As filed with the Securities and Exchange Commission on April 26, 1999.
Registration No. 000-25351
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
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ALFORD REFRIGERATED WAREHOUSES, INC.
(Name of small business issuer in its charter)
Texas 75-2695621
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
318 Cadiz Street
Dallas, Texas 75207
(214) 426-5151
(Address, including zip code, and telephone number,
including area code, of Issuer's principal executive offices)
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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ITEM 1. DESCRIPTION OF BUSINESS.........................................................................1
The Company.....................................................................................1
Merger with Alford............................................................1
The Business....................................................................................2
The Industry..................................................................3
Customers.....................................................................3
Competition; Growth Potential.................................................3
Sales and Marketing...........................................................3
Suppliers.....................................................................4
Employees.....................................................................4
Government Regulation.........................................................4
Research......................................................................4
Licenses, Permits and Product Registrations...................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................................................5
Results of Operations...........................................................................6
Year Ended December 31, 1998, Compared to Year Ended December 31, 1997:.........................6
Revenues......................................................................6
Operating Costs...............................................................7
General and Administrative Expenses...........................................7
Depreciation, Amortization, Rent and Interest.................................7
Income Tax Expense or Benefit.................................................8
Liquidity and Capital Resources.................................................................8
Year 2000.......................................................................................9
Fluctuations in Operating Results; Seasonality.................................................10
Environmental Matters..........................................................................10
Inflation......................................................................................10
Accounting Matters.............................................................................10
ITEM 3. DESCRIPTION OF PROPERTY........................................................................11
Dallas, Texas................................................................11
La Porte, Texas..............................................................11
Richardson, Texas............................................................12
Fort Worth, Texas............................................................12
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................................................................12
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS........................................................................................13
Committees of the Board of Directors...........................................................14
ITEM 6. EXECUTIVE COMPENSATION.........................................................................14
Executive Compensation.........................................................................14
Director Compensation..........................................................................15
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................15
ITEM 8. LEGAL PROCEEDINGS..............................................................................16
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS .......................................................................................16
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES........................................................17
ITEM 11. DESCRIPTION OF SECURITIES......................................................................17
General ......................................................................................17
Common Stock...................................................................................17
Preferred Stock................................................................................18
Provisions Having a Possible Anti-takeover Effect .............................................18
Limitation of Liability of Directors...........................................................18
Bylaw Provisions and Amendment of Bylaws.......................................................19
Transfer Agent.................................................................................19
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................................19
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................................................40
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS..............................................................40
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company
Alford Refrigerated Warehouses, Inc., a Texas corporation formerly
known as Hilltop Acquisition Holding Corporation, and prior to that, as Optical
Acquisition Corp. (the "Company"), was originally incorporated in October 1992
under the laws of the state of Delaware.
The Company filed a bankruptcy petition on September 21, 1995 and filed
the First Amended Joint Plan of Reorganization (the "Plan") on July 9, 1996. The
United States Bankruptcy Court for the Northern District of Texas, Dallas
Division (the "Court") entered an order approving the Plan on August 9, 1996.
The Plan was modified pursuant to an order of the Court on February 28, 1997.
The Plan provided for the liquidation of the Company's assets and
distribution of the proceeds to secured, priority and unsecured creditors. The
Plan further provided that the Company would remain in existence, although all
capital stock outstanding as of the Petition Date was canceled The Company was
reincorporated in the State of Texas in September 1997.
As contemplated in the Plan, the Company, which had no operations or
significant assets at the time, had undertaken a business strategy to seek out
and consummate an acquisition or merger transaction.
Merger with Alford
On or about December 15, 1998, the Company merged with Alford
Refrigerated Warehouses, Inc. ("Alford") pursuant to an Agreement and Plan of
Merger dated November 23, 1998 by and among Hilltop, Womack Gilman Investment
Services, L.C., Halter Financial Group, Inc. and Alford (the "Merger
Agreement"). In accordance with the terms of the Merger Agreement, Alford was
the surviving corporation. Immediately prior to the merger, Hilltop amended its
Articles of Incorporation to effect a reverse stock split so that each share of
Hilltop's issued and outstanding common stock was automatically converted into
.625 of a fully paid and nonassessable share of Hilltop's common stock. Pursuant
to the terms of the Merger Agreement, each share of common stock of Alford was
automatically converted into the right to receive 655.1372 shares of the common
stock of the Company. In addition, the Articles of Incorporation and the Bylaws
of Alford became the Articles of Incorporation and Bylaws of the Company, the
directors and officers of Alford became the directors and officers of the
Company, and the Company changed its name to Alford Refrigerated Warehouses,
Inc. The transaction is considered a reverse merger.
Application of reverse merger accounting results in the following:
1. The consolidated financial statements of the combined entity
are issued under the name of the legal parent, Alford
Refrigerated Warehouses, Inc. (formerly Hilltop), but the
entity is considered a continuation of the legal subsidiary,
Alford.
2. As Alford is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated financial statements of the continuing entity at
their carrying values.
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3. Amounts presented for periods prior to December 1998 are those
of Alford, the legal subsidiary. All shares for periods prior
to December 31, 1998, have been retroactively adjusted as if a
stock split had occurred.
4. Costs related to the transaction with the Company were expens-
ed during 1998.
In November 1998, certain affiliated entities of Alford were merged
into Alford. These entities, including Robco Industries, Inc. ("Robco") and
Alltemp Logistical Services, LLC ("Alltemp") are in the same line of business as
the Company and, by virtue of their ultimate ownership, are considered to be
entities under common control with the Company. Accordingly, these mergers were
accounted for in a manner similar to a pooling of interests and the balance
sheets, statements of operations, stockholders' equity and cash flows give
retroactive effect to the mergers as if they occurred as of the beginning of the
earliest period presented. The operations of Robco and Alltemp are insignificant
to total operations.
The Business
The Company believes that it is the largest public refrigerated ware-
housing operation in the southwest United States. The Company operates a network
of four strategically located refrigerated warehouse facilities in Texas, with a
total area of 1,500,000 sq. ft. or 32,000,000 cu. ft. of storage space. The Com-
pany's principal executive office is located at 318 Cadiz Street, Dallas, Texas
75207 and its telephone number is (214) 426-5151.
The Company's public warehouse business consists of providing
customers, which include food processors, distributors, wholesalers and
retailers, with temperature controlled storage services and a full range of
logistics management and other value-added services such as (i) blast freezing
of fresh products, (ii) repackaging and labeling of food products, (iii) order
picking and load consolidation, (iv) crossdocking, (v) container handling, (vi)
importing and exporting services, (vii) USDA approved storage and inspection
services, and (viii) Federal Government inspected facility for export.
The Company is a third party service provider and as such does not
purchase the inventory that it stores. When the Company receives products for
storage, it provides the customer with a nonnegotiable warehouse receipt. At
that time, the customer pays for one month of storage and handling based upon
the type and amount of product accepted at the beginning of the 30 day period.
The Company's inventory control system monitors the product by type of product
and by lot number. In order to remove any product from storage, the customer
places an order with the Company, the Company removes the product from the
warehouse for the customer and provides the customer with a bill of lading. If
there is any product remaining in storage at the end of the 30 day period, the
Company bills the customer for an additional 30 days of storage.
In addition to its public warehouse business, the Company leases
refrigerated space to approximately 28 tenants who manage their own inventory
and logistics functions and utilize their own equipment and personnel. In almost
all cases, the tenant pays all of the expenses, except for utilities and
property taxes which are included in the rent. The terms of the leases may be
month to month or as long as five years. The Company does not allow tenants to
make any special modifications to the leased space without the Company's prior
approval. For the year ended December 31, 1998 public warehouse customers
represented over 93% of the Company's revenue, the remainder of which was
attributable to leased space. For the year ended December 31, 1997, public
warehouse customers represented approximately 92% of the Company's revenue.
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The Company is designing and planning the construction of a 4,000,000
cubic foot addition to its Cadiz Street facility in Dallas, Texas. The Company
anticipates that the new addition will contain a blast freezing capacity of
400,000 lbs. per day and storage at -20(degree)F.
The Industry
The public refrigerated warehousing industry provides refrigerated
warehousing, inventory management and logistics services to food processors,
distributors and retailers of frozen and chilled foods during the period between
production and consumption. In the food industry, there is a period between
production and consumption as well as a continuing shift by individual food
processors, distributors and retailers from owning their refrigerated storage
facilities to outsourcing their warehousing requirements, inventory management
and logistics functions to operators of public refrigerated warehousing
businesses who are generally more economical providers of such services.
Historically, public refrigerated warehousing growth has been steady
and non-cyclical. Although the overall U.S. food industry has been growing at
the rate of population growth, according to a U.S. Department of Agriculture
report dated January of 1998, the public refrigerated warehousing industry has
been growing more rapidly than the population, at an average compound annual
growth rate of 4.5% per year over the past 10 years.
Customers
The Company had approximately 600 customers during the 12 months ended
December 31, 1998 and during the 12 months ended December 31, 1997. The
Company's customers include a broad base of national, regional and local food
processors, distributors, wholesalers and retailers. The current customer base
includes Pilgrim's Pride, Nabisco Food, M & M Mars, Kroger Co., Maple Leaf
Foods, Borden Dairy, Chef America, Dairy Farmers of America and many others.
During the twelve months ended December 31, 1998, no customer accounted for more
than 10% of the Company's revenues. During the twelve months ended December 31,
1997, Nabisco Food accounted for approximately 12% of the Company's revenues.
Competition; Growth Potential
The United States public refrigerated warehousing market is highly
fragmented. According to the Internatioinal Association of Refrigerated
Warehouses, the 10 largest public refrigerated warehousing firms represent less
than 40% of the available public refrigerated warehousing space. Public
refrigerated warehousing facilities in the United States are typically owned by
strong local or regional operators with one to four facilities representing two
to 14 million cubic feet of public refrigerated warehousing space which, on
average, generate direct profit contribution margins of 40%. Many of these
companies are family-owned businesses without successors active in the
management of the business. Based on past experience with such owners and the
dynamics of the industry, the Company believes that many of these businesses can
be acquired at attractive cash flow multiples.
Sales and Marketing
The Company's marketing and sales efforts are integrated across all
levels of management. Senior management has the responsibility for major
customers, including all national accounts. In addition, customers in each
region are serviced by regional general managers who work with sales and
3
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marketing professionals to plan and execute regional business development
strategies. At the local level, individual facility managers are responsible for
developing and maintaining long-term relationships with customers.
The Company's management and sales professionals are aggressively
pursuing business development opportunities that arise from natural market
growth as sales of frozen foods increase and the trend towards the use of public
refrigerated warehouse services continues. Management believes that by taking an
active role in the management and coordination of its customers' inventories and
by providing a broader range of logistics services, the Company will maintain
its competitive advantage over the long term.
Suppliers
The Company's largest expenses are labor and utilities. It is not
dependent upon any one supplier for raw materials. The majority of the Company's
maintenance services are provided primarily by its own employees.
Employees
As of December 31, 1998, the Company had a total of 188 employees, all
of whom are full-time employees. Of these employees, approximately 136 were
employed at the Dallas, Texas facility which includes its corporate offices, 28
were employed at the La Porte facility, 17 were employed at the Richardson
facility and seven were employed at the Fort Worth facility. None of the
employees are represented by a labor union.
Government Regulation
The Company's operations are subject to federal, state and local laws,
regulations and ordinances relating to the storage, handling, emission,
transportation and discharge of certain materials and various other health and
safety matters. These laws include the Clean Air Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, and the Resource
Conservation and Recovery Act. For example, the Company uses anhydrous ammonia
in its operations. In addition, the Company uses a type of refrigerant which is
no longer being produced because of government regulations. The Company is in
the process of modifying its equipment and believes that all of its equipment
will be able to use a new type of refrigerant by the end of 1999. The Company's
operations also are governed by laws and regulations relating to workplace
safety and worker health, principally the Occupational Safety and Health Act and
the regulations thereunder.
Governmental authorities have the power to enforce compliance with
their regulations, and violators may be subject to fines, injunctions or both.
The Company believes that it is currently in substantial compliance with all
such applicable laws and regulations. The Company cannot at this time estimate
the impact of any increased regulation on the Company's operations, future
capital expenditure requirements or the cost of compliance.
In addition to regulating the Company directly, the Company's customers
are subject to certain regulations relating to the import and export of food
products. The Company maintains an approved USDA inspection room on site at
three of its four facilities for the benefit of its customers.
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Research
The Company generally does not spend any material amount of its
resources on research and development. Rather, it is a member of the
Refrigeration Research and Education Foundation which is an organization that
was founded in 1943 as a scientific and educational foundation for the following
purposes:
o to advance the application of refrigeration technology for better
preservation of food and commodities;
o develop and support research in the science of refrigeration;
o cooperate with government and private institutions in research
activities;
o train and educate refrigerated warehouse/distribution personnel;
and
o establish and make available a repository of scientific
information specific to the industry.
Licenses, Permits and Product Registrations
The Company uses certain licenses and registrations in its operations.
For example, the Company has a perpetual license for the use of certain software
from Maves International Software, Inc. The Company uses this software for
inventory control and financial reporting. The Company is not required to pay
any additional royalties on the software, however, the Company periodically
purchases upgrades to the software.
In addition, Alford Distribution Services, Inc. ("ADS"), a wholly owned
subsidiary of the Company, is licensed by the Texas Alcoholic Beverages
Commission to store products containing alcohol. ADS is required to post a bond
each year to maintain this license which is subject to revocation, modification
and renewal each year by the commission.
For the benefit of its customers, the Company maintains a room at three
of its four facilities that is approved by the USDA for use in connection with
the inspection of food products.
The Company's trademark, a penguin, is registered with the patent
trademark office. This registration is periodically subject to renewal.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
With the exception of historical information, the matters discussed in
this report are "forward looking statements" as that term is defined in Section
21E of the Securities Exchange Act of 1934. The Company cautions the reader that
actual results could differ materially from those expected by the Company
depending on the outcome of certain factors, including, without limitation,
adverse changes in the market for the Company's services. Readers are cautioned
not to place undue reliance on any forwardlooking statement. All forward-looking
statements speak only as of the date of this filing. The Company does not have
any obligations to update or otherwise make any revisions to these statements to
reflect events or circumstances after the date of this filing, including,
without limitation, changes in the Company's business strategy or planned
capital expenditures, or to reflect the occurrence of unanticipated events.
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Reference to 1997 and 1998 are to the years ended December 31 of each
year.
Results of Operations
The following table sets forth unaudited information for the periods
indicated, including the dollar amount and percentage of revenues and pre-tax
net income derived from each of the Company's segments (warehouse locations).
<TABLE>
<CAPTION>
YEAR ENDED
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1998 1997
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<S> <C> <C> <C> <C>
REVENUES:
Dallas $ 9,411,480 53.3 $ 8,129,544 52.1
Richardson (1) 2,264,779 12.8 1,899,151 12.2
Fort Worth (2) 1,110,884 6.3 1,005,607 6.4
La Porte (3) 2,771,127 15.7 2,500,846 16.0
Other (4) $ 2,093,671 11.9 2,076,258 13.3
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$ 17,651,941 100.0% $ 15,611,406 100.0%
==============================================================
NET INCOME (LOSS):
Dallas $ 1,500,682 127.8 $ 802,032 585.8
Richardson (1) 213,996 18.2 127,413 93.1
Fort Worth (2) 120,465 10.3 67,454 49.3
La Porte (3) 15,012 1.3 (64,734) (47.3)
Other (4) (675,879) (57.6) (795,261) (580.9)
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$ 1,174,276 100.0% $ 136,904 100.0%
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<FN>
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(1) Richardson began operations on 12/05/96 under the Company's management.
(2) Fort Worth began operations on 1/02/97 under the Company's management.
(3) La Porte was leased and operated up to February 6, 1998 by Alltemp
Logistical Services, LLC ("Alltemp"), which was owned 100% by Mr. Michael
Oros, who is now the President of the Company. Alltemp was sold to the
Company's parent who then exercised an option to purchase the La Porte
facility. The Company then leased the facility from that date. On November
30, 1998 the Company's parent contributed its ownership interest in Alltemp
to the Company. The contribution was treated as a merger with an entity
under common control. Accordingly, Alltemp's operations are presented as
if the contribution occurred January 1, 1997.
(4) Includes revenues or losses of a facility in Houston, which was
discontinued in 1998 and expenses associated with the corporate office (
accounting, legal, data processing and administrative).
</FN>
</TABLE>
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Year Ended December 31, 1998, Compared to Year Ended December 31, 1997:
Revenues
The Company recorded a net profit of $813,276, or $.12 per share for
1998, as compared to a net profit of $141,497, or $.02 per share for 1997.
Total revenues for 1998 were $17,651,941, an increase of $2,040,535, or
13.1%, compared to revenues of $15,611,406 for 1997. This increase in revenues
is comprised primarily of the following components: Dallas revenues increased by
$1,281,936, or 15.8%; Richardson revenues increased by $365,628, or 19.3%; Fort
Worth revenues increased by $105,277, or 10.5%; and La Porte revenues increased
by $270,281, or 10.8%. Revenues from the facility in Houston, which was
discontinued in 1998, decreased marginally from 1997.
The increases of 15.8% in Dallas and 19.3% in Richardson are due to a
higher utilization of space at each facility. The current senior management team
began working on an aggressive revenue building program when they joined the
Company in December 1996. Continued increases are projected for 1999 as the
facilities are utilized to their fullest extent. The Fort Worth facility has
approximately 30% of the warehouse space leased to a tenant, which accounted for
approximately 32% of the revenues for 1998 and 25% of the revenues for 1997. The
revenue earning capability of this facility is stabilized by this constant flow
of revenue and increases in revenue are more dependant on the efficient
utilization of the remaining warehouse capacity. La Porte came under current
management's control in February 1998. Although the revenue increases from 1997
to 1998 exceeded 10%, management believes that the true earning capability of La
Porte will not be realized until at least 1999.
Operating Costs
Operating costs increased by $754,843, or 7.0% from 1997 to 1998, due
primarily to the increase in related sales. This overall increase is generally
made up of the net of the following increases and decreases:
- Wages and benefits increased by $643,320, or 11.6% primarily
due to increases in utilization which in turn necessitated
increased employment levels.
- Utilities increased by $261,986, or 11.1% primarily due to the
abnormally high outside temperatures during 1998 which
contributed to increased consumption of electricity.
- Insurance decreased by $56,512, or 14.6% primarily due to the
consolidation of La Porte under corporate insurance policies
in 1998.
- The remaining decrease in operating costs was due to a
multitude of smaller decreases which on an individual basis
are not material.
General and Administrative Expenses
General and administrative expenses decreased by $267,622, or 20.3%.
This decrease was primarily due to a decrease in legal and professional fees of
$226,514, or 57.4%.
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Depreciation, Amortization, Rent and Interest
Depreciation expense increased in 1998 to $776,569 from $545,732 in
1997 due primarily to the purchase of La Porte and the capitalization of lease
assets and obligations. Rent expense decreased by $146,424, or 8.5% from 1997 to
1998. This decrease was primarily due to the purchase of La Porte in 1998 and
the closing of the leased facility in Houston. Interest expense was $1,462,318
in 1998, as compared to $1,030,789 in 1997. This increase of $431,529, or 41.9%
was due primarily to the assumption of $5,400,000 of long-term debt for the
purchase of La Porte and the higher utilization of the line of credit.
Income Tax Expense or Benefit
Income tax expense or benefit includes the current federal tax expense
or benefit and the effect of deferred taxes related primarily to the difference
between book and tax depreciation on property, plant and equipment. For the
years ended December 31, 1998 and December 31, 1997, the Company recorded income
tax expense of $361,000 and an income tax benefit of $4,593, respectively. The
change from 1998 to 1997 is due to an increase in taxable income and deferred
tax expense related to the utilization of net operating losses which became
available in 1998 after the merger with Robco.
The Company establishes valuation allowances when necessary, in
accordance with the provisions of SFAS 109, "Accounting for Income Taxes," to
reduce deferred tax assets to the amount expected to be realized. The Company
had potential net operating loss carryforward of approximately $8,332,000 and
$9,703,000 for the years ended December 31, 1998 and December 31, 1997,
respectively. A valuation allowance of $1,676,000 exists for both years for net
operating loss carryforwards not anticipated to be realized before expiration.
Based upon future income projections, the Company expects to realize the net
asset.
Liquidity and Capital Resources
At December 31, 1998, the Company's working capital ratio was .9 to 1
compared to 1.3 to 1 at December 31, 1997. The Company had a working capital
deficit of $241,219 at December 31, 1998, as compared to working capital of
$681,778 at the end of 1997. The decrease in the Company's working capital ratio
and working capital is primarily due to decreases in cash and cash equivalents
of $337,047 and federal income tax receivable of $127,629 and increases in
property taxes payable of $294,704 and current maturities of long-term debt in
the amount of $384,285. These decreases are offset in part by an increase in
accounts receivable of $188,443. The increase in accounts receivable and
property taxes payable are primarily due to addition of La Porte in 1998. The
increase in current maturities of long-term debt is primarily due to the
assumption of a note payable of $5,400,000 for the purchase of La Porte and the
capitalization of lease assets and obligations of $1,191,228.
Net cash provided by operating activities for 1998 totaled $2,119,211
as compared to net cash used in operating activities of $91,878 for the year
ended 1997. The increase in net cash provided by operating activities is
comprised of the following factors: net income was $813,276 in 1998 as compared
to $141,497 in 1997; depreciation expense was $776,569 in 1998 as compared to
$545,732 in 1997; deferred tax expense was $296,000 in 1998 as compared to
deferred tax benefit of $6,593 in 1997; prepaid expenses decreased $459,058 in
1998 as compared to $294,517 in 1997; accounts payable increased $116,068 in
1998 as compared to a decrease of $87,826 in 1997; and property taxes payable
increased $294,704 in 1998 as compared to $186,158 in 1997. These increases were
partially offset by a decrease in notes payable of $522,254 in 1998 as compared
to $280,659 in 1997. In 1997 there were other material decreases in net cash
8
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provided by operating activities due to an increase in deposits and escrows of
$552,506 and an increase in other assets of $511,827. There was no material
change in these categories in 1998.
Capital expenditures for 1998 were $1,417,965, compared to $746,579 for
1997. The increase of $671,386 was due primarily to the cash paid on the
purchase of the La Porte facility.
The Company has a line of credit which provides up to $2,500,000, of
which the company had borrowed $1,549,377 at December 31, 1998. The borrowing
base on the line of credit fluctuates based on reports submitted by the Company
to the lender on an as needed basis. The availability at any time is determined
by a calculation of 80% of the eligible accounts receivable submitted plus 20%
of the cash receipts collected since the last report. The line of credit expires
on December 3, 2001.
Net cash used in financing activities for 1998 totaled $1,038,293 as
compared to net cash provided by financing activities of $697,062 in 1997, a net
change of $1,735,355. Financing activities in 1997 included mortgage financing
on the Dallas facility for $8,100,000 and a term loan of $1,207,160. The Company
also received $678,165 in advances on the line of credit. Cash was used to make
principal payments on debt of $5,758,195 and advances to an affiliate of
$3,922,472. In 1998 financing activities consisted of advances on the line of
credit in the amount of $1,021,212. Cash was used to make principal payments on
debt of $1,261,464 and advances to an affiliate of $798,041.
During 1998, the Company's parent assumed $2,600,000 of the notes
payable outstanding as of January 1, 1998 as a settlement of a portion of the
notes payable due to the Company. The Company has guaranteed this obligation
which totaled $2,350,000 at December 31, 1998. The Company believes that the
collateral pledged by its parent is adequate to cover the debt in case of a
default and has not recorded a liability in the financial statements related to
this guarantee.
The company believes that cash flow supplemented by the Company's
positive cash position will be adequate to fund the Company's capital
requirements.
The Company has entered into an agreement for the purchase of the Fort
Worth facility for $3,000,000. The Company expects to complete the transaction
in the second quarter of 1999. The Company has executed an "Exclusive Option
Contract" for the purchase of the Richardson facility for $6,000,000. The option
period will expire on February 22, 2000. Management hopes to close this trans-
action by the end of the third quarter of 1999. The Company is currently
negotiating with a potential lender to provide financing for both facilities.
Year 2000
The Company, like many companies, faces the "Year 2000" issue. This is
a result of computer programs being written using two digits rather than four to
define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among other things a temporary
inability to process transactions or engage in similar normal business
activities. The Company recognizes that it must take action to ensure that its
operations will not be adversely impacted by Year 2000 software failures.
The Company has conducted a comprehensive review of its computer
systems to identify the impact of the "Year 2000" issue. The company has
developed a plan to address the problem and is currently implementing the
changes identified in the plan. During 1998 the Company replaced one of its
9
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computer processors to handle the Year 2000 compliant software. The software
used by the Company is provided by a third party who has assured the company
that its latest version is Year 2000 compliant. The fees associated with the
licensing of the latest version were paid in 1996. Implementation of the
software is expected late in the second quarter of 1999. The remaining costs
associated with the implementation are not expected to have a material effect on
the Company or its results of operations. The total cost associated with the
remediation plan is currently estimated to be less than $180,000, most of which
was incurred in 1996 and 1998.
The Company has maintained correspondence with many of the Company's
significant customers and suppliers. To date, the Company is not aware of any
third party customer or supplier with a "Year 2000" issue that would materially
impact the Company's results of operations, liquidity or capital resources.
However, the Company has no means of ensuring that all third parties will be
"Year 2000" ready.
The Company has reviewed its non-information technology and systems
that may include embedded chips for Year 2000 compliance. The Company's
assessments indicate that due to the nature of the Company's operations, these
technology systems do not represent an area of material risk relative to Year
2000 readiness.
Fluctuations in Operating Results; Seasonality
The Company's operating results do not vary significantly from period
to period. Generally sales volumes are lowest at the beginning of the fiscal
year and grow steadily to a peak in November and December.
Environmental Matters
The Company is not aware of any environmental liability relating to its
facilities or operations that would have a material adverse effect on the
Company, its business, assets or results of operations.
Inflation
Inflation has not historically had a material effect on the Company's
operations, and is not expected to have a material impact on the Company in the
future.
Accounting Matters
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected financial information about
operating segments in interim financial reports to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The disclosure requirements of SFAS No.
131 are effective for financial statements for financial years beginning after
December 15, 1997. The Company has complied with the disclosure requirements of
SFAS No. 131 in its financial statements for fiscal year ended December 31, 1998
and December 31, 1997.
10
<PAGE>
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement standardized the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement generally
provides for matching the timing of gain or loss recognition on the hedging
instrument with the recognition of (a) the changes in fair value of hedged asset
or liabilities that are attributable to the hedged risk or (b) the earnings
effect of the hedged forecasted transaction. The statement is effective for all
fiscal quarters for all fiscal years beginning after June 15, 1999, with early
application encouraged, and shall not be applied retroactively to financial
statements of prior periods. Adoption of SFAS No. 133 is expected to have no
effect on the Company's financial statements.
ITEM 3. DESCRIPTION OF PROPERTY
Set forth below is information with respect to certain of the Company's
properties. The industry measures space in cubic feet instead of square feet
because cost projections include facility height to account for refrigeration
and stacked cooled product. The Company believes that all of these properties
are adequately insured, in good condition and suitable for their anticipated
future use.
<TABLE>
<CAPTION>
Lease
Location Primary Use Approximate Size Owned/Lease Expiration Date
- -------- ----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Dallas, Texas Corporate office 24,000,000 cubic Owned N/A
& Warehouse feet on 52 acres
La Porte, Texas Warehouse 4,500,000 cubic feet Owned N/A
on 32.3 acres
Richardson, Texas Warehouse 3,200,000 cubic feet Leased Dec. 31,2007
on 12.4 acres
Fort Worth, Texas Warehouse 1,550,000 cubic feet Leased Jan. 31, 2000
on 13.5 acres
</TABLE>
Dallas, Texas
The Company has 18 tenants at its Dallas, Texas facility. Of these, no
tenant occupies ten percent or more of the rentable cubic footage of the
facility. The Company itself uses a majority of the total cubic feet of the
facility as a public refrigerated warehouse. A majority of the Dallas, Texas
facility is used for refrigerated warehousing purposes. The remainder is used
for public dry storage and for the Company's corporate offices.
The Dallas, Texas facility is subject to a 10 year fixed rate mortgage
in the original principal amount of $8,100,000 which accrues interest at 8.4%
per year. As of January 20, 1999, the Company owed approximately $7,893,859 on
the mortgage which matures on or about October 1, 2007. At that time, assuming
no prepayments, the Company will owe approximately $5,682,578.
The Company currently plans to construct a 4,000,000 cubic-foot
addition to its facility in Dallas, Texas. The estimated cost of the
improvements is approximately $8,000,000 which amount most likely will be
financed by a conventional mortgage or sale of convertible debentures in
addition to cash flow and the issuance of the Company's common shares.
11
<PAGE>
La Porte, Texas
The Company has three tenants at its La Porte facility. Of these, no
tenant occupies ten percent or more of the rentable cubic footage of the
facility. The Company itself uses a majority of the total cubic feet of the
facility as a public refrigerated warehouse.
This property is subject to a 10 year fixed rate mortgage in the
original principal amount of $5,400,000 which accrues interest at 8.36% per
year. As of January 20, 1999, the Company owed approximately $5,352,494 on the
mortgage which matures on or about March 1, 2008. At that time, assuming no
prepayments, the Company will owe approximately $4,511,799.
Richardson, Texas
The Company has three subtenants at its Richardson facility. The
Company has executed an exclusive option contract for the purchase of this
property for $6,000,000. The Company has received a term sheet from a bank,
subject to due diligence, to finance the purchase of the property in an amount
up to 70% of the property's appraised value. The Company hopes to close this
transaction by the end of the third quarter of 1999.
Fort Worth, Texas
As of December 31, 1998, the Company had four tenants at its Ft. Worth
facility. Of these, Kroger Co. accounted for approximately 30% of the space in
the facility. The lease between the Company and Kroger Co. is for a one year
term with provisions for annual renewal.
The Company has entered into a purchase and sale agreement to purchase
this property for $3,000,0000 in cash. The Company has received a term sheet
from a bank, subject to due diligence, to finance the purchase of the property
in an amount up to 70% of the property's appraised value. The Company hopes to
close this transaction in the second quarter of 1999.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of December 31,
1998 with regard to the beneficial ownership of Common Stock by (i) each person
known to the Company to be the beneficial owner of 5% or more of its outstanding
Common Stock, (ii) the officers and directors of the Company individually, and
(iii) the officers and directors of the Company as a group. All addresses are in
care of the Company, 318 Cadiz Street, Dallas, Texas 75207.
<TABLE>
<CAPTION>
Number of
Name Shares Owned Percent
---- ------------ -------
<S> <C> <C> <C>
Joseph Y. Robichaud(1) 6,551,372 93.6%
Castor Capital Corporation 6,551,372 93.6%
Directors and executive 6,551,372 93.6%
officers as a group (5 persons)
12
<PAGE>
<FN>
- --------------------------
(1) All of these shares are held by Castor Capital Corporation. The sole
shareholder of Castor is the Robichaud Family Trust, of which Mr.
Robichaud is the trustee. Mr. Robichaud is also the chairman and chief
executive officer of Castor.
</FN>
</TABLE>
Castor Capital Corporation is the owner of approximately 93.6% of the
outstanding shares of the Common Stock and as such is able to elect the board of
directors and determine the outcome of other matters requiring shareholder
action without the concurrence of any other shareholder. The sole shareholder of
Castor Capital Corporation is the Robichaud Family Trust, of which Mr. Robichaud
is trustee. Mr. Robichaud is also the chairman and chief executive officer of
Castor.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Set forth below is certain information regarding the directors,
executive officers and significant employees of the Company. Each of the
directors of the Company will serve until the next annual meeting of
shareholders or until his successor is elected and qualified. Executive officers
of the Company are elected by the Board of Directors to hold office until their
respective successors are elected and qualified.
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C> <C>
Alton M. Adams 60 Chief Executive Officer
Michael A. Oros 63 President
James C. Williams 41 Vice President, Chief
Financial Officer,
Secretary, Treasurer and
Director
Joseph Y. Robichaud 71 Director
Kenneth M. Tomilson 65 Director
</TABLE>
Set forth below is a description of the backgrounds of the directors,
executive officers and significant employees of the Company.
Joseph Y. Robichaud has served as a Director of the Company since
December 1996 and from March 1994 to July 1995. Mr. Robichaud is also on the
board of directors and serves as the chairman and chief executive officer of
Castor Capital Corporation. From 1966 to 1995, Mr. Robichaud was chairman and,
indirectly, principal shareholder of Odyssey Industries, Inc., which was the
sole shareholder of Associated Freezers of Canada, Inc., an operating company in
the business of owning and operating frozen food warehousing facilities in
Canada and Australia. In 1994, a dispute arose between Odyssey and its bank
lender concerning currency exchange rates affecting the repayment of Odyssey's
loan. At the request of the bank, a receiver was appointed for Odyssey and the
receiver subsequently placed Odyssey into bankruptcy and sold the profitable
operations of Associated Freezers of Canada, Inc. Mr. Robichaud received his
Bachelor of Science degree in Civil Engineering from the University of New
Brunswick in 1950. Mr. Robichaud is the brother-in-law of Mr. Tomilson.
Kenneth M. Tomilson has served as a Director of the Company since
December 1996. Mr. Tomilson is also the president of Castor Capital Corporation
and has served in that position since 1995. From 1964 to the present, Mr.
Tomilson has served as president of Engineering Design & Construction Managers
Ltd. which provides design services, engineering, construction supervision and
management for low and high-rise residential, commercial and industrial
buildings, food processing and refrigerated warehousing. Prior to 1995, Mr.
Tomilson was vice president and a director of Odyssey Industries, Inc. In 1994,
a dispute arose between Odyssey and its bank lender concerning currency exchange
13
<PAGE>
rates affecting the repayment of Odyssey's loan. At the request of the bank, a
receiver was appointed for Odyssey and the receiver subsequently placed Odyssey
into bankruptcy. Mr. Tomilson is a member of The Canadian Standards Association
Technical Committee responsible for setting standards and formulating codes for
mechanical refrigeration in Canada. Mr. Tomilson graduated from the University
of New Brunswick with a Bachelor of Science degree in Civil Engineering in 1958.
Mr. Tomilson is the brother-in-law of Mr. Robichaud and is also the
brother-in-law of Mr. Adams.
Alton M. Adams has served as the Chief Executive Officer of the Company
since January 1997. Mr. Adams also currently serves as vice president of Castor
Capital Corporation, a position which he has held since September 1995. From
April 1995 to April 1996, Mr. Adams served as president of Polar Corp
International. From 1984 to 1995, he served as president of Associated Freezers
of Canada, Inc., and during that time, was also a director of Odyssey
Industries, Inc., which was the sole shareholder of Associated Freezers of
Canada, Inc. In 1994, a dispute arose between Odyssey and its bank lender
concerning currency exchange rates affecting the repayment of Odyssey's loan. At
the request of the bank, a receiver was appointed for Odyssey and the receiver
subsequently placed Odyssey into bankruptcy and sold the profitable operations
of Associated Freezers of Canada, Inc. Mr. Adams graduated from the University
of New Brunswick with a Bachelor of Science degree in Electrical Engineering in
1960, earned a master of science degree in 1963 in Electrical Engineering from
Queen's University and a master of arts degree in Political Science from
Canadian Forces Staff College in 1968.
Michael A. Oros has served as President of the Company since January
1997. He also served as its chief operating officer from January 1997 until
December 1998. From 1986 until 1996, Mr. Oros served as president and chief
operating officer of Associated Freezers, Inc. Mr. Oros is a member of
International Association of Refrigerated Warehousemen, the North Texas
Warehouse Association, the American Frozen Food Institute, the Meat Importers
Council, the Southwest Meat Association and the National Frozen Food
Association.
