acquisition of fixed assets,
to the extent permitted elsewhere in this Agreement.
 
(e) Additional Debt for business purposes that does not exceed a total principal
amount of One Hundred Thousand Dollars ($100,000.00) outstanding at any one
time.
 
(f) Debt and lease obligations existing on the date hereof and disclosed to the
Lender.
 
Section 8.11. Other Liens.  The Borrowers shall not create, assume, or allow any
Liens on any property of the Borrowers or any Collateral, except Permitted
Liens.
 
 
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Section 8.12. Maintenance of Assets.
 
(a) The Borrowers shall not sell, assign, lease, transfer or otherwise dispose
of any part of Borrowers’ respective businesses or assets, except (i) in the
ordinary course of business, (ii) if the applicable transaction is between
Greystone Logistics and one or more of its subsidiaries, or (iii) if the asset
being sold, assigned, leased, transferred or otherwise disposed of is (A)
obsolete, worn out or uneconomic, (B) no longer necessary for the business of
the applicable Borrower, or (C) contemporaneously replaced by an asset of at
least comparable value and use.
 
(b) The Borrowers shall not sell, assign, lease, transfer or otherwise dispose
of any assets for less than fair market value, or enter into any agreement to do
so.
 
(c) The Borrowers shall not enter into any sale and leaseback agreement covering
any of its fixed assets.
 
(d) The Borrowers shall maintain and preserve all rights, privileges, and
franchises any Borrower now has which are necessary to the conduct of their
respective businesses.
 
(e) The Borrowers shall make any repairs, renewals, or replacements to keep
Borrowers’ properties in good working condition.
 
(f) Without otherwise limiting this Section 8.11, the Borrowers shall not sell,
assign, lease, transfer or otherwise convey any of their respective businesses
or assets to Plastic Pallet Production, Inc., a Texas corporation.
 
Section 8.13. Change of Control.  No Borrower shall cause, permit, or suffer any
Change of Control.
 
Section 8.14. Additional Negative Covenants.  The Borrowers shall not, without
Lender’s written consent:
 
(a) Enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a limited
liability company.
 
(b) Acquire or purchase a business or all or substantially all of its assets.
 
(c) Engage in any business activities substantially different from their present
businesses.
 
(d) Liquidate or dissolve their respective businesses.
 
(e) Voluntarily suspend any Borrower’s business for more than five (5) days in
any ten (10) day period
 
Section 8.15. Notices to Lender.  The Borrowers shall promptly notify Lender in
writing of:
 
(a) Any lawsuit over Two Hundred Thousand Dollars ($200,000) against any
Borrower or any Obligor.
 
(b) Any Default or Event of Default under this Agreement.
 
(c) Any substantial dispute between any Tribunal and any Borrower or any
Obligor.
 
(d) Any change in any Borrower’s name, legal structure, principal residence (for
an individual), state of registration (for a registered entity), place of
business, or chief executive office if such Borrower has more than one place of
business.
 
 
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Section 8.16. Books and Records.  The Borrowers shall maintain adequate books
and records and allow Lender and its agents to examine, audit and make copies of
books and records at any reasonable time.  If any of Borrowers’ books or records
are in the possession of a third party, each Borrower authorizes that third
party to permit Lender or its agents to have access to perform examinations or
audits and to respond to Lender’s requests for information concerning such books
and records.
 
Section 8.17. Further Assurances.  Upon request by Lender, the Borrowers shall
perform all acts which may be necessary or advisable to perfect any Lien
provided for in this Agreement or to carry out the intent of this Agreement.
 
Section 8.18. Inspections, Appraisals, Engineering Reports.  The Borrowers shall
allow Lender and its agents to visit the Real Property and the Collateral at any
reasonable time for the purpose of inspecting the Collateral and conducting
appraisals and/or engineering reports, and deliver to Lender any financial or
other information concerning the Collateral as Lender may request.  If no
Default or Event of Default has occurred and is continuing, only one such
inspection or appraisal per calendar year shall be at the expense of Borrower.
 
Section 8.19. ERISA Plans.  Promptly during each year, the Borrowers shall pay
and cause any of their subsidiaries to pay contributions adequate to meet at
least the minimum funding standards under ERISA with respect to each and every
Plan; file each annual report required to be filed pursuant to ERISA in
connection with each Plan for each year; and notify the Lender within ten (10)
days of the occurrence of any Reportable Event that might constitute grounds for
termination of any capital Plan by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate United States District Court of a trustee
to administer any Plan.  Capitalized terms in this Section have the meanings
defined within ERISA.
 
