THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
FORM 10-KSB - DECEMBER 31, 1996
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. For the fiscal
year ended December 31, 1996.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Commission File No. 0-27994
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THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3203301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
186 N. INDUSTRIAL DRIVE
LAKE HELEN, FL 32744-0280
904-228-1000
(Address and telephone number
of principal executive offices)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common stock,
no par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days:
_X_ Yes ___ No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by referenced in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The registrant's revenues for its most recent fiscal year, ended December 31,
1996 were $3,332,612.
The aggregate market value of the registrant's voting stock held by
non-affiliates, computed by reference to the last sale price per share as of
February 28, 1997 was $4,606,636.
There were 4,114,000 shares of the registrant's Common Stock outstanding as of
March 14, 1997.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of the registrant for the
registrant's Annual Meeting of the Shareholders for the fiscal year ended
December 31, 1996, which definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the
registrant's fiscal year end of December 31, 1996 are incorporated by reference
into Part III.
Transitional Small Business Disclosure Format (check one): ___ Yes _X_ No
INDEX
Page
PART I
Item 1. Business...........................................................3
Item 2. Properties.........................................................8
Item 3. Legal Proceedings..................................................8
Item 4. Submission of Matters to a Vote of Security Holders................9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters..........9
Item 6. Management's Discussion and Analysis or Plan of Operations........11
Item 7. Financial Statements..............................................14
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures...................................32
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act s.........32
Item 10. Executive Compensation.............................................32
Item 11. Security Ownership of Certain Beneficial Owners and Management.....32
Item 12. Certain Relationships and Related Transactions.....................32
Item 13. Exhibits and Reports on Form 8-K, Index............................33
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PART I
ITEM 1. BUSINESS
GENERAL
The Company specializes in publishing free membership directories
for bar associations nationwide. The Company relies upon the sale of
advertising to generate its principal revenues.
The Company's principal product is the printed publication of city and
county bar association directories throughout the continental United States.
Most bar association directories contain a complete listing of member attorneys
along with their firm names, addresses, telephone numbers and fax numbers. They
often also contain court information and specialized local information which
attorneys may require during their course of business.
The Company publishes the majority of it's directories "in-house" . In
most cases, the Company assumes all costs of publication, including design,
layout, printing and binding of its directories.
The Company is a Florida corporation which was organized in September
1993. Since inception, the number of print directories published by the Company
and its predecessor have increased from one directory in 1993, 16 directories
in 1994, 33 directories in 1995 to 46 directories in 1996. The Company's senior
management has approximately 20 years of combined experience in publishing
print specialty directories. This experience, the high quality of the free
print directories published by the Company and the Company's commitment to
client service have contributed to the Company's pattern of growth.
In December 1995, the Company became the publisher of the directory for
the National Association of Bar Executives ("NABE") which is affiliated with the
American Bar Association. NABE consists of executives from many leading bar
associations at the state, county and local levels. NABE members include bar
executives nationwide including the bar associations for Atlanta, Boston,
Chicago, Dallas, Denver, Detroit, the District of Columbia, Houston, Los
Angeles, New Orleans, New York, Philadelphia, San Francisco and St. Louis. As
the publisher of the NABE directory, the Company believes that it has an
important competitive advantage in the marketing of bar directories to
NABE members.
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PRINT DIRECTORIES
Industry Overview
The market for specialty publishing is rapidly growing due in part to
the ever increasing need of businesses for specialized information. According to
an industry source, 221 companies produced 300 databases worldwide in 1979; in
1993, a total of 2,221 companies produced 5,210 databases. As a result of this
need for information, many publishers have oriented their business toward
specialty publishing.
The specialty publishing market is diverse, consisting of trade
journals, newsletters, directories and magazines aimed at specific target
markets such as computer users, sports fans, women or men, gun collectors, etc.
Print directories, including association directories and yellow page
directories, are just one part of the specialty publishing market. Advertisers
are increasingly seeking ways to channel their advertising dollars toward
specific target markets. Specialty publications, including the Company's bar
association directories, offer advertisers the opportunity to advertise their
products and services to these select markets.
Legal Specialty Market
Bar directories have long been an important segment of the legal
publishing industry. Legal directories are often used by attorneys and their
staffs. Nationwide legal directories, such as the Martindale-Hubbell Law
Directory ("Martindale-Hubbell"), can assist in searching for attorneys
nationwide with specific credentials and expertise.
The majority of attorneys work for smaller law firms or government
agencies which generally lack the substantial support staffs typically found in
large law firms and corporations. These attorneys may rely on the information
contained in their bar association directories. In the course of their
profession, lawyers are required to frequently communicate with other lawyers.
Therefore, bar directories meet a need of attorneys. From a lawyer's
perspective, a bar directory contains a convenient listing of names, addresses
and telephone numbers and often, facsimile numbers of co-counsel, opposing
counsel, local courts and judges. Since a bar association directory is often
used, the advertising contained in those directories is intended to reach its
targeted audience on a regular basis.
THE COMPANY'S BAR DIRECTORIES
The Company provides directories to individual bar associations
nationwide which distribute the directories to member attorneys. The Company
derives its principal revenues from the sale of yellow page advertising located
after the listing of association members. Advertisers are usually local
merchants marketing their goods and services to lawyers in the communities
served by the bar association. Participating advertisers include title
companies, court reporters, accountants, and office supply companies.
Additionally, the Company markets to many attorneys the option of having their
own specialty listings in their local directory. These listings are contained in
bar directories published by the Company and provide a convenient source of
referrals for attorneys who need assistance in a given area of the law for their
clients.
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The Company targets bar associations with enough members within a
localized area so that the potential advertising revenue is expected to exceed
direct and indirect publishing costs. In order to do so, the Company researches
the demographics of each bar association and the local community. The Company's
target market consists of all bar associations with approximately 300 or more
members although it has published directories for smaller bar associations. In
targeting bar associations, the Company uses area demographics including the
local yellow pages and other local publications to determine if the number of
potential advertisers which meet its criteria exist in the community.
The Company is concentrating its efforts on obtaining multiyear
contracts to publish additional bar directories. Once it targets a bar
association for publication of its directory, the Company uses referrals from
other clients to assist in obtaining an agreement to publish that directory. As
the Company has expanded its operations, management has developed business
relationships with bar association executives throughout the country. In
addition, the Company uses its published bar directories and letters from
satisfied bar associations as marketing tools to show prospective new clients.
Publication of Directories
The Company publishes bar directories at no cost to most bar
associations. The Company's no-cost approach means that it will publish a
directory, assuming all production costs including design, advertising layout,
printing and binding. In this fashion, the financial risk is transferred from
the association to the Company.
The publication of bar directories by the Company involves a number of
stages. First the Company must obtain a contract to publish a directory from a
bar association as described above. Once an agreement to publish is reached, the
Company's in-house sales staff solicits advertisements from local businesses
which provide goods and services to attorneys in the bar association's
community. At the same time, the Company markets specialty listings to bar
association members which generates additional revenues. A draft of all
advertisements for the directory is submitted to the bar association which can
reject any advertisements which do not meet its standards. In most directories,
the Company has not experienced a rejection of a proposed advertisement.
As part of the publication process, the association provides the
Company with a complete database of membership information and other general
information, such as court listings, which the association wants to include in
the directory. Many of the directories published by the Company are pictorial.
In these instances, the Company assists the association in arranging for
photographs of its members using unaffiliated photographers. Most graphics for
the directory are prepared by the Company's staff of graphic artists. Once all
of the graphics are completed including advertising, the Company produces a
draft of the directory, obtains approval from the bar association, and then
arranges for printing and binding of the directory by an independent commercial
printer. After printing and binding, the directories are shipped by the Company
to the bar association which distributes them to its members.
Clients
Through December 31, 1996, the Company has published 95 directories,
all but a few of which have been for city, county, or area bar associations.
During 1996 the Company increased its presence in the city and county
bar association markets and entered the state markets with the
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publication of the New Hampshire Bar Association directory and the
signing of agreements to publish directories for the Tennessee Bar
Association, the North Carolina Bar Association, the Idaho State
Bar, and the West Virginia State Bar. As the Company has grown,
it believes that its emerging national presence has given it
the credibility to permit it to market its products and
services to other state bar associations.
Alternative Publishing Method
In addition to turnkey publishing, bar associations can publish
directories themselves. By self-publishing, the bar association staff compiles
the information to be included, negotiates with printers and photographers and
distributes the directories. Under this method, the association pays all costs.
The association can attempt to recoup these costs from either the sale of
advertisements or the sale of directories to its members.
NEWSLETTER PROGRAM
In December 1995, the Company began publishing the Atlanta Lawyer, the
monthly newsletter for the Atlanta Bar Association. The Company provides this
newsletter to all Atlanta Bar members at no cost. The Company derives its
revenues from the sale of advertising contained in the newsletter. The content
of the newsletter is provided to the Company by the Atlanta Bar Association and
the advertising is solicited by the Company. While the Company still publishes
the Atlanta Bar Association's newsletter on a monthly basis, the Company has
declined other opportunities to publish such newsletters as the Company believes
that its efforts are best focused on directory advertising sales.
Internet Program
In 1996, the Company expanded its business to include free electronic
publishing on the Internet for certain bar association clients. The Company
planned to sell advertising on each bar's web site. After pursuing
advertising for these various web sites, the Company decided to cease
this activity after determining that the return on its resources was much
better for print directories advertising. However, the Company plans to
market low cost Internet advertising as an add-on sale to its existing print
directory advertisers in the near future. By doing so, the Company intends to
post all Internet advertising to a single newly created web site, thus
eliminating the need to contract with the bar associations and maintain
an Internet web site for each.
SALES AND ADVERTISING
Revenues generated from the sale of advertising enable the Company to
provide its publications free of charge to bar associations. The Company
maintains two separate sales offices (Lake Helen, FL and Orlando, FL), each
operated by account executives who specialize in selling advertisements by
telephone to businesses which supply support services and products to the legal
profession as well as to the general public. The Company believes that through
its in-house sales team of approximately 74 full-time account executives, it is
better able to maintain quality control and establish a reputation for
professionalism. The Company's management supervises the sales staff
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in order to ensure that it is acting in an ethical and professional manner and
clearly communicates that the Company is independent of the bar associations.
All new account executives go through a structured 60-day training program.
The Company's account executives are taught not merely how to sell
advertising but also about the Company and its goals. In accordance with
the Company's structured goal-oriented philosophy, each account executive
works with the sales manager and each month prepares a goal sheet detailing
realistic monthly and daily sales goals.
All agreements with bar associations provide that each association has
the right to reject any advertising that is not consistent with its guidelines.
Advertising is contained in a section entitled "Attorney Support Services" and
follows a "yellow page" format in print directories and newsletters.
Advertising sales are assisted by a letter of introduction from the bar
association noting that the Company is publishing the directory and stating how
many attorneys and judges will receive the directory. Like other forms of print
advertising including newspaper and yellow pages, the Company offers a variety
of possible advertisements including inside front cover pages, full and partial
pages, business card listings, and simple classified line listings. The Company
requires a 50% deposit upon approval by the advertiser of a proof and the
balance is payable upon publication. A 10% discount is offered in exchange for
full payment upon approval of a proof.
The Company markets its sale of specialty listings by direct mail and
advertising in bar newsletters. It does not engage in telephone solicitation of
attorneys.
PRINTING
The Company is not engaged in the printing of its bar directories and
newsletters but subcontracts this work to independent printing companies. The
Company believes that there is an ample supply of independent printers willing
to perform quality printing services for the Company and that it will not be
materially adversely affected by subcontracting its printing services. In doing
so, the Company believes that it avoids the need to invest substantial sums of
capital in printing and binding equipment and has more flexibility to meet its
clients' specialized needs.
BACKLOG
The Company's backlog consists of advertising agreements for
directories and newsletters which have not been published. As of March 1, 1997,
the Company's backlog was approximately $2,100,000 as compared to approximately
$1,159,000 a year earlier and $620,000 on March 1, 1995. Since the Company
recognizes revenues when it ships its print bar directories and newsletters, it
anticipates that all of the March 1, 1997 backlog will be recognized as revenues
during the current fiscal year.
SIGNIFICANT CLIENTS
Although the Company does not derive its revenues directly from bar
associations, advertising sales from the publication of one bar directory
accounted for 19% of the Company's revenues in fiscal 1995, while another
directory accounted for 11%. In 1996, advertising sales from the publication of
one bar directory accounted for 15% of the Company's revenues. The Company will
not receive any revenues during the current fiscal year from the directory
published by one of these bar associations due to that association's policy of
publishing its directory every three years. Because of the Company's increasing
backlog, the Company does not expect to be materially adversely affected by the
absence of revenues from this bar association's directory. See "Business--The
Company's Bar Directories."
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COMPETITION
There are two levels of competition within the Company's business. The
Company competes in obtaining agreements with bar associations to publish its
directory. Once the Company has contracts to publish, it faces substantial
competition in the sale of advertising.
There are three primary competitive factors which affect the Company's
business--cost, service and product quality. The Company believes its principle
competitive advantage is its ability to offer products and services at no cost
to professional associations.
As the publisher of the National Association of Bar Executives ("NABE")
directory, the Company perceives that it has an additional competitive advantage
in the marketing of bar directories to NABE members. Individually, NABE's
members generally are in a position to play an important role in the selection
of local directory publishers. Each NABE member receives a NABE directory
published by the Company which gives the Company increased visibility to these
bar association executives.
Print Directories
The print bar directory market is highly segmented and localized. Other
than Martindale-Hubbell, few competitors focus exclusively on legal directories.
Martindale-Hubbell is a national directory consisting of a set of 25 large
hardcover volumes. The set costs $745 per year and cannot be purchased for a
particular geographic area. However, on a national scale, Martindale-Hubbell is
the pre-eminent name in the print bar directory business.
For print directories covering a limited geographical area, the
Company's principal competitor is believed to be Legal Directories Publishing
Company ("LDP"), a privately-held company located in Dallas, Texas. LDP
publishes state bar directories which it sells directly to attorneys and others
who have a need for a state bar directory. LDP is believed to have
significantly larger revenues than the Company.
Other competitors include Elson-Alexandre, an affiliate of Western
Photography Services, Inc. located in Buena Vista, California. Elson-Alexandre
is primarily a portrait photographer and publishes the directories as an
adjunct to its core business which is the sale of photographic packages.
Advertising Competition
The Company competes with all forms of media which sell
advertising--yellow pages, alternative yellow pages, specialty magazines,
newspapers and television, among others.
There are no significant barriers to entry by competitors. Since these
potential competitors can enter the Company's business without substantial
capital investment or industry experience, the Company is seeking to protect
its competitive position through its co-operative payment program. See
"Business--Competition", and "Business--Future Business Strategy."
FUTURE BUSINESS STRATEGY
The Company's overall marketing strategy is to increase its base of
legal directories published nationwide. The Company also believes that the
fragmented nature of the specialty publishing industry creates favorable
acquisition opportunities.
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EMPLOYEES
At December 31, 1996 the Company had 124 full-time and seven
independent contractors, including its executive officers. The Company's staff
is divided into 24 people in administration, 74 account executives in sales and
marketing, 10 graphic artists, 5 production assistants and 11 customer
service representatives. None of the Company's employees or independent
contractors are covered by a collective bargaining agreement. Management
believes that the Company's relationship with its employees and contractors is
excellent. The Company believes that the future success of the Company is
dependent to a significant degree on its ability to retain existing employees
and to attract and train additional skilled personnel.
ITEM 2. PROPERTIES
The Company's corporate headquarters occupy approximately 21,500 square
feet in a seven-year-old two-story concrete building located at 186 North
Industrial Park Drive, Lake Helen, Florida, 32744. The Company purchased the
building and approximately three acres of land for approximately $900,000 in
September of 1996; modifications to enhance the property's usefulness to the
Company increased the investment to approximately $989,000 at December 31, 1996.
In December, 1996 the Company closed on an $800,000 mortgage on the property.
See Note 6 to "Notes to Financial Statements." Prior to its current corporate
headquarter facilities, the Company leased approximately 7,100 square feet in
Deltona, Florida.
In July, 1996, in addition to its corporate headquarters the Company
opened a sales office location in Orlando, Florida. The Company leased 7,245
square feet under a noncancellable operating lease which expires in 1999 and
which may be renewed by the Company for consecutive one-year increments until
2002. Approximate future minimum lease payments due in 1997 are $99,275. See
Note 5 to "Notes to Financial Statements."
Management considers that it may open one or more additional sales
offices during 1997 as the Company's contract base may mandate.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any legal proceedings either by or against
it, nor is the Company aware of any pending legal proceedings at the time of
this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Report.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Prices of Securities
The Company's common stock began trading on the NASDAQ National Market
System on May 17, 1996 under the symbol PCNA. The following table sets forth the
prices as reported to the Company by NASDAQ for the periods indicated. Such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
High Low
------ ------
1996 Second Quarter 7 1/2 6
Third Quarter 7 1/8 4 3/4
Fourth Quarter 5 1/8 2
As of December 31, 1996, there were approximately 700 beneficial
holders of the Company's common stock.
The Company did not pay dividends on its common stock in 1996 and it
does not anticipate paying any dividends thereon in the foreseeable future;
rather, it intends to retain any future earnings to finance the development and
expansion of its business.