James C. Williams has served as Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since December 1996. Prior to
that time, from October 1995 until April 1997, Mr. Williams served as vice
president of finance for Castor Capital Corporation and from June 1987 until
October 1995 as the controller for Associated Freezers of Canada, Inc. Mr.
Williams is on the Maves Advisory Board. He graduated from the University of
Waterloo Co-op Program in 1982 with a bachelor of mathematics degree. Mr.
William's degree included a major in mathematics and minors in computer science
and accounting.
Due to the broad experience of the Company's executive officers,
directors and key personnel in the refrigerated warehousing industry, the
Company does not believe that the loss of any one of them would have a material
adverse effect on its business. None of the executive officers currently have an
employment agreement with the Company, however, Mr. Adams has a consulting
contract which automatically renews on an annual basis and provides for a fee of
$8,000 per month for services rendered.
Committees of the Board of Directors
The Board of Directors does not have any committees at this time.
14
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth the cash and non-cash compensation paid
by the Company to its chief executive officer and its two other most highly
compensated executive officers for the fiscal years ended December 31, 1998,
1997 and 1996. None of the Company's other officers or directors received cash
or non-cash compensation in excess of $100,000 for the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Name and ---------------------------------------------------- All Other
Principal Position Year Salary Bonus Options Compensation(1)
- ---------------------- ------ -------- -------- -------------------------------------
<S> <C> <C> <C> <C>
Mr. Adams 1998 96,000
Chief Executive Officer 1997 96,000
1996 N/A
Mr. Oros 1998 100,000 25,000
President 1997 100,000 25,000
1996 N/A
- ------------------------------------------------------------------------------------------
<FN>
(1) These amounts were paid pursuant to a consulting contract and were paid
by the Company directly to Mr. Adams in 1997 and to Castor Capital
Corporation which paid Mr. Adams in 1998.
</FN>
</TABLE>
In addition to the officers listed above, Mr. George Gilman served as
the president and secretary of Hilltop Acquisition Holding Corporation from
February 18, 1998 until December 15, 1998 when it merged with Alford. Mr.
Timothy T. Halter served as president and secretary of Hilltop Acquisition
Holding Corporation prior to Mr. Gilman. Neither Mr. Gilman nor Mr. Halter
received any compensation for services rendered to Hilltop from 1996 through
1998.
Director Compensation
Directors who are employees of the Company will not receive additional
compensation for serving as directors. Independent directors will receive an
annual fee to be established by the Board of Directors and a fee of $500 for
attending each meeting of the Board of Directors or any committee of the Board
of Directors. All directors will be reimbursed for out-of-pocket expenses
incurred in attending meetings and for other expenses incurred in performing in
their capacity as directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On or about December 1, 1996, Alford entered into an agreement with
Canfina AG, a company organized under the laws of Switzerland, and J. Eichmann
to repay existing loans to Canfina AG in the original principal amount of
$6,700,000 and to purchase all of the shares of stock of Alford owned by Mr. J.
Eichmann in exchange for $2,000,000. As of December 1, 1996, Mr. Eichmann owned
5,000 shares (the equivalent of 3,275,686 shares after the reverse merger) or
50% of the issued and outstanding capital stock of Alford (the "Eichmann
Shares"). On or about December 4, 1997, Alford paid to Mr. Eichmann $2,000,000
15
<PAGE>
in exchange for rights to the Eichmann Shares using funds obtained through a
term note and line of credit. Alford's rights to the Eichmann Shares were
subsequently transferred by Alford to Alford's parent, Castor Capital
Corporation, in exchange for a $2,000,000 note receivable. On or about December
15, 1998, in connection with the merger of Alford with and into the Company, the
Eichmann Shares were converted into 3,275,686 shares of the Company, all of
which are being held in escrow pending the final payment due to Mr. Eichmann in
December 2001. As of December 31, 1998, the outstanding principal balance on the
note was $2,350,000. Castor Capital Corporation has assumed the liability for
this note.
On or about February 6, 1998, Alford leased a warehouse facility in La
Porte, Texas at market rates from La Porte Properties, LLC, a Texas limited
liability company ("La Porte"), which was a wholly owned subsidiary of Alltemp
Logistical Services, L.L.C., a Texas limited liability company ("Alltemp"). At
that time, Alltemp was a wholly owned subsidiary of Castor Capital Corporation.
Effective November 30, 1998, Alltemp was merged with and into Alford.
In 1997, Alford made two loans to its parent, Castor Capital
Corporation. On or about September 17, 1997, Alford loaned Castor $1,500,000,
and on or about December 4, 1997, Alford loaned Castor $2,000,000. Each of these
loans is evidenced by a promissory note bearing interest at a rate of eight
percent per annum. The notes are due December 31, 2000 and December 31, 2002. As
of December 31, 1998, the total amount of principal and interest payable to the
Company by Castor pursuant to these two notes was $1,676,655. Mr. Robichaud, a
Director of the Company, is the trustee of the Robichaud Family Trust which is
the sole shareholder of Castor Capital Corporation.
In 1997 and 1998, Alford paid to Associated Freezers, Inc. an aggregate
of $475,903 for the rights to certain trademarks consisting of a penguin and the
name Associated Freezers, Inc. At that time, Associated Freezers, Inc. was
indirectly owned 100% by Mr. Robichaud. Effective November 30, 1998, Associated
Freezers, Inc. was merged with and into its parent which was then merged with
and into Alford.
Engineering Design & Construction Managers Ltd. ("EDCM") is a company
which specializes in the design, construction and maintenance of refrigerated
warehouse facilities. EDCM is owned in equal proportions by Mr. Robichaud, Mr.
Tomilson, Mr. Adams and Mr. Paul Haines. EDCM has provided maintenance services
to the Company for which it billed the Company on a per diem basis. The Company
and EDCM are in the process of formalizing a new agreement which they tend to
make effective as of January 1, 1999. Pursuant to this new five year maintenance
contract, EDCM will provide professional engineering and maintenance services
for Alford's four facilities for a fee of $200,000 per year.
Castor Capital Corporation owns approximately 93.6% of the Company's
issued and outstanding Common Stock. Mr. Robichaud, a director of the Company,
is the trustee of the Robichaud Family Trust which owns all of the issued and
outstanding stock of Castor Capital Corporation.
ITEM 8. LEGAL PROCEEDINGS
The Company is a not a party to any legal actions or proceedings that
it believes will have a material adverse effect on its business, results of
operations or financial position.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There is no public trading market for the Company's securities.
16
<PAGE>
None of the Company's securities are subject to outstanding options or
warrants to purchase, or securities convertible into common stock of the
Company. As of March 31, 1999, [357,343] shares of Common Stock of the Company
could be sold pursuant to Rule 144 (without registration) under the Securities
Act, the offering of which could have a material effect on the market price of
the Common Stock.
As of March 31, 1999, there were 7,000,715 shares of Common Stock
issued and outstanding held by approximately 894 holders of record.
The Company has not paid dividends on its Common Stock and anticipates
that in 1999 all earnings will be retained to finance the continuing development
of its business. The Company does not anticipate paying dividends on the Common
Stock in 1999 but may consider paying dividends thereafter. The Company's
current bank loan agreement requires the bank's prior written consent for the
payment of dividends.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to the First Amended Joint Plan of Reorganization entered into
on July 9, 1996, as modified, the Company issued an aggregate of 187,701 shares
of Common Stock to certain of its creditors on various dates in 1996. Such
shares were issued in accordance with Section 1145 under the United States
Bankruptcy Code and the transaction was thus exempt from the registration
requirements of Section 5 of the Securities Act of 1933 (the "Securities Act").
Effective December 15, 1998, the Company issued to Castor Capital
Corporation, the sole stockholder of Alford, an aggregate of 6,551,372 shares of
Common Stock in exchange for an aggregate of 10,000 shares of common stock of
Alford pursuant to the Merger Agreement. Castor Capital Corporation is a
sophisticated, knowledgeable investor able to bear the economic risk of an
investment in these shares of Common Stock. The Company relied on Section 4(2)
of the Securities Act because the transaction did not involve a public offering
and was thus exempt from the registration requirements of the Securities Act. No
underwriters were used in connection this transaction.
Effective in December 1998, the Company issued to Mr. Art Beroff 92,000
shares of Common Stock as a finders fee. Mr. Art Beroff is a sophisticated,
knowledgeable investor able to bear the economic risk of an investment in these
shares of Common Stock. The Company relied on Section 4(2) of the Securities Act
because the transaction did not involve a public offering and was thus exempt
from the registration requirements of the Securities Act. No underwriters were
used in connection with this transaction.
ITEM 11. DESCRIPTION OF SECURITIES
General
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock").
17
<PAGE>
Common Stock
Each share of Common Stock entitles the holder thereof to one vote on
all matters on which holders are permitted to vote. No shareholder has any
preemptive right or other similar right to purchase or subscribe for any
additional securities issued by the Company, and no shareholder has any right to
convert Common Stock into other securities. No shares of Common Stock are
subject to redemption or to any sinking fund provisions. All of the outstanding
shares of Common Stock are fully paid and nonassessable.
Subject to rights of holders of Preferred Stock, if any, the holders of
shares of Common Stock are entitled to dividends when, as and if declared by the
Board of Directors from funds legally available therefor and, upon liquidation,
to a pro rata share in any distribution to shareholders. The Company does not
anticipate declaring or paying any cash dividends on the Common Stock in 1999.
The Company's current bank loan agreement requires the bank's prior written
consent for the payment of dividends.
Preferred Stock
Pursuant to the Company's Amended and Restated Articles of
Incorporation, the Board of Directors has the authority, without further
shareholder approval, to provide for the issuance of up to 5,000,000 shares of
Preferred Stock in one or more series and to determine the dividend rights,
conversion rights, voting rights, rights and terms of redemption, liquidation
preferences, the number of shares constituting any such series and the
designation of such series. Because the Board of Directors has the power to
establish the preferences and rights of each series, it may afford the holders
of any Preferred Stock preferences, powers and rights (including voting rights)
senior to the rights of the holders of Common Stock. No shares of Preferred
Stock are currently outstanding. Although the Company has no present intention
to issue shares of Preferred Stock, the issuance of shares of Preferred Stock,
or the issuance of rights to purchase such shares, may have the effect of
delaying, deferring or preventing a change in control of the Company.
Provisions Having a Possible Anti-takeover Effect
The Company's Articles of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors of the Company and in the
policies formulated by the Board and to discourage certain types of transactions
which may involve an actual or threatened change of control of the Company. The
provisions are designed to reduce the vulnerability of the Company to an
unsolicited proposal for a takeover of the Company or an unsolicited proposal
for the restructuring or sale of all or part of the Company. The provisions also
are intended to discourage certain tactics that may be used in proxy fights.
The Board will have the authority, without further action by the
shareholders, to issue up to 5,000,000 shares of the Company's preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, and to issue over 42,999,285 additional shares of Common
Stock. The issuance of the Company's preferred stock or additional shares of
Common Stock could adversely affect the voting power of the holders of Common
Stock and could have the effect of delaying, deferring or preventing a change in
control of the Company.
18
<PAGE>
Limitation of Liability of Directors
The Articles of Incorporation provide that, to the fullest extent
permitted by applicable law, a director of the Company shall not be liable to
the Company or its shareholders for monetary damages for an act or omission in
the director's capacity as a director. This provision does not eliminate the
duty of care, and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Texas law. In addition, each director will continue to be subject to liability
for breach of the director's duty of loyalty to the Company, for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to a
director and for acts or omissions for which a director is made expressly liable
by applicable statute, such as the improper payment of dividends. The
limitations on liability provided for in the Articles of Incorporation do not
restrict the availability of non-monetary remedies and do not affect a
director's responsibility under any other law, such as the federal securities
laws or state or federal environmental laws. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as executive officers and directors.
The inclusion of these provision in the Articles of Incorporation, may
have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter shareholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefitted the Company and its
shareholders.
Bylaw Provisions and Amendment of Bylaws
The Board of Directors of the Company, acting by a majority of
directors then in office, may fill any vacancy or newly created directorship,
provided that the Board of Directors may not fill more than two such
directorships between successive annual meetings of the shareholders. The Bylaws
provide that a special meeting of the shareholders may be called only by the
President, the Chairman of the Board of Directors, or the holders of not less
than ten percent of all shares entitled to vote at such meeting. The Bylaws
provide that the power to amend or repeal the Bylaws or to adopt new Bylaws is
vested in the Board of Directors, but is subject to the right of the
shareholders to amend or repeal the Bylaws or to adopt new Bylaws.
Transfer Agent
The Company's transfer agent is Securities Transfer Corporation, 16910
Dallas Parkway, Suite 100, Dallas, Texas 75248.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation provide that the Company shall indemnify
any person who was, is or is threatened to be made a named defendant in a
proceeding because the person (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving as a director, officer, partner, or other functionary of another
corporation, partnership or other enterprise, to the fullest extent that a
corporation may grant indemnification to a director under the Texas Business
Corporation Act. Article 2.01-1 of the Texas Business Corporation Act (the
"TBCA") provides that a corporation may indemnify any director or officer
provided that the director or officer (i) conducted himself in good faith, (ii)
reasonably believed (a) in the case of conduct in his official capacity, that
his conduct was in the corporation's best interests or (b) in all other cases,
that his conduct was at least not opposed to the corporation's best interests
and (iii) in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. Subject to certain exceptions, a director or
19
<PAGE>
officer may not be indemnified if the person is found liable to the corporation
or if the person is found liable on the basis that he improperly received a
personal benefit. Under Texas law, reasonable expenses incurred by a director or
officer may be paid or reimbursed by the corporation in advance of a final
disposition of the proceeding after the corporation receives a written
affirmation by the director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification and a written undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined that the director or officer is not entitled to
indemnification by the corporation. Texas law requires a corporation to
indemnify an officer or director against reasonable expenses incurred in
connection with a proceeding in which he is named a defendant or respondent
because he is or was a director or officer if he is wholly successful in defense
of the proceeding.
Texas law permits a corporation to purchase and maintain insurance or
another arrangement on behalf of any person who is or was a director or officer
against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, whether or not the
corporation would have the power to indemnify him against that liability under
Article 2.02-1 of the TBCA. The Company has directors' and officers' liability
insurance policies to cover certain liabilities of directors and officers
arising out of claims based on certain acts or omissions by them in their
capacity as directors or officers.
The above discussion of the TBCA and the Bylaws is not intended to be
exhaustive and is qualified in its entirety by such statute and Bylaws,
respectively.
20
<PAGE>
ITEM 13. FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated balance sheets F-3
Consolidated statements of operations F-4
Consolidated statements of stockholders' equity F-5
Consolidated statements of cash flows F-6
Notes to consolidated financial statements F-7 - F-19
F-1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors of
Alford Refrigerated Warehouses, Inc.
We have audited the accompanying consolidated balance sheets of Alford
Refrigerated Warehouses, Inc. and Subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of 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. The financial
statements give retroactive effect to certain mergers which occurred in 1998 as
described in Note 1 to the financial statements.
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 presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Alford
Refrigerated Warehouses, Inc. and Subsidiaries as of December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ BDO Seidman
-------------------------
BDO Seidman, LLP
March 9, 1999
Dallas, Texas
F-2
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Balance Sheets
Note (1)
<S> <C> <C>
December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents (Note 7) $ 109,517 $ 446,564
Accounts receivable 2,008,239 1,819,796
Prepaid expense 250,045 313,281
Income tax receivable (Note 4) 6,000 133,629
Escrows (Note 5) 522,072 474,657
- -------------------------------------------------------------------------------------------------------------------
Total current assets 2,895,873 3,187,927
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net (Notes 3 and 5) 18,757,679 11,525,055
Due from affiliates (Note 2) 2,213,079 4,015,038
Deferred tax asset, net (Note 4) 221,961 579,961
Other assets 454,178 342,357
Deposits 173,640 178,966
- -------------------------------------------------------------------------------------------------------------------
Total assets $ 24,716,410 $ 19,829,304
===================================================================================================================
Liabilities and Stockholders' Equity
Current
Accounts payable $ 555,491 $ 439,423
Property taxes payable 666,747 372,043
Accrued charges 724,671 862,353
Notes payable (Note 5) 117,768 144,200
Current maturities of long-term debt (Note 5) 1,072,415 688,130
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,137,092 2,506,149
- -------------------------------------------------------------------------------------------------------------------
Deferred revenue 224,308 158,112
Long-term debt, less current maturities (Notes 2 and 5) 14,396,572 11,851,093
Line of credit (Note 5) 1,549,377 728,165
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 19,307,349 15,243,519
- -------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 6)
Stockholders' equity (Notes 1 and 10):
Preferred stock, par value $0.01 per share;
5,000,000 shares authorized; none issued - -
Common stock, par value $0.01 per share;
50,000,000 shares authorized; issued 7,000,715
in 1998 and 6,552,087 in 1997 70,007 65,521
Additional paid-in capital 5,032,395 5,026,881
Retained earnings (deficit) 306,659 (506,617)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 5,409,061 4,585,785
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $24,716,410 $ 19,829,304
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statements of Operations
Note (1)
<S> <C> <C>
Years ended December 31, 1998 1997
- ------------------------------------------------------------------------------------------------------------------
Warehouse Revenues (Note 7) $17,651,941 $ 15,611,406
- -------------------------------------------------------------------------------------------------------------------
Operating Costs and General and Administrative
Operating costs 11,611,227 10,856,384
General and administrative expenses 1,050,422 1,318,044
- -------------------------------------------------------------------------------------------------------------------
Total Operating Costs and General and Administrative 12,661,649 12,174,428
- -------------------------------------------------------------------------------------------------------------------
Depreciation, Rent and Interest Expenses:
Depreciation 776,569 545,732
Rent 1,577,129 1,723,553
Interest 1,462,318 1,030,789
- -------------------------------------------------------------------------------------------------------------------
Total Depreciation, Rent and Interest Expenses 3,816,016 3,300,074
- -------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 1,174,276 136,904
Income Tax Expense (Benefit) (Note 4) 361,000 (4,593)
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 813,276 $ 141,497
===================================================================================================================
Basic Earnings Per Share -
Net income $ 0.12 $ 0.02
===================================================================================================================
Weighted Average -
Common shares used in computing earnings per share $ 6,572,982 $ 6,552,087
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statements of Stockholders' Equity
Note (1)
Common Stock Additional Retained
Paid-in Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 6,552,087 $ 65,521 $ 5,026,881 $ (648,114) $ 4,444,288
Net income - - - 141,497 141,497
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 6,552,087 65,521 5,026,881 (506,617) 4,585,785
Issuance of 448,628 shares in
connection with reverse merger (Note 1) 448,628 4,486 5,514 - 10,000
Net income - - - 813,276 813,276
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 7,000,715 $ 70,007 $ 5,032,395 $ 306,659 $ 5,409,061
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statements of Cash Flows
Note (1)
Increase (Decrease) in Cash and Cash Equivalents
Years ended December 31, 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income $ 813,276 $ 141,497
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 776,569 545,732
Deferred income taxes 296,000 (6,593)
Changes in operating assets and liabilities:
Accounts receivable (188,443) (98,230)
Prepaid expenses 459,058 294,517
Deposits and escrows (42,089) (552,506)
Income tax receivable 127,629 97,047
Other assets (39,821) (511,827)
Accounts payable 116,068 (87,826)
Property taxes payable 294,704 186,158
Accrued charges (37,682) 91,641
Notes payable (522,254) (280,659)
Deferred revenue 66,196 89,171
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 2,119,211 (91,878)
- -------------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities -
Capital expenditures (1,417,965) (746,579)
- -------------------------------------------------------------------------------------------------------------------
Financing Activities:
Due from affiliates (798,041) (3,922,472)
Funds borrowed 1,021,212 10,377,729
Principal payments on debt (1,261,464) (5,758,195)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (1,038,293) 697,062
- -------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (337,047) (141,395)
Cash and cash equivalents, beginning of year 446,564 587,959
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 109,517 $ 446,564
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
The accompanying consolidated financial statements of Alford Refrigerated
Warehouses, Inc. and consolidated entities (the "Company") have been prepared in
conformity with generally accepted accounting principles, the most significant
of which are described in Note 1 "Summary of Significant Accounting Policies".
These, along with the remainder of the Notes to Consolidated Financial
Statements, are an integral part of the consolidated financial statements. The
data presented in the Notes to Consolidated Financial Statements are as of
December 31 of each year and for the year then ended, unless otherwise
indicated. Certain balances for 1997 have been reclassified to conform to the
1998 presentation. Shares and per share data have been restated for the reverse
stock split effected December 1998, as discussed in the following section,
"Description of the Merger with Alford."
1. Summary of
Significant
Accounting
Policies
Description of
the Merger with
Alford
Alford Refrigerated Warehouses, Inc., a Texas corporation formerly known as
Hilltop Acquisition Holding Corporation, and prior to that, as Optical
Acquisition Corp. (the "Company"), was originally incorporated in October
1992 under the laws of the state of Delaware.
The Company filed a bankruptcy petition on September 21, 1995 and filed the
First Amended Joint Plan of Reorganization (the "Plan") on July 9, 1996.
The United States Bankruptcy Court for the Northern District of Texas,
Dallas Division (the "Court") entered an order approving the Plan on August
9, 1996. The Plan was modified pursuant to an order of the Court on
February 28, 1997.
The Plan provided for the liquidation of the Company's assets and
distribution of the proceeds to secured, priority and unsecured creditors.
The Plan further provided that the Company would remain in existence,
although all capital stock outstanding as of the Petition Date was canceled
The Company was reincorporated in the State of Texas in September 1997.
As contemplated in the Plan, the Company, which had no operations or
significant assets at the time, had undertaken a business strategy to seek
out and consummate an acquisition or merger transaction.
On or about December 15, 1998, the Company merged with Alford Refrigerated
Warehouses, Inc. ("Alford") pursuant to an Agreement and Plan of Merger
dated November 23, 1998 by and among Hilltop, Womack Gilman Investment
Services, L.C., Halter Financial Group, Inc. and Alford (the "Merger
Agreement"). In accordance with the terms of the Merger Agreement, Alford
was the surviving corporation. Immediately prior to the merger, Hilltop
amended its Articles of Incorporation to effect a reverse stock split so
that each share of Hilltop's issued and outstanding common stock was
automatically converted into .625 of a fully paid and nonassessable share
of Hilltop's common stock. Pursuant to the terms of the Merger Agreement,
each share of common stock of Alford was automatically
F-7
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
converted into the right to receive 655.1372 shares of the common stock of
the Company. In addition, the Articles of Incorporation and the Bylaws of
Alford became the Articles of Incorporation and Bylaws of the Company, the
directors and officers of Alford became the directors and officers of the
Company, and the Company changed its name to Alford Refrigerated
Warehouses, Inc. The transaction is considered a reverse merger.
Application of reverse merger accounting results in the following:
1. The consolidated financial statements of the combined entity are
issued under the name of the legal parent, Alford Refrigerated
Warehouses, Inc. (formerly Hilltop), but the entity is considered a
continuation of the legal subsidiary, Alford.
2. As Alford is deemed to be the acquirer for accounting purposes, its
assets and liabilities are included in the consolidated financial
statements of the continuing entity at their carrying values.
3. Amounts presented for periods prior to December 1998 are those of
Alford, the legal subsidiary. All shares for periods prior to December
31, 1998, have been retroactively adjusted as if a stock split had
occurred.
4. Costs related to the transaction with the Company were expensed during
1998.
Merger of
Affiliated
Entities
with Alford
In November 1998, certain affiliated entities of Alford were merged into
Alford. These entities, including Robco Industries, Inc. ("Robco") and
Alltemp Logistical Services, LLC ("Alltemp") are in the same line of
business as the Company and, by virtue of their ultimate ownership, are
considered to be entities under common control with the Company.
Accordingly, these mergers were accounted for in a manner similar to a
pooling of interests and the balance sheets, statements of operations,
stockholders' equity and cash flows give retroactive effect to the mergers
as if they occurred as of the beginning of the earliest period presented.
The operations of Robco and Alltemp are insignificant to total operations.
Description of
Business and
Revenue
Recognition
The Company's public warehouse business consists of providing customers,
which include food processors, distributors, wholesalers and retailers,
with temperature controlled storage services and a full range of logistics
management and other value-added services such as (i) blast freezing of
fresh products, (ii) repackaging and labeling of food products, (iii) order
picking and load consoli dation, (iv) cross docking , (v) container
handling, (vi) importing and exporting services, (vii) USDA approved
storage and inspection services, and (viii) Federal Government inspected
facility for export.
The Company is a third party service provider and as such does not purchase
the inventory that it stores. When the Company receives products for
storage, it provides the customer with a nonnegotiable warehouse receipt.
At that time, the customer pays for one month of storage and handling based
F-8
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
upon the type and amount of product accepted at the beginning of the 30 day
period. The prepayment is accounted for as deferred revenue. The Company's
inventory control system monitors the product by type of product and by lot
number. In order to remove any product from storage, the customer places an
order with the Company, the Company removes the product from the warehouse
for the customer and provides the customer with a bill of lading. Revenue
is re- cognized ratably throughout the storage period and billed monthly.
In addition to its public warehouse business, the Company leases
refrigerated space to approximately 28 tenants who manage their own
inventory and logistics functions and utilize their own equipment and
personnel. In almost all cases, the tenant pays all of the expenses, except
for utilities and property taxes which are included in the rent. The terms
of the leases may be month to month or as long as five years. The Company
does not allow tenants to make any special modifications to the leased
space without the Company's prior approval. For the year ended December 31,
1998, public warehouse customers represented over 93 percent of the
Company's revenue, the remainder of which was attributable to leased space.
Basis of
Presentation
The consolidated financial statements include the accounts of Alford
Refrigerated Warehouses, Inc. and its wholly owned subsidiaries: Alford
Logistical Services, Inc. ("ALS"), Thermix Corporation ("Thermix"),
Specialty Processing Corporation ("SPC"), Alford Terminal Warehouses, Inc.
("ATW"), Alford Distribution Services, Inc. ("ADS"), Cadiz Properties, Inc.
("Cadiz"), and La Porte Properties, LLC ("LPP"). All intercompany
transactions and balances have been eliminated.
Set forth below is information with respect to certain of the Company's
properties. The industry measures space in cubic feet instead of square
feet because cost projections include facility height to account for
refrigeration and stacked cooled product.
<TABLE>
<CAPTION>
Approximate Lease
Primary Size Owned/ Expiration
Location Use (Unaudited) Lease Date
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dallas, Texas Corporate office 24,000,000 cubic Owned N/A
& Warehouse feet on 52 acres
La Porte, Texas Warehouse 4,500,000 cubic feet Owned N/A
on 32.3 acres
Richardson, Texas Warehouse 3,200,000 cubic feet Leased Dec. 31, 2007
on 12.4 acres
Fort Worth, Texas Warehouse 1,550,000 cubic feet Leased Jan. 31, 2000
on 13.5 acres
</TABLE>
F-9
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
Cash and Cash
Equivalents
For purposes of reporting the consolidated statements of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Property, Plant
and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation. The cost of additions and improvements are capitalized, while
maintenance and repairs are charged to expense when incurred.
Depreciation of property, plant and equipment is calculated using the
straight-line method. The estimated depreciable lives range from three to
seven years for most machinery and equipment and 31.5 years for buildings.
Leased property meeting certain criteria is capitalized and the present
value of the related lease payments is recorded as a liability.
Amortization of capitalized leased assets is computed on the straight-line
method over the term of the lease.
Realization of long-lived assets is periodically assessed by the Company to
determine if an impairment of the carrying value of the assets has
occurred. If impairment exists, an impairment loss is recognized, by a
charge against earnings, equal to the amount by which the carrying amount
of the asset exceeds the fair value of the asset. If impairment of an asset
is recognized, the carrying amount of the asset is reduced by the amount of
the impairment, and a new cost for the asset is established. Such new cost
is depreciated over the asset's remaining useful life.
Income Taxes
The Company used the asset and liability approach for accounting for income
taxes. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable for the
period and the change during the period in deferred tax assets and
liabilities.
Use
of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Earnings Per
Share
Income per share is computed based upon the weighted average number of
shares of Common Stock outstanding during each year adjusted for the
reverse stock split effected November 1998. The Company adopted SFAS 128,
Earnings Per Share, effective for 1997. The adoption had no impact on the
financial statements of the Company.
F-10
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
2. Related
Party
Transactions
On December 1, 1996, the Company entered into an agreement ("the
Agreement") with Canfina AG and J. Eichmann to repay existing loans and to
purchase Mr. Eichmann's Company stock. The Agreement terms consisted of the
following:
$1,700,000 loan repayment to Canfina AG on December 31, 1996
$3,000,000 loan repayment to Canfina AG on June 11, 1997
$2,000,000 payment to Mr. Eichmann no later than December 13, 1997 in
consideration for his shares of Company stock (see below).
$2,600,000 term note due December 2001 secured by shares of the
Company's common stock held in escrow (Note 4).
The Company made the first payment of $1,700,000 as scheduled. On September
15, 1997, the Company modified the Agreement with Mr. Eichmann whereby the
interest rate on the $2,600,000 note increased from 8 percent to 9 percent
in exchange for an extension on the due date of the $3,000,000 payment. The
second payment of $3,000,000 due to Mr. Eichmann was made by use of certain
proceeds from an $8,100,000 loan from Morgan Guaranty Trust Company of New
York. On December 4, 1997, the Company paid Mr. Eichmann $2,000,000 in
exchange for rights to his shares in accordance with the Agreement using
funds obtained through a term note and line of credit with Nations Credit
Commercial Corporation (Note 5). These rights were assigned to the
Company's parent, Castor Capital Corporation ("Castor") in exchange for a
$2,000,000 note receivable (see below). During 1998, Castor assumed
$2,600,000 of the aforementioned amounts due Eichmann as settlement of a
portion of the notes payable due the Company.
During 1998, the Company advanced Castor a total of $834,868. As a part of
the aforementioned settlement of the Castor notes payable due the Company,
$771,509 of these advances were settled.
On February 5, 1998, the Company loaned an affiliate $714,362 as evidenced
by a promissory note payable to the Company at the rate of 8 percent per
annum due December 31, 1999. During November 1998, the $714,362 receivable
was eliminated upon the merger of the affiliated entity with Alford.
F-11
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
The Company's due from affiliates consists of the following at December 31, 1998
and 1997:
<S> <C> <C>
Description 1998 1997
- ----------------------------------------------------------------------------------------------------------
8% promissory note from Castor,
secured by 500,000 shares of
the Company common stock,
balance of principal and
accrued interest due December
31, 2002 $ 1,676,655 $ 2,007,452
8% unsecured promissory note
from Castor, balance of
principal and accrued
interest due December 31,
2000 - 1,534,521
Advances to Castor 396,424 333,065
Advances to affiliate 140,000 140,000
- --------------------------------------------------------------------------------------------------
$ 2,213,079 $ 4,015,038
==================================================================================================
</TABLE>
3. Property,
Plant and
Equipment
The Company's property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 4,939,136 $ 4,265,389
Building 12,707,043 7,183,415
Machinery and equipment 2,656,873 2,036,283
Machinery and equipment
under capital leases 1,595,040 403,812
- -------------------------------------------------------------------------------------------------------------------
21,898,092 13,888,899
Less accumulated depreciation 3,140,413 2,363,844
- -------------------------------------------------------------------------------------------------------------------
Total $ 18,757,679 $ 11,525,055
===================================================================================================================
</TABLE>
Included in accumulated depreciation is $240,385 and $40,500 of accumulated
depreciation related to machinery and equipment under capital leases at December
31, 1998 and 1997, respectively.
F-12
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
4. Income
Taxes
Income tax expense (benefit) for the years ended December 31, 1998 and 1997
was as follows: 1998 1997
1998 1997
- --------------------------------------------------------------------------------
Current tax expense $ 65,000 $ 2,000
Deferred tax expense (benefit) 296,000 (6,593)
- --------------------------------------------------------------------------------
Total tax expense (benefit) $ 361,000 $ (4,593)
================================================================================
A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory federal income tax rate to earnings
before income taxes follows:
1998 1997
- --------------------------------------------------------------------------------
Computed income taxes, at 34 percent $ 399,000 $ 51,000
Change in valuation allowance - (57,593)
Franchise taxes 16,000 2,000
Other, net (54,000) -
- --------------------------------------------------------------------------------
$ 361,000 $ (4,593)
================================================================================
The net deferred tax asset is partially offset by a deferred tax liability
which consists primarily of the difference between book and tax
depreciation on property, plant and equipment. Differences between book and
tax depreciation were approximately $2,763,000 and $3,081,000 at December
31, 1998 and 1997, respectively. The deferred tax liability was calculated
at the federal tax rate of 34 percent.
The net deferred tax asset includes amounts relating to the carryforward of
prior year net operating losses (NOL) which have expiration dates ranging
from 2003 through 2006. At December 31, 1998 and 1997, the Company had
potential NOL carryforwards of approximately $8,332,000 and $9,703,000,
respectively. A valuation allowance of $1,676,000 exists for both years for
NOL carryforwards not anticipated to be realized before expiration.
Management believes realization of the entire net asset is more likely than
not based on future income projections. The deferred tax asset was
calculated at the federal tax rate of 34 percent.
F-13
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
5. Notes
Payable,
Long-Term
Debt, and
Line of
Credit
Notes payable consist of various notes due to insurers with principal
totaling $117,768 and $144,200 at December 31, 1998 and 1997, respectively.
The notes accrue interest at various rates; principal and interest are due
monthly.
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
Description 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8.4% Morgan Guaranty Trust Company of New York note, monthly payments of
principal and interest of $69,782, remaining balance of principal and accrued
interest due October, 2007, secured by the land and improvements and certain
other property and equipment at the Company's Cadiz Street facility. $ 7,908,283 $ 8,073,745
8.36% Amresco Capital, L.P. note, monthly payments of principal and interest of
$42,974, remaining balance of principal and interest due March, 2008, secured
by the land and improvements and certain other property and equipment at the
Company's La Porte, Texas facility. 5,355,641 -
Obligations under capital leases, maturity dates ranging from 1999 through 2002.
Nations Credit Commercial Corporation term note, prime plus 5% (12.75% at
December 31, 1998), monthly principal payments of $20,119 plus accrued
interest, remaining principal and accrued interest due December 3, 2001,
secured by selected equipment and guaranties from Castor, ALS, Thermix,
SPC, ATW, and ADS. 965,760 1,207,160
Other 152,799 238,843
9% J. Eichmann note, quarterly principal payments from second to fifth year of
$62,500, remaining principal and accrued interest due December 2001, secured
by common stock held in escrow (Note 2). - 2,600,000
- ------------------------------------------------------------------------------------------------------------------------------------
15,468,987 12,539,223
Current maturities (1,072,415) (688,130)
- ------------------------------------------------------------------------------------------------------------------------------------
$14,396,572 $11,851,093
====================================================================================================================================
</TABLE>
F-14
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
Maturities of long-term debt follows:
Year ended December 31,
- --------------------------------------------------------------------------------
1999 $ 1,072,415
2000 814,894
2001 1,020,587
2002 445,376
2003 350,639
Thereafter 11,765,076
- --------------------------------------------------------------------------------
$ 15,468,987
================================================================================
Included in the above maturities of long-term debt are capital lease
principal payments of approximately $443,000 in 1999, $280,000 in 2000,
$241,000 in 2001 and $123,000 in 2002.
The Morgan Guaranty Trust Company of New York ("Morgan") note requires the
establishment of certain escrow accounts. Morgan restricts the use of the
funds to the designated purpose of the accounts in accordance with the
terms of the note.
The loan agreement with Nations Credit Commercial Corporation ("Nations")
contains various restrictive covenants. Certain covenants were in technical
default at December 31, 1998. The Company obtained waivers pertaining to
these defaults from Nations permitting the payments made to affiliates
during 1998 and the capital additions in excess of allowed limits, as
restricted by the loan agreement.
