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EXHIBIT 10.6
CAPITAL CONTRIBUTION AND DEBT CANCELLATION AGREEMENT
This CAPITAL CONTRIBUTION AND DEBT CANCELLATION AGREEMENT (the
"Agreement") is made and entered into this 26th day of June, 1996, by and
between Myriad International, Inc., a Delaware corporation ("Myriad"), and
Conversion Industries, Inc., a British Columbia corporation ("Conversion"), as
to the following recitals of fact:
RECITALS
A. Conversion, pursuant to a Loan Agreement by and between Conversion
and Myriad, dated October 31, 1993, loaned Myriad the principal sum of Five
Million Seven Hundred Eighty Thousand Seven Hundred Twenty One Dollars and fifty
nine cents ($5,780,721.59) and has subsequently loaned Myriad an additional
$514,000, for a total principal balance of $6,294,721.59 (the "Loan").
B. Myriad acknowledges that it is presently obligated to pay to
Conversion all unpaid principal and accrued interest owing on the Loan, which
amounts to $8,215,607 as of April 30, 1996 (the "Loan Balance").
C. Conversion is the owner of approximately 300,000 shares of Myriad
Class A Common Stock; warrants to acquire an additional 215,000 shares of Myriad
Class A Common Stock (125,000 warrants exercisable at $1.00 per share, 50,000
exercisable at $0.50 per share and 40,000 exercisable at $0.75 per share) and
500,000 shares of Myriad Series 2 Preferred Stock which is convertible into
1,000,000 shares of Myriad Class A Common Stock. (Conversion's shareholdings in
Myriad Class A Common Stock; warrants and Series 2 Preferred Stock will
sometimes collectively be referred to herein as the "Myriad Securities").
D. As collateral for the Loan, Conversion is holding all of the
outstanding shares of Remedquip International Manufacturing, Inc., an Oregon
corporation ("Remedquip"), A&E Industries, Inc., a Delaware corporation ("A&E"),
and Advanced Test Systems, Inc., a California corporation ("ATS"). Remedquip,
A&E, and ATS are all wholly-owned subsidiaries of Myriad.
E. Myriad has made capital contributions to A&E in the amount of
$6,000,000 as of July 31, 1995.
F. A&E, in consideration of the capital contributions described in
Paragraph E above, guaranteed the repayment of the Loan in accordance with the
provisions of a Guaranty and Indemnity Agreement dated October 31, 1994 (the
"Guaranty Agreement") and a Security Agreement dated as of the same date (the
"Security Agreement").
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G. A&E is presently in Chapter 7 proceedings under the United States
Bankruptcy Code in the United States Bankruptcy Court, Southern District of
California, Case Number 94-08317-A7 (the "A&E Bankruptcy Proceedings").
H. Conversion, by virtue of the Guaranty Agreement and the Security
Agreement, is a secured creditor of A&E in the A&E Bankruptcy Proceedings.
I. Myriad is also a claimant against A&E in the A&E Bankruptcy
Proceedings and filed all documents necessary to perfect its rights as a
claimant in such proceedings.
J. ATS is also a claimant in the A&E Bankruptcy Proceedings.
K. A&E, prior to the Bankruptcy Proceedings, performed work pursuant to
four (4) contracts entered into between A&E and the United States Department of
the Navy dated October 8 and 9, 1993, respectively (the "Navy Contracts"), which
work related to the vessel known as the U.S.S. Constellation. A dispute has
arisen between A&E and the United States Department of the Navy regarding
non-payment of certain amounts owing under the Navy Contracts.
L. Conversion is willing to: (a) release Myriad of all liability with
respect to the Loan Agreement and all amounts owing thereunder and (b) to return
to Myriad all of the shares of Remedquip, A&E, and ATS that it is holding as
collateral in return for (i) the payment of Seven Hundred and Fifty Thousand
Dollars ($750,000); (ii) the assignment of all rights, title and interest that
Myriad and ATS have in the A&E Bankruptcy Proceedings and (iii) the reduction in
exercise price of the 125,000 warrants presently at $1.00 and the 40,000
warrants presently at $0.75 to $0.50.
AGREEMENT
In consideration of the terms, conditions, releases, warranties, and
covenants contained herein, Conversion and Myriad agree as follows:
1. Recitals and Exhibits Recitals A through L are incorporated herein
by this reference and made a part hereof. All Exhibits referenced in this
Agreement shall be attached to the Agreement and shall be deemed incorporated
herein.
