Exhibit 10.17c
SUBORDINATED PROMISSORY NOTE
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$25,000
February 11, 1997
DISCAS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to MANTIS V, L.L.C. having an address at 250
Park Avenue, New York, New York, or permitted assigns (the "Payee" or "Holder")
the principal amount of Twenty-Five Thousand Dollars ($25,000) and accrued
interest thereon as hereinafter provided.
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
Interest on the unpaid portion of said principal amount from time to
time outstanding shall be paid by the Company at the rate of eight percent (8%)
per annum (the "Stated Interest Rate"), said interest payable to the Payee
quarterly commencing March 31, 1997 and for each of the five consecutive
calendar quarters thereafter, followed by the payment in full of principal and
interest, with the final maturity of this Note on July 31, 1998.
Assuming no prepayments by the Company pursuant to Section 5 hereof,
the first interest installment shall be $263.01 due for the period ending March
31, 1997, followed by five quarterly interest payments of $500 each, and the
last payment on July 31, 1998 of all remaining principal and interest (each
payment date hereinafter a "Payment Date" or collectively the "Payment Dates");
provided however, if the Company receives long term capital in the form of
equity or long term debt (other than from the Bank, as hereinafter defined) in
an amount (or series of amounts) which equals or exceeds $2,500,000, then this
Note shall become immediately due and payable. If any installment of principal
or interest on this Note is not paid within ten (10) days of the applicable
Payment Date, all amounts remaining owing under this Note shall bear interest
at the rate of 15%, to the extent that payment of such interest on overdue
amounts is enforceable under applicable law, until all such arrearages have
been cured by the Company. The Company will pay or cause to be paid all sums
becoming due hereon for principal and interest by check sent to the Holder's
above address or to such other address as Holder may designate for such purpose
from time to time by written notice to the Company, without any requirement for
the presentation of this Note or making any notation thereon except that the
Holder hereof agrees to endorse hereon
the amount of principal paid hereon and the last date to which interest has
been paid hereon and to notify the Company of the name and address of any
transferee.
2. COVENANTS OF THE COMPANY.
The Company covenants and agrees with Holder that so long as any part
of the principal amount of this Note or any accrued interest thereon shall
remain unpaid, the Company will not, without the express prior written consent
of the Holder: (i) sell all or substantially all of its assets, (ii) liquidate
or dissolve, or (iii) pay any dividends or make any distributions on the common
stock of the Company (other than dividends or distributions payable solely in
additional shares of the common stock of the Company).
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
(a) a default in the payment of the principal or interest on this
Note, when and as the same shall become due and payable, either by the terms
hereof or upon acceleration or otherwise and said default continues uncured for
a period of twenty (20) business days following written notice thereof to the
Company by the Holder; provided, that Holder shall not be required to give
written notice of such payment default more than three (3) times during the
term of this Note in order to create an Event of Default; or
(b) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or a default which is elsewhere
herein specifically dealt with as Event of Default), and continuance of such
default or breach uncured for a period of thirty (30) days following written
notice thereof to the Company by the Holder, unless such breach or default is
of a nature such that it cannot reasonably be cured within such thirty day
period, so long as the Company has commenced a cure of such breach or default
within such thirty day period and continues to diligently pursue such cure to
completion; or
(c) The entry of a decree or order by a court having jurisdiction
adjudging the Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its affairs, and
the continuance of any such
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decree or order unstated and in effect for a period of ninety (90) days; or the
commencement by the Company of a voluntary case under federal bankruptcy law,
as now or hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency, or other similar law, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief under
federal bankruptcy law or any other applicable Federal or state law, or the
consent by it to the filing of such petition or the appointment of a receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Company
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
(d) A Senior Default (as hereinafter defined) has occurred and the
Bank as hereinafter defined) has accelerated the Senior Debt (as hereinafter
defined).
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. Upon each occurrence of an Event of Default and at
any time during the continuation thereof (unless the principal of this Note
shall already have become and be due and payable), the Holder, by notice in
writing given to the Company, may declare the principal of the Note then
outstanding to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, anything herein
contained to the contrary notwithstanding, provided further, that upon the
occurrence of any event of default under Section 3(c) hereof, such acceleration
shall occur automatically without any action on the part of Holder.
4.2 Proceedings and Actions. During the continuation of any one or
more Events of Default, the Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims, plus reasonable expenses of collection,
including attorneys' fees.
5. PREPAYMENT.
Subject to the provisions of Section 6, this Note may be prepaid in
whole or in part at any time upon five (5) days' notice at the option of the
Company, provided that such prepayment is accompanied by accrued interest to
the prepayment date. In the case of partial prepayment, the amount and other
details thereof shall be noted on this Note. Upon giving notice of prepayment,
the maturity date of that portion of the principal proposed to be prepaid shall
be deemed to be the
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prepayment date specified in the notice, and it shall be an Event of Default
under Section 3 (and without need for any notice of default from Holder) if
payment is not in fact made on or before such date.