Effective January 1, 1998, Castor assumed the $2,600,000 note payable to
Eichmann (see Note 2). The Company guaranteed the repayment of the note
payable to Eichmann.
The Company has a line of credit with Nations Credit Commercial Corporation
which provides up to $2,500,000 through December 3, 2001 at prime (7.75
percent at December 31, 1998) plus 5 percent. Interest is payable monthly,
and all unpaid but accrued interest and principal is due at maturity. The
line of credit is secured by guaranties from Castor, ALS, Thermix, SPC,
ATW, and ADS.
6. Commitments
and
Contingencies
The Company rents certain real estate and equipment under operating leases.
The leases do not provide for any significant renewals; and, except for
insignificant leases, there are no existing purchase options. Rent expense
was $1,577,129 and $1,723,553 for the years ended December 31, 1998 and
1997, respectively.
Future minimum rental payments required under operating leases that have
initial or remaining noncancelable lease terms in excess of one year at
December 31, 1998, were:
F-15
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
Year ended December 31, Amount
- --------------------------------------------------------------------------------
1999 $ 881,130
2000 630,384
2001 600,000
2002 600,000
2003 600,000
Thereafter 2,400,000
- --------------------------------------------------------------------------------
$ 5,711,514
================================================================================
From time to time, in the normal course of business, the Company is a party
to various matters of litigation. Management is of the opinion that the
eventual resolution of these matters will not have a material adverse
effect on the Company.
The Company has guaranteed an obligation of Castor to Mr. J. Eichmann (see
Note 5). At December 31, 1998, this obligation totaled $2,350,000. No
liability has been recorded in the financial statements related to this
guarantee.
The Company has entered into a Purchase and Sale Agreement for the Fort
Worth facility for $3,000,000. The Company expects to complete the
transaction in the second quarter of 1999 and is currently negotiating with
a potential lender to provide financing. The Company has executed an
"Exclusive Option Contract" for the purchase of the Richardson facility for
$6,000,000. The option period will expire on February 22, 2000.
7. Concentration
of Credit Risk
At December 31, 1998 and 1997, the Company had bank deposits in excess of
federally insured limits of approximately $45,000 and $134,000,
respectively.
The Company derived 12 and 10 percent of its revenue from two customers,
respectively, in 1997. During 1998, no single customer provided greater
than 10 percent of the Company's revenues. The Company closely monitors the
creditworthiness of its customers and does not believe that it is dependent
upon any single customer.
8. Supplemental
Cash Flow
Information
Cash paid for interest during the years ended December 31, 1998 and 1997
was approximately $1,385,000 and $800,000, respectively. Cash paid for
income taxes during the years ended December 31, 1998 and 1997 was
approximately $6,000 and $-0-, respectively.
Noncash investing and financing activity during 1998 and 1997 consists of
the following:
F-16
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financing of various insurance policies
(Note 5) $ 395,822 $ 418,022
Capitalization of leased assets and
obligations (Note 5) 1,191,228 403,812
Debt reduction in exchange for receivable
reduction (Note 2) 2,600,000 -
Assumption of debt related to acquisition
of property, plant and equipment in
LaPorte, Texas 5,400,000 -
Issuance of common shares for services,
pursuant to merger agreement 10,000 -
</TABLE>
9. Rental
Income
Under
Operating
Leases
The Company's operations include the leasing of space to third parties in
their commercial warehouses. The following is a schedule of minimum future
rental income on non-cancelable operating leases at December 31, 1998:
Year ended December 31, Amount
- --------------------------------------------------------------------------------
1999 $ 519,262
2000 99,215
2001 73,685
2002 39,600
2003 3,300
- --------------------------------------------------------------------------------
$ 735,062
================================================================================
10. Description
of
Securities
Each share of Common Stock entitles the holder thereof to one vote on all
matters on which holders are permitted to vote. No shareholder has any
preemptive right or other similar right to purchase or subscribe for any
additional securities issued by the Company, and no shareholder has any
right to convert Common Stock into other securities. No shares of Common
Stock are subject to redemption or to any sinking fund provisions. All of
the outstanding shares of Common Stock are fully paid and nonassessable.
Subject to rights of holders of Preferred Stock, if any, the holders of
shares of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors from funds legally available therefor and, upon
liquidation, to a pro rata share in any distribution to shareholders. The
Company does not anticipate declaring or paying any cash dividends on the
Common Stock in 1999. The Company must obtain approval from its lenders
prior to paying dividends in order to remain in compliance with various
loan covenants.
Pursuant to the Company's Amended and Restated Articles of Incorporation,
the Board of Directors has the authority to provide for the issuance of up
F-17
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
to 5,000,000 shares of Preferred Stock in one or more series and to
determine the dividend rights, conversion rights, voting rights, rights and
terms of redemption, liquidation preferences, the number of shares
constituting any such series and the designation of such series. Because
the Board of Directors has the power to establish the preferences and
rights of each series, it may afford the holders of any Preferred Stock
preferences, powers and rights (including voting rights) senior to the
rights of the holders of Common Stock. No shares of Preferred Stock are
currently outstanding.
11. Segment
Information
Alford Refrigerated Warehouses, Inc. has four reportable segments
consisting of one cold storage public warehouse in each segment. Each
warehouse is identified and referred to by the city in which the warehouse
is located: Dallas, Richardson, Fort Worth and La Porte. The reportable
segments are strategic business units which are managed separately as
independent profit centers. The services from which each reportable segment
derives its revenues are fundamentally the same, the storage and handling
of refrigerated product.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company measures
segment profit as income before income taxes and extraordinary items. There
are no intersegment sales or transfers.
The "Other" category includes results from a location which ceased
operations in November 1998 and expenses for the corporate office.
<TABLE>
<CAPTION>
Fiscal year ended Consolidated
December 31, 1998 Dallas Richardson Ft. Worth La Porte Subtotal Other Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 9,411,480 $ 2,264,779 $ 1,110,884 $2,771,127 $15,558,270 $ 2,093,671 $17,651,941
Depreciation and
amortization 451,867 12,591 15,433 254,624 734,515 42,054 776,569
Interest expense 1,029,172 - - 414,425 1,443,597 18,721 1,462,318
Rent expense - 818,217 267,500 20,000 1,105,717 471,413 1,577,130
Segment profit 1,500,682 213,996 120,465 15,012 1,850,155 (675,879) 1,174,276
Segment gross property,
plant and equipment 13,849,675 323,940 294,661 6,818,201 21,286,477 611,615 21,898,092
</TABLE>
F-18
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Fiscal year ended Consolidated
December 31, 1998 Dallas Richardson Ft. Worth La Porte Subtotal Other Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 8,129,544 $ 1,899,151 $ 1,005,607 $2,500,846 $13,535,148 $ 2,076,258 $15,611,406
Depreciation and
amortization 388,035 15,204 43,112 42,328 488,679 57,053 545,732
Interest expense 815,864 - - 2,570 818,434 212,355 1,030,789
Rent expense - 622,117 225,000 426,436 1,273,553 450,000 1,723,553
Segment profit 802,032 127,413 67,454 (64,734) 932,165 (795,261) 136,904
Segment gross property,
plant and equipment 12,564,663 286,042 291,173 137,325 13,279,203 609,696 13,888,899
</TABLE>
12. Fair Value
of Financial
Instruments
The methods and assumptions used to estimate the fair value of each class
of financial instrument are as follows:
Cash and cash equivalents, trade receivables, certain other current assets,
notes payable, accounts payable, and current maturities of long-term debt.
The carrying amounts approximate fair value because of the short maturity
of these instruments.
Long-term receivables. The fair value of long-term receivables was based on
discounted cash flows or other specific instrument analysis.
The carrying amounts and fair values of long-term notes receivable were as
follows:
December 31, 1998 1997
- --------------------------------------------------------------------------------
Carrying amount $ 1,676,655 $ 3,541,973
Fair value 1,615,000 3,412,000
================================================================================
Long-term debt. The carrying amounts of the Company's bank borrowings under
its revolving credit agreement approximates fair value because the interest
rate is based on floating rates identified by reference to market rates.
The fair values of the Company's other long-term debt either approximate
carrying value or are estimated based on quoted market prices for the same
or similar issues or on the current rates offered to the Company for debt
of the same remaining maturities.
The carrying amounts and fair values of long-term debt at December 31, 1998
and 1997 were as follows:
December 31, 1998 1997
- --------------------------------------------------------------------------------
Carrying amount $14,396,572 $11,851,093
Fair value 14,253,000 11,700,000
================================================================================
F-19
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) The financial statements filed as part of this Registration
Statement in Item 13 are listed in the Index to Financial Statements contained
in such Item.
(b) The following documents are filed as exhibits to this Registration
Statement:
2.1 First Amended Joint Plan of Reorganization dated July 9,
1996 as modified and clarified to date.
2.2 Agreement and Plan of Merger dated November 23, 1998 by and
between Hilltop Acquisition Holding Corporation, Womack
Gilman Investment Services, L.C., Halter Financial Group,
Inc. and Alford Refrigerated Warehouses, Inc.
3(i) Restated Articles of Incorporation (with amendments)*
3(ii)Amended and Restated Bylaws*
4.1 Form of Common Stock Certificate
10.1 Fixed Rate Note dated September 15, 1997 between Cadiz
Properties, Inc., and Morgan Guaranty Trust Company of New
York
10.2 Fixed Rate Note dated February 6, 1998 between La Porte
Properties, L.L.C., and Amresco Capital, L.P.
10.3 Consulting Agreement dated January 1, 1997 between Alford
Refrigerated Warehouses, Inc. and Alton M. Adams, P. Eng.
10.4 Purchase and Sale Agreement executed on or about January 19,
1999 between Alford Refrigerated Warehouses, Inc. and Fort
Worth Cold Storage Holdings, Inc.
10.5 Consulting Agreement dated March 29, 1999 between Alford
Refrigerated Warehouses, Inc. and Engineering Design and
Construction Managers Limited
21.1 Subsidiaries of the Company.
27 Financial Data Schedule
______________________
*Filed previously with 10-SB
40
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Act of 1934, the
Company caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALFORD REFRIGERATED WAREHOUSES, INC.
By: /s/ James C. Williams Date: April 26, 1999
-------------------------------
James C. Williams
Chief Financial Officer
41
Exhibit 2.1
Jay W. Ungerman
State Bar No. 20393000
UNGERMAN & UNGERMAN, P.C.
2515 McKinney Ave.
Suite 800
Dallas, Texas 75201
Telephone: (214) 747-3536
Facsimile: (214) 747-0068
ATTORNEYS FOR DEBTORS-IN-POSSESSION
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: ss.
ss.
OCA ACQUISITIONS, INC., NOW ss. CASE NO. 395-35856-RCM-11
KNOWN AS OPTICAL CORPORATION ss.
OF AMERICA, ss.
ss.
DEBTOR ss.
ss.
IN RE: ss.
ss.
BENSON OPTICAL CO., INC., ss. CASE NO. 395-35857-RCM-11
ss.
DEBTOR ss.
ss.
IN RE: ss.
ss.
SUPERIOR OPTICAL COMPANY, INC. ss. CASE NO. 395-36572-RCM-11
ss.
DEBTOR ss. JOINTLY ADMINISTERED UNDER
ss. CASE NO. 395-35856-RCM-11
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
---------------------------------------------------
OCA ACQUISITION, INC., NOW KNOWN AS OPTICAL CORPORATION OF AMERICA,
("Optical Corporation") BENSON OPTICAL CO., INC. ("Benson") AND SUPERIOR OPTICAL
1
<PAGE>
COMPANY, INC. ("Superior") are corporations that filed for relief under Title 11
of the U.S. Code in 1995. Since the bankruptcy Court on November 21, 1995
ordered that Superior has been consolidated with Benson for all purposes, the
remaining corporate Debtors, Optical Corporation and Benson (hereinafter
collectively the "Debtors"), propose the following Joint Plan of Reorganization
(hereinafter referred to as "Plan")
PREAMBLE
This Plan is a liquidating plan under Chapter 11 of the Bankruptcy
Code. Distributions under the Plan will be made from the proceeds of sales of
the Debtors' assets, from recoveries on certain causes of action which will be
prosecuted by the Plan Proponents and from the Stock Issuance of the Debtors.
The Plan provides for the collection, liquidation and distribution to creditors
of all property of the Debtors and issuance of stock in the Reorganized Debtor.
The Plan provides for the conveyance of all assets of each of the Debtors into a
single liquidating Trust, the unitary treatment of claims all of the Debtors and
the issuance of 37.5% of the stock of each of the Debtors: a) 32.5% to creditors
of all of the Debtors based on their cumulative Pro Rata Allowed Unsecured
Claim; and b) 5% to the shareholders of the Debtors. This treatment represents a
compromise and settlement under F.B.R.P. 9019 of any and all causes of action by
and between the Debtors and any party in interest concerning any allegations
that the Debtors should be substantively consolidated or that the Debtors are
the alter egos or instrumentalities of each other and hence each liable for the
debts of the other. The Proponents believe that the Plan offers the best vehicle
for implementing in the most efficient and economical manner a liquidation of
the Debtors' assets and distribution of the proceeds to their Creditors. The
Proponents encourage all holders of claims against each of the Debtors to vote
in favor of the Plan.
2
<PAGE>
ARTICLE I.
Definitions
-----------
For the purposes of this Plan, the following terms shall have the
following meanings unless the context clearly requires otherwise:
1.1 Administrative Claim. A claim Allowed under ss.330, 503(b), or 507
of the Code that is entitled to Priority and payment under Section 507(a)(1) of
the Code.
1.2 Allowed Claim. Means, respectively, (a) any Claim against the
Debtors, proof of which was filed on or before the date designated by the
Bankruptcy Court as the last date for filing proofs of Claim in connection with
these Chapter 11 Cases and which Claim is not a Disputed Claim; (b) if no proof
of Claim is filed, any Claim which has been or hereafter is listed in the
schedules of liabilities filed by the Debtors as liquidated in amount and not
disputed or contingent, and, in either case, which Claim is not a Disputed
Claim; or (c) any claim which has been Allowed by a Final Order. Unless
otherwise specified in this Plan, "Allowed Claim" shall not, for purposes of
computation of distribution under the Plan, include interest on any Allowed
Claim from and after the Petition Date.
1.3 Bar Date. The last day for filing claims in these proceedings was
60 days after rejection of leases for landlord claims; February 4, 1996, for all
other administrative claims, except as to Halter Financial Group, Inc.; and,
January 22, 1996, for all other claims.
1.4 Code. The United States Bankruptcy Code and being Title 11 of the
United States Bankruptcy Code as enacted in 1978 and as amended.
1.5 Confirmation Date. The date upon which the Bankruptcy Court enters
the Confirmation Order on its docket.
3
<PAGE>
1.6 Confirmation Order. The order of the Bankruptcy Court confirming
the Plan in accordance with the provisions of Chapter 11 of the Bankruptcy Code.
1.7 Consummation of the Plan. When all of the requirements of 'the
Plan are met. The Consummation of the Plan can not occur until after substantial
consummation as that term is defined in 11 U. S. C. ss. 1101 (2) and will only
occur upon the Consummation of the Plan Date.
1.8 Consummation of the Plan Date. The date fifteen (15) months from
the Effective Date of the Plan by which a reverse merger or reverse acquisition
must have been completed as to each specific Debtor or the discharge set forth
under 11 U.S.C. ss. 1141 (d)(3) will be deemed to have not been achieved and the
stock issued herein is deemed canceled and void. Upon the Consummation of the
Plan Date being achieved as to each Debtor, any and all claims by creditor's as
to a default under the Plan, can only be asserted against the Trust that is
established by the Plan.
1.9 Creditor. Any party or entity having a claim against the Debtors,
including but not limited to the following: Secured Creditors, Priority
Creditors, Unsecured Creditors and Equity Interest Owners as herein elsewhere
defined.
1.10 Debtors. OCA Acquisition, Inc., Now Known as Optical Corporation
of America; Benson Optical Co., Inc. Superior Optical Company, Inc has been
substantively consolidated with Benson and its creditors will be treated as
creditors of Benson in accordance with this Court's order of November 21, 1995.
1.11 Disputed Claim. Means (a) any Claim or portion of a Claim (other
than an Allowed Claim) which is scheduled by the Debtors as disputed, contingent
or unliquidated, or (b) a Claim proof of which has been filed pursuant to
Section 501 (a) of the Bankruptcy Code as unliquidated or contingent, or (c) a
4
<PAGE>
Claim, proof of which has been filed pursuant to Section 501 (a) of the
Bankruptcy Code and as to which an objection to the allowance thereof has been
interposed within any time limitation fixed by an order of the Bankruptcy Court,
or by this Plan, which objection has not been settled or determined, in whole or
in part, by an Order of the Bankruptcy Court which Order has not been stayed,
modified or reversed.
1.12 Effective Date. Means the business day following the eleventh (11th)
day after the Confirmation Order is entered, provided that in the event the
Confirmation Order has been stayed on appeal by a court of competent
jurisdiction, the Effective Date shall mean the first Business Day following the
date such stay is lifted or dissolved by a court of competent jurisdiction.
1.13 Equity Interest Owners. The shareholders of the Debtors.
1.14 Halter Financial Group, Inc. or HFG. Means the corporation that in
exchange for taking payment of its administrative expense claim of $17,500 in
each Debtor's case and the requirements set forth in Section V. of the Plan,
will receive 62.5% of the Stock Issuance of each Debtor. HFG's principal, Tim
Halter, will, after the Effective Date, become the President of each of the
Debtors. HFG, as the owner of 62.5% of each of the Debtors, will be responsible
for securing a reverse merger or reverse acquisition partner as set forth in
this Plan as to each of the Debtors.
1.15 Lipshy Loan. A loan in an amount not to exceed $100,000.00 to be
borrowed by the Creditors Trust for payment of attorneys and professional fees
for services provided to the Creditors Trust with respect to its prosecution of
the litigation against Benson Eyecare Corp. and/or its related entities and any
other litigation which may be brought by the Creditors Trust on behalf of the
Debtors' Estates. Listed below is an outline of the terms of the loan:
5
<PAGE>
a. Purpose: Attorneys' fees and expenses for maintenance of lawsuits and
other avoidance claims by the Debtors against Benson Eyecare Corp.
and/or its related entities;
b. Loan Amount: Up to $100,000.00;
c. Interest: None;
d. Repayment Terms: Upon receipt of proceeds of any judgment or
settlement of any claims;
i. Lipshy to receive first $50,000.00;
ii. Lipshy and the Creditors Trust to split next $100,000.00 on 50/50
basis;
iii. Creditors Trust to receive the next $400,000.00;
iv. Lipshy and the Creditors Trust to split all remaining proceeds,
25% to Lipshy and 75% to Creditors Trust, subject to a maximum to
Lipshy of an additional $100,000.00;
e. Miscellaneous:
i. Creditors Trust agrees to diligently pursue such claims against
Benson Eyecare Corp. and/or its related entities;
ii. Lipshy shall waive his unsecured Class 5 claim against the
Debtor;
iii. Loan documents shall contain terms acceptable to Lipshy
including, but not limited to, a release by the Debtors and
Creditors Trust to Lipshy and his affiliates, accountants,
attorneys and consultants, of any and all claims, if any; and,
iv. Prior to Confirmation of the Plan, all loan draws to be made upon
agreed order of the Court or upon Motion to the Court with notice
to Lipshy within 10 days following approval of fees and expenses
by the Bankruptcy Court; following Confirmation of the Plan, in
accordance with the Plan terms.
1.16 Plan. This Joint Plan of Reorganization, including any modifications,
amendments or corrections.
6
<PAGE>
1.17 Post Confirmation Debtors. The Debtors, each of which will have
their corporate names changed, post confirmation, as follows "Optical
Corporation" will become "Optical Acquisition Corp." and "Benson" will become
"Eyecare Acquisition Corp." Their respective states of incorporation are subject
to being changed. The officers and directors of the Post Confirmation Debtors is
set forth in the Plan.
1.18 Priority Creditor. A creditor having an Allowed claim entitled to
Priority pursuant to Section 330, 503(b), or 507 of the Code.
1.19 Pro Rata. Means proportionately, so that the ratio of the amount
of the distribution made on account of a particular Allowed Claim to the
distributions made on account of all Allowed Claims of the Class in which the
particular Allowed Claim is included is the same as the ratio of the amount of
such particular Allowed Claim to the total amount of Allowed Claims of the Class
in which such particular Allowed Claim is included.
1.20 Secured Creditor. Any creditor whose claim has been Allowed by the
Court as having a lien against property of the Debtors.
1.21 Stock Issuance. Means the issuance of stock by the Debtors,
Optical Corporation, and Benson, Pro Rata to the holders of Class 5 Allowed
Unsecured Claims and Class 6 equity interest owners under Section 1145 of the
Bankruptcy Code.
1.22 Substantial Consummation. Means the requirements set forth inss.
1101 (2) of the Bankruptcy Code.
1.23 Trust or Creditors Trust. Means the Trust established for the
benefit of Creditors pursuant to Article VI of the Plan.
7
<PAGE>
1.24 Trustee. The individual, Alan Katz, appointed under Article 6 of
the Plan as a Trustee of the Trust to administer the Trust and distribute
Property to Creditors.
1.25 Statement of Financial Affairs. The Statement of Financial Affairs
and Schedules of Assets and Liabilities and amendments thereto on file with the
Bankruptcy Court in this proceeding by the Debtors.
1.26 Unsecured Creditor. Any person or entity including trade creditors
having an Allowed claim against the Debtors that has not been designated as a
Priority or Secured Creditor by the Debtors, nor whose claim has been Allowed by
the Court as a Priority or secured claim.
ARTICLE II.
Classification of Creditors
---------------------------
In accordance with section 1123(a)(1) of the Bankruptcy Code, all
Claims and Interests, except Administrative Claims under 11 U.S.C. Section
507(a)(1) and Claims of governmental units under 11 U.S.C. Section 507(a)(8),
are hereby classified as set forth below.
The Creditors of the Debtors are divided into the following Classes of
Claims:
Class 1: The Allowed Priority Claims of Employees.
-------
Class 2: The Allowed Priority Claims for contributions
------- to the Debtors' employee benefit plan.
Class 3: The Allowed Priority Claims of individuals
------- arising from a deposit.
Class 4: The Allowed claims of Secured Creditors.
-------
Class 5: The Allowed non-Priority claims of Unsecured
------- Creditors.
Class 6: The Equity Interest Owners of the Debtors.
-------
8
<PAGE>
ARTICLE III.
Treatment of Classes
--------------------
Treatment of Unclassified Claims.
3.1 Each holder of an Allowed Administrative Claim under 11 U.S.C.
Section 507(a)(1) shall receive cash equal to the Allowed amount of such
Administrative Claim (unless the holder of such Administrative Claim agrees to
other treatment) from the assets of the Debtors, either within sixty (60) days
after the Effective Date or 30 days after they become Allowed or in the case of
professional fees on the eleventh (11th) day after the entry of an order
allowing said professional fees. All professionals shall file their application
for payment of fees with in 30 days after the Effective Date.
3.2 Administrative Claims of HFG will be paid in accordance with the
promissory notes executed by the each of the Debtors or HFG may take the
treatment set forth herein to receive 62.5% of the Stock Issuance of each of the
Debtors in full satisfaction of its Administrative Claims, by notifying counsel
for the Debtors and counsel for the Committee, in writing, with in 10 days prior
to the hearing date set for the Confirmation of the Plan.
3.3 All Allowed Priority Claims under 11 U.S.C. Section 507(a)(8) for
taxes owed to any governmental unit shall be paid in full, as soon as
practicable after the Effective Date once the payment of Allowed Administrative
Claims and Classes 1 - 3 have been made, but in no event later than six years
after the assessment of such tax. Any tax liens against the Property which were
recorded prior to the Petition Date will be discharged and released upon full
payment of the Claims for taxes which such liens secure.
9
<PAGE>
Treatment of Classified Claims.
3.4 Class 1: The Allowed Class 1 Priority Claims of Employees are
impaired under the Plan and shall be paid their Pro Rata share, without
interest, of any sums remaining after payment of all sums determine to be or
agreed to be due and owing to Allowed Administrative Claims. They shall be paid
up to the full amount of their Allowed Priority claim to the extent that said
claims do not exceed $4,000.00. Any sum in excess of $4,000.00 owed to an
individual Class 2 Claimant shall be Allowed as a Class 5 Unsecured Claim and
treated as such under this Plan.
3.5 Class 2: The Allowed Priority Claim of Class 2 for contributions to
the Debtors' employee benefit plan is impaired and shall be paid up to the full
amount of its Allowed Priority Claim, without interest, as soon as practicable
after the payment of all sums due and owing to Allowed Administrative Claims and
Class 1 or through the establishment of appropriate reserves for such payment.
3.6 Class 3: The Allowed Priority Claims of Class 3 individuals arising
from a deposit are impaired under the Plan and shall be paid their Pro Rata
share, without interest, of any sums remaining after payment of all sums due and
owing to Allowed Administrative Claims and Classes 1 and 2 or through the
establishment of appropriate reserves for such payment.. They shall be paid up
to the full amount of their Allowed Priority claim to the extent that said
claims do not exceed $1,800.00. Any sum in excess of $1,800.00 owed to an
individual Class 3 Claimant, shall be Allowed as a Class 5 Unsecured Claim and
treated as such under this Plan.
10
<PAGE>
3.7 Class 4: The Allowed Secured Claims of Class 4 are unimpaired and
shall receive their collateral in full satisfaction of their claims. The
unsecured portion of the claim of a holder of an Allowed Secured Claim shall
receive the treatment set forth in Class 5.
3.8 Class 5: The Allowed Unsecured Claims of Class 5 are impaired under
the Plan and shall be paid their Pro Rata share, without interest, of any sums
remaining after payment of all sums due and owing to Allowed Administrative
Claims and Classes 1, 2, and 3 or the establishment of appropriate reserves for
such payment. The holders of Allowed Unsecured Claims will also receive, from
the Trust, as nominee holder of 32.5% of the Stock Issuances of each of the
Debtors a Pro Rata share of said 32.5% of the newly issued stock of each of the
Post Confirmation Debtors. Any such holder may elect not to take its Pro Rata
share of the newly issued stock of the Debtor when voting on the Plan. Any such
holder who elects not to accept the tendered stock, shall have their Pro Rata
share redistributed to all of the other holders of Class 5 Claims . There is a
requirement, however, that there be at least 225 members of this class that have
elected to accept the tender of the shares in the Post Confirmation Debtors set
forth herein. If that number would otherwise be reached, then those ballots
received in the mail or by fax latest in time will not be able to so elect until
such time as the minimum has been reached. The number may be adjusted due to
subsequent votes in favor of the plan. Any holder of an allowed Class 5 who does
not vote on the confirmation of this Plan will be deemed to have accepted the
tendered referenced above and will be considered as so voting in the calculation
of the ability of those who do vote, but who elect to not accept the tender
above referenced. IF THE VOTES THAT ARE CAST IN THIS CLASS CAUSE THIS CLASS TO
ACCEPT THE PLAN, IN ACCORDANCE WITH THE STANDARDS FOR ACCEPTANCE BY A CLASS AS
11
<PAGE>
SET FORTH IN THE BANKRUPTCY CODE, AND THIS PLAN IS OTHERWISE CONFIRMED, THEN ALL
HOLDERS OF CLAMS IN THIS CLASS WILL BE RELEASED FROM AND NOT SOUGHT TO BE HELD
LIABLE FOR THE RECEIPT OF PREFERENTIAL TRANSFERS RECEIVED WITH IN 90 DAYS OF THE
DEBTORS FILING FOR RELIEF UNDER CHAPTER 11 OF TITLE 11, UNDER SECTIONS 547 AND
550 OF THE BANKRUPTCY CODE, NOR HAVE THE ALLOWABILITY OF THEIR CLAIMS CONTESTED
ON THE BASIS THAT THEY HAD RECEIVED A PREFERENCE UNDER SECTION 547. PLEASE NOTE
THIS RELEASE AND WAIVER OF CLAIMS OBJECTIONS DOES NOT APPLY TO THOSE CLAIMANTS
IN OTHER CLASSES WHO HAVE A RESULTING CLAIM IN THIS CLASS OR WHO ARE
SPECIFICALLY LISTED IN THIS PLAN AS BEING THE SUBJECT OF A PREFERENCE ACTION.
THIS RELEASE DOES NOT RELATE TO ANY OTHER AVOIDANCE POWER UNDER CHAPTER 5 OF THE
BANKRUPTCY CODE AS TO ANY CLASS 5 CLAIMANT.
3.9 Class 6: The equity interest owners shall have their interests in each
of the Debtors canceled on the stock ledgers of the Debtors and will have new
stock certificates in each of the Reorganized Debtors issued to them by the
President of each Reorganized Debtor as to their Pro Rata shares of 5% of the
Stock Issuance in each of the Post Confirmation Debtors. This treatment will be
in and for consideration of the securing of the Lipshy Loan for the prosecution
of avoidance and other actions set forth above.
12
<PAGE>
ARTICLE IV.
Potential Cram Down of Non-Consenting Classes
---------------------------------------------
If any Class of Creditors fail to accept this Plan, the Debtors reserve
the right to move for a so-called "cram down" of that Class under the provisions
of ss.1129(b) of the Code. In the event the Court refuses to impose a "cram
down" on the rights of a non-consenting Class, the Debtors reserve the right to
propose modifications to this Plan and to seek confirmation of the Plan as
modified in accordance with the Bankruptcy Code and Rules. The Debtors further
reserve the rights granted under ss. 1126(e) of the Code to seek a designation
that any Creditors' rejection of the Plan was not in good faith.
ARTICLE V
Means for Execution of the Plan
-------------------------------
5.1 The Plan will be implemented consistent with Section 1123 and 1145
of the Bankruptcy Code. The assets of Debtors' respective estates shall be
conveyed to the Trust. All intercompany claims between the Debtors shall be
extinguished. All distributions required to be made under the Plan shall be made
by the Trustee from the Trust. The Trust shall become effective and shall be
funded on the Effective Date as provided below.
5.2 All Property shall be automatically vested in the Trust and made
available for distribution to Creditors following the allowance of their Claims
pursuant to the Plan or further orders of the Bankruptcy Court. As and when the
Property is collected and converted into cash, the Trustee shall make
distributions to Creditors subject to their making appropriate reserves for
Disputed Claims and costs and expenses of the Trust pursuant to the Plan. The
Trust will be the nominee holder of 37.5% of the Stock Issuances of each of the
Debtors, until the claims allowance process is completed and shares of each of
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the Post Confirmation Debtors can be transferred to the intended holders. No
fractional units will be issued, all shares will be rounded up or down from 50%
of a single share. The total amount of shares to be issued will be determined by
HFG and the Trust, not inconsistent with the provisions of this Plan. The Trust,
as nominee holder during the claims allowance process, may not sell, transfer or
hypothecate the shares held as nominee. The Trust may cause the shares
representing a 32.5% ownership interest in each of the Debtors to be distributed
to the holders of Allowed Unsecured Class 5 claims in the same manner as any
distribution of Property under the plan to the holders of Allowed Unsecured
Class 5 claims as well as to the 5% ownership interest in each of the Debtors to
the holders of Class 6 equity owners interests.
5.3 Continued Corporate Existence and Future Governance.
---------------------------------------------------
The Debtors names will be changed post confirmation and the Post
Confirmation Debtors will be thereafter known as follows: "Optical Corporation"
to "Optical Acquisition Corp.", "Benson" to " Eyecare Acquisition Corporation.".
HFG will have the power to change the place of incorporation and any one or all
of the Post Confirmation Debtors may subsequently reincorporate under the laws
of another state. The new shares of common stock issued pursuant to the Plan,
the Stock Issuance, will be in an amount sufficient to meet the requirements of
the Plan, which shall be approximately 500,000 shares. Sixty two and one half
percent (62.5%) of such newly issued shares in each of the Post Confirmation
Debtors will be issued to HFG in exchange for the release of its Allowed
Administrative Claim and the performance of services and incurring of fees
related to the anticipated post-confirmation reverse mergers or reverse
acquisitions of the Post Confirmation Debtors. The remaining 37.5% will be
issued, 32.5% to the holders of Allowed Unsecured Claims and 5% to the equity
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interest holders. Each of the Post Confirmation Debtors' officers will be Tim
Halter, as president and secretary. Tim Halter is the owner of all of the shares
of HFG and its President and sole director. The Post Confirmation Debtors' sole
director prior to the reverse merger or reverse acquisition, will also be Tim
Halter.
The Post Confirmation Debtors shall continue in existence in accordance
with the laws of their state of incorporation pursuant to the charter and bylaws
in effect prior to the Effective Date as specifically modified by this Plan and
as are authorized to be modified hereinafter. After the Effective Date, the Post
Confirmation Debtors may amend its respective articles of incorporation or
change its state of incorporation as necessary to effectuate the Plan. The
authorized changes will be executed by the Post Confirmation Debtors successor
officers and directors and acknowledged by the Trust. The proposed authorized
changes will be made available on or before the earlier of seven (7) days prior
to the ballot deadline or the tenth (10th) day prior to the confirmation
hearing. You may request copies of same by contacting the Debtors counsel's
office. Both of the Debtors have been registered and authorized to conduct
business in various states as foreign corporations. The Post Confirmation
Debtors will not be assuming or otherwise attempting to utilize those
registrations. As such, said registrations will be deemed to have lapsed as of
the Effective Date. The Post Confirmation Debtors will each increase the number
of common shares authorized in anticipation of a reverse merger or reverse
acquisition transaction to 40,000,000. All matters of corporate governance of
the Post Confirmation Debtors will be controlled by their respective articles of
incorporation and bylaws, as modified by the Plan or authorized to be modified
by this Plan. No proposals submitted by the officer and director of a Post
Confirmation Debtor as to changes in the articles of incorporation or the bylaws
of the Post Confirmation Debtor, except the authorized changes, or to approve
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the reverse merger or reverse acquisition, may be made without the approval of
the majority of those shares which vote on the proposal. A majority of those
shares that vote on such proposals is defined as the simple majority of shares
voted and held by any shareholder other than HFG. HFG's shares shall
automatically be voted with the majority of those shares that voted on said
proposals. Any restrictive provisions of the Articles or bylaws shall be
replaced per Post Confirmation Debtor upon the completion of an authorized
reverse merger or reverse acquisition as to said Post Confirmation Debtor, as
necessary, to meet the requirements of the reverse merger or reverse
acquisition, without further requirement to secure any authority from the
shareholders of said Post Confirmation Debtor. HFG shall complete the reverse
mergers or reverse acquisitions by the Consummation of the Plan Date. If such
transactions are not closed by the Consummation of the Plan Date, then HFG and
the holders of Allowed Unsecured Claims against the Debtors agree that the
shares issued will be deemed void. The order confirming the Plan will constitute
unanimous consent of the post confirmation shareholders of each of the Debtors
to the changes detailed herein or to be attached pursuant hereto. The shares
distributed to HFG are subject to being non transferable, absent registration,
due to the application of ss.1145(b)(1)(A). This plan will not make any attempt
to discern or influence any such decision by any applicable government agency.
The determination of same shall be the responsibility of HFG.
5.4 Distribution of shares of the Post Confirmation Debtors
------------------------------------------------------------
Shares of stock in the Post Confirmation Debtors shall be finally disbursed
once all Class 5 claims are determined to be Allowed or disallowed and in
accordance with any holders election that they do not wish to receive their pro
rata distribution of the Stock Issuances. The Trust shall hold the approximate
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187,500 shares of each of the Post Confirmation Debtors, as nominee holder for
coth the Class 5 Allowed Claimants and the Allowed Class 6 Claimants, until such
distribution. The Trust may make interim distributions of stock of a Post
Confirmation Debtor in the same manner and with the same safeguards as set forth
above for the distribution of cash set forth in the Plan.