Sales of Unregistered Securities within the Last Three years
During the past three years, the following persons and entities
acquired shares of Common Stock and other securities from the Company as set
forth in the table below:
Class of Amount of
Date Securities Securities Sold Consideration
------- ------------ --------------- -------------
Peter S. Balise 3/8/96 Bridge Note $50,000 $50,000
Common Stock 5,000
Matt Butler 3/8/96 Bridge Note $50,000 $50,000
Common Stock 5,000
Michael D. and
Beth J. Harris 3/8/96 Bridge Note $25,000 $25,000
Common Stock 2,500
James M. Koller 3/8/96 Bridge Note $25,000 $25,000
Common Stock 2,500
John D. McKey, Jr. 3/8/96 Bridge Note $50,000 $50,000
5,000
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (CONTINUED)
Class of Amount of
Date Securities Securities Sold Consideration
------- ------------ --------------- -------------
Robert Plakon 3/8/96 Bridge Note $25,000 $25,000
Common Stock 2,500
Ronald Plakon 3/8/96 Bridge Note $25,000 $25,000
Common Stock 2,500
Stephen E. Strang 3/8/96 Bridge Note $25,000 $25,000
Common Stock 2,500
Gerald H. Stein 3/8/96 Bridge Note $25,000 $25,000
Common Stock 2,500
Matt Butler 5/17/96 Common Stock 3,000 Services as
a Director
John D. McKey, Jr. 5/17/96 Common Stock 3,000 Services as
a Director
Phillip S. Hofmann 11/25/96 Common Stock 3,000 Services as
a Director
James M. Koller 1/29/97 Common Stock 5,000 $11,233
Employee
Compensation
Christopher J.
Maikisch 1/29/97 Common Stock 1,900 $4,305
Employee
Compensation
Yellow Magic, Inc. 1/29/97 Common Stock $10,400 $33,950
Purchase of
Software
The Common Stock and Bridge notes listed above were sold to accredited
investors in reliance upon exemptions from registration pursuant to Section 4
(2) of the Securities Act of 1933 and Rule 506 thereunder.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Revenues for the year ended December 31, 1996 increased 71% to
$3,332,612 from $1,949,266 for the year ended December 31, 1995 primarily due
to an increase in the number of directories published. In 1995 the Company
published 33 directories with average net revenues of $59,069 per directory. In
1996 the Company published 46 directories with average net revenues of $68,886
per directory. Additionally during 1996, the
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Company recognized approximately $160,000 in revenues for the Atlanta Lawyer
newsletter and Internet operations; these had no revenues in 1995.
While revenues rose $1,383,346 from 1995 to 1996, costs rose $2,667,806
and the Company incurred a loss of $691,495 for the year ended December 31, 1996
compared to net income of $580,246 for the year ended December 31, 1995.
An increase of $1,139,554 in salaries and commissions accounted for the
single largest factor in the increase in costs. During 1995, the Company's
employment ranged from approximately 18 at the beginning of the year to
approximately 43 full-time at year-end; by the end of 1996, the Company was
at 124 full-time employees. The Company's increase in staff was primarily in
the area of sales for the Orlando sales office in the latter part of the
year; approximately 74 of the 124 employees at the end of 1996 were
salespeople; an additional 11 were in sales administration and support. The
Company added this staff in order to be able to sell advertising
for the increased number of directories scheduled for shipment
during 1996 and beyond. Advertising contracts booked for print
directories totaled approximately $4,100,000 for 1996, compared
to approximately $1,900,000 for 1995.
General and administrative expenses increased $847,783 in 1996
from 1995. The largest single component of these costs was bad debt
expense, which increased from $37,730 in 1995 to $422,460 in 1996.
As the Company continues to grow, it has found that the level of
uncollectible receivables has also increased. Therefore, the Company
revised its allowance for doubtful accounts at December 31, 1996
to 9 1/2% of net sales for amounts owed six months or less relating
to directory publications and 20% for amounts owed six months or
less relating to newsletter and Internet revenues; in addition,
the Company provided a full reserve for amounts owed more than six
months, based upon an expectation that a small percentage of these
monies will be collected. All amounts owed more than one year are
written off. The Company's bad debt expense for 1996 was 12.7% of
net revenues, which gives effect to the varying allowances
described above. The Company also noted significant increases in
legal, outside accounting, and other professional services
which primarily are a direct result of the Company's transition
from private to public ownership. Those three areas rose from
$6,787 in 1995 to $177,674 in 1996; the Company considers that
at least $100,000 of the expense in 1996 was attributable to
services the Company contracted as a result of being publicly
owned.
Marketing and selling expense increased $299,480 from
1995 to 1996. More than half of this increase was telephone
expense which rose 166% to $245,371 in 1996 from $92,095 in
1995. This is directly attributable to the increase in staff
noted above, particularly the sales staff, who conduct most
of their business over the telephone. Contracted labor
relating to selling and marketing activities rose more
than $50,000 from 1995 to 1996.
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Materials and printing costs increased to 17% of net sales in 1996 from
13% of sales in 1995. The Company believes that this increase in the ratio of
costs to revenues was due to both increases in the costs and decreases in the
amount of advertising revenues relative to the costs, which vary little in
relationship to the amount of advertising contained. There were a number of
advertising sales campaigns for directories shipped in 1996 that were
curtailed in order to meet a scheduled ship date. The Company estimates
that the materials and printing costs for 1997 will be closer to those
for 1996 than for 1995.
Other income of $27,416 for the year ended December 31, 1996 was
comprised of $109,588 of interest and investment income, $89, 654 of interest
expense, and $7,482 of other non-operating income.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to a registration statement on Form SB-2 with the Securities and
Exchange Commission dated May 17, 1996 the Company's common stock commenced
trading on the NASDAQ National Market System under the symbol PCNA. Gross
proceeds of $6,325,000 were raised from the sale of 1,150,000 shares at $5.50
per share. Net proceeds to the Company after paying all related costs of the
offering were approximately $4,900,000.
The Company used $300,000 of the proceeds from its initial public offering
to repay bridge notes which had been issued earlier in the year in order to
provide funds during the pre-offering period. During the year ended December 31,
1996 the Company distributed the 1995 S Corporation earnings of $447,178 to
shareholders as of December 31, 1995.
At December 31, 1996, the Company had $1,760,831 in cash and equivalents
and $2,477,500 in U.S. Treasury securities.
The Company's only debt is an $800,000 mortgage on which it closed
December 30, 1996. This mortgage relates to the Company's land and building
purchased in September, 1996 for use as its corporate headquarters. At December
31, 1996 the Company's investment in the land and building was approximately
$989,000. Additional information concerning the mortgage is included in Note 6
of the Notes to Financial Statements.
Net cash used in operations was $73,994 for the year ended December 31,
1996 compared to $487,182 provided by operations for the same period a year
earlier. The most significant reason for the decrease in cash provided from
operations in 1996 from 1995 was the operating loss for reasons described above
under Results of Operations. Accounts receivable before the allowance for
doubtful accounts increased by $142,017 during the one-year period; however, an
increase of $230,032 in the allowance caused net receivables to decrease by
$88,015. Directories in progress, which represents estimated costs accumulated
for directories unpublished at the end of the period, increased $57,205 during
the year ended December 31, 1996, reflecting the increase in the amount of
directories in progress at the end of 1996 from that a year earlier. Deferred
revenue, which represents amounts received from advertisers prior to shipment of
the related directories, increased $190,177 primarily for
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the same reason. Accrued expenses at December 31, 1996 consist primarily of
approximately $94,000 in accrued wages and deferred compensation and $111,000
in various accrued expenses and property and sales taxes.
In early 1997, the Company purchased a software system designed
specifically for its industry for $83,950. Later in 1997 the Company may invest
an estimated $175,000 in software and computer hardware for automation of its
sales functions. The Company has no commitments at this time to acquire a
material amount of capital assets.
As described in the Company's registration statement on Form SB-2, the
Company intends to seek to increase market share through the acquisition of
print directory competitors or the rights to certain publishing contracts held
by such competitors. As of the date of this filing, the Company has not entered
into any agreements, understandings, or commitments relating to any potential
acquisition, although discussions with respect to such transactions are being
conducted. Such transactions are expected to involve a combination of cash,
Company stock, and payments from the future earnings of the acquired operations;
the cash requirements for these transactions is not expected to exceed the
$1,000,000 identified in the registration statement.
Based on current cash and investment balances and the Company's anticipated
results of future operations, the Company believes that it has sufficient cash
resources to fund its operations for the next twelve months or more.
FORWARD-LOOKING STATEMENTS
The statements made above relating to the Company's anticipation that
all of the March 1, 1997 backlog will be recognized as revenue during the
current fiscal year, to the anticipated material and printing costs in 1997
and to the Company's intentions or expectations regarding an increase in market
share through the acquisition of print directory competitors or the right to
certain publishing contracts held by such competitors are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The results
anticipated by any or all of these forward-looking statements may not occur.
Important factors that may cause actual results to differ materially from the
forward-looking statements include the following: (1) unanticipated
cancellation by bar associations of existing contracts to publish directories;
(2) unplanned postponement of the shipment of directories due to factors over
which the Company has no control; (3) unanticipated changes in third-party
printing costs as a result of changes in labor or paper costs; (4) the
Company's ability to continue to sell sufficient advertising per directory
published in order to maintain the same percentages of materials and printing
costs to directory revenues; and (5) the Company's ability to identify, or
consummate the acquisition of, or successfully operate, suitable print
directory competitors or rights to suitable publishing contracts held by such
competitors.
14
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The Publishing Company of North America, Inc.
Financial Statements
Years ended December 31, 1996 and 1995
CONTENTS
Report of Independent Certified Public Accountants...........................16
Audited Financial Statements
Balance Sheets...............................................................17
Statements of Operations.....................................................18
Statements of Shareholders' Equity...........................................19
Statements of Cash Flows.....................................................20
Notes to Financial Statements................................................22
15
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors
The Publishing Company of North America, Inc.
We have audited the accompanying balance sheets of The Publishing Company of
North America, Inc. as of December 31, 1996 and 1995, and the related statements
of operations, shareholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Publishing Company of North
America, Inc. at December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Orlando, Florida
February 21, 1997
16
<PAGE>
<TABLE>
<CAPTION>
The Publishing Company of North America, Inc.
Balance Sheets
DECEMBER 31
1996 1995
-----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,760,831 $286,023
Available-for-sale securities 2,477,500 16,500
Accounts receivable, less allowance for doubtful accounts of $267,787 and
$37,755 in 1996 and 1995, respectively 228,997 317,012
Directories in progress 144,823 87,618
Refundable income taxes 72,068 -
Other current assets 17,544 16,747
-----------------------------------
Total current assets 4,701,763 723,900
Property and equipment, net 1,329,783 169,200
Other assets 66,417 -
-----------------------------------
Total assets $6,097,963 $893,100
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 234,334 $ 33,318
Accrued expenses 205,670 39,767
Deferred revenue 460,434 270,257
Mortgage payable 48,889 -
-----------------------------------
Total current liabilities 949,327 343,342
Mortgage payable after one year 751,111 -
-----------------------------------
Total liabilities 1,700,438 343,342
Commitments and contingencies - -
Shareholders' equity:
Common shares, no par value:
15,000,000 shares authorized, 4,114,000 and 2,925,000 shares issued and
outstanding in 1996 and 1995, respectively 5,137,565 100
Unrealized loss on available-for-sale securities (13,024) (17,520)
Retained earnings (accumulated deficit) (691,495) 567,178
Unearned compensation, net (35,521) -
-----------------------------------
Total shareholders' equity 4,397,525 549,758
-----------------------------------
Total liabilities and shareholders' equity $6,097,963 $893,100
===================================
See accompanying notes.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
The Publishing Company of North America, Inc.
Statements of Operations
YEAR ENDED DECEMBER 31
1996 1995
------------------ ------------------
<S> <C> <C>
Net sales $3,332,612 $1,949,266
Cost and expenses:
Salaries and commissions 1,957,318 817,764
Materials and printing 573,635 247,978
Depreciation 93,055 37,723
Marketing and selling 406,647 107,167
General and administrative 1,020,868 173,085
------------------ ------------------
4,051,523 1,383,717
------------------ ------------------
Income (loss) from operations (718,911) 565,549
Other income 27,416 14,697
------------------ ------------------
Net income (loss) $ (691,495) $ 580,246
================== ==================
Net (loss) per share $ (.19)
==================
Shares used in computation of net (loss) per share 3,681,233
==================
Pro forma data (unaudited):
Income as reported before pro forma provision for income taxes
$ 580,246
Pro forma provision for income taxes (218,700)
------------------
Pro forma net income $ 361,546
==================
Pro forma net income per share $ .12
==================
Shares used in computation of pro forma net income per share 2,955,000
==================
See accompanying notes.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
The Publishing Company of North America, Inc.
Statement of Shareholders' Equity
RETAINED
EARNINGS
COMMON UNREALIZED (ACCUMULATED UNEARNED
STOCK LOSS DEFICIT) COMPENSATION TOTAL
--------------- --------------- ---------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 100 $ - $ 34,936 $ - $ 35,036
Unrealized holding loss on
available-for-sale security - (17,520) - - (17,520)
Shareholder distributions - - (48,004) - (48,004)
Net income - - 580,246 - 580,246
--------------- --------------- ---------------- ------------------- ---------------
Balance at December 31, 1995 100 (17,520) 567,178 - 549,758
Issuance of common stock 4,976,215 - - - 4,976,215
Shareholder distributions - - (447,178) - (447,178)
Transfer of undistributed
earnings 120,000 - (120,000) - -
Unrealized holding gain on
available-for-sale security - 4,496 - - 4,496
Restricted stock granted 41,250 - - (41,250) -
Amortization of unearned
compensation - - - 5,729 5,729
Net loss - - (691,495) - (691,495)
--------------- --------------- ---------------- ------------------- ---------------
Balance at December 31, 1996 $5,137,565 $(13,024) $(691,495) $(35,521) $4,397,525
=============== =============== ================ =================== ===============
See accompanying notes.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
The Publishing Company of North America, Inc.
Statements of Cash Flows
YEAR ENDED DECEMBER 31
1996 1995
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (691,495) $580,246
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation 93,055 37,723
Amortization of unearned compensation 5,729 -
Bad debt expense 422,460 48,987
Exchange of advertising for machinery and equipment (12,639) (11,778)
Accretion of bridge notes 77,778 -
(Gain) loss on sale of securities 4,953 (7,713)
Increase in accounts receivable (334,444) (284,604)
Increase in directories in progress (57,205) (32,487)
Increase in refundable income taxes (72,068) -
Increase in other assets (67,214) (964)
Increase in accounts payable 201,016 52,085
Increase in deferred revenue 190,177 105,687
Increase in accrued expenses 165,903 -
------------------------------------
Net cash provided by (used in) operating activities (73,994) 487,182
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities (4,441,315) (67,860)
Sales of available-for-sale securities 1,979,858 41,553
Purchases of property and equipment (1,241,000) (128,762)
------------------------------------
Net cash used in investing activities (3,702,457) (155,069)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 800,000 -
Proceeds from bridge notes 300,000 -
Repayment of bridge notes (300,000) -
Repayment of shareholder advances - (13,610)
Shareholder distributions (178,871) (48,004)
Repayment of promissory notes to shareholders (268,307) -
Net proceeds from initial public offering of common shares 4,898,437 -
------------------------------------
Net cash provided by (used in) financing activities 5,251,259 (61,614)
------------------------------------
Net increase in cash and cash equivalents 1,474,808 270,499
Cash and cash equivalents at beginning of year 286,023 15,524
------------------------------------
Cash and cash equivalents at end of year $1,760,831 $286,023
====================================
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
The Publishing Company of North America, Inc.
Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31
SUPPLEMENTAL CASH FLOW INFORMATION 1996 1995
------------------------------------
<S> <C> <C>
Income taxes paid $ 72,068 $ -
====================================
Interest paid $ 89,472 $ -
====================================
Exchange of advertising for supplies $ 33,487 $ 26,649
====================================
====================================
Distribution to shareholders in exchange for promissory notes $ 268,307 $ -
====================================
See accompanying notes.
</TABLE>
21
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements
December 31, 1996
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Publishing Company of North America, Inc. (the Company) began operations on
September 30, 1993. The primary business activity of the Company is publishing
membership directories for bar associations and selling advertising in those
directories. The Company markets its directories to associations throughout the
continental United States. During 1996, advertising sales from the publication
of one bar directory accounted for approximately 15% of the Company's revenues.
During 1995, advertising sales from the publication of two directories accounted
for approximately 19% and 11% of the Company's revenues, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable are comprised primarily of amounts due from advertisers in
the bar association directories. The Company's allowance for doubtful accounts
is estimated by management as a percentage of sales. All amounts outstanding in
excess of one year are written off.
AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in a separate component of shareholders' equity.
Realized gains and losses and declines in value judged to be
other-than-temporary are included in investment income. The cost of securities
sold is based on the specific identification method. Interest and dividends are
included in investment income.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation for machinery and
equipment and office furniture and fixtures is computed using a 150% accelerated
depreciation method over five years. Real property is depreciated using the
straight line method over 30 years. Leasehold improvements are depreciated using
the straight-line method over the remaining lease term.
22
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Expenditures for maintenance and repairs are charged to expense as incurred.
Major improvements are capitalized.
REVENUE RECOGNITION
Revenues and related costs are recorded by the Company upon shipment of
directories. Costs accumulated under directories in progress are stated at
estimated costs, not in excess of estimated realizable value. Deferred revenue
represents amounts received from advertisers prior to shipment of the related
directories.
INCOME TAXES
Until January 1, 1996, the Company elected by consent of its shareholders to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company did not pay federal corporate income taxes on its
taxable income; instead, the shareholders were liable for individual federal
income taxes on the Company's taxable income. In March 1996, the Company
terminated its S Corporation status effective January 1, 1996 and thereafter it
became taxed as a C Corporation. As a direct result of the conversion, a
deferred tax liability of $48,110 was recognized and charged to income as of
January 1, 1996. In March 1996, the Company made a distribution of $178,871 to
existing shareholders for estimated federal income taxes due on 1995 S
Corporation income and the Company issued $268,307 of notes payable to existing
shareholders for S Corporation earnings not previously declared as dividends
during 1995. These notes were paid in July 1996. Proforma income tax adjustments
had the Company been a C Corporation during 1995 are provided in the
accompanying financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
ADVERTISING COSTS
The costs of advertising are expensed as incurred. For the years ended December
31, 1996 and 1995, advertising costs included in other operating costs were
$38,261 and $13,762, respectively.
