Hong Yuan Holding Group (HGYN)

[Renee]

12Yearplan: It appears that Cereplast can obtain money from other convertible debenture lenders (cash for CERP shares) but all outstanding notes payable to Magna / Hanover would need to be paid off assuming any new lender wanted to be "senior in right of payment". No new lender would want to be subordinate to the Magna / Hanover notes, particularly with the ongoing lawsuit by Cereplast against Magna.

So, Cereplast needs to borrow enough money to remedy the default to Horizon (secured loan for all of Cereplast's assets) and to pay off any balances to Magna / Hanover if the company obtains a new lender.

Exhibit 10:1 Page 8: (d) Additional Indebtedness . As long as the Notes shall remain outstanding and until such time as the Notes issued by the Company pursuant to that certain Venture Loan and Security Agreement dated as of December 21, 2010 (as the same has been amended, supplemented or otherwise modified from time to time) between the Company and Horizon have been repaid, unless the Holder shall have otherwise given prior written consent, the Company shall not, and shall not directly or indirectly create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, which shall be senior in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise.

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=8871936-10683-48072&type=sect&TabIndex=2&companyid=671627&ppu=%252fdefault.aspx%253fcik%253d1324759