6. SUBORDINATION.
Notwithstanding anything to the contrary set forth herein, any other
documents between the Holder and the Company, or under applicable law, all of
the Company's obligations and liabilities (including, without limitation,
principal, interest and any costs and fees) under this Note (the "Subordinated
Debt") are and shall be subject and subordinate to the Senior Debt. "Senior
Debt" means collectively any loans, accommodations, or extensions of credit now
or hereafter made, granted or extended by Bank of Boston Connecticut, its
affiliates or successors (the "Bank") or which the Bank is or will become
obligated to make, grant or extend to or for the account of Company and/or its
affiliate, Discas Recycled Products Corporation (collectively, "Borrowers"),
including principal of, and interest (including interest subsequent to the
commencement of a Bankruptcy Proceeding (as hereinafter defined), whether or
not payable and also including capitalized interest and default interest) on
any such loans, accommodations, or extensions of credit, and all other
indebtedness, obligations and liabilities of either Borrower to the Bank,
including, without limitation, reimbursement obligations, indemnities, fees,
costs of collection (including, without limitation, attorneys' fees) and other
expenses or amounts payable under or with respect to any agreement between the
Bank and either or both Borrowers.
Unless and until all Senior Debt shall have been indefeasibly paid in
full or cash equivalents, the Holder shall not receive, nor permit, directly or
indirectly, by redemption, purchase, or in any other manner, any payment for or
in respect of the Subordinated Debt; provided, however, that the Holder shall
be entitled to receive quarterly interest payments (but not principal payments,
including, without limitation, prepayments) in accordance with the terms of
this Note so long as no default or state of facts which by the passage of time,
the giving of notice, or both, would constitute a default (such occurrence or
circumstance being a "Senior Default"), has occurred and is continuing under
the Senior Loan Documents or would result from such interest payment. "Senior
Loan Documents" means collectively each and every document, instrument,
financing statement or agreement now or hereafter executed, delivered and, if
appropriate, filed, in connection with the Senior Debt, together with any
extensions, renewals and amendments thereof.
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In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property, assets or business of any Borrower, or the proceeds
thereof, to any creditor or creditors of any Borrower or upon any indebtedness
of any Borrower, by reason of any sale, liquidation, dissolution or other
winding up of such Borrower or its business or by reason of any Bankruptcy
Proceeding, then and in any such event, any payment or distribution of any kind
or character, whether in cash, property or securities which, but for the
subordination provisions set forth herein would otherwise be payable or
deliverable upon or in respect of Subordinated Debt shall instead be paid over
or delivered to the Bank on account of the Senior Debt, until all Senior Debt
shall have been indefeasibly paid in full, for application on account of the
Senior Debt before the Holder shall be entitled to receive any such payment or
distribution or any benefit therefrom. "Bankruptcy Proceeding" means any
receivership, insolvency or bankruptcy proceedings or assignment for the
benefit of creditors or any proceeding by or against any Borrower for any
relief under any bankruptcy, reorganization or insolvency law, or any other law
relating to the relief of debtors, readjustment of indebtedness,
reorganization, composition or extension.
The Holder hereby irrevocably authorizes and empowers (without
imposing any obligation on) the Bank, after the occurrence of a Senior Default
or after the commencement of any Bankruptcy Proceeding, to collect and receive
every such payment or distribution described in this Section 6 and give
acquittance therefor and to take all such other action (including, without
limitation, making all necessary endorsements of the Holder in respect of the
Subordinated Debt), in its name or the name of the Holder or otherwise, as the
Bank may deem necessary or advisable for the enforcement of the subordination
provisions set forth in this Section 6. Under such circumstances, the Holder
shall duly and promptly take such action as may be requested at any time and
from time to time by the Bank (but at no cost to the Holder) to collect the
Subordinated Debt and to file appropriate proofs of claim in respect thereof
and to execute and deliver such powers of attorney, assignments or other
instruments as may be requested by the Bank, to enable it to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt.
Should any payment or distribution or security, or the proceeds of any
thereof, be collected or received by the Holder in respect of the Subordinated
Debt prior to the indefeasible payment in full of the Senior Debt, the Holder
will forthwith deliver the same to the Bank for the account of the Senior Debt
in precisely the form received (except for the endorsement or the assignment of
such by the Holder where necessary) and, until so delivered, the same shall be
held in trust by Holder as the property of the Bank.
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Any present or future liens securing payment of the Subordinated Debt
shall at all times be and remain subordinate, junior and subject to the liens
securing Senior Debt, regardless of the order or time as of which any such
liens attach to any or all of the collateral therefor, the order or time of
Uniform Commercial Code or any other filings or recordings, the order or time
of granting of any liens or the physical possession of any of such collateral.
The Holder acknowledges that the Bank possesses a first priority lien on all of
the tangible and intangible real and personal properties of the Borrowers. The
Bank shall not be required to marshall any assets.