23
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123, Accounting and Disclosure of Stock-Based Compensation, which encourages but
does not require companies to recognize stock awards based on their fair value
at the date of grant. The Company currently follows, and expects to continue to
follow, the provision of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations in
accounting for its employee stock options. Under APB 25, no compensation expense
is recognized when the exercise price of the Company's employee stock options
equals or exceeds the market price of the underlying stock on the date of grant.
EARNINGS PER SHARE
Income (loss) per share is based upon the weighted average number of common
shares outstanding during each year.
Pro forma net income per share is computed based on the weighted average number
of common shares outstanding. In accordance with the Securities and Exchange
Commission requirements, common and common equivalent shares issued during the
12-month period prior to the filing of an initial public offering have been
included in the calculation as if they were outstanding for all periods
presented using the treasury stock method and the initial public offering price.
Historical net income per share is not considered meaningful for the year ended
December 31, 1995; accordingly, such per share information is not presented.
RECLASSIFICATIONS
Certain amounts in the 1995 financial statements have been reclassified to
conform to the presentation adopted in 1996.
24
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
2. AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities and the related gross unrealized gains and losses
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------------------------------
GROSS UNREALIZED GROSS UNREALIZED ESTIMATED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $2,456,504 $15,404 $ (3,908) $2,468,000
Equity Securities 34,020 - (24,520) 9,500
------------------------------------------------------------------------
$2,490,524 $15,404 $(28,428) $2,477,500
========================================================================
DECEMBER 31, 1995
------------------------------------------------------------------------
GROSS UNREALIZED GROSS UNREALIZED ESTIMATED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------------
Equity Securities $ 34,020 $ - $ (17,520) $ 16,500
========================================================================
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
---------------------------------------
<S> <C> <C>
Land $ 255,000 $ -
Building 733,884 -
Machinery and equipment 414,068 183,386
Office furniture and equipment 50,205 17,594
Leasehold improvements - 11,973
---------------------------------------
1,453,157 212,953
Less accumulated depreciation (123,374) (43,753)
---------------------------------------
$1,329,783 $169,200
=======================================
</TABLE>
25
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
4. INCOME TAXES
In March 1996, the Company terminated its S Corporation status effective January
1, 1996, at which time the Company became subject to corporate federal and state
income taxes. At December 31, 1996, the Company has a net operating loss
carryforward of approximately $128,000 for income tax purposes that expires in
the year 2011.
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense for 1996 is:
Income taxes computed at the federal statutory rate
of 34% $ (235,109)
State income taxes, net of federal benefit (24,617)
Cumulative effect of converting from S Corporation to
C Corporation 26,405
Other 4,533
Valuation allowance 228,788
-----------
Total income tax provision $ -
===========
The components of the deferred income tax asset and liability at December 31 are
as follows:
1996
-----------
Deferred tax assets:
Accrual to cash $192,939
Net operating loss carryforward 48,171
Unrealized loss on securities 4,901
Deferred tax liabilities:
Depreciation (17,223)
Accrual to cash -
Valuation allowance (228,788)
-----------
Net deferred tax asset (liability) $ -
===========
The net change in the valuation allowance for 1996 was a charge to expense of
$228,788.
The unaudited pro forma tax provision, presented as if the Company were a
taxable entity during 1995 and calculated in accordance with SFAS No. 109, is
as follows:
Current income tax provision $166,000
Deferred income tax provision (benefit) 52,700
-----------
$218,700
===========
26
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
4. INCOME TAXES (CONTINUED)
A reconciliation of statutory federal income taxes to the proforma tax provision
is as follows:
Income taxes computed at the federal statutory rate of 34% $197,100
State income taxes, net of federal benefit 21,060
Other 540
-----------
$218,700
===========
5. LEASE OBLIGATIONS
The Company is obligated for the rental of its sales office in Orlando, Florida,
under a noncancellable operating lease. The lease expires in 1999 and may be
renewed by the Company for consecutive one-year increments until 2002.
Approximate future minimum lease payments are as follows:
1997 $ 99,000
1998 102,000
1999 52,000
-----------
$253,000
===========
For the years ended December 31, 1996 and 1995, total rental expenses included
in other operating costs were $89,720 and $66,700, respectively.
6. MORTGAGE PAYABLE
In September 1996, the Company purchased land and a building in Lake Helen,
Florida, for use as its corporate headquarters for approximately $900,000.
Modifications to improve the property's usefulness increased the investment to
approximately $989,000 at December 31, 1996. In December 1996, the Company
closed on an $800,000 mortgage on this property. Monthly principal payments are
due along with accrued interest on the outstanding principal based upon the
LIBOR (London InterBank Offering Rate) plus 250 basis points. In December 2011,
a final balloon payment is due of the remaining principal balance and any unpaid
interest accrued.
The mortgage is secured by assets with a carrying value of $1,307,000 at
December 31, 1996.
27
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
6. MORTGAGE PAYABLE (CONTINUED)
The mortgage becomes due for the years ended December 31 as follows:
1997 $ 48,889
1998 53,333
1999 53,333
2000 53,333
2001 53,333
Thereafter 537,779
-----------
$800,000
===========
The mortgage agreement requires the Company, among other provisions, to maintain
minimum levels of funds flow (as defined in the agreement). The covenant was not
met as of and for the year ended December 31, 1996. The Company has obtained a
waiver of the required minimum level of funds flow through January 31, 1998.
Accordingly, amounts payable under the mortgage agreement are classified as
long-term in the accompanying balance sheet.
7. INITIAL PUBLIC OFFERING OF THE COMPANY'S COMMON STOCK
Pursuant to a registration statement on Form SB-2 with the Securities and
Exchange Commission, on May 17, 1996 the Company's common stock commenced
trading on the NASDAQ National Market System under the symbol PCNA. Gross
proceeds of $6,325,000 were raised from the sale of 1,150,000 shares at $5.50
per share. Net proceeds to the Company after paying all related costs of the
offering were approximately $4,900,000.
8. RELATED PARTY TRANSACTIONS
In March 1996, the Company borrowed $300,000 through the private placement of
units consisting of an aggregate $300,000 principal amount of Bridge Notes and
an aggregate of 30,000 shares of common stock. The Bridge Notes bore interest at
a rate of 8% per annum and were repaid upon the closing of the Company's initial
public offering. The Company's President loaned $50,000 and its Chief Financial
Officer loaned $25,000 to the Company pursuant to this transaction. Interest
expense for 1996 was $89,472 on these debt instruments.
28
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
In July 1996, the Company elected to retire $268,307 of notes payable plus
accrued interest to existing shareholders representing 1995 S Corporation
earnings not previously paid as dividends. This amount included payments which
aggregated to $178,795 to the President and Executive Vice President of the
Company.
During 1996, the Company entered into a consulting agreement with two of its
shareholders, one of whom later became a Director of the Company. The agreement
provides for the payment of $25,000 per annum to each shareholder for a period
of three years in exchange for certain agreed-upon consulting services.
9. SHAREHOLDERS' EQUITY
In March 1996, the Company amended and restated its Articles of Incorporation
affecting shareholders' equity, including (i) increasing the number of
authorized shares of common stock to 15,000,000; (ii) changing the par value
from $1 per share to no par value; and (iii) effecting a 29,250-to-1 stock split
on outstanding shares. All share and per share information in the accompanying
financial statements has been restated to reflect the effect of the change in
authorized shares and split.
INCENTIVE STOCK PLAN
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
Accounting for Stock-Based Compensation, requires use of option valuation models
that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
In March 1996, the Board of Directors approved the Company's 1996 Stock Plan
(the Plan) covering 500,000 shares of the Company's common stock. The Plan
provides for incentive stock options, non-qualified stock options,
non-discretionary stock options, and awards of stock to employees, officers,
directors, and certain other parties related to the Company. Generally, grants
of options vest each December 31 in equal installments over three or five
years and they expire ten years from the date of grant.
29
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
9. SHAREHOLDERS' EQUITY (CONTINUED)
At December 31, 1996 options for 121,500 shares were outstanding, of which
24,300 were exercisable.
The following table summarizes option activity from the Plan's inception through
December 31, 1996:
WEIGHTED AVERAGE
EXERCISE
SHARES PRICE
------------------------------
Outstanding at January 1, 1996 - -
Granted 123,500 $5.17
Forfeited (2,000) $5.50
------------------------------
Outstanding at December 31, 1996 121,500 $5.16
==============================
The weighted average fair value of options granted during the year ended
December 31, 1996 was $3.18. The weighted average remaining contractual
life of these options is 9.43 years.
PROFORMA DISCLOSURES
Proforma information regarding net income is required by FASB Statement 123
Accounting for Stock-Based Compensation, and has been determined as if the
Company had accounted for its employee stock options under the fair value method
of that Statement. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1996: risk-free interest rate of 5.82%;
dividend yield of 0%; volatility factor of .682; and a weighted-average expected
life of the options of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because change in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
30
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
9. SHAREHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma net loss and net loss per share for the year ended December 31, 1996 is
$768,772 and $.21, respectively.
RESTRICTED STOCK
The Company issued 9,000 restricted shares of its common stock in 1996 to
certain of its directors. The number of shares and related value used in
computing unearned compensation, which is shown as a separate component of
shareholders' equity in the balance sheet, is as follows:
<TABLE>
<CAPTION>
MARKET TOTAL
NUMBER VALUE PER SHARE MARKET
OF AT ISSUANCE VALUE AT ISSUANCE
SHARES
------------------------------------------------------
<S> <C> <C> <C>
Issued May 17, 1996 6,000 $5.50 $33,000
Issued November 25, 1996 3,000 2.75 8,250
------------------------------------------------------
9,000 - $41,250
======================================================
</TABLE>
The unearned compensation is being amortized over the respective vesting period
of the shares. Expense charged against operations during 1996 was $5,729.
STOCK WARRANTS
The underwriter of the Company's initial public offering purchased warrants for
$95 to purchase up to 95,000 shares of the Company's common stock at $6.60 per
share (120% of the initial public offering price). The warrants are exercisable
for a period of four years commencing May 17, 1997, at which time holders of
these warrants obtain certain registration rights.
10. EMPLOYEE BENEFIT PLAN
In April of 1996 the Company established a 401(k) Salary Reduction Plan covering
substantially all employees with six months of service or more. Participants may
contribute up to 15% of his or her annual compensation. The Company's matching
contribution is determined annually by the Board of Directors. The Company's
contribution for 1996 was approximately $6,000.
31
<PAGE>
The Publishing Company of North America, Inc.
Notes to Financial Statements (continued)
11. SUBSEQUENT EVENTS
In December, 1996 the Company contracted to purchase a software system designed
specifically for the yellow-page publishing industry; delivery of the software
was taken in January, 1997. The software provides for customer and order
management, workflow control, typesetting and pagination, and certain accounting
functions. The price of the system was $83,950, of which $50,000 was paid in
cash and the balance through the issuance of 10,400 shares of the Company's
restricted (unregistered) common stock.
In January 1997, the Board of Directors granted options for 75,100 shares of its
common stock to certain of its employees and nonemployee consultants. At the
same time, 6,900 shares of common stock were issued to two employees of the
Company in lieu of cash compensation for 1996 services.
32
<PAGE>
PART III
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information concerning Directors, Executive Officers, Promoters and
Control Persons is incorporated herein by reference to the definitive proxy
statement of the Company for the Company's Annual Meeting of the Shareholders
for the fiscal year ended December 31, 1996, which definitive proxy statement
will be filed with the Securities and Exchange Commission not later than 120
days after the Company's fiscal year end of December 31, 1996.
ITEM 10. EXECUTIVE COMPENSATION
Information concerning Executive Compensation is incorporated herein by
reference to the definitive proxy statement of the Company for the Company's
Annual Meeting of the Shareholders for the fiscal year ended December 31, 1996,
which definitive proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the Company's fiscal year end of
December 31, 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference to the definitive proxy
statement of the Company for the Company's Annual Meeting of the Shareholders
for the fiscal year ended December 31, 1996, which definitive proxy statement
will be filed with the Securities and Exchange Commission not later than 120
days after the Company's fiscal year end of December 31, 1996.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning Certain Relationships and Related Transactions
is incorporated herein by reference to the definitive proxy statement of the
Company for the Company's Annual Meeting of the Shareholders for the fiscal year
ended December 31, 1996, which definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the Company's
fiscal year end of December 31, 1996.
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Index to Exhibits
1. Exhibit 3.0 Articles of Incorporation and By-Laws..............36
2. Exhibit 10.0 Mortgage and Security Agreement to
First Union National Bank.......................36
3. Exhibit 10.1 First Union Real Estate Balloon Promissory Note....60
4. Exhibit 10.3 Assignment of Leases, Rents, and
Profits to First Union National Bank...............72
5. Exhibit 11.0 Statement Re: computation of per share
earnings (Loss).................................78
6. Exhibit 27.0 Financial Data Schedule............................79
b. No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf on March 31, 1997 by the
undersigned, thereunto duly authorized.
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
/s/ Peter S. Balise
---------------------------------
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signatures Title Date
- ----------------------- -------------------------------- --------------
/s/ Peter S. Balise Chairman of the Board of Directors March 31, 1997
- -----------------------
/s/ D. Scott Plakon Director March 31, 1997
- -----------------------
/s/ Phillip S. Hofmann Director March 31, 1997
- -----------------------
/s/ James M. Koller Chief Financial Officer March 31, 1997
- ----------------------- (Principal Financial Officer
and Chief Accounting Officer)
35
EXHIBITS
ITEM 13. Exhibits and Reports on Form 8-K
a. Exhibits
1. Exhibit 3.0 Articles of Incorporation and By-Laws
The Amended and Restated Articles of Incorporation of
the Company are incorporated herein by reference to
Exhibit 3.1 of the Company's Registration Statement
No. 333-2306 on Form SB-2 as filed with Securities
and Exchange Commission on March 13, 1996.
The Form of First Amendment to Amended and Restated
Articles of Incorporation of the Company are
incorporated herein by reference to Exhibit 3.1 of
the Company's Registration Statement No. 333-2306 on
Form SB-2 as filed with Securities and Exchange
Commission on March 13, 1996.
The Amended and Restated Bylaws of the Company are
incorporated herein by reference to Exhibit 3.1 of
the Company's Registration Statement No. 333-2306 on
Form SB-2 as filed with Securities and Exchange
Commission on March 13, 1996
2. Exhibit 10.0 Mortgage and Security Agreement to
First Union National Bank
This item begins on the following page.
36
Prepared By & Return To:
Casey Cavanaugh, Esquire
LOWNDES, DROSDICK, DOSTER, KANTOR
& REED, P.A.
215 North Eola Drive
Orlando, Florida 32802
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (hereinafter referred to as the
"Mortgage") executed December 30, 1996 by THE PUBLISHING COMPANY OF NORTH
AMERICA, INC., a Florida corporation, whose address for notice under this
Mortgage is 186 North Industrial Park Blvd., Lake Helen, Florida 32744
(hereinafter referred to as the "Borrower") to and in favor of FIRST UNION
NATIONAL BANK OF FLORIDA, a national banking association organized and existing
under the laws of the United States of America, whose address is 800 North
Magnolia Avenue, Orlando, Florida 32803 (hereinafter referred to as the
"Lender").
W I T N E S S E T H:
That for divers good and valuable considerations and to secure the
payment of an indebtedness in the aggregate sum of EIGHT HUNDRED THOUSAND AND
NO/100 DOLLARS ($800,000.00), or so much thereof as may be advanced, to be paid
in accordance with a note of even date herewith (hereinafter referred to as the
"Note") (which note has a maturity date of December 5, 2011) together with
interest thereon and any and all sums due or which may become due from the
Borrower to the Lender, the Borrower does grant, bargain, sell, alien, remise,
release, convey and confirm unto the Lender, its successors and assigns, in fee
simple, all of that certain tract of land of which the Borrower is now seized
and possessed and in actual possession, situate in the County of Volusia, State
of Florida, which is more fully described in Exhibit "A" attached hereto and
made a part hereof, together with the buildings and improvements thereon erected
or to be erected (hereinafter referred to as the "Premises");
TOGETHER with:
(a) all leasehold estate, and all right, title and interest of
Borrower in and to all leases or subleases covering the Premises or any
portion thereof now or hereafter existing or entered into, and all
right, title and interest of Borrower thereunder, including, without
limitation, all cash or security deposits, advance rentals, and
deposits or payments of similar nature;
(b) all right, title and interest of Borrower in and to all
options to purchase or lease the Premises or any portion thereof or
interest therein, and any greater estate in the Premises owned or
hereafter acquired;
(c) all easements, streets, ways, alleys, rights-of-way and
rights used in connection
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therewith or as a means of access thereto,
and all tenements, hereditaments and appurtenances thereof and thereto,
and all water rights;
(d) any and all buildings, structures and improvements now or
hereafter erected thereon, including, but not limited to the fixtures,
attachments, appliances, equipment, machinery, and other articles
attached to said buildings, structures and improvements (sometimes
hereinafter referred to as the "Improvements");
(e) all fixtures, appliances, machinery, equipment, furniture,
furnishings and articles of personal property now or hereafter affixed
to, placed upon or used in connection with the operation of any of said
Premises; all gas, steam, electric, water and other heating, cooking,
refrigerating, lighting, plumbing, ventilating, irrigating and power
systems, machines, appliances, fixtures, and appurtenances which are
now or may hereafter pertain or be used with, in or on said Premises,
even though they may be detached or detachable and all building
improvement and construction materials, supplies and equipment
hereafter delivered to said land contemplating installation or use in
the construction thereon and all rights and interests of Borrower in
building permits and architectural plans and specifications relating to
contemplated constructions or Improvements on said Premises and all
rights and interests of Borrower in present or future mortgage loan
commitments pertaining to any of said Premises or Improvements thereon
(sometimes hereinafter referred to as the "Personal Property");
(f) all awards and proceeds of condemnation for the Premises
or any part thereof to which Borrower is entitled for any taking of all
or any part of the Premises by condemnation or exercise of the right of
eminent domain. All such awards and condemnation proceeds are hereby
assigned to Lender and the Lender is hereby authorized, subject to the
provisions contained in this Mortgage, to apply such awards and
condemnation proceeds or any part thereof, after deducting therefrom
any expenses incurred by the Lender in the collection or handling
thereof, toward the payment, in full or in part, of the Note,
notwithstanding the fact that the amount owing thereon may not then be
due and payable;
(g) all right, title and interest in and to and payments under
any performance or payment bonds issued with respect to the Premises or
for the construction of improvements thereon, to which Borrower is
entitled;
(h) all rents, issues and profits of the Premises and all
the estate, right, title and interest of every nature whatsoever of
the Borrower in and to the same;
(i) all accounts (including contract rights) and general
intangibles pertaining to or arising from or in connection with all or
any part of the Mortgaged Property, as hereinafter defined, including
without limitation all proceeds and choses in action arising under any
insurance policies maintained with respect to all or any part of the
Mortgaged Property; and,
(j) all proceeds, products, replacements, additions,
substitutions, renewals and accessions of any of the
foregoing items.