Section 8.20. Use of Real Property; Indemnity.  The Borrowers shall occupy the
Real Property for the conduct of their regular business.  The Borrowers shall
not change their intended use of the Real Property without the Lender’s prior
written approval.  The Borrowers shall jointly and severally indemnify, defend
with counsel acceptable to Lender, and hold Lender harmless from and against all
liabilities, claims, actions, damages, costs and expenses (including all legal
fees and expenses of Lender’s counsel) arising out of or resulting from the
ownership, operation, or use of the Real Property, whether such claims are based
on theories of derivative liability, comparative negligence or
otherwise.  Borrowers’ obligations to Lender under this Section shall survive
termination of this Agreement and repayment of the Obligations, and shall also
survive as unsecured obligations after any acquisition by Lender of the Real
Property or any part of it by foreclosure or any other means.
 
Section 8.21. Lender as Principal Depository.  Borrowers shall maintain Lender
or one of its Affiliates as its principal depository bank, including for the
maintenance of business, cash management, operating and administrative deposit
accounts.
 
Section 8.22. Insurance.  The Borrowers shall cause all of the Collateral to be
insured against loss or damage by fire or other risks usually insured against by
owners or users of similar properties in similar businesses under an all-risk
property policy on a replacement cost basis, as applicable, together with
liability and other insurance covering such other hazards as Lender may from
time to time request, and in amounts and in accordance with industry standards
and from insurance companies and with deductibles or retentions satisfactory to
Lender.  Borrowers shall deliver certificates of insurance to Lender before
closing of the Loans and before making any payment after each subsequent renewal
of such insurance and when Lender so requests, and whether or not so delivered
such policies and all proceeds thereof shall be security for all the
Obligations.  All such insurance policies shall contain coverages and
endorsements in form satisfactory to Lender.  All property insurance policies
shall show Lender as sole loss payee and additional insured as its interest may
appear.  All liability insurance policies shall show Lender and its employees,
officers, directors and agents, as additional insureds, and shall provide that
such insurance is primary with respect to such additional insureds, and any
other insurance maintained by such additional insureds is excess of and not
contributory with insurance maintained by or on behalf of Borrowers.  All such
insurance shall contain a cancellation provision stating that the insurance
policy shall only be cancelable with thirty (30) days prior written notice to
Lender, except for ten (10) days notice for non-payment of premium.  All
insurance proceeds received by Lender shall be retained by Lender at its option
after full consultation with Borrowers for application to the payment of such
portion of the Obligations as Lender may determine in its sole discretion or
shall be applied to repair any such insurable loss or damage.  Borrowers shall
promptly notify Lender of any material event or occurrence causing a loss or
decline in value of property insured or the existence of an event justifying a
claim under any insurance and, in both situations, the estimated amount thereof.
 
Section 8.23. Policies or Certificates of Insurance.  The Borrowers shall
promptly deliver to Lender valid certificates of such insurance which are
required hereunder to be obtained and maintained by Borrowers.  Such valid
policies and certificates shall show that (i) such insurance is in full force
and effect in accordance with the provisions of this Agreement, (ii) such
insurance is non-cancelable without at least thirty (30) days’ prior written
notice to Lender sent by United States registered or certified mail, return
receipt requested, except for ten (10) days notice for non-payment of premiums,
(iii) written notice of any non-renewal of such policies shall be sent to Lender
in the same manner as notice requirements for insurer provided the notice is at
least thirty (30) days before the non-renewal date, and (iv) such insurance
fully complies with the requirements of Section 8.22 and this Section 8.23,
including the additional insured and waiver of subrogation
requirements.  Borrowers shall obtain before the expiration date of each policy
maintained pursuant to Section 8.22 and this Section 8.23, a renewal or
replacement thereof and deliver to Lender a valid policy and certificate of such
renewal or replacement policy on or before the expiration date.  If Borrowers
fail to procure and maintain the insurance required under Section 8.22 and this
Section 8.23, Lender shall have the right, but not be obligated, to procure such
insurance on behalf of and at the cost of Borrowers.  If any of the insurance
required under Section 8.22 and this Section 8.23 is on a claims made basis,
such insurance shall have a retroactive date the same as or before the date of
this Agreement and shall remain in effect for at least two (2) years following
the termination of this Agreement.
 
