<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from ____________ to ____________
Commission File Number: 0-8767
CALNETICS CORPORATION
(Exact name or registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 95-2303687
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20401 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311
(Address of principle executive offices) (zip code)
</TABLE>
(818) 886-9819
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of each exchange on
Title of each class which registered
------------------- ------------------------------
None ---
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value.
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant is $5,618,000 as of August 3, 1995.
2,914,799
(number of shares of common stock outstanding as of August 3, 1995)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission in connection with the Annual Meeting of Stockholders,
to be held November 9, 1995, are incorporated by reference in Part III hereof.
Exhibit Index Located on Pages 34 through 38.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
Calnetics Corporation, a California corporation ("Calnetics") and its
wholly-owned subsidiaries, Manchester Plastics Co., Inc., a California
corporation ("Manchester"), Ny-Glass Plastics, Inc., a California corporation
("Ny-Glass"), and Agricultural Products, Inc., a California corporation
("API"), are hereinafter referred to together as the "Company". Calnetics was
incorporated under the laws of the State of California on July 18, 1960. The
Company's headquarters are located in Chatsworth, California.
Manchester manufactures proprietary items and custom products of acrylic,
polycarbonate and polystyrene plastic sheet that serve the building materials
and industrial plastics industries. Ny-Glass manufactures plastic parts,
specializing in injection molding. Ny-Glass operations include the operations
of Plastic Science, Inc. ("PSI"), which were acquired in June 1992 and Ny-Glass
was subsequently consolidated with PSI in Corona, California in September 1992.
API, which was acquired as of April 30, 1994, manufactures plastic tubing,
fittings, filters and accessories that serve the agricultural irrigation
industry.
Approximately 70% of the Company's net sales of $29,172,000 are of
proprietary products. The remaining portion of the Company's sales consist of
custom fabrication and production parts to individual customers' specifications
and are produced for a wide variety of industries.
MERGERS AND ACQUISITIONS
In March 1988, Mr. Clinton G. Gerlach, either directly or through Gerlach
Holding Corporation ("GHC"), a Delaware corporation of which Mr. Gerlach was
the sole shareholder, acquired an aggregate of 682,004 shares of Calnetics'
Common Stock. GHC purchased 300,000 newly-issued shares directly from
Calnetics and the remaining shares were purchased by Mr. Gerlach and GHC from
individual shareholders of Calnetics. In February 1992, GHC acquired all of
the Calnetics' Common Stock holdings owned by Larry Sacks, a former officer and
Director of Calnetics, consisting of 403,500 common shares, resulting in an
aggregate ownership by GHC of 1,085,504 shares, representing 37% of the total
shares outstanding as of June 30, 1995. As of June 30, 1995, Mr. Gerlach owned
52% of the outstanding shares of GHC, with the remaining 48% owned by Mr.
Gerlach's son and daughter.
Since 1989, Calnetics has actively reviewed and pursued potential merger and
acquisition candidates with a goal of increasing revenues and profitability.
Calnetics intends to continue reviewing potential merger and acquisition
candidates in the future and to pursue mergers and acquisitions where
warranted. Acquisitions since the beginning of 1989 are described in the
following paragraphs.
Page 2
<PAGE> 3
On September 18, 1989, Calnetics acquired all of the capital stock of
Manchester. Manchester, located in Chatsworth, California, now operates as a
wholly-owned subsidiary of Calnetics.
On June 3, 1992, Calnetics completed the cash acquisition of substantially
all of the assets of PSI, a manufacturer of plastic injection molding
components located in Corona, California. The acquisition was accomplished
through a subsidiary of the Company, Ny-Glass, which continued the business of
PSI under the Ny-Glass name in Corona, California. At the time of the
acquisition, Ny-Glass entered into a ten (10) year building lease with respect
to the premises formerly occupied by PSI. In September 1992, the Ny-Glass
division of the Company, located in Paramount, California, moved to Corona,
California and consolidated with the Ny-Glass subsidiary.
As of April 30, 1994, Calnetics acquired all of the capital stock of API for
$4,402,144 by payment of $4,000,102 in cash obtained from long-term bank
financing, and $402,042 in unsecured notes payable to the API shareholders.
API owns two plants, consisting of 50,000 square feet in Ontario, California
and 30,000 square feet in Winter Haven, Florida. API's executive offices are
located on site with the plant in Ontario, California.
CUSTOMERS AND MARKETING
No customer accounted for ten (10%) percent or more of the Company's net
sales and export sales accounted for less than five (5%) percent of total
sales.
The Company's marketing efforts at all four facilities are conducted by
in-house personnel and a limited number of outside sales personnel and
independent manufacturers representatives.
RAW MATERIALS
The principal raw materials used by the Company with respect to the
manufacture of its products are resins for producing plastic parts. Based on
market and economic conditions, as of July 31, 1995, the Company was not
experiencing shortages in supply, other than nominal shortages of polycarbonate
resin at Manchester, but was experiencing increases in the price of resins.
However, there can be no assurances that additional shortages will not result.
All items, except polycarbonate resin, necessary for the production of the
Company's products are purchased from a variety of suppliers.
PATENTS
The Company presently does not hold any patents, trademarks, franchises,
licenses, or concessions which are material to its operations.
Page 3
<PAGE> 4
ENVIRONMENTAL MATTERS
The Company believes that its policy in controlling the use and discharge of
hazardous materials is in compliance with applicable local, state and federal
regulations. The Company does not currently anticipate that any assertions of
noncompliance with such laws will materially adversely affect its earnings or
competitive position, or will require any material capital expenditures during
fiscal 1996.
SEASONALITY
The Company's business (excluding API) is not of a seasonal nature. The
Company is diversified across numerous industry lines and customers, and it has
not experienced any substantial seasonal variation to date. API's business
historically has been seasonal in nature, with demand for its irrigation
products being highest during the spring and early summer. In fiscal 1995, the
Company's revenue reflected this trend, with $12,922,762 of revenue in the
first half of the fiscal year (July - December) and $16,249,344 during the
remainder of the fiscal year.
INVENTORY
The Company maintains what it considers a normal supply of its raw material
resins ranging from 30 to 60 days' supply in inventory. These amounts are not
increased except in times of expected shortages.
The Company maintains an inventory of raw materials and finished goods for
sale in order to respond quickly to customer demand. (See Note 2 of Notes to
Consolidated Financial Statements.) While such raw materials and finished
goods on hand represent a significant commitment of the Company's working
capital, the Company believes that a rapid response to customer catalog orders
is essential and that its inventory practices are typical of the industry in
which it competes.
Page 4
<PAGE> 5
BACKLOG
The Company's backlog of orders consists of written purchase orders and
telephone orders generally confirmed in writing or by substantially concurrent
delivery and acceptance of product. The Company estimates that approximately
80% of its sales orders are written. The Company normally does not offer
cancellation rights and considers its backlog to be firm. The Company's
backlog at June 30, 1995 and at the end of the preceding fiscal year was as
follows:
<TABLE>
<CAPTION>
JUNE 30
---------------------------
1995 1994
---------------------------
<S> <C> <C>
All Company Products $2,290,000 $2,365,000
</TABLE>
It is anticipated that approximately 95% of the backlog at June 30, 1995 will
be filled during the 1996 fiscal year.
GOVERNMENT CONTRACTS
The Company does not have any government contracts or any other contracts
which are subject to renegotiation of profits or termination at the election of
the government.
CURRENT BORROWING ARRANGEMENTS
Calnetics, Ny-Glass and Manchester have a credit agreement for a $2,000,000
bank unsecured line of credit, subject to certain conditions. As of June 30,
1995, no outstanding balances existed on this bank credit line. The credit
agreement expires November 30, 1995 and bears interest at the bank's reference
rate at June 30, 1995 plus 1/2% (9.25% at June 30, 1995). (See Notes 3 and 4
to the Consolidated Financial Statements.)
To finance the acquisition of API, the Company entered into two five-year
collateralized bank term loans with two banks for a total of $4.5 million, with
one such loan bearing interest at the bank's reference rate at June 30, 1995
(9% at June 30, 1995) plus 3/4%, and the other loan bearing interest at the
bank's prime rate at June 30, 1995 (9% at June 30, 1995) plus 3/4%. As part
of the API purchase price, the Company also executed unsecured promissory
notes totaling $402,042, payable to the former API shareholders, with interest
payable semi-annually at a rate of 7.50% per annum and principal payable in
four equal annual installments beginning June 1996. (See Note 4 to the
Consolidated Financial Statements.)
Page 5
<PAGE> 6
As part of the acquisition of API, the Company assumed an industrial revenue
bond payable of $1,455,000 at June 30, 1995, principal due in annual sinking
fund installments ranging from $15,000 to $130,000 through December 2021, plus
interest due monthly with an adjustable interest rate, which was 4.7% at June
30, 1995. In addition, the Company assumed mortgages payable to a bank of
$294,663 at June 30, 1995, secured by the related building and land, payable
in monthly installments at an interest rate of three-quarter percent (3/4%)
over the bank's prime rate with a balloon payment of $201,415 due on March 5,
2000. (See Note 4 to the Consolidated Financial Statements.)
COMPETITION
The Company encounters competition from many competitors, many of which are
larger and have greater financial resources. The number of businesses in the
plastics manufacturing industry in which the Company competes is impossible to
estimate, but it consists of numerous small and large corporations and
proprietorships. To the Company's knowledge, no single competitor is dominant.
Competition is principally based on price, product quality, customer service
and the ability to deliver products on schedule. The Company believes it has
developed a good following in the industries it serves including a favorable
reputation for product quality and prompt and reliable customer service.
RESEARCH AND DEVELOPMENT
The Company conducts routine product analysis to develop additional catalog
and custom products as part of its normal operations; however, the expenditures
required for such developments have not been and are not anticipated to be
material to the Company's operations.
IMPACT OF ENVIRONMENTAL REGULATIONS
The Company does not expect any assertions of noncompliance of environmental
issues with respect to local and Federal regulations nor does it expect that
such laws will materially adversely affect the Company's earnings or
competitive position or require material expenditures in fiscal 1996.
EMPLOYEES
At June 30, 1995, the Company employed approximately 220 employees, none of
which are subject to a collective bargaining agreement. The Company considers
the relationship with its employees to be good and has not experienced any work
stoppage from any labor dispute.
Page 6
<PAGE> 7
ITEM 2. PROPERTIES.
The Company operates from leased facilities in Chatsworth, California and
Corona, California. The Chatsworth facilities consist of a one-floor, 56,600
square foot building and the Corona facilities consist of a one-floor, 30,000
square foot building. At the Manchester facility in Chatsworth, the lease
expires on December 6, 1999. At the Ny-Glass facility in Corona, the lease
expires on May 31, 2002.
The Company also operates from two plants owned by API, consisting of
facilities of 50,000 square feet in Ontario, California and 30,000 square feet
in Winter Haven, Florida.
The Company believes the above facilities are in good repair, adequate for
the Company's current operations, and sufficient to accommodate up to a forty
(40%) percent increase of present production levels, which would, however,
require additional equipment, and in certain cases, additional semi-skilled
labor.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently subject to any legal actions which are expected
to have a material adverse effect on its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The names, ages and positions of all the executive officers of the Company as
of August 3, 1995 are listed below, followed by a brief account of their
business experience during the past five years. Officers are normally
appointed annually by the Board of Directors at a meeting of the Directors
immediately following the Annual Meeting of Shareholders. There are no family
relationships among these officers or any arrangements or understandings
between any officers and any other person pursuant to which an officer was
selected. None of these officers has been involved in any court or
administrative proceeding within the past five years adversely reflecting on
his or her ability or integrity.
Page 7
<PAGE> 8
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------ --- -----------------------
<S> <C> <C>
Clinton G. Gerlach 69 President and Chairman
of the Board
Michael A. Hornak 52 Vice President
Steven L. Strawn 41 Vice President
Teresa S. Louie 41 Treasurer
Mary Livingston 56 Secretary
Lon Schultz 61 President and Director of API
</TABLE>
Clinton G. Gerlach has served as the President, Chairman of the Board and
Chief Executive Officer of the Company since March of 1988 and the Chairman of
the Board and Director of Manchester since September 1989, and Director,
Chairman of the Board and Chief Executive Officer of Ny-Glass since June 1992,
and Director and Chairman of the Board of API since June 1994. Mr. Gerlach was
the Chairman of the Board and Chief Executive Officer of Gerlach Industries,
Inc. from November 1983 to December 1986 and was the Chairman of the Board and
Chief Executive Officer of Tannetics, Inc. from August 1969 to November 1983.
From January 1987 to March 1988, Mr. Gerlach was self employed. Mr. Gerlach is
also a Director of Zero Corporation (a manufacturer of cases, cabinets, cooling
and cargo enclosures).
Michael A. Hornak has been a Vice President of the Company since 1974 and a
Director of the Company since 1984. Mr. Hornak has also been President of the
Ny-Glass Plastics division of the Company since 1985, President, Director and
Chief Financial Officer of Ny-Glass since June 1992, and was President of the
Hydro Flight division of the Company from 1983 to 1985.
Steven L. Strawn has been a Vice President of the Company since September
1989 and Director since February 1992. Mr. Strawn has also been President and
Chief Operating Officer of Manchester since 1989 and has held various other
positions with its predecessor, Manchester Products, from 1980 to 1989.
Teresa S. Louie has been with the Company since August 1973 and was appointed
Treasurer of Calnetics in February 1992, and has held various offices with the
Company including Assistant Treasurer, Assistant Secretary and Controller.
Mary Livingston rejoined the Company in March of 1995 and had worked
previously as Mr. Gerlach's Executive Secretary from 1984 through 1990. Ms.
Livingston owned and operated a retail shop in Marina del Rey, California from
1990 through 1994. Prior to employment with the Company, Ms. Livingston was an
Executive Secretary at Continental Airlines.
Page 8
<PAGE> 9
Lon Schultz is the Founder, President and a Director of API. API was formed
in 1973 and Mr. Schultz has been the Chief Executive Officer of API since the
date of inception. Mr. Schultz has also been a Director of Story Plastics,
Inc. since 1975.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information
Calnetics common stock is traded in the over-the-counter market and is quoted
in the National Daily Quotation Service, under the CALN symbol. The following
table sets forth the high and low bid and asked quotations for the periods
indicated. Quotations represent prices between dealers, without retail
markups, markdowns or commissions and may not necessarily represent actual
transactions.
Common stock price information (in dollars):
<TABLE>
<CAPTION>
BID ASKED
--------------------------------
HIGH LOW HIGH LOW
----- ----- ----- -----
<S> <C> <C> <C> <C>
Year Ended June 30, 1995
First Quarter 3-1/4 2-3/4 3-1/2 3
Second Quarter 4 2-3/4 4-1/2 3
Third Quarter 5-3/4 3-1/4 6-1/4 3-3/4
Fourth Quarter 5-1/4 3-1/2 5-3/4 4
Year Ended June 30, 1994
First Quarter 2-3/8 2-3/8 2-3/4 2-3/4
Second Quarter 3 2-3/4 3-1/8 3-1/8
Third Quarter 2-7/8 1-3/4 3-3/8 2-1/8
Fourth Quarter 3 2-1/2 3-1/4 2-7/8
</TABLE>
(b) Number of shareholders of record as of August 3, 1995 - 270.