5.5 Pre-reverse merger or reverse acquisition shareholder requirements
------------------------------------------------------------------
Under ss.1145(d) of the Bankruptcy Code, the issuance of shares pursuant to
the Plan in each of the respective Debtors constitutes a public offering. There
are, therefore, no statutory restrictions to the free transferability of the
shares received to the holders of Allowed Unsecured Claims or equity interest
holders. However, there is no established market for the shares of the
respective Debtors that are to be issued pursuant to the Plan. Moreover, to
assure that the requirements of ss. 1141 (d)(3 ) are met so as to secure the
discharge under said section, all trading of such stock will be enjoined by the
order confirming the Debtors' Plan until the completion of the reverse merger or
reverse acquisition but in no event later than fifteen (15) months after the
Effective Date. This shareholder requirement will be extinguished as each Post
Confirmation Debtor completes the requirements of its reverse merger or reverse
acquisition. Once all the requirements of the reverse merger or reverse
acquisition are met, those shares will be freely tradeable and the injunction on
such trading provided for herein, shall be automatically dissolved.
5.6 Post Confirmation Reporting
----------------------------
The President of each of the Post Confirmation Debtors shall inform the
shareholders of each of the Post Confirmation Debtors of the date when the
reverse merger or reverse acquisition is completed, so as to trigger
Consummation of the Plan and the listing price of the stock of said Post Confir-
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mation Debtor when such stock first becomes tradable on a public market, with in
fifteen (15) days of such date, so as to provide tax information to the holders
of said stock.
ARTICLE VI
CREDITORS TRUST
6.1 Creation of Creditors Trust
-----------------------------
A Trust is hereby created for the benefit of Creditors holding Claims
entitled to distributions under this Plan. The Trustee of the Trust shall make
distributions set forth in the Plan and shall have the power and authority set
forth in the Plan.
6.2 Vesting of Property in the Trust
--------------------------------
On the Effective Date all "Property" of the Debtors and their estates shall
be automatically conveyed, assigned, transferred and granted to the Trustee and
the Trust and shall vest in the Trustee and the Trust in accordance with the
requirements of Section 1123 (b)(3)(B). The term "Property" for the purposes of
this Plan means:
a. All property of the Debtors and the Debtors' estates as defined in 11
U.S.C. Section 541 whether such property is now existing or hereafter
arising and wherever located.
b. All causes of action, rights, claims and demands against any third
parties, Creditors, investors, individuals, insiders or other entities
that the Debtors or the Debtors in Possession own or have an interest
in or can assert in any fashion since their formation, or which could
be asserted by any Creditor or Creditor representative or trustee
under the Bankruptcy Code, whether pre-petition or post-petition,
including, but not limited to, actions under Sections 542 through 553
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inclusive of the Bankruptcy Code and Section 510 of the Bankruptcy
Code to recover assets for any of the Debtors' estates and for the
benefit of Creditors and to subordinate claims (collectively "Debtor
Actions") and all proceeds of and recoveries on Debtor Actions. PLEASE
NOTE, HOWEVER, THE PROVISIONS OF SECTION 3.8 ABOVE AS TO THE DEBTORS'
WAIVER OF THE RIGHT TO OBJECT TO CLAIMS BY VIRTUE OF THE RECEIPT OF
PREFERENTIAL TRANSFERS THAT WERE RECEIVED IN 90 DAYS BY NON INSIDERS
OR NON AFFILIATES OF THE DEBTORS OR TO PURSUE THE RECOVERY OF
PREFERENTIAL TRANSFERS THAT WERE RECEIVED WITH IN 90 DAYS BY NON
INSIDERS OR NON AFFILIATES OF THE DEBTORS IF THE CLASS SET FORTH IN
SECTION 3.7, CLASS 5, VOTES IN FAVOR OF THIS PLAN AND THE PLAN IS
OTHERWISE CONFIRMED.
c. Any and all of the Debtors' money in the Debtors' bank accounts or
held by others on behalf of the Debtors and any other monies or sums
to which the Debtors or their estates may be entitled hereafter, save
and except for $2,500 per Debtor, which is to remain in each of the
Debtors for a total of $5,000, if HFG elects to have its
Administrative Expense Claim paid by virtue of the Stock Issuance.
d. Any mortgages, deeds of trust, assignments of rents, interests or
security agreements encumbering properties of third parties which
liens, interests and encumbrances belong to or are entitled to be
claimed by the Debtors or in which any of the Debtors have an
interest.
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e. Any and all other assets of the Debtors including but not limited to
real estate, machinery, equipment, inventory, accounts receivable, the
proceeds of liquidation sales of such assets, tax refunds, insurance
proceeds, recoveries from third parties, and all other assets and
rights to payment of any kind, nature or description.
f. Property expressly excludes each of the Post Confirmation Debtors'
Corporate Shell and the stock issued to H. F. G. The stock to be
issued to Class 5 and Class 6 Claimants is property only for the
purpose of being a nominee holder for said Claimants.
For the purposes of meeting the requirement in section 1124 (b)(3)(B) that the
retention be for the benefit of creditors of the Debtors, the recovery from any
avoidance action set forth in Chapter 5 of Title 11 shall be accounted for and
distributed by the Trustee 70% of the net proceeds to Class 5 Allowed Unsecured
Claims and 30% of the net proceeds to the payment of any remaining class of
claims or to pay Administrative expenses of the Debtors' or the Trust.
6.3 Liquidation and Collection
--------------------------
The Trustee shall promptly take such action as is necessary to liquidate to
cash all Property and to collect on all Debtor Actions vested in him and the
Trust by such means as the Trustee deem advisable. The Trustee is hereby
authorized, subject to approval of the Bankruptcy Court, to retain
professionals, including attorneys, auctioneers and appraisers for such
purposes. The fees and expenses of such professionals shall be subject to
approval of the Bankruptcy Court.
6.4 Authorization
-------------
The Trustee is hereby appointed under Section 1123 (b)(3) (B) as a
representative of the respective Debtor's estates, and shall generally have all
of the powers of a Chapter 7 Trustee under the Bankruptcy Code including, with-
out limitation, the power and authority to perform the following acts:
20
<PAGE>
a. Perfect and secure his right, title and interest to the assets
comprising the Property;
b. Sell and convert the Property to cash and distribute the net proceeds
as specified herein;
c. Manage and protect the Property and distribute the net proceeds, as
specified herein;
d. Release, convey, abandon or assign any right, title or interest in or
about the Property;
e. Pay and discharge any costs, expenses, Trustee' fees or obligations
deemed necessary to preserve the Property or any part thereof or to
preserve this Trust;
f. Deposit Trust funds and draw checks and make distributions thereof;
g. Employ and have such attorneys, accountants, engineers, agents, tax
specialists, and other professionals and clerical and stenographic
assistance as may be deemed necessary, subject to Bankruptcy Court
approval;
h. Exercise any and all powers granted to the Trustee by any agreements
or by common law or any statute which serves to increase the extent of
the powers granted to the Trustee hereunder.
i. Take any action required or permitted by this Plan;
j. Settle, compromise or adjust by arbitration or otherwise any disputes
or controversies in favor of or against the Trust or the Property;
k. Waive or release rights and claims of any kind;
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1. In general, without in any manner limiting any of the foregoing, deal
with the Trust Property or any part or parts thereof in all other ways
as would be lawful for any person owing the same to deal therewith,
whether similar to or different from the ways above specified, at any
time or times hereafter; and
m. Have instituted on behalf of the Trust and prosecute all suits and
proceedings, including, without limitation, all Debtors Actions claims
or causes of actions which could be brought by a trustee or
debtor-in-possession under the Bankruptcy Code, and prosecute or
defend all actions against or appeals on behalf of the Debtors.
6.5 Operations of Trust
-------------------
Subject to the rights of the Committee described below, the Trustee shall
have full and complete authority to manage, do and perform all acts, execute all
documents and to make all payments and distributions of funds directed to be
done, executed, performed, paid and disbursed by the provisions of this Plan.
The Trustee shall have the power to invest funds of the Trust in demand and
time deposits in any national bank which is an authorized depository for
bankruptcy funds in the Northern District of Texas or to make temporary
investments such as short-term certificates of deposit in such banks or Treasury
bills.
In no case shall any party dealing with the Trustee in any manner
whatsoever in relation to the Property or to any part or parts thereof,
including but not limited to, any party to whom the Property or any part thereof
shall be conveyed or contracted to be sold by the Trustee, be obligated to see
to the application of any money or proceeds borrowed or advanced on said
Properties or be obligated to see that the provisions of this Plan or the terms
of this Trust have been complied with, or be obligated or privileged to inquire
22
<PAGE>
into the necessity or expediency of any act of the Trustee, or to inquire into
any other limitation or restriction of the power and authority of the Trustee,
but as to any party dealing with the Trustee in any manner whatsoever in
relation to the Property, the power of the Trustee to act or otherwise deal with
said Properties shall be absolute.
The Trustee shall receive reasonable compensation for services rendered,
based upon a reasonable hourly rate ($39.00 per hour), and expenses incurred in
the administration of the Trust which compensation for services and expenses
shall be approved by the Bankruptcy Court. Any attorneys or other professionals
employed by the Trustee shall receive reasonable compensation for their services
rendered, based upon a reasonable hourly rate, and expenses incurred in the
administration of the Trust which compensation for services and expenses shall
be approved by the Bankruptcy Court. Such compensation, as approved by the
Bankruptcy Court, shall be deemed earned from the commencement of the Trust, and
shall be a charge against and paid out of the Property on the same basis as
other costs, expenses and obligations of the Trust.
The Trustee shall keep an accounting of receipts and distributions, which
shall be open to inspection by the Committee or any other Creditor at all
reasonable times and the Trustee shall otherwise keep the Committee informed in
the matters of this Trust.
No recourse shall ever be had, directly or indirectly, against the Trustee
personally or against the Committee or any member thereof or against the
Creditors who are beneficiaries of the Trust or any of them or against any
employee of or professional retained by the Trustee or the Committee, by legal
or equitable proceedings or by virtue of any statute or otherwise, on any deed
23
<PAGE>
of trust, mortgage, pledge, note, nor upon any promise, contract, instrument,
undertaking, obligation, covenant or agreement whatsoever executed by the
Trustee under this Plan or by them or by any person employed by the Committee,
for any purpose authorized by this Trust, it being expressly understood and
agreed that all such liabilities, covenants, and agreements of the Trustee or
any such employee, whether in writing or otherwise, under this Trust shall be
enforceable only against and be satisfied only out of the Property or such part
thereof as shall under the terms of any such agreement be liable therefor or
shall be evidence only of a right of payment out of the income, proceeds and
avails of the Property, as the case may be.
The Trustee shall not be liable for any act they may do or omit to do
as Trustee hereunder while acting in good faith and in the exercise of their
business judgment, and the fact that such act or omission was advised, directed
or approved by an attorney acting as attorney for this Trust, shall be
conclusive evidence of such good faith and good judgment; nor shall the Trustee
be liable in any event except for his own gross negligence or willful default or
misconduct.
The initial Trustee shall be Alan Katz and the law firm of Ungerman &
Ungerman, P.C. shall be counsel for the Trustee. The Trustee may resign at any
time by giving written notice to the Chairman of the Committee, counsel for the
Trustee, and counsel for the Committee and such resignation shall be effective
upon the date provided in such notice.
In case of the resignation of a Trustee, a successor Trustee shall
thereupon be selected by an instrument in writing, signed and acknowledged by
the Chairman of the Committee and delivered to the resigning Trustee. Each
succeeding Trustee may in like manner resign and another may in like manner be
appointed in his place. In the event of the death or inability to act of a
Trustee, a successor Trustee shall be selected by the Committee. Immediately
24
<PAGE>
upon selection, whether because of death inability or resignation, any successor
Trustee shall seek approval of his/her appointment with the Bankruptcy Court,
with notice, including to counsel for the Trustee, together with an affidavit of
disinterestedness. Upon Court approval the successor Trustee shall be vested
with all the rights, privileges, powers and duties of his predecessor.
This Trust shall be effective as of the Effective Date and shall remain
and continue in full force and effect until the earlier of the following: (1)
the indebtedness of the Debtors to all Creditors has been paid or satisfied in
accordance with the provisions of the Plan, or (2) the Property vested in the
Trust has been wholly converted to cash and all costs, expenses and obligations
incurred in administering this Trust have been fully paid and discharged and all
remaining income, proceeds and avails of the Property have been distributed to
Creditors. The Trustee will make continuing efforts to dispose of the Property,
make timely distributions and not unduly prolong the duration of the Trust.
Notwithstanding anything contained herein, the Trust shall terminate not later
than 21 years from the Effective Date. Upon termination of the Trust, or at such
other time as may be required by the Bankruptcy Court or applicable law, the
Trustee will file with the Bankruptcy Court a final account and a motion seeking
the entry of a final decree closing these Chapter 11 Cases.
The Committee shall remain in existence following confirmation of the
Plan and shall act in an advisory capacity to the Trustee with such powers as
are provided in this Article. The individual members of the Committee shall
serve without compensation but, subject to the approval of the Bankruptcy Court,
each individual member of the Committee shall be reimbursed out of the Property
for all reasonable out-of-pocket expenses and distributions incurred by him or
her in the performance of his or her duties as a member of the Committee in the
25
<PAGE>
performance of its function and in the exercise of its rights and remedies under
this Plan prior and subsequent to confirmation.
Upon the termination of the Trust created in this Article VI, the Committee
shall disband.
ARTICLE VII.
Executory Contracts and Unexpired Leases
----------------------------------------
All executory contracts and unexpired leases of the Debtors have been
previously rejected any others not otherwise rejected are rejected by the
confirmation of the Plan. Each person who is a party to an executory contract or
unexpired lease of the Debtors rejected herein or heretofore, shall be entitled
to file and must serve upon the Trustee, not later than thirty days after the
Confirmation Date, a proof of Claim for damages alleged to arise from the
rejection of such executory contract or unexpired leases to which such person is
a party.
ARTICLE VIII.
Modification of the Plan
------------------------
The Debtors may propose amendments to, or modifications of this Plan at
any time prior to confirmation with leave of the Court, upon notice to all
parties-in-interest as required by the Court. After confirmation, the Debtors
may, with the approval of the Court and so long as it does not materially or
adversely affect the interest of the creditors, remedy any defect or omission or
reconcile any inconsistencies in the Plan, or in the Order of Confirmation, in
such manner as may be necessary to carry out the purposes and effect of this
Plan.
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ARTICLE IX
Jurisdiction of the Court
-------------------------
The Court shall retain jurisdiction until this Plan has been fully
consummated including, but not limited to the following purposes:
1. The Classification of the claim of any creditor and the
re-examination of the claims which have been Allowed for the purposes of
determining acceptances at the time of confirmation and the determination of
such objections as may be filed to creditors' claims. The failure by the Debtor
to object to, or to examine any claim the purposes of determining acceptances,
shall not be deemed to be a waiver of the Debtors' right to object to or
re-examine the claim in whole or in part.
2. Rejection of executory contracts or unexpired leases that are not
discovered prior to confirmation and allowance of claims for damages as to the
rejection of any such executory contracts or unexpired leases within such
further time as the Court may direct.
3 . Determination of all questions and disputes regarding title to the
assets of the Debtors and determination of all causes of action, controversies,
disputes or conflicts, whether or not subject to pending action as of the date
of confirmation between the Debtors and any other party including, but not
limited to, any right of the Debtor to recover assets pursuant to the provisions
of Title 11 of the Code.
4. The correction of any defect, the curing of any omission or the
reconciliation of any inconsistency in this Plan or the Order of Confirmation as
may be necessary to carry out the purpose and intent of this Plan.
27
<PAGE>
5. The modification of this Plan after confirmation pursuant to the
Bankruptcy Rules and Title 11 of the Code.
6. To enforce and interpret the terms and conditions of this Plan.
7. Entry of any order, including injunctions, necessary to enforce the
title, rights and powers of the Debtors and to impose such limitations,
restrictions, terms and conditions of such title, rights and powers as this
Court may deem necessary.
8. Entry of an Order concluding and terminating this Case.
9. Determination of the allowability of Claims and Interests upon objection
to such Claims by the Trustees, other successors to the Debtors, or any other
party in interest;
10. Determination of any tax liability, pursuant to Section 505 of the
Bankruptcy Code;
11. Approval, pursuant to Section 365 of the Bankruptcy Code, of all
matters related to the assumption, assumption and assignment, or rejection of
any executory contract or unexpired lease of the Debtors;
12. Determination or request for payment of administrative expenses
entitled to priority under Section 507(a)(1) of the Bankruptcy Code, including
compensation of parties entitled thereof,
13. Adjudication of any causes of action that arose pre-confirmation or in
connection with the implementation of this Plan, including, without limitation,
all avoidance actions under Chapter 5 pf Title 11, brought by the Debtors or the
Trustee acting as a representative of the Debtors' estate as well as the Benson
Eye Care litigation, whether any such cause of action is instituted pre or post
confirmation;
14. Entry of a Final Order closing the Chapter 11 Cases;
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<PAGE>
ARTICLE X.
OBJECTION TO CLAIMS: VOTING OF CLAIMS
10.1 Objections to Claims. Objections to Claims shall be filed by the
Trustee or any other party in interest with the Clerk of the Bankruptcy Court
and served upon each holder of each of the Claims to which objections are made
within ninety (90) days following the Confirmation Date.
10.2 Resolution of Disputed Claims. Unless otherwise ordered by the
Bankruptcy Court, the Trustee shall litigate to judgment, settle or withdraw
objections to Disputed Claims, in their sole discretion, without notice to any
party in interest other than the Bankruptcy Court, the holders of such Disputed
Claims, the Chairman of the Committee and its counsel. The provisions for
payment which are set forth in Article III of the Plan are without prejudice to
any objection to Claims and the right to assert such objections, and all such
provisions for payment are subject to the provisions set forth in this Article
IX of the Plan.
10.3 Payment of Allowed Claims. For purposes of determining the amount
of distribution to be made to each holder of an Allowed Claim under the Plan,
the amount of all Disputed Claims will be deemed to be Allowed Claims. Except as
the Trustee may otherwise determine in their sole discretion, no payment or
distribution will be made on a claim if any portion of such Claim is a Disputed
Claim until all of the objections to such Claim or portion of such Claim have
been determined by a Final Order of the Bankruptcy Court. Any payment or
distribution which otherwise would have been made on account of a Disputed Claim
if it had been an Allowed Claim will be held in reserve by the Trustee in the
Disputed Claims Reserve pending a determination of the allowability of such
Claim. In the event that a Disputed Claim is resolved by the allowance of such
29
<PAGE>
Disputed Claim in whole or in part, the Trustee will make the appropriate
distribution to the holder of such Claim, to the extent that it is an Allowed
Claim, from the Disputed Claims Reserve in accordance with the provisions of the
Plan. When all Disputed Claims have been Allowed or disallowed and amounts in
the Disputed Claims Reserve have been distributed, all amounts then remaining in
the Disputed Claims Reserve, if any, will be distributed pursuant to Article III
of the Plan.
10.4 Voting of Claims. The amount of a Claim that will be used to
determine votes for or against the Plan will be either (a) the Claim amount
listed in Debtors' schedule of liabilities (the "Schedules") on file with the
Bankruptcy Court, unless such Claim is listed in the Schedules as contingent,
unliquidated or disputed or (b) the liquidated amount specified in a proof of
Claim timely filed with the Bankruptcy Court that is not the subject of an
objection. If the holder of a Claim submits a ballot, but such holder has not
timely filed a proof of Claim and such holder's Claim is listed on the schedules
as contingent, unliquidated or disputed or such holder's Claim is the subject of
an objection, the ballot will not be counted in accordance with Bankruptcy Rule
3018, unless the Bankruptcy Court temporarily allows the Claim for the purpose
of accepting or rejecting the Plan in accordance with Bankruptcy Rule 3018.
10.5 Any creditor or claimant who does not vote will be deemed to have
accepted the Plan, although said deemed acceptance shall not be considered in
the calculation of the required majorities for the determination of whether a
Class accepts or rejects the Plan. Any claimant who fails to object to and
secure the removal of said objectionable provisions of this Plan, shall be bound
by all provisions of this Plan, if it is confirmed.
30
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ARTICLE XI.
EFFECT OF THE PLAN ON CLAIMS AND INTERESTS
11.1 Discharge of Claims. If on the Consummation of the Plan Date, as
defined in the Plan, a Post Confirmation Debtor has closed a reverse merger or
reverse acquisition, then each such Post Confirmation Debtor will be discharged
from claims or other debts that arose before the Confirmation Date.
Additionally, all persons who have claims against the Debtors which arise prior
to the Confirmation Date shall also be prohibited from asserting such claims
against the Creditors Trust or the Debtors' property, except as provided in the
Plan.
11.2 Injunction. Except as provided in the Plan or Confirmation Order,
as of the Effective Date, all entities that have held, currently hold or may
hold a Claim or other debt or liability against the Debtors or an Interest or
other right of an equity security holder in the Debtors are permanently enjoined
from taking any of the following actions on account of any such Claims, debts,
liabilities or interests: (1) commencing or continuing in any manner any action
or other proceedings against the Trustee, the Reorganized Debtors or the
Property; (2) enforcing, attaching, collecting or recovering in any manner any
judgment, award, decree or order against the Trustee the Reorganized Debtors or
the Property; (3) creating, perfecting or enforcing any lien or encumbrance
against the Trustee, the Reorganized Debtors or the Property; (4) asserting
against the Trustee, the Reorganized Debtors or the Property a set off, right or
claim of subordination or recoupment of any kind against any debt, liability or
obligation due to the Debtors; and (5) commencing or continuing any action, in
any manner, in any place that does not comply with or is inconsistent with the
provisions of the Plan and the reverse merger or reverse acquisition by the Post
Confirmation Debtors. Additionally, there will be an injunction restricting the
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transfer of the shares of each of the Post Confirmation Debtors until such time
as the reverse mergers or reverse acquisitions as to such Post Confirmation
Debtor is completed. The President of the applicable Post Confirmation Debtor
will notify the shareholders of the date of the completion of the reverse merger
or reverse acquisition. If Consummation of the Plan Date passes without the
completion of a reverse merger or reverse acquisitions as to such Post
Confirmation Debtor, such shares will be deemed void and the injunction on the
trading of any such shares shall become permanent. Nothing herein shall prohibit
any claimant, however, for suing the Trust for failing to abide by the
provisions of the Plan, or to otherwise enforce the provisions of the Plan.
After the Effective Date, any creditor may only look to the Trust and not to the
Reorganized Debtor's to have obligations of the Plan met. This injunction, as to
the Reorganized Debtors, shall, upon the Consummation of the Plan Date, be
augmented by the discharge provisions set forth in Section 11.1.
11.3 Revesting and Vesting. Except as otherwise provided in the Plan,
on and after the Effective Date, all Property of the Debtors' estates shall vest
in the Trust and the Trustee free and clear of all Claims, liens, debts,
liabilities, charges, interests and other encumbrances.
11.4 Settlement of all Intercompany Disputes and Causes of Action to
Consolidate the Debtors as well as Certain Preference Actions and Claims
Objections. The confirmation of this Plan will compromise and settlement under
F.B.R.P. 9019 any and all causes of action by and between the Debtors and any
party in interest concerning any allegations that the Debtors should be
substantively consolidated or that the Debtors are the alter egos or
instrumentalities of each other and hence each liable for the debts of the
other. Moreover, this plan shall provide for the settlement of preference
actions as set forth in Section 3.8 above, on the conditions set forth therein.
32
<PAGE>
DATED: July 9, 1996.
OCA ACQUISITION, INC., NOW KNOWN
AS OPTICAL CORPORATION OF AMERICA
BENSON OPTICAL CO., INC.
SUPERIOR OPTICAL COMPANY, INC.
(Substantively Consolidated with
Benson)
By: /s/ Alan J. Katz
-------------------------
Alan J. Katz,
Executive Vice-President
UNGERMAN & UNGERMAN, P.C.
By: /s/ Jay W. Ungerman
-------------------
Jay W. Ungerman
Bar I.D. No. 20393000
2515 McKinney Ave.
Suite 800
Dallas, Texas 75201
(214) 747-3536
(214) 747-0068 Facsimile
ATTORNEYS FOR DEBTORS-IN-POSSESSION
33
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: ss.
ss.
OCA ACQUISITION, INC. n/k/a ss CASE NO. 395-35856-RCM-11
OPTICAL CORPORATION OF AMERICA, ss.
ss.
Debtor. ss.
ss.
IN RE: ss.
ss.
BENSON OPTICAL CO., INC., ss. CASE NO. 395-35857-RCM-11
ss.
Debtor. ss.
ss.
IN RE: ss.
ss.
SUPERIOR OPTICAL CO., INC., ss. CASE NO. 395-36572-RCM-11
ss.
Debtor. ss. JOINTLY ADMINISTERED UNDER
ss. CASE NO. 395-35856-RCM-11
ORDER CONFIRMING FIRST AMENDED JOINT PLAN OF REORGANIZATION
-----------------------------------------------------------
The First Amended Joint Plan of Reorganization under Chapter 11 of the
Bankruptcy Code filed by OCA ACQUISITION, INC. n/k/a OPTICAL CORPORATION OF
AMERICA, BENSON OPTICAL CO., INC., and SUPERIOR OPTICAL CO., INC. ("Debtors") on
July 9, 1996 (the "Plan"), having been transmitted to creditors and equity
security holders; and
It having been determined after hearing on notice that the requirements for
confirmation set forth in 11 U.S. C. ss. 1129 have been satisfied, it is
ORDERED that the First Amended Joint Plan of Reorganization filed by the
Debtors on July 9, 1996, is confirmed. A copy of the confirmed Plan is attached.
It is further
ORDER CONFIRMING FIRST AMENDED JOINT PLAN OF REORGANIZATION
Page 1
<PAGE>
ORDERED that holders of shares of stock in the postconfirmation debtors
issued pursuant to the Plan are hereby enjoined from trading said shares until
the completion of each reverse merger or reverse acquisition as provided for in
the Plan. This injunction shall terminate upon the completion of said
transaction for each postconfirmation debtor entity. If, upon the expiration of
15 months after the Effective Date of the Plan, either of such transactions is
not complete, then the shares in each postconfirmation debtor entity whose
reverse merger or reverse acquisition has not been completed shall be deemed
void and canceled.
It is further
Ordered that Alan Katz, as Executive Vice President of the Debtors, is
hereby authorized to execute any necessary documents to meet the Statutory
Requirements for the State of Delaware for a reorganization under title 11 of
the U.S. Code.
DATED: August 9, 1996.
/s/ Robert C. McGuire
------------------------------
ROBERT C. McGUIRE
UNITED STATES BANKRUPTCY JUDGE
ORDER CONFIRMING FIRST AMENDED JOINT PLAN OF REORGANIZATION
Page 2
<PAGE>
Jay W. Ungerman
State Bar No. 20393000
UNGERMAN SWEET & BROUSSEAU, P. C.
2515 McKinney Ave.
Suite 800
Dallas, Texas 75201-1993
Telephone: (214) 747-3536
Facsimile: (214) 747-0068
ATTORNEYS FOR THE TRUSTEE OF THE CREDITORS TRUST
E. P. Keiffer
State Bar No. 11181700
BURKE, WRIGHT & KEIFFER, P.C.
2900 Renaissance Tower
1201 Elm Street
Dallas, TX 75270-2102
Phone: (214) 742-2900
Fax: (214) 748-6815
ATTORNEYS FOR THE POST CONFIRMATION DEBTORS
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: ss.
ss.
OCA ACQUISITION, INC., NOW ss. CASE NO. 395-35856-RCM-11
KNOWN AS OPTICAL CORPORATION ss.
OF AMERICA ss.
ss.
DEBTOR. ss.
ss.
IN RE: ss.
ss.
BENSON OPTICAL CO., INC., ss. CASE NO. 395-35857-RCM-11
ss.
DEBTOR. ss.
ss.
IN RE: ss.
ss. CASE NO. 395-36572-RCM-11
SUPERIOR OPTICAL COMPANY, INC. ss.
ss. JOINTLY ADMINISTERED:
DEBTOR. ss. CASE NO, 395-35856-RCM-11
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 1
<PAGE>
POST CONFIRMATION MODIFICATIONS TO THE DEBTORS'
FIRST AMENDED JOINT PLAN OF REORGANIZATION
January 29 , 1997
The Trustee of the Creditors Trust ("Trustee") and Optical Acquisition
Corp. and Eyecare Acquisition Corp. (hereinafter the "Post Confirmation
Debtors") propose the following Post Confirmation Modifications to the confirmed
Debtors' First Amended Joint Plan of Reorganization.
1. The Definitions in Article I will be replaced as follows:
1.8 Consummation of the Plan Date. The date on which the
reverse merger or reverse acquisition transaction is completed. Such
date shall not be later than 18 months from the Effective Date of the
Plan or the discharge set forth under 11 U.S.C. Section 1141(d)(3) will
be deemed not to have been achieved and the Plan Shares issued under
the Plan shall be canceled. Upon Consummation of the Plan being
achieved as to each Debtor, any and all claims by Creditors as to a
default under the Plan can only be asserted against the Trust
established by the Plan.
1.14 Halter Financial Group, Inc. or HFG. The Texas
corporation that will be responsible for locating a reverse merger or
acquisition transaction for each Post Confirmation Debtor as described
in the Plan. In exchange for its Administrative Claim of $17,500 as to
each Debtor, HFG may elect to receive approximately 62.5% of the Plan
Shares issued b each Post Confirmation Debtor as described in the Plan.
2. The definition of Plan Shares will be added at 1.16.1 and the
definition of Stock Issuance, at l.21, will be deleted. The term "Plan Shares"
will be substituted in at every place where the term "Stock Issuance" is set
forth in the Plan:
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 2
<PAGE>
1.16.1 Plan Shares. The shares of common stock of each Post
Confirmation Debtor to be issued under Section 1145 of the Code to the
holders of Class 5 Allowed Unsecured Claims and Class 6 Equity Interest
Owners. Such Plan Shares may also be issued to HFG as set forth in the
Plan.
3. The sections describing the treatment of unsecured claimants and equity
security holders will be amended to read as follows: (stricken out portions are
deletions and bolded portions are the changes)
3.8 Class 5: The Allowed Unsecured Claims of Class 5 are impaired
under the Plan and shall be paid their Pro Rata share, without interest, of
any sums remaining after payment of all sums due and owing to Allowed
Administrative Claims and Classes 1, 2, and 3 or the establishment of
appropriate reserves for such payment. The holders of Allowed Unsecured
Claims will also receive, a Pro Rata share of approximately 32.5% of the
Plan Shares of each of the Post Confirmation Debtors. Any such holder may
elect not to take its Pro Rata share of the Plan Shares when voting on the
Plan. Any such holder who elects not to accept the Plan Shares, shall have
its Pro Rata share redistributed to all of the other holders of Class 5
Claims. There is a requirement, however, that there be at least 225 members
of this class that have elected to accept the Plan Shares of each Post
Confirmation Debtors. If that number would otherwise be reached, then those
ballots received in the mail or by fax latest in time will not be able to
so elect until such time as the minimum has been reached. The number may be
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 3
<PAGE>
adjusted due to subsequent votes in favor of the Plan. Any holder of an
Allowed Class 5 claim who does not vote on the confirmation of this Plan
will be deemed to have accepted the Plan Shares and will be considered as
so voting in the calculation of the ability of those who do vote, but who
elect to not accept the Plan Shares. IF THE VOTES THAT ARE CAST IN THIS
CLASS CAUSE THIS CLASS TO ACCEPT THE PLAN, IN ACCORDANCE WITH THE STANDARDS
FOR ACCEPTANCE BY A CLASS AS SET FORTH IN THE BANKRUPTCY CODE, AND THIS
PLAN IS OTHERWISE CONFIRMED, THEN ALL HOLDERS OF CLAIMS IN THIS CLASS WILL
BE RELEASED FROM AND NOT SOUGHT TO BE HELD LIABLE FOR THE RECEIPT OF
PREFERENTIAL TRANSFERS RECEIVED WITHIN 90 DAYS OF THE DEBTORS FILING FOR
RELIEF UNDER CHAPTER 11 OF TITLE 11, UNDER SECTIONS 547 AND 550 OF THE
BANKRUPTCY CODE, NOR HAVE THE ALLOWABILITY OF THEIR CLAIMS CONTESTED ON THE
BASIS THAT THEY HAD RECEIVED A PREFERENCE UNDER SECTION 547. PLEASE NOTE
THIS RELEASE AND WAIVER OF CLAIMS OBJECTIONS DOES NOT APPLY TO THOSE
CLAIMANTS IN OTHER CLASSES WHO HAVE A RESULTING CLAIM IN THIS CLASS OR WHO
ARE SPECIFICALLY LISTED IN THIS PLAN AS BEING THE SUBJECT OF A PREFERENCE
ACTION. THIS RELEASE DOES NOT RELATE TO ANY OTHER AVOIDANCE POWER UNDER
CHAPTER 5 OF THE BANKRUPTCY CODE AS TO ANY CLASS 5 CLAIMANT.
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 4
<PAGE>
3.9 Class 6: The Equity Interest Owners shall have their interests in
each of the Debtors canceled. In consideration for securing of the Lipshy
Loan for the prosecution of avoidance and other actions set forth above,
the Equity Interest Owners will receive a Pro Rata Share of 5% of the Plan
Shares of each Post Confirmation Debtor.
4. Article V, the Means for Execution of the Plan will be amended in its
entirety to read as follows:
5.1 The Plan will be implemented consistent with Sections 1123 and
1145 of the Bankruptcy Code. The Property of Debtors' respective estates,
as defined in Article 6.2, shall be conveyed to the Trust. All intercompany
claims between the Debtors shall be extinguished. All distributions
required to be made under the Plan shall be made by the Trustee from the
Trust and, as to the Plan Shares, by the respective Post Confirmation
Debtors as to holders of Class 5 Allowed Unsecured Claims and Class 6
Allowed Equity Interest Owners. The Trust shall become effective and shall
be funded on the Effective Date as provided below.
5.2 All Property, as defined in Article 6.2, shall be automatically
vested in the Trust and made available for distribution to Creditors
following the allowance of their Claims pursuant to the Plan or further
orders of the Bankruptcy Court. As and when the Property is collected and
converted into cash, the Trustee shall make distributions to Creditors
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 5
<PAGE>
subject to their making appropriate reserves for Disputed Claims and costs
and expenses of the Trust pursuant to the Plan.
5.3 Continued Corporate Existence and Future Governance.
---------------------------------------------------
5.3.1 The Plan authorizes each Post Confirmation Debtor to amend and
restate its certificate of incorporation and bylaws. Such amended and
restated certificates of incorporation and bylaws are referred to herein as
the "Post Confirmation Certificates" and the "Post Confirmation Bylaws,"
respectively. The Post Confirmation Certificates will differ from each of
the Debtor's current certificate of incorporation in certain respects. Most
significantly, the Post Confirmation Certificates change each Post
Confirmation Debtors' corporate names and authorize the issuance of
40,000,000 shares of common stock and the issuance of 10,000,000 shares of
preferred stock. The corporate name of Optical Corporation of America will
be changed to "Optical Acquisition Corp." and Benson Optical Co.,Inc. will
be changed to "Eyecare Acquisition Corp."
Each Post Confirmation Debtor will continue its corporate existence as
a Delaware corporation and will be governed by the General Corporation Law
of Delaware, its Post Confirmation Certificate and its Post Confirmation
Bylaws. The proposed Post Confirmation Certificates and Post Confirmation
Bylaws will be made available on or before the earlier of seven days prior
to the ballot deadline or the tenth day prior to the date of the
confirmation hearing. You may request copies of the Post Confirmation
Certificates by contacting the Debtor's counsel. The Confirmation Order
will constitute unanimous consent of the shareholders of each Post
Confirmation Debtor of such amendment and restatement.