 
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ARTICLE IX
 
DEFAULT AND REMEDIES
 
Section 9.1. Events of Default.  Each of the following constitutes an “Event of
Default” under this Agreement:
 
(a) Failure to Pay.  Borrowers fail to make a payment under this Agreement or
any Loan Document when due.
 
(b) Other Agreements.  Any default occurs under any other agreement Borrowers
have with Lender or any Affiliate of Lender after any applicable cure period.
 
(c) Cross-default.  Any default occurs under any agreement in connection with
any credit Borrowers have obtained from anyone else or that any or all Borrowers
have guaranteed, and such default continues unremedied for a period of thirty
(30) days after the earlier of any Borrower’s knowledge of such default, the
date on which any Borrower should have had knowledge of such default or the date
notice thereof is given by the Lender to any Borrower.
 
(d) False Information.  Any information provided to Lender, or representations
or warranties made to Lender, by any Borrower or any Obligor, is false or
misleading in any material respect.
 
(e) Bankruptcy.  Any Borrower or any Obligor files a bankruptcy petition, a
bankruptcy petition is filed against any of the foregoing parties and not
dismissed within 30 days thereafter, or any Borrower or any Obligor makes a
general assignment for the benefit of creditors.
 
(f) Receivers.  A receiver or similar official is appointed for any portion of
any Borrower’s or any Obligor’s business, or the business is terminated or any
Borrower is liquidated or dissolved.
 
(g) Lien Priority.  Lender fails to have a valid and enforceable perfected Lien
on the Collateral (unless such failure is due to neglect on the Lender’s part),
or such Lien fails to be before the rights and interest of others (except for
any Permitted Liens), and such failure continues for period of thirty (30) days.
 
(h) Judgments.  Any judgments or arbitration awards are entered against any
Borrower or any Obligor, or any Borrower or any Obligor enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of $100,000 or more in excess of any insurance coverage and
such judgment or arbitration award is not paid or stayed on appeal within 60
days thereafter.
 
(i) Death.  If any Obligor is a natural person, such Obligor dies or becomes
legally incompetent.
 
(j) Material Adverse Change.  A material adverse change occurs in (i) the
business, assets, operations or condition, financial or otherwise, of any
Borrower or any Obligor, (ii) the ability of any Borrower or any Obligor to
perform any of its obligations under this Agreement or any of the other Loan
Documents to which it is a party, (iii) the Collateral, or the Lender’s Liens on
the Collateral or the priority of such Liens, or (iv) the rights available to
the Lender under the Loan Documents, and such material adverse changes is not
remedied within thirty (30) days.
 
(k) Government Action.  Any Tribunal takes action that Lender reasonably
believes materially adversely affects the financial condition or ability to
repay or any Borrower or any Obligor.
 
(l) Default under Loan Documents.  Any default occurs under any of the other
Loan Documents and is not remedied within any applicable cure period or any
Borrower asserts that any such Loan Document is no longer in effect, or any
Obligor purports to revoke or disavow its guaranty.  Notwithstanding the
foregoing, a default or an “Event of Default” under, and as defined in, the
Mortgage or any guarantee, that is attributable solely to an “Event of Default”
under the Greystone Real Estate Loan Agreement, is not an Event of Default under
this Agreement.
 
 
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(m) Enumerated Breaches.  Any default or failure to perform by the Borrowers of
any covenant, condition or agreement contained in Section 8.1, Section 8.2,
Section 8.3, Section 8.4, Section 8.5, Section 8.6, Section 8.7, Section 8.8,
Section 8.13, Section 8.14, Section 8.15,
 
Section 8.19, Section 8.22 or Section 8.23.
 
(n) Other Breach Under Agreement.  A breach or default occurs under any other
term or condition of this Agreement not specifically referred to in this
Article, and such breach or default continues unremedied for a period of thirty
(30) days after the earlier of any Borrower’s knowledge of such breach or
default, the date on which any Borrower should have had knowledge of such breach
or the date notice thereof is given by the Lender to any Borrower.
 