(c) To date the Company has not paid any dividends.
Page 9
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
(IN DOLLARS)
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales 29,172,106 17,996,617 16,564,448 13,570,688 13,388,753
Net income 1,006,066 616,975 502,176 407,222 422,324
Earnings per .33 .21 .17 .14 .15
common share
Capital 512,153 113,884 340,617 180,549 246,950
expenditures
Total assets 17,122,578 16,376,776 7,484,777 7,894,373 7,006,003
Long-term debt 5,551,284 6,284,524 --- 234,375 667,630
Shareholders' 7,136,146 6,099,882 5,296,342 4,794,166 4,382,569
equity
========== ========== ========== ========== ==========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MANCHESTER ACQUISITION
In September 1989, the Company acquired Manchester. The acquisition expanded
the Company's operations to include the manufacturing of acrylic, polycarbonate
and polystyrene plastic sheet that serves the building materials and industrial
plastics industries. Prior to the acquisition, the Company was primarily
engaged in the manufacturing of molded plastic components by injection,
transfer and compression processes.
PSI ACQUISITION
On June 3, 1992, the Company acquired for cash substantially all of the
assets of PSI, a manufacturer of plastic injection molding components located
in Corona, California. The acquisition was accomplished through a subsidiary
of the Company, Ny-Glass, which continued the business of PSI, under the
Ny-Glass name in Corona, California.
Page 10
<PAGE> 11
The cash purchase price paid for the assets acquired amounted to $320,100,
$250,000 of which was obtained from a short-term bank loan, utilizing the
Company's then existing credit line of $1,000,000.
Current assets acquired as part of the acquisition amounted to $354,182 and
current liabilities assumed totaled $306,081.
API ACQUISITION
In fiscal 1994, the Company completed the acquisition of all of the
outstanding stock of API of Ontario, California from the API shareholders
effective as of April 30, 1994. The purchase price was $4,402,144, consisting
of cash of $4,000,102 and unsecured promissory notes payable to the selling
shareholders of $402,042. API, which was a closely held private company, is a
manufacturer of plastic water handling products, including tubing, filters and
drip system accessories with manufacturing plants in Ontario, California and
Winter Haven, Florida.
Net assets acquired totaled $3,528,341, resulting in recording of goodwill of
$873,803 which is being amortized on a straight-line basis over 20 years.
CHANGE IN INVENTORY PRICING
Beginning July 1, 1994, the Company changed its method of pricing finished
goods inventories at Manchester from FIFO to LIFO. The change in method was
made to more properly match current expenses with revenues and to improve cash
flow which was reduced due to the effects of increases in certain costs of raw
materials.
At June 30, 1995, if the FIFO method had been used to value Manchester
finished goods inventories, the stated value of inventories would have been
approximately $408,000 higher and the effect on 1995 operations would have
increased income before provision for income taxes by $408,000, net income by
$230,000 and earnings per common share and common share equivalent by $.07 (See
Note 2 to the Consolidated Financial Statements).
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
Net sales for the fiscal year ended June 30, 1995 increased 62% from
$17,996,617 to $29,172,106. The increase is principally attributed to the
Company's ownership of API. API operating results were included for only two
months in fiscal 1994 as compared to twelve months in fiscal 1995.
Page 11
<PAGE> 12
Cost of sales, as a percentage of sales, decreased to 74.5% for the twelve
months ended June 30, 1995, as compared to 75.7% for the same period in the
prior year. The decrease is primarily attributed to the increased sales volume
in 1995 as compared with 1994.
Selling, general and administrative expenses increased during the twelve
months ended June 30, 1995 to $5,187,534, as compared with $3,253,056 for the
same period in the prior fiscal year. The increase is attributed to the
increased sales volume in 1995 as compared with 1994 in large part due to the
addition of API.
Net income for the year ended June 30, 1995 amounted to $1,006,066 after
provision for income taxes of $739,000, as compared with $616,975 after a
provision for income taxes of $522,000 in the previous year. Income per share
increased from $0.21 per share in 1994 to $0.33 per share in 1995. The
increase in net income and income per share is primarily attributed to
increased sales volume primarily from the API acquisition.
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
Net sales for the twelve months ended June 30, 1994 increased 9% from
$16,564,448 to $17,996,617. The increase was primarily attributed to the
acquisition of API and the resultant inclusion of API's sales for May and June,
1994 as well as the record performance in sales by Manchester.
Cost of sales, as a percentage of sales, decreased to 75.7% for the twelve
months ended June 30, 1994, as compared with 77.3% for the same period in the
prior year. The decrease was primarily attributed to the higher profit margins
generated by API for May and June, 1994, the period which includes API's
operating results.
Selling, general and administrative expenses increased during the current
fiscal year to $3,253,056 as compared with $2,868,729 for the twelve months
ended June 30, 1994. The increase was primarily attributed to the inclusion of
API's expenses for May and June, 1994.
Net income for the year ended June 30, 1994 was $616,975 after provision for
income taxes of $522,000, as compared with net income of $502,176 after a
provision for income taxes of $368,300 in the previous year. Income per share
increased from $0.17 per share in 1993 to $0.21 per share in 1994.
The increases in net income and income per share are, in part, attributed to
the acquisition of API as of April 30, 1994, and the resultant inclusion of
API's income for the months of May and June, 1994 as well as the record
performance in income by Manchester.
Page 12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the primary source of liquidity for the Company was cash
generated from operations.
Working capital at June 30, 1995 increased to $7,234,385 as compared with
$6,789,446 at June 30, 1994, and current ratios are 2.7 and 2.8 at June 30,
1995 and 1994, respectively.
Expenditures for property and equipment were $512,153 for the fiscal year
ended June 30, 1995 as compared with $113,884 (except for property and
equipment acquired in connection with the acquisition of API) for the fiscal
year ended June 30, 1994. The Company has no immediate plans for any
significant capital expenditures in fiscal 1996. The Company believes that its
available funds and internally generated cash from operations will be
sufficient to meet its working capital needs in fiscal 1996. Certain loan
agreements limit capital expenditures to $500,000 in 1996 and thereafter.
The Company has a credit agreement with a bank under which the Company may
borrow up to $2,000,000 on an unsecured basis. No borrowings were made against
this credit line in fiscal 1995. The agreement expires on November 30, 1995
and bears interest at the bank's reference rate plus 1/2% (9.50% at June 30,
1995).
Although the impact of inflation is difficult to accurately assess,
management of the Company does not believe that inflation has had a significant
impact on the Company's net sales and revenues, or on income from continuing
operations in the current period, or in the two preceding fiscal years.
As part of the Company's business strategy, the Company frequently evaluates
potential acquisitions of companies in the thermoplastics industry and in other
industries which management believes offer significant growth opportunities.
The Company has no present understanding or commitment with respect to any
acquisition.
The Company expects to finance any future acquisitions through either cash
flow from operations, borrowings under existing or future credit facilities or
the issuance of debt or equity securities. The Company also may consider the
issuance of long-term convertible subordinated debentures or the issuance of
convertible preferred stock to enhance long-term liquidity.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA.
The financial statements are listed under Part IV, Item 14 in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not applicable
Page 13
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS OF THE COMPANY
The information under "Election of Directors" in the 1995 Proxy Statement is
incorporated herein by reference.
EXECUTIVE OFFICERS OF THE COMPANY
The "Executive Officers of the Company" are discussed under Part I, Item 4A
of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the captions "Information Regarding the Board of
Directors," "Committees" and "Executive Compensation" in the 1995 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
<TABLE>
<S> <C> <C>
Clinton G. Gerlach (1) 1,185,504 (2)(6) 39%
Fred E. Edward (1) 202,064 (3)(6) 6
Raymond H. Heller (1) 71,230 (4)(6) 2
Michael A. Hornak (1) 144,500 (5)(8) 5
Lon Schultz (1) 51,500 (9) 2
Steven L. Strawn (1) 140,000 (6)(7)(8) 5
Teresa S. Louie (1) 10,200 (5) __
Mary Livingston (1) 5,100 __
All Directors and
Officers as a Group
(8 persons) 1,810,098 59%
</TABLE>
(1) 20401 Prairie Street, Chatsworth, California 91311
Page 14
<PAGE> 15
(2) Includes 1,085,504 shares held of record by GHC, a Delaware corporation
owned by the following entities or individuals by the percentages
indicated: The Gerlach Family Trust (52%) and Mr. Gerlach's son and
daughter, Clinton G. Gerlach II (24%) and Kimberlee Ann Grot (24%).
Each of the GHC shareholders has a right of first refusal on a prorata
basis covering the GHC stock owned by the remaining GHC shareholders
pursuant to a right of first refusal agreement dated July 1, 1992. Also
includes (i) 10,000 shares of Common Stock held of record by the Gerlach
Family Trust and (ii) 90,000 shares of Common Stock held of record by
Mr. Gerlach's nephew, Charles Gerlach, as to which Mr. Gerlach has sole
voting power.
(3) Held of record by the Fred and Evelyn Edward Family Trust, Fred Edward,
Trustee, (the "Edward Trust").
(4) Held of record by the Raymond H. and Hollyce O. Heller Revocable Trust
of 1982 (the "Heller Trust").
(5) Jointly owned with spouse.
(6) Mr. Gerlach has the right of first refusal on a prorata basis covering
the 71,230 shares of Common Stock owned by the Heller Trust and the
202,064 shares of Common Stock owned by Edward Trust, pursuant to
certain right of first refusal agreements, dated as of September 18,
1989. In addition, pursuant to agreements Mr. Gerlach, through GHC, has
rights of first refusal covering (i) 40,000 shares of Common Stock owned
by Steven L. Strawn, a Vice President and Director of the Company and
(ii) 70,000 shares of Common Stock owned by other shareholders of the
Company.
(7) Includes currently exercisable options with the Company to acquire
45,000 shares of Common Stock at an exercise price of $1.438 per share.
(8) Includes currently exercisable options with the Company to acquire
16,667 shares of Common Stock at an exercise price of $2.00 per share, a
portion of a 50,000 share option grant, which is exercisable in
one-third increments in March of 1995, 1996 and 1997.
(9) Includes currently exercisable options with the Company to acquire
16,667 shares of Common Stock at an exercise price of $3.00 per share, a
portion of a 50,000 share option grant, which is exercisable in
one-third increments in July of 1995, 1996 and 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
Page 15
<PAGE> 16
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page reference to
this Form 10-K
-----------------
<S> <C>
1. EXHIBITS
See Exhibit Index on pages 34 through 38 of this Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report F-2
Consolidated Balance Sheets,
June 30, 1995 and 1994 F-3
Consolidated Statements of Income
and Retained Earnings for the Years
Ended June 30, 1995, 1994 and 1993 F-5
Consolidated Statements of Shareholders' Equity
Years ended June 30, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows for
the Years Ended June 30, 1995, 1994 and 1993 F-7
Notes to Consolidated Financial
Statements F-9
Schedule II - Valuation and Qualifying Accounts F-18
</TABLE>
SCHEDULES OMITTED:
Schedules not listed above are omitted because of the absence of conditions
under which they are required or because the information is included in the
financial statement named above or in the notes thereto.
3. REPORTS ON FORM 8-K
During the quarter ended June 30, 1995, the Company did not file a Form 8-K.
Page 16
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Directors and Shareholders of Calnetics Corporation:
We have audited the accompanying consolidated balance sheets of CALNETICS
CORPORATION (a California Corporation) and subsidiaries as of June 30, 1995 and
1994, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended June 30, 1995.
These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Calnetics Corporation and
subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 27, 1995
Page 17
<PAGE> 18
CALNETICS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--JUNE 30, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,580,974 $ 1,853,091
Accounts receivable, net of allowances of $263,000
and $198,000 in 1995 and 1994, respectively 4,448,526 4,254,797
Inventories 4,962,037 4,176,531
Prepaid expenses 312,996 148,397
Deferred income taxes 272,000 232,000
----------- -----------
Total current assets 11,576,533 10,664,816
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 466,288 466,288
Buildings and leasehold improvements 2,204,992 2,177,356
Machinery and equipment 3,752,505 3,521,932
Furniture and fixtures 224,251 190,558
----------- -----------
6,648,036 6,356,134
Less--Accumulated depreciation and amortization 2,776,164 2,364,239
----------- -----------
3,871,872 3,991,895
----------- -----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $259,938 and
$187,617 in 1995 and 1994, respectively 1,472,968 1,545,289
Deposits and other assets 201,205 174,776
----------- -----------
1,674,173 1,720,065
----------- -----------
$17,122,578 $16,376,776
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
Page 18
<PAGE> 19
CALNETICS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--JUNE 30, 1995 AND 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 338,000 $ 488,418
Accounts payable 2,650,651 1,880,127
Customer deposits 150,004 80,898
Accrued liabilities 707,503 884,875
Accrued compensation and benefits 437,797 345,086
Income taxes payable 58,193 195,966
----------- -----------
Total current liabilities 4,342,148 3,875,370
----------- -----------
LONG-TERM DEBT, net of current portion 5,551,284 6,284,524
----------- -----------
DEFERRED INCOME TAXES 93,000 117,000
----------- -----------
COMMITMENTS (Note 6)
SHAREHOLDERS' EQUITY:
Preferred stock:
Authorized--2,000,000 shares
Issued and outstanding--0 shares - -
Common stock, no par value:
Authorized--20,000,000 shares
Issued and outstanding--2,914,799
and 2,893,799 shares in 1995
and 1994, respectively 2,397,635 2,367,437
Retained earnings 4,738,511 3,732,445
----------- -----------
Total shareholders' equity 7,136,146 6,099,882
----------- -----------
$17,122,578 $16,376,776
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
Page 19
<PAGE> 20
CALNETICS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $29,172,106 $17,996,617 $16,564,448
COST OF SALES 21,739,246 13,628,257 12,799,046
----------- ----------- -----------
Gross profit 7,432,860 4,368,360 3,765,402
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 5,187,534 3,253,056 2,868,729
----------- ----------- -----------
Income from operatons 2,245,326 1,115,304 896,673
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Gain on sale of property and equipment 6,500 760 16,620
Interest and other income 27,345 65,127 10,786
Interest expense (534,105) (42,216) (37,279)
Other expense - - (16,324)
----------- ----------- -----------
(500,260) 23,671 (26,197)
----------- ----------- -----------
Income before provision for
income taxes 1,745,066 1,138,975 870,476
PROVISION FOR INCOME TAXES 739,000 522,000 368,300
----------- ----------- -----------
Net income $ 1,006,066 $ 616,975 $ 502,176
=========== =========== ===========
Earnings per common share and common
share equivalent $ .33 $ .21 $ .17
=========== =========== ===========
Weighted average number of shares
outstanding 3,030,283 2,921,854 2,879,096
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 20
<PAGE> 21
CALNETICS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Common Stock
------------------------- Total
Shares Retained Shareholders'
Outstanding Amount Earnings Equity
----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1992 2,793,799 $2,180,872 $2,613,294 $4,794,166
Net income - - 502,176 502,176
--------- ---------- ---------- ----------
BALANCE, June 30, 1993 2,793,799 2,180,872 3,115,470 5,296,342
Net income - - 616,975 616,975
Exercise of stock options 90,000 81,565 - 81,565
Shares issued for services 10,000 20,000 - 20,000
Extension of stock option
term (Note 7) - 85,000 - 85,000
--------- ---------- ---------- ----------
BALANCE, June 30, 1994 2,893,799 2,367,437 3,732,445 6,099,882
Net income - - 1,006,066 1,006,066
Exercise of stock options 21,000 30,198 - 30,198
--------- ---------- ---------- ----------
BALANCE, June 30, 1995 2,914,799 $2,397,635 $4,738,511 $7,136,146
========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 21
<PAGE> 22
CALNETICS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,006,066 $ 616,975 $ 502,176
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 704,497 444,833 375,562
Provision for doubtful accounts 93,521 52,521 55,000
Gain on sale of property, plant and
equipment (6,500) (760) (16,620)
Provision (benefit) for deferred
income taxes (64,000) 24,000 12,133
Common stock issued for services - 20,000 -
Extension of stock option term - 85,000 -
Change in operating assets and liabilities,
net of effects from acquisitions:
Decrease (increase) in:
Accounts receivable (287,260) 589,945 (49,997)
Inventories (785,506) (28,860) 80,207
Prepaid expenses (164,599) 75,472 (27,767)
Deposits and other assets (26,429) (66,232) 13,172
Increase (decrease) in:
Accounts payable 770,524 (683,303) (411,840)
Customer deposits 69,106 26,774 34,145
Accrued liabilities and compensation
and benefits (84,661) 518,890 (127,571)
Income taxes payable (137,773) 178,000 6,876
---------- ---------- ----------
Net cash provided by operating activities 1,086,996 1,853,255 445,476
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant
and equipment 6,500 4,000 49,968
Purchases of property, plant and equipment (512,153) (113,884) (340,617)
Cash used in acquisitions - (4,000,102) -
---------- ---------- ----------
Net cash used in investing activities (505,653) (4,109,986) (290,649)
---------- ---------- ----------
</TABLE>
Page 22
<PAGE> 23
- 2 -
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under line of credit
agreement $ - $ (100,000) $(150,000)
Proceeds from long-term debt - 4,500,000 -
Repayments of long-term debt (883,658) (897,887) (234,375)
Net proceeds from issuance of
common stock 30,198 81,565 -
---------- ----------- ---------
Net cash provided by (used
in) financing activities (853,460) 3,583,678 (384,375)
---------- ----------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (272,117) 1,326,947 (229,548)
CASH AND CASH EQUIVALENTS,
beginning of year 1,853,091 342,723 572,271
CASH OF ACQUIRED ENTITY - 183,421 -
---------- ----------- ---------
CASH AND CASH EQUIVALENTS,
end of year $1,580,974 $ 1,853,091 $ 342,723
========== =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 23
<PAGE> 24
CALNETICS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
1. Basis of Presentation
Calnetics Corporation (the Company) is engaged in manufacturing operations at
three wholly owned subsidiaries:
Manchester Plastics, Co., Inc. (Manchester), which is located in Chatsworth,
California, primarily manufactures proprietary products consisting of acrylic,
polycarbonate and polystyrene plastic sheets for the building material and
industrial plastics industries.