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 6
<PAGE>
The officers of each Post Confirmation Debtor will take all corporate
action necessary to adopt the Post Confirmation Certificates and the Post
Confirmation Bylaws following the Confirmation Date. The Post Confirmation
Certificates and the Post Confirmation Bylaws will be acknowledged by the
Trust. Any restrictive provisions contained in the Post Confirmation
Certificates and the Post Confirmation Bylaws pursuant to the Code will be
null and void upon completion of the reverse merger or reverse acquisition
transaction without any further shareholder authorization or other action,
due to the shareholder authorization of the reverse merger or acquisition
as set forth in Article 5.4.3 below.
5.3.2 Each Post Confirmation Debtor may change its state of
incorporation by means of a reincorporation merger during the period of
time following the Confirmation Date and prior to the completion of the
reverse merger or acquisition transactions in accordance with the
applicable requirements of the General Corporation Law of Delaware and any
other applicable law.
5.3.3 In addition to meeting any shareholder approval and other
requirements set forth in the applicable provisions of General Corporation
Law of Delaware, any amendments, modifications, restatements or other
changes with respect to the Post Confirmation Certificates or Post
Confirmation Bylaws during the time period following the Confirmation Date
and prior to the completion of the reverse merger or acquisition
transactions, including reverse common stock splits of either Post
Confirmation Debtor, shall also be approved by the majority of the shares
of common stock held by shareholders other than HFG that are voted on such
matter.
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 7
<PAGE>
5.3.4 Both Debtors are authorized to conduct business in various
states as foreign corporations. The Post Confirmation Debtors will not
utilize such authorizations and such authorizations will be deemed to have
lapsed as of the Effective Date.
5.3.5 Timothy P. Halter, the sole shareholder, officer and director of
HFG, will serve as the initial sole director and officer of each Post
Confirmation Debtor.
5.4 The Reverse Merger or Reverse Acquisition.
-----------------------------------------
5.4.1 The terms "reverse merger" or "reverse acquisition" as used in
the Plan are intended to permit any kind of business combination, including
a stock exchange, which would benefit the shareholders of a Post
Confirmation Debtor by allowing them to own an interest in a viable,
operating business enterprise.
5.4.2 Each Post Confirmation Debtor shall complete a reverse merger or
acquisition transaction by the Consummation of the Plan Date. In the event
that a Post Confirmation Debtor does not complete such a transaction by the
Consummation of the Plan Date, all of its outstanding Plan Shares shall be
canceled and the holders thereof will receive no payment or other
distribution of any kind therefor.
5.4.3 As to each Post Confirmation Debtor, the terms and conditions of
the proposed reverse merger or acquisition transaction shall be approved by
the majority of the shares of common stock held by shareholders other than
HFG that are voted on such matter. Except as otherwise set forth the Plan,
any other matters presented to the shareholders of any Post Confirmation
Debtor prior to the completion of the reverse merger or acquisition
transactions shall be approved by shareholders as determined by the Post
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 8
<PAGE>
Confirmation Debtor in a manner consistent with the General Corporation Law
of Delaware and any other applicable law.
5.5 Distribution of the Plan Shares.
-------------------------------
5.5.1 Each Post Confirmation Debtor will issue a sufficient number of
Plan Shares to meet the requirements of the Plan. The exact number of Plan
Shares to be issued, which is estimated to be approximately 500,000 for
each Post Confirmation Debtor, will be calculated by the Trustee and the
Post Confirmation Debtors in a manner consistent with the Plan as to each
Post Confirmation Debtor, the Plan Shares will be issued as follows: (i)
assuming HFG so elects as described elsewhere in the Plan, approximately
62.5% of the Plan Shares will be issued to HFG in exchange for the release
of its Administrative Claims and for the performance of certain services
and the payment of certain fees related to the anticipated reverse merger
or acquisition transactions described in the Plan; (ii) approximately 5% of
the Plan Shares will be issued to holders of Allowed Class 5 Claims on a
Pro Rata basis; and (iii) approximately 32.5% of the Plan Shares will be
issued to the holders of Class 6 Equity Interest Owners on a Pro Rata
basis. No fractional Plan Shares will be issued. One full share ,will be
issued in lieu of any fractional share.
5.5.2 The Plan Shares will be issued at the time shown as soon as
practicable after the Trustee has completed the claims allowance process.
The Plan Shares may also be issued in multiple phases, in the
discretion of each Post Confirmation Debtor, prior to the completion of the
allowance process, in the sole discretion of each Post Confirmation Debtor,
but only upon receipt of the following from the discretion of each Post
Confirmation Debtor, but only upon receipt of the following from the
Trustee:
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 9
<PAGE>
i) a listing of the claimants and the amount of their Allowed Unsecured
Claim.
ii) a listing of those holders of Unsecured Claims subject to objection
and the amounts listed as their claim.
Such information will enable the Trustee and each Post Confirmation Debtor to
properly take into account all asserted claims.
Once a Post Confirmation Debtor has elected to issue the Plan Shares in
multiple phases, the Trustee and the Post Confirmation Debtor will determine (i)
the number of Plan shares to be issued to holders of Allowed Unsecured Claims
not subject to objection and (ii) the approximate number of Plan Shares to be
allocated for future issuance to holders of Unsecured Claims subject to
objection. As soon as practicable after the Trustee and the Post Confirmation
Debtor have made such determination, the Post Confirmation Debtor will issue the
Plan Shares to the holders of Allowed Unsecured Claims not subject to objection.
Holders of Unsecured Claims subject to objection will each receive their Pro
Rata share of the Plan Shares allocated for future issuance as soon as
practicable after resolution of the objection. The approximate number of Plan
Shares allocated for future issuance to the holders of Unsecured Claims subject
to objection is an estimate only and the number of Plan Shares actually received
by such holder may differ from such number. Any portion of the Plan Shares
allocated but not issued to a holder of an Unsecured Claim that is subject to an
objection, upon a determination of the actual amount of the Allowed Unsecured
Claim, will be accumulated and issued Pro Rata to all Allowed Unsecured Claim
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 10
<PAGE>
holders once all of the objections are resolved either by written agreement by
and between the claimant and the Trustee or by order of the Bankruptcy Court.
5.5.3 The Plan Shares will be issued under Section 1 145 of the Code.
Under Section 1145(d) of the Code, the Plan Shares issued to holders of
Allowed Unsecured Claims are not subject to any restrictions on
transferability. Prior to the completion of a reverse merger or acquisition
and certain required filings with the National Association of Securities
Dealers, Inc. to be made thereafter, there will be no established trading
market for the Plan Shares. Moreover, to ensure compliance with Section
1145(d)(3) of the Code in order to secure discharge thereunder, all Plan
Shares issued to holders of Allowed Unsecured Claims shall be enjoined from
trading by the Confirmation Order until the completion of a reverse merger
or acquisition. The Plan Shares issued to HFG are subject to the provisions
of Section 1145(a)(1)(A) of the Code.
5.6 Post Confirmation Date Reporting.
--------------------------------
An officer of each Post Confirmation Debtor shall forward to
shareholders written confirmation of the completion of a reverse merger or
acquisition transaction within 15 days of the date of such completion.
5. Article 6.2, Vesting of the Property in the Trust will have the
following subsections amended to read as follows (stricken out portions are
deletions and bolded portions are the changes):
c. Any and all of the Debtors' money in the Debtors' bank accounts or
held by others on behalf of the Debtors and any other monies or sums
to which the Debtors or their estates may be entitled hereafter,
except that in the event that HFG elects to have its Administrative
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 11
<PAGE>
Claims paid by the receipt of the Plan Shares of each Post
Confirmation Debtor, for $2,500 will remain in each Debtor.
f. Property expressly excludes each of the Post Confirmation Debtors'
corporate Shell structure and the Plan Shares.
Dated this 29th day of, January, 1997.
----
CREDITORS TRUST FOR OCA ACQUISITION, INC
BENSON OPTICAL CO. INC AND SUPERIOR
OPTICAL COMPANY, INC.
By: /s/ Alan Katz
------------------
Alan Katz, Trustee
OPTICAL ACQUISITION CORP.
By: /s/ Tim Halter
---------------------
Tim Halter, President
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 12
<PAGE>
EYECARE ACQUISITION CORP.
By: /s/ Tim Halter
---------------------
Tim Halter, President
POST CONFIRMATION MODIFICATIONS TO THE
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION Page - 13
<PAGE>
Jay W. Ungerman
State Bar No. 20393000
UNGERMAN SWEET & BROUSSEAU, P.C.
2515 McKinney Ave.
Suite 800
Dallas, Texas 75201-1993
Telephone: (214) 747-3536
Facsimile: (214) 747-0068
ATTORNEYS FOR THE TRUSTEE OF THE CREDITORS TRUST
E. P. Keiffer
State Bar No. 11181700
BURKE, WRIGHT & KEIFFER, P.C.
2900 Renaissance Tower
1201 Elm Street
Dallas, TX 75270-2102
Phone: (214) 742-2900
Fax: (214) 748-6815
ATTORNEYS FOR POST CONFIRMATION DEBTORS
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: ss.
ss.
OCA ACQUISITION, INC., NOW ss. CASE NO. 395-35856-RCM-11
KNOWN AS OPTICAL CORPORATION ss.
OF AMERICA, ss.
ss.
DEBTOR. ss.
ss.
IN RE: ss.
ss.
BENSON OPTICAL CO., INC., ss. CASE NO. 395-35857-RCM-11
ss.
DEBTOR. ss.
ss.
IN RE: ss.
ss. CASE NO. 395-36572-RCM-11
SUPERIOR OPTICAL COMPANY, INC. ss.
ss. JOINTLY ADMINISTERED:
DEBTOR. ss. CASE NO. 395-35856-RCM-11
ORDER
Page - 1
<PAGE>
ORDER
Came on to be heard this ____ day of February, 1996, the Trustee of the
Creditors Trust for the above referenced Debtors and the post confirmation
debtors, Optical Acquisition Corp. and Eyecare Acquisition Corp, (hereinafter
the "Movants") Motion for Approval of Post Confirmation Modifications to the
Debtors' First Amended Joint Plan of Reorganization (hereinafter the "Movants'
Motion"). The Court, after making separate findings of fact and conclusions of
law, and noting that due notice under F.R.B.P. 2002 had been given to the twenty
(20) largest creditors and those requesting notice, that there are no objections
that the modifications affect any class that voted to accept, in a material
adversely manner, finds that just cause exists to determine the Debtors' First
Amended Joint Plan of Reorganization in the above entitled and numbered case to
have been modified in accordance with said First Amended Joint Plan and 11
U.S.C. ss. 1127. It is therefore
ORDERED that the Movants' Motion is hereby granted and the Debtors' First
Amended Joint Plan of Reorganization so modified as set forth in Exhibit "1" to
the Movant's Motion, is now the plan in this case under 11 U. S. C. ss. 1127
(b). SO ORDERED
Signed this FEB 28 1997 day of February, 1997.
-----------
/s/ Robert C. McGuire
---------------------
ROBERT C. MCGUIRE
U.S. BANKRUPTCY JUDGE
ORDER
Page - 2
Exhibit 2.2
* * * * *
AGREEMENT AND PLAN OF MERGER
by and among
Hilltop Acquisition Holding Corporation,
Womack Gilman Investment Services, L.C.,
Halter Financial Group, Inc.
and
Alford Refrigerated Warehouses, Inc.
* * * * *
November 23, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE/SECTION PAGE
- --------------- ----
RECITALS.................................................................................................1
ARTICLE I THE MERGER......................................................................................1
1.1 The Merger......................................................................................1
1.2 Closing.........................................................................................1
1.3 Effective Time of the Merger....................................................................1
1.4 The Surviving Corporation.......................................................................2
1.5 Conversion of Shares............................................................................2
1.6 Stock Certificates..............................................................................2
1.7 Fractional Shares...............................................................................3
1.8 Dissenting Shares...............................................................................3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF ALFORD........................................................3
2.1 Organization....................................................................................3
2.2 Capitalization..................................................................................3
2.3 Certain Corporate Matters.......................................................................3
2.4 Authority Relative to this Agreement............................................................4
2.5 Consents and Approvals; No Violations...........................................................4
2.6 Disclosure......................................................................................4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY, WGI
AND HFG.........................................................................................4
3.1 Organization....................................................................................4
3.2 Capitalization ......................................................................4
3.3 Certain Corporate Matters.......................................................................5
3.4 Authority Relative to this Agreement............................................................5
3.5 Consents and Approvals; No Violations...........................................................5
3.6 Subsidiaries....................................................................................6
3.7 Financial Statements .............................................................6
3.8 Events Subsequent to Financial Statements ..................................6
3.9 Undisclosed Liabilities.........................................................................7
3.10 Tax Matters.....................................................................................7
3.11 Real Property ......................................................................7
3.12 Books and Records...............................................................................7
3.13 Questionable Payments...........................................................................7
3.14 Environmental Matters...........................................................................8
3.15 Intellectual Property .....................................................................10
3.16 Insurance......................................................................................10
3.17 Contracts......................................................................................10
3.18 Litigation.....................................................................................10
i
<PAGE>
3.19 Employees......................................................................................10
3.20 Employee Benefit Plans.........................................................................10
3.21 Legal Compliance...............................................................................10
3.22 Broker's Fees..................................................................................11
3.23 Disclosure.....................................................................................11
ARTICLE 4 CONDUCT OF BUSINESS PENDING THE CLOSING........................................................11
4.1 Conduct of Business by the Company Pending the Closing.........................................11
4.2 Other Actions..................................................................................12
ARTICLE 5 ADDITIONAL AGREEMENTS 12
5.1 Access and Information.........................................................................12
5.2 Proxy Statement................................................................................12
5.3 Meeting of Shareholders........................................................................13
5.4 Certain Information............................................................................13
5.5 Press Releases.................................................................................13
ARTICLE 6 CONDITIONS OF CLOSING..........................................................................13
6.1 Conditions to Obligations of Each Party to Effect the Closing..................................13
6.2 Additional Conditions to Alford's Obligations..................................................13
6.3 Additional Conditions to the Obligations of the Company, WGI and HFG...........................14
ARTICLE 7 TERMINATION....................................................................................15
7.1 Termination by Mutual Consent..................................................................15
7.2 Termination by Any Party.......................................................................16
7.3 Material Breach................................................................................16
7.4 Effect of Termination..........................................................................16
ARTICLE 8 GENERAL PROVISIONS.............................................................................16
8.1 Notices........................................................................................16
8.2 Interpretation.................................................................................16
8.3 Severability...................................................................................16
8.4 Miscellaneous..................................................................................17
8.5 Separate Counsel...............................................................................17
8.6 Governing Law..................................................................................17
8.7 Counterparts...................................................................................17
8.8 Amendment......................................................................................17
8.9 Parties In Interest; No Third Party Beneficiaries..............................................17
8.10 Waiver.........................................................................................17
8.11 Expenses.......................................................................................17
</TABLE>
ii
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of November 23, 1998 (this
"Agreement"), is made and entered into by and among Hilltop Acquisition Holding
Corporation, a Texas corporation (the "Company"), Womack Gilman Investment
Services, L.C., a Texas limited liability company ("WGI"), Halter Financial
Group, Inc., a Texas corporation ("HFG"), and Alford Refrigerated Warehouses,
Inc., a Texas corporation ("Alford").
WHEREAS, the respective Boards of Directors of the Company, WGI and
Alford have adopted resolutions approving and adopting the proposed merger (the
"Merger") of Alford with and into the Company upon the terms and conditions
hereinafter set forth in this Agreement; and
WHEREAS, WGI and HFG, which own approximately 54.5% and 28.4% of the
outstanding common stock of the Company, respectively, desire to enter into this
Agreement for the purpose of evidencing their consent to the consummation of the
Merger and for the purpose of making certain representations, warranties,
covenants and agreements;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements contained herein and other good aid
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereinafter defined), Alford shall be merged with and
into the Company and the separate corporate existence of Alford shall thereupon
cease. The Company (sometimes hereinafter referred to as the "Surviving
Corporation") shall be the surviving corporation in the Merger. The Merger shall
have the effects set forth in the applicable provisions of the Texas Business
Corporation Act (the "TBCA").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
at 11:30 a.m., central standard time, at the offices of Jackson Walker L.L.P.
located at 1100 Louisiana Street, Suite 4200, Houston, Texas 77002 on December
15, 1998, or as soon as the conditions set forth in Article 6 have been
satisfied or waived or as soon as practicable thereafter. Such date is herein
referred to as the "Closing Date."
1.3 Effective Time of the Merger. If all the conditions to the Merger
set forth in Article 6 shall have been fulfilled or waived in accordance
herewith and this Agreement shall not have been terminated, the parties hereto
shall cause Articles of Merger (the "Articles of Merger") that meet the
applicable requirements of the TBCA to be properly executed and filed with the
Secretary of State of the State of Texas on the Closing Date. The Merger shall
be effective at the time of filing of the Articles of Merger with the Secretary
of State of the State of Texas in accordance with the TBCA, or at such later
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time which the parties hereto shall have agreed upon and designated in such
filing as the effective time of the Merger (the "Effective Time").
1.4 The Surviving Corporation.
-------------------------
(a) Articles of Incorporation. The Articles of Incorporation
of Alford shall be the Articles of Incorporation of the Surviving
Corporation. However, prior to the Effective Time, the Articles of
Incorporation of the Company shall be amended by this Agreement as
follows:
(i) The following sentence shall be included in Article
Four:
"Each one share of the Corporation's Common Stock issued and
outstanding immediately prior to the effective date of these
Articles of Incorporation shall be and hereby is
automatically changed without further action into .625 of a
fully paid and nonassessable share of the Corporation's
Common Stock, provided that no fractional shares shall be
issued pursuant to such change. The Corporation shall issue
to each shareholder who would otherwise be entitled to a
fractional share as a result of such change one full share
of the Corporation's Common Stock."
(b) Bylaws. The Bylaws of Alford as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving
Corporation.
(c) Directors and Officers. The directors and officers of Alford
immediately prior to the Effective Time shall be the initial directors
and officers of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly elected
or appointed and qualify in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by law.
1.5 Conversion of Shares. At the Effective Time and subject to the
limitations contained herein, by virtue of the Merger and without any action on
the part of the Company or Alford or any holder of capital stock of any of them,
each share of common stock of Alford, $0.01 (the "Alford Common Stock"), issued
and outstanding immediately prior to the Effective Time shall be automatically
converted into the right to receive 655.1372 shares of common stock of the
Company, par value $.0l per share (the "Company Common Stock"). Following the
Merger, the shareholders of Alford will own approximately 93.6% of the issued
and outstanding shares of Company Common Stock. Schedule "A" attached hereto
details the ownership of the Company Common Stock prior and subsequent to the
Merger.
1.6 Stock Certificates. At or following the Effective Time, each holder
of an outstanding certificate or certificates representing Alford Common Stock
shall surrender the same to the Company and the Company shall, in exchange
therefor, cause to be issued to the holder of such certificate(s) a new
certificate representing shares of Company Common Stock in accordance with
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<PAGE>
with Section 1.5, less any amount required to be withheld under applicable
federal, state or local tax requirements, and the surrendered certificate(s)
shall be canceled. Until so surrendered and exchanged, each such certificate
shall represent solely the right to receive shares of Company Common Stock in
accordance with Section 1.5, without interest and less any tax withholding.
1.7 Fractional Shares. No fractional shares of Company Common Stock
shall be issued in the Merger. In the event that a holder of Alford Common Stock
would otherwise be entitled to receive any fractional shares of Company Common
Stock as a result of the Merger, such holder shall be entitled to receive one
full share in lieu thereof.
1.8 Dissenting Shares. Each share of Company Common Stock and Alford
Common Stock issued and outstanding immediately prior to the Effective Time not
voted in favor of the Merger, the holder of which has given written notice of
the exercise of dissenter's rights and has perfected such rights as required by
the TBCA, is herein called a "Dissenting Share." Dissenting Shares shall not be
converted into or represent the right to receive shares of Company Common Stock
pursuant to this Article I and shall be entitled only to such rights as are
available to such holder pursuant to the TBCA, unless the holder thereof shall
have withdrawn or forfeited his dissenter's rights. Each holder of Dissenting
Shares shall be entitled to receive the value of such Dissenting Shares held by
him in accordance with the applicable provisions of the TBCA. The Company will
promptly pay to any holder of Dissenting Shares such amount as such holder shall
be entitled to receive in accordance with the applicable provisions of the TBCA.
If any holder of Dissenting Shares shall effectively withdraw or forfeit his
dissenter's rights under the TBCA, such Dissenting Shares shall be converted
into the right to receive shares of Company Common Stock in accordance with this
Article 1.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ALFORD
Alford hereby represents and warrants to the Company, WGI and HFG as
follows:
2.1 Organization. Alford has been duly incorporated, is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation, and has the requisite corporate power to carry on its business as
now conducted.
2.2 Capitalization. The authorized capital stock of Alford consists of
50,000,000 shares of Alford Common Stock, of which 10,000 shares are issued and
outstanding, and 5,000,000 shares of preferred stock, $0.01 par value per share,
none of which have been issued or are outstanding. All of the issued and
outstanding shares of Alford Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are no
outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements or
commitments to which Alford is a party or which are binding upon Alford
providing for the issuance or transfer by Alford of additional shares of its
capital stock and Alford has not reserved any shares of its capital stock for
issuance, nor are there any outstanding stock option rights, phantom equity or
similar rights, contracts, arrangements or commitments. There are no voting
trusts or any other agreements or understandings with respect to the voting of
Alford's capital stock.
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<PAGE>
2.3 Certain Corporate Matters. Alford is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the ownership of its properties, the employment of its personnel or the conduct
of its business requires it to be so qualified, except where such failure would
not have a material adverse effect on Alford's financial condition, results of
operations or business. Alford has full corporate power and authority and all
authorizations, licenses and permits necessary to carry on the business in which
it is engaged and to own and use the properties owned and used by it.
2.4 Authority Relative to this Agreement. Alford has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by Alford and the consummation by Alford of the transactions contemplated hereby
have been duly authorized by the Board of Directors and shareholders of Alford
and no other actions on the part of Alford are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Alford and constitutes a valid and binding
agreement of Alford, enforceable against Alford in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
2.5 Consents and Approvals: No Violations. Except as set forth in
Schedule 2.5, no filing with, and no permit, authorization, consent or approval
of, any third party, public body or authority is necessary for the consummation
by Alford of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement by Alford nor the consummation by
Alford of the transactions contemplated hereby, nor compliance by Alford with
any of the provisions hereof, will (a) conflict with or result in any breach of
any provisions of the Articles of Incorporation or Bylaws of Alford, (b) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which Alford or any of its subsidiaries is a party
or by which any of them or their properties or assets may be bound or (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Alford, any of its subsidiaries or any of their properties or
assets, except in the case of clauses (b) and (c) for violations, breaches or
defaults which are not in the aggregate material to Alford and its subsidiaries
taken as a whole.
2.6 Disclosure. The representations, warranties and statements of fact
made by Alford in this Agreement are, as applicable, accurate, correct and
complete and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained herein not false or misleading.
5
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, WGI AND HFG
The Company, WGI and, as it relates to the Company only, HFG hereby
jointly and severally represent and warrant to Alford as follows:
3.1 Qrganization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has the requisite corporate power to carry on its business as now conducted.
3.2 Capitalization. The Company's authorized capital stock consists of
40,000,000 shares of Company Common Stock, of which 1,100,201 shares are issued
and outstanding and 10,000,000 shares of preferred stock, par value $.01 per
share, of which none are presently issued and outstanding. All issued and
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are no
outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements or
commitments to which the Company or WGI are parties or which are binding upon
the Company or WGI providing for the issuance by the Company or transfer by the
Company or WGI of additional shares of its capital stock and the Company has not
reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, phantom equity or similar rights, contracts,
arrangements or commitments. There are no voting trusts or any other agreements
or understandings with respect to the voting of the Company's capital stock.
3.3 Certain Corporate Matters. The Company is duly licensed or
qualified to do business and is in good standing as a foreign corporation in
every jurisdiction in which the character of the Company's properties or nature
of the Company's business requires it to be so licensed or qualified other than
such jurisdictions in which the failure to be so licensed or qualified does not,
or insofar as can reasonably be foreseen, in the future will not, have a
material adverse effect on its financial condition, results of operations or
business. The Company has full corporate power and authority and all
authorizations, licenses and permits necessary to carry on the business in which
it is engaged or in which it proposes presently to engage and to own and use the
properties owned and used by it. The Company has delivered to Alford true,
accurate and complete copies of its Articles of Incorporation and Bylaws, which
reflect all restatements of and amendments made thereto at any time prior to the
date of this Agreement. The records of meetings of the shareholders and Board of
Directors of the Company are complete and correct in all material respects. The
stock records of the Company and the shareholder lists of the Company as
previously furnished to Alford by the Company are complete and correct in all
material respects and accurately reflect the record ownership and the beneficial
ownership of all the outstanding shares of the Company's capital stock and any
other outstanding securities issued by the Company. The Company is not in any
material default or in violation of any restriction, lien, encumbrance,
indenture, contract, lease, sublease, loan agreement, note or other obligation
or liability by which it is bound or to which any of its assets is subject.
6
<PAGE>
3.4 Authority Relative to this Agreement. Each of the Company, WGI and
HFG has the requisite corporate power and authority to enter into this Agreement
and carry out its obligations hereunder. The execution, delivery and performance
of this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by the Boards of Directors of the
Company, WGI and HFG and no other actions on the part of the Company, WGI or HFG
are necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company, WGI and HFG and constitutes a valid and binding obligation of the
Company, WGI and HFG, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
3.5 Consents and Approvals: No Violations. Except for applicable
requirements of federal securities laws and state securities or blue sky laws,
no filing with, and no permit, authorization, consent or approval of, any third
party, public body or authority is necessary for the consummation by the
Company, WGI and HFG of the transactions contemplated by this Agreement. Neither
the execution and delivery of this Agreement by the Company, WGI and HFG nor the
consummation by the Company, WGI or HFG of the transactions contemplated hereby,
nor compliance by the Company, WGI or HFG with any of the provisions hereof,
will (a) conflict with or result in any breach of any provisions of the Articles
of Incorporation or Bylaws of Company, WGI or HFG, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which either the Company, WGI or HFG is a party or by which it or any of its
properties or assets may be bound or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, WGI or HFG, or
any of their properties or assets, except in the case of clauses (b) and (c) for
violations, breaches or defaults which are not in the aggregate material to the
Company, WGI or HFG taken as a whole.
3.6 Subsidiaries. Except for Hilltop Acquisition Corporation, a Texas
corporation, the Company does not own, directly or indirectly, any of the
capital stock of any other corporation or any equity, profit sharing,
participation or other interest in any corporation, partnership, joint venture
or other entity.
3.7 Financial Statements. The Company has delivered to Alford audited
financial statements comprised of the following: (a) its balance sheets as of
August 31,1997 and December 31, 1996; (b) its statements of operations for the
period from August 9, 1996 and for the eight months ended August 31, 1997; (c)
its statements of cash flows for the period from August 9, 1996 and for the
eight months ended August 31, 1997; and (d) its statements of changes in
shareholders' equity for the period from August 9, 1996 and for the eight months
ended August 4, 1997 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby and
present fairly the financial condition of the Company as of such dates and the
results of its operations and changes in cash flows for such periods.
7
<PAGE>
3.8 Events Subsequent to Financial Statements. Since August 31, 1997,
there has not been:
(a) Any material adverse change in the financial condition,
results of operations or business of the Company;
(b) Any sale, lease, transfer, license or assignment of any
assets, tangible or intangible, of the Company;
(c) Any damage, destruction or property loss, whether or not
covered by insurance, affecting adversely the properties or business of
the Company;
(d) Any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of
the Company or any redemption, purchase or other acquisition of any
such shares;
(e) Any subjection to any lien on any of the assets, tangible
or intangible, of the Company;
(f) Any incurrence of indebtedness or liability or assumption
of obligations by the Company;
(g) Any waiver or release by the Company of any right of any
material value;
(h) Any compensation or benefits paid to officers or directors
of the Company;
(i) Any change made or authorized in the Articles of Incor-
poration or Bylaws of the Company; or
(j) Any loan to or other transaction with any officer,
director or shareholder of the Company giving rise to any claim or
right of the Company against any such person or of such person against
the Company.
3.9 Undisclosed Liabilities. The Company has, no material liability or
obligation whatsoever, either direct or indirect, matured or unmatured, accrued,
absolute, contingent or otherwise.
3.10 Tax Matters.
-----------
(a) Except as set forth on Schedule 3.10, the Company has (and
as of the Closing Date will have) duly filed all material federal,
state, local and foreign tax returns required to be filed by or with
respect to it with the Internal Revenue Service or other applicable
taxing authority, and no extensions with respect to such tax returns
have (or as of the Closing Date will have) been requested or granted;
8
<PAGE>
(b) The Company has (and as of the Closing Date will have)
paid, or adequately reserved against in the Financial Statements, all
material taxes due, or claimed by any taxing authority to be due, from
or with respect to it;
(c) To the best knowledge of the Company, WGI and HFG, there
has been no material issue raised or material adjustment proposed (and
none is pending) by the Internal Revenue Service or any other taxing
authority in connection with any of the tax returns;
(d) No waiver or extension of any statute of limitations as to
any material federal, state, local or foreign tax matter has been given
by or requested from the Company; and
(e) The Company has not filed a consent under Section 341 (f)
of the Internal Revenue Code of 1986, as amended.
For the purposes of this Section 3.10, a tax is due (and must therefore
either be paid or adequately reserved against in the Financial Statements) only
on the last date payment of such tax can be made without interest or penalties,
whether such payment is due in respect of estimated taxes, withholding taxes,
required tax credits or any other tax.
3.11 Real Property. The Company does not own or lease any real pro-
perty.
3.12 Books and Records. The books and records of the Company fairly
reflect the transactions to which the Company is a party or by which its
properties are bound.
3.13 Questionable Payments. Neither the Company, WGI nor HFG nor any
employee, agent or representative of any of them has, directly or indirectly,
made any bribes, kickbacks, illegal payments or illegal political contributions
using Company funds or made any payments from the Company's funds to
governmental officials for improper purposes or made any illegal payments from
the Company's funds to obtain or retain business.
3.14 Environmental Matters.
(a) Definitions. For the purpose of this Agreement, the
following terms shall have the meaning herein specified:
(i) "Governmental Authority" shall mean the United
States, each state, each county, each city and each other
political subdivision in which the Company's business is
located, and any court, political subdivision, agency or
instrumentality with jurisdiction over the Company's business.
(ii) "Environmental Laws" shall mean (A) the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C.A. 9601 et seq.
("CERCLA"), (B) the Resource Conservation and Recovery Act, as
9
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amended by the Hazardous and Solid Waste Amendment of 1984,42
U.S.C.A. 6901 et seq. ("RCRA"), (C) the Clean Air Act, 42
U.S.C.A. 7401 et seq., (D) the Federal Water Pollution Control
Act, as amended, 33 U.S.C.A. 1251 et seq., (E) the Toxic
Substances Control Act, 15 U.S.C.A. 2601 et seq., (F) all
applicable state laws, and (G) all other laws and ordinances
relating to municipal waste, solid waste, air pollution, water
pollution and/or the handling, discharge, disposal or recovery
of on-site or off-site hazardous substances or materials, as
each of the foregoing has been or may hereafter be amended
from time to time.
(iii) "Hazardous Materials" shall mean, among others,
(A) any "hazardous waste" as defined by RCRA, and regulations
promulgated thereunder; (B) any "hazardous substance" as
defined by CERCLA, and regulations promulgated thereunder; (C)
any "toxic pollutant" as defined in the Federal Water
Pollution Prevention and Control Act, as amended, 33 U.S.C.
1251 et seq., (commonly known as "CWA" for "Clean Water Act"),
and any regulations thereunder; (D) any "hazardous air
pollutant" as defined in the Air Pollution Prevention and
Control Act, as amended, 42 U.S.C. 7401 et seq. (commonly
known as "CAA" for "Clean Air Act") and any regulations
thereunder; (E) asbestos; (F) polychlorinated biphenyls; (G)
any substance the presence of which on the Business Location
(as hereinafter defined) is prohibited by any Environmental
Laws; and (H) any other substance which is regulated by any
Environmental Laws.
(iv) "Hazardous Materials Contamination" shall mean
the presence of Hazardous Materials in the soil, groundwater,
air or any other media regulated by the Environmental Laws on,
under or around the Company's facilities at levels or
concentration which trigger any requirement under the
Environmental Laws to remove, remediate, mitigate, abate or
otherwise reduce the level or concentration of the Hazardous
Materials. The term "Hazardous Materials Contamination" does
not include the presence of Hazardous Materials in process
tanks, lines, storage or reactor vessels, delivery trucks or
any other equipment or containers, which Hazardous Materials
are used in the manufacture, processing, distribution, use,
storage, sale, handling, transportation, recycling, reuse or
disposal of the products that were manufactured and/or
distributed by the Company.
(b) Representations and Warranties. Based on the foregoing,
the Company, WGI and, as it relates to the Company only and except for
(iii) below, HFG jointly and severally represent and warrant that:
(i) To the best knowledge of the Company, WGI and
HFG, there has been no material failure by the Company to
comply with all applicable requirements of Environmental Laws
relating to the Company, the Company's operations, and the
Company's manufacture, processing, distribution, use,
treatment, generation, recycling, reuses, sale, storage,
handling, transportation or disposal of any Hazardous Material
and neither the Company, WGI nor HFG is aware of any facts or
10
<PAGE>
circumstances which could materially impair such compliance
with all applicable Environmental Laws.
(ii) Neither the Company, WGI nor HFG has, through
the Closing Date, received notice from any Governmental
Authority or any other person of any actual or alleged
violation of any Environmental Laws, nor is any such notice
anticipated.
(iii) Prior to the Closing Date, neither the Company,
WGI nor HFG will do or permit anything that will cause the
Company to be in material violation of any requirements of
Environmental Laws, or do or permit a violation of
Environmental Laws that would materially and adversely affect
the financial condition of the Company or subject the Company
to any enforcement actions under any Environmental Laws.
(iv) To the best knowledge of the Company,
Environmental Laws do not require that any permits, licenses
or similar authorizations to construct, occupy or operate any
equipment or facilities used in the conduct of the Company's
business.
(v) No Hazardous Materials are now located at the
Business Location, and, to the best knowledge of the Company,
WGI and HFG, the Company has not ever caused or permitted any
Hazardous Materials to be generated, placed, stored, held,
handled, located or used at the Business Location, except
those which may lawfully be used, transported, stored, held,
handled, generated or placed at the Business Location in the
conduct of the Company's business.
(vi) Neither the Company, WGI nor HFG has received
any notices, whether from a Governmental Authority or some
other third party, that Hazardous Material Contamination
exists at the Business Location or at any other location
utilized by the Company in the conduct of its business nor is
the Company, WGI nor HFG aware of any circumstances that would
give rise to an allegation of such contamination.
(vii) To the best knowledge of the Company, WGI and
HFG, no investigation, administrative order, consent order or
agreement, litigation or settlement with respect to Hazardous
Materials or Hazardous Materials Contamination is proposed,
threatened, anticipated, pending or otherwise in existence
with respect to the Business Location or with respect to any
other site controlled or utilized by the Company in the
operation of its business. To the best knowledge of the
Company, WGI and HFG, the Business Location is not currently
on, and has never been on, any federal or state "Superfund" or
"Superlien" list.