Section 9.2. Remedies.  Upon the occurrence of an Event of Default, Lender may
do one or more of the following without prior notice: declare Borrowers in
default, stop making any additional credit available to Borrowers, and require
Borrowers to repay the Obligations immediately.  If a Default or an Event of
Default has occurred and is continuing, Lender has no obligation to make
advances or extend additional credit under this Agreement.  In addition, if any
Event of Default occurs, Lender shall have all rights, powers and remedies
available under any of the Loan Documents or any of the instruments and
agreements required by or executed in connection with this Agreement, as well as
all rights and remedies available at law or in equity.  If an Event of Default
occurs under the paragraph entitled “Bankruptcy,” above, with respect to any
Borrower, then all Obligations will automatically be due immediately.
 
ARTICLE X
 
ENFORCING THIS AGREEMENT; MISCELLANEOUS
 
Section 10.1. Financial Information.  Except as otherwise stated in this
Agreement, all financial information provided to Lender and all financial
covenants will be made in accordance with GAAP.
 
Section 10.2. Governing Law.  This Agreement shall be governed by Oklahoma law,
without regard to any conflict-of-law principles that would apply the law of any
other jurisdiction.
 
Section 10.3. Successors and Assigns.  This Agreement is binding on Borrowers’
respective successors and assignees and will inure to the benefit of Lender’s
successors and assigns.  Each Borrower agrees that it may not assign this
Agreement without Lender’s prior consent.
 
Section 10.4. Severability; Waivers.  If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced.  Lender retains all
rights.  If Lender waives a default, it may enforce a later default.  Any
consent or waiver under this Agreement must be in writing.
 
Section 10.5. Attorneys’ Fees.  Borrowers shall reimburse Lender for any
reasonable costs and attorneys’ fees incurred by Lender in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, “workout” or restructuring under this
Agreement.  In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys’ fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.  If any case is commenced by or against any Borrower under
the Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, Lender is entitled to recover costs and reasonable attorneys’ fees
incurred by Lender related to the preservation, protection, or enforcement of
any rights of Lender in such a case.
 
Section 10.6. Set-Off.
 
(a) In addition to any rights and remedies of Lender provided by Law, upon the
occurrence and during the continuance of any Event of Default under this
Agreement, Lender is authorized, at any time, to set off and apply any and all
Deposits of Borrowers or any Obligor held by Lender against any and all
Obligations owing to Lender.  The set-off may be made irrespective of whether or
not Lender shall have made demand under this Agreement or any guaranty, and
although such Obligations may be contingent or unmatured or denominated in a
currency different from that of the applicable Deposits.
 
(b) The set-off may be made without prior notice to Borrowers or any other
party, any such notice being waived by Borrowers (on its own behalf and on
behalf of each Obligor) to the fullest extent permitted by Law.  Lender agrees
promptly to notify Borrowers after any such set-off and application, but the
failure to give such notice shall not affect the validity of such set-off and
application.
 
(c) For the purposes of this paragraph, “Deposits” means any deposits (general
or special, time or demand, provisional or final, individual or joint) and any
instruments owned by any Borrower or any Obligor that comes into the possession
or custody or under the control of Lender.
 
 
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Section 10.7. One Agreement.  This Agreement and any related mortgage, security
or other agreements required by this Agreement, collectively (a) represent the
sum of the understandings and agreements among Lender and Borrowers concerning
this credit, (b) replace any prior oral or written agreements among Lender and
Borrowers concerning this credit; and (c) are intended by Lender and Borrowers
as the final, complete and exclusive statement of the terms agreed to by
them.  In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
 
Section 10.8. Indemnification.  Borrowers shall jointly and severally indemnify
and hold Lender harmless from any loss, liability, damages, judgments, and costs
of any kind relating to or arising directly or indirectly out of (a) this
Agreement or any document required hereunder, (b) any credit extended or
committed by Lender to Borrowers hereunder, and (c) any litigation or proceeding
related to or arising out of this Agreement, any such document, or any such
credit, except to the extent any such loss, liability, etc. is the result of the
Lender’s own gross negligence, willful misconduct or bad faith.  This indemnity
includes but is not limited to attorneys’ fees (including the allocated cost of
in-house counsel).  This indemnity extends to Lender, its parent, subsidiaries
and all of their directors, officers, employees, agents, successors, attorneys,
and assigns.  This indemnity will survive repayment of Borrowers’ obligations to
Lender.  All sums due to Lender hereunder shall be joint and several obligations
of the Borrowers, due and payable immediately without demand.
 