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All of the foregoing real and personal property, and all rights, privileges and
franchises are collectively referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD all and singular the Mortgaged Property hereby
conveyed, and the tenements, hereditaments and appurtenances thereunto belonging
or in anywise appertaining, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof and also all the estate, right,
title interest property, possession, claim and demand whatsoever as well in law
as in equity of the said Borrower in and to the same and every part and parcel
thereof unto the said Lender in fee simple.
PROVIDED ALWAYS that if the Borrower shall pay to the Lender any and
all indebtedness due by Borrower to Lender (including the indebtedness evidenced
by the Note and any and all renewals of the same) and shall perform, comply with
and abide by each and every stipulation, agreement, condition, and covenant of
the Note and of this Mortgage; then this Mortgage and the estate hereby created
shall cease and be null and void. Provided, it is further covenanted and agreed
by the parties hereto that this Mortgage also secures the payment of and
includes all future or further advances as hereinafter set forth, to the same
extent as if such made on the date of the execution of this Mortgage, and any
disbursements made for the payment of tax, levies or insurance on the Mortgaged
Property, with interest on such disbursements at the Default Rate as hereinafter
defined.
To protect the security of this Mortgage, the Borrower further
covenants, warrants and agrees with the Lender as follows:
ARTICLE I
COVENANTS AND AGREEMENTS OF BORROWER
1.01 Payment of Secured Obligations. Borrower shall pay when due the
principal of, and the interest on, the indebtedness evidenced by the Note, and
the charges, fees and the principal of, and interest on, any future advances
secured by this Mortgage and shall otherwise comply with all the terms of the
Note and this Mortgage.
1.02 Warranties and Representations. Borrower hereby covenants with
Lender that Borrower is indefeasibly seized of the Mortgaged Property in fee
simple; that the Borrower has full power and lawful right to convey the same in
fee simple as aforesaid; that it shall be lawful for Borrower at all times
peaceably and quietly to enter upon, hold, occupy and enjoy said Mortgaged
Property and every part thereof; that Borrower will make such further assurances
to perfect the lien interest in said premises in Lender, as may reasonably be
required; and that Borrower does hereby fully warrant the title to the Mortgaged
Property and every part thereof and will defend the same against the lawful
claims of all persons whomsoever.
Borrower further represents and warrants to Lender that all
information, reports, paper and data given to Lender with respect to Borrower,
and to the loan evidenced by the Note and Mortgage are accurate and correct in
all material respects and complete insofar as may be necessary to give Lender a
true and accurate knowledge of the subject matter.
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1.03 Ground Leases, Leases, Subleases and Easements. Borrower, at
Borrower's sole cost and expense, shall maintain and cause to be performed all
of the covenants, agreements, terms, conditions and provisions on its part to
be kept, observed and performed under any ground lease, lease, sublease or
easements which may constitute a portion of or an interest in the Premises,
shall require its tenants or subtenants to keep, observe and perform all the
covenants, agreements, terms, conditions and provisions on their part to be
kept, observed or performed under any and all ground leases, leases, subleases
or easements; and shall not suffer or permit any breach or default to occur with
respect to the foregoing; and in default thereof the Lender shall have the right
to perform or to require performance of any such covenants, agreements, terms,
conditions and provisions of any such ground lease, lease, sublease or easements
and to add any expense incurred in connection therewith to the debt secured
hereby, which such expense shall bear interest from the date of payment to the
date of recovery by the Lender at the Default Rate as hereinafter defined. Any
such payment by the Lender with interest thereon shall be immediately due and
payable. The Borrower shall not, without the consent of the Lender, consent to
the modification, amendment, cancellation, termination or surrender of any such
ground lease, lease, sublease, or easement.
No release or forbearance of any of Borrower's obligation under any
such ground lease, lease, or sublease shall release Borrower from any of its
obligations under this Mortgage.
1.04 Required Insurance. Borrower will, at Borrower's sole cost and
expense, maintain or cause to be maintained with respect to the Mortgaged
Property, and each part thereof, the following insurance:
(a) Insurance against loss or damage to the Improvement by
fire and any of the risks covered by insurance of the type now known as
"fire and extended coverage" in an amount not less than the original
amount of the Note or the full replacement cost of the Improvements
whichever is less; and
(b) Such other insurance, and in such amounts, as may from
time to time be required by Lender against the same or other hazards.
All policies of insurance required by the terms of this Mortgage shall
contain an endorsement or agreement by the insurer that any loss shall be
payable in accordance with the terms of such policy notwithstanding any act or
negligence of Borrower which might otherwise result in forfeiture of said
insurance and the further agreement of the insurer waiving all rights of set
off, counterclaim or deductions against Borrower.
Borrower may effect for its own account any insurance not required
under this Section 1.04, but any such insurance effected by Borrower on the
Premises, whether or not so required, shall be for the mutual benefit of
Borrower and Lender and shall be subject to the other provisions of this
Mortgage.
1.05 Delivery of Policies, Payment of Premiums. All policies of
insurance shall be issued by companies and in amounts in each company
satisfactory to Lender. All policies of insurance shall have attached thereto a
lender's loss payment endorsement for the benefit of Lender in form satisfactory
to
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Lender. Borrower shall furnish Lender with an original policy of all policies
of required insurance. If Lender consents to Borrower providing any of the
required insurance through blanket policies carried by Borrower and covering
more than one location, then Borrower shall furnish Lender with a certificate of
insurance for each such policy setting forth the coverage, the limits of
liability, the name of the carrier, the policy number, and the expiration date.
At least thirty (30) days prior to the expiration of each such policy, Borrower
shall furnish Lender with evidence satisfactory to Lender of the Payment of
premium and the reissuance of a policy continuing insurance in force as required
by this Mortgage. All such policies shall contain a provision that such policies
will not be canceled or materially amended, which term shall include any
reduction in the scope or limits of coverage, without at least thirty (30) days
prior written notice to Lender. In the event Borrower fails to provide,
maintain, keep in force or deliver and furnish to Lender the policies of
insurance required by this Section, Lender may procure such insurance or single
interest insurance for such risks covering Lender's interest, and Borrower will
pay all premiums thereon promptly upon demand by Lender, and until such payment
is made by Borrower the amount of all such premiums together with interest
thereon at the rate of interest after maturity or default provided in the Note
or the maximum rate permitted by Florida law, whichever is less (the "Default
Rate"), and shall be deemed to be a part of the indebtedness secured by this
Mortgage.
1.06 Insurance Proceeds. After the happening of any casualty to
the Mortgaged Property or any part thereof, Borrower shall give prompt written
notice thereof to Lender.
(a) In the event of any damage to or destruction of the
Mortgaged Property, Lender shall have the option in its sole discretion
of applying or paying all or part of the insurance proceeds (I) to any
indebtedness secured hereby and in such order as Lender may determine,
or (ii) to the restoration of the Improvements, or (iii) to Borrower.
(b) In the event of such loss or damage, all proceeds of
insurance shall be payable to Lender, and Borrower hereby authorizes
and directs any affected insurance company to make payment of such
proceeds directly to Lender. Lender is hereby authorized and empowered
by Borrower to settle, adjust or compromise any claims for loss, damage
or destruction under any policy or policies of insurance.
(c) Except to the extent that insurance proceeds are received
by Lender and applied to the indebtedness secured hereby, nothing
herein contained shall be deemed to excuse Borrower from repairing or
maintaining the Mortgaged Property as provided in this Mortgage or
restoring all damage or destruction to the Mortgaged Property,
regardless of whether or not there are insurance proceeds available or
whether any such proceeds are sufficient in amount, and the application
or release by Lender of any insurance proceeds shall not cure or waive
any default or notice of default under this Mortgage or invalidate any
act done pursuant to such notice.
1.07 Assignment of Policies Upon Foreclosure. In the event of
foreclosure of this Mortgage or other transfer of title or assignment of the
Mortgaged Property in extinguishment, in whole or in part, of the debt secured
hereby, all right, title and interest of the Borrower in and to all policies of
insurance required by this Section shall inure to the benefit of and pass the
successor in interest to Borrower or the purchaser or grantee of the Mortgaged
Property. Borrower hereby appoints Lender its attorney-in-fact to endorse any
checks, drafts or other instruments representing any proceeds of such insurance,
whether
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payable by reason of loss thereunder or otherwise.
1.08 Taxes, Utilities and Impositions. Borrower will pay, or cause to
be paid and discharged, on or before the last day on which they may be paid
without penalty or interest, all such duties, taxes, sewer rents, charges for
water, or for setting or repairing of meters, and all other utilities on the
Mortgaged Property or any part thereof, and any assessments and payments, usual
or unusual, extraordinary or ordinary, which shall be imposed upon or become due
and payable or become a lien upon the Premises or any part thereof and the
sidewalks or streets in front thereof and any vaults therein by virtue of any
present or future law of the United States or of the State, County, or City
wherein the Premises are located (all of the foregoing being herein collectively
called "Impositions"). In default of any such payment of any imposition, Lender
may pay the same and the amount so paid by Lender shall, at the Lender's option,
become immediately due and payable with interest at the Default Rate and shall
be deemed part of the indebtedness secured by this Mortgage.
If at any time there shall be assessed or imposed (i) a tax or
assessment on the Premises in lieu of or in addition to the Impositions payable
by Borrower pursuant to this Section or (ii) a license fee, tax or assessment
imposed on Lender and measured by or based in whole or in part upon the amount
of the outstanding obligations secured hereby, then all such taxes, assessments
or fees shall be deemed to be included within the term "Impositions" as defined
in this Section, and Borrower shall pay and discharge the same as herein
provided with respect to the payment of Impositions or at the option of Lender,
all obligations secured hereby, together with all accrued interest thereon,
shall immediately become due and payable. Anything to the contrary herein
notwithstanding, Lender shall have no obligation to pay any franchise, estate,
inheritance, income, excess profits or similar tax levied on Borrower or on the
obligations secured hereby.
Borrower will pay all mortgage recording taxes and fees payable with
respect to this Mortgage or other mortgage or transfer taxes due on account of
this Mortgage or the Note secured hereby.
Borrower will exhibit to Lender the original receipts or other
reasonably satisfactory proof of the payment of all Impositions which may affect
the Mortgaged Property or any part thereof or the lien of the Mortgage promptly
following the last date on which each Imposition is payable hereunder.
Notwithstanding the foregoing, Borrower shall have the right, after
prior written notice to Lender, to contest at its own expense the amount and
validity of any Imposition affecting the Mortgaged Property by appropriate
proceedings conducted in good faith and with due diligence and to postpone or
defer payment thereof, if and so long as:
(a) Such proceedings shall operate to suspend the collection
of such Imposition from Borrower or the Mortgaged Property; or
(b) Neither the Mortgaged Property nor any part thereof would
be in immediate danger of being forfeited or lost by reason of such
proceedings, postponement or deferment; and
(c) In the case of any Imposition affecting the Mortgaged
Property which might be or become a lien, encumbrance or charge upon or
result in any forfeiture or loss of the Mortgaged
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Property or any part thereof, or which might result in loss or
damage to Borrower or Lender, Borrower, prior to the date such
Imposition would become delinquent, shall have furnished Lender
with security satisfactory to Lender, and, in the event that such
security is furnished, Lender shall not have the right during the
period of the contest to pay, remove or discharge the Imposition.
1.09 Maintenance, Repairs, Alterations. Borrower shall keep the
Mortgaged Property, or cause the same to be kept, in good condition and repair
and fully protected from the elements to the satisfaction of Lender; Borrower
shall not commit nor permit to be committed waste thereon and shall not do nor
permit to be done any act by which the Mortgaged Property shall become less
valuable; Borrower will not remove, demolish or structurally alter any of the
Improvements (except such alterations as maybe required by laws, ordinances or
regulations) without the prior written permission of the Lender; Borrower shall
complete promptly and in good and workmanlike manner any building or other
improvement which may be constructed on the Premises and promptly restore in
like manner any Improvements which may be damaged or destroyed thereon and will
pay when due all claims for labor performed and materials furnished therefor;
Borrower shall use and operate, and shall require its lessees or licensees to
use or operate, the Mortgaged Property in compliance with all applicable laws,
ordinance, regulations, covenants, conditions and restrictions, and with all
applicable requirements of any ground lease, lease or sublease now or hereafter
affecting the Premises or any part thereof. Unless required by law or unless
Lender has otherwise agreed in writing, Borrower shall not allow changes in the
stated use of Mortgaged Property from that which was disclosed to Lender at the
time of execution hereof. Borrower shall not initiate or acquiesce to a zoning
change of the Mortgaged Property without the prior notice to and consent of
Lender. Lender and its representatives shall have access to the Premises at all
reasonable times to determine whether Borrower is complying with its obligations
under this Mortgage, including, but not limited to, those set out in this
Section.
1.10 Escrows for Taxes, Insurance, Assessments. In order to more fully
protect the security of this Mortgage, the Lender, at its option, in the event
Borrower at any time fails to make payment when due of all taxes, assessments,
public charges and insurance premiums as herein elsewhere required, may require
the Borrower to deposit with the Lender, together with and in addition to each
monthly payment due on account of the indebtedness evidenced by the Note, an
amount equal to one-twelfth (1/12) of the annual total of such taxes,
assessments, charges and premiums (all as estimated by the Lender in its sole
discretion) so as to place sufficient funds in the hands of Lender for the
payment of such taxes, assessments, charges and premiums as the same shall
become due, and the Lender may hold the sums so deposited without interest and
commingled with its general funds and apply the same to the payment of said
taxes, assessments, charges or premiums as they become due and payable. If at
any time the funds so held by Lender are insufficient to pay such taxes,
assessments, charges or premiums as they become due and payable, the Borrower
shall immediately, upon notice and demand by Lender, deposit with Lender the
amount of such deficiency, and the failure on the part of the Borrower to do so
shall entitle the Lender, at its option, to itself make such payments in
accordance with its right and pursuant to the conditions elsewhere in this
Mortgage provided. Whenever any default exists under this Mortgage, Lender may,
at its option, and without obligation so to do, apply any funds so held by it
upon such of the indebtedness secured hereby, and in such order and manner of
application as Lender may elect.
1.11 Eminent Domain. Should the Mortgaged Property, or any part thereof
or interest therein,
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be taken or damaged by reason of any public use or improvement or condemnation
proceeding, or in any other manner ("Condemnation"), or should Borrower receive
any notice or other information regarding such Condemnation, Borrower shall
give prompt written notice thereof to Lender.
(a) Lender shall be entitled to all compensation, awards and
other payments or relief granted in connection with such Condemnation,
and shall be entitled, at its option, to commence, appear in and
prosecute in its own name any action or proceedings relating thereto.
Lender shall also be entitled to make any compromise or settlement in
connection with such taking or damage. All such compensation, awards,
damages, rights of action and proceeds awarded to Borrower (the
"Proceeds") are hereby assigned to Lender and Borrower agrees to
execute such further assignments of the Proceeds as Lender may require.
(b) In the event any portion of the Mortgaged Property is so
taken or damaged, Lender shall have the option in its sole and absolute
discretion, to apply all such Proceeds, after deducting therefrom all
costs and expenses (regardless of the particular nature thereof and
whether incurred with or without suit), including attorneys' fees,
incurred by it in connection with such Proceeds, upon any indebtedness
secured hereby, or to apply all such Proceeds, after such deductions,
to the restoration of the Mortgaged Property upon such conditions as
Lender may determine. Such application or release shall not cure or
waive any default or notice of default hereunder or invalidate any act
done pursuant to such notice.
(c) Any amounts received by Lender hereunder (after payment of
any costs in connection with obtaining same), shall, if retained by
Lender, be applied in payment of any accrued interest and then in
reduction of the then outstanding principal sum of the Note,
notwithstanding that the same may not then be due and payable. Any
amount so applied to principal shall be applied to the payment of
installments of principal on the Note in inverse order of their due
dates.
