Document:

Unassociated Document

EXHIBIT 10.4

 

 

Execution Original

 

 

PROMISSORY NOTE

 

 

	 $7,500,000.00	 Austin, Texas	 March 1, 2011

 

                                                            

FOR VALUE RECEIVED, the undersigned, High Plains Energy, LLC, a Delaware limited liability company (“Maker”), hereby promises to pay to the order of James H. Edsel, Nancy Edsel, and James Edsel, Jr., each a resident of Travis County, Texas (collectively, “Payee”), the principal sum of Seven Million Five Hundred Thousand and No/100 Dollars ($7,500,000.00), as hereinafter described:

 

1.   Background.  Pursuant to the Partnership Interest Purchase Agreement dated as of March 1, 2011 (the “Purchase Agreement”), among Maker and Payee, Maker has purchased the Seller Interest from the Payee for the Purchase Price.  Pursuant to Section 2.2(b)(ii) of the Purchase Agreement, $7,500,000.00 of the Purchase Price is to be paid to Payee by Maker’s delivery of a promissory note to Payee in the stated principal amount of $7,500,000.00.  This note is the “Promissory Note” referred to in the Purchase Agreement and is subject to the terms and entitled to the benefits thereof pertaining to the Promissory Note.  Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to such terms in the Purchase Agreement.

 

2.   Interest.

 

(a)   The unpaid principal balance of this note shall bear interest at a per annum rate of interest of five percent (5%).

 

(b)   During the continuance of a Default (as defined in Paragraph 4), all past-due principal of and interest on this note shall bear interest at the per annum rate of interest that is the lesser of (i) the Highest Lawful Rate or (ii) eighteen percent (18%).

 

(c)   All payments of interest shall be calculated on the basis of actual number of days elapsed, but computed as if each calendar year consisted of 365 or 366 days, as applicable.

 

3.   Payments and Prepayments.

 

(a)   Interest on this note will be paid monthly on the last calendar day of each month, beginning March 31, 2011, and with a final payment of all then outstanding accrued but unpaid interest due and payable on June 1, 2012 (the “Maturity Date”).

 

(b)   Principal on this note will be paid as follows:  $1,000,000.00 on June 1, 2011, and $1,500,000.00 on September 1, 2011, $2,000,000.00 on December 31, 2011, and $1,500,000.00 on each of March 1, 2012, and the Maturity Date.

 

(c)   Maker may make voluntary prepayments of all or any part of the principal of this note at any time and from time to time, without penalty.

 

(d)   Each payment or prepayment on this note must be paid at the principal address of Payee set forth on the last page of this note in funds which are or will be available for immediate use by Payee at the principal address of Payee on the day such payment or prepayment is due.

 

 

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Execution Original

 

 

 

(e)   Any payment that is due on a day that is a Saturday, Sunday, or a day on which banks in the State of Texas are authorized by law to be closed (a “Non-Business Day” ) shall be due and payable on the next succeeding business day (i.e. the next day that is not a Non-Business Day), notwithstanding any contrary provision contained in this note or in any agreement or instrument executed in connection with this note.

 

4.   Default; Remedies.

 

(a)   The term “Default,” as used in this note, means the occurrence of any one or more of the following events (including the passage of time, if any, specified therefor) (provided, that if any such event occurs and the Payee subsequently agrees in writing that it will not exercise any rights or remedies hereunder as a result of such event, the occurrence of such event shall no longer be deemed a “Default” hereunder insofar as the state of facts giving rise to such event is concerned):

 

(i)   the failure or refusal of Maker to punctually and properly perform, observe, and comply with any covenant, agreement, or condition contained in this note, in the Purchase Agreement, in the Security Agreement (as defined in Paragraph 10 below), or in any other agreement or instrument securing the obligations of Maker under this note (other than covenants to pay principal of or interest on this note), and such failure or refusal continues uncured for a period of 15 days after receipt of notice from Payee;

 

(ii)   the occurrence of any “default” or “event of default” under any agreement or instrument entered into by Maker in connection with any existing or future debt or equity financing consummated by Maker;

 

(iii)   the discovery by Payee that any representation or warranty given by Maker in the Purchase Agreement or in any other Transaction Document is false, misleading, or erroneous in any material respect at the time given; or

 

(iv)   Maker shall (1) become insolvent, or (2) fail to pay its debts generally as they become due, or (3) become subject to a proceeding under, voluntarily seek, consent to, or acquiesce in the benefits of any Debtor Relief Law (as herein defined), other than as a creditor or claimant, that would suspend or otherwise adversely affect the rights and remedies of Payee granted in this note, the Security Agreement, or any other agreement or instrument securing the obligations of Maker under this note (unless, in the event such proceeding is involuntary, the petition instituting the same is dismissed within 60 days after the filing thereof).  As used herein, the term “Debtor Relief Law”  means the Bankruptcy Act of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

 

 

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(b)   Should a Default occur and be continuing, Payee, at the option of Payee, may (i) declare the entire unpaid principal of and accrued interest on this note immediately due and payable, without further notice, demand, or presentment, all of which are hereby waived, and/or (ii) foreclose any liens or security interests securing all or any part hereof, and/or (iii) exercise any other right or remedy to which Payee may be entitled by agreement, at law, or in equity.