Ny-Glass Plastics, Inc. (Ny-Glass), formerly Plastic Science, Inc. (PSI), which
is located in Corona, California, and the former Ny-Glass Plastics Division,
formerly located in Paramount, California, manufactures custom plastic
injection molding components for original equipment manufacturers and
high-quality, close-tolerance molded plastic components for a wide variety of
industries. Approximately one-fifth of its production is proprietary, consisting
of products for the electronic, computer, automotive and other high-tech
industries.
Agricultural Products, Inc. (API), which has facilities in Ontario, California
and Winter Haven, Florida, manufactures and distributes various irrigation
hoses, fittings and other products primarily for the agriculture industry.
Effective April 30, 1994, the Company acquired all of the outstanding stock of
API for $4,402,144, which included a cash payment of $4,000,102 obtained for
long-term bank financing and $402,042 in notes payable to the former API
shareholders.
The API acquisition was accounted for using the purchase method of accounting,
and accordingly, the purchase price was allocated to assets acquired and
liabilities assumed based on their estimated fair values as follows:
<TABLE>
<S> <C>
Cash $ 183,421
Accounts receivable 2,491,788
Inventories 1,532,340
Other current assets 124,529
Property, plant and equipment, net 3,273,197
Other noncurrent assets 897,812
Current liabilities (1,840,121)
Long-term debt (2,260,822)
-----------
$ 4,402,144
===========
</TABLE>
The other noncurrent assets include goodwill of $873,803 which is being
amortized on a straight-line basis over 20 years.
Page 24
<PAGE> 25
The results of operations of API from April 30, 1994 have been included
in the accompanying consolidated financial statements. The following summarized
unaudited pro forma financial information assumes the acquisition occurred on
July 1, 1993:
<TABLE>
<CAPTION>
Year Ended
June 30,
1994
-----------
(Unaudited)
<S> <C>
Ne sales $26,849,000
===========
Net income $ 699,000
===========
Earnings per common share $ .24
===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its three wholly owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
REVENUE RECOGNITION
Revenue on product sales is recognized at the time of shipment.
INVENTORIES
Inventories include costs of materials, labor and manufacturing
overhead, are stated at the lower of cost or market using the first-in,
first-out (FIFO) and the last-in, first-out (LIFO) methods. The LIFO method is
used for the finished goods inventory at Manchester and totals approximately
$1,727,000. Inventories consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Raw materials $2,402,121 $1,954,757
Finished goods 2,559,916 2,221,774
---------- ----------
$4,962,037 $4,176,531
========== ==========
</TABLE>
Beginning July 1, 1994, the Company changed its method of pricing
finished goods inventories at Manchester from FIFO to LIFO. The change in
method was made to more properly match current expenses with revenues and to
improve cash flow which was reduced due to the effects of increases in certain
costs of raw materials.
At June 30, 1995, if the FIFO method had been used to value Manchester
finished goods inventories, the stated value of inventories would have been
approximately $408,000 higher and the effect on 1995 operations would have
increased income before provision for income taxes by
Page 25
<PAGE> 26
$408,000, net income by $230,000 and earnings per common share and common share
equivalent by $.07.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company follows
the policy of capitalizing expenditures which materially increase asset lives
and charging ordinary maintenance and repairs to operations as incurred.
Amounts expensed as maintenance and repairs were approximately $370,000,
$163,000 and $178,000 in 1995, 1994 and 1993, respectively.
When assets are sold or disposed of, the cost and related depreciation are
removed from the accounts and any resulting gain or loss is included in income.
Property, plant and equipment are depreciation and amortized using the
straight-line and accelerated methods over the following useful lives:
<TABLE>
<S> <C>
Building and improvements 7 - 31.5 years
Leasehold improvements term of lease
Machinery and equipment 3 - 7 years
Furniture and fixtures 5 - 7 years
</TABLE>
GOODWILL
Goodwill resulted from the purchase of Manchester during 1989 and the
purchase of API in 1994. It is being amortized on a straight-line basis over 30
years and 20 years, respectively.
STATEMENTS OF CASH FLOWS
For the purposes of the statements of cash flows, the Company considers
all highly liquid investments with an original maturity date of 90 days or less
to be cash and cash equivalents.
Cash paid for income taxes was approximately $932,000, $330,000 and
$349,000 in 1995, 1994 and 1993, respectively. Cash paid for interest was
approximately $511,000, $31,000 and $42,000 in 1995, 1994 and 1993,
respectively.
EARNINGS PER COMMON SHARE
Earnings per common share and common share equivalent are based on the
weighted average number of shares of common stock and common stock equivalents
(dilutive stock options) outstanding during the related periods. The weighted
average number of common stock equivalent shares includes shares issuable upon
the assumed exercise of stock options, less the number of shares assumed
purchased with the proceeds available from such exercise. Fully diluted net
income per share does not differ materially from net income per common share
and common share equivalent.
Page 26
<PAGE> 27
3. SHORT-TERM BORROWINGS
The Company has a $2,000,000 unsecured line of credit with a bank. At
June 30, 1995, the entire amount of $2,000,000 was available under this credit
arrangement, which expires on November 30, 1995. Borrowings under this
facility bear interest at the bank's reference rate (9 percent at June 30,
1995) plus 0.5 percent. The line of credit agreement includes certain
restrictive covenants which are discussed in Note 4 below.
4. LONG-TERM DEBT
At June 30, 1995 and 1994, long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Term loans payable to banks, secured by
inventory and receivables, interest at the
banks' reference rate (9 percent at June 30,
1995) plus .75 percent, due in various monthly
installments of principal and interest through
July 1, 1999, with balloon payments totaling
$1,458,462 due on August 1, 1999 $3,683,316 $4,500,000
Industrial revenue bond payable, principal due
in annual sinking fund installments ranging
from $15,000 to $130,000 through December
2021, plus interest due monthly based on the
Issuer's Weekly Adjustable Interest Rates for
Revenue Bonds (4.7 percent at June 30, 1995),
secured by a standby letter of credit issued
by a bank with an annual fee of 1.25 percent 1,455,000 1,470,000
Loans payable to former API shareholders,
unsecured, interest payable semi-annually at
7.50 percent, principal payable in four equal
annual installments beginning June 1996 402,042 402,042
Mortgage payable to bank, secured by the related
building and land, pricipal payable in monthly
installments of $1,665 plus interest at the
bank's prime rate (9 percent at June 30, 1995)
plus .75 percent, with a balloon payment of
$201,415 due on March 5, 2000 294,663 314,336
Equipment term notes payable to banks, secured
by the related equipment, due in equal monthly
installments of principal and interest ranging
from $214 to $780, interest at rates ranging
from a bank's prime rate (9 percent at June 30,
1995) plus 1.0 percent to 11.87 percent
through October 1998 54,263 86,564
---------- ----------
5,889,284 6,772,942
Less--Current portion of long-term debt 338,000 488,418
---------- ----------
$5,551,284 $6,284,524
========== ==========
</TABLE>
Page 27
<PAGE> 28
The following is a schedule of future principal payments of long-term
debt as of June 30, 1995:
<TABLE>
<S> <C>
1996 $ 338,000
1997 800,374
1998 803,488
1999 836,748
2000 1,750,674
Thereafter 1,360,000
----------
$5,889,284
==========
</TABLE>
The line of credit agreement (see Note 3), term loans and notes payable
include certain restrictive financial and non-financial covenants, including
certain cash restrictions and limitations on payment of cash dividends and
redemption of stock. At June 30, 1995, the Company was in compliance with all
bank covenants.
5. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109).
Under SFAS 109, deferredincome tax assets or liabilities are computed
based on the temporary difference between the financial statement and income
tax bases of assets and liabilities using the enacted marginal income tax rate
in effect for the year in which the differences are expected to reverse.
Deferred income tax expenses or credits are based on the changes in the
deferred income tax assets or liabilities from period to period.
The components of the deferred income tax asset at June 30, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Allowance for bad debts $106,000 $ 83,000
Vacation accrual 56,000 47,000
State taxes 51,000 39,000
Inventory reserve 30,000 32,000
Warranty reserve 26,000 22,000
Other 3,000 9,000
-------- --------
$272,000 $232,000
======== ========
</TABLE>
The primary component of the deferred income tax liability at June 30,
1995 and 1994 was depreciation.
Page 28
<PAGE> 29
The components of the provision (benefit) for income taxes for the
years ended June 30, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current - Federal $621,833 $392,437 $272,005
- State 181,167 105,563 84,162
-------- -------- --------
803,000 498,000 356,167
-------- -------- --------
Current - Federal (49,000) 19,000 9,100
- State (15,000) 5,000 3,033
-------- -------- --------
(64,000) 24,000 12,133
-------- -------- --------
Provision for income taxes $739,000 $522,000 $368,300
======== ======== ========
</TABLE>
The components of the provision (benefit) for deferred income taxes for
the years ended June 30, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Allowance for doubtful accounts $(23,000) $ 9,000 $ -
Depreciation (4,000) 43,000 (29,007)
Accrued expenses and reserves (27,000) (12,000) -
Relocation expense - - 42,000
State taxes (12,000) (6,000) -
Other 2,000 (10,000) (860)
-------- -------- --------
$(64,000) $ 24,000 $ 12,133
======== ======== ========
</TABLE>
A reconciliation of income taxes at the statutory federal income tax
rate and the provisions for income taxes for the years ended June 30, 1995,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
Amount % Amount % Amount %
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Income tax at statutory
federal rate $593,322 34.0% $387,252 34.0% $295,962 34.0%
State and local income
taxes, net of federal
income tax effect 106,449 6.1 69,477 6.1 53,100 6.1
Amortization of goodwill 35,033 2.0 30,310 2.7 10,200 1.2
Other items, net 4,196 0.2 34,961 3.0 9,038 1.0
-------- ---- -------- ---- -------- ----
$739,000 42.3% $522,000 45.8% $368,300 42.3%
======== ==== ======== ==== ======== ====
</TABLE>
Page 29
<PAGE> 30
6. COMMITMENT
EMPLOYMENT
In June 1994, API entered into a three-year employment agreement with a
key employee. The agreement states that if the employee dies or becomes
disabled or is terminated for cause (as defined in the agreement) during the
employment period, the employee or the employee's beneficiary will receive
certain fixed payments as defined in the agreement.
NON-COMPETITION AGREEMENT
In June 1994, API entered into a non-competition agreement with the
former shareholders of API. The agreement expires in June 19999.
PURCHASE AGREEMENT
In June 1994, API entered into a four-year purchase agreement with one
of its vendors. The minimum purchase quantities are based on historical
purchase trends as defined in the agreement and the purchase price of the parts
will be the list price as set forth in the agreement and as adjusted in the
future based on the mutual agreement of the parties.
LEASE COMMITMENTS
The Company leases certain office and manufacturing facilities and
equipment under noncancelable operating leases which expire at various dates
through May 2002. The aggregate minimum future lease payments under these
leases at June 30, 1995 are approximately as follows:
<TABLE>
<S> <C>
1996 $ 661,000
1997 667,000
1998 682,000
1999 703,000
2000 145,000
Thereafter 279,000
----------
$3,137,000
==========
</TABLE>
Rental expense charged to operations was approximately $641,000,
$595,000 and $624,000 for the years ended June 30, 1995, 1994 and 1993,
respectively.
7. EMPLOYEE STOCK OPTIONS
In 1988, the Company established an Employee Stock Option Plan under
which options to purchase a toal of 275,000 shares of common stock may be
granted to certain employees as determined by the Company's Board of Directors.
Options granted under this plan vest in equal amounts on the first and second
anniversary date of the granting of the options. At June 30, 1995, options to
acquire 124,000 shares are outstanding and exercisable under this plan,
expiring at various dates through July 24, 1997.
Page 30
<PAGE> 31
In 1993, the Company established the 1993 Stock Option Plan, which
provides for granting options to purchase up to 250,000 shares of the
Company's common stock to employees, officers, directors and consultants of
the Company. The 1993 plan is a non-statutory stock option plan and options to
purchase 150,000 shares have been granted and are outstanding under this plan
at June 30, 1995. Options granted to purchase 100,000 shares expire on March 1,
2003 and vest in three equal amounts on March 1, 1995, 1995, and 1997. The
remaining option granted to purchase 50,000 shares (granted in fiscal 1995)
expires on July 18, 2004 and vests in three equal amounts on July 19, 1995,
1996 and 1997.
