Exhibit 10.3
PURCHASE OF SUBORDINATED SECURED PROMISSORY NOTE
AND SUPPLY AND CONSIGNMENT AGREEMENT
This agreement to Purchase Subordinated Secured Promissory Note and Supply
and Consignment Agreement (this "Agreement") is made thisAlp day of February
2002, by and among SerVaas, Inc., an Indiana corporation ("SerVaas"), The Bourt
SerVaas Revocable Trust (the "Trust), U.S. Rubber Reclaiming, Inc., an Indiana
corporation ("USRK) and Obsidian Enterprises, Inc., a Delaware corporation
("Obsidian") and D.C. Investments, LLC, an Indiana limited liability company.
RECITALS
WHEREAS, SerVaas sold all of the issued and outstanding capital stock of
U.S. Rubber Reclaiming, Inc. to USRR Acquisition, Inc. on December 29, 2000; and
thereafter USRR Acquisition, Inc. and U.S. Rubber Reclaiming, Inc. merged with
USRR Acquisition, Inc. as the surviving corporation; and thereafter USRR
Acquisition, Inc. changed its name to U.S. Rubber Reclaiming, Inc. ("USW') the
business corporation that is a party to this Agreement; and
WHEREAS, on December 29, 2000, USRR entered into a certain Subordinated
Secured Promissory Note in the principal amount of One Million Seven Hundred
Fifty Thousand and no/100 Dollars ($1,750,000) (the "Note") payable to the order
of SerVaas, Inc. with interest at 14% per annum through March 31, 2001 and at
20% per annurn thereafter in partial payment of the acquisition costs of USRR;
and
WHEREAS, on December 29, 2000, SerVaas and USRR entered into that certain
Supply and Consignment Agreement (the "Supply Agreement") wherein SerVaas agreed
to supply and USRR agreed to purchase Six Million Four Hundred Thousand
(6,400,000) pounds of scrap butyl rubber raw material inventory (the "SerVaas
Scrap Butyl") in equal monthly orders of Two Hundred Sixty Six Thousand Six
Hundred Sixty-Seven (266,667) pounds each, for a monthly purchase price of Forty
One Thousand Six Hundred Sixty Seven Dollars ($41,667.00). The total Supply
Agreement Purchase Price being One Million Eight and no/100 Dollars
($1,000,008.00); and
WHEREAS, on December 29, 2000, SerVaas, USRR and Bank One, Indiana,
National Association ("Bank One") entered into that certain Subordination
Agreement (the "Subordination Agreement") wherein SerVaas subordinated the
obligations of the Note and Supply Agreement to the Obligations owed by USRR to
Bank One; and
WHEREAS, on June 14, 200 1, USRR and SerVaas entered into a Waiver and
Deferral Agreement (the "Waiver") wherein SerVaas agreed to the suspension of
interest payments on the Note for the months of May, June, July and August, 200
1, which interest accrued at 14% per annum, and further SerVaas agreed to defer
USRR's purchases of SerVaas Scrap Butyl for the same 4 month period of May,
June, July and August 200 1; and
WHEREAS, Obsidian's predecessor in interest Xxxxxx Corporation ("Xxxxxx")
acquired all of the outstanding capital stock of USRR (the "USRR Shares") in an
acquisition that closed on June 21, 200 1; and thereafter on June 29, 2001
pursuant to a Stock Pledge Agreement Xxxxxx pledged the USSR Shares to SerVaas
(the "Stock Pledge") in order to secure the USRR obligations under the Note and
Supply Agreement; and
WHEREAS, certain disagreements have risen between SerVaas, USRR and
Obsidian in respect of the value and usefulness of the SerVaas Scrap Butyl and
the condition of the 12 inch extruder owned and utilized by USRR as of December
29, 2000; and
WHEREAS, in May, 2001 Obsidian caused USRR to suspend any further payments
under either the Note and/or the Supply Agreement until such disputes are
resolved; and
WHEREAS, on the 301h day of December, 2001, SerVaas assigned the Note to
the Trust; and
WHEREAS, on February 7, 2002 the parties entered into a Term Sheet settling
the disputes between the parties and providing for the purchase of both the Note
and Supply Agreement; and
WHEREAS, on February 7, 2002, in consideration of the agreements set forth
in the Tenn Sheet, SerVaas waived certain defaults of USRR under the Note and
Supply Agreement through November 1, 2002; and
WHEREAS, the parties to this Agreement desire to compromise and settle the
disputes that have arisen among them and in order to settle such disputes
Obsidian is willing, for a discount, to purchase the Note and arrange for an
affiliated Party to purchase the Supply Agreement.
NOW, THEREFORE, in consideration of the mutual promises made by the Parties
one to the other and other good and valuable consideration the receipt of which
is hereby acknowledged, the Parties hereto hereby agree as follows:
1. Note Purchase. During the four (4) month period of the Waiver, the
Note accrued interest through August 31, 2001 in the amount of
Eighty-Two Thousand Five Hundred Sixty-One and 64/100 Dollars
($82,561.64) and commencing September 1, 2001, through the date hereof
the Note has accrued interest at the rate of twenty percent (20%) per
annum in the amount of One Hundred Seventy-One Thousand Six Hundred
Forty-Three and 84/100 Dollars ($171,643.84). On or before February
26, 2002 Obsidian agrees to purchase and the Trust agrees to sell to
Obsidian the Note and all interest earned and accrued thereon for the
Purchase Price of Seven Hundred Thousand Dollars ($700,000), plus
30,000 shares of Obsidian Series C Preferred Stock Convertible to
Obsidian Common Stock at 20:1 and valued for the purposes of this
Agreement at $5.00 per share or $150,000 (the "Note Purchase Price").