3.15 Intellectual Property. The Company does not own or use any
trademarks, tradenames, service marks, patents, copyrights or any applications
with respect thereto. The Company, WGI and HFG have no knowledge of any claim
that, or inquiry as to whether, any product activity or operation of the Company
infringes upon or involves, or has resulted in the infringement of, any trade-
marks, tradenames, service marks, patents, copyrights or other proprietary
11
<PAGE>
rights of any other person, corporation or other entity; and no proceedings have
been instituted, are pending or are threatened.
3.16 Insurance. The Company has no insurance policies in effect.
3.17 Contracts. The Company has no material contracts, leases,
arrangements and commitments (whether oral or written). The Company is not a
party to or bound by or affected by any contract, lease, arrangement or
commitment (whether oral or written) relating to: (a) the employment of any
person; (b) collective bargaining with, or any representation of any employees
by, any labor union or association; (c) the acquisition of services, supplies,
equipment or other personal property; (d) the purchase or sale of real property;
(e) distribution, agency or construction; (f) lease of real or personal property
as lessor or lessee or sublessor or sublessee; (g) lending or advancing of
funds; (h) borrowing of funds or receipt of credit; (i) incurring any obligation
or liability; or (j) the sale of personal property.
3.18 Litigation. The Company is not subject to any judgment or order of
any court or quasi judicial or administrative agency of any jurisdiction,
domestic or foreign, nor is there any charge, complaint lawsuit or governmental
investigation pending against the Company. The Company is not a plaintiff in any
action, domestic or foreign, judicial or administrative. There are no existing
actions, suits, proceedings or investigations of the Company, and neither the
Company, WGI nor HFG know of any basis for such actions, suits, proceedings or
investigations. There are no unsatisfied judgments, orders, decrees or
stipulations affecting the Company or to which the Company is a party.
3.19 Employees. Except for George W. Gilman, the Company's sole officer
and director, the Company does not have any employees. The Company does not owe
any compensation of any kind, deferred or otherwise, to any current or previous
employees. The Company has no written or oral employment agreements with any
officer or director of the Company. The Company is not a party to or bound by
any collective bargaining agreement. There are no loans or other obligations
payable or owing by the Company to any shareholder, officer, director or
employee of the Company, nor are there any loans or debts payable or owing by
any of such persons to the Company or any guarantees by the Company of any loan
or obligation of any nature to which any such person is a party.
3.20 Employee Benefit Plans. The Company has no (a) non-qualified
deferred or incentive compensation or retirement plans or arrangements, (b)
qualified retirement plans or arrangements, (c) other employee compensation,
severance or termination pay or welfare benefit plans, programs or arrangements
or (d) any related trusts, insurance contracts or other funding arrangements
maintained, established or contributed to by the Company.
3.21 Legal Compliance. No claim has been filed against the Company
alleging a violation of any applicable laws and regulations of foreign, federal,
state and local governments and all agencies thereof. The Company holds all of
the material permits, licenses, certificates or other authorizations of foreign,
federal, state or local governmental agencies required for the conduct of its
business as presently conducted.
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3.22 Broker's Fee. Except as set forth in that Agreement dated October
20, 1998 among the parties and Castor Capital Corporation (the "WGI Agreement"),
neither the Company, WGI, HFG nor anyone on their behalf has any liability to
any broker, finder, investment banker or agent, or has agreed to pay any
brokerage fees, finder's fees or commissions, or to reimburse any expenses of
any broker, finder, investment banker or agent in connection with this
Agreement.
3.23 Disclosure. The representations, warranties and statements of fact
made by the Company, WGI and BFG in this Agreement are, as applicable, accurate,
correct and complete and do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements and
information contained herein not false or misleading.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 Conduct of Business by the Company Pending the Closing. The
Company, WGI and HFG, with the covenants and agreements of HFG contained in this
Article to be, as applicable, solely on a best efforts basis, jointly and
severally covenant and agree that prior to the Closing Date:
(a) The Company shall con its business and operations only in
the usual and ordinary course;
(b) Except as contemplated by this Agreement and as necessary
to effect the proposals contained in the Proxy Statement (as
hereinafter defined), the Company shall not directly or indirectly do
any of the following: (i) sell, pledge, dispose of or encumber any of
its assets; (ii) amend or propose to amend its Articles of
Incorporation or Bylaws; (iii) split, combine or reclassify any
outstanding shares of its capital stock, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or
otherwise with respect to shares of its capital stock; (iv) redeem,
purchase or acquire or offer to acquire any shares of its capital stock
or other securities; (v) create any subsidiaries; or (vi) enter into or
modify any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(c) The Company shall not (i) issue, sell, pledge or dispose
of, or agree to issue, sell, pledge or dispose of, any additional
shares of, or any options, warrants, conversion privileges or rights of
any kind to acquire any shares of, its capital stock; (ii) acquire (by
merger, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division or
the material assets thereof; (iii) incur any indebtedness for borrowed
money, issue any debt securities or guarantee any indebtedness to
others; or (iv) enter into or modify any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
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(d) The Company shall not enter into any employment, severance
or similar agreements or arrangements with, or grant any bonus, salary
increase, severance or termination pay to, any officers or directors;
(e) The Company shall not adopt any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee;
(f) Except as otherwise required by its Articles of
Incorporation or Bylaws, by this Agreement or by applicable law,
neither the Company, WGI nor HFG shall call any meeting of
shareholders;
(g) The Company, WGI and HFG shall (i) use their best efforts
not to take any action which would render, or which reasonably may be
expected to render, any representation or warranty made by them in this
Agreement untrue at any time prior to the Closing Date as if then made;
and (ii) notify Alford of any emergency or other change in the normal
course of its business or in the operation of its properties and of any
tax audits, tax claims, governmental or third party complaints,
investigations or hearings (or communications indicating that the same
may be contemplated) if such emergency, change, audit, claim,
complaint, investigation or hearing would be material, individually or
in the aggregate, to the financial condition, results of operations or
business of the Company, or to the ability of any of the parties hereto
to consummate the transactions contemplated by this Agreement;
(h) The Company, WGI and HFG shall notify Alford promptly of
any material adverse event or circumstance affecting the Company
(including the filing of any material litigation against the Company or
the existence of any dispute with any person or entity which involves a
reasonable likelihood of such litigation being commenced); and
(i) The Company shall comply with all legal
requirements and contractual obligations applicable to its operations
and business and pay all applicable taxes.
4.2 Other Actions. Unless approved in writing by Alford, the Company,
WGI and HFG shall not take any action or permit any action to occur that might
reasonably be expected to result in any of the representations and warranties of
the Company, WGI and HFG contained in this Agreement becoming untrue after the
date hereof or any of the conditions to the Closing set forth in Article 6 of
this Agreement not being satisfied.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access and Information. Except for information relating to any
claims any party may have against the other, Alford and the Company shall each
afford to the other and to the other's financial advisors, legal counsel,
accountants, consultants and other representatives necessary access throughout
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the period prior to the Closing to all of its books, records, properties and
personnel and, during such period in order to allow each party to complete its
due diligence review, each shall furnish promptly to the other all information
as such other party may reasonably request. Each party shall hold in confidence
certain information in accordance with that certain Confidentiality Agreement
dated October 23, 1998 among the parties hereto.
5.2 Proxy Statement. The Company, WGI and their representatives shall,
with the assistance of Alford and its representatives, prepare a Proxy Statement
and related Notice of Shareholders' Meeting (collectively, the "Proxy
Statement") that will submit certain matters to the Company's shareholders for
approval in accordance with applicable law, including this Agreement. The Proxy
Statement may also contain additional proposals regarding such other matters
appropriate for shareholder approval as may be mutually agreed upon by the
parties.
Alford shall be responsible for providing the information to WGI
required in the Proxy Statement that relates to Alford and its management
business and financial condition. WGI and the Company shall be responsible for
providing the other information required in the Proxy Statement that relates to
WGI and the management business and financial condition of the Company.
5.3 Meeting of Shareholders. The Company shall call a special meeting
of its shareholders to be held in accordance with the laws of the State of Texas
to consider and vote upon the proposals contained in the Proxy Statement.
5.4 Certain Information. The Company, WGI, Alford and each of their
respective representatives shall prepare and assemble certain information
regarding the Merger, the Company and Alford necessary for the shareholders of
Alford to make an informed investment decision regarding the Merger.
5.5 Press Releases. The Company and Alford shall consult with each
other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby; provided, however, that nothing herein shall be deemed to
prohibit any party hereto from making any disclosure that is required to fulfill
such party's disclosure obligations imposed by law, including, without
limitation, federal securities laws.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Each Party to Effect the Closing. The
respective obligations of each party hereto to effect the Closing shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
(a) The Merger and any other proposals contained in the Proxy
Statement shall have been approved by the shareholders of the Company
in accordance with applicable law; and
15
<PAGE>
(b) No order shall have been entered and remained in effect in
any action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal
the consummation of the transactions contemplated hereby.
6.2 Additional Conditions to Alford's Obligations. The obligations of
Alford to effect the Closing are subject to the satisfaction of the following
additional conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article 3
of this Agreement will be true and correct in all material respects as
of the date hereof and at and as of the Closing Date as though then
made;
(b) The Company, WGI and HFG shall have performed, in all
material respects, each obligation and agreement and complied with each
covenant to be performed and complied with by them under Articles 4 and
5 of this Agreement prior to the Closing Date;
(c) All consents by governmental or regulatory agencies or
otherwise that are required to be obtained by the Company for the
consummation of the transactions contemplated hereby will have been
obtained;
(d) No action or proceeding before any court or governmental
body will be pending or threatened wherein a judgment, decree or order
would prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(e) Alford and its financial and legal representatives shall
have completed a due diligence review of the business, operations and
financial statements of the Company, the results of which shall be
satisfactory to Alford in its sole discretion;
(f) Alford will have received from Jackson Walker LLP, counsel
to the Company, an opinion addressed to Alford, dated the Closing Date
in a form mutually satisfactory to the parties; and
(g) At the Closing, the Company shall have delivered or caused
to be delivered to Alford the following:
(i) a certificate used on behalf of the Company, WGI,
and, HFG stating that the conditions set forth in Sections
6.2(a) through (d) of this Agreement have been satisfied;
(ii) resolutions duly adopted by the respective
Boards of Directors of the Company, WGI and, as applicable,
HFG authorizing and approving the proposals contained in the
Proxy Statement, including the Merger and the execution,
delivery and performance of this Agreement;
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<PAGE>
(iii) certificates of existence and good standing for
the Company from the State of Texas, dated not earlier than
five days prior to the Closing Date;
(iv) a copy of the Articles of Incorporation of the
Company certified as of a recent date by the Secretary of
State of the State of Texas;
(v) an incumbency certificate of the officers of the
Company, WGI and HFG;
(vi) the written resignation of George W. Gilman from
his positions of officer and director of the Company and its
wholly-owned subsidiary, Hilltop Acquisition Corporation; and
(vii) such other documents as Alford may reasonably
request in connection with the transactions contemplated
hereby.
6.3 Additional Conditions to the Obligations of the Company, WGI and
HFQ. The respective obligations of the Company, WGI and HFG to effect the
Closing are subject to the satisfaction of the following conditions on or before
the Closing Date:
(a) The representations and warranties set forth in Article 2
of this Agreement will be true and correct in all material respects as
of the date hereof and at and as of the Closing Date as though then
made;
(b) Alford shall have performed, in all material respects,
each obligation and agreement and complied with each covenant required
to be performed and complied with by it under Article 5 of this
Agreement prior to the Closing Date;
(c) All consents by governmental or regulatory agencies or
otherwise that are required to be obtained by Alford for the
consummation of the transactions contemplated hereby will have been
obtained;
(d) No action or proceeding before any court or governmental
body will be pending or threatened wherein a judgment, decree or order
would prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(e) The Company shall have received from Jenkens & Gilchrist,
P.C. counsel to Alford, an opinion addressed to the Company, WGI and
HFG, dated the Closing Date in a form mutually satisfactory to the
parties; and
(f) On the Closing Date, Alford shall have delivered to the
Company the following:
17
<PAGE>
(i) a certificate executed on behalf of Alford
stating that the conditions set forth in Sections 6.3(a)
through (d) of this Agreement have been satisfied;
(ii) resolutions duly adopted by the Board of
Directors of Alford authorizing and approving the Merger and
the execution, delivery and performance of this Agreement;
(iii) resolutions duly adopted by the shareholders of
Alford approving the Merger and the execution, delivery and
performance of this Agreement;
(iv) certificates of existence and good standing for
Alford from the State of Texas, dated not earlier than five
days prior to the Closing Date;
(v) a copy of the Articles of Incorporation of Alford
certified as of a recent date by the Secretary of State of the
State of Texas;
(vi) an incumbency certificate of the officers of
Alford; and
(vii) such other documents as the Company may
reasonably request in connection with the transactions
contemplated hereby.
ARTICLE 7
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Closing by the mutual consent of the parties hereto.
7.2 Termination by Any Party. This Agreement may be terminated by any
party hereto if a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this section shall
have used all reasonable efforts to remove such injunction, order or decree.
7.3 Material Breach. This Agreement may be terminated if there has been
a material breach of this Agreement and such breach has not been cured by the
alleged breaching party within 30 days of receipt of written notice from a
non-breaching party detailing such breach.
7.4 Effect of Termination. In the event of termination of this
Agreement pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to the
Confidentiality Agreement referred to in Section 5.1.
18
<PAGE>
ARTICLE 8
GENERAL PROVISIONS
8.1 Notices. All notices and other communications hereunder shall be in
writing and shall be defined to have been duly given if delivered personally,
sent by overnight courier or mailed by registered or certified mail (postage
prepaid and return receipt requested) to the party to whom the same is so
delivered, sent or mailed at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to the Company or WGI: George W. Gilman
710 North Post Oak Road, Suite 400
Houston, Texas 77024
If to HFG: Timothy P. Halter, President
Halter Financial Group, Inc.
14160 Dallas Parkway, Suite 950
Dallas, Texas 75240
If to Alford: James C. Williams, Vice President
318 Cadiz Street
Dallas, Texas 75707
Joseph Y. Robichaud
Castor Capital Corporation
3500 Dufferin Street, Suite 300
Downsview, Ontario M3K IN2
8.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
8.3 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of the Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated and the parties shall negotiate in
good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
8.4 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof; (b) except as
expressly set forth herein, is not intended to confer upon any other person any
19
<PAGE>
rights or remedies hereunder and (c) shall not be assigned by operation of law
or otherwise, except as may be mutually agreed upon by the parties hereto.
8.5 Separate Counsel. Each party hereby expressly acknowledges that it
has been advised and urged to seek its own separate legal counsel for advice
with respect to this Agreement.
8.6 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Texas, without regard
to conflicts or choice of law provisions of the State of Texas.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
8.8 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by all parties hereto.
8.9 Parties In interest: No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. This Agreement
shall not be deemed to confer upon any person not a party hereto any rights or
remedies hereunder.
8.10 Waiver. No waiver by any party of any default or breach by another
party of any representation, warranty, covenant or condition contained in this
Agreement shall be deemed to be a waiver of any subsequent default or breach by
such party of the same or any other representation, warranty, covenant or
condition. No act, delay, omission or course of dealing on the part of any party
in exercising any right, power or remedy under this Agreement or at law or in
equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
8.11 Expenses. Except as may be otherwise provided in the WGI Agreement
described above, the parties hereto shall pay all of their own expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers. Notwithstanding the foregoing, including provisions of the WGI
Agreement and the Consulting Agreement dated October 20, 1998, among HFG, the
Company, Alford and others, WGI shall bear all legal fees and expenses of
Jackson Walker L.L.P. relating to the transactions contemplated hereby, whether
or not the Merger is consummated.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HILLTOP ACQUISITION HOLDING
CORPORATION
By: /s/ George W. Gilman
----------------------------------
George W. Gilman, President
WOMACK GILMAN INVESTMENT
SERVICES, L.C.
By: /s/ George W. Gilman
----------------------------------
George W. Gilman
Title:
---------------------------
HALTER FINANCIAL GROUP, INC.
By: /s/ Timothy P. Halter
--------------------------------
Timothy P. Halter, President
ALFORD REFRIGERATED WAREHOUSES,
INC.
By: /s/ James C. Williams
---------------------------------
James C. Williams, Vice President
21
INCORPORATED UNDER THE
LAWS OF THE STATE OF TEXAS
COMMON STOCK COMMON STOCK
NUMBER ARW SHARES
This certificate is transferable in CUSIP 01542P 10 7
Dallas, Texas and New York, New York
Alford Refrigerated Warehouses, Inc.
This Certifies that
--------------------------------------------------
---------------------------------------------------------------------------
is the owner of
-----------------------------------------------------------
FULLY PAID AND NON-TRANSFERABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE, OF
ALFORD REFRIGERATED WAREHOUSES, INC.
(hereinafter referred to as the "Corporation") transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued under and shall be subject to all the provisions
of the Articles of Incorporation and the Bylaws of the Corporation and any
amendments thereto, copies of which are on file with the Corporation and the
Transfer Agent, to all of which the holder, by acceptance hereof, assents
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated: ____________
______________________________ Countersigned and Registered:
PRESIDENT Securities Transfer Corporation
P.O. Box 701829
______________________________ Dallas, TX 75370-00001
SECRETARY
-------------------------------
TRANSFER AGENT AND REGISTRAR-
AUTHORIZED SIGNATURE
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
The Articles of Incorporation of the Corporation on file in the office
of the Secretary of State of Texas set forth (a) the aggregrate number of shares
and the par value of each class of capital shares which the Corporation is
authorized to issue together with the designations, preferences, limitations and
relative rights of each such class; (b) a statement of the authority vested in
the Board of Directors to establish series and to fix and determine the
variations in the relative rights and preferences between any such series of the
Preferred Stock so established; (c) a denial of preemptive rights of the
shareholders to acquire unissued or treasury shares of the Corporation; and (d)
a denial of cumulative voting at any meeting of the shareholders for electing
directors. The Corporation will furnish a copy of such statement to the record
holder of this certificate without charge upon written request to the
Corporation at its registered office.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _________Custodian
________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as
joint tenants with right of Under Unform Gifts to Minors
survivorship and not as tenants Act _______________________
in common (State)
Additional abbreviations may also be used though not in
the above list.
FOR VALUE RECEIVED, ______________________________________ hereby sell,
assign and transfer unto __________________________________________________.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby irre-
vocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated _________________________
X___________________________________
NOTICE: ->
THE SIGNATURE(S) TO THIS ASSIGNMENT X __________________________________
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR WITHOUT ALTERATION The signature(s) must be guaranteed
OR ENLARGEMENT OR ANY CHANGE WHATEVER. by an eligible guarantor institution
(banks, stockbrokers, savings and
loan associations and credit unions
with membership in an approved sig-
nature medallion program) pursuant
to S.E.C. Rule 17Ad-15.
Exhibit 10.1
Loan No. V_00303
FIXED RATE NOTE
$8,100,000.00 September 15, 1997
FOR VALUE RECEIVED CADIZ PROPERTIES, INC., a Texas corporation
(hereinafter referred to as "Borrower"), promises to pay to the order of MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation, its
successors and assigns (hereinafter referred to as "Lender"), at the office of
Lender or its agent, designee, or assignee at 60 Wall Street, New York, New York
10260-0060, Attention: Loan Servicing, or at such place as Lender or its agent,
designee, or assignee may from time to time designate in writing, the principal
sum of EIGHT MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($8,100,000.00), in
lawful money of the United States of America, the Applicable Interest Rate
(hereinafter defined) at all times prior to the occurrence of an Event of
Default (as defined in the Security Instrument [hereinafter defined]), and to be
paid in installments as set forth below. Unless otherwise herein defined, all
initially capitalized terms shall have the meanings given such terms in the
Security Instrument.
1. PAYMENT TERMS
Principal and interest due under this Note shall be paid as follows:
(a) A payment of interest only on the date hereof for the
period from the date of the advance of the principal evidenced hereby through
September 30, 1998, both inclusive; and
(b) A constant payment of Sixty-Nine Thousand Seven Hundred
Eighty-One and 86/100 Dollars ($69,781.86), on the first day of November, 1997
and on the first day of each calendar month thereafter up to and including the
first day of September, 2007;
(i) First, to the payment of interest and other costs
and charges due in connection with this Note or the Debt, as Lender may
determine in its sole discretion; and
(ii) The balance shall be applied toward the reduction
of the principal sum;
and the balance of said principal sum, together with accrued and unpaid interest
and any other amounts due under this Note shall be due and payable on the first
day of October, 2007 or upon earlier maturity hereof whether by acceleration or
otherwise (the "Maturity Date"). Interest on the principal sum of this Note
shall be calculated on the basis of a three hundred sixty (360) day year
composed of twelve (12) months of thirty (30) days each, expect that Internet
1
<PAGE>
calculated with reference to the maximum rate permitted by applicable law shall
be calculated by multiplying the actual number of days elapsed in such period by
a daily rate based on a year of 365/366 days (as applicable). All amounts due
under this Note shall be payable without setoff, counterclaim or a any other
deduction whatsoever.
2. INTEREST
The term "Applicable Interest Rate" means from the date of this Note
through and including the Maturity Date, a rate of eight and two-fifths percent
(8.40%) per annum.
3. SECURITY
This Note is secured by, and Lender is entitled to the benefits of, the
Security Instrument, the Assignment, the Environmental Agreement, and the other
Loan Documents (hereinafter defined). The term "Security Instrument" means the
Deed of Trust and Security Agreement dated the date hereof given by Borrower for
the use and benefit of Lender covering the estate of Borrower in certain
premises as more particularly described therein, which premises, together with
all properties, rights, titles, estates and interests now or hereafter securing
the Debt and/or other obligations of Borrower under the Loan Documents, are
collectively referred to herein as the ("Property"). The term "Assignment" means
the Assignment of Leases and Rents of even date herewith executed by Borrower in
favor of Lender. The term "Environmental Agreement" means the Environmental
Liabilities Agreement of even date herewith executed by Borrower and/or others
in favor of Lender. The term "Loan Documents" refers collectively to this Note,
the Security Instrument, the Assignment, the Environmental Agreement, and any
and all other documents executed in connection with this Note or now or
hereafter executed by Borrower and/or others and by or in favor of Lender, which
wholly or partially secure or guarantee payment of this Note or pertains to
indebtedness evidenced by this Note.
4. LATE FEE
If any installment payable under this Note (including the final
installment due on the Maturity Date) is not received by Lender within ten (10)
days after the date on which it is due (without regard to any applicable cure
and/or notice period), Borrower shall pay to Lender upon demand an amount equal
to the lesser of (a) five percent (5%) of such unpaid sum or (b) the maximum
amount permitted by applicable law to delay the expenses incurred by Lender in
handling and processing such delinquent payment and to compensate Lender for the
loss of the use of such delinquent payment, and such amount shall be secured by
the Loan Documents.
5. DEFAULT AND ACCELERATION
So long as an Event of Default exist, Lender may, at its option,
without notice or demand to Borrower, declare the Debt immediately due and
payable. All remedies hereunder, under the Loan Documents and at law or in
equity shall be cumulative. In the event that it should become necessary to
2
<PAGE>
employ counsel to collect the Debt or to protect or foreclose the security for
the Debt or to defend against any claims asserted by Borrower arising from or
related to the Loan Documents, Borrower also agrees to pay to Lender on demand
all costs of collection or defense incurred by Lender, including reasonable
attorneys' fees for the services of counsel whether or not suit be brought.
6. DEFAULT INTEREST
Upon the occurrence of an Event of Default, Borrower shall pay interest
on the entire unpaid principal sum and any other amounts due under the Loan
Documents at the rate equal to the lesser of (a) the maximum rate permitted by
applicable law, or (b) the greater of (i) five percent (5%) above the Prime Rate
(hereinafter defined) in effect at the time of the occurrence of the Event of
Default (the "Default Rate"). The term "Prime Rate" means the prime rate
reported in the Money Rates section of The Wall street Journal. In the event
that The Wall Street Journal should cease or temporarily interrupt publication,
the term "Prime Rate" shall mean the daily average prime rate published in
another business newspaper, or business section of a newspaper, of national
standing and general circulation chosen by Lender. In the event that a prime
rate is no longer generally published or is limited, regulated or administered
by a governmental or quasi-governmental body, then Lender shall select a
comparable interest rate index which is readily available and verifiable to
Borrower but is beyond Lender's control. The Default Rate shall be computed from
the occurrence of the Event of Default until the actual receipt and collection
of a sum of money determined by Lender to be sufficient to cure the Event of
Default. Amounts of interest accrued at the Default Rate shall constitute a
portion of the Debt, and shall be deemed secured by the Loan Documents. This
clause, however, shall not be construed as an agreement or privilege to extend
the date of the payment of the Debt, nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of any Event of Default.
7. PREPAYMENT
(a) The principal balance of this Note may not be prepaid in
whole or in part (except with respect to the application of casualty or
condemnation proceeds) prior to the fifth Loan Year (as hereinafter defined).
During the fifth Loan Year or at anytime thereafter, provided no Event of
Default exists, the principal balance of this Note may be prepaid, in whole but
not in part (except with respect to the application of casualty or condemnation
proceeds), on any scheduled payment date under this Note upon not less than
thirty (30) days prior written notice to Lender specifying the scheduled payment
date on which prepayment is to be made (the "Prepayment Date") and upon payment
of (i) interest accrued and unpaid on the principal balance of this Note to and
including the Prepayment Date, (ii) all other sums then due under this Note and
the other Loan Documents, and (iii) a prepayment consideration in an amount
equal to the greater of (A) one percent (1%) of the outstanding principal
balance of this Note at the time of prepayment, or (B) (x) the present value as
of the Prepayment Date of the remaining scheduled payments of principal and
interest from the Prepayment Date through the Maturity Date (including any
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balloon payment) determined by discounting such payments at the Discount Rate
(as hereinafter defined), less (y) the amount of principal being prepaid. The
term "Prepayment Date" means the rate which, when compounded monthly, is
equivalent to the Treasury Rate (as hereinafter defined), when compounded
semi-annually. The term "Treasury Rate" means the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading "U.S. Government
Securities/Treasury Constant Maturities" for the week ending prior to the
Prepayment Date, of U.S. Treasury constant maturities with maturity dates (one
longer and one shorter) most nearly approximating the Maturity Date. (In the
event Release H.15 is no longer published, Lender shall select a comparable
publication to determine the Treasury Rate.) Lender shall notify Borrower of the
amount and the basis of determination of the required prepayment consideration.
Notwithstanding the foregoing, Borrower shall have the additional privilege to
prepay the entire principal balance of this Note (together with any other sums
constituting the Debt) on any scheduled payment date during the six (6) months
preceding the Maturity Date without any fee or consideration for such privilege.
If any such notice of prepayment is given, the principal balance of this Note
and the other sums required under this paragraph shall be due and payable on the
Prepayment Date. Lender shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by the prepayment
consideration due in connection therewith. The term "Loan Year" for purposes of
this paragraph means each complete 365-day period (366 days in a leap year)
after the first scheduled payment date set forth in Section 1 of this Note.
(b) If following the occurrence of any Event of Default,
Borrower shall tender payment of an amount sufficient to satisfy the Debt at any
time prior to a sale of the Property, either through foreclosure or the exercise
of the other remedies available to Lender under the Security Instrument, such
tender by Borrower shall be deemed to be a voluntary prepayment under this Note
in the amount tendered. If at the time of such tender, prepayment of the
principal balance of this Note is not permitted, Borrower shall, in addition to
the entire Debt, also pay to Lender a sum equal to interest which would have
accrued on the principal balance of this Note at the Applicable Interest Rate in
effect on the date which is five (5) days prior to the date of prepayment, from
the date of such tender to the first day of the period during which prepayment
of the principal balance of this Note would have been permitted, together with a
prepayment consideration equal to the prepayment consideration which would have
been payable as of the first day of the period in which prepayment is permitted
under this Note. If at the time of such tender, prepayment of the principal
balance of this Note is permitted, Borrower shall, in addition to the entire
Debt, also pay to Lender the applicable prepayment consideration specified in
this Note.
(c) If the prepayment results from the application to the Debt
of the casualty or condemnation proceeds from the Property, no prepayment
consideration will be imposed. Partial prepayments of principal resulting from
the application of casualty or insurance proceeds to the Debt shall not change
the amounts of subsequent monthly installments nor change the dates on which
such installments are due, unless Lender shall otherwise agree in writing.
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8. SAVINGS CLAUSE
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance due
hereunder at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of such
maximum rate, the Applicable Interest Rate or the Default Rate, as the case may
be, shall be deemed to be immediately reduced to such maximum rate and all
previous payments in excess of the maximum rate shall be deemed to have been
payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt, shall to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of this Note until payment in full so that the rate or amount
of interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding. Notwithstanding anything to the contrary contained
herein or in any of the other Loan Documents, it is not the intention of Lender
to accelerate the maturity of any interest that has not accrued at the time of
such acceleration or to collect unearned interest at the time of such
acceleration.
9. WAIVERS
(a) Except as specifically provided in the Loan Documents,
Borrower and any endorsers, sureties or guarantors hereof jointly and severally
waive presentment and demand for payment; notice of intent to accelerate
maturity, notice of acceleration of maturity, protest and notice of protest and
non-payment, all applicable exemption rights, valuation and appraisement, notice
of demand, and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note and the bringing
of suit and diligence in taking any action to collect any sums owing hereunder
or in proceeding against any of the rights and collateral securing payment
hereof. Borrower and any surety, endorser or guarantor hereof agree (i) that the
time for any payments hereunder may be extended from time to time without notice
and consent, (ii) to the acceptance by Lender of further collateral, (iii) the
release by Lender of any existing collateral for the payment of this Note, (iv)
to any and all renewals, waivers or modifications that may be granted by Lender
with respect to the payment or other provisions of this Note, and/or (v) that
additional Borrowers, endorsers, guarantors or sureties may become parties
hereto all without notice to them and without in any manner affecting their
liability under or with respect to this Note. No extension of time for the
payment of this Note or any installment hereof shall affect the liability of
Borrower under this Note or any endorser or guarantor hereof even though the
Borrower or such endorser or guarantor is not a party to such agreement.
(b) Failure of Lender to exercise any of the options granted
herein to Lender upon the happening of one or more of the events giving rise to
such options shall not constitute a waiver of the right to exercise the same or
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any other option at any subsequent time in respect to the same or any other
event. The acceptance by Lender of any payment hereunder that is less than
payment in full of all amounts due and payable at the time of such payment shall
not constitute a waiver of the right to exercise any of the options granted
herein to Lender at that time or at any subsequent time or nullify any prior
exercise of any such option without the express written acknowledgment of the
Lender.
10. EXCULPATION
(a) Notwithstanding anything in the Loan Documents to the
contrary, but subject to the qualifications below, Lender and Borrower agree
that:
(i) Borrower shall be Liable upon the Debt and
for the other obligations arising under the Loan Documents to the full extent
(but only to the extent) of the security therefor, provided, however, that in
the event (A) of fraud, wilful misconduct or material misrepresentation by
Borrower, its general partners, if any, its members, if any, its principals, its
affiliates, its agents or its employees or by any Guarantor or any Indemnitor in
connection with the loan evidenced by this Note, (B) of Borrower's breach or
default under Sections 4.3 or 8.2 of the Security Instrument, or (C) the
Property or any part thereof becomes an asset in a voluntarybankruptcy or
insolvency proceeding, the limitation on recourse set forth in this Subsection
10(a) will be null and void and completely inapplicable, and this Note shall be
with full recourse to Borrower;
(ii) If a default occurs in the timely and proper
payment of all or any part of the Debt, Lender shall not enforce the liability
and obligation of Borrower to perform and observe the obligations contained in
this Note or the Security Instrument by any action or proceeding wherein a money
judgment shall be sought against Borrower, except that Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon the Security
Instrument, the Other Loan Documents and the interest in the Property, the Rents
and any other collateral given to Lender created by the Security Instrument and
the Other Loan Documents; provided, however, that any judgment in any action or
proceeding shall be enforceable against Borrower only to the extent of
Borrower's interest in the Property, in the Rents and in any other collateral
given to Lender. Lender, by accepting this Note and the Security Instrument
agrees that it shall not, except as otherwise herein provided, sue for, seek or
demand any deficiency judgment against Borrower in any action or proceeding,
under or by reason of or under or in connection with this Note, the Other Loan
Documents or the Security Instrument.
(iii) The provisions of this Subsection 10(a) shall
not (A) constitute a waiver, release or impairment of any obligation evidenced
or secured by this Note, the Other Loan Documents or the Security Instrument;
(B) impair the right of Lender to name Borrower as a party defendant in any
action or suit for judicial foreclosure and sale under the Security Instrument;
(C) affect the validity or enforceability of any indemnity, guaranty, master
lease or similar instrument made in connection with this Note, the Security
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Instrument, or the Other Loan Documents; (D) impair the right of Lender to
obtain the appointment of a receiver, (E) impair the enforcement of the
Assignment executed in connection herewith; (F) impair the right of Under to
enforce the provisions of Article 11 of the Security Instrument; or (G) impair
the right of Lender to obtain a deficiency judgment or judgment on this Note
against Borrower if necessary to obtain any insurance proceeds or condemnation
awards to which Lender would otherwise be entitled under the Security
Instrument; provided, however, Lender shall only enforce such judgment against
the insurance proceeds and/or condemnation awards.
(iv) Notwithstanding the provisions of this Article
to the contrary, Borrower shall be personally liable to Lender for the Losses it
incurs due to: (A) the misapplication or misappropriation of Rents; (B) the
misapplication or misappropriation of insurance proceeds or condemnation awards;
(C) Borrower's failure to return or to reimburse Lender for all Personal
Property taken from the Property by or on behalf of Borrower and not replaced
with Personal Property of the same utility and of the same or greater value; (D)
any act of actual waste or arson by Borrower, any principal, affiliate, general
partner or member thereof or by any Indemnitor or any Guarantor, (E) any fees or
commissions paid by Borrower to any principal, affiliate, general partner or
member of Borrower, any Indemnitor or any Guarantor in violation of the terms of
this Note, the Security Instrument or the Other Loan Documents; (F) Borrower's
failure to comply with the provisions of Section 11.2 of the Security
Instrument; or (G) any breach of the Environmental Indemnity.
(b) Nothing herein shall be deemed to be a waiver of any right
which Lender may have under Sections 506(a), 506(b), 1111 (b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt or to require that all collateral shall continue to secure all of the Debt
owing to Lender in accordance with this Note, the Security Instrument and the
Other Loan Documents.
11. AUTHORITY
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note and the other Loan
Documents and that this Note and the other Loan Documents constitute legal,
valid and binding obligations of Borrower. Borrower further represents that the
loan evidenced by the Loan Documents was made for business or commercial
purposes and not for personal, family or household use.
12. NOTICES
All notices or other communications required or permitted to be given
pursuant hereto shall be given in the manner and be effective as specified in
the Security Instrument, directed to the parties at their respective addresses
as provided therein.
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13. TRANSFER
Lender shall have the unrestricted right at any time or from time to
time to sell this Note and the loan evidenced by this Note and the Loan
Documents or participation interests therein. Borrower shall execute,
acknowledge and deliver any and all instruments requested by Lender to satisfy
such purchasers or participants that the unpaid indebtedness evidenced by this
Note is outstanding upon the terms and provisions set out in this Note and the
other Loan Documents. To the extent, if any, specified in such assignment or
participation, such assignee(s) or participant(s) shall have the rights and
benefits with respect to this Note and the other Loan Documents as such
assignee(s) or participant(s) would have if they were the Lender hereunder.
