EXHIBIT 10.8
THE RIGHTS OF THE HOLDER OF THIS NOTE ARE SUBJECT TO THE TERMS AND PROVISIONS OF
THAT CERTAIN INTERCREDITOR AGREEMENT DATED MARCH 10, 1995 BETWEEN THE ▇▇▇▇
COMPANY AND CONGRESS FINANCIAL CORPORATION.
TERM NOTE
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$1,626,294 Philadelphia, Pennsylvania
Dated: March 10, 1995
FOR VALUE RECEIVED, POLYCHEM CORPORATION, a corporation
organized under the laws of the Commonwealth of Pennsylvania, having its
principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Maker"), promises
to pay to the order of THE ▇▇▇▇ COMPANY, a Michigan corporation, having its
principal office at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇ ▇▇▇▇▇
("Payee"), or at such other place as the holder hereof may from time to time
designate in writing, the principal sum of ONE MILLION FIVE HUNDRED AND ELEVEN
THOUSAND DOLLARS ($1,511,000), lawful money of the United States, on or before
March 31, 2003 (the "Maturity Date"), which principal sum shall bear interest as
set forth below.
1. Maker, Payee and The Eastwind Group, Inc. ("Surety") have
entered into an Asset Purchase Agreement of even date herewith ("Asset
Agreement"), pursuant to which Maker has agreed to purchase certain assets and
assume certain liabilities of the Polychem Division of the Payee. This Term Note
evidences Maker's obligation to pay Payee that portion of the Purchase Price in
connection with the Asset Agreement not paid in cash or by delivery of the
Retainage Note at Closing. This Term Note is specifically subject to Section
13.8 of the Asset Agreement, which is incorporated herein by reference.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Asset Agreement.
2. (a) Maker shall pay the principal due hereunder in twenty
(20) equal consecutive quarterly installments ("Regular Quarterly Principal
Payments") commencing on the third (3rd) anniversary of the last day of the
month during which Closing occurs, and continuing on the last day of each third
month thereafter, until the principal amount hereof is fully paid.
(b) Notwithstanding subsection (a) above, but subject to
subsection (c) and Sections 5, 6 and 7 below, if the amount of any Regular
Quarterly Principal Payment exceeds an amount equal to the Net Cash Flow of
Maker for its last fiscal quarter ending prior to the date on which such Regular
Quarterly Principal Payment is due (a "Related Fiscal Quarter"), then Maker may
defer payment of the excess, but not more than twenty-five percent (25%) of the
amount of such Regular Quarterly Principal Payment, which shall be accrued
("Accrual") and shall continue to bear interest as set forth in Section 3 below.
All Accruals and interest thereon shall be paid immediately to the extent that
Maker's Net Cash Flow for any subsequent fiscal
quarter exceeds the next Regular Quarterly Principal Payment due at or after the
and of such fiscal quarter.
(c) Maker shall calculate its Net Cash Flow and deliver
such calculation to Payee as soon as possible after the end of each of its
fiscal quarters, but in any event within fifteen (15) days thereafter, and shall
deliver to Payee any, work papers, financial statements and other books and
records requested by Payee in connection with such calculation.
(d) Notwithstanding anything contained in subsection (b)
above, the entire principal amount hereof, including all Accruals under
subsection (b) and all interest due hereunder, shall be due and payable on the
Maturity Date.
(e) For purposes of this Term Note, "Net Cash Flow" for any
fiscal quarter shall mean the net income of Maker plus non-cash expenses
included in the calculation of net income, less payments of principal which are
due under the terms of that certain Loan and Security Agreement with Congress
Financial Corporation of even date herewith (or any amendment, restatement or
refinancing thereof) and are actually paid (but not including any prepayment,
accelerated payment or payment made pursuant to any amendment or modification of
such Loan Agreement), plus or minus any net change in working capital from the
prior fiscal quarter, plus the amount of any capital expenditures up to but not
exceeding the amount of depreciation of property, plant and equipment owned by
maker on the date hereof. Such calculations shall be made on a cash basis for
each fiscal quarter. Except to the extent otherwise specifically defined herein,
all financial terms used herein shall have the meanings ascribed thereto under
generally accepted accounting principles, consistently applied ("GAAP"). All
calculations under this Term Note shall be made in accordance with GAAP, in a
consistent manner and consistent with the application of such principles in the
preparation of the Maker's financial statements.
3. The unpaid principal balance under this Term Note shall
bear interest at the rate of eight percent (8%) per annum commencing on the date
hereof through and including the Maturity Date hereof. Interest on the unpaid
principal balance hereof shall be paid quarterly beginning on the last day of
the third month following the end of the month in which Closing occurs and
continuing on the last day of each third month thereafter, until the principal
amount hereof is fully paid. No payment of interest may be deferred or accrued.
4. Notwithstanding Section 3 above, any payment of principal
and, to the extent permitted by law, interest, of or on this Term Note which is
not paid in full when due shall bear interest at a rate per annum of twelve
percent (12%) (the "Default Rate"), payable on demand.