Section 10.9. Notices.  Unless otherwise provided in this Agreement or in
another agreement between Lender and Borrowers, all notices required under this
Agreement shall be in writing.  Notice sent by mail must be personally delivered
or sent by first class mail, postage prepaid, or by overnight courier, to the
addresses on the signature page of this Agreement, or to such other addresses as
Lender and Borrowers may specify from time to time in writing.  Notices sent by
electronic mail should be sent to the e-mail address designated by the receiving
party in writing.  Notices and other communications shall be effective (i) if
mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
mail, first class, postage prepaid, (ii) if hand-delivered, by courier or
otherwise (including telegram, lettergram or mailgram), when delivered, or (iii)
if sent by electronic mail with confirmation of transmission by the transmitting
software or equipment with a subject line or heading that says “IMPORTANT NOTICE
RELATING TO GREYSTONE LOGISTICS LOAN AGREEMENT” (or a similar heading).
 
Section 10.10. Headings.  Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
 
Section 10.11. Counterparts.  This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
 
Section 10.12. Borrower Information; Reporting to Credit Bureaus.  Each Borrower
authorizes Lender at any time to verify or check any information given by such
Borrower to Lender, check such Borrower’s credit references, verify employment,
and obtain credit reports.  Borrowers agree that Lender shall have the right at
all times to disclose and report to credit reporting agencies and credit rating
agencies such information pertaining to Borrowers and/or all guarantors as is
consistent with Lender’s policies and practices from time to time in effect.
 
Section 10.13. Supplements Security Agreement and Mortgage.  The provisions of
this Agreement are not intended to supersede the provisions of the Security
Instruments but shall be construed as supplemental thereto.  During the
continuance of this Agreement, if there is inconsistency between this Agreement
and any Security Instrument, this Agreement shall be controlling.
 
Section 10.14. USA PATRIOT Act Notice. IMPORTANT INFORMATION ABOUT PROCEDURES
FOR OPENING A NEW ACCOUNT.  To help the government fight the funding of
terrorism and money laundering activities, federal Law requires all financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial services
product.  What this means for Borrowers: When a Borrower opens an account,
Lender will ask for that Borrower’s name, residential address, tax
identification number, and other information that will allow Lender to identify
Borrower, including Borrower’s date of birth if Borrower is an
individual.  Lender may also ask, if Borrower is an individual, to see
Borrower’s driver’s license or other identifying documents, and, if Borrower is
not an individual, to see Borrower’s legal organizational documents or other
identifying documents.  Lender will verify and record the information Lender
obtain from Borrower pursuant to the USA PATRIOT Act, and will maintain and
retain that record in accordance with the regulations promulgated under the USA
PATRIOT Act.
 
Section 10.15. Not a Reportable Transaction.  The parties signatory hereto
acknowledge and stipulate and Borrowers represent to Lender that the
transactions contemplated by this Agreement do not constitute a “Reportable
Event” as that term is described and defined in regulations of the Treasury
Department of the United States.
 
Section 10.16. Dispute Resolution. LENDER AND BORROWERS AGREE TO ARBITRATION AS
FOLLOWS (hereinafter referred to as the “Arbitration Provisions”):
 
(a) SPECIAL PROVISIONS AND DEFINITIONS APPLICABLE TO BOTH CONSUMER DISPUTES AND
BUSINESS DISPUTES:
 
 
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(i) Informal Resolution of Customer Concerns.  Most customer concerns can be
resolved quickly and to the customer’s satisfaction by contacting Borrowers’
account officer, branch manager or by calling the Customer Service Department in
the appropriate 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 the applicable account officer, branch manager or the
customer service department is unable to resolve a complaint to Borrowers’
satisfaction or if Lender has not been able to resolve a dispute it has with
Borrowers after attempting to do so informally, Borrowers and Lender agree to
resolve those disputes through binding arbitration or small claims court instead
of in courts of general jurisdiction.
 
(ii) Sending Notice of Dispute.  If either Borrowers or Lender intends to seek
arbitration, then Borrowers or Lender must first send to the other by certified
mail, return receipt requested, a written Notice of Dispute.  The Notice of
Dispute to 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 (special email address to
be provided by IBC).  The Notice of Dispute must (A) describe the nature and
basis of the claim or dispute; and (B) explain specifically what relief is
sought.  Borrowers may download a copy of the Notice of Dispute at www.ibc.com
or may obtain a copy from its account officer or branch manager.
 