14. WAIVER OF TRIAL BY JURY
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS NOTE
OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH INCLUDING, BUT NOT LIMITED TO, THOSE RELATING TO W
ALLEGATIONS THAT A PARTNERSHIP EXISTS BETWEEN LENDER AND BORROWER; (B) USURY OR
PENALTIES OR DAMAGES THEREFOR; (C) ALLEGATIONS OF UNCONSCIONABLE ACTS. DECEPTIVE
TRADE PRACTICE, LACK OF GOOD FAITH OR FAIR DEALING, LACK OF COMMERCIAL
REASONABLENESS, OR SPECIAL RELATIONSHIPS (SUCH AS FIDUCIARY,TRUST OR
CONFEDENTIAL RELATIONSHIP); (D) ALLEGATIONS OF DOMINION, CONTROL, ALTER EGO,
INSTRUMENTALITY, FRAUD, REAL ESTATE FRAUD, MISREPRESENTATION, DURESS, COERCION,
UNDUE INFLUENCE INTERFERENCE OR NEGLIGENCE; (E) ALLEGATIONS OF TIORTIOUS
INTERFERENCE WITH PRESENT OR PROSPECTIVE BUSINESS RELATIONSHIPS OR OF ANTITRUST,
OR (F) SLANDER, LIBEL OR DAMAGE TO REPUTATION. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD 0THERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY
OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
BORROWER.
15. APPLICABLE LAW
This Note shall be governed by and construed in accordance with the
laws of the State of Texas (without regard to any conflict of laws or
principles) and the applicable laws of the United States of America.
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16. JURISDICTION
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY COURT OF
COMPETENT JURISDICTION LOCATED IN THE STATE IN WHICH THE PROPERTY IS LOCATED IN
CONNECTION WITH ANY PROCEEDING OUT OF OR RELATING TO THIS NOTE.
17. NO ORAL CHANGE
The provisions of this Note and the Loan Documents may be amended or
revised only by an instrument in writing signed by the Borrower and Lender. This
Note and all the other Loan Documents embody the final, entire agreement of
Borrower and Lender and supersede any and all prior commitments, agreements,
representations and understandings, whether written or oral, relating to the
subject matter hereof and thereof and may not be contradicted or varied by
evidence of prior, contemporaneous or subsequent oral agreements or discussions
of Borrower and Lender. There are no oral agreements between Borrower and
Lender.
Executed as of the day and year first above written.
BORROWER
CADIZ PROPERTIES, INC.,
a Texas corporation
By:/s/James Williams
------------------------
Name: James Williams
Title: Secretary
9
Exhibit 10.2
Loan No. 400029184
FIXED RATE NOTE
$5,400,000.00 February 6, 1998
FOR VALUE RECEIVED LA PORTE PROPERTIES, L.L.C., a Texas limited
liability company (hereinafter referred to as "Maker"), promises to pay to the
order of AMRESCO CAPITAL, L.P., a Delaware limited partnership, its successors
and assigns (hereinafter referred to as "Payee", at the office of Payee or its
agent, designee, or assignee at 700 North Pearl Street, Suite 2400, LB#342,
Dallas, Texas 75201-7424, Attention: Loan Servicing, or at such place as Payee
or its agent, designee, or assignee may from time to time designate in writing,
the principal sum of FIVE MILLION FOUR HUNDRED THOUSAND and No/ 100 Dollars
($5,400,000.00) in lawful money of the United States of America, with interest
thereon to be computed on the unpaid principal balance from time to time
outstanding at the Applicable Interest Rate (hereinafter defined) at all times
prior to the occurrence of an Event of Default (as defined in the Mortgage
[hereinafter defined]), and to be paid in installments as follows:
1. A payment of interest only on the date hereof for the period
from the date hereof through the last day of the current
calendar month, both inclusive;
2. A constant payment (the "Monthly Payment"), in arrears, of
$42,973.99, on the first day of April, 1998 and on the first
day of each calendar month thereafter up to and including the
month immediately preceding the Maturity Date stated below,
which Monthly Payment is calculated using an amortization
period of twenty-five (25) years;
and the balance of said principal sum, together with accrued and unpaid interest
and any other amounts due under this Note shall be due and payable on the first
day of March, 2008 or upon earlier maturity hereof whether by acceleration or
otherwise (the "Maturity Date"). Interest on the principal sum of this Note
shall be calculated on the basis of the actual number of days elapsed in the
applicable calendar month multiplied by a daily rate based upon a 360 day year,
and (ii) in any event interest calculated with reference to the maximum rate
permitted by applicable law shall be calculated by multiplying the actual number
of days elapsed in such period by a daily rate based on a year of 365/366 days
(as applicable). Monthly Payments under this Note shall be applied first, to the
payment of interest and other costs and charges due in connection with this Note
or the Debt (as hereinafter defined), as Payee may determine in its sole
discretion, and the balance shall be applied toward the reduction of the
principal sum. All amounts due under this Note shall be payable without setoff,
counterclaim or any other deduction whatsoever.
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The term "Applicable Interest Rate" means from the date of this Note
through and including the Maturity Date a rate of eight and 36/100 percent
(8.36%) per annum.
This Note is secured by, and Payee is entitled to the benefits of, the
Mortgage, the Assignment, the Environmental Agreement, and the other Loan
Documents (hereinafter defined). The term "Mortgage" means the Mortgage, Deed of
Trust and Security Agreement dated the date hereof given by Maker for the use
and benefit of Payee covering the estate of Maker in certain premises as more
particularly described therein (the "Mortgaged Property"). The term "Assignment"
means the Assignment of Leases and Rents of even date herewith executed by Maker
in favor of Payee. The term "Environmental Agreement" means the Environmental
Liabilities Agreement of even date herewith executed by Maker in favor of Payee.
The term "Loan Documents" refers collectively to this Note, the Mortgage, the
Assignment, the Environmental Agreement and any and all other documents executed
in connection with this Note or now or hereafter executed by Maker and/or others
and by or in favor of Payee, which wholly or partially secure or guarantee
payment of this Note or pertains to indebtedness evidenced by this Note.
If any installment payable under this Note (including the final
installment due on the Maturity Date) is not received by Payee within ten (10)
days after the date on which it is due (without regard to any applicable cure
and/or notice period), Maker shall pay to Payee upon demand an amount equal to
the lesser of (a) five percent (5 %) of such unpaid sum or (b) the maximum
amount permitted by applicable law to defray the expenses incurred by Payee in
handling and processing such delinquent payment and to compensate Payee for the
loss of the use of such delinquent payment, and such amount shall be secured by
the Loan Documents. The term "Debt" means, collectively, (i) the unpaid
principal balance of and the accrued but unpaid interest on this Note, (ii) all
other sums due, payable or reimbursable to Payee under the Loan Documents
(including, without limitation, sums due or payable by Maker for deposit into
the Tax and Insurance Escrow Fund [as defined in the Mortgage], the Replacement
Escrow Fund [as defined in the Mortgage], and any other escrows established or
required under the Loan Documents), and (iii) any and all other liabilities and
obligations of Maker under this Note or the other Loan Documents.
So long as an Event of Default exists, Payee may, at its option,
without notice or demand to Maker, declare the Debt immediately due and payable.
All remedies hereunder, under the Loan Documents and at law or in equity shall
be cumulative. In the event that it should become necessary to employ counsel to
collect the Debt or to protector foreclose the security for the Debt or to
defend against any claims asserted by Maker arising from or relate to the Loan
Documents, Maker also agrees to pay to Payee on demand all costs of collection
or defense incurred by Payee, including reasonable attorneys' fees for the
services of counsel whether or not suit be brought.
Upon the occurrence of an Event of Default Maker shall pay interest on
the entire unpaid principal sum and any other amounts due under the Loan
Documents at the rate equal to the lesser of (a) the maximum rate permitted by
applicable law, or (b) the greater of (i) five percent (5%) above the Applicable
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Interest Rate or (ii) five percent (5%) above the Prime Rate (hereinafter
defined), in effect at the time of the occurrence of the Event of Default (the
"Default Rate"). The term "Prime Rate" means the prime rate reported in the
Money Rates section of The Wall Street Journal. In the event that The Wall
Street Journal should cease or temporarily interrupt publication, the term
"Prime Rate" shall mean the daily average prime rate published in another
business newspaper, or business section of a newspaper, of national standing and
general circulation chosen by Payee. In the event that a prime rate is no longer
generally published or is limited, regulated or administered by a governmental
or quasi-governmental body, then Payee shall select a comparable interest rate
index which is readily available and verifiable to Maker but is beyond Payee's
control. The Default Rate shall be computed from the occurrence of the Event of
Default until the actual receipt and collection of a sum of money determined by
Payee to be sufficient to cure the Event of Default. Amounts of interest accrued
at the Default Rate shall constitute a portion of the Debt, and shall be deemed
secured by the Loan Documents. This clause, however, shall not be construed as
an agreement or privilege to extend the date of the payment of the Debt, nor as
a waiver of any other right or remedy accruing to Payee by reason of the
occurrence of any Event of Default.
The principal balance of this Note may not be prepaid in whole or in
part (except with respect to the application of casualty or condemnation
proceeds) prior to the seventh Loan Year (as hereinafter defined). During the
seventh Loan Year or at anytime thereafter, provided no Event of Default exists,
the principal balance of this Note may be prepaid, in whole but not in part
(except with respect to the application of casualty or condemnation proceeds),
on any scheduled payment date under this Note upon not less than thirty (30)
days prior written notice to Payee specifying the scheduled payment date on
which prepayment is to be made (the "Prepayment Date") and upon payment of (a)
interest accrued and unpaid on the principal balance of this Note to and
including the Prepayment Date, (b) all other sums then due under this Note, and
the other Loan Documents, and (c) a prepayment consideration in an amount equal
to the greater of (i) one percent (1%) of the outstanding principal balance of
this Note at the time of prepayment, or (ii) the present value as of the
Prepayment Date of the remaining scheduled payments of principal and interest
from the Prepayment Date through the Maturity Date (including any amount of
principal and interest that would have been payable had the Note been paid in
full on the Maturity Date) determined by discounting such payments at the
Discount Rate (as hereinafter defined) less the amount of principal being
prepaid. The term "Discount Rate" means the rate which, when compounded monthly,
is equivalent to the Treasury Rate (as hereinafter defined), when compounded
semi-annually. The term "Treasury Rate" means the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading "U.S. Government
Securities/Treasury Constant Maturities" for the week ending prior to the
Prepayment Date, of U.S. Treasury constant maturities with maturity dates (one
longer and one shorter) most nearly approximating the Maturity Date. (In the
event Release H.15 is no longer published, Payee shall select a comparable
publication to determine the Treasury Rate.) Payee shall notify Maker of the
amount and the basis of determination of the required prepayment consideration.
Notwithstanding the foregoing, Maker shall have the additional privilege to
prepay the entire principal balance of this Note (together with any other sums
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constituting the Debt) on any scheduled payment date during the six (6) months
preceding the Maturity Date (the "Open Prepayment Period") without any fee or
consideration for such privilege. If any such notice of prepayment is given, the
principal balance of this Note and the other sums required under this paragraph
shall be due and payable on the Prepayment Date. Payee shall not be obligated to
accept any prepayment of the principal balance of this Note unless it is
accompanied by the prepayment consideration due in connection therewith. The
term "Loan Year" for purposes of this paragraph means each complete 365-day
period (366 days in a leap year) after the first scheduled payment date set
forth in section 2 on page 1 of this Note.
If following the occurrence of any Event of Default, Maker shall tender
payment of an amount sufficient to satisfy the Debt at any time prior to a sale
of the Mortgaged Property, either through foreclosure or the exercise of the
other remedies available to Payee under the Mortgage, such tender by Maker shall
be deemed to be a voluntary prepayment under this Note in the amount tendered.
If at the time of such tender, prepayment of the principal balance of this Note
is not permitted, Maker shall, in addition to the entire Debt, also pay to Payee
a sum equal to interest which would have accrued on the principal balance of
this Note at the Applicable Interest Rate in effect on the date which is five
(5) days prior to the date of prepayment, from the date of such tender to the
first day of the period during which prepayment of the principal balance of this
Note would have been permitted, together with a prepayment consideration equal
to the prepayment consideration which would have been payable as of the first
day of the period during which prepayment would have been permitted. If at the
time of such tender, prepayment of the principal balance of this Note is
permitted, Maker shall, in addition to the entire Debt, also pay to Payee the
applicable prepayment consideration specified in this Note. If the prepayment
results from the application to the Debt of the casualty or condemnation
proceeds from the Mortgaged Property or is made during the Open Prepayment
Period, no prepayment consideration will be imposed. Partial prepayments of
principal resulting from the application of casualty or insurance proceeds to
the Debt shall not change the amounts of subsequent monthly installments nor
change the dates on which such installments are due, unless Payee shall
otherwise agree in writing.
It is expressly stipulated and agreed to be the intent of Maker and
Payee at all times to comply with applicable state law or applicable United
States federal law (to the extent that it permits Payee to contract for, charge,
take, reserve or receive a greater amount of interest than under state law) and
that this section shall control every other covenant and agreement in this Note
and the other Loan Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under this
Note or under any of the other Loan Documents, or contracted for, charged,
taken, reserved or received with respect to the indebtedness evidenced by this
Note and the other Loan Documents, or if Payee's exercise of the option to
accelerate the maturity of this Note, or if any prepayment by Maker results in
Maker having paid any interest in excess of that permitted by applicable law,
then it is Maker's and Payee's express intent that all excess amounts
theretofore collected by Payee be credited on the principal balance of this Note
(or, if this Note has been or would thereby be paid in full, refunded to Maker),
and the provisions of this Note and the other Loan Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
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comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder. All sums paid or agreed to
be paid to Payee for the use, forbearance and detention of the indebtedness
evidenced hereby and by the other Loan Documents shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the maximum rate
permitted under applicable law from time to time in effect and applicable to the
indebtedness evidenced hereby for so long as such indebtedness remains
outstanding. Notwithstanding anything to the contrary contained herein or in any
of the other Loan Documents, it is not the intention of Payee to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.
Except as specifically provided in the Loan Documents, Maker and any
endorsers, sureties or guarantors hereof jointly and severally waive presentment
and demand for payment, notice of intent to accelerate maturity, notice of
acceleration of maturity, protest and notice of protest and non-payment, all
applicable exemption rights, valuation and appraisement, notice of demand, and
all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note and the bringing of suit and
diligence in taking any action to collect any sums owing hereunder or in
proceeding against any of the rights and collateral securing payment hereof.
Maker and any surety, endorser or guarantor hereof agree (i) that the time for
any payments hereunder may be extended from time to time without notice and
consent, (ii) to the acceptance of further collateral, (iii) the release of any
existing collateral for the payment of this Note, (iv) to any and all renewals,
waivers or modifications that may be granted by Payee with respect to the
payment or other provisions of this Note, and/or (v) that additional makers,
endorsers, guarantors or sureties may become parties hereto all without notice
to them and without in any manner affecting their liability under or with
respect to this Note. No extension of time for the payment of this Note or any
installment hereof shall affect the liability of Maker under this Note or any
endorser or guarantor hereof even though the Maker or such endorser or guarantor
is not a party to such agreement.
Failure of Payee to exercise any of the options granted herein to Payee
upon the happening of one or more of the events giving rise to such options
shall not constitute a waiver of the right to exercise the same or any other
option at any subsequent time in respect to the same or any other event. The
acceptance by Payee of any payment hereunder that is less than payment in full
of all amounts due and payable at the time of such payment shall not constitute
a waiver of the right to exercise any of the options granted herein to Payee at
that time or at any subsequent time or nullify any prior exercise of any such
option without the express written acknowledgment of the Payee.
Notwithstanding anything in the Loan Documents to the contrary, but
subject to the qualifications below, Payee and Maker agree that:
5
<PAGE>
(A) Maker shall be liable upon the Debt and for the other obligations
arising under the Loan Documents to the full extent (but only to
the extent) of the security therefor, the same being all
properties (whether real or personal), rights, estates and
interests now or at any time hereafter securing the payment of
the Debt and/or the other obligations of Maker under the Loan
Documents (collectively with the Mortgaged Property, the
"Security Property"), provided, however, in the event (i) of
fraud or material misrepresentation by Maker or guarantors in
connection with the loan evidenced by this Note, or (ii) the
first full monthly payment on the Note is not paid when due, the
limitation on recourse set forth in this section (A) will be null
and void and completely inapplicable, and this Note shall be with
full recourse to Maker;
(B) if a default occurs in the timely and proper payment of all or
any part of the Debt, any judicial proceedings brought by Payee
against Maker shall be limited to the preservation, enforcement
and foreclosure, or any thereof, of the liens, security titles,
estates, assignments, rights and security interests now or at any
time hereafter securing the payment of the Debt and/or the other
obligations of Maker under the Loan Documents, and no attachment,
execution or other writ of process shall be sought, issued or
levied upon any assets, properties or funds of Maker other than
the Security Property, except with respect to the liability
described in section (A) above and in section (C) below; and
(C) in the event of a foreclosure of such liens, security titles,
estates, assignments, rights or security interests securing the
payment of the Debt, no judgment for any deficiency upon the Debt
shall be sought or obtained by Payee against Maker, except with
respect to the liability described in section (A) above and below
in this section (C); provided that, notwithstanding the foregoing
provisions of this section, nothing contained therein shall in
any manner or way release, affect or impair the right of Payee to
recover, and Maker shall be fully and personally liable and
subject to legal action for any loss, cost, expense, damage,
claim or other obligation (including without limitation
reasonable attorneys' fees and court costs) incurred or suffered
by Payee arising out of or in connection with the following:
1. any breach of the Environmental Agreement, including the
indemnification provisions contained therein;
2. Maker's failure to obtain Payee's prior written consent to
(a) any subordinate financing or any other encumbrance on
the Mortgaged Property, or (b) any transfer of the Mortgaged
Property or majority ownership in Maker in violation of the
Mortgage;
3. any litigation or other legal proceeding related to the Debt
that delays or impairs Payee's ability to preserve, enforce
or foreclose its lien on the Security Property, including,
but not limited to, the filing of a voluntary or involuntary
petition concerning Maker under 11 U.S.C. ss. 101 et seq.
(the "Bankruptcy Code"), in which action a claim, counter-
claim, or defense is asserted against Payee, other than any
6
<PAGE>
litigation or other legal proceeding in which a final,
non-appealable judgment for money damages or injunctive
relief is entered against Payee;
4. Maker's failure to pay required taxes, assessments, and
insurance premiums payable with respect to the Mortgaged
Property or to maintain the required escrows therefor, to
the extent that monies are not paid by Maker in escrow for
the payment of such amounts, except for any amounts
applicable to the period after foreclosure of Payee's lien
on the Mortgaged Property, or the delivery by Maker of a
deed to the Mortgaged Property in lieu of foreclosure (which
deed has been accepted by Payee in writing), or the
appointment of a receiver for the Mortgaged Property;
5. the gross negligence or willful misconduct of Maker, its
agents, affiliates, officers or employees which causes or
results in a diminution, or loss of value, of the Security
Property that is not reimbursed by insurance or which gross
negligence or willful misconduct exposes Payee to claims,
liability or costs of defense in any litigation or other
legal proceeding;
6. the seizure or forfeiture of the Security Property, or any
portion thereof, or Payee's interest therein, resulting from
criminal wrongdoing by any person or entity other than Payee
under any federal, state or local law;
7. (a) any physical waste of the Mortgaged Property caused by
the intentional or grossly negligent act(s) or omissions) of
Maker, its agents, affiliates, officers and employees, (b)
the failure by Maker to maintain, repair or restore any part
of the Mortgaged Property as may be required by the Mortgage
or any of the other Loan Documents to the extent of all
gross revenues that have been generated by the Mortgaged
Property following the date which is eighteen (I 8) months
prior to notice to Maker from Payee of such failure to
maintain, repair or restore any part of the Mortgaged
Property and that have not been applied to pay any portion
of the Debt, reasonable and customary operating expenses and
capital expenditures for the Mortgaged Property paid to
third parties not affiliated (directly or indirectly) with
Maker, taxes and insurance premiums for the Mortgaged
Property and escrows deposited with Payee, or (c) the
removal or disposal of any portion of the Mortgaged Property
after an Event of Default under the Loan Documents to the
extent such Mortgaged Property is not replaced by Maker with
like property of equivalent value, function and design;
8. Maker's misapplication or conversion of any insurance
proceeds paid by reason of any loss, damage or destruction
to the Mortgaged Property and any awards or amounts received
in connection with the condemnation of all or a portion of
the Mortgaged Property and not used by Maker for restoration
or repair of the Mortgaged Property;
7
<PAGE>
9. Maker's failure to pay in accordance with the terms of the
Mortgage any charges for lab6r or materials or other charges
for work performed or materials furnished prior to
foreclosure that can create liens on any portion of the
Mortgaged Property, to the extent of the amount rightfully
claimed by the lien claimant, or found in any legal
proceeding to be owed to the lien claimant, and not so paid;
10. Maker's failure to deliver any security deposits collected
with respect to the Mortgaged Property to Payee or any other
party entitled to receive such security deposits under the
Loan Documents, following an Event of Default; and
11. any rents (including advanced or prepaid rents), issues,
profits, accounts or other amounts generated by or related
to the Mortgaged Property attributable to, or accruing after
an Event of Default, which amounts were collected by Maker
or its property manager and not turned over to the Payee or
used to pay unaffiliated third parties for reasonable and
customary operating expenses and capital expenditures for
the Mortgaged Property, taxes and insurance premiums with
respect to the Mortgaged Property and any other amounts
required to be paid under the Loan Documents with respect to
the Mortgaged Property.
References to particular sections of the Loan Documents shall be deemed
references to such sections as affected by other provisions of the Loan
Documents relating thereto. Nothing contained in the foregoing sections (A), (B)
or (C) shall (1) be deemed to be a release or impairment of the Debt or the lien
of the Loan Documents upon the Security Property, or (2) preclude Payee from
foreclosing under the Loan Documents in case of any default or from enforcing
any of the other rights of Payee, including naming Maker as a party defendant in
any action or suit for foreclosure and sale under the Mortgage, or obtaining the
appointment of a receiver, except as stated in this section, or (3) limit or
impair in any way whatsoever the Guaranty (the "Guaranty") of even date executed
and delivered in connection with the indebtedness evidenced by this Note or
release, relieve, reduce, waive or impair in any way whatsoever, any obligation
of any party to the Guaranty.
Nothing herein shall be deemed to be a waiver of any right which Payee
may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the
Bankruptcy Code to file a claim for the full amount of the Debt secured by the
Loan Documents or to require that all collateral shall continue to secure all of
the Debt owing to Payee in accordance with this Ncte and the other Loan
Documents.
Maker (and the undersigned representative of Maker, if any) represents
that Maker has full power, authority and legal right to execute, deliver and
perform its obligations pursuant to this Note and the other Loan Documents and
that this Note and the other Loan Documents constitute legal, valid and binding
obligations of Maker. Maker further represents that the loan evidenced by the
Loan Documents was made for business or commercial purposes and not for
personal, family or household use.
8
<PAGE>
All notices or other communications required or permitted to be given
pursuant hereto shall be given in the manner and be effective as specified in
the Mortgage, directed to the parties at their respective addresses as provided
therein.
Payee shall have the unrestricted right at any time or from time to
time to sell this Note and the loan evidenced by this Note and the Loan
Documents or participation interests therein. Maker shall execute, acknowledge
and deliver any and all instruments requested by Payee to satisfy such
purchasers or participants that the unpaid indebtedness evidenced by this Note
is outstanding upon the terms and provisions set out in this Note and the other
Loan Documents. To the extent, if any specified in such assignment or
participation, such assignee(s) or participant(s) shall have the rights and
benefits with respect to this Note and the other Loan Documents as such
assignee(s) or participant(s) would have if they were the Payee hereunder.
MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE
OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO TEaS NOTE OR THE
OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH INCLUDING, BUT NOT LIMITED TO THOSE RELATING TO (A)
ALLEGATIONS THAT A PARTNERSHIP EXISTS BETWEEN PAYEE AND MAKER; (B) USURY OR
PENALTIES OR DAMAGES THEREFOR; (C) ALLEGATIONS OF UNCONSCIONABLE ACTS, DECEPTIVE
TRADE PRACTICE, LACK OF GOOD FAITH OR FAIR DEALING, LACK OF COMMERCIAL
REASONABLENESS, OR SPECIAL RELATIONSHIPS (SUCH AS FIDUCIARY, TRUST OR
CONFIDENTIAL RELATIONSHIP); (D) ALLEGATIONS OF DOMINION, CONTROL, ALTER EGO,
INSTRUMENTALITY, FRAUD, REAL ESTATE FRAUD, MISREPRESENTATION, DURESS, COERCION,
UNDUE INFLUENCE, INTERFERENCE OR NEGLIGENCE; (E) ALLEGATIONS OF TORTIOUS
INTERFERENCE WITH PRESENT OR PROSPECTIVE BUSINESS RELATIONSHIPS OR OF ANTITRUST;
OR SLANDER, LIBEL OR DAMAGE TO REPUTATION, THIS WAIVER OF RIGHT TO TRIAL BY JURY
IS GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WE[[CH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE, PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE IN WHICH THE REAL PROPERTY ENCUMBERED BY THE MORTGAGE IS
LOCATED (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA, MAKER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION LOCATED IN THE STATE IN
CORPAUS:48279.1 31942-00001
9
<PAGE>
WHICH THE MORTGAGED PROPERTY IS LOCATED IN CONNECTION WITH ANY PROCEEDING OUT OF
OR RELATING TO THIS NOTE.
THE PROVISIONS OF THIS NOTE AND THE LOAN DOCUMENTS MAY BE AMENDED OR
REVISED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE MAKER AND PAYEE. THIS
NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT OF
MAKER AND PAYEE AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF MAKER AND PAYEE, THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.
Executed as of the day and year first above written.
MAKER:
LA PORTE PROPERTIES, L.L.C.,
a Texas limited liability company
By: /s/Michael A. Oros
-----------------------------------
Michael A. Oros
Title: Managing Member
10
Exhibit 10.3
CONSULTING AGREEMENT
THIS AGREEMENT is dated the first day of January, 1997
BETWEEN:
Alford Refrigerated Warehouses, Inc.
318 Cadiz Street
Dallas, Texas 75207
(herein called the "Client")
- and -
Alton M. Adams, P. Eng.
3273 Grassfire Cresc.
Mississauga, Ontario, L4Y 3J8
(herein called the "Consultant")
WHEREAS, the Client desires to engage the Consultant to provide services to the
Client for the term of this Agreement and the Consultant has agreed to provide
such services, all in consideration and upon the terms and conditions contained
herein;
NOW, THEREFORE, it is hereby agreed as follows:
1. Services
--------
The Client agrees to engage the Consultant to provide the services
described in Schedule "A" attached hereto and the consultant has agreed
to perform and provide such services (collectively call the
"Services").
2. Term
----
Except as otherwise provided in this Agreement, the Client agrees to
engage the Consultant to provide the Services for a term commencing
January 1, 1997 and ending December 31, 1997. Should the Consultant
provide services beyond the end of the initial term of the Agreement
(or the end of any automatic renewals thereof), the term of this
Agreement shall be automatically renewed for an additional term of 1
year.
1
<PAGE>
3. Fee
---
(a) The Client agrees to pay the Consultant a fee for the services
provided by the Consultant under the Agreement in the amount
of $8,000.00 U.S. per month payable semi-monthly on the
fifteenth and thirty-first days of each month.
(b) The Consultant agrees to render semi-monthly invoices to the
Client, in a form reasonably acceptable to the Client,
detailing the Services performed by the Consultant.
4. Expenses
--------
The Client shall pay for or reimburse the Consultant for all
reasonable, ordinary and necessary expenses incurred by the Consultant
in the ordinary course of performing the Services upon presentation of
proper accounts, statements, invoices or receipts for such items.
5. Time and Effort
---------------
The Consultant shall be free to devote such portion of the Consultant's
time, energy, effort and skill as the Consultant sees fit, and to
perform the Consultant's duties when and where the Consultant sees fit,
so long as the Consultant performs the Services set out in this
Agreement in a timely and professional fashion.
6. Compliance
----------
(a) The Consultant shall comply with all applicable federal, state
and municipal laws, rules and regulations arising out of or
connected with the performance of the Services under this
Agreement by the Consultant or its employees.
(b) The Consultant shall be responsible for all Unemployment
Insurance Contributions, Canada Pension Plan contributions,
Income Tax and Workers' Compensation payments relating to or
arising out of the fees paid to the Consultant under this
Agreement and the Services performed by the Consultant or its
employees. Payments relating to any of the above shall be the
responsibility of the Consultant and shall be forwarded by the
Consultant as appropriate, directly to the government agencies
involved. Proof of compliance with this requirement shall be
available to the Client upon request.
2
<PAGE>
7. Other Services
--------------
The Consultant will be free to perform consulting and other services to
the Consultant's other clients during the term of this Agreement,
provided, however, that the Consultant shall ensure that the Consultant
is able to perform the Services pursuant to this Agreement in a timely
and professional fashion. The Consultant agrees not to perform services
for the Consultant's other clients which may create a conflict of
interest or interfere with the Consultant's duties pursuant to this
Agreement.
8. Termination
-----------
Upon termination of this Agreement:
(i) the Client's obligations to the Consultant under this
Agreement shall terminate except for the Client's obligation
to pay any fees and expenses in accordance with the terms of
this Agreement, to the date of termination; and
(ii) the Consultant's obligations to the Client under this
Agreement shall terminate except those obligations which are
specifically expressed to survive the termination of this
Agreement.
9. Governing Law
-------------
This Agreement shall be governed by the laws of the Province of Ontario
and the federal laws of Canada applicable therein.
10. Severability
------------
If any provision of this Agreement, or the application of such
provision to any person or in any circumstance, shall be determined to
be invalid, illegal or unenforceable, the remaining provisions of this
Agreement, and the application of such provision to any person or in
any circumstance other than that to which it is held to be invalid,
illegal or unenforceable, shall not be affected thereby.
11. Amendments
----------
Any amendments to this Agreement must be in writing and signed by both
parties hereto.
12. Time of Essence
---------------
Time shall be of the essence in this Agreement.
3
<PAGE>
13. Indemnification
---------------
This is the entire Agreement between the Client and the Consultant with
respect to the consulting services to be provided by the Consultant to
the Client and supersedes any prior agreements with respect to such
services whether written or oral.
14. Notices
-------
Notices hereunder shall be in writing and must be either delivered or
sent by double registered mail to the address(es) set forth above. A
party may change the address set forth above by proper notice to the
other.
15. Waiver
------
The failure of any party to insist upon the strict performance of a
covenant or obligation hereunder, irrespective of the length of time
for which such failure continues, shall not be a waiver of such party's
right to demand strict performance in the future. No consent or waiver,
express or implied, to or of any breach or default in the performance
of any covenant or obligation hereunder shall constitute a consent or
waiver to or of any other breach or default in the performance of the
same or of any other obligation hereunder.
16. Assignment
----------
This Agreement is personal in nature and may not be assigned by either
party hereto.
17. Inurement
---------
This Agreement shall be binding upon and shall inure to the benefit of
each of the parties hereto and their respective employees and permitted
receivers, successors and assigns.
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
ALFORD REFRIGERATED WAREHOUSES, INC.
Per: /s/Michael A. Oros
------------------
A. M. ADAMS, P. ENG.
- -----------------------
4
<PAGE>
SCHEDULE "A"
Description of Services
To provide managerial services required as Chief Operating Officer.
Exhibit 10.4
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
ALFORD REFRIGERATED WAREHOUSES, INC.
AS "BUYER"
AND
FORT WORTH COLD STORAGE HOLDINGS, INC.
AS "SELLER"
<PAGE>
TABLE OF CONTENTS
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
ALFORD REFRIGERATED WAREHOUSES, INC., AS "BUYER"
AND
FORT WORTH COLD STORAGE HOLDINGS, INC., AS "SELLER"
<TABLE>
<CAPTION>
<S> <C> <C>
1. Property.................................................................................................1
2. Purchase Price...........................................................................................2
3. Physical Inspection of Property..........................................................................2
4. Ernest Money.............................................................................................4
5. Survey; Title Binder.....................................................................................6
6. Covenants of Seller......................................................................................7
7. Seller's Representations and Warranties..................................................................7
8. Conditions to Buyer's Obligations........................................................................9
9. Closing.................................................................................................10
10. Remedies................................................................................................12
11. Advisor.................................................................................................12
12. Notice..................................................................................................13
13. Miscellaneous...........................................................................................14
</TABLE>
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (hereinafter sometimes called the "Agreement") by and
between FORT WORTH COLD STORAGE HOLDINGS, INC., an Ontario corporation
(hereinafter called "Seller"), and ALFORD REFRIGERATED WAREHOUSES, INC., a Texas
Corporation, (hereinafter called "Buyer") is entered into as of the Effective
Date (as herein defined in paragraph 13(1).
WITNESSETH:
1. Property
Subject to the terms and provision of this Agreement, Seller hereby
agrees to sell and convey to Buyer and Buyer agrees to purchase from Seller the
following:
(a) That certain tract or parcel of land described in Exhibit "A"
attached hereto and incorporated by reference herein for all
purposes (hereinafter called the "Land") located at 300 Garden
Acres, Fort Worth, Tarrant County, Texas;
(b) All buildings, structures and improvements situated on the Land
and all immoveable fixtures (hereinafter called the
"Improvements");
(c) All the rights and appurtenances pertaining to the Land and
Improvements, including any mineral rights, all rights in and to
wastewater capacity and other utility capacity allocated to the
Land or Improvements, rights under any reciprocal easement
agreements or other recorded or unrecorded instrument benefitting
the Property (as hereinafter defined), any right, title, or
interest of Seller in and to easements, adjacent or contiguous
tracts, strips, gores, streets, alleys, or rights-of-way, any
reversionary rights attributable to the Land, any condemnation
awards made or to be made in lieu thereof, and any awards for
damage to the Land by reason of a change of grade of any highway,
street, road, or avenue (hereinafter called the "Appurtenances");
and
(d) To the extent that any may be in the Seller's possession, all of
the following to the extent they relate to or arise out of the
design, construction, ownership, use leasing, maintenance,
service, or operation of the Land, Improvements and
Appurtenances: (i) contracts or agreements such as maintenance,
service, or utility contracts (hereinafter called the "Operating
Agreements"), to the extend that Buyer elects to take assignment
thereof, (ii) warranties, guaranties and indemnities, (iii)
development rights, governmental approvals, licenses, permits, or
similar documents, (iv) telephone exchanges, trade names, marks,
1
<PAGE>
all goodwill attributable to or associated with such trade names
and marks, and other identifying material used by Seller in the
operation of the Property, (v) plans, drawings, specifications,
surveys, engineering, reports, environmental reports and audits,
government or regulatory compliance reports, such as, American
with Disabilities Act compliance reports, equipment manuals, and
other technical manuals and description, and (vi) insurance
contracts or policies, to the extent that Buyer elects to take
assignment thereof, (collectively, all such property described in
this subparagraph (d) being called the "Intangible Property").
The Land, the Improvements, the Appurtenances and the Intangible
Property are hereinafter collectively called the "Property."
2. Purchase Price
The purchase price for the Property shall be the sum of THREE MILLION
and NO/100 DOLLARS ($3,000,000.00) (the "Purchase Price"), payable as follows:
(i) Two Million Six Hundred Thousand and no/100 Dollars ($2,600,000.00) in cash,
cashier's checks, federal wire transfer funds, or other immediately available
funds at the closing (as hereinafter defined), subject to any increases,
adjustments and credits provided in this Agreement and (ii) Four Hundred
Thousand and no/100 ($400,000.00) in the form of a real estate mortgage note in
the form attached hereto as Exhibit "B", secured by a first lien deed of trust
in the form attached hereto as Exhibit "C" along with any and all ancillary
documents reasonably required by the Seller.
3. Physical Inspection of Property
For a period of thirty (30) days following the date of the execution of
this Agreement (the "Inspection Period"), Buyer shall have the right (for
itself, its engineers, and other representatives) to enter onto the Property for
the following limited purposes: (i) survey, and (ii) appraisal of the Property,
Seller will cause its advisors and agent to cooperate with Buyer, its employees,
agents, and representatives in connection with such survey and appraisal and to
respond to such reasonable questions as Buyer (or its employees, agents,
engineers and representatives) may ask in connection therewith.