1.12 Actions by Lender to Preserve the Security of This Mortgage. If
the Borrower fails to make any payment or to do any act as and in the manner
provided for in this Mortgage or the Note, the Lender, in its own discretion,
without obligation so to do and without notice to or demand upon Borrower and
without releasing Borrower from any obligation, may make or do the same in such
manner and to such extent as the Lender may deem necessary to protect the
security hereof. Borrower will pay upon demand all expenses incurred or paid by
Lender (including, but not limited to, attorneys fees and court costs including
those of appellate and bankruptcy proceedings) on account of the exercise of any
of the aforesaid rights or privileges or on account of any litigation which may
arise in connection with this Mortgage or the Note or on account of any attempt,
without litigation, to enforce the terms of this Mortgage or said Note. In case
the Mortgaged Property or any part thereof shall be advertised for foreclosure
sale and not sold, Borrower shall pay all costs in connection therewith.
In the event that the Lender is called upon to pay any sums of money to
protect this Mortgage and the Note as aforesaid, all monies advanced or due
hereunder shall become immediately due and payable, together with interest at
the Default Rate, computed from the date of such advance to the date of the
actual receipt of payment thereof by the Lender.
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1.13 Cost of Collection. In the event this Mortgage is placed in the
hands of an attorney for the collection of any sum payable hereunder, the
Borrower agrees to pay all costs of collection, including reasonable attorneys
fees including those in all appellate and bankruptcy proceedings, incurred by
the Lender, either with or without the institution of any action or proceeding,
and in addition to all costs, disbursements and allowances provided by law. All
such costs so incurred shall be deemed to be secured by this Mortgage.
1.14 Survival of Warranties. All representations, warranties and
covenants of Borrower contained herein or incorporated by reference shall
survive funding of the loan evidenced by the Note and shall remain continuing
obligations, warranties and representations of Borrower during any time when any
portion of the obligations secured by this Mortgage remain outstanding.
1.15 Additional Security. In the event Lender at any time holds
additional security for any of the obligations secured hereby, it may enforce
the sale thereof or otherwise realize upon the same, at its option, either
before or concurrently herewith or after a sale is made hereunder.
1.16 Inspections. Lender, or its agents, representatives or workmen,
are authorized to enter at any reasonable time upon or on any part of the
Premises for the purpose of inspecting the same, and for the purpose of
performing any of the acts it is authorized to perform under the terms of this
Mortgage.
I.1 Liens. Borrower shall pay and promptly discharge, at Borrower's
cost and expense, all liens, encumbrances and charges upon the Mortgaged
Property or any part thereof or interest therein. Borrower shall have the right
to contest in good faith the validity of any such lien, encumbrance or charge,
provided Borrower shall first deposit with Lender a bond or other security
satisfactory to Lender in such amounts as Lender shall reasonably require, and
provided further that Borrower shall thereafter diligently proceed to cause such
lien, encumbrance or charge to be removed and discharged. If Borrower shall fail
to discharge any such lien, encumbrance or charge, then, in addition to any
other right or remedy of Lender, the Lender may, but shall not be obligated to,
discharge the same, either by paying the amount claimed to be due, or by
procuring the discharge of such lien by depositing in court a bond for the
amount claimed or otherwise giving security for such claim, or in such manner as
is or may be prescribed by law. Any amount so paid by the Lender shall, at
Lender's option, become immediately due and payable with interest at the Default
Rate, and shall be deemed part of the indebtedness secured by this Mortgage.
1.18 Future Advances. This Mortgage is given to secure not only
existing indebtedness, but also future advances, whether such advances are
obligatory or are to be made at the option of Lender, or otherwise, as are made
within twenty (20) years from the date hereof, to the same extent as if such
future advances are made on the date of the execution of this Mortgage. The
total amount of indebtedness that maybe so secured may decrease to a zero amount
from time to time, or may increase from time to time, but the total unpaid
balance so secured at one time shall not exceed twice the face amount of the
Note, plus interest thereon, and any disbursements made for the payment of
taxes, levies or insurance on the Mortgaged Property, with interest on such
disbursements at the Default Rate as hereinafter defined.
1.19 No Limitation of Future Advance Rights. Borrower covenants
and agrees with Lender that:
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(a) Borrower waives and agrees not to assert any right to
limit future advances under this Mortgage, and any such attempted
limitation shall be null, void and of no force and effect. Any
correspondence by Borrower regarding the future advances must be sent
to Lender at the address set forth above and to Lender's counsel: Casey
Cavanaugh, Esquire, Lowndes, Drosdick, Doster, Kantor & Reed,
Professional Association, Post Office Box 2809, Orlando, Florida
32802-2809.
(b) An event of default under the Mortgage shall automatically
exist (I) if Borrower executes any instrument which purports to have or
would have the effect of impairing the priority of or limiting any
future advance which might ever be made under the Mortgage or (ii) if
Borrower takes, suffers, or permits any action or occurrence which
would adversely affect the priority of any future advance which might
ever be made under the Mortgage.
1.20 Appraisals. Borrower covenants and agrees that Lender may obtain
an appraisal of the Mortgaged Property when required by the regulations of the
Federal Reserve Board or the Office of the Comptroller of the Currency or at
such other times as the Lender may reasonably require. Such appraisals shall be
performed by an independent third party appraiser selected by the Lender. The
cost of such appraisal shall be borne by the Borrower. Borrower's failure or
refusal to sign such an engagement letter however shall not impair Lender's
right to obtain such an appraisal. Borrower agrees to pay the cost of such
appraisal within ten (10) days after receiving an invoice for such appraisal.
ARTICLE II
ASSIGNMENT OF LEASES, SUBLEASES,
FRANCHISES, RENTS, ISSUES AND PROFITS
2.01 Assignment of Rents. Borrower hereby collaterally assigns and
transfers to Lender all the leases, subleases, franchises, rents, issues and
profits of the Mortgaged Property, and hereby gives to and confers upon Lender
the right, power and authority to collect such rents, issues and profits as
herein set forth. Borrower irrevocably appoints Lender its true and lawful
attorney-in-fact. In the event of default under the Note or this Mortgage,
Lender shall have the right, at its option, immediately and without further
legal action being necessary, to demand, receive and enforce payment, to give
receipts, releases and satisfactions, and to sue, in the name of Borrower or
Lender, for all such rents, issues and profits and apply the same to the
indebtedness secured hereby; provided, however, that Borrower shall have the
right to collect such rents, issues and profits (but not more than one month in
advance) prior to or so long as there is not an event of default under this
Mortgage.
2.02 Collection Upon Default. Upon any event of default under this
Mortgage, Lender may, at any time without notice, either in person, by agent or
by a receiver appointed by a court, and without regard to the adequacy of any
security for the indebtedness hereby secured, enter upon and take possession of
the Mortgaged Property, or any part thereof, in its own name, sue for or
otherwise collect such rents, issues and profits, including those past due and
unpaid, and apply the same, less costs and expenses of operation and collection,
including attorneys' fees, upon any indebtedness secured hereby, and in such
order as Lender may determine. The collection of such rents, issues and profits,
or the entering upon and taking possession of the Mortgaged Property, or the
application thereof as aforesaid,
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shall not cure or waive any default or notice of default hereunder or
invalidate any act done in response to such default or pursuant to such
notice of default.
2.03 Restriction on Further Assignments, etc. Except as hereinafter
specifically provided, Borrower shall not, without the prior written consent of
the Lender, assign the rents, issues or profits, or any part thereof, from the
Mortgaged Property or any part thereof, and shall not consent to the
modification, cancellation or surrender of any lease or sublease covering the
Mortgaged Property. An action of Borrower in violation of the terms of this
Section shall be void as against Lender in addition to being a default under
this Mortgage.
The Borrower shall not, without the consent of the Lender, consent to
the cancellation or surrender or, accept prepayment of rents, issues or profits,
other than rent paid at the signing of a lease or sublease, under any lease or
sublease now or hereafter covering the Mortgaged Property or any part thereof,
nor modify any such lease or sublease so as to shorten the term, decrease the
rent, accelerate the payment of rent, or change the terms of any renewal option;
and any such purported assignment, cancellation, surrender, prepayment or
modification made without the written consent of the Lender shall be void as
against the Lender. The Borrower shall, upon demand of the Lender, enter into an
agreement with the Lender with respect to the provisions contained in the
preceding provision regarding any lease or sublease covering said Mortgaged
Property or any part thereof, and the Borrower hereby appoints the Lender
attorney-in-fact of the Borrower to execute and deliver any such agreement on
behalf of the Borrower and deliver written notice thereof to the tenant to whose
lease such agreement relates.
The Borrower agrees to furnish to the Lender a copy of any modification
of any lease presently in effect and copies of all future leases affecting the
Mortgaged Property covered by this Mortgage, and failure to furnish to the
Lender a copy of any modification of a lease or a copy of any future lease
affecting said Mortgaged Property, shall be deemed a default under this Mortgage
and the Note, for which the holder of this Mortgage may, at its option, declare
the entire unpaid balance of the subject Mortgage and Note to be immediately due
and payable.
All leases or subleases hereafter entered into by Borrower with respect
to the Mortgaged Property or any part thereof, shall be subordinate to the lien
of this Mortgage unless expressly made superior to this Mortgage in the manner
hereinafter provided. At any time or times Lender may execute and record in the
appropriate Office of the Register or County Clerk of the County where the
Premises are situated, a Notice of Subordination reciting that the lease or
leases therein described shall be superior to the lien of this Mortgage. From
and after the recordation of such Notice of Subordination, the lease or leases
therein described shall be superior to the lien of this Mortgage and shall not
be extinguished by any foreclosure sale hereunder.
ARTICLE III
ENVIRONMENTAL CONDITION OF PREMISES
3.01 Environmental Condition of Property. Borrower hereby
warrants and represents to Lender after thorough investigation that:
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(a) the premises are now and at all times hereafter will
continue to be in full compliance with all Federal, State and local
environmental laws and regulations, including but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA), Public Law No. 96-510, 94 Stat. 2767, and the Superfund Amendments
and Reauthorization Act of 1986 (SARA), Public law No. 99-499, 100 Stat. 1613,
and
(b) as of the date hereof there are no hazardous materials,
substances, waste or other environmentally regulated substances
(including without limitation, any materials containing asbestos)
located on, in or under the Premises or used in connection therewith.
Borrower has obtained and will maintain all licenses, permits and
approvals required with respect thereto, and is and will remain in full
compliance with all of the terms, conditions and requirements of such
licenses, permits and approvals. Borrower further warrants and
represents that it will promptly notify Lender of any change in the
environmental condition of the Premises or in the nature or extent of
any hazardous materials, substances or wastes maintained on, in or
under the Premises or used in connection therewith, and will transmit
to Lender copies of any citations, orders, notices or other material
governmental or other communication received with respect to any other
hazardous materials, substances, waste or other environmentally
regulated substance affecting the Premises within five (5) days of
Borrower's receipt thereof.
Borrower hereby indemnifies and holds harmless Lender from and against
any and all damages, penalties, fines, claims, suits, liabilities, costs,
judgments and expenses (including attorneys', consultant's or expert's fees) of
every kind and nature incurred, suffered by or asserted against Lender as a
direct or indirect result of:
(c) any warranty or representation made by Borrower in
this paragraph being or becoming false or untrue in any material
respect or
(d) any requirement under the law, regulation or ordinance,
local, state or federal, regarding the removal or elimination of any
hazardous materials, substances, waste or other environmentally
regulated substances.
Borrower's obligations hereunder shall not be limited to any extent by
the term of the Note, and, as to any act or occurrence prior to payment in full
and satisfaction of said Note which gives rise to liability hereunder, shall
continue, survive and remain in full force and effect notwithstanding
foreclosure of this Mortgage, where Lender is the purchaser at the foreclosure
sale, or delivery of a deed in lieu of foreclosure to Lender.
Lender and its representatives shall have the right to enter onto the
Premises at reasonable times during the term of this Mortgage for the purpose of
conducting environmental inspections and testing. The cost of such inspections
and/or tests shall be borne by the Borrower if Lender has reason to believe that
Borrower's representations, covenants, warranties and certifications herein are
untrue or have been violated.
ARTICLE IV
SECURITY AGREEMENT
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4.01 Creation of Security Interest. Borrower hereby grants to Lender a
security interest in any and all personal property included within the Mortgaged
Property (herein the "Personal Property") located on or at the Premises,
including without limitation any and all property of similar type or kind
hereafter located on or at the Premises for the purposes of securing all
obligations of Borrower set forth in this Mortgage. This instrument is a
self-operative security agreement with respect to the above described property,
but Borrower agrees to execute and deliver on demand such other security
agreements, financing statements and other instruments as Lender may request.
4.02 Warranties, Representations and Covenants of Borrower.
Borrower hereby warrants, represents and
covenants as follows:
(a) Except for the security interest granted hereby, Borrower
is, and as to portions of the Personal Property to be acquired after
the date hereof will be, the sole owner of the Personal Property, free
from any adverse lien, security interest, encumbrance or adverse claims
thereon of any kind whatsoever. Borrower shall notify Lender of, and
shall defend the Personal Property against, all claims and demands of
all persons at any time claiming the same or any interest therein.
(b) Borrower shall not lease, sell, convey or in any manner
transfer the Personal Property without the prior written consent of
Lender.
(c) The Personal Property is not and shall not be used or
bought for personal, family or household purposes.
(d) The Personal Property shall be kept on or at the Premises
and Borrower will not remove the Personal Property from the Premises
without the prior written consent of Lender, except such portions or
items of Personal Property which are consumed or worn out in ordinary
usage, all of which shall be promptly replaced by Borrower.
(e) Borrower maintains a place of business in the State of
Florida and Borrower shall immediately notify Lender in writing of any
change in its place of business as set forth in the beginning of this
Mortgage.
(f) At the request of the Lender, Borrower shall join Lender
in executing one or more financing statements and renewals and
amendments thereof pursuant to the Uniform Commercial Code of Florida
in form satisfactory to Lender, and will pay the cost of filing the
same in all public offices wherever filing is deemed by Lender to be
necessary or desirable.
(g) All covenants and obligations of Borrower contained herein
relating to the Mortgaged Property shall be deemed to apply to the
Personal Property whether or not expressly referred to herein.
(h) This Mortgage constitutes a Security Agreement as that
term is used in the Uniform Commercial Code of Florida.
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ARTICLE V
REMEDIES UPON DEFAULT
5.01 Events of Default. Any one or more of the following shall
constitute a default under this Mortgage and the Note hereby secured:
(a) Failure of Borrower to make one or more payments required
by said Note on the due date thereof.
(b) Failure of Borrower to pay the amount of any costs,
expenses and fees (including counsel fees) of the Lender, with interest
thereon, as required by any provision of this Mortgage.
(c) Failure to exhibit to the Lender, within ten (10) days
after demand, receipts showing payment of real estate taxes and
assessments.
(d) Except as hereinbefore permitted, the actual or threatened
alteration, demolition or removal of any building on the Premises
without written consent of the Lender.
(e) Failure to maintain the Improvements on the Premises as
herein required, free of any liens placed or threatened during the term
hereof.
(f) Failure to comply with any requirements or order or notice
of violation of law or ordinance issued by any governmental department
claiming jurisdiction over the Mortgaged Property within three (3)
months from the issuance thereof, or before any such violation becomes
a lien against the Mortgaged Property, whichever first occurs.
(g) Failure of Borrower or others to comply with or perform
any other warranty, covenant or agreement contained herein, in the
Note, in the Construction Loan Agreement, if any, Commitment Letter or
in any other document executed by Borrower in conjunction with this
transaction, of even date herewith.
(h) Any breach of any covenant or warranty or material untruth
of any representation of Borrower contained in this Mortgage, or the
Note or any guaranty executed in conjunction herewith.
(i) The institution of any bankruptcy, reorganization or
insolvency proceedings against the then owner or Borrower in possession
of the Mortgaged Property, or any guarantor, or the appointment of a
receiver or a similar official with respect to all or a substantial
part of the properties of the then owner or Borrower in possession of
the Mortgaged Property and a failure to have such proceedings dismissed
or such appointment vacated within a period of forty-five (45) days.
(j) The institution of any voluntary bankruptcy,
reorganization or insolvency proceedings by the then owner or Borrower
in possession of the Mortgaged Property, or any
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guarantor, or the appointment of a receiver or a similar official with
respect to all or a substantial part of the properties of the then
owner or Borrower in possession of the Mortgaged Property at the
instance of the then owner or Borrower in possession of the
Mortgaged Property.
(k) The assertion or making of any levy, seizure, forfeiture
action, mechanic's or materialman's lien or attachment on the Mortgaged
Property or any part thereof.
(l) If default shall occur in any loan now or hereafter in
existence between Lender and Borrower or any mortgage encumbering
property in which the Borrower or any guarantor has any interest
whatsoever, and, conversely, the occurrence of an Event of Default
hereunder shall also constitute a default under any such other loan.
(m) The occurrence of any Event of Default under the Note, or
any loan agreement or guaranty, whether or not such event is
specifically set forth herein.
5.02 Default Rate. The Default Rate shall be the highest rate allowable
by law at the time of default, provided, however, that at no time shall any
interest or charges in the nature of interest be taken, exacted, received or
collected which would exceed the maximum rate permitted by law.
5.03 Acceleration Upon Default, Additional Remedies. In the event that
one or more defaults as above provided shall occur, the remedies available to
Lender shall include, but not necessarily be limited to, any one or more of the
following:
(a) Lender may declare the entire unpaid balance of the Note
immediately due and payable without notice.
(b) Lender may take immediate possession of the Mortgaged
Property or any part thereof(which Borrower agrees to surrender to
Lender) and manage, control or lease the same to such person or persons
and at such rental as it may deem proper and collect all rents, issues
and profits, therefrom, including those past due as well as those
thereafter accruing, with the right in the Lender to cancel any lease
or sublease for any cause which would entitle Borrower to cancel the
same; to make such expenditures for maintenance, repairs and costs of
operation as it may deem advisable; and after deducting the cost
thereof and a commission of five (5%) percent upon the gross amount of
rents collected, to apply the residue to the payment of any sums which
are unpaid hereunder or under the Note. The taking of possession under
this paragraph shall not prevent concurrent or later proceedings for
the foreclosure sale of the Mortgaged Property as provided elsewhere
herein.
