Exhibit 10.3


 


THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT
BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II)
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF APPLICABLE
STATE SECURITIES LAWS ARE AVAILABLE.


 


	
  $6,000,000.00

  	
   

  	
  November 30, 2005

  



 


PROMISSORY
NOTE


 


APOLLO LNG, INC., a
Texas corporation, and Apollo Resources
International, Inc., a Utah corporation, (collectively hereinafter
called “Maker”), a Texas corporation, for value received, promises and
agrees to pay to the order of OLIVER KENDALL KELLEY (hereinafter
called “Payee”) in lawful money of the United States of America, the
principal sum of SIX MILLION DOLLARS ($6,000,000.00), together with interest
thereon (calculated on the basis of a 365 day year or a 366 day year in the
case of a leap year) from and after the date hereof until maturity at a rate
per annum equal to eight and one-half percent (8.50%) (the “Applicable Rate”)
but in no event in excess of the maximum rate of nonusurious interest allowed
from time to time by law (hereinafter called the “Highest Lawful Rate”).
 All past due amounts of principal of,
and to the extent permitted by applicable law, unpaid interest on, this Note from
time to time outstanding, and all amounts of unpaid principal of this Note during
any period in which an Event of Default (as hereinafter defined) exists or
would exist but for the giving of notice or the passage of time, or both, shall
bear interest at the rate equal to the Applicable Rate plus five percent
(5.00%), but in no event higher than the Highest Lawful Rate. All sums due
under this Note are payable to Payee at 8101 W. 34th Avenue, Amarillo, Texas
79121, or at such other address as may be designated from time to time in
writing by Payee to the Maker.


 


This Note is
secured by a Security Agreement of even date herewith from Maker, as debtor, to
Payee, as secured party, covering the personal property and other interests
more fully described therein.  This Note
and the Security Agreement may be referred to herein as the “Transaction Documents.”


 


The principal and interest under this Note shall be payable as follows:


 


1.               THE PRINCIPAL of
this Note shall be paid in six (6) annual installments of One Million Dollars
($1,000,000.00) each; the first such installment shall be due and payable on December 1,
2006 (the “First Anniversary”), and one such installment shall be due and
payable on December 1 of each successive year thereafter until and
including December 1, 2011, when the final payment of the then remaining
unpaid principal balance and accrued interest shall be due and payable.


 


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2.               AN INTEREST HOLIDAY
shall be in effect for a period beginning on the Execution Date and expiring on
the First Anniversary, during which time this Note shall not bear nor accrue
any interest.


 


3.               INTEREST shall
begin to accrue as of the First Anniversary and shall be due and payable
thereafter semi-annually, on each December 1 and each June 1,
beginning June 1, 2007, until the entire principal has been paid to Payee;
provided however, that if the principal
of this Note is prepaid, in whole or in part, all accrued and unpaid interest
is due and payable on the date of such prepayment. If any amount owing under
this Note is due and payable on a day that is not a Business Day (which shall
be defined as a day on which the Citibank, NA office at 53rd and
Park Avenue, New York, New York is open for business) such payment shall be due
and payable on the next succeeding Business Day. Maker has the right to prepay
this Note, in whole or in part, at any time and from time to time without
premium or penalty upon not less than five (5) days’ notice to Payee.  Any and all prepayments shall be applied
first to accrued interest and then toward the reduction of principal.  All prepayments of principal shall be applied
in the inverse order of maturity.


 


FOR PURPOSES of this Note, an “Event
of Default” shall occur if (a) Maker fails to pay any installment
of principal (or any part thereof) when due; or (b) after three (3) days
written notice to Maker of such failure, Maker fails to pay any installment of
interest (or any part thereof) when due; or (c) after twenty (20) days
written notice to Maker of such failure, Maker fails to perform any other
obligation under this Note when due; or (d) any Event of Default (as
defined in any Transaction Document) occurs under any of the Transaction
Documents, and is not cured within twenty (20) days following written notice of
such Event of Default.  Upon the
occurrence of an Event of Default, then, Payee, at Payee’s election, and
without notice to any person liable hereunder, may declare the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest
and other sums and charges due under this Note or any Transaction Document, to
be immediately due and payable.  Failure
to exercise this option will not constitute a waiver of the right to exercise
it at any other time when an Event of Default will exist or continue.  Upon the occurrence of an Event of Default,
Payee will also have the unconditional right to exercise all remedies provided (1) hereunder,
(2) under any Transaction Document, and (3) at law or in equity.  No delay on the part of Payee in the exercise
of any power or right under this Note, or under any other instrument executed
in connection herewith, will operate as a waiver thereof, nor will a single or
partial exercise of any power or right preclude other or further exercise thereof
or exercise of any other power or right. 
Enforcement by Payee of any security for the payment hereof will not
constitute an election by Payee of remedies so as to preclude the exercise of
any other remedy available to Payee.