In fiscal 1995, the board of directors approved the establishment of
the 1995 Stock Option Plan, which will provide for granting options to
purchase up to 250,000 shares of the Company's common stock.
At June 30, 1995, 274,000 stock options were outstanding and 157,334
options were exercisable at $1.438 or $2 per share. All options have been
granted at prices equal to the fair market value of the common stock at the
grant date. No options were granted, exercised or canceled during fiscal 1993.
The Company extended the expiration date for one year on 1998 options to
acquire 85,000 shares. This extension resulted in additional compensation
expense of $85,000 in 1994.
A summary of option activities is as follows:
<TABLE>
<CAPTION>
Number Option
of Shares Prices
--------- ---------------
<S> <C> <C>
Balance, June 30, 1992 and 1993 235,000 $0.875 to 1.438
Granted 100,000 2.000
Exercised (90,000) 0.875 to 1.438
Canceled - -
------- ---------------
Balance, June 30, 1994 245,000 1.438 to 2.000
Granted 50,000 3.000
Exercised (21,000) 1.438
Canceled - -
------- ---------------
Balance, June 30, 1995 274,000 $1.438 to 3.000
======= ===============
</TABLE>
8. Employee Benefit Plans
API provides a profit-sharing plan and 401(k) plan for its employees.
The Board of Directors can authorize discretionary contributions with no
required minimum contribution. API's contribution to the profit-sharing plan
for the periods ended June 30, 1995 and 1994 was $120,000 and $60,000,
respectively. There were no API contributions to the 401(k) plan for the
periods ended June 30, 1995 and 1994.
Page 31
<PAGE> 32
9. UNAUDITED QUARTERLY RESULTS
Unaudited quarterly results of operations for each of the quarters in
the three years ended June 30, 1995 are presented below:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended June 30,
1995
Net sales $6,647,000 $6,275,000 $7,705,000 $8,545,000
Gross profit 1,590,000 1,579,000 1,992,000 2,272,000
Net income 170,000 179,000 280,000 377,000
Earnings per share .06 .06 .09 .12
1994
Net sales 3,938,000 3,656,000 4,100,000 6,303,000
Gross profit 833,000 855,000 870,000 1,810,000
Net income 108,000 123,000 135,000 251,000
Earnings per share .04 .04 .05 .08
1993
Net sales 3,822,000 4,159,000 4,158,000 4,425,000
Gross profit 816,000 922,000 1,017,000 1,010,000
Net income 71,000 115,000 170,000 146,000
Earnings per share .02 .04 .06 .05
</TABLE>
Page 32
<PAGE> 33
SCHEDULE II
CALNETICS CORPORATION
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION> Balance Additions
at Charged Deductions Balance
Beginning to from at End of
of Period Expense Allowance Other Period
--------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts:
Year ended
June 30, 1995 $197,525 $93,531 $28,041 $ -- $263,015
======== ======= ======= ======= ========
Year ended
June 30, 1994 $141,399 $52,521 $76,385 $80,000(a) $197,525
======== ======= ======= ======= ========
Year ended
June 30, 1993 $144,292 $55,000 $57,893 $ -- $141,399
======== ======= ======= ======= ========
</TABLE>
________________
(a) Represents Agricultural Products, Inc.'s allowance for doubtful accounts
balance at the date of acquisition.
Page 33
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page In
Exhibit Sequentially
Number Description Numbered Copy
- ------- ----------- -------------
<S> <C> <C>
3.1 Amended and Restated Articles of *
Incorporation of Calnetics (Exhibit
3.1 to Form 10-K filed September
25, 1989).
3.2 Bylaws of Calnetics Corporation *
(Exhibit 1.2 to Form 10-K filed
September 21, 1978).
3.3 Amendment to Bylaws of Calnetics *
Corporation (Exhibit 3 to Form 8
filed September 28, 1989).
10.1 Lease dated November 22, 1989 between *
Manchester Plastics Co., Inc. a subsidiary
of the Company and Tom Schneider and Arlene
Schneider and Amendment to said lease
dated December 5, 1989 (Exhibit 10.12
to Form 10-K dated June 30, 1991).
10.2 Lease dated June 2, 1992 by and between *
Honey Protas and Ny-Glass Plastics
Company, Incorporated, a subsidiary of
the Calnetics Corporation (Exhibit 10.19
to Form 10-K dated June 30, 1992).
10.3 Addendum No. 1 to Lease dated June 2, *
1992 (Exhibit 10.20 to Form 10-K
dated June 30, 1992).
10.4 Lease Guaranty Agreement entered into as *
of June 2, 1992 by Calnetics Corporation
(Exhibit 10.21 to Form 10-K dated June
30, 1992).
10.5 Memorandum of Lease with Right of First *
Refusal and Option to Purchase dated
May 22, 1992 (Exhibit 10.22 to
Form 10-K dated June 30, 1992).
</TABLE>
Page 34
<PAGE> 35
<TABLE>
<S> <C> <C>
10.6 Side Letter Agreement re Standard *
Industrial Commercial Single Tenant
Lease by and between Honey Protas as
lessor and Ny-Glass Plastics Company
as lessee dated May 22, 1992 (Exhibit
10.23 to Form 10-K dated June 30, 1992).
10.7 Calnetics Corporation 1988 Employee *
Stock Option Plan (Exhibit 10.25 to
Form 10-K dated June 30, 1993).
10.8 Calnetics Corporation 1993 Nonstatutory *
Stock Option Plan (Exhibit 10.26 to
Form 10-K dated June 30, 1993).
10.9 Business Loan Agreement dated June 28, *
1993 among Bank of America National
Trust and Savings Association, Calnetics
Corporation, Manchester Plastics Co.,
Inc. and Ny-Glass Plastics, Inc. (Exhibit
10.27 to Form 10-K dated June 30, 1993).
10.10 First Amendment to Business Loan Agreement of *
June 28, 1993 dated as of June 20, 1994 among
Bank of America National Trust and Savings
Association, Calnetics, Manchester and
Ny-Glass (Exhibit 10.17 to Form 10-K dated
June 30, 1994).
10.11 Stock Purchase Agreement among Calnetics and *
the Selling Shareholders of API effective as
of April 30, 1994. (Exhibit 2 to Form 8-K
filed June 24, 1994).
10.12 Business Loan Agreement dated June 20, 1994 *
among The Bank of California, N.A., Calnetics,
Manchester, Ny-Glass and API (Exhibit 10.19 to
Form 10-K dated June 30, 1994).
10.13 Security Agreement (Receivables and Inventory) *
dated June 20, 1994 between Calnetics and The
Bank of California, N.A. (Exhibit 10.20 to
Form 10-K dated June 30, 1994).
</TABLE>
Page 35
<PAGE> 36
<TABLE>
<S> <C> <C>
10.14 Security Agreement (Receivables and Inventory) *
dated June 20, 1994 between Ny-Glass and The
Bank of California, N.A. (Exhibit 10.21 to Form
10-K dated June 30, 1994).
10.15 Security Agreement (Receivables and Inventory) *
dated June 20, 1994 between Manchester and The
Bank of California, N.A. (Exhibit 10.22 to
Form 10-K dated June 30, 1994).
10.16 Security Agreement (Receivables and Inventory) *
dated June 20, 1994 between API and The Bank
of California, N.A. (Exhibit 10.23 to Form 10-K
dated June 30, 1994).
10.17 Term Loan Note dated June 20, 1994 among *
The Bank of California, N.A., Calnetics,
Manchester, Ny-Glass and API (Exhibit 10.24
to Form 10-K dated June 30, 1994).
10.18 Business Loan Agreement dated June 20, 1994 *
among Bank of America National Trust and
Savings Association, Calnetics, Manchester,
Ny-Glass and API (Exhibit 10.25 to Form 10-K
dated June 30, 1994).
10.19 Security Agreement dated June 20, 1994 *
between Calnetics and Bank of America
National Trust and Savings Association (Exhibit 10.26
to Form 10-K dated June 30, 1994).
10.20 Security Agreement dated June 20, 1994 *
between Ny-Glass and Bank of America
National Trust and Savings Association
(Exhibit 10.27 to Form 10-K dated June 30, 1994).
10.21 Security Agreement dated June 20, 1994 *
between Manchester and Bank of America
National Trust and Savings Association
(Exhibit 10.28 to Form 10-K dated June 30, 1994).
10.22 Security Agreement dated June 20, 1994 *
between API and Bank of America National
Trust and Savings Association (Exhibit 10.29
to Form 10-K dated June 30, 1994).
</TABLE>
Page 36
<PAGE> 37
<TABLE>
<S> <C> <C>
10.23 Noncompetition and Noninterference Agreement *
dated June 20, 1994 among Calnetics, API
and Lon Schultz, individually and as trustee
of the Lon Schultz Charitable Remainder
Unitrust (Exhibit 10.31 to Form 10-K dated
June 30, 1994).
10.24 Employment Agreement dated June 20, 1994 *
between API and Lon Schultz, an individual
(Exhibit 10.32 to Form 10-K dated June 30, 1994).
10.25 Parts Purchase and Supply Agreement dated *
June 20, 1994 between API and Story Plastics,
Inc. a California corporation (Exhibit 10.33 to
Form 10-K dated June 30, 1994).
10.26 Loan Agreement dated December 31, 1991 between *
California Statewide Communities Development
Authority and API (Exhibit 10.34 to Form 10-K
dated June 30, 1994).
10.27 Reimbursement Agreement dated December 1, 1991 *
between API and Union Bank (Exhibit 10.35 to
Form 10-K dated June 30, 1994).
10.28 Standby Reimbursement Agreement dated *
December 1, 1991 between API and The Bank of
California, N.A. (Exhibit 10.36 to Form 10-K
dated June 30, 1994).
10.29 Sixth Amendment to the Standby Reimbursement *
Agreement of December 1, 1991 dated July
1, 1994 (Exhibit 10.37 to Form 10-K dated
June 30, 1994).
10.30 Renewal/Consolidation Promissory Note and *
Security Agreement dated March 13, 1992
between API as borrower and First Union
National Bank of Florida as lender (Exhibit
10.38 to Form 10-K dated June 30, 1994).
10.31 Amendment dated November 30, 1994 to Business
Loan Agreement dated June 20, 1994 among Bank
of America National Trust and Savings Association,
Calnetics, Manchester, Ny-Glass and API.
</TABLE>
Page 37
<PAGE> 38
<TABLE>
<S> <C> <C>
10.32 Mortgage Modification, Consolidation, Spreader,
and Extension Agreement dated March 31, 1995
among First Union National Bank of Florida,
API and Calnetics.
10.33 API Profit Sharing Plan Adoption Agreement *
dated November 21, 1991 (Exhibit 10.39 to
Form 10-K dated June 30, 1994).
10.34 API 401(k) Plan Adoption Agreement effective *
as of January 1, 1993 (Exhibit 10.40 to Form
10-K dated June 30, 1994).
10.35 Nonstatutory Stock Option Agreement between *
Calnetics and Michael A. Hornak dated
February 28, 1994 (Exhibit 10.41 to Form
10-K dated June 30, 1994).
10.36 Nonstatutory Stock Option Agreement between *
Calnetics and Steven L. Strawn dated
February 28, 1994 (Exhibit 10.42 to Form 10-K
dated June 30, 1994).
10.37 Nonstatutory Stock Option Agreement between
Calnetics and Lon Schultz dated
July 18, 1994
22. Subsidiaries of the Company
27. Financial Data Schedule
- -----------------------------------------------------
</TABLE>
*Incorporated by reference to the document indicated.
Page 38
<PAGE> 39
SIGNATURES
Pursuant to the requirement of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CALNETICS CORPORATION
<TABLE>
<S> <C>
By: /s/ Teresa Louie Dated: September 4, 1995
---------------------------------- ---------------------
Teresa S. Louie
Treasurer
</TABLE>
Pursuant to the requirements of Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Clinton Gerlach Dated: September 4, 1995
- --------------------------------------- ---------------------
Clinton G. Gerlach
Chairman of the Board, President
Director
/s/ Michael Hornak Dated: September 4, 1995
- -------------------------------------- ---------------------
Michael A. Hornak
Vice President, Director
/s/ Raymond H. Heller Dated: September 4, 1995
- ------------------------------------ ---------------------
Raymond H. Heller
Director
/s/ Fred Edward Dated: September 4, 1995
- -------------------------------------- ---------------------
Fred E. Edward
Director
/s/ Steven Strawn Dated: September 4, 1995
- ------------------------------------- ---------------------
Steven L. Strawn
Vice President, Director
</TABLE>
Page 39
<PAGE> 1
EXHIBIT 10.31
================================================================================
[LOGO] BANK OF AMERICA AMENDMENT TO DOCUMENTS
- --------------------------------------------------------------------------------
AMENDMENT NO. 1 TO BUSINESS LOAN AGREEMENT
This Amendent No. 1 (the "Amendment") effective as of November 30, 1994
(the "Effective Date"), is between Bank of America National Trust and Savings
Association (the "Bank") and CALNETICS CORPORATION ("Borrower 1"), MANCHESTER
PLASTICS CO., INC. ("Borrower 2"), NY-GLASS PLASTICS, INC. ("Borrower 3") and
AGRICULTURAL PRODUCTS, INC. ("Borrower 4") (Borrower 1, Borrower 2, Borrower 3
and Borrower 4 are sometimes referred to collectively as the "Borrowers", and
individually as the "Borrower").
RECITALS
A. The Bank and the Borrowers entered into a certain Business Loan
Agreement dated as of June 20, 1994 (the "Agreement").
B. The Bank and the Borrowers desire to amend the Agreement.
AGREEMENT
1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meaning given to them in the Agreement.
2. AMENDMENTS. The Agreement is hereby amended as follows:
2.1 In Section 1 of the Agreement, the words "FACILITY NO. 1: TERM
LOAN AMOUNT AND TERMS" are substituted for the words "TERM
LOAN AMOUNT AND TERMS".
2.2 A new Section 1A is hereby added to the Agreement (following
Paragraph 1.4(c)), which reads in its entirety as follows:
1A. FACILITY NO. 2: LINE OF CREDIT AMOUNT AND TERMS
1A.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit (the "Facility No. 2") to
the Borrowers. The amount of the line of credit (the
"Facility No. 2 Commitment") is Two Million Dollars
($2,000,000).
(b) This is a revolving line of credit. During the
availability period described below, the Borrowers may
repay principal amounts and reborrow them.
(c) The Borrowers agree not to permit the outstanding
principal balance of the Facility No. 2 line of credit
to exceed the Facility No. 2 Commitment.
1A.2 AVAILABILITY PERIOD.
The line of credit is available between the date of this
Agreement and November 30, 1995 (the "Facility No. 2
Expiration Date") unless any Borrower is in dafault pursuant
to the provisions set forth in Section 9 of the Agreement.
- --------------------------------------------------------------------------------
AmendL (10/92) - 1 - 65-TempBR02
<PAGE> 2
1A.3 INTEREST RATE.
(a) The interest rate is the Bank's Reference Rate plus
one-half (0.50) percentage point.