(c) Lender may apply to any court of competent jurisdiction
for the appointment of a receiver or similar official to manage and
operate the Mortgaged Property, or any part thereof, and to apply the
net rents and profits therefrom to the payment of the interest and/or
principal of said Note and/or any other obligations of Borrower to
Lender hereunder. In event of such application, Borrower agrees to
consent to the appointment of such receiver or similar official, and
agrees that such receiver or similar official may be appointed without
notice to Borrower without regard to the adequacy of any security for
the debts and without regard to the solvency of
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Borrower or any other person, firm or corporation who or which may be
liable for the payment of the Note or any other obligation of Borrower
hereunder.
(d) Without declaring the entire unpaid principal balance due,
the Lender may foreclose only as to the sum past due, without injury to
this Mortgage or the displacement or impairment of the remainder of the
lien thereof, and at such foreclosure sale the property shall be sold
subject to all remaining items of indebtedness; and Lender may again
foreclose, in the same manner, as often as there may be any sum past
due.
(e) Lender may withhold disbursement, at Lender's option, of
all or any portion of loan proceeds, for so long as any event,
circumstance or condition exists which would give rise to an Event of
Default.
5.04 Additional Provisions. Borrower expressly agrees, on behalf of
itself, its successors and assign and any future owner of the Mortgaged
Property, or any part thereof or interest therein, as follows:
(a) All remedies available to Lender with respect to this
Mortgage shall be cumulative and may be pursued concurrently or
successively. No delay by Lender in exercising any such remedy shall
operate as a waiver thereof or preclude the exercise thereof during the
continuance of that or any subsequent default.
(b) The obtaining of a judgment or decree on the Note, whether
in the State of Florida or elsewhere, shall not in any manner affect
the lien of this Mortgage upon the Mortgaged Property covered hereby,
any judgment or decree so obtained shall be secured to the same extent
as said Note is now secured.
(c) In the event of any foreclosure sale hereunder, all net
proceeds shall be available for application to the indebtedness hereby
secured whether or not such proceeds may exceed the value of the
Mortgaged Property for unpaid taxes, liens, assessments and any other
costs relating to the Mortgaged Property.
(d) The only limitation upon the foregoing agreements as to
the exercise of Lender's remedies is that there shall be but one full
and complete satisfaction of the indebtedness secured hereby.
(e) The Borrower shall duly, promptly and fully perform each
and every term and provision of any Construction or other Loan
Agreement which has been executed and delivered by the parties hereto
simultaneously with the execution and delivery hereof, the terms of
which Construction or other Loan Agreement are incorporated herein by
reference. The lien of this Mortgage secures the payment of all sums
payable to Lender and the performance of all covenants and agreements
of Borrower under the terms of any Construction or other Loan
Agreement.
5.05 Remedies Not Exclusive. Lender shall be entitled to enforce
payment and performance
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of any indebtedness or obligations secured hereby and to exercise all rights and
powers under this Mortgage or the Note or under any other agreement or any laws
now or hereafter in force, notwithstanding some or all of the said indebtedness
and obligations secured hereby may now or hereafter be otherwise secured,
whether by mortgage, deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Mortgage nor its enforcement shall prejudice
or in any manner affect Lender's right to realize upon or enforce any other
security now or hereafter held by Lender, it being agreed that Lender shall
be entitled to enforce this Mortgage and any other security now or hereafter
held by Lender in such order and manner as Lender may in its absolute
discretion determine. No remedy herein conferred upon or reserved to Lender
is intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or not or hereafter existing at law or in equity or by
statute. Every power or remedy given to Lender or to which it may be otherwise
entitled may be exercised, concurrently or independently, from time to time
and as often as may be deemed expedient by Lender and it may pursue
inconsistent remedies.
5.06 Arbitration. Upon demand of any party hereto, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Mortgage and
other Loan Documents ("Disputes") between or among parties to this Mortgage,
shall be resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, claims arising from Loan Documents executed in the
future, or claims arising out of or connected with the transaction reflected by
this Mortgage. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of
Lender first stated above is located. The expedited procedures set forth in Rule
51 et seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be a licensed attorney.
Notwithstanding the foregoing, this arbitration does not apply to disputes under
or related to swap agreements.
5.07 Preservation and Limitation of Remedies. Notwithstanding the
preceding binding arbitration provisions, Lender and Borrower agree to preserve,
without diminution, certain remedies that any party hereto may employ or
exercise freely, independently or in connection with an arbitration proceeding
or after an arbitration action is brought. Lender and Borrower shall have the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale granted under Loan Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment,
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attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute. Lender and
Borrower agree that they shall not have a remedy of punitive or exemplary
damages against the other in any Dispute and hereby waive any right or claim
to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
ARTICLE VI
MISCELLANEOUS
6.01 Corporate Existence. So long as the Mortgaged Property shall be
owned or held by a corporation, such corporation shall at all times maintain its
corporate existence and shall be fully authorized to do business in the State of
Florida and shall maintain in the State of Florida a duly authorized registered
agent for the service of process. Failure to comply with such obligations shall
be a default under this Mortgage. Within ninety (90) days after the expiration
of the time for filing its annual report and the payment of the appropriate
corporate taxes in the State of Florida, Borrower will furnish to Lender a
certificate of good standing or other evidence satisfactory to Lender to show
compliance with the provisions of this Section.
6.02 Statements by Borrower. Borrower, within three (3) days after
request in person or within ten (10) days after request by mail, will furnish to
Lender or any person, firm or corporation designated by Lender, a duly
acknowledged written statement setting forth the amount of the debt secured by
this Mortgage, and stating either that no offsets of defenses exist against such
debt, or, if such offsets or defenses are alleged to exist, full information
with respect to such alleged offsets and/or defenses.
6.03 Successors and Assigns. The provisions hereof shall be binding
upon and shall inure to the benefit of the Borrower, its successors and assigns,
including without limitation subsequent owners of the Premises or the leasehold
estate of the Premises or any part thereof; shall be binding upon and shall
inure to the benefit of Lender, its successors and assigns and any future holder
of the Note, and any successors or assigns of any future holder of the Note. In
the event the ownership of the Mortgaged Property or any leasehold estate that
may be covered by this Mortgage, becomes vested in a person other than Borrower,
Lender may, without notice to Borrower, deal with such successor or successors
in interest with reference to this instrument and the Note in the same manner as
with the Borrower, and may alter the interest rate and/or alter or extend the
terms of payments of the Note without notice to Borrower hereunder or under the
Note hereby secured or the lien or priority of this Mortgage with respect to any
part of the Mortgaged Property covered hereby, but nothing herein, contained
shall serve to relieve Borrower of any liability under the Note or this Mortgage
(or any other agreement executed in conjunction therewith) unless Lender shall
expressly release Borrower in writing. Borrower and any transferee or assignee
shall be jointly and severally liable for any documentation or intangible taxes
imposed as a result of any transfer or assumption.
6.04 Notice. All notices, demands and requests given by either party
hereto to the other party shall be in writing. All notices, demands and requests
by the Lender to the Borrower shall be deemed to
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have been properly given if sent by United States registered or certified mail,
postage prepaid. All notices, demands and requests by the Borrower to the Lender
shall be deemed to have been properly given if sent by United States registered
or certified mail, postage prepaid, addressed to the Lender, or to such other
addresses the Lender may from time to time designate by written notice to the
Borrower given as herein required. Notices, demands and requests given in the
manner aforesaid shall be deemed sufficiently served or given for all purposes
hereunder at the time such notice, demand or request shall be deposited in any
post office or branch post office regularly maintained by the United States
Government.
The Borrower shall deliver to the Lender, promptly upon receipt of
same, copies of all notices, certificates, documents and instruments received by
it which materially affect any part of the Mortgaged Property covered hereby,
including, without limitation, notices from any lessee or sublessee claiming
that the Borrower is in default under any terms of any lease or sublease.
6.05 Modifications in Writing. This Mortgage may not be changed,
terminated or modified orally or in any other manner than by an instrument in
writing signed by the party against whom enforcement is sought.
6.06 Captions. The captions or headings at the beginning of each
Section hereof are for the convenience of
the parties and are not a part of this Mortgage.
6.07 Invalidity of Certain Provisions. If the lien of this Mortgage is
invalid or unenforceable as to any part of the debt, or if the lien is invalid
or unenforceable as to any part of the Mortgaged Property, the unsecured portion
of the debt shall be completely paid prior to the payments of the secured
portion of the debt, and all payments made on the debt, whether voluntary or
otherwise, shall be considered to have been first paid on and applied to the
full payment of that portion of the debt which is not secured or fully secured
by the lien of this Mortgage.
6.08 No Merger. If both the lessor's and lessee's estates under any
lease or any portion thereof which constitutes a part of the Mortgaged Property
shall at any time become vested in one owner, this Mortgage and the lien created
hereby shall not be destroyed or terminated by application of the doctrine of
merger and, in such event, Lender shall continue to have and enjoy all of the
rights and privileges of Lender as to the separate estates. In addition, upon
the foreclosure of the lien created by this Mortgage on the Mortgaged Property
pursuant to the provisions hereof, any leases or subleases then existing and
created by Borrower shall not be destroyed or terminated by application of the
law of merger or as a result of such foreclosure sale unless Lender shall so
elect. No act by or on behalf of Lender or any such purchaser shall constitute a
termination of any lease or sublease unless Lender or such purchaser shall give
written notice thereof to such tenant or subtenant.
6.09 Governing Law and Construction of Clauses. This Mortgage shall be
governed and construed by the laws of the State of Florida. No act of the Lender
shall be construed as an election to proceed under any one provision of the
Mortgage or of the applicable statutes of the State of Florida to the exclusion
of any other such provision, anything herein or otherwise to the contrary
notwithstanding.
6.10 Transfer. In the event all or any part of the property encumbered
by this Mortgage, or
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any interest therein, is sold, conveyed, encumbered or otherwise transferred by
the Borrower, without Lender's prior written consent, or, if Borrower is a
partnership, any general partner of Borrower ceases to be a general partner, or
if Borrower is a corporation:
(i) any shareholder of Borrower owning directly
or indirectly 10% or more of the issued and
outstanding stock of Borrower as of the date
hereof transfers, during the term of this
Mortgage, any of such stock, or
(ii) any additional stock of Borrower is issued
after the date hereof.
then, and in the event any of the foregoing events occur, Lender may, in its
sole discretion: require a modification of the terms of the loan or loans
secured hereby (including without limitation those related to the rate of
interest and terms or schedule or repayment) in a manner satisfactory to Lender,
and may charge an "assumption fee" or similar fee in consideration of such
modification or approval; or accelerate the indebtedness secured hereby and
declare the then outstanding balance, with all accrued interest to be
immediately due and payable.
6.11 Books and Records. The Borrower agrees to keep accurate books,
records and accounts reflecting its financial condition, including, but not
limited to, the operation of the Mortgaged Property, in accordance with
generally accepted accounting principles, consistently applied. The Lender shall
have the right, from time to time and at all times during normal business hours,
to examine such books, records and accounts at the offices of Borrower or other
entity maintaining such books, records and accounts, and to make such copies of
extracts thereof as the Lender shall desire.
6.12 Financial Statements. The Borrower shall, until the entire
indebtedness secured hereby has been fully paid, annually furnish to Lender the
Borrower's financial statements, which must be acceptable to Lender in Lender's
sole discretion. Such statements shall include, but not be limited to, a profit
and loss statement and reconciliation of surplus statement of the Borrower for
such year, and a balance sheet as of the end of such year. All reports shall be
audited without scope limitations by independent certified public accountants of
recognized standing selected by Borrower and acceptable to the Lender. Such
reports shall be furnished to the Lender not later than ninety (90) days after
the close of the Borrower's fiscal year.
6.13 Other Indebtedness Secured. This Mortgage is also given as
security for any and all other sums, indebtedness, obligations and liabilities
of any and every kind now or hereafter during the term hereof owing and to
become due from Borrower to Lender, however created, incurred, evidenced,
acquired or arising, whether under the Note or this Mortgage, or any other
instrument, obligation, contract, agreement or dealing of any and every kind now
or hereafter existing or entered into between Borrower and Lender, or otherwise,
as amended, modified or supplemented from time to time, and whether direct,
indirect, primary, secondary, fixed or contingent, and any and all renewals,
modifications or extensions of any or all of the foregoing.
6.14 Cross Default. A default under any commitment and/or loan made by
any lending institution (including, without limitation, Lender) to Borrower
shall, at the option of Lender, be and constitute a default under all
commitments and/or loans made to Borrower by Lender (including, without
limitation, the Note and this Mortgage).
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6.15 Broker's Commissions. The Borrower hereby agrees to defend Lender
and hold Lender harmless from and against all claims, losses, or liabilities,
including attorneys' fees, paralegal fees, and all related legal costs and
expenses related to or arising out of any claim for a brokerage fee, commission,
or finder's fee alleged to be due as a result of the issuance of the loan
evidenced by the Note and secured by this Mortgage.
6.16 Depository Accounts. For so long as the Note and the other
Loan Documents remain unpaid, the Borrower
shall maintain its depository accounts at the Lender's bank.
6.17 Funds Flow Coverage Ratio. Borrower shall, at all times, maintain
a Funds Flow Coverage Ratio of not less than 1.25 to 1.00. "Funds Flow Coverage"
shall mean the sum of net profit, depreciation and amortization minus all
dividends, withdrawals and non-cash income divided by the sum of all current
maturities of long term debt and capital lease obligations.
6.18 Parking Lot Construction. Borrower and Lender agree that a portion
of the loan proceeds, approximately SIXTY FIVE THOUSAND AND NO/100 DOLLARS
($65,000.00), is to be used by Borrower to construct a parking lot (the "Parking
Lot") at the Premises. Borrower agrees to complete the Parking Lot in a good and
workmanlike manner and in compliance with all applicable laws, rules and
regulations. Borrower shall so complete construction of the Parking Lot within
twelve (12) months of the date hereof. If Borrower does not complete the Parking
Lot within said twelve (12) months, Borrower shall, upon receipt of written
request from Lender, deposit $65,000.000 with Lender to be escrowed by Lender
for Borrower's account and to be thereafter applied toward completion of the
Parking Lot. In the event that Borrower does not escrow said $65,000.00 with
Lender within thirty (30) days of Borrower's receipt of Lender's request for
same, Borrower shall be in default hereunder.
6.19 WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREES, THAT:
(A) NEITHER THE BORROWER NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR
LEGAL REPRESENTATIVE OF ANY OF THE SAME SHALL SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE
ARISING FROM OR BASED UPON THIS MORTGAGE, THE NOTE, ANY OTHER LOAN
AGREEMENT OR ANY LOAN DOCUMENT EVIDENCING, SECURING OR RELATING TO THE
OBLIGATIONS OR TO THE DEALINGS OR RELATIONSHIP BETWEEN OR AMONG THE
PARTIES THERETO;
(B) NEITHER THE BORROWER NOR LENDER WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED;
(C) THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
NEGOTIATED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS;
(D) NEITHER THE BORROWER, NOR LENDER HAS IN ANY WAY AGREED
WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
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PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES; AND
(E) THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO
ENTER INTO THIS TRANSACTION.
IN WITNESS WHEREOF, Borrower has hereunto set hand and seal all done as
of the day and year first hereinbefore written.
Signed, sealed and delivered
in the presence of: THE PUBLISHING COMPANY OF NORTH
AMERICA, INC., a Florida corporation
/s/ Casey Cavanaugh By: /s/ Peter S. Balise
- ------------------------- -----------------------------
Name: Casey Cavanaugh PETER S. BALISE, President
/s/ Bonnie B. Coller
- -------------------------
Name: Bonnie B. Coller "BORROWER"
Borrower's Address: 186 North Industrial Park Blvd., Lake Helen, Florida 32744
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STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me on December 30,
1996 by PETER S. BALISE as President of THE PUBLISHING COMPANY OF NORTH AMERICA,
INC., a Florida corporation, on behalf of the corporation. He is personally
known to me or produced _____________________________________ as identification
and did not take an oath.
/s/ Casey Cavanaugh
--------------------------------
NOTARY SIGNATURE
Casey M. Cavanaugh
--------------------------------
PRINTED NOTARY SIGNATURE
NOTARY PUBLIC, STATE OF FLORIDA
Commission Number: CC480064
My Commission Expires: July 12, 1999
59
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
FORM 10-KSB - DECEMBER 31, 1996
EXHIBITS
3. Exhibit 10.1 First Union Real Estate Balloon Promissory Note
This item begins on the following page.
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FIRST UNION
REAL ESTATE BALLOON PROMISSORY NOTE
$800,000.00 No._____________ ORLANDO, FLORIDA
December 30, 1996
LENDER: FIRST UNION NATIONAL BANK OF FLORIDA, (hereinafter termed
"LENDER"), 800 North Magnolia Avenue, Orlando, Florida 32803
BORROWER: THE PUBLISHING COMPANY OF NORTH AMERICA, INC., a Florida
corporation, whose address is 186 North Industrial Park Blvd.,
Lake Helen, Florida 32744
BORROWER REPRESENTS HEREWITH THAT THE LOAN EVIDENCED HEREBY IS BEING OBTAINED
FOR THE FOLLOWING PRIMARY PURPOSE:
[X]BUSINESS; [ ]PERSONAL; [ ]FAMILY OR HOUSEHOLD; [ ]AGRICULTURAL
FOR VALUE RECEIVED: to wit, money loaned, the above named; the
undersigned BORROWER (hereinafter "BORROWER"), promises to pay to the order of
LENDER at its office in the above city, or wherever else LENDER may specify, the
sum of EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($800,000.00), with interest
until paid.
