Bankruptcy Petition #: 07-50934-wsh Debtor Plasticon International, Inc.
Extract from Doc 23: Part 1
Transcription of Doc 23
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF KENTUCKY
LEXINGTON DIVISION
In Re:
Case No. 07-50934
Judge William S. Howard
Chapter 11
PLASTICON INTERNATIONAL, INC.,
Debtor. )
OBJECTION TO MOTION FOR JOINT ADMINISTRATION AND PROCEDURAL CONSOLIDATION
The John P. Murphy, III Revocable Trust No. 1; Pro Plas, LLC, a Missouri limited liability company; 10315, LLC, a Missouri liability company; and John P. Murphy, III (collectively "Creditors") file this their Objection to Debtor’s Motion for Joint Administration and Procedural Consolidation in the above-entitled and numbered cause and in support thereof respectfully state the following:
1. Creditors admit the allegations in paragraph 1 of Debtor’s Motion for Joint Administration and Procedural Consolidation (“Debtor’s Consolidation Motion”).
2. Creditors admit the allegations in paragraph 2 of Debtor’s Consolidation Motion.
3. Creditors admit the allegations in paragraph 3 of Debtor’s Consolidation Motion.
4. Creditors admit the allegations in paragraph 4 of Debtor’s Consolidation Motion.
5. Creditors admit the allegations in paragraph 5 of Debtor’s Consolidation Motion.
6. Creditors admit the allegations in paragraph 6 of Debtor’s Consolidation Motion that the stock of Debtor Pro Mold is wholly owned by Debtor Plasticon but deny that Debtor Plasticon holds the voting rights.
7. a. Creditors deny the allegations in sentence 1 of paragraph 7 of Debtor’s Consolidation Motion. Debtor Pro Mold has claims and causes of action against Debtor Plasticon.
b. Creditors deny the allegations in sentence 2 of paragraph 7 of Debtor’s Consolidation Motion because it is an incomplete and inaccurate summary of the transaction.
c. Creditors deny the allegations in sentence 3 of paragraph 7 of Debtor’s Consolidation Motion for the reasons recited below.
d. Creditors deny the allegations in sentence 4 of paragraph 7 of Debtor’s Consolidation Motion for the reasons recited below.
e. Creditors deny the allegations in sentence 5 of paragraph 7 of Debtor’s Consolidation Motion for the reasons recited below.
8. Creditors deny the allegations in paragraph 8 of Debtor’s Consolidation Motion. Debtor Pro Mold has claims and causes of action against Debtor Plasticon.
FACTS
9. On June 14, 2005, Plasticon approached Pro Mold and offered to purchase Pro Mold.
10. On July 14, 2005, a Deal Points Memorandum was executed.
11. On or about December 6, 2005, the following parties executed a Share and Asset
Purchase Agreement (“Agreement”):
a. Plasticon International, Inc., a Wyoming corporation (“Plasticon”);
b. Pro Mold, Inc., a Missouri corporation (“Pro Mold”);
c. The John P. Murphy III Revocable Trust No. 1 (“Trust”); and
d. The 10315 LLC, a Missouri Limited Liability Company (“LLC”).
12. The Trust was the owner of 1,000 shares of common stock of Pro Mold which represented all of the issued and outstanding shares of Pro Mold (“Pro Mold Shares”).
13. The LLC was the owner of certain assets used by Pro Mold in the operation of its’ business (“LLC Assets”).
14. Plasticon agreed to purchase on or before December 30, 2005, the Pro Mold shares and the LLC Assets.
15. The purchase price for the acquisition of the Pro Mold Shares and the LLC Assets was $3,500,000 and was to be paid in the following manner:
a. $2,500,000 payable to the Trust and LLC on December 20, 2005.
b. $1,000,000 payable to the Trust in the form of a Promissory Note (“$1,000,000 Note”) payable in equal monthly installments over a five year period beginning April 1, 2006 with an interest rate of five (5) percent per annum.
c. Plasticon and Pro Mold also executed and delivered to the Trust a Security Agreement and granted the Trust a security interest in the machinery and equipment of Pro Mold subject only to the prior security interest of Regions Bank not to exceed $400,000.
16. The purchase price was allocated in the following manner:
a. Pro Mold Shares $3,435,000
b. LLC Assets $ 65,000
17. The Agreement also contained “Additional Terms and Conditions” in Section 5.
18. Plasticon was to cause Regions Bank to release John P. Murphy III (“Murphy”) from his personal guaranty on the Pro Mold Line of Credit with Regions Bank and to deliver the release and personal guaranty to Murphy at Closing (“Murphy Line of Credit Guaranty”).
19. Plasticon was to undertake all reasonable efforts to release Murphy as the personal guarantor of the Pro Mold Equipment/Machinery Loan at Regions Bank on or before December 18, 2005 and was to attempt to refinance the Equipment/Machinery Loan prior to Closing (“Murphy Equipment/Machinery Loan Guaranty”) and if Plasticon was not successful prior to Closing:
a. Plasticon and Pro Mold agreed to indemnify and hold Murphy harmless in connection with the Regions Bank debt.
b. Plasticon and Pro Mold agreed to secure the indemnity obligation and to execute and deliver to Murphy a security interest in all of Pro Mold’s machinery and equipment subject only to the prior lien of Regions Bank not to exceed $400,000.
c. If Plasticon failed to deliver the release of the Murphy Equipment/Machinery Guaranty on or before December 18, 2008, Plasticon would be deemed to be in default and Murphy had the right to exercise his rights and remedies under the Security Agreement.
