Exhibit 10.36
FORBEARANCE AND STIPULATED
CONFESSION OF JUDGMENT AGREEMENT
This Forbearance and Stipulated Confession of Judgment Agreement
("Agreement") is made and entered into as of October ___, 2002, by and between
Xxxx Industries, LLC, a Delaware limited liability company ("Borrower") and
Planet Polymer Technologies, Inc., a California corporation ("Lender"), and is
made with reference to the facts set forth below.
RECITALS
A. Borrower is indebted to Lender under the terms of a Purchase and Sale
Agreement dated December 21, 2001 (the "Purchase and Sale Agreement"),
including, without limitation, obligations under the following documents by and
between the parties, each dated December 21, 2001: (a) a Promissory Note in the
original principal amount of $50,000.00 (the "First Note") and (b) a second
Promissory Note in the original principal amount of $250,000.00 (the "Second
Note") (First Note and Second Note are collectively referred to herein as the
"Notes"); (c) a Security Agreement (the Purchase and Sale Agreement, Notes and
the Security Agreement are collectively referred to herein as the "Loan
Documents"); and (d) the Consulting Agreement providing for payments of $3,500
per month. The Loan Documents and the Consulting Agreement are collectively
referred to herein as the "Contract Documents." The current unpaid principal
balance of the First Note is $50,000.00. Late fees on the First Note as of the
date hereof are in the amount of $1,000.00. The current unpaid principal balance
of the Second Note is $100,000.00. Late fees on the Second Note as of the date
hereof are in the amount of $1,600.00. Current delinquent consulting fees under
the Consulting Agreement are in the amount of $3,500.00.
B. The Notes are secured by liens on the Collateral described in the
Loan Documents.
C. Lender has previously notified Borrower and Borrower has acknowledged
that Borrower is in default and breach as of August 10, 2002, with respect to
certain financial covenants set forth in the Contract Documents (the "Existing
Defaults"). As a result of the Existing Defaults, Lender is entitled to exercise
any and all of its rights and remedies under the Contract Documents and
applicable law, and to collect all amounts owing under the Contract Documents.
Any future default of the Existing Defaults by Borrower is referred to herein as
a "Future Default."
D. Borrower and Lender now desire to amend the Contract Documents and
impose certain additional obligations upon Borrower, all as more fully set forth
herein, notwithstanding the fact that Borrower remains in default under the
Contract Documents. Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings given those terms in the Contract Documents.
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AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
promises and agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Lender agrees to: (i) continue to forbear from enforcing its rights
and remedies under the Contract Documents due to the Existing Defaults; (ii)
extend the maturity date of the Notes to April 1, 2003 ("Maturity Date"); and
(iii) not institute collection proceedings under the Contract Documents as a
result of the Existing Defaults until the Maturity Date, provided that: (a)
Borrower satisfies the mandatory principal reductions and other obligations set
forth in Sections 2 and 3 below as of the applicable dates set forth therein,
and (b) Borrower is not otherwise in default under any other terms of the
Contract Documents, this Agreement, or any other obligations of Borrower to
Lender.
2. Commencing on the date hereof, Borrower shall be required to make
payments of principal and collection fees to Lender under the Notes as modified
hereunder, in the following amounts on or before the dates set forth below:
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DATE REVISED PAYMENT COLLECTION FEE TOTAL PAYMENT DUE
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12-01-02 $25,000.00 $2,500.00 (10%) $27,500.00
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01-01-03 $25,000.00 $2,500.00 (10%) $27,500.00
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02-01-03 $25,000.00 $3,750.00 (15%) $28,750.00
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03-01-03 $25,000.00 $3,750.00 (15%) $28,750.00
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04-01-03 $50,000.00 $7,500.00 (15%) $57,500.00
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3. In addition to the foregoing financial covenants, as a condition to
Lender's continued forbearance hereunder, Borrower agrees to: (i) concurrently
execute, and cause its counsel to execute, a Stipulated Confession of Judgment
Statement in the form and content of Schedule 1 attached hereto and incorporated
herein by reference, and any other required pleadings and/or documents to
effectively file and enforce such Statement; and (ii) upon execution of this
Agreement, pay Lender all past due installments owed by Borrower to Lender under
the terms of the Consulting Agreement, which equals one past due installment of
$3,500 for the month of August, and to thereafter pay on or before the first day
of each month the monthly payment of $3,500 for the remaining term of the
Consulting Agreement, which shall be four (4) months after the effective date of
this Agreement. As a further condition to Lender's continued forbearance
hereunder, Borrower agrees not to directly or indirectly, create, incur or
assume any lien, pledge, claim, charge, security interest, mortgage or
encumbrance of any nature whatsoever with respect to any of the Collateral
pledged under the Security Agreement. Borrower grants and confirms the security
interest granted to Lender in the Collateral pledged under the Security
Agreement to secure all obligations of Borrower to Lender under the Contract
Documents.