The terms of subordination set forth in this Section 6 shall not be
affected by (a) any failure to receive any and all notices of renewal,
extension or accrual of the Senior Debt; (b) the fact that any demand for
payment of any Senior Debt may be rescinded in whole or in part and any Senior
Debt may be extended, modified, accelerated, compromised, sold, waived or
released; (c) the fact that any Senior Loan Document may be amended, modified,
supplemented or terminated in whole or in part, any credit facilities increased
or decreased, and any collateral security at any time held by the Bank may be
sold, exchanged, waived, surrendered or released, in each case all without
notice to or further assent by any the Holder; (d) the fact that the Bank may
exercise or refrain from exercising any right, remedy or power granted by the
Bank Documents or at law, in equity or otherwise; (e) the fact that any and all
collateral security and/or liens for the Senior Debt, and any rights or
remedies of the Bank may, from time to time, in whole or in part, be exchanged,
sold, surrendered, released, modified, waived or extended; and (f) the fact
that any balance or balances of either Borrower's funds with the Bank may, from
time to time, in whole or in part, be surrendered or released.
The foregoing subordination provisions shall apply regardless of the
legality, validity or enforceability of the Senior Debt or any Senior Loan
Document or the legality, validity, perfection or enforceability of the liens
securing such indebtedness. To the extent that the Bank receives payments on,
or proceeds of collateral for, the Senior Debt which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under the U.S.
Bankruptcy Code or any other applicable law, then, to the extent of such
payment or proceeds received, the indebtedness intended to be satisfied shall
be revived and continue in full force and effect as if such payments or
proceeds have not been received by the Bank.
7. ENFORCEMENT ACTIONS.
The Holder shall notify the Bank (at an address from time to time
furnished by the Bank) in writing, which notice shall be effective upon
receipt, (a) of the occurrence of any default in the Company's obligations
hereunder (in which case the Bank shall have a reasonable opportunity, but
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not the obligation, to cure such default), and (b) at least ten (10) business
days before the Holder engages in any Enforcement. So long as no Senior Default
has occurred, the Holder shall be entitled to commence and prosecute an
Enforcement; provided that (a) such Enforcement arises out of the Company's
failure to pay an installment of interest and principal hereunder when due; and
(b) the Holder shall suspend, for 120 days, any Enforcement after the
occurrence of any Senior Default; provided further that the Holder will suspend
any Enforcement for an additional 365 days, if during or after such initial 120
day period, the Bank exercises its rights under any Senior Loan Document or
applicable law to effect collection of the Senior Debt and diligently pursues
such action. The foregoing restriction on Enforcement shall not preclude the
filing of a proof of claim and other documents necessary to establish a claim
in a Bankruptcy Proceeding.
"Enforcement" means the Holder's exercise of any of its rights and
remedies hereunder or any other agreements with the Company, at law or in
equity, for whatever purpose, including acceleration of the indebtedness
evidenced by this Note or declaration of an Event of Default, attachment or
foreclosure of a lien and seeking the appointment of a receiver, trustee or
other person for a Bankruptcy Proceeding.
8. THIRD PARTY BENEFICIARY.
Sections 6 and 7 shall be enforceable by the Bank as a third party
beneficiary and shall be effective and may not be terminated or otherwise
revoked until after the Senior Debt has been fully and indefeasibly paid and
the Bank has no further obligation to extend credit to the Company. Section 6
and 7 shall be binding on the Holder and any other person or entity from time
to time holding any Subordinated Debt and their respective successors and
assigns. The Holder acknowledges that the Bank is relying on Sections 6 and 7
in consenting to the Company incurring the indebtedness evidenced by this Note.
Any provision of Sections 6 and/or 7 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction. The Holder shall
execute and deliver such further documents and to do such other acts and things
as the Bank may reasonably request in order fully to effect the purpose of
Sections 6 and 7.
9. MISCELLANEOUS.
9.1 Notices. All communications provided hereunder shall be in writing
and, if to the Company, delivered or mailed by registered or certified mail
addressed to Discas, Inc., 567-1 S.
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Leonard Street Waterbury, Connecticut, 06708, Attention: Patrick A. DePaolo,
Sr., President, or if to the Holder at the address shown for the Holder at the
beginning of this Note.
9.2 Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Connecticut, without giving effect to
conflict of laws principles.
9.3 Waivers. The Company hereby waives presentment, demand, protest,
notice of protest, dishonor and any other notice or action otherwise required
to be taken or given in connection with the enforcement of this Note by Holder.
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[signature page, Discas, Inc./Mantis V, L.L.C. $25,000 Note]
IN WITNESS WHEREOF, Discas, Inc. has caused this Note to be executed
in its corporate name by its Chief Executive Officer and to be dated the day
and year first above written.
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
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Patrick A. DePaolo, Sr., President
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