2. Payment and Assignment by Myriad to Conversion
2.1 On or before August 1, 1996 Myriad shall pay to Conversion
by cashier's check or federal wire the sum of Two Hundred and Fifty Thousand
Dollars ($250,000).
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2.2 On or before September 30, 1996, Myriad shall pay to
Conversion by cashier's check or federal wire the sum of Two Hundred and Fifty
Thousand Dollars ($250,000).
2.3 On or before October 31, 1996, Myriad shall pay to
Conversion by cashier's check or federal wire the sum of Two Hundred and Fifty
Thousand Dollars ($250,000).
2.4 Myriad, in its capacities as a shareholder and/or creditor
of A&E, hereby transfers and assigns and agrees to execute any additional
documents reasonably required to transfer and assign to Conversion all of its
rights to the claims filed or which can be filed by Myriad in and to the A&E
Bankruptcy Proceedings to Conversion. Myriad will provide the Notice of
Assignment, a copy of which is attached hereto as Exhibit 2.3, to the Trustee in
the A&E Bankruptcy Proceedings.
2.5 Myriad, in its capacities as a shareholder and/or creditor
of A&E and the sole shareholder of ATS, hereby transfers and assigns and agrees
to execute any additional documents reasonably required to transfer and assign
to Conversion all of ATS' rights to the claims filed or which can be filed by
ATS in and to the A&E Bankruptcy Proceedings to Conversion. Myriad will cause
ATS to provide the Notice of Assignment, a copy of which is attached hereto as
Exhibit 2.4, to the Trustee in the A&E Bankruptcy Proceedings.
2.6 Myriad agrees to reduce the exercise price of the 165,000
warrants presently at $1.00 (125,000) and $0.75 (40,000) to $0.50.
3. Release of Liability
3.1 Upon receipt of the payments required by Paragraphs 2.2,
2.3 and 2.4 above and return of an acknowledgment of the assignments provided
for in Paragraphs 2.4 and 2.5 from the United States Bankruptcy Trustee in the
A&E Bankruptcy Proceedings. Conversion shall release Myriad with respect to all
liability for the repayment of the Loan and return to Myriad the shares of
Remedquip, A&E and ATS that it is holding as collateral.
3.2 In the event Myriad fails to make any of the payments
required by Paragraph 3.1 on or before the dates specified, Conversion has the
right to terminate this Agreement on five days written notice; provided that the
Loan Balance shall be reduced by $1.00 for each dollar of payments made by
Myriad.
3.3 Upon consummation of this Agreement, Myriad shall release
Conversion from any and all liability with respect to the Loan and transactions
related to the Loan.
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4. Cooperation of Myriad
4.1 Conversion intends to enter into an agreement with the
Trustee in the A&E Bankruptcy Proceedings and the Internal Revenue Service,
subject to the United States Bankruptcy Court's approval, regarding the funding
of special counsel to pursue any claims A&E has against the United States
Department of the Navy arising out of the Navy Contracts.
4.2 Myriad shall utilize its best efforts to cause A&E,
through the Bankruptcy Trustee, to continue to pursue all claims against the
United States Department of the Navy arising out of the Navy Contracts and to
take all steps reasonably necessary to cause payment by the United States
Department of the Navy to A&E and/or to the Bankruptcy Trustee, including but
not limited to providing all documents and materials to the Trustee's special
counsel and to utilize its best efforts to identify and make available all
personnel necessary so as to assist A&E and/or the Bankruptcy Trustee to prove
any claims against the United States Department of the Navy arising out of the
Navy Contracts.
5. Representations and Warranties of the Parties
5.1 Myriad hereby represents and warrants to Conversion that
it is a corporation validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as now conducted in the State of California. Myriad further
represents that each of the recitals made herein concerning Myriad and/or A&E
are true and correct as of the date hereof.
5.2 Myriad hereby represents that it has not made any prior
assignments of the claims against A&E of Myriad and/or ATS being assigned to
Conversion pursuant to Paragraphs 2.4 and 2.5 of this Agreement.