 

5.   Maximum Interest Rate.  Regardless of any provision contained herein, Payee shall never be entitled to contract for, charge, take, reserve, receive, or apply, as interest on this note any amount in excess of the Highest Lawful Rate (as hereinafter defined).  If Payee ever contracts for, charges, takes, reserves, receives, or applies as interest any such excess, it shall be deemed a partial prepayment of principal and treated hereunder as such; and, if the principal hereof is paid in full, any remaining excess shall promptly be paid to Maker.  In determining whether interest paid or payable exceeds the Highest Lawful Rate, Maker and Payee shall, to the maximum extent permitted under applicable Law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) “spread” the total amount of interest throughout the entire contemplated term hereof; provided that, if the principal hereof is paid in full prior to the end of the full contemplated term hereof, and if the interest received for the actual period of existence exceeds the Highest Lawful Rate, Payee shall refund the excess, and, in such event, Payee shall not be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving, or receiving interest in excess of the Highest Lawful Rate.  As used herein, the term “Highest Lawful Rate” means the maximum rate of interest (or, if the context requires, an amount calculated at such rate) which Payee is allowed to contract for, charge, take, reserve, or receive under applicable federal or state (whichever is higher) Law from time to time in effect after taking into account, to the extent required by applicable federal or state (whichever is higher) Law from time to time in effect, any and all relevant payments or charges under this note.  In no event shall the provisions of Chapter 346 of the Texas Finance Code apply to this note.  To the extent that Payee is relying on Chapter 303 of the Texas Finance Code to determine the Highest Lawful Rate payable on this note, Payee will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended.  To the extent United States federal Law permits Payee to contract for, charge, take, receive, or reserve a greater amount of interest than under Texas Law, Payee will rely on United States federal Law instead of such Chapter 303 for the purpose of determining the Highest Lawful Rate.  Additionally, to the extent permitted by applicable Law now or hereafter in effect, Payee may, at its option and from time to time, utilize any other method of establishing the Highest Lawful Rate under such Chapter 303 or under other applicable Law by giving notice, if required, to Maker as provided by applicable Law now or hereafter in effect.

 

6.   Certain Waivers.  Maker and each surety, endorser, guarantor, and other party ever liable for payment of any part hereof jointly and severally waive presentment and demand for payment, protest, notice of intention to accelerate, notice of acceleration, and notice of protest and nonpayment, and agree that their liability on this note shall not be affected by, and hereby consent to, any renewal or extension in the time of payment hereof, any indulgences, or any release or change in any security for the payment of this note.

 

 

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Execution Original

 

 

 

 

7.   ENTIRETY.  THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

8.   GOVERNING LAW.  THE VALIDITY, CONSTRUCTION, AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.

 

9.   Parties Bound.  This note is binding upon and shall inure to the benefit of Maker, Payee, and their respective permitted successors and assigns.  Maker may not assign any of its rights or obligations hereunder without Payee’s prior written consent, and any purported assignment thereof without Payee’s prior written consent shall be void and ineffective.

 

10.   Security.  This note is secured by the liens and security interests granted by Maker to Payee pursuant to the Partnership Interest Pledge and Security Agreement and Collateral Assignment of even date herewith (the “Security Agreement”) between Maker and Payee, as defined and described in the Purchase Agreement (to which document reference is made for a more complete description of the collateral, the nature and extent of the security, and the rights of Payee) in respect thereof.

 

11.   Collection.  Maker agrees to pay the reasonable costs and expenses incurred by or on behalf of Payee in collecting, or attempting to collect, the amounts due to Payee under this note, or to enforce any provision hereof, including, without limitation, reasonable attorney’s fees and expenses.

 

12.   No Waiver.  No waiver by Payee of any rights or remedies under this note shall be considered a waiver of any other subsequent right or remedy.  No delay or omission in the exercise by Payee of any rights or remedies, or in the enforcement of any such rights or remedies, shall be held to exhaust any other right or remedy.