INTEREST RATE:
Interest shall accrue at the rate of two hundred fifty (250) basis points above
the "LIBOR Base Rate", as hereinafter defined. The interest rate shall initially
be calculated with reference to the LIBOR Base Rate which is in effect on the
date of this Note and shall be adjusted on the fifth (5th) day of each month
beginning the fifth (5th) of February, 1997 and continuing each month thereafter
(the "Change Date"). The interest rate shall be fixed until the next Change Date
as such LIBOR Base Rate changes. Interest shall be calculated on the basis of a
three hundred sixty (360) day year, and charged for the actual number of days
elapsed in an interest payment period. The term "LIBOR Base Rate" shall mean
that rate per annum for United States dollar deposits with a one month maturity
for an amount equal or comparable to the outstanding principal balance of this
Note as reported on Telerate page 3750 (or if not so reported, then as
determined by Lender from another recognized source of interbank quotations of
Lender's choice), as of 11:00 a.m. London time, two (2)London business days
prior to each Change Date for settlement in immediately available funds by major
top credit quality banks in the London Interbank Market adjusted for reserves by
dividing that rate by 1.00 minus the LIBOR Reserve. The LIBOR Base Rate shall be
rounded to the next higher 1/16th of 1% unless the Borrower has hedged LIBOR
with an interest rate swap with the Lender in which event LIBOR shall be rounded
five (5) decimal places as set forth in the 1991 ISDA Definitions published by
the International Swap and Derivatives Association, Inc. "LIBOR Reserve" is the
maximum percentage reserve requirement (rounded to the next highest
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1/16th of 1%) in effect for any day the principal balance of this Note is
outstanding under the Federal Reserve Board's Regulation D for "Euro-Currency
Liabilities" as defined therein. In no event, however, shall any adjustment or
LIBOR Reserve exceed the Borrower's pro rata share of Lender's total reserve
requirement for all of its Euro-Currency Liabilities. The LIBOR Base Rate is
one of several interest rate bases used by Lender, and is not necessarily the
lowest or most favorable rate of interest offered by Lender.
PAYMENTS OF PRINCIPAL AND INTEREST:
Beginning on the fifth (5th) day of February, 1997, and continuing on the fifth
(5th) day of each month thereafter until this Note shall be paid in full,
monthly payments of (i) all accrued but unpaid interest at the interest rate
provided above, plus (ii) principal in the amount of $4,444.44, shall be due and
payable. On December 5, 2011, this Note shall be fully paid in a final balloon
payment and the then remaining principal balance shall be paid in full, together
with all interest accrued thereon.
The Borrower agrees to pay a late charge equal to 5% of each payment of
principal and/or interest which is not paid within 10 days of the date on which
it is due. At LENDER'S option, the interest rate shall become the highest rate
allowed by the law of the state of LENDER'S office as set forth herein
commencing with and continuing for so long as the loan or any portion thereof is
in Default (as hereinafter defined). Further, upon BORROWER'S Default and where
LENDER deems it necessary or proper to employ an attorney to enforce collection
of any unpaid balance or to otherwise protect its interests hereunder; then
BORROWER agrees to pay LENDER'S reasonable attorneys' fees (including appellate
costs, if any) and collection costs. Liability for reasonable attorneys' fees
and costs shall exist whether or not any suit or proceeding is commenced.
Interest is computed on the basis of a 360 day year for the actual number
of days in the interest period (Actual/360 computation) unless indicated
below.
BORROWER HEREBY FURTHER WARRANTS, COVENANTS, AND AGREES, AS FOLLOWS:
Anything contained herein to the contrary notwithstanding, if for any
reason the effective rate of interest on this Note should exceed the maximum
lawful rate, the effective rate shall be deemed reduced to and shall be such
maximum lawful rate, and any sums of interest which have been collected in
excess of such maximum lawful rate shall be applied as a credit against the
unpaid balance due hereunder.
LENDER'S Actual/360 or 365/360 computation determines the annual
effective interest yield by taking the stated (nominal) interest rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the interest period. Application of such
computation produces an annualized effective interest rate exceeding that of the
nominal rate.
At LENDER'S option, any repayments of this Note, other than by U.S.
currency, will not be credited to the outstanding loan balance until LENDER
receives collected funds.
In the event any provision(s) of this instrument shall be left blank or
incomplete, BORROWER
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hereby authorizes and empowers LENDER to supply and complete the necessary
information as a ministerial task consistent with the understanding between the
parties.
BORROWER warrants that BORROWER does not have either a "record" or
reputation for violating Laws of the United States or of any State relating to
liquor (as referred to in 18 U.S.C.A. 3617, et seq.) or narcotics and/or any
commercial crimes.
The collateral pledged by BORROWER to secure this Note (hereinafter
referred to as the "COLLATERAL") SHALL, AT ALL TIMES, BE AT BORROWER'S risk. The
loss, injury to or destruction of COLLATERAL shall not release BORROWER from
payment or other performance hereof. BORROWER agrees to obtain and keep in force
Physical Damage and/or Property Damage Insurance on said COLLATERAL and any
other insurance required by LENDER. Such insurance is to be in form and amounts
satisfactory to LENDER, with the same payable to LENDER. All such policies shall
provide for ten days written minimum cancellation notice to LENDER. BORROWER
shall furnish to LENDER the original policies or certificate or other evidence
satisfactory to LENDER of compliance with the foregoing provisions. LENDER is
authorized, but not obligated, to purchase any or all of said insurance or
"single interest insurance" protecting only its security interest, all at
BORROWER'S expense. In such event, BORROWER agrees to reimburse LENDER for the
cost of such insurance to the extent that the same is not included in the
principal amounts of this Note.
BORROWER hereby assigns to LENDER the proceeds of all such insurance to
the extent of the unpaid balance hereunder, and directs any insurer to make
payments directly to LENDER. BORROWER further hereby grants to LENDER its Power
of Attorney, which shall be irrevocable for so long as any amount is unpaid
hereunder. Said Power of Attorney gives LENDER the sole right to file Proof of
Loss and/or any other forms required to collect from any insurer any amount due
from any loss, damage or destruction of the COLLATERAL; to agree to and bind
BORROWER as to the amount of said recovery; to designate Payee(s) of such
recovery; to grant releases to payor-insurers for their liability; to grant
subrogation rights to any such payor-insurer, to indorse any settlement check or
draft. BORROWER further agrees not to exercise any of the foregoing powers
granted to LENDER, without the LENDER'S written consent. In the event of any
default hereunder, LENDER is authorized in its sole discretion to cancel any
insurance and credit any premium refund against the unpaid balance due on
BORROWER'S OBLIGATIONS.
If, with respect to any security pledged hereunder, a stock dividend is
declared or any stock split-up made or right to subscribe is issued, all
certificates for the shares representing such stock dividend or stock split-up
right to subscribe will be immediately delivered, duly indorsed to the LENDER as
additional COLLATERAL security.
If, at any time, the COLLATERAL shall be deemed unsatisfactory to and
by LENDER, or in the event LENDER shall otherwise deem itself, its security
interests, its COLLATERAL or said debt unsafe or insecure, then and on demand of
LENDER, BORROWER shall immediately furnish such further COLLATERAL or make such
payment on said account as will be satisfactory to LENDER to be held by said
LENDER as if originally pledged hereunder.
At its option, LENDER may discharge taxes, liens, security interests or
other encumbrances at any time levied or placed on said COLLATERAL, may pay for
insurance and for the maintenance and
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preservation of same. BORROWER agrees to reimburse LENDER, on demand, for any
such payment made, or any such expense incurred by LENDER pursuant to the
foregoing authorization. Until Default, as hereinafter defined, BORROWER shall
have the right to retain possession of the COLLATERAL, unless otherwise agreed
by the parties hereto, and to use in any lawful manner not inconsistent with
this Note and the LOAN AGREEMENT and with any policy of insurance thereon.
BORROWER shall be liable for all documentary and intangible taxes assessed at
closing or from time to time during the life of the transaction.
LENDER may, to the extent permitted by law, with or without notice,
before or after maturity of this Note, transfer or register in the name of its
nominee(s) all or any part of the COLLATERAL and also exercise any or all rights
of collection, conversion or exchange and other similar rights, privileges and
options pertaining to the COLLATERAL; but shall have no duty to exercise any
such rights, privileges or options or to sell or otherwise realize upon any of
the COLLATERAL as herein authorized or to preserve the same and shall not be
responsible for any failure to do so or delay in so doing. As to any COLLATERAL
consisting of instruments or chattel paper, it is agreed that LENDER shall not
be required to take any steps whatever to preserve any rights against prior
parties.
LENDER shall have no custodial or ministerial duties to perform with
regard to COLLATERAL pledged except for its safekeeping; and by way of
explanation and not by way of limitation thereof, LENDER shall incur no
liability for any of the following: loss or depreciation of the COLLATERAL
unless caused by its willful misconduct, failure to present any paper for
payment or protest or to protest or give notice of non-payment or any other
notice with respect to any paper or COLLATERAL; or its failure to present or
surrender for redemption, conversion or exchange any bond, stock, paper or other
security whether in connection with any merger, consolidation, recapitalization,
reorganization or arising out of the intendment or refunding of the original
security or its failure to notify any party hereto that the COLLATERAL should be
so presented or surrendered.
Upon any transfer of this Note, the LENDER may deliver the property
held as security, or any part thereof, to the transferee, as well as any
subsequent holder hereof who shall thereupon become vested with all the power
and rights herein given to the LENDER in respect to the property so transferred
and delivered; and the LENDER shall thereafter be forever relieved and fully
discharged from any liability or responsibility with respect to such property so
transferred but with respect to any property not so transferred, the LENDER
shall retain all rights and powers hereby given.
With prior written consent of LENDER, other COLLATERAL may be
substituted for the original COLLATERAL herein, in which event all rights,
duties, obligations, remedies and security interests provided for, created or
granted shall apply fully to such substitute COLLATERAL.
Upon the occurrence of any of the "EVENTS OF DEFAULT," as hereinafter
defined, LENDER is herewith expressly authorized to exercise its right of
Set-Off or Bank Lien as to any monies deposited in demand, checking, time,
savings or other accounts of any nature maintained in and with it by any of the
undersigned, without advance notice. Said right of Set-Off may also be exercised
and applicable where LENDER is indebted to any signer hereof by reason of any
Certificate of Deposit, Note or otherwise.
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WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREES, THAT:
(A) NEITHER THE BORROWER NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR LEGAL
REPRESENTATIVE OF ANY OF THE SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE ARISING FROM OR
BASED UPON THIS PROMISSORY NOTE, ANY OTHER LOAN AGREEMENT OR ANY LOAN DOCUMENT
EVIDENCING, SECURING OR RELATING TO THE OBLIGATIONS OR TO THE DEALINGS OR
RELATIONSHIP BETWEEN OR AMONG THE PARTIES THERETO;
(B) NEITHER THE BORROWER NOR THE LENDER WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED;
(C) THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED
BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS;
(D) NEITHER THE BORROWER NOR THE LENDER HAS IN ANY WAY AGREED
WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES; AND
(E) THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER
INTO THIS TRANSACTION.
EVENTS OF DEFAULT
BORROWER shall be in default (herein referred to as a "Default") under
this AGREEMENT upon the happening of any of the following events, circumstances
or conditions, namely:
(1) Default in the payment or performance of any of the OBLIGATIONS
provided hereunder or in connection herewith or any other OBLIGATIONS of
BORROWER or any "affiliate" (as defined in 11 U.S.C. 101(2), hereinafter
"affiliate") of BORROWER or any endorser, guarantor or surety for BORROWER to
LENDER or any affiliate of LENDER, howsoever created, primary or secondary,
whether direct or indirect, absolute or contingent now or hereafter existing,
due or to be become due, or of any other covenant, warranty, or undertaking
expressed herein, therein, or in any other document establishing said
endorsement, guaranty or surety; or any other document executed by BORROWER in
conjunction herewith; or
(2) Any warranty, representation or statement made or furnished to
LENDER by or on behalf of BORROWER, or any guarantor, endorser, or surety for
BORROWER in connection with the Note or to induce LENDER to make a loan to
BORROWER which was false in any material respect when made or furnished or has
become materially false, if such warranty of BORROWER or guarantor, endorser or
surety for BORROWER was ongoing in nature; or
(3) Death, dissolution, termination of existence, insolvency, business
failure, appointment of a receiver, custodian, or trustee for any part of the
property of, assignment for the benefit of creditors by,
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or the commencement of any proceeding under any bankruptcy or insolvency laws by
or against BORROWER or any endorser, guarantor, or surety for BORROWER, or
(4) BORROWER or any guarantor, endorser, or surety for BORROWER shall
allow the acquisition of substantially all of the business or assets of BORROWER
or guarantor or surety for BORROWER or a material portion of such business
assets if such a sale is outside BORROWER'S or guarantor's, endorser's or
surety's ordinary course of business or more than 50% of the outstanding stock
or voting power of BORROWER in a single transaction or a series of transactions,
or acquire substantially all of the business or assets or more than 50% of the
outstanding stock or voting power of any other entity, or enter into any
transaction of merger or consolidation without prior written consent of LENDER;
or
(5) Failure of a corporate or limited partnership BORROWER or endorser,
guarantor or surety for said BORROWER to maintain its corporate or limited
partnership (as the case may be) existence in good standing; or
(6) Upon the entry of any monetary judgment or the assessment and/or
filing of any tax lien against BORROWER or any endorser, surety, or guarantor,
or upon the issuance of any writ of garnishment, judicial seizure of, or
attachment against any property of, debts due or rights of BORROWER or any
endorser, surety or guarantor, to specifically include commencement of any
action or proceeding to seize monies of BORROWER or any endorser, surety or
guarantor on deposit in any bank account with LENDER; or
(7) The BORROWER or any endorser, guarantor, or surety for said
BORROWER shall be a debtor, either voluntarily or involuntarily, under (and as
the term debtor is defined in) the Bankruptcy Code or should the BORROWER be
generally not paying BORROWER'S debts as such debts become due; or
(8) Failure of said BORROWER, endorsers, guarantors or
sureties to furnish financial statements or other financial information
reasonably requested by LENDER; or
(9) Loss, theft, substantial damage, destruction, sale or encumbrance
to or of any COLLATERAL or the assertion or making of any levy, seizure,
mechanic's or materialman's lien or attachment thereof or thereon; or
(10) If LENDER should otherwise deem itself or the debt created
hereunder unsafe or insecure; or should LENDER, in good faith, believe that the
prospect of payment or other performance is impaired.
REMEDIES ON DEFAULT (INCLUDING POWERS OF SALE)
Upon the occurrence of any of the foregoing events, circumstances or
conditions of Default, all of the OBLIGATIONS evidenced herein and secured
hereby shall at the option of the LENDER , immediately be due and payable
without notice. Further, LENDER shall then have all the rights and remedies of
a SECURED PARTY under the Uniform Commercial Code, as adopted by the State of
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LENDER'S office as set forth herein.
Without limitation thereto, LENDER shall have the following specific
rights and remedies:
(1) To take immediate possession of the COLLATERAL without notice or
resort to legal process; and for such purpose, to enter upon any premises on
which the COLLATERAL or any part thereof may be situated and remove the same
therefrom; or at its option, to render the COLLATERAL unusable. Further, also at
its option, to dispose of said COLLATERAL on BORROWER'S premises.
(2) To require BORROWER to assemble the COLLATERAL and make it
available to LENDER at a place to then be designated by said LENDER, which is
reasonably convenient to both parties.
(3) To exercise its rights of Set-Off by applying any monies of
BORROWER on deposit with LENDER toward payment of the OBLIGATIONS evidenced or
referred to herein or secured hereby, without notice. If any process is issued
or ordered to be served on LENDER, seeking to seize BORROWER'S rights and/or
interest in any bank account maintained with LENDER; the balance in any said
account shall immediately be deemed to have been and shall be set-off against
any and all OBLIGATIONS of BORROWER to LENDER, as of the time of issuance of any
such writ or process; whether or not BORROWER and/or LENDER shall then have been
served therewith.
(4) To dispose of COLLATERAL as allowed by the Uniform Commercial Code,
as adopted by the State of LENDER'S office as set forth herein, in any County or
place selected by LENDER, at either Private or Public Sale (at which Public Sale
LENDER may be the purchaser) with or without having the COLLATERAL physically
present at said site.
(5) To make or have made any repairs deemed necessary or desirable at
time of repossession, possession or sale, the cost of which is to be charged
against BORROWER.
(6) To apply the proceeds realized from disposition of the COLLATERAL
to satisfy the following terms, in the order here listed:
(a) The cost of reimbursing any person whose interest in the
premises is physically damaged by the entry and removal of the COLLATERAL, upon
BORROWER'S failure to do so; next to
(b) The expenses of taking, removing, holding for sale,
repairing or otherwise preparing for sale and selling of said COLLATERAL
specifically including the LENDER'S reasonable attorneys' fees (including
appellate costs, if any) and both legal and collection expenses; next to
(c) The expense of liquidating any liens, security interest,
attachments or encumbrances superior to the security interests herein created or
described; and finally to
(d) The unpaid principal and all accumulated interest
hereunder and to any other debt owed to LENDER by any signer hereof.
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Any surplus, after the satisfaction of the foregoing items (a) through
(d) shall be paid to BORROWER or to any other party lawfully entitled thereto
and known to this LENDER. Further, if proceeds realized from disposition of the
COLLATERAL shall fail to satisfy any of the foregoing items (a) through (d),
BORROWER shall forthwith pay deficiency balance to LENDER.
Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Note and other Loan Documents
("Disputes") between or among parties to this Note, shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims, counterclaims, disputes as to
whether a matter is subject to arbitration, claims brought as class actions,
claims arising from Loan Documents executed in the future, or claims arising out
of or connected with the transaction reflected by this Note. Arbitration shall
be conducted under and governed by the Commercial Financial Disputes Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association (the
"AAA") and Title 9 of the U.S. Code. All arbitration hearings shall be conducted
in the city in which the office of Lender first stated above is located. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall
be applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration does
not apply to disputes under or related to swap agreements.
Notwithstanding the preceding binding arbitration provisions, Lender
and Borrower agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, independently or in connection with
an arbitration proceeding or after an arbitration action is brought. Lender and
Borrower shall have the right to proceed in any court of proper jurisdiction or
by self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute. Lender and Borrower agree that they shall not have a
remedy of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
No waivers, amendments or modifications shall be valid unless in
writing. Further, this Note shall be governed by and construed under the laws of
the State of the LENDER'S office as set forth herein. All terms and expressions
contained herein which are defined in Articles 1, 3 or 9 of the
68
<PAGE>
Uniform Commercial Code of the State of LENDER'S office set forth herein shall
have the same meaning herein as in said Articles of said Code. No waiver by
LENDER of any default(s) shall operate as a waiver of any other default or the
same default on a future occasion. All rights of LENDER hereunder shall inure to
the benefit of its successors and assigns; and all obligations of BORROWER shall
bind his heirs, executors, administrators, successors and/or assigns.
If more than one person has signed this instrument, such parties are
jointly and severally obligated hereunder. Further, use of the masculine pronoun
herein shall include the feminine and neuter and also the plural. If any
provision of this instrument shall be prohibited or invalid under applicable
law, such provision shall be ineffective but only to the extent of such
prohibition of invalidity, without invalidating the remainder of such provision
or the remaining provisions of the Agreement. "Agreement" refers to the entire
PROMISSORY NOTE herein. In the case of conflict between the terms of this
Agreement and the Mortgage, Loan Agreement and/or Commitment Letter issued in
connection herewith, the priority of controlling terms shall be first this
Agreement, then the Mortgage, the Loan Agreement, then the Commitment Letter.
All payments received during normal banking hours after 2:00 P.M. shall
be deemed received at the opening of the next banking day.
If the scheduled payment amount is insufficient to pay accrued
interest, BORROWER shall make an additional payment of the amount of the accrued
interest in excess of the scheduled payment.
Each of the undersigned, whether BORROWER, sureties, or endorsers; and
all others who may become liable for all or any part of the OBLIGATIONS
evidenced hereby, do hereby, jointly and severally; waive presentment, demand,
protest, notice of protest and/or of dishonor, and also notice of acceleration
of maturity on Default or otherwise. Further, they agree that LENDER may, from
time to time, extend, modify, amend or renew this Note for any period (whether
or not longer than the original period of the Note) and grant any releases,
compromises or indulgences with respect to the note or any extensions,
modifications, amendments or renewals thereof or any security therefor, or to
any party liable thereunder or hereunder, all without notice to or consent of
any of the undersigned and without affecting the liability of the undersigned
hereunder.
PAYMENT of this Note, all obligations of the undersigned BORROWER
(herein "OBLIGATIONS") to LENDER, its successors and assigns, is secured inter
alia, (and includes the terms and obligations set forth therein), by a valid,
subsisting Mortgage and Security Agreement (the "Mortgage") recorded or to be
recorded in the county in which the real property described in the Mortgage (the
"Property") is located, and by this reference is incorporated herein. If this
Note is issued pursuant to a loan agreement of even date herewith, made by and
between BORROWER and LENDER (the "Loan Agreement," which term shall be deemed to
include any construction loan agreement or development loan agreement), then by
this reference, the Loan Agreement is specifically incorporated herein;
If default be made in the payment of any installment under this Note or
if the BORROWER violates any of the terms or breaches any of the conditions of
the Mortgage or the Loan Agreement, the
69
<PAGE>
entire principal sum and accrued interest shall become due and payable without
notice unless otherwise provided in the Loan Agreement at the option of the
Lender. Failure to exercise this option shall not constitute a waiver of the
right to exercise the same at any other time. Upon such default, the principal
of the Note and any part thereof, and accrued unpaid interest, if any, shall
bear interest at the rate of the then highest legal rate permissible by law.
All parties liable for the payment of this Note agree to pay the LENDER
reasonable attorneys' fees for the services and expenses of counsel employed
after maturity or default to collect this Note (including any appeals relating
to such enforcement proceedings), or to protect or enforce the security hereto,
whether or not suit be brought.
The remedies of LENDER as provided herein, in the Mortgage and Loan
Agreement shall be cumulative and concurrent, and may be pursued singly,
successively or together, at the sole discretion of LENDER and may be exercised
as often as occasion therefor shall arise. No act of omission or commission of
Lender, including specifically any failure to exercise any right, remedy or
recourse, shall be effective as a waiver thereof unless it is set forth in a
written document executed by LENDER and then only to the extent specifically
recited therein. A waiver or release with reference to one event shall not be
construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to any subsequent event.
BORROWER and all sureties, endorsers and guarantors of this Note hereby
(a) waive demand, presentment for payment, notice of nonpayment, protest, notice
of protest and all other notice, filing of suit and diligence in collecting this
Note, in enforcing any of the security rights or in proceeding against the
Property; (b) agree to any substitution, exchange, addition or release of any of
the Property or the addition or release of any party or person primarily or
secondarily liable hereon; (c) agree that LENDER shall not be required first to
institute any suit, or to exhaust his, their or its remedies against BORROWER or
any other person or party to become liable hereunder or against the Property in
order to enforce payment of this Note; (d) consent to any extension,
rearrangement, renewal or postponement of time of payment of this Note and to
any other indulgency with respect hereto without notice, consent or
consideration to any of the foregoing; and (e) except for the express written
release by LENDER of any such person, they shall be and remain jointly and
severally, directly and primarily, liable for all sums due under this Note, the
Mortgage and the Loan Agreement.
As used herein, the words, "BORROWER" and "LENDER" shall be deemed to
include BORROWER and LENDER as defined herein and their respective heirs,
personal representatives, successors and assigns.
This Note is executed and delivered at the LENDER'S address specified
above and shall be construed and enforced in accordance with the laws of the
State of Florida.
IN WITNESS WHEREOF, the BORROWER, on the day and year first written
above, has caused this Note to be executed under seal by (i) if a corporation,
adoption of the facsimile seal printed hereon for such special occasion and
purpose (or if an impression seal appears hereon by affixing such impression
seal) by its duly authorized officer(s) or, (ii) if by individuals, hereunto
setting their hands and seals.
70
<PAGE>
THE PUBLISHING COMPANY OF NORTH
AMERICA, INC., a Florida corporation
By: /s/ Peter S. Balise
------------------------------
PETER S. BALISE, President
"BORROWER"
Borrower's Address: 186 North Industrial Park Blvd., Lake Helen, Florida 32744
Documentary stamps in the amount of $2,800.00 have been affixed to the original
Mortgage and Security Agreement of even date herewith which secures this Note.
71
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
FORM 10-KSB - DECEMBER 31, 1996
EXHIBITS
4. Exhibit 10.2 Assignment of Leases, Rents, and Profits to
First Union National Bank
This item begins on the following page.
72
<PAGE>
Prepared By & Return To:
Casey Cavanaugh, Esquire
LOWNDES, DROSDICK, DOSTER, KANTOR
& REED, P.A.
215 North Eola Drive
Orlando, Florida 32802
ASSIGNMENT OF LEASES, RENTS, AND PROFITS
THIS ASSIGNMENT is executed and delivered on December 30, 1996 by THE
PUBLISHING COMPANY OF NORTH AMERICA, INC., a Florida corporation, whose address
is 186 North Industrial Park Blvd., Lake Helen, Florida 32744 (hereinafter
referred to as "Borrower"), to and in favor of FIRST UNION NATIONAL BANK OF
FLORIDA, a national banking association, organized and existing under the laws
of the United States of America, whose address is 800 North Magnolia Avenue,
Orlando, Florida 32803, (hereinafter referred to as the "Lender");
W I T N E S S E T H:
WHEREAS, Borrower is the present owner in fee simple of certain real
property (hereinafter referred to as the "Mortgaged Property") located in
Volusia County, Florida, more particularly described as follows:
SEE EXHIBIT "A" ATTACHED HERETO
and
WHEREAS, Lender is the owner and holder of a first mortgage
(hereinafter referred to as the "Mortgage") encumbering the Mortgaged Property,
which Mortgage secures the payment of a REAL ESTATE BALLOON PROMISSORY NOTE
(hereinafter referred to as the "Note") of even date herewith in the amount of
EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($800,000.00) made by Borrower to and
in favor of Lender; and
WHEREAS, Lender, as a condition to making the aforesaid mortgage loan
and to obtain additional security therefor, has required the execution of this
assignment of the leases, rents, income and profits of the Mortgaged Property by
Borrower.
NOW THEREFORE, in order further to secure the payment of the
indebtedness of Borrower to Lender, and in consideration of the loan represented
by the Mortgage and the Note secured thereby, and in further consideration of
the sum of TEN AND NO/100 DOLLARS ($10.00) in hand paid by Lender to Borrower,
the receipt and sufficiency of which is hereby acknowledged, Borrower does
hereby sell, assign, transfer and set over unto Lender all of the leases, rents,
issues, profits, and income of, from or pertaining to the Mortgaged Property.
This Assignment shall include any and all leases or rental agreements that may
now be in effect, as well as any future or additional leases or rental
agreements, and any renewals or extensions of such leases or rental agreements,
that may be entered into by Borrower for
73
<PAGE>
the lease or rental of the Mortgaged Property, or any part thereof, and Borrower
hereby agrees to execute and deliver such other and further assignments of said
leases or rental agreements as Lender may from time to time require.
PROVIDED ALWAYS, however, that if the Borrower shall pay unto the
Lender the indebtedness evidenced and represented by the Note, and if the
Borrower shall duly, promptly and fully perform, discharge, execute, effect,
complete and comply with and abide by each and every one of the stipulations,
agreements, conditions and covenants of the Note, the Mortgage and all other
documents and instruments executed as further evidence of or as security for
indebtedness secured hereby, then this Assignment and the estates and interests
hereby granted and created shall cease, terminate and be null and void.
1. In furtherance of the foregoing Assignment, Borrower:
a. Represents and warrants that it is the owner in fee simple of the
Mortgaged Property and has good title to the leases, rents, income, issues and
property hereby assigned and good right to assign the same, and that no other
person, firm, or corporation has any right, title, or interest therein; that it
has not previously sold, assigned, transferred, mortgaged, or pledged said
rents, issues, profits, income, and leases of the Mortgaged Property; and that
payment of any of the same has not otherwise been anticipated, waived, released,
discounted, set off or otherwise discharged or compromised.
b. Agrees and warrants that the terms of any and all leases will not be
amended, altered, modified, or changed, in any manner whatsoever, nor will they
be surrendered or cancelled, nor will any proceedings for dispossession or
eviction of any lessee be instituted by Borrower without the prior written
consent of Lender.
c. Agrees and warrants that no request will be made of any lessee to
pay any rent, and no rent will be accepted, in advance of the dates upon which
such rent becomes due and payable under the terms of any and all leases, it
being agreed between Borrower and Lender that rent shall be paid as provided in
said leases and not otherwise.
d. Authorizes Lender, by its employees or agents, at its option, after
the occurrence of a default under the Note or any other document securing same
or executed in connection therewith, to enter upon the Mortgaged Property and to
collect, in the name of Borrower, as its lawful attorney, or in its own name as
assignee, any rents or other income or profits accrued but unpaid and/or in
arrears at the date of such default, as well as the rents, income or profits
thereafter accruing and becoming payable during the period of the continuance of
the said default or any other default; and to this end, Borrower further agrees
that it will facilitate, in all reasonable ways, Lender's collection of said
rents, income or profits and will, upon request by Lender, execute a written
notice to each tenant, occupant, or licensee, directing said tenant, occupant,
or licensee to pay directly to Lender all income, rents and profits; provided,
however, that Lender may notify said tenant, occupant or licensee of the
effectiveness of this Assignment without giving notice to Borrower or requesting
Borrower to give such notice or join in such notice.
e. Authorizes Lender, upon such entry, at its option, to take over and
assume the
74
<PAGE>
management, operation and maintenance of the Mortgaged Property and to perform
all acts necessary and proper and to expend such sums out of the income of the
Mortgaged Property as may be needful in connection therewith, in the same manner
and to the same extent as Borrower theretofore might do. Borrower hereby
releases all claims against Lender arising out of such management, operation
and maintenance, excepting the liability of Lender to account as hereinafter
set forth.
f. Agrees to execute, upon the request of the Lender, any and all
instruments requested by the Lender to carry these presents into effect or to
accomplish any other purpose deemed by the Lender to be necessary or appropriate
in connection with these presents.
g. Agrees and acknowledges that this Assignment shall in no way operate
to prevent Lender from pursuing any remedy which it now or hereafter may have
because of any breach of the terms and conditions of the aforesaid Note,
Mortgage, or any document or instrument incorporated therein or executed in
conjunction therewith, or the extension thereof.
2. The Lender shall, after payment of all proper charges and expenses, including
reasonable compensation to any Managing Agent as it shall select and employ, and
after the accumulation of a reserve to meet taxes, assessments, water rents, and
fire and liability insurance in requisite amounts, credit the net amount of
income received by it from the Mortgaged Property, by virtue of this Assignment,
to any amounts due and owing to it by Borrower under the terms of the Mortgage
and the Note, but the manner of the application of such net income and what
items shall be credited shall be determined in the sole discretion of Lender.
Lender shall make a reasonable effort to collect rents, income and profits
reserving, however, within its own discretion, the right to determine the method
of collection and the extent to which enforcement of collection of delinquent
rents, income and profits shall be prosecuted.
3. In the event, however, that Borrower shall, with the consent of Lender,
reinstate the mortgage loan completely in good standing, having complied with
all the terms, covenants and conditions of the Mortgage and the Note, then, the
Lender, within one (1) month after demand in writing, shall redeliver possession
of the Mortgaged Property to Borrower, who shall remain in possession unless and
until another default occurs, at which time Lender may, at its option, again
take possession of the Mortgaged Property under authority of this instrument.
4. This Assignment shall remain in full force and effect as long as the
mortgage debt to Lender remains unpaid in
whole or in part.
5. The provisions of this instrument shall be binding upon Borrower and its
successors and assigns, and upon Lender and its successors and assigns. The
creation of rights and powers under this Assignment in favor of, or available
to, Lender shall, in no way whatsoever, be construed to impose concomitant
duties or obligations of Lender in favor of the Borrower or Borrower's tenants
except as expressly set forth herein.
6. It is understood and agreed that a complete release or satisfaction of the
aforesaid Mortgage shall operate as a complete release or satisfaction of all
Lender's rights and interest hereunder, and that satisfaction of said Mortgage
shall operate to satisfy this Assignment.
75
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Assignment to be executed
on the day and year first above written.
Signed, sealed and delivered
in the presence of: THE PUBLISHING COMPANY OF NORTH
AMERICA, INC., a Florida corporation
/s/ Casey Cavanaugh By: /s/ Peter S. Balise
- --------------------------- -----------------------------
Name: Casey Cavanaugh PETER S. BALISE, President
/s/ Bonnie B. Coller
- ---------------------------
Name: Bonnie B. Coller "BORROWER"
Borrower's Address: 186 North Industrial Park Blvd., Lake Helen, Florida 32744
76
<PAGE>
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me on December 30,
1996 by PETER S. BALISE as President of THE PUBLISHING COMPANY OF NORTH AMERICA,
INC., a Florida corporation, on behalf of the corporation. He is personally
known to me or produced _____________________________________ as identification
and did not take an oath.
/s/ Casey Cavanaugh
-------------------------------
NOTARY SIGNATURE
Casey M. Cavanaugh
-------------------------------
PRINTED NOTARY SIGNATURE
NOTARY PUBLIC, STATE OF FLORIDA
Commission Number: CC480064
My Commission Expires: July 12, 1999
77
<PAGE>
EXHIBITS
5. Exhibit 11.0 Statement Re: computation of per share earnings
(loss)
Year
ended
Primary Dec. 31,1996
--------------
Average shares outstanding 3,680,575
Net effect of dilutive stock options
based on the treasury stock method
using the average market price 658
--------------
Total 3,681,233
==============
Net loss ($691,495)
==============
Per share amount ($0.19)
==============
Fully-diluted
Average shares outstanding 3,680,575
Net effect of dilutive stock options
based on the treasury stock method using the
market price at end of period or the average
market price, whichever is higher 658
--------------
Total 3,681,233
==============
Net loss ($691,495)
==============
Per share amount ($0.19)
==============
78
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1760831
<SECURITIES> 2477500
<RECEIVABLES> 496784
<ALLOWANCES> 267787
<INVENTORY> 0
<CURRENT-ASSETS> 4701763
<PP&E> 1453157
<DEPRECIATION> (123374)
<TOTAL-ASSETS> 6097963
<CURRENT-LIABILITIES> 949327
<BONDS> 751111
0
0
<COMMON> 5137565
<OTHER-SE> (740040)
<TOTAL-LIABILITY-AND-EQUITY> 6097963
<SALES> 3233348
<TOTAL-REVENUES> 3467116
<CGS> (540754)
<TOTAL-COSTS> (2937600)
<OTHER-EXPENSES> (1113923)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27416
<INCOME-PRETAX> (691495)
<INCOME-TAX> 0
<INCOME-CONTINUING> (691495)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (691495)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