(b) The Reference Rate is the rate of interest publicly
announced from time to time by the Bank in San
Francisco, California, as its Reference Rate. The
Reference Rate is set by the Bank based on various
factors, including the Bank's costs and desired return,
general economic conditions and other factors, and is
used as a reference point for pricing some loans. The
Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference
Rate shall take effect at the opening of business on the
day specified in the public announcement of a change in
the Bank's Reference Rate.
1A.4 REPAYMENT TERMS.
(a) The Borrowers will pay all accrued but unpaid interest
on December 1, 1994, and then monthly thereafter until
payment in full of any principal outstanding under this
Facility No. 2 line of credit.
(b) The Borrowers will repay in full all principal and any
accrued but unpaid interest or other charges outstanding
under this line of credit no later than the Facility
No. 2 Expiration Date.
2.3 A new Paragraph 2.1 is added to the Agreement which reads in
its entirety as follows:
2.1 REQUIRED DEPOSITS. (FACILITY NO. 2)
(a) The Borrowers agree that until the availability period
set forth in Paragraph 1A.2 expires and all obligations
under Facility No. 2 of this Agreement are repaid, the
Borrowers will keep net free collected balances ("NFC
Balances") at least equal to One Hundred Thirty Thousand
Dollars ($130,000).
(b) NFC Balances are non-interest bearing deposits after the
Bank deducts float and balances it requires under its
normal practices as compensation for maintaining deposit
accounts.
(c) The Bank will use the Reference Rate in effect at the
end of each calculation period.
(d) The fee will be calculated on a calendar quarter basis.
(e) The fee will be due 10 days from the Bank's billing date
and will be paid quarterly.
2.4 New Paragraphs 4.9 and 4.10 are added to the Agreement which
read in their entirety as follows:
4.9 REQUESTS FOR CREDIT. (FACILITY NO. 2) Each request for
an extension of credit will be made in writing in a
manner acceptable to the Bank, or by another means
acceptable to the Bank.
4.10 TELEPHONE AUTHORIZATION. (FACILITY NO. 2)
(a) The Bank may honor telephone instructions for advances
or repayments given by any one of the individual
signer(s) of this Agreement or a person or persons
authorized by any one of the signer(s) of the Agreement.
- -------------------------------------------------------------------------------
AmendL (10/92) - 2 - 65-TempBR02
<PAGE> 3
(b) Advances will be deposited in and repayments will be
withdrawn from Borrower 1's account number 14656-50415,
or such other accounts with the Bank as are designated
in writing by the Borrowers.
(c) The Borrowers indemnify and excuse the Bank (including
its officers, employees, and agents) from all
liability, loss, and costs in connection with any act
resulting from telephone instructions it reasonably
believes are made by any individual authorized by the
Borrowers to give such instructions. This indemnity and
excuse will survive this Agreement's termination.
2.5 Sub-paragraph (a) of Paragraph 4.2 of the Agreement is
amended to read in its entirety as follows:
(a) The Borrowers agree that the Bank will debit Borrower
1's deposit account number 14656-50415 (the "Designated
Account"), or such other accounts with the Banks as
are designated in writing by the Borrowers on the date
each payment of principal and interest for Facility No.
1, and each payment of interest for Facility No. 2
becomes due (each such date a "Due Date"). If any Due
Date is not a banking day, the Designated Account will
be debited on the next banking day.
2.6 Paragraph 7.1 of the Agreement is amended to read in its
entirety as follows:
7.1 To use the proceeds of (a) Facility No. 1 only to
finance the acquisition of Agricultural Products, Inc.;
and (b) Facility No. 2 only to finance short term
working capital requirements.
2.7 New Paragraphs 7.21 and 7.22 are added to the Agreement which
read in their entirety as follows:
7.21 PROFITABILITY. (FACILITY NO. 2) To maintain on a
consolidated basis a positive net income before taxes
and extraordinary items and a positive net income after
taxes and extraordinary items for each semi-annual
accounting period.
7.22 OUT OF DEBT PERIOD. (FACILITY NO. 2) To repay any
advances in full, and not to draw any additional
advances on the Borrowers' Facility No. 2 revolving
line of credit, for a period of at least 30 consecutive
days in each line-year. "Line-year" means the period
between the date of this Agreement and November 30,
1995, and each subsequent one-year period (if any).
2.8 A new Paragraph 10.13 ia added to the Agreement which reads
in its entirety as follows:
10.13 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes
the Business Loan Agreement entered into as of June
28, 1993 between the Bank and Borrower 1, Borrower 2,
and Borrower 3, and any credit outstanding thereunder
shall be deemed to be outstanding as Facility No. 2
under this Agreement.
3. EFFECT OF AMENDMENT. Except as specifically modified or
supplemented by the terms of this Amendment, all of the terms
and conditions of the Agreement shall remain in full force
and effect.
4. COUNTERPARTS. This Amendment may be executed in as many
counterparts as necessary or convenient, and by the different
parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
5. CALIFORNIA LAW. This Amendment is governed by California law.
- -------------------------------------------------------------------------------
AmendL (10/92) -3- 65-TempBRO2
<PAGE> 4
This Amendment is executed as of the date stated at the beginning of this
Amendment.
BANK OF AMERICA CALNETICS CORPORATION
National Trust and Savings Association
X /s/ ROD C. BAUER X /s/ STEVEN L. STRAWN
-------------------------------- --------------------------------
By: Rod C. Bauer By: Steven L. Strawn
Title: Vice President Title: Vice President
X /s/ CLINTON G. GERLACH
--------------------------------
By: Clinton G. Gerlach
Title: Chairman of the Board and
President
MANCHESTER PLASTICS CO., INC.
X /s/ STEVEN L. STRAWN
--------------------------------
By: Steven L. Strawn
Title: President
X /s/ CLINTON G. GERLACH
--------------------------------
By: Clinton G. Gerlach
Title: Chairman of the Board
NY-GLASS PLASTICS, INC.
X /s/ MICHAEL A. HORNAK
--------------------------------
By: Michael A. Hornak
Title: President
X /s/ CLINTON G. GERLACH
--------------------------------
By: Clinton G. Gerlach
Title: Chairman of the Board
AGRICULTURAL PRODUCTS, INC.
X /s/ LOU SCHULTZ
--------------------------------
By: Lon Schultz
Title: President
X /s/ CLINTON G. GERLACH
-------------------------------
By: Clinton G. Gerlach
Title: Chairman of the Board
- ------------------------------------------------------------------------------
AmendL (10/92) -4- 65-TempBRO2
<PAGE> 1
EXHIBIT 10.32
This instrument was prepared by:
Mr. Robert J. Stambaugh
SHARIT, BUNN, CHILTON & HOLDEN, P. A.
Attorneys at Law
Post Office Box 9498
Winter Haven, FL 33883-9498
MORTGAGE MODIFICATION, CONSOLIDATION, SPREADER,
AND EXTENSION AGREEMENT
THIS AGREEMENT made and entered into as of the 31st day of March, 1995,
by and between AGRICULTURAL PRODUCTS, INC., a California corporation,
hereinafter referred to as "Mortgagor", CALNETICS CORPORATION, a California
corporation, hereinafter referred to as "Guarantor", and FIRST UNION NATIONAL
BANK OF FLORIDA, hereinafter referred to as "Mortgagee".
WITNESSETH:
WHEREAS, the Mortgagee is the present owner and holder of the below
described instruments executed by Mortgagor in connection with the following
described Mortgage loans from Mortgagor encumbering real estate situated in Polk
County, Florida, said instruments being specifically:
1. Promissory Note from Mortgagor to Mortgagee dated February 20,
1990, evidencing an original principal indebtedness of $162,000.00 secured by
that certain Mortgage dated February 20, 1990 and recorded February 26, 1990 in
O. R. Book 2827, page 1519 of the public records of Polk County, Florida.
2. Promissory Note from Mortgagor to Mortgagee dated May 25, 1990
evidencing an original principal indebtedness of $90,000.00 secured by that
certain Mortgage dated May 25, 1990, recorded July 19, 1990 in O. R. Book 2866,
page 1067, public records of Polk County, Florida.
3. Renewal/Consolidated Promissory Note from Mortgagor to Mortgagee
(renewing and consolidating the Promissory Notes described in paragraphs 1 and
2 above) in the amount of $233,945.01 dated March 13, 1992.
4. Mortgage Modification, Consolidation, and Extension Agreement
entered into between Mortgagor and Mortgagee (modifying, consolidating and
extending the Mortgages described at paragraphs 1 and 2 above) dated March 13,
1992, and recorded March 30, 1992 in O. R. Book 3081, page 1491, public records
of Polk County, Florida.
5. Promissory Note from Mortgagor to Mortgagee dated March 27, 1991
evidencing an original indebtedness of $130,500.00 secured by that certain
Mortgage dated March 27, 1991, and recorded March 28, 1991 in O. R. Book 2955,
page 1818, public records of Polk County, Florida.
WHEREAS, the Mortgages described at paragraphs 1 and 2 above, as
modified by the Agreement described at paragraph 4 above, encumber the real
property described in Exhibit A attached hereto; and
WHEREAS, the Mortgage described 5, above, encumbers the real property
described in Exhibit B attached hereto; and
WHEREAS, the present cumulative total unpaid principal balance due on
the Promissory Notes described at paragraphs 3 and 5, above, is presently the
sum of TWO HUNDRED NINETY-NINE THOUSAND SIX HUNDRED TWENTY-SIX AND 21/100
DOLLARS ($299,626.21); and
WHEREAS, Mortgagor has requested the Mortgagee to adjust certain of the
loan terms, and to consolidate and modify the payment provisions of the above
described Promissory Notes and Mortgages, all as more specifically set forth in
this Agreement, and the Renewal Consolidated Promissiory Note; and
WHEREAS, the Mortgagee has agreed to make the adjustments and changes
requested by Mortgagor as hereinafter set forth on the condition that the lien
of each of the Mortgages be spread to include all of the real property
described in Exhibits A and B attached hereto.
NOW, THEREFORE, in consideration of the aforesaid premises, the mutual
benefits to and the mutual promises of the parties hereto, the sums hereinafter
stipulated to be paid, and other good and valuable considerations, it is hereby
agreed by the Mortgagor, Guarantor, and the Mortgagee as follows:
I.
All interest due and owing on said notes and mortgages has been paid
through March 30, 1995.
<PAGE> 2
II.
As evidence of the said sum due Mortgagee by Mortgagor, Mortgagor has
this day simultaneously executed and a Renewal Consolidated Promissory Note in
the amount of TWO HUNDRED NINETY-NINE THOUSAND SIX HUNDRED TWENTY-SIX AND 21/100
DOLLARS ($299,626.21), combining the remaining indebtedness due on the
Promissory Notes described in the preceding paragraphs 3 and 5 of this
agreement, bearing interest at the rate of Mortgagee's Prime, plus
three-quarters percent (0.75%) per annum, as that rate may change from time to
time with changes to occur on the date that Mortgagee's prime rate changes,
calculated on a 360 day basis based on the actual elapsed, said Consolidate
Renewal Note payable as follows:
Principal shall be paid in fifty-nine (59) equal monthly installments
of $1,664.59 each, commencing on May 2, 1995, together with accrued
interest thereon at the rate set forth above, and continuing on the
same day of each successive month thereafter, with a final payment of
all unpaid principal and interest thereon on April 2, 2000.
III.
The liens of the Mortgage described in paragraphs 1 and 2 (as
consolidated by Agreement described in paragraph 4) and paragraph 5, are hereby
spread, consolidated and modified so that they, and each of them, shall now
constitute a single valid first mortgage lien on all of the real property
described in Exhibits A and B, attached, which shall secure the payment of the
obligations secured in the Mortgages, as fully as if set forth herein.
IV.
The parties to this Agreement hereby consent to the said Modification,
Consolidation, Spreader and Extension and agree that the statute of limitations
shall not commence to run against the same until the expiration of time for
payment of the indebtedness as herein extended.
V.
The terms, provisions and covenants of the Letter Commitment issued by
Mortgagee to Mortgagor dated March 22, 1995, and accepted by Mortgagor on April
4, 1995, are incorporated herein by reference, and the failure of Mortgagor to
comply with and fulfill the obligations thereunder shall constitute an event of
default entitling Mortgagee, at its option, to declare the notes and mortgages,
as modified, herein described immediately due and payable entitling Mortgagee
to foreclose on the security therefor and to exercise any other remedies then
available to Mortgagee.
VI.
It is the intent of the parties hereto that this instrument shall not
constitute a novation and shall in no way adversely affect or impair the lien
priority of the Mortgages. In the event this instrument, or any part hereof, or
any of the instruments executed in connection herewith shall be construed or
shall operate to affect the lien priority of the Mortgages, then to the extent
such instrument creates a charge upon the real property encumbered by the
Mortgages in excess of that contemplated and permitted by the Mortgages, and to
the extent third persons acquiring an interest in such property between the
time of recording of the Mortgages and the recording hereof are prejudiced
thereby, if any, this instrument shall be void and of no force or effect;
provided, however, that notwithstanding the foregoing, the parties hereto, as
between themselves, shall be bound by all the terms and conditions hereof until
all indebtedness owing from Mortgagor to Mortgagee shall have been paid.
VII.
Environmental Conditions of Property; Indemnification. Mortgagor
warrants and represents to Mortgagee, after appropriate inquiry and
investigation that: (a) while Mortgagee has any interest in or lien on the
Property, the Property described herein is, and at all times hereafter, will
continue to be in full compliance with all Federal, State and local
environmental laws and regulations, including but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA), Public Law No. 96-510, 94 Stat. 2767, 42 USC 9601, et. seq, and the
Superfund Amendments and Reauthorization Act of 1986 (SARA), Public Law No.
99-499, 100 Stat. 1613, and (b) (i), as of the date hereof there are no
hazardous materials, substances, wastes or other environmentally regulated
substances (including without limitation, any materials containing asbestos)
located on, in, or under the Property or used in connection therewith, or (ii)
Mortgagor has fully disclosed to Mortgagee in writing the existence, extent, and
nature of any such hazardous materials, substances, wastes, or other
environmentally regulated substances, which Mortgagor is legally authorized and
empowered to maintian on, in, or under the Property or use in connection
therewith, and Mortgagor has obtained and will maintain all licenses, permits,
and approvals required with respect thereto, and is in full compliance
<PAGE> 3
with all of the terms, conditions, and requirements of such licenses, permits,
and approvals. Mortgagor further warrants and represents that it will promptly
notify Mortgagee of any change in the nature or extent of any hazardous
materials, substances or wastes maintained on, in, or under the Property or
used in connection therewith, and will transmit the Mortgagee copies of any
citations, orders, notices, or other material governmental or other
communication received with respect to any other hazardous materials,
substances, wastes, or other environmentally regulated substances affecting the
Property.
Mortgagor shall indemnify and hold Mortgagee harmless from and against
any and all damages, penalties, fines, claims, liens, suits, liabilities, costs
(including clean-up costs), judgments, and expenses (including attorneys',
consultants', or experts' fees and expenses) of every kind and nature suffered
by or asserted against Mortgagee as a direct or indirect result of any warranty
or representation made by Mortgagor in the preceding paragraph being false or
untrue in any material respect or any requirement under any law, regulation, or
ordinance, local, state, or federal, which requires the elimination or removal
of any hazardous materials, substances, wastes or other environmentally
regulated substances by Mortgagee.