 

13.   Principal Address of Payee.  The principal address of Payee for all purposes related to this note, including the address for payments and prepayments on this note, is as follows:

 

 

	 	James H. Edsel 
Barton Oaks Plaza 1, Suite 435

901 South MoPac Expressway

Austin, Texas  78746

Facsimile:  (512) 732-9999

 

 

[Signature Page Follows]

 

 

 

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Execution Original

 

 

 

	 	 MAKER: 
 

High Plains Energy, LLC

	 	 
	 	 By:  /s/ J. Johnson      
	 	 Name:  J. Johnson
	 	 Title     Managing Member

 

 

ACKNOWLEDGED AND AGREED:

PAYEE:

/s/ James Edsel            

James Edsel

/s/ Nancy Edsel            

Nancy Edsel

/s/ James Edsel, Jr.          

James Edsel, Jr.

 

 

 

 

 

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EXHIBIT 10.5

 

 

INSTALLMENT PAYMENT AGREEMENT

 

This Installment Payment Agreement (this “Agreement”) dated effective as of  the 31st day of May, 2011 (the “Effective Date”).

 

AMONG:

 

Digital Valleys Corp., a Nevada corporation (the “Buyer”),

 

and

 

High Plains Oil, LLC, a Nevada limited liability company (the “Seller”),

 

and

 

Pimuro Capital Partners, LLC, a Texas limited liability company (“Pimuro” and together with the Buyer and the Seller, the “Parties”)

 

RECITALS:

 

A.           Pimuro and the Seller are parties to an agreement under which the Seller is obligated to pay Pimuro a fee of $240,000 (the “Pimuro Fee”) in connection with the closing of transaction between the Seller and James H. Edsel, Nancy Edsel, and James Edsel, Jr. (collectively, the “Edsels”) under the terms of a Membership Interest Purchase Agreement effective as of January 1, 2011 (the “Edsel Purchase Agreement”), pursuant to which the Seller acquired 100% of the equity interests in JHE Holdings, LLC, a Texas limited liability company (the “Company”).  The Company owns the royalty, leasehold, working, operating, carried, net revenue, net profit, reversionary and other mineral Rights, interests and Contract Rights, described in the Edsel Purchase Agreement (collectively, the “Company Oil and Gas Properties”).

 

B.           The Seller and Buyer have negotiated a Membership Interest Purchase Agreement effective as of May 31, 2011 (the “Buyer Purchase Agreement”), under which the Buyer intends to purchase 100% of the equity interests in the Company.

 

C.           Under the terms of the Buyer Purchase Agreement, the Buyer and the Seller agree that the Buyer will pay the Pimuro Fee in complete satisfaction of the Seller’s obligation to Pimuro, subject to the terms and conditions set forth in this Agreement.

 

NOW THEREFORE, for good and valuable consideration (receipt and sufficiency of which are hereby acknowledged), the parties hereto mutually covenant and agree as follows:

 

1.   Assumption of Pimuro Fee.  The Parties agree that in consideration for the covenants, agreements and undertakings set forth herein, the Buyer will pay the Pimuro fee as follows:

 

	
  

	
(a)

	
$100,000 in cash concurrent with the closing date of the transactions contemplated in the Buyer Purchase Agreement (the “Closing Date”);

 

 

  

  

  

 

	
  

	
(b)

	
$50,000 on the last day of the month in which the Company receives aggregate revenue distribution in excess of $75,000 during such month from the Company Oil and Gas Properties following the Closing Date (the “Installment Commencement Date”);

 

	
  

	
(c)

	
$50,000 on the one month anniversary of the Installment Commencement Date;

 

	
  

	
(d)

	
$40,000 on the two month anniversary of the Installment Commencement Date.

 

In lieu of any of the above installment payments set forth in Sections 1(b), (c) and (d), Pimuro may elect in writing to receive such payment in shares of common stock of the Buyer, the value of which will be determined based on 85% of the five day weighted average trading price for common stock on the principal trading market for such shares ending on the trading date of such notice.  All cash payments of the Pimuro Fee will be paid to Pimuro in accordance with written wire instructions provide by Pimuro.

 

2.   Assumption of Pimuro Fees.  The Buyer hereby accepts the obligations of the Pimuro Fees effective as of and from the Closing Date, and covenants and agrees with the Seller and Pimuro that from and after the Closing Date it will be bound by, timely observe and perform, carry out and pay the Pimuro Fees as set forth in Section 1 of this Agreement.

 

3.   Acknowledgment of Assumption.  Pimuro hereby acknowledges the assumption of the obligations of the Pimuro Fees by the Seller effective as of and from the Closing Date.  Upon the payment of the Pimuro Fees as set forth in Section 1 of this Agreement, each of the Seller and Buyer shall be released from any obligations related to the Pimuro Fees.