2. Supply Agreement. From January 1, 2001 through April 30,2001, USRR
purchased 1,066,668 pounds of SerVaas Scrap Butyl and paid to SerVaas
the sum of $125,001 for such SerVaas Scrap Butyl. SerVaas has
5,599,999 pounds of SerVaas Scrap Butyl remaining at the USRR facility
on consignment and subject to the Supply Agreement. DC Investments
hereby agrees to purchase the Supply Agreement by the issuance of its
unsecured Promissory Note to SerVaas in the principal amount of
$700,000 with interest at 8% per annum and with a maturity date of
March 18, 2003 (the "DC Investments Note") and in consideration
therefore, SerVaas shall assign all its right, title and interest in
and to the Supply Agreement to DC Investments, The DC Investments Note
shall be amortized over twelve (12) months in equal monthly
installments of $60,767.06 each.
3. Waiver. Effective with the execution of this Agreement the Waiver and
Deferral Agreement and Term Sheet are terminated and merged into this
Agreement.
4. Note and Stock Pledge. Upon payment of the Note Purchase Price, the
Trust agrees to promptly cancel the Stock Pledge Agreement and to
return the pledged USRR shares to Obsidian and to assign the Note and
all accrued interest thereon to Obsidian.
5. Subordination. This Agreement is subject to and conditioned upon the
terms and conditions of the Subordination Agreement. Upon the
execution and delivery of this Agreement, Obsidian will request a
consent from Bank One to the transactions contemplated herein. Such
request shall include a request for the termination and release of
SerVaas from the Subordination Agreement and also from the terms and
conditions of that certain Inter-creditor Agreement by and between
SerVaas and Bank One dated December 29, 2000, such releases and
terminations to be effective upon the Close of the transactions
contemplated herein.
6. DC Investments Note. SerVaas intends to sell the DC Investments Note
to a bona fide purchaser for value and in contemplation of such sale
the parties agree as follows:
(i) in the event SerVaas receives a bona fide third party offer to
purchase the DC Investments Note then in such event, DC Investments
shall have and SerVaas hereby grants to DC Investments a "right of
first refusal" to purchase the DC Investments Note on the same terms
and conditions as such bona fide third party offer; upon receipt of
written notice of a bona fide offer to purchase the DC Investments
Note, DC Investments will notify SerVaas within five (5) days of its
exercise of this right of first refusal or such right will terminate;
and
(ii) in the event the bona fide third party offer to purchase the DC
Investments Note is less than the then outstanding principal balance
of the DC Investments Note, then in such event, DC Investments shall
pay the difference to SerVaas of the bona fide offer and the then
outstanding principal balance of the Note up to a maximum differential
amount of $150,000.
7. Mutual Release. Conditioned upon the satisfactory performance of this
Agreement as contemplated in paragraphs 1,2,3 and 4 above, DC
Investments, Obsidian and USRR hereby release and forever discharge
SerVaas and the Trust and SerVaas and the Trust hereby release, and
forever discharge Obsidian, USRR and DC Investments from any and all
obligations, claims, loss and/or damage arising from the Note, Supply
Agreement, Waiver, Stock Pledge, Subordination Agreement and
Intercreditor Agreement.
8. Term and Termination. In the event either DC Investments or Obsidian
are unable to complete its obligations set forth in paragraphs I and 2
above, on or before February 26, 2002, then in such event this
Agreement shall terminate and all of the terms and conditions of the
Note and Supply Agreement shall be immediately reinstated, and all
accrued interest on the Note shall be immediately due and payable.
9. Binding. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
10. Governing Law. This Agreement shall be governed by the laws of the
State of Indiana, without regard to conflict of laws principles.
11. Counterparts. This Agreement may be executed by original or facsimile
signatures, in two or more counterparts, each of which shall
constitute an original, but all of which when taken together shall
constitute but one agreement.
12. Miscellaneous. This Agreement constitutes the entire Agreement of
SerVaas, the Trust, USRR, Obsidian and DC Investments with respect to
the matters set forth herein, captions are for the ease of reference
only and shall not affect the meaning of relevant provisions. The
meanings of all defined terms used in this Agreement shall be equally
applicable to the singular and the plural forms of the terms defined.
No amendment or waiver of any provisions of this Agreement shall be
effective, unless the same shall be in writing and signed by all
Parties.
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
on the date first above written.
DC Investments, LLC U.S. Rubber Reclaiming, Inc.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
-------------------------- -----------------------------
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx, Chairman
Managing Member
Obsidian Enterprises, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Chairman
The Beurt SerVaas Revocable Trust SerVaas, Inc.
By: /s/ Beurt SerVaas By: /s/ Beurt SerVaas
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Beurt SerVaas, Trustee Beurt SerVaas, President