20. A $25,000 Transaction Non-Refundable Cancellation Fee was paid.
21. Plasticon was to deliver $2,085,000 to the Escrow Agent it selected, Carmine J. Bua, III (“Escrow Agent Bua”), of San Diego, California on or before December 20, 2005 and closing was to occur on or before December 30, 2005.
22. Plasticion did not deliver $2,085,000 to Escrow Agent Bua on or before December 20, 2005.
23. Plasticon did deliver $1,000,000 directly to the Trust.
24. Closing did not occur on or before December 30, 2005.
25. Pro Mold notified Plasticon that Plasticon had defaulted under the terms of the Agreement but agreed to forebear from taking action until January 2006 provided certain conditions were satisfied.
26. On January 1, 2006, even though closing had not occurred, Pro Mold operated in a manner consistent with the policies and guidelines of Plasticon as if closing had occurred.
27. At the Concrete Show in January 2006, Bill Howe approached Murphy and explained that he would sell Plasticon stock and raise sufficient cash for Plasticon to perform pursuant to the Agreement.
28. Plasticon was unable to make the monthly payments beginning on April 1, 2006 and on March 30, 2006 the Trust agreed to accept Plasticon stock in lieu of the first principal payment due on April 1, 2006 on the $1,000,000 Note.
29. On or about April 30, 2006, Plasticon, Pro Mold, the Trust and the LLC executed a First Amendment to Share and Asset Purchase Agreement.
30. On June 1, 2006 Plasticon paid Regions Bank and Regions Bank released Murphy from his personal guaranty on the Pro Mold Line of Credit.
31. After July 11, 2006 Plasticon, Pro Mold, the Trust and the LLC executed a Restatement and Amendment of First Amendment to Share and Asset Purchase Agreement (“Third Agreement”) and stated that closing did not occur on December 30, 2005 due to no fault of Pro Mold, the Trust or LLC.
32. In addition, the parties stated that they desired to execute the Third Agreement to correctly reflect the intent and oral agreement of the parties as to the closing date of the Agreement.
33. The Third Agreement stated that paragraph 2.1.2 of the Agreement was amended and
the $1,000,000 Note would be payable as follows:
“Beginning April 1, 2006 and continuing on the first day of each month thereafter, forty eight (48) successive payment of interest shall be paid on the unpaid principal balance at the rate of 6.5% per annum. In lieu of the first principal payment of $125,000.00 on October 1, 2006, PLNI (Plasticon) shall immediately grant to JPM (Murphy) 22,321,143 shares of PLNI’s (Plasticon’s) common stock, which is equal to $125,000 based upon the price per share as of March 30, 2006, subject to the normal CEO restrictions. Commencing on April 1, 2007 and continuing on the first day of every six months thereafter, PLNI (Plasticon) shall pay to the Trust principal payments of $125,000 each, until the Note has been paid in full.”
34. Plasticon failed to undertake all reasonable efforts to release Murphy as the personal guarantor of the Pro Mold Equipment/Machinery Loan on or before December 18, 2005 and to attempt to refinance the Equipment/Machinery Loan prior to Closing. (“Murphy Equipment/Machinery Loan Guaranty”)
35. The Third Agreement addressed these failures by Plasticon by stating that paragraph 5.5 of the Agreement was amended and replaced by the following:
Release of JPM (Murphy) Personal Guaranty: The original certificate representing the 1,000 PMI (Pro Mold) Shares registered in the name of the Trust and an original assignment of the PMI (Pro Mold) Shares executed by the Trust and an original Bill of Sale executed by the LLC shall be released to Escrow Agent upon satisfaction or waiver of all the Escrow conditions (“Escrow Conditions”) set forth in paragraph 6.5, and a new certificate representing the 1,000 PMI (Pro Mold) Shares registered in the name of PLNI (Plasticon) and an original Stock Pledge Agreement executed by PLNI (Plasticon) and Irrevocable Stock Power executed by PLNI (Plasticon) shall be released to Riezman Berger, P.C. upon satisfaction or waiver of all the Escrow Conditions…
36. The Third Agreement also states that paragraph 6.1 of the Agreement is amended and replaced by the following:
Transaction Closng: The closing of the transactions as contemplated by this Agreement shall be deemed to be as of December 31, 2005.
37. The Third Agreement also states that paragraph 6.5.3 of the Agreement is amended to state:
Delivery of PMI (Pro Mold) Shares: … Upon satisfaction or waiver of all Escrow Conditions, Escrow Agent shall deliver to Riezman Berger, P.C. a new certificate registered in the name of PLNI (Plasticon) representing the PMI (Pro Mold) Shares, together with a Stock Pledge Agreement and Irrevocable Stock Power both executed by PLNI (Plasticon) to the Trust. |