 

4.   Enurement.  This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

 

5.   Counterpart Execution.  This Agreement may be executed in separate counterparts and delivered by facsimile, each of which when so executed and delivered shall constitute the one and the same original document.

 

6.   Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the State of Texas without giving effect to principles of conflicts of laws.

 

7.   Notices.  All notices, requests, demands, and other communications made in connection with this Agreement must be in writing and will be deemed to have been duly given when delivered by (a) first-class, registered, or certified mail, return receipt requested, postage prepaid, or (b) transmitted by courier, hand delivery, or facsimile, addressed to the respective Parties as follows:

 

 

 

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If to the Buyer:

	
Digital Valleys Corp.

Attn: David Brow

1100 Dexter Ave. North

Suite 100

Seattle, Washington 98109

Facsimile:

 

	 	
With a copy (which

will not constitute

notice) to:

Facsimile:

	
Dorsey & Whitney LLP

Attn: Kenneth Sam

1400 Wewatta Street

Suite 400

Denver, Colorado 80202

Facsimile:  (303) 629-3450

 

	 	
If to the Seller or

 the Company:

	
High Plains Oil, LLC

Attn:  Jeff Johnson

8916 Estribo Circle

Benbrook, Texas 76126

Facsimile:

 

	 	
with copy (which

will not constitute

notice) to:

 

 

	  
	 	
If to the Pimuro:

	
Pimuro Capital Partners, LLC

Attn: G. Jonathan Pina

 

________________________

 

________________________

Facsimile: _______________

 

	 	
with copy (which

will not constitute

notice) to:

	  

 

Any notice that is addressed and mailed in the manner herein provided will be conclusively presumed to have been given to the party to which it is addressed and will be deemed effective at the close of business, local time of the recipient, on the third day after the date it is so placed in the mail.  Any notice that is delivered by courier, hand delivery, or facsimile shall be deemed given at the time of actual receipt.  However, if an attempt to give notice by facsimile transmission fails because of any problem with the recipient’s designated facsimile number or facsimile equipment, such notice will nevertheless be considered to have been received at the time such transmission was attempted if it is also sent that day by guaranteed overnight delivery to the recipient for receipt on the following day and received on such following day.  In any case, such notices, requests, demands, and other communications will be sent to such other addresses as either party will notify the other by notice given in the manner described above.

 

 

 

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8.   Headings.  The headings contained in this Agreement are for purposes of convenience only and will not affect the meaning or interpretation of this Agreement.

 

9.   Entire Agreement.  This Agreementconstitutes the entire agreement and supersedes all prior agreements and understandings, whether written or oral, between or among the parties with respect to the subject matter hereof.

 

10.   Assignment. This Assignment will not be assignable by any party hereto without the prior written consent of the other parties hereto.

 

11.   No Third Party Beneficiaries.  Nothing in this Agreement will confer any rights upon any person other than the parties hereto and their respective successors and permitted assigns.

 

12.   Amendment; Waivers. No amendment, modification, or discharge of this Agreement, and no waiver hereunder, will be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge, or waiver is sought.  Neither the waiver by any of the parties hereto of a breach of any of the provisions of this Agreement, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right hereunder, will be construed as a waiver of any other breach of a similar nature, or as a waiver of any of such provisions or rights hereunder.

 

13.   Negotiated Transaction.  The provisions of this Agreement were negotiated by the parties hereto, and this Agreement will be deemed to have been drafted by all of the parties hereto.

 

14.   Attorney’s Fees. In the event that any party hereto is required to obtain the services of an attorney in order to enforce any right or obligation under this Agreement, the prevailing party shall be entitled to recover reasonable attorney’s fees and court costs from the other party.

 

THIS AGREEMENT executed effective as of the day and year first above written.

 

[Signature Page Follows]

 

 

 

 

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EXECUTED to be effective on and as of the Effective Date, notwithstanding that this Agreement and other documents may be executed and delivered on a later date.

 

 

	
THE BUYER:

 

DIGITAL VALLEYS CORP.

 

By:   ______________________________                                                   

 

Printed Name: _______________________

 

Title: _____________________________

                                    

 

	
THE SELLER:

 

HIGH PLAINS OIL, LLC

 

By:   ______________________________                                                   

 

Printed Name: _______________________

 

Title: _____________________________

                                       

 

	
 

PIMURO:

 

PIMURO CAPITAL PARTNERS, LLC

 

By:   ______________________________                                                   

 

Printed Name: _______________________

 

Title: _____________________________

                                        

 

 

	  

 

 

 

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