Mortgagor's obligations to Mortgagee hereunder shall terminate upon
payment in full of the Note secured hereby and satisfaction and release of the
Mortgage, except, as to any act or occurrence prior to such payment and
satisfaction which gives rise to liability hereunder, the Mortgagor's liability
shall continue, survive, and remain in full force and effect notwithstanding
payment in full and satisfaction of said Note and this Mortgage or foreclosure
under this Mortgage, or delivery of a deed in lieu of foreclosure.
VIII.
Except as modified herein, the notes described above, as well as all
other loan documentation executed in connection with this loan transaction,
including all amendments or modifications thereof, are ratified, approved and
affirmed in all their terms and conditions, and shall remain in full force and
effect, and the execution of this instrument on behalf of the Mortgagee shall
not be deemed a waiver of any default in any of the above described notes
existing as of this date, or shall this instrument be deemed to eliminate any
right which Mortgagee may otherwise have to accelerate the indebtedness on
account of any default by Mortgagor.
IX.
This Agreement shall bind jointly and severally the parties
hereto, their heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, the Mortgagor, the Guarantor, and the Mortgagee
have caused this Agreement to be executed as of this 31st day of March, 1995.
Signed, Sealed and Delivered AGRICULTURAL PRODUCTS, INC.
in the Presence of:
/s/ K. BRIDGERS By /s/ LON SCHULTZ
- ------------------------------ ----------------------------------------
K. BRIDGERS Lon Schultz, President
- ------------------------------ 3857 West Lake Hamilton Drive
Print/Type Name of Witness Winter Haven, FL 33881
/s/ LOUISE A. MANZANO (CORPORATE SEAL)
- ------------------------------
LOUISE A. MANZANO MORTGAGOR
- ------------------------------
Print/Type Name of Witness
AS TO MORTGAGOR CALNETICS CORPORATION
By /s/ CLINTON G. GERLACH
/s/ MARY LIVINGSTON ----------------------------------------
- ------------------------------ Clinton G. Gerlach, President
MARY LIVINGSTON 20401 Prairie Street
- ------------------------------ Chatsworth, CA 91311
Print/Type Name of Witness
/s/ BARBARA GUYER (CORPORATE SEAL)
- ------------------------------
BARBARA GUYER (GUARANTOR)
- ------------------------------
Print/Type Name of Witness
AS TO GUARANTOR
/s/ CHARLES D. CHITTON
- ------------------------------ FIRST UNION NATIONAL BANK OF FLORIDA
CHARLES D. CHITTON
- ------------------------------ By /s/ J. EARL MORGAN
Print/Type Name of Witness ---------------------------------------
J. Earl Morgan, III, Vice President
/s/ LYNN S. SCOTT Post Office Box 193
- ------------------------------ Winter Haven, FL 33882-0193
LYNN S. SCOTT
- ------------------------------ (CORPORATE SEAL)
Print/Type Name of Witness
AS TO MORTGAGEE (MORTGAGEE)
3
<PAGE> 4
STATE OF CALIFORNIA
COUNTY OF SAN BERNARDINO
The foregoing document was acknowledged before me by LON SCHULTZ as
President of AGRICULTURAL PRODUCTS, INC., a California corporation, on behalf
of said corporation, who is personally known to me or who has produced
B1536807, as identification, this 8th day of May, 1995.
[SEAL] /s/ CONSUELO UNTALAN
-------------------------------------
CONSUELO UNTALAN
-------------------------------------
Print/Type Name of Notary Public
Commission No.
----------------------
My Commission Expires:
--------------
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
The foregoing document was acknowledged before me by CLINTON G.
GERLACH, as President of CALNETICS, INC., a California corporation, on behalf
of said corporation, who is personally known to me or who has produced
, as identification, this day of May, 1995.
- ----------- ----
[SEAL] /s/ ROBERT WALTER MATLOSZ
-------------------------------------
ROBERT WALTER MATLOSZ
-------------------------------------
Print/Type Name of Notary Public
Commission No. 1014700
My Commission Expires: Jan. 20, 1998
STATE OF FLORIDA
COUNTY OF POLK
The foregoing document was acknowledged before me by J. EARL MORGAN,
III, as Vice President of FIRST UNION NATIONAL BANK OF FLORIDA, who is
personally known to me, this 15th day of May, 1995.
[SEAL] /s/ LYNN S. SCOTT
-------------------------------------
LYNN S. SCOTT
-------------------------------------
Print/Type Name of Notary Public
Commission No. CC207265
My Commission Expires: Jul. 16, 1996
EXHIBIT A
The North 457.50 feet of Lot 180, lying East of canal in Lucern Park Fruit
Association, as shown by map or plat thereof recorded in the office of the
Clerk of the Circuit Court in and for Polk County, Florida, in Plat Book 3,
Page 67, LESS AND EXCEPT the North 307.5 feet thereof and LESS AND EXCEPT
roadways of record.
EXHIBIT B
Commence at the Southeast corner of Lot 180 of Lucerne Park Fruit Association
Subdivision, as recorded in Plat Book 3B, page 67, of the public records of
Polk County, Florida, run thence North 00 degrees 27 minutes 13 seconds West
along the East boundary of said lot, 31.22 feet to the point of beginning.
Thence continue North 00 degrees 27 minutes, 13 seconds West, 150.00 feet;
thence South 89 degrees 41 minutes 41 seconds West, 308.63 feet to the Easterly
right of way of the Lake Henry-Lake Hamilton Canal, thence South 00 degrees 19
minutes 40 seconds East along said right of way, 150.00 feet, thence North 89
degrees 41 minutes 41 seconds East, 308.96 feet to the point of beginning.
Subject to maintained right of way along the East boundary thereof.
4
<PAGE> 5
[FIRST UNION LOGO]
March 22, 1995
Mr. Lon Schultz, President
Agricultural Products, Inc.
Post Office Box 3760
Ontario, CA 91761
Dear Mr. Schultz:
We are pleased to advise you that the First Union National Bank of Florida
(hereinafter referred to as "Bank") has approved the renewal and consolidation
of your mortgage loans secured by first mortgages on the real property
(hereinafter referred to as the "Mortgaged Premises") located at 3855 and 3857
Lake Hamilton Drive in Winter Haven, Florida. This commitment is being offered
subject to the following terms and conditions.
A. TERMS OF LOAN
1. Borrower: The loan shall be made to Agricultural Products, Inc.
(hereinafter referred to as "Borrower"), which shall be responsible for the
repayment of the loan.
2. Amount of Loan: The loan shall be in an amount not to exceed Two
Hundred Ninety Nine Thousand Six Hundred Twenty Six and 21/100 Dollars
($299,626.21).
3. Term of Loan: The principal amount of the loan shall be repayable over
the term of five (5) years from the date of closing, effective as of March
31, 1995, with repayment terms set forth in paragraph 5 below.
4. Interest Rate: The loan shall bear interest at a rate of
three-quarters of one percent (0.75%) above the Bank's Prime Rate per annum.
Prime Rate is defined as that rate of interest announced from time to time by
the Bank as its Prime Rate. Interes shall be calculated using a year base of
360 days and charged for the actual number of days elapsed in an interest
period.
5. Repayment: Commencing on the fifth day of the first month of the
loan term and continuing on the fifth day of each month thereafter, principal
payments of $1,664.59 plus interest shall be due in fifty-nine (59) monthly
installments, with the principal balance of the loan, if not sooner paid, being
payable at maturity, which shall be the fifth day of the sixtieth (60th) month
of the loan term.
<PAGE> 6
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 2
6. Prepayment: The loan may be prepaid in whole or in part at any time
without any prepayment premium, penalty, or fee whatsoever. Prepayments will be
applied to the principal balance of the loan in inverse order of maturity.
7. Loan Purpose: The loan shall be used by the Borrower for the
purpose of renewing and consolidating First Union notes #42 and #67 and for no
other purpose.
8. Loan Security: The repayment of the loan shall be secured by:
(a) A mortgage constituting a valid first lien on the Mortgaged
Premises, together with all Improvements presently located or hereafter
to be constructed thereon. The final legal description of the Mortgaged
Premises must be approved by the Bank and its attorneys.
(b) A Security Agreement, constituting a valid first lien on and prior
perfected security interest in such fixtures, equipment, and personal
property (including additions, replacements, substitutions thereto or
thereof, and after-acquired property) to be located in or upon which
are used or useful on, in, or about the Mortgaged Premises.
9. Unlimited Guaranty: The repayment of the loan and all interest
accrued thereon and the performance of the Borrower and the terms shall be
unconditionally guaranteed by Calnetics Corporation (hereinafter referred to as
"Guarantor"). The Guaranty shall remain in full force on this obligation, as
amended.
10. Loan Administration Fee: Upon acceptance of this Commitment,
Borrower shall pay to Bank a nonrefundable Loan Administration Fee in the
amount of $500.00 to compensate the Bank for costs and expenses incurred to
underwrite, document, and close the loan herein contemplated.
B. REQUIREMENTS OF LOAN
1. Title Assurance: The Bank's obligation to provide the financing
contemplated herein is expressly conditioned upon it's receipt of a title
opinion letter from it's attorney verifying that it will have a valid first
mortgage in the real property.
<PAGE> 7
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 3
2. Insurance: At the time of loan closing, Borrower shall furnish a
permanent policy or policies of fire and extended coverage insurance and
general comprehensive liability insurance policy or policies, which shall be
written in such amounts, on such forms, and by such companies as shall be
acceptable to and approved by the Bank and shall contain a written
noncontributing standard long-form mortgage/loss payable clause in favor of the
Bank, as its interest may from time to time appear, and, in addition shall
contain the written obligation on the part of the issuing carrier or carriers
to provide to the Bank with at least ten (10) days prior written notice of the
expiration or any contemplated termination or cancellation of such policy or
policies.
3. Annual Reports: The Guarantor shall furnish to the Bank within
ninety (90) days after the end of each fiscal year the Annual Report pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, more commonly
known as the 10-K report. The report shall be prepared in accordance with
generally accepted accounting principles.
4. Closing Attorneys: The loan shall be closed by Attorneys of the
Bank's choosing who shall represent the Bank in this transaction. All matters
pertaining to the Commitment requirements and the loan documents must be
satisfactory to said attorneys.
C. DOCUMENTATION OF LOAN
1. General Provisions: The documents used to evidence and secure the
loan transaction contemplated herein shall be those documents customarily used
by the Bank in connection with loan transactions of the nature and size
contemplated herein and/or such other documents as the Bank and its attorneys,
in their sole discretion, may deem necessary or expedient for the Bank's
protection. All required loan documents shall be prepared by and acceptable to
the Bank's attorneys. In addition to all other documents which may be
required, the following specific loan documents shall be required, to
wit:
(a) A Renewal Consolidated Promissory Note evidencing the loan.
(b) A Mortgage Deed, granting a first lien on the Borrower's fee
simple title to the Mortgage Premises.
(c) A Security Agreement granting a first lien and prior perfected
security interest in all construction materials, fixtures, equipment,
and items of personal property as aforesaid.
<PAGE> 8
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 4
(d) Uniform Commercial Code Financing Statements to be filed with
the Office of the Secretary of State of Florida and the Clerk of the
Circuit Court of Polk County, Florida, evidencing the security
interests granted by the aforesaid Security Agreements.
(e) An Environmental Rider.
(f) A Closing Statement.
2. Special Provisions: The loan documents shall provide that, so long as
any part of the loan contemplated hereby is outstanding, the Mortgaged Premises
referred to above shall remain free and clear of all liens, encumbrances,
mortgages, security interests, and secondary financing whatsoever, and shall
not be sold, conveyed, or transferred, or leased, except for those transactions
which may be approved in writing by the Bank. The loan documents shall provide
that occurrence of any of the foregoing shall, at the option of the Bank,
constitute grounds for accelerating any and all sums unpaid under the loan.
D. MISCELLANEOUS
1. Environmental Certification: Borrower certifies by acceptance of this
agreement, or shall furnish evidence satisfactory to Bank, that to the best of
its knowledge the property does not contain: (a) asbestos in any form, (b)
urea formaldehyde foam insulation, (c) transformers or other equipment
containing polychlorinated biphenyls (PCBs) in amounts that exceed acceptable
standard levels, (d) underground storage tanks, nor (e) any other materials or
substances that are regulated or prohibited by Federal, State, or local laws,
or that are known to pose a hazard to the environment or to human health.
Borrower also certifies, or shall furnish evidence satisfactory to Bank, that
to the best of its knowledge the property and operations at the property are
in compliance with all applicable Federal, State, and local statutes, laws, and
regulations. Borrower further certifies that no notices claiming a violation of
regulations or statutes, nor notices requiring compliance with regulations or
statutes, nor notices demanding payment or contribution for injury to the
environment or human health have been served on Borrower, or, to the best of
Borrower's knowledge, on any former owner/operator of the Mortgaged Premises,
by any government agency, individual, or other entity. Borrower agrees to
forward a copy of any such notices received after settlement to
<PAGE> 9
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 5
Bank within three (3) days of their receipt. Borrower acknowledges that Bank
shall not be obligated to make any disbursements if condemnation proceedings
are commenced or threatened against any part of the property.
Borrower further certifies that any hazardous or potentially hazardous
materials used in Borrower's operation or generated as a product or by-product
are now and will continue to be stored, used, and maintained in accordance with
applicable Federal, State, and local laws and regulations, and that all
hazardous wastes will be disposed of by duly licensed contractors in accordance
with all governing regulations. In the sole and absolute discretion of Bank,
Borrower may be required to submit a report, satisfactory to Bank, prepared by
a consultant acceptable to Bank, certifying that Borrower has complied and is
complying with this clause. Bank further reserves the right to require
systematic and periodic monitoring of the property throughout the term of the
loan.
By execution of a rider attached to the mortgage/security instrument at loan
closing, Borrower shall provide additional warranties and representations
concerning the environmental conditions of the property. Borrower shall also
indemnify Bank against any and all damages arising from any claims of
environmental contamination of the property. A copy of this rider is attached
for Borrower's review.
2. Representations of Borrower: The validity of this Commitment is
subject to the accuracy of all information, representations, and materials
provided, made, or submitted with or in support of the application for the loan
contemplated herein; and the failure of the accuracy thereof or any material
changes therein shall, at the option of the Bank, operate to terminate this
Commitment and all of the Bank's obligations hereunder if the same shall occur
prior to closing and shall constitute grounds for accelerating any and all sums
unpaid under the loan documents if the same shall occur subsequent to closing.
3. Costs and Expenses: The Bank shall not be put to any expense
whatsoever in connection with the issuance of this Commitment or the closing of
the loan transaction contemplated hereby. Accordingly, the Borrower shall pay
directly or reimburse the Bank for all costs and expenses incurred in
connection with the preparation for and the closing of the loan whether said
loan is closed or not, including, without limitation, all appraisal fees,
surveys, legal fees, documentary stamp taxes, intangible taxes, recording
costs, license and permit fees, and all title insurance and other insurance
premiums required in connection with the loan transaction contemplated herein.
<PAGE> 10
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 6
4. Voidability of Commitment: This Commitment shall be voidable, at the
option of the Bank, if any of the following events shall occur, to wit:
(a) If Borrower commits an act of bankruptcy.