4. Upon execution of this Agreement and Borrower's payment of all past
due amounts under the Consulting Agreement referenced above, Lender agrees to
continue to perform its obligations under the Consulting Agreement for the
remaining term of the Consulting
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Agreement, as extended, and to forebear for ninety (90) days after otherwise
due, the collection of royalties otherwise due under the Purchase and Sale
Agreement for the three month period ending September 30, 2002; provided in each
case Borrower is not otherwise in default under the Contract Documents. During
the term of this Agreement, Lender acknowledges that Borrower will pay such
royalties in accordance with Borrower's good faith and reasonable interpretation
of the amount and timing of the royalties, however, Lender reserves its rights
to contest Borrower's interpretation, which dispute shall be resolved pursuant
to binding arbitration through the American Arbitration Association ("AAA")
unless otherwise resolved. So long as Borrower is not in default under this
Agreement, Lender agrees not to pursue the arbitration or to institute any other
action to collect royalties in excess of such amount tendered by Borrower prior
to April 15, 2003. Borrower agrees to pay to Lender a late fee equal to ten
percent (10%) of each royalty payment not paid to Lender in accordance with the
original terms of the Purchase and Sale Agreement; provided, however, if
Borrower defaults in any of its obligations and at Lender's request Borrower
immediately and voluntarily turns over and delivers to Lender full and
unencumbered title and possession of the Collateral, Lender agrees not to seek
any deficiency judgment against Borrower for collection of any such late fees.
5. Borrower hereby represents, warrants and certifies to Lender that
each of the acknowledgments, representations and warranties to Lender given to
induce Lender to grant this forbearance is true and correct as of the date
hereof.
6. In consideration of Lender's agreement to enter into this Agreement,
Borrower hereby further agrees as follows:
(a) Borrower for itself and its successors and assigns hereby
absolutely and irrevocably waives, releases, and forever discharges Lender, and
its respective officers, shareholders, directors, agents, servants, contractors,
employees, parent and subsidiary corporations, and predecessors-in-interest
(collectively, the "Released Parties") from any and all claims, rights, demands,
actions, suits, causes of action, damage, counterclaims, defenses, losses,
costs, obligations, liabilities, and expenses of every kind or nature, known or
unknown, suspected or unsuspected, fixed or contingent, foreseen or unforeseen,
arising out of or relating directly or indirectly to any circumstances or state
of facts pertaining to the Contract Documents or this Agreement (collectively,
"Claims"), up to and as of the date hereof, excluding claims related to the
calculation of Royalty Sales or Tungsten Sales referenced in the Purchase and
Sale Agreement and the calculation and timing of royalties payable with respect
to such sales. Claims shall include any damages related to the actions of Lender
in administering the Contract Documents or negotiating this Agreement and claims
of lender liability, fraud, duress, illegality, usury, waiver, bad faith,
interference in the business of any person or any non-performance of any
agreement or obligation related thereto, or any statements, representations,
acts or omissions, intentional, willful, negligent, or innocent, by any of the
Released Parties in any way connected with, relating to, or affecting, directly
or indirectly, the Contract Documents or this Agreement; provided, however, that
the foregoing shall not constitute a release of Lender's obligations under this
Agreement.
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(b) Borrower hereby acknowledges that it has not relied upon any
representation of any kind made by Lender in making the release set forth above,
except as expressly set forth in this Agreement.
(c) Borrower acknowledges that it may have claims against Lender
of which it has no knowledge at the time of the execution of this Agreement.
Borrower agrees that the waivers and releases in this Section are specifically
intended to and do extend to claims, demands or causes of actions of which
Borrower has no knowledge. As to all Claims, Borrower specifically waives the
benefit of the provisions of Section 1542 of the California Civil Code, which
provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Borrower hereby waives the provisions of Section 1542 of the California Civil
Code and the provisions of any similar laws. Borrower realizes and acknowledges
that factual matters now unknown to it may have given or hereafter give rise to
Claims which are presently unknown, unanticipated, and unsuspected, and the
release provided hereunder has been negotiated and agreed upon in light of that
realization.
(d) Borrower represents and warrants that it has not heretofore
assigned, or transferred, or purported to assign or to transfer, to any person
or entity (other than Lender), any Claim released hereunder or any portion
thereof or interest therein, and Borrower agrees to indemnify, defend, and hold
the Released Parties harmless from and against any and all such Claims based on
or arising out of any such assignment or transfer or purported assignment or
transfer.
(e) It is understood and agreed that this Section shall not be
deemed or construed as an admission by Lender of liability of any nature
whatsoever arising from or related to the subject matter of this Section.