Buyer shall indemnify Seller and hold Seller harmless from and against
all loss, liability, damage, injury, and claims resulting from Buyer's survey
and appraisal or other activities of or on the Property.
4. Earnest Money
(a) Within two (2) business days after a counterpart or counterparts of
this Agreement executed by Seller and Buyer are delivered to Safeco Title
Company, Dallas, Texas (the "Title Company"), Buyer will deposit with the Title
2
<PAGE>
Company an assignment in form and substance satisfactory to Seller's counsel, of
all distributions from the Trustee of Landmark Logistical Services, Debtor, up
to but not exceeding the sum of FIFTY THOUSAND and N0/100 DOLLARS ($50,000.00)
(the "Earnest Money"), which assignment and the proceeds thereof, shall be held
in escrow by the Title Company and shall only be disbursed in accordance with
the terms of the Agreement. The Title Company shall deposit all cash portions of
the Earnest Money in one or more interest bearing accounts with a bank or other
financial institution acceptable to Buyer. The Earnest Money plus all interest
to accrue thereon shall be fully insured throughout the term of this Agreement
by the Federal Deposit Insurance Corporation. Interest earned on the Earnest
Money shall accrue for the benefit of the Seller and shall be deemed a portion
of the Earnest Money; provided, however, upon the closing of this transaction,
the Earnest Money, plus any accrued interest thereon, shall be delivered to the
Seller and shall be credited against the Purchase Price. In the event this
transaction does not close, the Title Company shall disburse the Earnest Money
as provided in this Agreement.
(b) If the transaction contemplated by this Agreement (the
"Transaction") is not timely closed because of any material default of Seller,
then the Earnest Money, together with all interest accrued thereon, shall be
returned to Buyer. Otherwise, on the Closing Date (whether or not the
transaction is closed), the Title Company shall deliver the Earnest Money,
together with all interest accrued thereon, to Seller, and the Buyer and the
Seller shall continue to have all of those obligations and other liabilities
specified in this Agreement (including all obligations hereunder that expressly
survive the termination of this Agreement).
5. Survey; Title Binder
(a) Seller, at Buyer's expense, shall deliver to Buyer within thirty
(30) days after the Effective Date a Category IA, Condition II survey,
(hereinafter called the "Survey") of the Property to be made by an engineer or
surveyor acceptable to Buyer and the Title Company prepared in accordance with
the current edition of the Manual of Practice of Land Surveying in Texas adopted
by the Texas Surveyors Association and sufficient to enable the Title Company to
endorse the standard printed survey exception in the Owner's Title Policy to
read "shortages in area". If Buyer timely closes the transaction described
herein, then, at Closing, Seller shall reimburse Buyer one-half (1/2) of the
cost of the Survey. Without limiting the foregoing, the Survey shall show the
following: adjacent roads; building lines; a metes and bounds description
showing the beginning points, its distance and bearing from a readily
ascertainable point (such as a street intersection), and the course, bearing,
and measured distances of all boundary lines; monuments or stakes found and set;
any building setback lines; location, dimensions, area, number of stories, and
street address of all buildings and the distance from each side of each building
to the property line; location, size, and total number of parking spaces
(including and designating handicap spaces); physical evidence of any building,
fence, or hedge near any property line; physical evidence and location of each
actual public and private easement and utility line and/or poles, and of each
pipeline, manhole, and drain outlet; the location of entry and exit of all
utilities to and from the Land and Improvements; any encroachment or overlapping
3
<PAGE>
of improvements; and the location and recording references of all easements,
encumbrances or restrictions affecting the Property which are established by and
any properly recorded instrument. If any easements are not susceptible of
location, the survey shall so indicate. Such Survey shall be dated, shall
contain a certificate in form reasonably satisfactory to the Title Company, and
shall be signed and scaled by the surveyor or engineer.
(b) Seller, at Buyer's expense, shall furnish to Buyer within twenty
(20) days after the Effective Date a title commitment (hereinafter called the
"Title Binder") issued by the Title Company, showing title to the Property and
committing to issue the Owner's Title Policy to Buyer pursuant to Paragraph 9 of
this Agreement, such title Binder to specify all exceptions to title, including,
without limitation, easements, liens, encumbrances, restrictions, conditions, or
covenants affecting the Property. If Buyer shall timely close the transaction
described herein, then at Closing, Seller shall reimburse Buyer one-half (1/2)
of the cost of the Owner's Title Policy. If any exceptions appear on the Title
binder, other than the standard printed exceptions (which shall be modified as
provided in Paragraph 9(iii) of this Agreement) or if any encroachments,
overlapping of improvements, or other conditions are shown on the Survey that
are not acceptable to Buyer, Buyer shall, within five (5) days after receipt of
the title Binder and the Survey notify Seller in writing of such fact. Seller
agrees to use Seller's best efforts to cure all objections provided, however,
that Seller shall not be obligated to institute litigation nor pay more than Ten
Thousand and No/100 Dollars ($10,000.00) to cure such objections (other than
liens or other defects in Seller's title voluntarily created by Seller,
including those created from and after the Effective Date), nor any liens now or
hereafter encumbering the Property, nor any interest therein, which defects
voluntarily created by Seller and all such liens shall be released at Closing
or, at Buyer's option, the amount thereof may be subtracted from the Purchase
Price. If Seller is unable or unwilling to cure such objections on or before
five (5) days after receipt of such notice, Buyer may either extend the time
during which Seller may cure such objections not to exceed fifteen (15)
additional days, or terminate this Agreement by written notice to Seller, or
accept such title as Seller can deliver, or exercise any other remedy provided
herein. In the event of such termination, the parties shall have no further
right or other obligation hereunder (other than with respect to obligations
hereunder that are expressly stated in this Agreement), and the Earnest Money
and accrued interest thereon shall be returned to Buyer. Those exceptions or
title deficiencies that appear on the Title Binder and any encroachments,
overlapping of improvements, or other conditions that are shown on the Survey
and are accepted by Buyer pursuant to the terms of this "Permitted Encumbrances"
shall not include any liens or any other title defects which Seller is obligated
to cure under the terms of this Agreement or agrees in writing to cure on or
before the Closing.
6. Covenants of Seller
Seller covenants and agrees with Buyer that, between the Effective Date
and the Closing Date:
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<PAGE>
(a) Seller will comply with all applicable laws as they relate to
Seller's ownership of the Property.
(b) Seller will not enter into any lease, use, or occupancy agreement
affecting any portion of the Property.
(c) Seller will not sell, exchange, assign, transfer, convey,
encumber, or otherwise dispose of the Property.
7. Seller's Representations and Warranties
Seller hereby represents and warrants to Buyer the following:
(a) Seller has not received any written notice that the location,
construction, occupancy, operation, and use of the Property
(including any improvements and equipment forming any part
thereof) violates any applicable law, statute, ordinance, rule,
regulation, order, or determination of any governmental authority
or any board of fire underwriters (or similar body), or any
restrictive covenant or deed restriction or zoning ordinance or
classification affecting the Property, including, without
limitation, all applicable building codes, flood disaster laws,
and health and environmental laws and regulations (hereinafter
sometimes collectively called "Applicable Laws");
(b) Seller has not received any written notice that the Property or
Seller are currently subject to any existing, pending, or, to the
best of Seller's knowledge, threatened, investigation or inquiry
by any governmental authority or to any remedial obligations
under any applicable Laws pertaining to health or the environment
("Environmental Laws");
(c) Seller has not received any written notice of any change
contemplated in any of the applicable Laws or of any judicial or
administrative action, any action by adjacent landowners, or any
fact or condition relating to the Property which would adversely
affect, prevent, or limit use of the Property as a warehouse;
(d) There is a tenant lease affecting the Property, the terms of
which are well known to the buyer which is the tenant under the
Tenant Lease.
(e) Seller has not received any written notice that the Land has been
contaminated by or used for the storage or disposal of any
hazardous substances, hazardous waste, or petroleum.
5
<PAGE>
(f) Seller has not received any written notice of any threatened,
litigation (including, without limitation, any condemnation or
notice or a condemnation) affecting or related to the Property;
(g) Seller is a duly formed and validly existing corporation
qualified to do business in the State of Texas. Seller is
authorized to enter into this Agreement, and the undersigned
signatory party for Seller has been duly authorized to execute
this Agreement;
(h) "There are no outstanding, written agreement with any other
person for the sale or other conveyance of the Property.
Buyer acknowledges and agrees that, except as specifically provided in
this Agreement, Seller has not made, does not make, and specifically negates and
disclaims any representations, warranties, promises, covenants, agreements, or
guarantees of any kind or character whatsoever, whether express or implied, oral
or written, past, present, or future, of, as to, concerning, or with respect to
(i) the income to be derived from the Property; (b) the suitability of the
Property for any and all activities and uses which Buyer may conduct thereon,
including, without limitation, the possibilities for future development of the
Property; (iii) the habitability, merchantability, marketability, profitability,
or fitness for a particular purpose of the Property; (iv) the manner, quality,
state of repair, or lack of repair of the property, (v) the nature, quality, or
condition of the Property including, without limitation, the water, soil and
geology; (vi) the compliance of or by the Property or its operation with any
laws, rules, ordinances, or regulations of any applicable governmental authority
or body; (vii) the manner or quality of the construction or materials, if any,
incorporated into the Property, (viii) compliance with any environmental
protection, pollution, or land use laws, rules, regulations, orders, or
requirements including, without limitation, Title III of the Americans with
Disabilities Act of 1990, the Federal Water Pollution control Act, the Federal
Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency
Regulations at 40 C.F.R., Part 261, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1996, the Clean Water Act, the Safe Drinking Water Act, the
Hazardous Materials Transportation Act, the Toxic Substance Control Act, and
regulations promulgated under any of the foregoing; (ix) the presence or absence
of hazardous materials at, on, under, or adjacent to the Property; (x) the
conformity of the Property to past, current, or future applicable zoning or
building requirements; (xi) deficiency of any drainage; (xii) the existence of
vested land use, zoning, or building" entitlements affecting, the Property;
(xiii) with respect to any other matter. Save and except only as expressed in
this Agreement, Seller is not and shall not be liable or bound in any manner by
any oral or written statements, representations, or information pertaining to
the Property, or the operation thereof, furnished by any real estate broker,
agent, employee, servant or other person, or (xiv) the current tenant lease, or
the enforceability, legal effectiveness, or other impact of the same on the
Property, legal, equitable, financial, or otherwise. Buyer further acknowledges
and agrees that, to the maximum extent permitted by law, the sale of the
Property as provided for herein is made on an "As Is" and "Where Is" condition
6
<PAGE>
and basis with all faults, and that Seller has no obligations to make repairs,
replacements, or improvements except as may otherwise be expressly stated
herein. Buyer acknowledges and agrees that, except for Seller's express
representations and warranties contained in this Agreement, Buyer is relying
solely upon Buyer's own investigation of and knowledge concerning the Property.
8. Conditions to Closing
It shall be a condition precedent to the Seller's and Buyer's
obligations to consummate the purchase of the Property hereunder that, on the
Closing Date (as hereinafter defined in paragraph 9), all the following
conditions shall exist:
(a) Seller Shall have substantially performed each covenant to
have been performed by Seller hereunder with the time
specified.
(b) There shall be no material change in the matters reflected in
the Title Binder.
(c) There shall be no material change in the matters reflected in
the Survey.
(d) No damage from fire or other casualty shall have materially
affected the improvements. No condemnation affecting the
Property shall have occurred, or be pending or threatened.
(e) There shall be no litigation pending which materially and
adversely affects the Property.
(f) On the Closing Date, the Seller shall not have filed a
petition under any section of the Bankruptcy Codes as amended,
or under any similar law or statute of the United States or
any State thereof, nor shall Seller have been adjudged
bankrupt or insolvent, nor shall any rearrangement of its
debts have been requested by Seller; the Seller shall not be
insolvent and no receiver or trustee shall have been appointed
for Seller or any of Seller's assets.
(g) There shall not have been any material breach of any of the
provisions of this Agreement.
(h) There shall be no parties in possession excerpt the Buyer as
tenant under the existing lease, or otherwise permitted or
suffered by Buyer.
If any one of the above conditions is not satisfied, Buyer and Seller
may waive such condition in writing and extend the Closing Date for a period of
time not to exceed thirty (30) days to allow an opportunity to satisfy such
condition, or the performing party may terminate this Agreement by written
7
<PAGE>
notice thereof to the non-performing party, in which last event the parties
shall a have no further rights or obligations hereunder (other than with respect
to obligations hereunder that expressly survive the termination of this
Agreement), and the Earnest Money plus all accrued interest thereon shall be
paid to the Seller, unless the cause of the failure to satisfy any such
condition is solely that of the Seller.
9. Closing
Provided that this Agreement has not been rightfully terminated
pursuant to its terms, the closing of the conveyance and purchase of the
Property (herein called the "Closing") shall, unless extended pursuant to the
terms of this Agreement, occur not more than ten (10) days after the Inspection
Period defined in Paragraph 3, at a time designated by Seller (the "Closing
Date"). Seller shall give at least two (2) business days prior notice to Buyer
of the Closing Date and the time scheduled for the Closing. The Closing shall
take place at the offices of the Title Company.
At the closing, the following shall occur;
(a) Seller shall deliver to Buyer the following:
(i) a General Warranty Deed conveying good and indefeasible
title to the Property to Buyer, free of any exceptions
other than the Permitted Encumbrances;
(ii) an Assignment of any then current tenant lease,
quitclaiming to Buyer, the right, title and interest of
the lessor or landlord under any such tenant lease if
any, excluding, however, all deposits existing as of
the Closing Date;
(iii)at Buyer's expense, (to be partially reimbursed as
specified in Paragraph 5(d) on Owner's Title Policy
showing Purchaser as the insured, fee simple title to
the Land as the insured estate, the Purchase Price as
the insurance coverage amount, and noting no exceptions
other than the Permitted Encumbrances and other
exceptions approved in writing by Buyer, and including
the following modifications to the standard typed or
printed exceptions in the title Binder: (1) the
restrictive covenants exception shall be deleted if the
Title Binder does not list any restrictive covenants as
exceptions to title; (2) the standard exception for
current taxes shall, except only as to taxes for the
year in which the Closing occurs, and shall indicate
that such taxes are not yet due and payable; (3) the
exception for any discrepancies, conflicts,
encroachments, or any overlapping of improvements shall
be deleted, except with respect to shortages in the
area; and (4) the exception for rights of parties in
possession shall be deleted, except for rights of
8
<PAGE>
tenants, as tenants only, under written lease, use, or
occupancy agreements; and
(iv) such affidavits, indemnities, and other documents as
the Title Company may require from Seller as a
condition to issuing the Owner's Title Policy in
accordance with Paragraph 9(a)(iv).
(b) Buyer shall pay the cash portion of the Purchase Price to
the Title Company by any one of the following methods, as
selected by Seller, any one of which shall be deemed to be
"cash": by cashier's check payable to the Title Company; by
wire transfer to thp Title Company's bank account; or by
Buyer's causing the Title Company to issue its check to
Seller.
(c) General real estate taxes for the then current Year relating
to the Property shall be prorated as of the Closing Date. If
the Closing shall occur before the tax rate is fixed for the
then current years, the apportionment of taxes shall be made
an the basis of the tax rate for the preceding year applied
to the latest assessed valuation of the Property; provided
that, if the taxes actually due for the current year are
more or less than the taxes for the preceding year, then
within thirty (30) days after the issuance of the then
current year's tax bill, Seller and Buyer shall adjust the
proration of such taxes; and Seller or Buyer, as the case
may be, shall pay to the other any amount required as a
result of such adjustment; this covenant shall not merge
with the deed delivered hereunder but shall survive the
Closing. All special taxes or assessments assessed prior to
the Closing Date shall be paid by Seller, and those assessed
after the Closing Date shall be paid by Buyer.
(d) Possession of the Property shall be delivered to Buyer,
subject only to the rights of tenants under tenant leases
(if any).
(e) Any escrow fee charged by the Title Company as well as (i)
the premium for the Owner's Title Policy and all
endorsements and (ii) the costs and fees of the Title
Company incurred in connection with the issuance of the
Title Binder and the Owner's Title Policy shall be paid by
Buyer, except to the extent that Seller has agreed to
reimburse Buyer pursuant to Paragraph 4(d), Seller shall pay
the fee for recording the warranty deed and any other
documents recorded in this transaction. Each party shall be
responsible for the payment of its own attorney's fees
incurred in connection with this transaction. Any other
costs payable at Closing shall be allocated to Buyer and
Seller as is customary in the county in which the Property
is located.
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<PAGE>
10. Remedies
(a) If Seller should fail or refuse to perform any of Seller's
obligations hereunder. Buyer may, at its option, exercise
any one of the following remedies: (i) terminate this
Agreement and obtain a refund of the Earnest Money, with
interest accrued thereon; or (ii) grant Seller additional
periods of time in which to satisfy Seller's obligations.
(b) If Buyer defaults and fails and refuses to close the
purchase of the Property as herein contemplated, Seller may,
at its option, exercise any one of the following remedies:
(i) terminate this Agreement and receive the Earnest Money,
with interest accrued thereon; (ii) enforce specific
performance and/or seek other legal and/or equitable relief,
including actual, consequential and/or punitive damages; or
(iii) grant Buyer additional periods of time in which to
satisfy Buyer's obligations.
11. Advisor
(a) Seller represents to Buyer that Seller has entered into an
agreement to pay an advisory fee in connection with this
transaction to EII Realty Corp. (hereinafter called
"Advisor"). Seller agrees to pay any fee or compensation
payable to Advisor. Seller will indemnify and save and hold
Buyer harmless from any claims of Advisor for any
commission, finder's fee, or other compensation in
connection with the transaction contemplated by this
Agreement.
(b) Each party hereto represents to the other that, except as
set forth above with respect to Advisor, such respective
party has not authorized any broker or finder to act on its
behalf in connection with the sale and purchase hereunder.
Each party hereto agrees to indemnify, defend, and hold
harmless the other party from and against any and all
claims, losses, damages, costs, or expenses (including, but
not limited to, reasonable attorney's fees) of any kind or
character arising out of or resulting from any agreement,
arrangements, or understanding (except as set forth above
with respect to Seller's Advisor.) alleged to have been made
by such party with any broker or finder in connection with
this Agreement or the transaction contemplated hereby. This
Paragraph 11 shall survive the Closing or any earlier
termination of this Agreement.
12. Notice
Any notice or communication required or permitted hereunder shall be
given in writing, sent by (a) personal delivery, (b) overnight courier or
delivery service with proof of deliver, (c) United States mail, postage prepaid,
registered or certified mail, or (d) prepaid telegram or telecopy (provided that
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<PAGE>
such telegram or telecopy is confirmed by mail in the manner previously
described), addressed as follows:
To Seller: Fort Worth Cold Storage Holdings, Inc.
Attention: Mr. Juerg Zuberbuehler
c/o Scott Prizer, Vice President
EII Realty Corp.
667 Madison Avenue, 16th Floor
New York, New York 10021
Telecopy: (212) 644-0028
With a copy to: Mr. L. E. Creel, III, Esq.
Creel, Sussman and Moore
5949 Sherry Lane
Suite 525
Dallas, Texas 75225
Telecopy: (214) 378-8290
To: Buyer: Alford's Refrigerated Warehouses, Inc.
James Williams, Vice President
Alford Refrigerated Warehouses, Inc.
318 Cadiz Street
Dallas, Texas 75207
Telecopy: (214) 426-0245
With a copy to: Mr. Scott Rose, Esq.
Jenkens & Gilchrist
1800 Frost Bank Tower
100 West Houston Street
San Antonio, Texas 78205-1497
Telecopy: (210) 246-5999
or to such other address or to the attention of such other person as hereafter
shall be designated in writing by the applicable party in a notice sent in
accordance with these notice provisions. Any such notice or communication shall
be deemed to have been given at the time of personal delivery or, in the case of
certified or registered mail, two (2) days after deposited in the custody of the
United States Postal Service, or in the case of overnight courier or delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, or, in the case of telegram or telecopy, upon receipt.
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13. Miscellaneous
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, and their heirs, successors,
and assigns. Whenever in this Agreement a reference is made to
any of the parties hereto, such reference shall be deemed to
include a reference to the heirs, legal representatives,
successors, and assigns of such parties.
(b) Buyer shall not have the right to assign this Agreement
without Seller's prior written consent.
(c) The titles of the Articles of this Agreement shall have no
effect and shall neither limit nor amplify the provisions of
the Agreement itself.
(d) This Agreement constitutes the entire agreement between the
parties and supersedes and replaces all prior and
contemporaneous agreements, representations, and
understandings between Buyer and Seller, whether written or
oral, excluding, however the existing lease agreement between
Seller, as lessor, and Buyer, as lessee. This Agreement shall
not be amended or changed except by written instrument signed
by both of the parties hereto.
(e) Time is of the essence with respect to the various times for
performance by Seller and Buyer.
(f) This Agreement is the result of negotiations between the
parties and, accordingly, shall not be construed for or
against either party regardless of which party drafted this
Agreement or any portion thereof.
(g) It is not, intended by this Agreement to, and nothing
contained in this Agreement shall, create any partnership,
joint venture, or other similar arrangement between Seller and
Buyer. No term or provision of this Agreement is intended to,
or shall, be for the benefit of any person, firm, corporation,
or other entity not a party hereto (including, without
limitations any broker), and no such party shall have any
right or cause of action hereunder.
(h) The terms and provisions of this Agreement shall be governed
by construed in accordance with the laws of the State of Texas
and applicable federal law.
(i) Except as herein expressly provided, no waiver by a party of
any breach of this Agreement or of any warranty or
representation hereunder by the other party shall be deemed to
be a waiver of any other breach by the other party (whether
preceding or succeeding and whether of the same or similar
nature), and no acceptance of payment or performance by a
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<PAGE>
party after any breach the other party shall be deemed to be
a waiver of any breach of Agreement or of any representation
or warranty hereunder by such other party, whether the first
party knows of such breach at the time it accepts such
payment or performance. No failure of delay by a party to
exercise any right may have by reason of the default of the
other party shall operate as waiver of default or
modification of this Agreement or shall prevent exercise of
any right by the first party while the other party continues
to be so in default.
(j) Each section of this Agreement constitutes a separate
agreement between parties. In the event that any provision
of this Agreement, which would not deprive the parties, or
either of them, of the benefit of the bargain, is deemed to
be illegal, invalid, or unenforceable on its face or as
applied, then such provision shall be deemed severed
herefrom to the extent illegal, invalid, and unenforceable.
(k) If any date set forth in this Agreement as the last date for
the taking of an action hereunder shall fall on a Saturday,
Sunday, or a federal holiday ( federal holiday being a day
on which the United States Postal Service does not deliver
first class mail), then the last date for taking such action
shall be extended to the next succeeding day that is not a
Saturday, Sunday, or federal holiday.
(1) The date upon which Buyer and the Title Company each
receives counterpart original of this Agreement duly
executed by Seller and Buyer and the Title Company receives
the Earnest Money shall be the date upon which this
Agreement become effective and legally binding.
EXECUTED by Buyer this 10th day of November, 1998.
ALFORD REFRIGERATED WAREHOUSES, INC.
By: /s/Joseph Y. Robichaud
-----------------------------------
Joseph Y. Robichaud
"BUYER"
EXECUTED by Buyer this 19th day of January, 1999.
FORT WORTH COLD STORAGE HOLDINGS, INC.
By: /s/Juerg Zuberbuehler
------------------------------------
Juerg Zuberbuehler, Attorney in Fact
"SELLER"
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<PAGE>
EXHIBIT A
LAND
Lot 1, Block 1 of the Cliff Industries Addition, Tarrant County, Texas,
containing 13.860 acres, more or less, and known locally as 350 Garden Acres
Drive, Fort Worth, Texas
<PAGE>
EXHIBIT B
REAL ESTATE MORTGAGE NOTE
(TO BE PREPARED)
<PAGE>
ADDENDUM TO EARNEST MONEY CONTRACT BETWEEN
ALFORD REFRIGERATED WAREHOUSES, INC.("BUYER")
AND
FORT WORTH COLD STORAGE HOLDINGS, INC. ("SELLER")
1. This Addendum is a part of the referenced contract. To the extent of
any conflict between this Addendum and the terms and provisions of the rnain
body of the contract or any exhibit thereto, the terms and provisions of this
Addendum shall control.
2. Purchase Price. The Purchase Price shall be the sum of THREE MILLION
AND NO/100 DOLLARS ($3,000,000.00). The purchase price shall be paid under one
of the following scenarios, the selection of which may be made by Buyer in its
sole and absolute discretion:
Scenario A: TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00)
shall be paid in cash at closing. FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000.00) shall be in the form of a real estate mortgage
note bearing interest at an annual ratio of nine percent (9%) due and
payable in full one (1) year from the date of closing, secured by a
second lien deed of trust. The note shall be prepayable in whole or in
part without penalty. The note and deed of trust shall be on forms
prepared by the State Bar of Texas. Interest on the note shall be paid
monthly. Additional collateral for the note shall be in the form of
fully registered shares in the publicly-traded entity to be formed by
Buyer in the amount of SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($750,000.00) (the "Stock Collateral"). If necessary, Buyer and/or
Castor Capital Corporation shall increase the number of Shares in the
Stock Collateral so as to maintain a $750,000.00 minimum value of the
Stock Collateral until the note is paid in full.
Scenario A: TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS ($2,700,00.00)
shall be paid in cash at closing. THREE HUNDRED THOUSAND AND NO/100
DOLLARS ($300,000.00) shall be in the form of a real estate mortgage
note bearing interest at an annual rate of nine percent (9%) due and
payable in full one (1) year from the date of closing, secured by a
second lien deed or trust. The note shall be prepayable in whole or in
part without penalty. The note and deed of trust shall be on forms
prepared by the State Bar of Texas. Interest on the note shall be paid
monthly. Additional collateral for the note, shall be in the form of
fully registered shares in the publicly traded entity to be formed by
Buyer in the amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
(the "Stock Collateral"). If necessary, Buyer and/or Castor Capital
Corporation shall increase the number of shares in the Stock
Collateral so as to maintain a $500,000.00 minimum value of the Stock
Collateral until the note is paid in full.
3. Phase I Environmental Report. For a period of thirty (30) days
following the execution of this Agreement (the "Inspection Period"), Buyer may,
at Buyer's expense, conduct a Phase I Environmental Assessment. In the event
1
<PAGE>
Buyer is for any reason disatisfied with its assessment, Buyer may terminate
this contract by written notice to Seller on or before the expiration of the
Inspection Period. In such event, Buyer's earnest money (less ONE HUNDRED AND
NO/100 DOLLARS ($100.00) as independent consideration for Buyer's rights
hereunder) shall be returned to Buyer by Seller.
4. Earnest Money. Buyer's earnest money shall be in the sum of TWENTY
THOUSAND AND N0/100 DOLLARS ($20,000.00) in the form of either (a) cash, or (b)
an assignment in form and substance satisfactory to Seller's counsel, of all
distributions up to such sum from the Trust of Landmark Logistical Services,
Debtor. At Closing, if funds have not been disbursed pursuant to 4(b), then
Buyer shall substitute cash for the assignment, and the assignment shall be
returned to Buyer.
9. Closing. Closing shall occur on or before April 30, 1999. Buyer
shall be entitled to a prorata credit for all deposits delivered to Seller
during calendar year 1999 by Buyer in its capacity as tenant, and in addition,
all unused security deposit.
13.b. Assignment. Buyer shall have the right to assign this Agreement
without Seller's prior written consent, provided such assignment is to an
affiliate or a controlled entity; otherwise, Seller's prior written consent is a
condition precedent to Buyer's right to assign.
INITIAL:
/s/JYR
- ----------
BUYER
/s/JZ
- ----------
SELLER
2
Exhibit 10.5
CONSULTING AGREEMENT
THIS AGREEMENT is dated March 29, 1999,
BETWEEN:
Alford Refrigerated Warehouses, Inc.
318 Cadiz Street
Dallas
Texas, 75207
(herein the "Client")
- and -
Engineering Design and Construction Managers Limited
3500 Dufferin Street, Suite 300
Downsview
Ontario, M3K IN2
(herein "Consultant")
WHEREAS the Client desires to engage the Consultant to provide services to the
Client for the term of this Agreement Find the Consultant has agreed to provide
such service, all in consideration and upon the terms and conditions contained
herein;
NOW THEREFORE it is hereby agreed as follows:
1. Services _______
The Client agrees to engage the Consultant to provide the
services Identified on Exhibit A and the Consultant has agreed
to perform and provide such services (collectively the
"Services").
2. Term _______
Except as otherwise provided in this Agreement, the Client
agrees to engage the Consultant to provide the Services for a
term of one year. Such term shall begin January 1, 1999.
Should the Consultant provide services beyond the end of the
initial term of the Agreement (or the end of any automatic
renewals thereof), the term of this Agreement shall be
automatically renewed for an additional term of one year.
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<PAGE>
3. Fee _______
(a) The Client agrees to pay the Consultant an annual fee
for the Services provided by the Consultant under the
Agreement in the amount of US $200,000.00 payable in
equal monthly payments of $16,667.00.
(b) The Consultant agrees to render monthly invoices to
the Client, in a form reasonably acceptable to the
Client, detailing the Services performed by the
Consultant.
(c) The Client shall be responsible for sales, value
added or other similar taxes payable in the State of
Texas in respect of such fees paid to the consultant.
4. Expenses _______
The Client shall pay for or reimburse the Consultant for all
reasonable, ordinary and necessary expenses incurred by the
Consultant in the ordinary course of performing the Services
upon presentation of proper accounts, statements, invoices or
receipts for such items; provided, however , that any expense
in excess of $5,000 must be pre-approved in writing by the
client.
5. Independent Contractor _______
The Consultant's relationship with the Client as created by
this Agreement is that of an independent contractor. It is
intended that the Consultant shall have general control and
direction over the manner in which its services are to be
provided to the Client under this Agreement. Nothing contained
in this Agreement shall be regarded or construed as creating
any relationship (whether by way of employer/employee; agency,
joint venture, association, or partnership) between the
parties other than as an independent contractor as set forth
herein.
6. Authority _______
The Consultant acknowledges that it is being retained as a
consultant to the Client and that as such it does not have the
authority and cannot commit or bind the Client to any matter,
contract or negotiation without the prior written
authorization of the Client.
7. Compliance _______
The Consultant shall comply with all applicable, state and
municipal laws, rules and regulations arising out of or
connected with the performance of the Services under this
Agreement by the Consultant or its employees.
2
<PAGE>
8. Support _______
The Client agrees to provide such assistance and make
available such employees, office space and support to the
Consultant as is reasonably necessary to enable the Consultant
to perform the Services under this Agreement.
9. Other Services _______
The Consultant will be free to perform consulting and other
services to the Consultant's other clients during the term of
this Agreement, provided, however, that the Consultant shall
ensure that the Consultant is able to perform the Services
pursuant to this Agreement in a timely and professional
fashion. The Consultant agrees not to perform services for the
Consultant's other clients which may create a conflict of
interest or interfere with the Consultant's duties pursuant to
this Agreement.
(a) In the event that the Consultant breaches this
Agreement, or otherwise fails to perform the Services
in accordance with the terms of this Agreement, the
Client may terminate this Agreement immediately and
without notice for cause. Either party may terminate
this Agreement at any time, without cause or reason,
upon giving 3 months advance notice to the other.
(b) Upon termination of this Agreement:
(i) the Client's obligations to the Consultant
under this Agreement shall terminate except
for the Client's obligation to pay the
monthly fees and expenses in accordance with
the terms of this Agreement, to the date of
termination; and
(ii) the Consultant's obligations to the Client
under this Agreement shall terminate except
those obligations which are specifically
expressed to survive the termination of this
Agreement.
11. Indemnification _______
The Client undertakes to, and does hereby agree to, indemnify
the Consultant and its directors, officers and employees
against any and all actions, suits, claims, costs, and
demands, losses, damages and expenses which may be brought
against or suffered by them or which they may sustain, pay or
incur by reason of the Consultant's performance of the
Services under this Agreement, with the exception of any such
actions, suits, claims, costs and demands, losses, damages and
expenses caused by the wilful misconduct or gross negligence
of the Consultant or any of its directors, officers or
employees.
3
<PAGE>
12. Governing Law _______
This Agreement shall be governed by the laws of the State of
Texas without giving effect to principles of conflicts of laws
and any federal laws applicable therein.
13. Severability _______
If any provision of this Agreement, or the application of such
provision to any person or in any circumstance, shall be
determined to be invalid, illegal or unenforceable, the
remaining provisions of this Agreement, and the application of
such provision to any person or in any circumstance other than
that to which it is held to be invalid, illegal or
unenforceable, shall not be affected thereby.
14. Amendments _______
Any amendment to this Agreement must be in writing and signed
by both parties hereto.
15. Time of Essence _______
Time shall be of the essence in this Agreement.
16. Entire Agreement _______
This is the entire Agreement between the Client and the
Consultant with respect to the consulting services to be
provided by the Consultant to the Client and supersedes any
prior agreements with respect to such services whether written
or oral.
17. Notices _______
Notices hereunder shall be in writing and must be either
personally delivered or sent by double registered mail to the
address(es) set forth above. A party may change the address
set forth above by proper notice to the other.
18. No Waiver _______
The failure of any party to insist upon the strict performance
of a covenant or obligation hereunder, irrespective of the
length of time for which such failure continues, shall not be
a waiver of such party's right to demand strict performance in
the future. No consent or waiver, express or implied, to or of
any breach or default in the performance of any covenant or
obligation hereunder shall constitute a consent of waiver to
4
<PAGE>
or of any other breach or default in the performance of the
same or of any other obligation hereunder.
19. Assignment _______
This Agreement is personal in nature and may not be assigned
by either party hereto.
20. Enurement _______
This Agreement shall be binding upon and shall enure to the
benefit of each of the parties hereto and their respective
employees and permitted receivers, successors and assigns.
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
Alford Refrigerated Warehouses, Inc.
Per: /s/J. C. Williams
---------------------------
J. C. Williams
CFO
Engineering Design and Construction Managers Limited
Per: /s/H. P. Haines
---------------------------
H. P. Haines
Vice President
5
<PAGE>
Exhibit A - Services
Consulting, engineering and management services related to
construction, renovations, conversions and maintenance operations for
all existing buildings and refrigeration systems and equipment owned by
or operated under lease by the Client.
6
Exhibit 21.1
The Company has the following subsidiaries:
Alford Logistical Services, Inc., a Texas corporation
Thermix Corporation, a Texas corporation
Specialty Processing Corporation, a Texas corporation
Alford Terminal Warehouses, Inc., a Texas corporation
Alford Distribution Services, Inc., a Texas corporation
Cadiz Properties, Inc., a Texas corporation
La Porte Properties, LLC, a Texas limited liability company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Sheet for Alford Refrigerated Warehouses, Inc.
</LEGEND>
<CIK> 0001078006
<NAME> Alford Refrigerated Warehouses, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 109,517
<SECURITIES> 0
<RECEIVABLES> 2,008,239
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,895,873
<PP&E> 21,898,092
<DEPRECIATION> 3,140,413
<TOTAL-ASSETS> 24,716,410
<CURRENT-LIABILITIES> 3,137,092
<BONDS> 15,945,949
0
0
<COMMON> 70,007
<OTHER-SE> 5,339,054
<TOTAL-LIABILITY-AND-EQUITY>24,716,410
<SALES> 0
<TOTAL-REVENUES> 17,651,941
<CGS> 0
<TOTAL-COSTS> 16,477,665
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,462,318
<INCOME-PRETAX> 1,174,276
<INCOME-TAX> 361,000
<INCOME-CONTINUING> 813,276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 813,276
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