(b) If a proceeding is commenced by or against Borrower under any
bankruptcy or insolvency law.
(c) If Borrower's business is discontinued or suspended for any
reason.
(d) If there is any material adverse change in Borrower's business or
financial condition.
(e) If Borrower defaults on any other obligation it may have to the
Bank.
5. Depository Accounts: Certain of Borrower's depository accounts will be
maintained at the Bank.
6. Cross-Default: A default under any commitment and/or loan made by any
lending institution to Borrower shall constitute a default under all
commitments and/or loans made to Borrower by the Bank.
7. Non-Assignability: Neither this Commitment nor the proceeds of the
loan contemplated herein shall be assignable by Borrower, except to Guarantor,
without the prior written consent of the Bank, and any attempt at such
assignment, without the Bank's prior written consent, shall be void.
8. Modifications and Amendments: No change in the provisions of this
Commitment shall be binding unless in writing and executed in the name of the
Bank and the Borrower by a duly authorized officer of the Bank and the
Borrower, respectively.
9. Governing Law: This Commitment, the loan transaction contemplated
hereby, and all loan documents executed pursuant hereto shall be construed
according to and governed by the laws of the State of Florida.
<PAGE> 11
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 7
10. Closing: The loan transaction contemplated herein shall be closed on
or before April 12, 1995, to be effective as of March 31, 1995. Failure to
close by this date shall render this commitment null and void.
11. Commitment Provisions Survive Closing: The provisions of this
Commitment shall survive the closing of the loan transaction contemplated here.
12. Commitment Expiration: This Commitment shall expire unless it has been
accepted in writing and the acceptance received by the undersigned on or before
April 5, 1995.
13. Waiver of Jury Trial: THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED ON THIS AGREEMENT OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK
ACCEPTING AND/OR ENTERING INTO THIS AGREEMENT (OR ANY AGREEMENT EXECUTED IN
CONNECTION WITH THIS AGREEMENT) FROM, OR WITH, BORROWER AND/OR GUARANTOR(S).
If the Bank chooses to waive any covenant, paragraph, or provision of this
Commitment, or if any covenant, paragraph, or provision of this Commitment is
construed by a court of competent jurisdiction to be invalid, it shall not
affect the applicability, validity, or enforceability of the remaining
covenants, paragraphs, or provisions.
Please indicate your acceptance of this Commitment and the terms and conditions
contained herein by executing your acceptance immediately below and returning
the executed original Commitment Letter to the Bank on or before April 5, 1995.
Sincerely,
/s/ EARL MORGAN
- ---------------------------
Earl Morgan, Vice President
<PAGE> 12
Mr. Lon Schultz, President
Agricultural Products, Inc.
March 22, 1995
Page 8
BORROWER'S ACCEPTANCE OF COMMITMENT AND AGREEMENT
The above Mortgage Loan Commitment is hereby accepted on the terms and
conditions outlined therein. If I fail to comply with any of the above
conditions or requirements or if my application is withdrawn or canceled by me,
or the loan contemplated therein cannot be closed within the time above
provided due to title difficulty, or other reasons within my control, I
understand that the Loan Commitment will expire immediately. I further agree
that, notwithstanding any such expiration of the Commitment, I shall be
obligated to pay all reasonable costs, expenses, and attorneys' fees incurred
by the Bank to the time of such expiration in connection with the issuance of
this Commitment and the preparation for the closing.
Agricultural Products, Inc.
By: /s/ LON SCHULTZ Date: 4/4/95
------------------------------------------- ---------------------
Lon Schultz, President
GUARANTOR'S ACCEPTANCE OF COMMITMENT AND AGREEMENT
Calnetics Corporation
By: /s/ CLINTON G. GERLACH Date: 4/5/95
------------------------------------------- ---------------------
Clinton G. Gerlach, Chairman
<PAGE> 13
FIRST UNION NATIONAL BANK
OF FLORIDA
Commercial Banking
Post Office Box 193
Winter Haven, Florida 33880
813 291-6620
FAX 813 291-6618
[FIRST UNION LOGO]
Via Facsimile to (909) 390-1889
March 13, 1995
Mr. Lon Schultz, President
Agricultural Products, Inc.
Post Office 3760
Ontario, California 91761
Re: RENEWAL AND CONSOLIDATION OF AGRICULTURAL PRODUCTS, INC.'S NOTES #42 AND 67
Dear Mr. Schultz:
This letter supercedes and replaces my letter to you dated March 8,
1995, in which I responded to your request that First Union National Bank of
Florida ("Bank") would renew and consolidate the two mortgage notes referenced
above. We would entertain such a consolidation and renewal, subject to the
terms and conditions outlined herein.
BORROWER:
The borrower would continue to be Agricultural Products, Inc.
("Borrower"), or, at the option of Calnetics, Agricultural Products, Inc.'s
parent company, Calnetics may be substituted as the Borrower.
AMOUNT:
The amount of the consolidated renewal note would be the unpaid
principal balance of the two existing notes, referenced above, as of the
closing date.
TERM:
The renewal term would be sixty months, based upon a fifteen-year
amortization of principal plus interest monthly with a balloon payment due in
the sixtieth month from the date of the renewal/consolidation.
Page One
<PAGE> 14
Mr. Schultz
March 13, 1995
Page Two
SECURITY:
The security for the loan would continue to be that collateral which
currently secures the two notes to be renewed and consolidated. There would be
no change in the existing collateral.
INTEREST RATE:
The interest rate would be First Union National Bank of Florida's Prime
Rate of interest plus three-quarters (.75 percent), adjustable with daily
changes in said index.
GUARANTOR:
The consolidated renewal note would be guaranteed by the parent
corporation, Calnetics.
FINANCIAL REVIEW BY THE BANK:
The Bank's final approval of this renewal and consolidation is subject
to our receipt and satisfactory review of Calnetics' December 31, 1994 10-Q
report and its June 30, 1994 10-K report. You may expedite our review of these
data by transmitting them via facsimile to (407) 649-5757 to the attention of
Mr. Chuck Beverly. We would also need originals for our files.
FEES AND COSTS OF RENEWAL/CONSOLIDATION:
The Borrower will bear any fees, costs or expenses in conjunction with
the renewal and consolidation of these two loans, including but not limited to
attorney's fees, Florida documentary stamps, recording fees, etc., with the
Borrower specifically agreeing to reimburse the Bank for up to $500.00 for an
internal evaluation of the real property securing the loan.
OTHER TERMS AND CONDITIONS:
All the other terms and conditions of the consolidated renewal note
would continue to be the same as those which currently prevail for the existing
two notes separately. For example, the Borrower will continue to maintain
hazard insurance covering the property, will provide periodic financial
reporting to the Bank, etc. Obviously, this letter is not intended to recite a
litany of detailed terms and conditions, but rather is sent to hasten you an
indication of our interest in providing you with the renewal and consolidation
requested. Should you choose to accept these broad and general terms, we will
forward you a somewhat more lengthy commitment letter after completing our
financial review, outlining the specifics of the anticipated closing.
<PAGE> 15
Mr. Schultz
March 13, 1995
Page Three
PREPAYMENT:
As you know from our prior discussion, there will be no prepayment
penalty. In regard to your request that we apply any prepayments to the front
end of the loan rather than to its balloon balance, however, we must decline.
Any prepayment you wish to make which you would wish to alter any of the stated
repayment terms, such as the amortization of the loan, would need to be
negotiated at the time of the proposed prepayment and would require our review
of the Borrower's current financial condition and payment history.
We hope this offer to renew and consolidate pleases you. If you wish to
accept its terms and proceed toward a closing, please sign where indicated
below and send us a copy of Calnetics' December 31, 1994 10-Q and June 30, 1994
10-K reports at your earliest convenience, so that we may expedite our review.
This offer to renew and consolidate will expire on April 30, 1995, if not
accepted in writing prior to that date.
Thank you for the opportunity to submit this proposal, and for the
favor of handling your financing needs.
Sincerely,
/s/ EARL MORGAN
-------------------------------------
Earl Morgan
Vice President and Commercial
Relationship Manager
Accepted by: Agricultural Products, Inc.
/s/ LON SCHULTZ 3/14/95
---------------------------------- -----------------
Lon Schultz Date
President
<PAGE> 16
March 31, 1995
First Union National Bank of Florida
Post Office Box 193
Winter Haven, FL 33882-0193
ATTENTION: MR. J. EARL MORGAN, III, VICE PRESIDENT
Gentlemen:
As required by the terms of your Commitment Letter issued to the undersigned
dated March 22, 1995, I represent and certify to you that Agricultural
Products, Inc. is not the subject of any pending or threatened administrative,
governmental, judicial, or quasi-judicial proceeding or investigation which
might adversely affect said corporation's ability to perform its obligations
under such Commitment Letter and/or the loan implementing documents.
The undersigned further certifies that no eminent domain or other condemnation
proceedings have been threatened or commenced against any part of the property
located at 3857 West Lake Hamilton, Winter Haven, FL 33881.
Very truly yours,
AGRICULTURAL PRODUCTS, INC.
By /s/ LON SCHULTZ
----------------------------------
Lon Schultz, President
<PAGE> 17
LOAN CLOSING STATEMENT
RE: FIRST UNION NATIONAL BANK OF FLORIDA LOAN TO AGRICULTURAL PRODUCTS,
INC.
DATE: MARCH 31, 1995
PROPERTY: The North 457.50 feet of Lot 180, lying East of canal in Lucerne
Park Fruit Association, as shown by map or plat thereof recorded
in the office of the Clerk of the Circuit Court in and for Polk
County, Florida, in Plat Book 3, Page 67, LESS AND EXCEPT the North
307.5 feet thereof and LESS AND EXCEPT roadways of record.
AND
Commence at the Southeast corner of Lot 180 of Lucerne Park Fruit
Association Subdivision, as recorded in Plat Book 3B, page 67, of
the public records of Polk County, Florida, run thence North 00
degrees 27' 13" West along the East boundary of said lot, 31.22
feet to the point of beginning. Thence continue North 00 degrees
27' 13" West, 150.00 feet; thence South 89 degrees 41' 41" West,
308.63 feet to the Easterly right of way of the Lake Henry-Lake
Hamilton Canal, thence South 00 degrees 19' 40" East along said
right of way, 150.00 feet, thence North 89 degrees 41' 41" East,
308.96 feet to the point of beginning. Subject to maintained right
of way along the East boundary thereof.
*******************************************************************************
CLOSING COSTS
Recording Mortgage
Modification, etc. $ 19.50
Loan Fee 500.00
April 2, 1995 payments on 2 loans
(pre-consolidated & renewal)
#00067 2,766.84
#00042 1,447.58
UCC Searches (pre-and post) 40.00
Filing UCC-1 Financing Statement
(Clerk, Polk County, FL) 15.00
Filing UCC-1 Financing Statement
(Secretary of State, FL) 31.00
Federal Express (2) 50.00
Title Opinion 350.00
Attorneys' Fees and costs 1,968.00
---------
TOTAL $7,187.92
LESS: AMOUNTS PREVIOUSLY PAID BY BORROWER 6,468.52
---------
AMOUNT DUE $ 719.40
I HEREBY CERTIFY THAT I HAVE READ AND APPROVED THE ABOVE LOAN
CLOSING STATEMENT. I ACKNOWLEDGE THAT SHARIT, BUNN, CHILTON & HOLDEN,
P.A. REPRESENT THE BANK ONLY; THAT I AM PAYING THEIR ATTORNEY'S FEES AS
A COST OF THE LOAN; THAT I WAS ADVISED TO RETAIN MY OWN COUNSEL.
/s/ LON SCHULTZ
----------------------------------
LON SCHULTZ, PRESIDENT
AGRICULTURAL PRODUCTS, INC.
<PAGE> 18
CONSOLIDATED RENEWAL
REAL ESTATE PROMISSORY NOTE
$299,626.21 No. March 31, 1995
----------- ----------- --------------------------------
(Date of Execution and Delivery)
LENDER: FIRST UNION NATIONAL BANK OF FLORIDA (hereinafter termed "LENDER"),
Winter Haven, Florida
-------------------------
(City)
BORROWER(S): AGRICULTURAL PRODUCTS, INC., a California Corporation
-----------------------------------------------------------------
(Name)
3857 West Lake Hamilton Drive, Winter Haven, Polk, FL 33881
-----------------------------------------------------------------
(No., Street or RFD) (City) (County) (State) (Zip Code)
BORROWER(S) REPRESENT HEREWITH THAT THE LOAN EVIDENCED HEREBY IS BEING OBTAINED
FOR THE FOLLOWING PRIMARY PURPOSE:
[X] BUSINESS: [ ] PERSONAL; [ ] FAMILY OR HOUSEHOLD; [ ] AGRICULTURAL
FOR VALUE RECEIVED: to wit, money loaned, the above named; the undersigned
BORROWER(S) (hereinafter collectively termed "BORROWER"), jointly and severally
(if more than one BORROWER), promise(s) to pay to the order of LENDER at its
office in the above city, or wherever else LENDER may specify, the sum of
TWO HUNDRED NINETY-NINE THOUSAND SIX HUNDRED TWENTY-SIX AND 21/100-------
- ------------------------------------------------------------------------------
($299,626.21) DOLLARS, witht interest until paid,
CONTRACT [ ] at the rate of percent ( %);
RATE OF ------------- -----
INTEREST [X] at the rate of LENDER'S PRIME RATE Plus three-quarters percent
(0.75%) as that rate may change from time to time with changes
to occur on the date the LENDER'S PRIME RATE changes;
[ ] at the rate of
--------------------------------------------------
to be adjusted beginning ;
-------------------- -------------------
[ ] payable in full on
----------------------------------------------
[ ] with interest payable commencing on and each
thereafter, -------- ------ --------
TERMS [X] payable in consecutive monthly payments of principal; commencing
OF on May 2, 1995, in 59 equal payments of $1,664.59 plus an
PAYMENT irregular payment of $201,415.40 due on April 2, 2000, with
interest payable monthly commencing on May 2, 1995, and each
month thereafter;
[ ] payable in consecutive payments of principal and
---------
interest; commencing on in equal payments
------------ ---
of $ plus an irregular payment of all remaining
----------
principal and interest due on
--------------------------------;
[ ] see attached Schedule "B", terms of which are incorporated
herein by reference;
(TERMS ABOVE NOT COMPLETED ARE DELETED)
The undersigned agrees to pay a late charge equal to 5% of each payment of
principal and/or interest which is not paid within 10 days of the date on which
it is due. At LENDER'S option, the contract rate shall become the highest rate
allowed by the law of the state of LENDER'S office as set forth herein
commencing with and continuing for so long as the loan or any portion thereof
is in Default (as hereinafter defined). Further, upon BORROWER'S Default and
where LENDER deems it necessary or proper to employ an attorney to enforce
collection of any unpaid balance or to otherwise protect its interests
hereunder; then BORROWER agrees to pay LENDER'S reasonable attorneys fees
(including appellate costs, if any) and collection costs. Liability for
reasonable attorneys fees and costs shall exist whether or not any suit or
proceeding is commenced.