5. Notwithstanding the other provisions of this Term Note to
the contrary, the entire principal amount, including Accruals, as well as all
interest and other amounts due hereunder, shall accelerate and become
immediately due and payable upon (a) the conveyance,
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transfer, sale or assignment of a substantial portion of the Maker's business or
assets, (b) the assumption by any person or entity of a substantial portion of
the Maker's liabilities or obligations, or (c) the transfer, sale or assignment
of more than fifty percent (50%) of the Maker's voting securities or equity
securities.
6. Maker shall give written notice to Payee immediately upon
the occurrence of an Event of Default (as hereinafter defined) or of any event
or occurrence which, with the passage of time or the giving of notice would
constitute an Event of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder:
(a) if any payment hereunder is not paid when due, whether
principal, interest or otherwise, or any other event of default, default, breach
or violation shall occur under this Term Note; or
(b) if any event of default, default, breach or violation
shall occur with respect to any obligation or liability of the maker or the
Surety to the Payee under the Surety Agreement of even date herewith.
(c) if the Maker becomes insolvent or makes an assignment
for the benefit of creditors, or if any petition is filed by or against the
Maker under any provision of any state or federal law or statute, including
without limitation, any provision of the Bankruptcy Reform Act of 1978, as
amended, alleging that the Maker is insolvent or unable to pay debts as they
mature which, in the case of an involuntary proceeding, shall continue for sixty
(60) days without being stayed, set aside or vacated;
(d) if (A) there shall be declared in writing a breach of
or a default under any other instrument, document or agreement respecting
borrowed money including without limitation the Loan and Security Agreement of
even date herewith between Maker and Congress Financial (and any amendment,
restatement, or refinancing thereof) or (B) the creditor thereunder shall cease
making additional loans and seek to enforce or exercise generally its remedies
with respect thereto against its collateral or otherwise; or
(e) if a judgment for the payment of money in excess of
$50,000 or judgments in the aggregate in excess of $100,000 shall be rendered
against Maker and the same shall remain undischarged for a period of 30 days
during which execution shall not be effectively stayed.
7. Upon the occurrence of an Event of Default, the outstanding
balance of this Term Note, including without limitation all Accruals, interest
and other sums due hereunder, shall be and become due and payable immediately
without presentment, protest, notice or demand to or upon Maker or any surety,
and Payee shall have such rights and remedies in respect of such sums as
provided by applicable law or in equity or under this Term Note. In the event of
any Event of Default, Payee may also recover from Maker all costs and other
expenses in
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connection therewith, together with reasonable attorneys' fees, together with
interest thereon and on any judgment obtained by Payee, at the Default Rate,
including interest at that rate from and after the date of any execution,
judicial or foreclosure sale until actual payment is made to Payee of the full
amount due Payee.
8. Payments hereunder shall be applied first to Accruals,
second to interest and other sums other than principal then due, third to
principal payments due but unpaid, and last to principal in the inverse order of
maturity. No prepayment of principal shall reduce the amounts of scheduled
installments or relieve Maker from the obligation of paying any scheduled
installment on each installment payment date, until the unpaid principal has
been paid in full.
9. Maker, all endorsers hereon and all sureties hereof,
jointly and severally, waive presentment, demand, notice of demand, protest,
notice of protest and notice of nonpayment or dishonor of this Term Note, and
all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Term Note. The granting, without
notice, of any extension of time for the payment of any sum due under this Term
Note or for the performance of any covenant, condition or agreement in
connection herewith, or the taking or release of security or other or additional
guaranties with respect thereto, shall in no way release or discharge the
liability of Maker or of any endorsers or any sureties. Maker and all endorsers
and sureties agree that additional makers, endorsers or sureties may become
parties hereto without notice to them or affecting their liability hereunder.
10. This Term Note shall be the joint and several obligation
of maker and all endorsers hereon and all sureties thereof and shall be binding
upon them and their successors and assigns. All of the rights and remedies given
to Payee hereunder and all rights and remedies arising under applicable law
shall be cumulative and concurrent, and may be pursued singly, successively, or
together at the sole discretion of Payee and may be exercised as often as
occasion therefor shall occur. The exercise by Payee of any of the rights and
remedies, to which Payee is entitled hereunder or under applicable law-shall not
constitute a waiver of any other remedy to which Payee may be so entitled. In
addition, the failure of Payee to exercise any right or remedy to which Payee is
entitled hereunder or under applicable law shall in no event be construed as a
waiver or release thereof.
11. Maker hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by Payee under the term of this Term
Note, as well as all benefit that might accrue to Maker by virtue of any present
or future laws exempting any property, real or personal, of Maker, or any part
of the proceeds arising from any sale of any such property, from attachment,
levy, or sale under execution, or providing for any stay of execution to be
issued on any judgment recovered on this Term Note or in any action to foreclose
on any collateral security, exemption from civil process, or extension of time
for payment; and Maker agrees that any real estate that may be levied upon
pursuant to a judgment obtained by virtue hereof, on any writ of execution
issued thereon, may be sold upon any such writ in whole or in part in any order
desired by Payee.