5.3 Conversion hereby represents and warrants to Myriad that
it is a corporation duly organized and validly existing under the laws of the
Province of British Columbia and has all requisite corporate power and authority
to carry on its business as now conducted in the State of California. Conversion
further represents that each of the recitals made herein concerning it are true
and correct as of the date hereof.
5.4 Myriad and Conversion each represents that each
corporation is duly qualified to transact business in each jurisdiction in which
it transacts business. All corporate action on the part of Myriad and Conversion
necessary for the authorization, execution and delivery hereunder has been taken
or will be taken prior to the delivery of and payment for the Myriad Securities,
and this Agreement constitutes a valid and legally binding obligation of Myriad
and Conversion.
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No consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state, local or provincial
governmental authority on the part of Myriad or Conversion is required in
connection with the consummation of the transactions contemplated by this
Agreement. NOTHING HEREIN SHALL AFFECT CONVERSION'S RIGHT TO SEEK REPAYMENT OF
THE LOAN FROM A&E PURSUANT TO THE GUARANTY AGREEMENT.
6. Bankruptcy Court Approval
6.1 Conversion shall use its reasonable best efforts to obtain
approval of the Bankruptcy Court to the consummation of the transactions
contemplated by this Agreement. Conversion further agrees to submit this
Agreement to the Bankruptcy Court for its approval as soon as reasonably
practical but in no event later than July 15, 1996.
6.2 Myriad agrees to pay the reasonable attorneys fees
incurred by Conversion in seeking Bankruptcy Court approval of this Agreement,
such fees not to exceed $5,000.
7. Survival. Notwithstanding the consummation of the transactions
contemplated by this Agreement, the representations and warranties of Myriad and
Conversion contained in this Agreement shall survive the consummation of the
transactions contained in this Agreement for three (3) years after the date of
execution of this Agreement.
8. Counterparts. This Agreement may be executed in one or more
counterparts, including counterparts by telecopy or facsimile signature, each of
which shall constitute one in the same instrument.
9. Entire Agreement. This Agreement contains all of the promises which
have been made in connection with the cancellation of the Loan and supersedes
the Capital Contribution and Debt Cancellation Agreement dated July 31, 1995.
There are no unstated or hidden terms, and every term which is important to this
Agreement is specified in writing. This Agreement contains the entire
understanding of the Parties of the terms upon which they have agreed to enter
into this Agreement, and any prior contemporaneous oral representations shall be
of no force and effect.
10. Headings. All topic headings in this Agreement have been used for
organizational purposes only and have no independent legal significance or
import.
11. Unenforceable Terms. The Parties agree that if any provision of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
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12. Further Assurances. Each of the Parties hereby agrees to at any
time and from time to time, upon the request of any party hereto, to execute and
deliver such further documents and do such other acts as reasonably requested in
order to effect fully the purposes of this Agreement.
13. Assignment. Each of the Parties shall have the right to assign this
Agreement to any successor entity, provided such entity agrees in writing to be
bound by all of the terms of this Agreement.
14. Arbitration. Any dispute concerning this Agreement shall be settled
by binding arbitration in accordance with the rules of the American Arbitration
Association in Los Angeles County, California.
15. Action on Agreement. If any party brings an action to enforce this
Agreement or any provision thereof, the prevailing party shall be entitled to
recover its attorneys' fees and costs from the losing party.
Dated as of the date first written above.
Conversion Industries, Inc.
By \s\ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
Chairman & CEO
Myriad Industries, Inc.
By \s\ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Chairman & CEO
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August 14, 1996
Xx. Xxxxxx X. Xxxxxxxxx, Chairman
Conversion Industries Inc.
000 X. Xxxxxxxx Xxxx.. Xxxxx 000
Xxxxxxxx, XX 00000
Dear Xx. Xxxxxxxxx:
This letter confirms our agreement that the date for the initial payment of
$250,000 set forth in Section 2.1 of the Capital Contribution and Debt
Cancellation Agreement of June 26, 1996 is extended to September 3, 1996: the
date for the second payment set forth in Section 2.2 is extended to October 1,
1996 and the date for the final payment set forth in Section 2.3 is extended to
November 1, 1996.
In addition the date to submit the agreement for Bankruptcy Court approval set
forth in Section 6.1 is extended to a date as soon as reasonably practicable as
mutually agreed by the parties.
Sincerely,
/s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx,
Chairman
Accepted and Agreed:
Conversion Industries Inc.
By: /s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx,
Chairman
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