(f) The provisions, waivers and releases set forth in this
Section are binding upon Borrower and its respective agents, employees,
representatives, officers, directors, general partners, limited partners, joint
venturers, affiliates, assigns, heirs, successors-in-interest and shareholders.
(g) Borrower agrees that if it hereafter commences, joins in, or
in any manner seeks relief through any suit arising out of, based upon, or
relating to any of the Claims or in any manner asserts against such Released
Parties, or any of them, any of the Claims, then it will pay to such Released
Parties, and each of them, in addition to any other damages caused to such
Released Parties thereby, all attorneys' fees incurred by such Released Parties
in defending or otherwise responding to said suit or claim.
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(h) Borrower acknowledges that it has defaulted in its
obligations to Lender under the Security Agreement. Pursuant to the provisions
of Division 9 of the California Uniform Commercial Code, as amended, Borrower
renounces its rights to require that Lender comply with the provisions in
Chapter 6 of Division 9 relating to disposition of the Collateral described in
the Security Agreement, including without limitation, consenting to the entry of
a Stipulated Confession of Judgment Statement in the form and content of
Schedule 1 attached hereto and the acquisition and retention by Lender of the
Collateral described in the Security Agreement in satisfaction of all
obligations of Borrower to Lender under the Contract Documents.
(i) Borrower appoints Lender as Borrower's attorney-in-fact to
act for Borrower on Borrower's behalf to execute and deliver a Xxxx of Sale in
the form and content attached hereto as Schedule 2 and incorporated herein by
reference, together with such further assignments and documents as may be
necessary or appropriate to transfer the Collateral to Lender. Borrower also
agrees to take any and all actions and execute any and all other documents in
Borrower's name to convey and to transfer the Collateral from Borrower to Lender
or such third party as Lender may designate upon the failure of Borrower to pay
or observe any obligation of Borrower under this Agreement or the Contract
Documents, as amended by this Agreement, unless such obligation is cured by
Borrower within five (5) business days after notice by Lender to Borrower,
including payment of any late fees, attorney's fees or collection costs.
(j) The provisions of this Section 6 shall survive payment in
full of the obligations under the Contract Documents, termination of this
Agreement, and full performance of all the terms of this Agreement.
7. Miscellaneous
(a) Each of the parties hereto agrees to execute all documents
and instruments and to take all other actions as may specifically be provided
for herein or as may be required in order to consummate the purposes of this
Agreement. Each party hereto shall diligently and in good faith pursue the
satisfaction of all conditions and contingencies to be satisfied by it in this
Agreement.
(b) Except as specifically set forth herein, no third party
shall be benefitted by any of the provisions of this Agreement, nor shall any
such third party have the right to rely in any manner upon any of the terms
hereof, and none of the covenants, representations, warranties or agreements
herein contained shall run in favor of any third party not specifically
referenced herein.
(c) Nothing in this Agreement shall constitute a waiver by
Lender of rights or remedies with respect to the Existing Defaults or any other
default or Event of Default under the Contract Documents, except as expressly
set forth in this Agreement. Lender has no obligation, and has made no
commitment to modify or extend any term of the Contract Documents, to waive any
default or Event of Default, or to forebear from exercising its remedies under
the Contract
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Documents, except as expressly set forth in this Agreement. Borrower's
obligations hereunder shall continue to be secured by the Security Agreement.
(d) The parties hereby irrevocably waive their respective rights
to a jury trial of any claim or cause of action based upon or arising out of
this Agreement or the Contract Documents. [INITIAL HERE ____________] This
waiver shall apply to any subsequent amendments, renewals, supplements, or
modifications to this Agreement.
(e) Time is of the essence for the performance of all
obligations and the satisfaction of all conditions of this Agreement. The
parties intend that all time periods specified in this Agreement shall be
strictly applied, without any extension (whether or not material) unless
specifically agreed to in writing by all parties.
(f) Borrower agrees to reimburse and pay to Lender, on demand,
all costs and expenses which Lender may incur as a result of or in connection
with the Existing Defaults, and enforcement of this Agreement, including without
limitation, attorneys' fees and costs incurred by Lender in connection with
legal advice received by Lender relating to the Existing Defaults, or actions
required to cure such defaults. Attorneys' fees and costs in connection with the
preparation of this Agreement in the amount of no more than $5,000 shall be
payable concurrently herewith, and Borrower acknowledges and agrees that such
fees and costs are reasonable. In addition, the prevailing party in any
arbitration, litigation or dispute over rights, remedies or duties arising under
this Agreement shall be entitled to recover, in addition to other appropriate
relief, its reasonable costs and expenses, including, without limitation,
attorneys' fees and court costs. Such entitlement shall include costs and
expenses incurred in the collection of any judgment or settlement.