(iii) If the Dispute is not Informally Resolved.  If Borrowers and Lender do not
reach an agreement to resolve the claim or dispute within thirty (30) days after
the Notice of Dispute is received, Borrowers or Lender may commence a binding
arbitration proceeding.  During the binding arbitration proceeding, any
settlement offers made by Borrowers or Lender shall not be disclosed to the
Arbitrator.
 
(iv) “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 Agreement or the other Loan Documents, compliance with applicable laws
and/or regulations, any and all services or products provided by 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.
 
(v) “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 Lender that
is primarily for personal, family or household purposes.  “Business Dispute”
means any Dispute that is not a Consumer Dispute.
 
 
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(vi) “PARTIES” or “PARTY”.  As used in these Arbitration Provisions, the term
“parties” or “party” means Lender and each Borrower, and each and all persons
and entities signing this Loan Agreement, any other Loan Documents, 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 Lender and
shall include any other owner and holder of the Notes.  Throughout these
Arbitration Provisions, the term “Arbitrator” refers to the individual
arbitrator or panel of arbitrators, as the case may be, before which the Dispute
is arbitrated.
 
(vii) 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).
 
(viii) CLASS ACTION WAIVER.  The parties agree that (A) 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 (B) 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 A BUSINESS DISPUTE ON AN INDIVIDUAL
BASIS AND EACH WAIVES THE RIGHT TO PARTICIPATE IN A CLASS ACTION.
 
(ix) FEDERAL ARBITRATION ACT AND TEXAS LAW.  The parties acknowledge that this
Loan Agreement evidences a transaction involving interstate commerce.  The
Federal Arbitration Act shall govern (A) the interpretation and enforcement of
these Arbitration Provisions, and (B) all arbitration proceedings that take
place pursuant to these Arbitration Provisions.  THE PARTIES AGREE THAT TEXAS
SUBSTANTIVE LAW WILL APPLY IN ANY BINDING ARBITRATION PROCEEDING OR SMALL CLAIMS
COURT ACTION REGARDLESS OF WHO INITIATES THE PROCEEDING, WHERE BORROWER RESIDES
OR WHERE THE DISPUTE AROSE, UNLESS EXPRESSLY PROHIBITED BY LAW.
 
(b) PROVISIONS APPLICABLE ONLY TO A CONSUMER DISPUTE:
 
(i) 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.
 
(ii) Instead of proceeding in arbitration, any party hereto may pursue its claim
in 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.
 
(iii) For any claim for actual damages that does not exceed $2,500, Lender will
pay all arbitration fees and costs provided Borrowers 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,
Lender also agrees to pay Borrowers’ reasonable attorney’s fees and reasonable
expenses Borrowers’ attorney charges Borrowers in connection with the
arbitration (even if the Arbitrator does not award those to Borrowers) plus an
additional $2,500 if Borrowers obtain a favorable arbitration award for its
actual damages which is greater than any written settlement offer for its actual
damages made by Lender to Borrowers prior to the selection of the Arbitrator.
 
(iv) Under the AAA’s Supplemental Procedures for Consumer Disputes, if
Borrowers’ claim for actual damages does not exceed $10,000, Borrowers shall
only be responsible for paying up to a maximum of $125 in arbitration fees and
costs.  If Borrowers’ claim for actual damages exceeds $10,000 but does not
exceed $75,000, Borrowers 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, 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, Lender agrees to pay all arbitration fees and costs
Borrowers 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 Borrowers submit
their claim shall apply.  The AAA rules also permit Borrowers to request a
waiver or deferral of the administrative fees and costs of arbitration if paying
them would cause Borrowers financial hardship.
 
(v) Although under some laws, Lender may have a right to an award of attorney’s
fees and expenses if it prevails in arbitration, 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.
 
 
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(vi) To request information on how to submit an arbitration claim, or to request
a copy of the AAA rules or fee schedule, Borrowers may contact the AAA at
1-800-778-7879 (toll free) or at www.adr.org.
 
(c) PROVISIONS APPLICABLE ONLY TO A BUSINESS DISPUTE:
 
(i) 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 Borrowers
extreme financial hardship Borrowers may request that AAA defer or reduce the
administrative fees or request Lender to cover some of the arbitration fees and
costs that would be Borrowers’ responsibility.
 
