Essay And Ethical Worksheet
(Suggested Time - 1 1/2 hours)
Martin Financial Printers, Inc. (MFP) filed a Chapter 11 petition on January 2, 1992. MFP is a financial printing company and has been in the financial printing business for over eighty years. It is a privately held corporation whose stock is owned equally by four individuals - - Joan Mead, Tamar Venter, Joseph Gerten, and Arielle Zorne. Mead, Venter, Gerten, and Zorne also serve as the principal officers and as directors of MFP.
In December, 1987, MFP obtained a five year term loan of $5 million from FirstBank to provide working capital for the business. Under the terms of the loan, MFP was obligated to pay interest only on a quarterly basis at prime + 2 points and to repay the principal in December, 1992. MFP last paid interest on the loan on October 7, 1991. At the time the loan was made in 1987, the bank took a security interest in all of MFP's inventory and equipment, now owned and hereafter acquired. Unfortunately, through an oversight, the bank failed to file financing statements to perfect its interest until after it performed a troubled loan review in November of 1991. On November 18, 1991, the bank filed U.C.C. financing statements with the Secretary of State and in the county in which MFP was located (the proper places under the relevant state law).
In September of 1990, MFP borrowed $2 million from CPI Finance Co. The loan was provided on an unsecured basis but was guaranteed by Mead, Venter, Gerten and Zorne. Under the terms of the loan, MFP was required to pay 12% interest to CPI on the 15th day of each month and was required to repay $1 million of the principal on September 1, 1991, and the other $1 million of principal on September 1, 1992. However, CPI was entitled to demand repayment earlier if it deemed itself insecure.
Unfortunately, MFP was adversely affected by the recession and by the decline in financial printing business caused by the...
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