(g) This Agreement, and the other documents executed
concurrently herewith, contain or expressly incorporate by reference the entire
agreement of the parties with respect to the matters contemplated herein and
supersede all prior negotiations. Any Schedules attached hereto and referenced
herein, including but not limited to, the Stipulated Confession of Judgment and
related pleadings attached as Schedule 1 and the Xxxx of Sale attached as
Schedule 2 are hereby incorporated into this Agreement.
(h) This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument. However, this Agreement shall not be binding on
Lender until all parties have executed it.
(i) This Agreement shall be governed by, construed and enforced
in accordance with, the laws of the State of California, and in any action
brought under or arising out of this Agreement, the parties (i) consent to the
jurisdiction of any competent court within San Diego County, California, (ii)
agree that venue shall be proper in San Diego County, California and (iii)
consent to service of process by certified mail at the address of each party
stated in the Purchase and Sale Agreement. Such service of process shall be
deemed accepted no later than two (2) days after the postmarked date of the
mailing. Borrower covenants not to seek any protection under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law until one hundred
twenty
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(120) days after payment of the last amount paid pursuant to Section 2 of this
Agreement or entry of judgment in favor of Lender pursuant to the Stipulated
Confession of Judgment Statement, whichever occurs earlier.
(j) Except as expressly modified by this Agreement and the
documents contemplated hereby, no other changes to the Contract Documents are
being made and all provisions of the Contract Documents shall remain in full
force and effect.
(k) The relationship between Lender and Borrower is that of a
lender and a borrower and not as partners or joint venturers. Lender owes no
fiduciary duty to Borrower.
(l) The terms of this Agreement shall be binding upon and inure
to the benefit of the heirs, successors and assigns of the parties to this
Agreement.
(m) The parties acknowledge that each party and its counsel have
reviewed this Agreement and the documents executed in connection herewith. The
parties agree that the rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any documents executed in connection
herewith.
(n) If any provision of this Agreement or any of the Notes or
the Loan Documents shall be determined by a court of competent jurisdiction to
be invalid, illegal or unenforceable, that portion shall be deemed severed
therefrom and the remaining parts shall remain in full force as though the
invalid, illegal or unenforceable portion had never been a part thereof.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
BORROWER: LENDER:
Xxxx Industries, LLC, Planet Polymer Technologies, Inc.
a Delaware limited liability company a California corporation
By: By:
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Its: Its:
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SCHEDULE 2
XXXX OF SALE
For valuable consideration, the receipt of which is acknowledged, Xxxx
Industries, LLC, a Delaware limited liability company ("Grantor"), hereby
conveys, remises, releases, and quitclaims to Planet Polymer Technologies, Inc.,
a California corporation ("Grantee"), all of Grantor's right, title, and
interest in and to all that personal property described in EXHIBIT "A" attached
hereto and incorporated by reference, which was originally sold by Grantee to
Grantor pursuant to that Purchase and Sale Agreement between the parties dated
December 21, 2001.
GRANTOR:
XXXX INDUSTRIES, LLC, a Delaware
limited liability company
By: Planet Polymer Technologies, Inc.,
a California corporation
Its: Attorney-in-fact
By:
-------------------------------------
Its:
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EXHIBIT "A"
1. EQUIPMENT.
Weigh scales
Blender Mixer
Dessicant dryer
S/S extruder
Twin screw extruder
Melt pump
Powder feeders
Take off conveyors
Granulator
Pellitzer
Debinding tanks
Sinter furnace
Molding machine
Melt indexer
Pychometer
Mold tools
Fork Lift
Misc. equipment
2. INTELLECTUAL PROPERTY COLLATERAL.
Patent U.S. 5,977,230
Patent Japan 3,142,828
Patent U.S. 6,008,281
Pending Patent - Singapore of U.S. 5,977,230
Applied Patent -- U.S. Dense Metal Composites
AQUAMIM trademarks and trade names
3. DOCUMENTS. All right, title and interest of Grantor in all existing business
relationships, general intangibles, development projects, business development
programs, files, books and records, customer lists and customer information,
existing orders and contracts, computer software and similar data, information,
contacts and related supplier and third-party information used in Grantor's
business.
4. PROCEEDS. Any "proceeds," as such term is presently or hereafter defined in
Article 9 of the California Uniform Commercial Code, as amended, now owned or
hereafter acquired by Grantor and which arise out of or based upon the foregoing
assets used in Grantor's business, and in any event shall include, without
limitation: any and all Proceeds of any of the foregoing, including, without
limitation, whatever is received upon the use, lease, sale, exchange,
collection, any other utilization or any disposition of any of the personal
property described in this Exhibit "A", whether cash or non-cash, all rental or
lease payments, accounts, chattel paper, instruments, documents, contract
rights, general intangibles, equipment, inventory, substitutions, additions,
accessions, replacements, products, and renewals of, for, or to such property
and all insurance therefor.