(ii) The parties shall have the right to (A) invoke self-help remedies (such as
set­off, notification of account debtors, seizure and/or foreclosure of
collateral, and non-judicial sale of personal property and real property
collateral) before, during or after any arbitration, and/or (B) 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.
 
(iii) 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 (A) punitive, exemplary, special or indirect
damages, (B) statutory multiple damages, or (C) penalties, statutory or
otherwise.
 
(iv) 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.
 
(d) GENERAL PROVISIONS APPLICABLE TO BOTH CONSUMER DISPUTES AND BUSINESS
DISPUTES:
 
(i) 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 (A) all
arbitrability questions, and (B) 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).
 
(ii) These Arbitration Provisions shall survive any termination, amendment, or
expiration of this Loan Agreement, the Note, or any other Loan Document, unless
all of the parties otherwise expressly agree in writing.
 
(iii) 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.
 
(iv) 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.
 
(v) Any Arbitrator selected shall be knowledgeable in the subject matter of the
Dispute and be licensed to practice law.
 
(vi) 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.
 
 
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(vii) 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.
 
(viii) 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.
 
(ix) 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.
 
(x) 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.
 
(xi) Unless the parties mutually agree to hold the binding arbitration
proceeding elsewhere, venue of any arbitration proceeding under these
Arbitration Provisions shall be in Tulsa County, Oklahoma.
 
(xii) 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.
 
Section 10.17. SUBMISSION TO JURISDICTION.  IF ANY JUDICIAL PROCEEDING IS
BROUGHT BY LENDER UNDER THE TERMS OF THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY OF THE
LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA COUNTY, OKLAHOMA AND
WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED ON IMPROPER VENUE OR
FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND
WAIVES PERSONAL SERVICE OR ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE
ADDRESS SET FORTH BELOW AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR
DELIVERED BY MESSENGER.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWERS IN ANY OTHER JURISDICTION.
 
Section 10.18. WAIVER OF JURY TRIAL.  WITHOUT INTENDING IN ANY WAY TO LIMIT THE
PARTIES’ AGREEMENT TO ARBITRATE ANY “DISPUTE” AS SET FORTH IN THIS AGREEMENT, TO
THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION OR IS DEEMED BY THE
ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE OR NOT
REQUIRED TO BE ARBITRATED, THE PARTIES HERETO WAIVE TRIAL BY JURY IN RESPECT OF
ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.”  THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE PARTIES HERETO, AND THE PARTIES HERETO
HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY
ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
PARTIES ENTERING INTO THIS AGREEMENT.  THE PARTIES HERETO ARE EACH HEREBY
AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER OF JURY TRIAL.  EACH PARTY HERETO FURTHER REPRESENTS AND
WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
 
Section 10.19. Maximum Rate of Interest.  In no event shall the amount or rate
of interest due and payable under this Agreement exceed the maximum amount or
rate of interest allowed by applicable Law, and, in the event any such excess
payment is made by Borrowers or received by Lender, such excess sum shall be
credited as a payment of principal or be refunded to Borrowers, at the option of
Lender.  It is the express intent hereof that Borrowers not pay and Lender not
receive, directly or indirectly, interest in excess of that which may be paid
under applicable Law.
 
[Signature Pages Attached]
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement the
date first above written.
 
 
“BORROWERS”
 
GREYSTONE LOGISTICS, INC., an Oklahoma corporation
 

 
By:           /s/ Warren F. Kruger
 
Warren F. Kruger, President/CEO
 
GREYSTONE MANUFACTURING, L.L.C., an Oklahoma limited liability company
 

 
By:           /s/ Warren F. Kruger
 
Warren F. Kruger, Manager
 

Address for Notice Purposes:
Greystone Logistics, Inc.
Attn: Warren F. Kruger
1613 East 15th
Tulsa, OK 74120
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement the
date first above written.
 
 
“LENDER”
 
INTERNATIONAL BANK OF COMMERCE, a Texas state banking association
 

 
By:           /s/ Andrew J. Levinson
 
Andrew J. Levinson,
 
Senior Vice President
 
Address for notices:
 
International Bank of Commerce
 
2250 East 73rd Street
 
Tulsa, Oklahoma 74136
 
Attention: Andrew J. Levinson
 
Facsimile:  (918) 497-2497
 
 
 
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