 


MAKER SHALL promptly notify Payee in writing of any Event of Default
under any of the Transaction Documents or any event that, with the giving of
notice or the passage of time, or both, would constitute an Event of Default
under the Transaction Documents.


 


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IT IS the intention of Maker and Payee to perform strictly according to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including, without limitation, the laws
of the State of Texas and of the United States of America), then, in that
event, notwithstanding anything to the contrary herein or in any agreement
entered into in  connection with or as
security for this Note, it is agreed that the aggregate of all consideration
which constitutes interest under applicable law that is taken, reserved,
contracted for, charged or received under this Note or under any of the
aforesaid agreements or otherwise in connection with this Note shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be cancelled automatically and, of theretofore paid, shall
be applied to the reduction of the principal balance of this Note by the holder
hereof (or, to the extent this Note shall have been or would thereby be paid in
full, refunded to the Maker).


 


FROM AND after the
occurrence of any Event of Default under this Note or the Transaction
Documents, in the event Payee employs one or more attorneys and/or legal
assistants to enforce collection of this obligation, in whole or in part, or to
pursue its remedies under the Transaction Documents or otherwise available at
law or in equity, then Maker will pay a reasonable fee for all such attorneys’
and legal assistants’ services and costs, regardless of whether suit is
instituted and, if suit or other action or proceeding is instituted, to enforce
payment of all or any portion of this obligation, for all administrative,
trial, and appellate proceedings, if any. Maker also agrees to pay (i) all
other reasonable costs of collection incurred, and (ii) all reasonable
costs and reasonable attorneys’ and legal assistants’ fees and costs otherwise
incurred by Payee for all administrative, trial, bankruptcy, insolvency, and
appellate proceedings in connection with the enforcement or protection of this
obligation and in connection with the enforcement or collection of any
judgment.


 


MAKER AND each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, all notices (including,
without limitation, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, and notice of intent to demand),
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, all without prejudice to the
holder.


 


MAKER AND each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this Note jointly and severally do
hereby, to the extent permitted by applicable law, further convey and assign to
the holder hereof and waive and renounce any and all exemption rights which
they may have under or by virtue of the Constitution or laws of the State of
Texas, or any other applicable state, or the United States of America, as may
be allowed, against this debt or any renewal thereof.


 


IF THIS Note is
signed by more than one party, then all obligations contained in this Note are
the joint and several obligations of each signer.


 


IN THE event that
any one or more of the provisions of this Note will for any reason be held to
be invalid, illegal, or unenforceable, in whole or in part, or in any respect,
or in the event that any one or more of the provisions of this Note will
operate, or would prospectively operate, to invalidate this


 


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Note, then and in such event, such provision or provisions only will be
deemed to be null and void and of no force or effect and will not affect any
other provision of this Note, and the remaining provisions of this Note will
remain operative and in full force and effect and will in no way be affected,
prejudiced, or disturbed thereby.


 


MAKER HEREBY
ACKNOWLEDGES AND REPRESENTS THAT THIS NOTE IS GIVEN FOR A BUSINESS, COMMERCIAL,
INVESTMENT, AGRICULTURAL, OR OTHER SIMILAR PURPOSE AND IS NOT GIVEN FOR MAKER’S
PERSONAL, FAMILY OR HOUSEHOLD USE.  MAKER
FURTHER ACKNOWLEDGES AND REPRESENTS THAT THIS NOTE AND THE INDEBTEDNESS
EVIDENCED HEREBY ARE NOT SUBJECT TO THE PROVISIONS OF CHAPTER XV OF THE TEXAS
CONSUMER CREDIT CODE.  MAKER ACKNOWLEDGES
RECEIPT OF A COPY OF EACH OF THE TRANSACTION DOCUMENTS (WITH ALL APPLICABLE
BLANKS FILLED IN) AT THE TIME OF SIGNING.


 


THE TRANSACTION DOCUMENTS, TOGETHER WITH THAT
CERTAIN STOCK PURCHASE AGREEMENT BETWEEN MAKER AND PAYEE DATED EFFECTIVE NOVEMBER 30,
2005, CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PAYEE AND THE OTHER PARTIES
TO THE LOAN DOCUMENTS CONCERNING THE SUBJECT MATTER CONTAINED IN THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS AND SUPERSEDE AS OF THE DATE HEREOF ALL PRIOR
AGREEMENTS BETWEEN PAYEE AND THE OTHER PARTIES TO THE LOAN DOCUMENTS, AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


 


THIS NOTE has been executed and delivered in and shall be construed in
accordance with the laws of the State of Texas and of the United States of
America.


 


	
   

  	
  APOLLO LNG, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  



 


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  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  



 


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  OLIVER KENDALL KELLEY

  	
   

  



 


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