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12. THE MAKER AND THE PAYEE (BY ACCEPTANCE HEREOF) HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THE
MAKER OR THE PAYEE MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW, OR IN EQUITY,
IN CONNECTION, WITH THIS AGREEMENT OR THE TRANSACTIONS RELATED THERETO. THE
MAKER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE PAYEE HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PAYEE WILL NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. THE MAKER
ACKNOWLEDGES THAT THE PAYEE HAS BEEN INDUCED TO ACCEPT THIS AGREEMENT BY, AMONG
OTHER THINGS, THE PROVISIONS OF THIS SECTION.
13. THE MAKER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR
ATTORNEYS OR THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR ANY OTHER STATE UPON THE FAILURE OF THE MAKER TO
PAY WHEN DUE ANY SUM PAYABLE BY THE MAKER HEREUNDER TO APPEAR FOR AND CONFESS
JUDGMENT AGAINST THE MAKER FOR SUCH SUMS AS SHALL HAVE BECOME DUE UNDER THIS
AGREEMENT, IN EITHER CASE WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT,
WITHOUT STAY OF EXECUTION AND WITH THE GREATER OF FIVE PERCENT (5%) OF SUCH SUMS
OR $7,000 ADDED AS A REASONABLE ATTORNEY'S FEE FOR COLLECTION. THE MAKER HEREBY
WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON, VOLUNTARILY
CONDEMNS THE SAME, AUTHORIZES THE PROTHONOTARY OR CLERK TO ENTER UPON THE WRIT
OF EXECUTION SAID VOLUNTARY CONDEMNATION AND AGREES THAT SAID REAL ESTATE MAY BE
SOLD ON A WRIT OF EXECUTION; AND ALSO WAIVES AND RELEASES ALL RELIEF FROM ANY
AND ALL APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR
HEREAFTER ENACTED. THE MAKER ALSO HEREBY WAIVES ITS RIGHT TO OBJECT TO AND
RELEASES ALL PROCEDURAL ERRORS IN SUCH PROCEEDINGS. IF A COPY OF THIS AGREEMENT,
VERIFIED BY AFFIDAVIT OF THE PAYEE OR SOMEONE ON BEHALF OF THE PAYEE, SHALL HAVE
BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL
AGREEMENT AS A WARRANT OF ATTORNEY. SUCH AUTHORITY AND POWER TO APPEAR FOR AND
ENTER JUDGMENT AGAINST THE MAKER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF,
AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE
IS OCCASION THEREFOR.
14. All notices and deliveries in connection with this Term
Note shall be given by deposit in the United States mail, return receipt
requested, addressed as set forth on page one hereof, and shall be effective an
receipt by the addressee.
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15. If any provision of this Term Note is held to be invalid
or unenforceable by a court of competent jurisdiction, the other provisions of
this Term Note shall remain in full force and effect and shall be liberally
construed in favor of Payee in order to effect the provisions of this Term Note.
In addition, in no event shall the rate of interest payable under this Term Note
exceed the maximum rate of interest permitted to be charged by applicable law
(including choice of law rules) and any interest paid in excess of such
permitted rate shall be refunded to Maker. Such refund shall be made by
application of the excessive amount of interest paid against any sums
outstanding and shall be applied in such order as Payee may determine. If the
excessive amount of interest paid exceeds the sums outstanding the portion
exceeding the said sums outstanding shall be refunded in cash by Payee. Any such
crediting or refund shall not cure or waive any Event of Default by Maker
hereunder. Maker agrees, however, that in determining whether or not any
interest payable under this Term Note exceeds the highest rate permitted by law,
any non-principal payment including, without limitation, prepayment fees and
late charges, shall be deemed to the extent permitted by law, to be an expense,
fee, premium or penalty rather than interest.
16. Payee shall not be deemed, by any act of omission or
commission, to have waived any of its rights or remedies hereunder unless such
waiver is, in writing and signed by Payee, and then only to the extent
specifically set forth in the writing. A waiver on one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy to a
subsequent event.
17. This Term Note shall be governed by and construed in
accordance with the laws, including equitable principles but without regard to
principles of conflict of laws, of the Commonwealth of Pennsylvania, in all
respects.
MAKER REPRESENTS AND ACKNOWLEDGES THAT IT HAS REVIEWED ALL OF
THE PROVISIONS OF THIS TERM NOTE WITH AN ATTORNEY, INCLUDING WITHOUT LIMITATION
PARAGRAPHS 12 AND 13. THE MAKER UNDERSTANDS THAT THE PROVISIONS OF PARAGRAPHS 12
AND 13 INVOLVE THE WAIVER OF CERTAIN CONSTITUTIONAL RIGHTS, AND ACKNOWLEDGES
THAT THE MAKER HAS KNOWINGLY AND VOLUNTARILY WAIVED SUCH RIGHTS AFTER REVIEWING
THE PROVISIONS OF PARAGRAPHS 12 AND 13 WITH ITS ATTORNEY.
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IN WITNESS WHEREOF, the Maker, intending to be legally bound
hereby, has executed these presents the day and year first written above.
Attest: (SEAL) POLYCHEM CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Secretary Chairman, CEO & Treasurer
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