INTEREST is computed on the basis of a 360 day year for the actual number of
days in the interest period (Actual/360 Computation) unless indicated below.
not applicable
- ------------------------------------------------------------------------------
DEFINITION OF LENDER'S PRIME RATE AND COMPUTATION FORMULAE APPEAR ON OTHER SIDE
All payments received during normal banking hours after 2:00 P.M. shall be
deemed received at the opening of the next banking day.
If the scheduled payment amount is insufficient to pay accrued interest,
BORROWER shall make an additional payment of the amount of the accrued interest
in excess of the scheduled payment.
Each of the undersigned, whether BORROWER, sureties, or endorsers; and all
others who may become liable for all or any part of the OBLIGATIONS evidenced
hereby, do hereby, jointly and severally; waive presentment, demand, protest,
notice of protest and/or of dishonor, and also notice of acceleration of
maturity of Default or otherwise. Further, they agree that Lender may, from
time to time, extend, modify, amend or renew this Note for any period (whether
or not longer than the original period of the Note) and grant any releases,
compromises or indulgences with respect to the Note or any extensions,
modifications, amendments or renewals thereof or any security therefor, or to
any party liable thereunder or hereunder, all without notice to or consent of
any of the undersigned and without affecting the liability of the undersigned
hereunder.
PAYMENT of this Note, all obligations of the undersigned BORROWER
hereunder "OBLIGATIONS" to LENDER, its successors and assigns, is secured
interalia, (and includes the terms and obligations set forth therein), by a
valid, subsisting Mortgage and Security Agreement (the "Mortgage") recordoed or
to be recorded in the county in which the real property described in the
Mortgage (the "Property") is located, and by this reference is incorporated
herein. If this Note is issued pursuant to a loan agreement of even date
herewith, made by and between Borrower and Lender (the "Loan Agreement", which
term shall be deemed to include any construction loan agreement or development
loan agreement), then by this reference, the Loan Agreement is specifically
incorporated herein;
If default be made in the payment of any installment under this Note or if
the Borrower violates any of the terms or breaches any of the conditions of the
Mortgage or the Loan Agreement, the entire principal sum and accrued interest
shall become due and payable without notice unless otherwise provided in the
Loan Agreement at the option of the Lender. Failure to exercise this option
shall not constitute a waiver of the right to exercise the same at any other
time. Upon such default, the principal of the Note and any part thereof, and
accrued unpaid interest, if any, shall bear interest at the rate of either
eighteen percent (18%) simple interest per annum after default until paid or at
the then highest legal rate permissable by law. All parties liable for the
payment of this Note agree to pay the Lender reasonable attorney's fees for the
services and expenses of counsel employed after maturity or default to collect
this Note (including any appeals relating to such enforcement proceedings), or
to protect or enforce the security hereto, whether or not suit be brought.
The remedies of Lender as provided herein, in the Mortgage and Loan
Agreement shall be cumulative and concurrent, and may be pursued singly,
successively or together, at the sale discretion of Lender and may be exercised
as often as occasion therefor shall arise. No act of omission or commission of
Lender, including specifically any failure to exercise any right, remedy or
recourse, shall be effective as a waiver thereof unless it is set forth in a
written document executed by Lender and then only to the extent specifically
recited therein. A waiver or release with reference to one event shall not be
construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to any subsequent event.
Borrower and all sureties, endorsers and guarantors of this Note hereby
(a) waive demand, presentment for payment, notice of nonpayment, protest,
notice of protest and all other notice, filing of suit and diligence in
collecting this Note, in enforcing any of the security rights or in proceeding
against the Property; (b) agree to any substitution, exchange, addition or
release of any of the Property or the addition of release of any party or
person primarily or secondarily liable hereon; (c) agree that Lender shall not
be required first to institute any suit, or to exhaust his, their or its
remedies against Borrower or any other person or party to become liable
hereunder or against the Property in order to enforce payment of this Note; (d)
consent to any extension, rearrangement, renewal or postponement of time of
payment of this Note and to any other indulgency with respect hereto without
notice; consent or consideration to any of the foregoing (except the express
written release by Lender of any such person), they shall be and remain jointly
and severally, directly and primarily, liable for all sums due under this Note,
the Mortgage and the Loan Agreement.
As used herein, the words, "Borrower" and "Lender" shall be deemed to
include Borrower and Lender as defined herein and their respective heirs,
personal representatives, successors and assigns.
This Note is executed and delivered at the Place of Execution and shall be
construed and enforced in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the Borrower, on the day and year first written above, has
caused this Note to be executed under seal by (i) if a corporation, adoption of
the facsimile seal printed hereon for such special occasion and purpose (or if
an impression seal appears hereon by affixing such impression seal) by its duly
authorized officer(s) or, (ii) if by individuals, hereunto setting their hands
and seals.
CORPORATE BORROWER SEAL AGRICULTURAL PRODUCTS, INC., a California
Corporation
----------------------------------------
Name of Corporation
BY: BY: LON SCHULTZ
---------------------------- ----------------------------------------
Lon Schultz, President
INDIVIDUAL BORROWER(S), BY:
PROPRIETORSHIPS, PARTNERSHIPS ----------------------------------------
(Seal) (Seal)
- --------------------------- --------------------------------------
(Seal) (Seal)
- --------------------------- --------------------------------------
Taxpayer Identification Number(s)
-------------
<PAGE> 19
FIRST UNION REAL ESTATE MARCH 31, 1995
UNCONDITIONAL GUARANTY --------------------------
(Date of Execution and
Delivery)
OBLIGOR(S): AGRICULTURAL PRODUCTS, INC., 3857 West Lake Hamilton Drive,
-------------------------------------------------------------------
(Print Full Name) (No. Street or RFD)
Winter Haven, Polk, FL 33881
-------------------------------------------
(City) (County) (State) (Zip)
GUARANTOR(S): CALNETICS CORPORATION, 20401 Prairie Street,
--------------------------------------------------
(Print Full Name) (No. Street or RFD)
Chatsworth, Los Angeles, CA 91311
--------------------------------------------------
(City) (County) (State) (Zip)
OBLIGEE: FIRST UNION NATIONAL BANK OF FLORIDA
P.O. Box 193, 203 Avenue A, N.W., Winter Haven, Polk, FL 33880
---------------------------------------------------------------------
(Mailing Address) (No. and Street) (City) (County) (State) (Zip)
WHEREAS, the above OBLIGOR(S) (hereinafter jointly and severally termed
"Customer"), desire(s) to obtain extensions of credit and/or a continuation of
credit extensions and/or to engage in business transactions and enter into
various contractual relationships and otherwise to deal with FIRST UNION
NATIONAL BANK OF FLORIDA (hereinafter termed "FUNB") and
WHEREAS, FUNB is unwilling to extend or continue to extend credit to and/or
engage in business transactions and enter into various contractual
relationships with, and otherwise to deal with Customer; unless it receives and
unconditional and continuing, joint and several guaranty from the above
identified, undersigned GUARANTOR(S) (hereinafter collectively termed
"Guarantor"), covering all "Obligations of Customer," as hereinafter defined.
NOW, THEREFORE, in consideration of the premises and of other good and valuable
consideration, and in order to induce FUNB to extend or continue to extend
credit to Customer in the principal amount of TWO HUNDRED NINETY-NINE THOUSAND
SIX HUNDRED SEVENTY-SIX AND 31/100 dollars ($299,676.21), plus interest, as
evidenced by that certain promissory note dated March 31, 1995 in favor of
Lender (the "Note"), and to enter into any loan agreement of even date
therewith executed in conjunction with the transaction (the "Loan Agreement"),
which term shall be deemed to include any construction loan and/or development
agreement),which Note is secured by that certain Mortgage and Security
Agreement of even date therwith encumbering the real and personal property
described therein, (the "Mortgage"), (with or without recourse) pursuant to
which Customer, jointly or severally, is liable as maker, or otherwise, and to
otherwise deal with Customer, Guarantor (jointly and severally, if more than
one) hereby absolutely and unconditionally guarantees to FUNB and to
successors and assigns, the due and punctual payment of all Obligations of
Customer. The full and prompt payment of principal, interest and any other
amounts due or to become due, whether by acceleration or otherwise, under the
Note or the Loan Agreement; the performance of any and all obligations of
Customer under the Loan Agreement, the Note, the Mortgage and any other Loan
Documents (as that term is hereinafter defined) including, without limitation,
obligations for the payment of insurance premiums and taxes, assessments and
other impositions with respect to or against the Property; and the full payment
and performance of all Customer's obligations, now or hereafter existing, to
any person who shall heretofore or hereafter deposit any sum of money with
Customer or any agent or escrow agent designated by Customer, on account of any
contract of agreement regarding the purchase of any condominium unit or other
portion of the property, including all renewals, extensions and/or
modifications thereof (all liabilities and obligations of the Customer to FUNB,
pursuant to the foregoing, being hereinafter termed "Obligations of Customer")
provided, however, that if and only if an amount is here specified; to wit:
$279,626.21 $ (LEAVE BLANK, IF LIABILITY HEREUNDER IS UNLIMITED.)
- -----------
then, the maximum liability, jointly and severally, of the undersigned
Guarantors hereunder, at any one time outstanding, with respect to the
aggregate principal amount of the "Obligations of Customer," shall not exceed
the sum of money above specified, plus all interest or Finance Charges, Costs
of Court, penalty interest, late payment charges and the reasonable attorney's
fees of FUNB (the Note, Mortgage, Loan Agreement and all other agreements,
documents and instruments evidencing or securing the obligations of Customer
being herein collectively called the "Loan Documents").
/ / If checked here, this Unconditional Guaranty is secured by a Mortgage,
incorporated herein by reference.
This Guaranty is in addition to and is not intended to supercede any prior
existing Guaranty of Guarantor.
Further, whether or not suit is brought by FUNB to acquire possession of any
collateral of Guarantor or Customer or to enforce collection of any unpaid
balance(s) hereunder, Guarantor expressly hereby agrees to pay all legal
expenses and the reasonable attorney's fees (including those relative to
appellate proceedings, if any) actually incurred by FUNB.
(If no amount is specified in the blank above provided, the joint and several
liability of the undersigned Guarantors hereunder shall be unlimited.)
In order to implement the foregoing and as additional inducements to FUNB,
Guarantor further covenants and agrees:
1. This guaranty is and shall remain an unconditional and continuing
guaranty of payment and not of collection, shall remain in full force and
effect irrespective of any interruption(s) in the business or other dealings
and relations of Customer with FUNB and shall apply to and guarantee the due
and punctual payment of all "Obligations of Customer" due by Customer to FUNB.
To that end, Guarantor hereby expressly waives any right to require FUNB to
bring any action against any Customer or any other person(s) or to require that
resort be had to any security or to any balance(s) of any deposit or other
account(s) or debt(s) or credit(s) on the books of FUNB in favor of Customer or
any other person(s) Guarantor acknowledges that its liabilities and obligations
hereunder are primary rather than secondary, recognizing that Customer is first
above identified as "OBLIGOR" and undersigned are identified first above as
"GUARANTOR(S)", solely for convenience in identification of the parties involved
in this Guaranty Agreement and in the obligation being secured hereby. To that
end and without limiting the generality of the foregoing, undersigned Guarantor
herewith expressly waives any rights he otherwise might have had under
provisions of the law of the state of the FUNB office set forth herein to
require FUNB to attempt to recover against Customer and/or to realize upon any
securities or collateral security which FUNB holds for the obligation evidenced
or secured nhereby. Notwithstanding the satisfaction or performance of the
"Obligations of Customer," Guarantor's liability shall continue to exist for so
long as the satisfaction of the "Obligations of Customer" could be set aside or
such "Obligations of Customer" otherwise be reinstated under the bankruptcy,
insolvency, fraudulent conveyance, debtor relief, or other similar laws of any
Federal, State or other competent jurisdiction.
2. TIME IS OF THE ESSENCE HEREOF. Any notice(s) to Guarantor shall be
sufficiently given, if mailed to the first above stated address(es) of
Guarantor.
3. If any process is issued or ordered to be served upon FUNB, seeking
to seize Customer's and/or Guarantor's rights and/or interests in any deposit
or other account(s) maintained with FUNB, the balance(s) in any such account(s)
shall immediately be deemed to have been and shall be set-off against any and
all "Obligations of Customer" and/or all obligations and liabilities of
Guarantor hereunder, as of the time of the issuance of any such writ or
process; whether or not Customer, Guarantor and/or FUNB shall then have been
served therewith.
4. All moneys available to and/or received by FUNB for application
toward payment of (or reduction of) the "Obligations of Customer" may be
applied by FUNB to such individual debt(s) in such manner, and apportioned in
such amount(s) and at such time(s), as FUNB, in its sole discretion, may deem
suitable or desirable.
(CONTINUED ON REVERSE SIDE)
WITNESS the Hand(s) and Seal(s) of the undersigned, this Unconditional
Guaranty Agreement being executed and delivered on the date first above
written. Each Guarantor has adopted as his seal the word "SEAL" appearing
beside his signature.
CALNETICS CORPORATION
WITNESS MARY LIVINGSTON BY: CLINTON G. GERLACH [SEAL]
------------------------------- ------------------------------
Clinton G. Gerlach,
Chairman of the Board & President
WITNESS [SEAL]
------------------------------ ---------------------------------
(GUARANTOR)
WITNESS [SEAL]
------------------------------ ---------------------------------
(GUARANTOR)
WITNESS [SEAL]
------------------------------ ---------------------------------
(GUARANTOR)
(If Guarantor is a corporation, a Corporate Resolution is required and the
corporate name should be signed by a duly authorized officer, with the Seal of
the Corporation affixed and attested by the Secretary or Assistant Secretary of
the corporation.)
<PAGE> 20
CERTIFICATE OF INCUMBENCY
The undersigned, being the Secretary of AGRICULTURAL PRODUCTS, INC., a
California corporation, (the "Corporation"), hereby certifies to the following:
1. The undersigned is the Secretary of the Corporation.
2. The officers and directors of the Corporation are as follows:
Officers
--------
Clinton G. Gerlach Chairman of the Board
Lon Schultz President/Chief
Financial Officer
Mary Livingston Secretary
Directors
---------
/s/ CLINTON G. GERLACH
---------------------------------
/s/ LON SCHULTZ
---------------------------------
---------------------------------
---------------------------------
3. Attached hereto as Exhibit "A" is a true and accurate copy of
the Articles of Incorporation of the Corporation.
5. Attached hereto as Exhibit "B" is a true and accurate copy of
the by-Laws of the Corporation.
Dated this 14 day of April, 1995.
AGRICULTURAL PRODUCTS, INC.
BY /s/ MARY LIVINGSTON
----------------------------
Mary Livingston, Secretary
<PAGE> 21
State
of
California
SECRETARY OF STATE
CERTIFICATE OF STATUS
DOMESTIC CORPORATION
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That on the 21st day of February, 1974, AGRICULTURAL PRODUCTS, INC.
became incorporated under the laws of the State of California by filing its
Articles of Incorporation in this office; and
That no record exists in this office of a certificate of dissolution of
said corporation nor of a court order declaring dissolution thereof, nor of a
merger or consolidation which terminated its existence; and
That said corporation's corporate powers, rights and privileges are not
suspended on the records of this office; and
That according to the records of this office, the said corporation is
authorized to exercise all its corporate powers, rights and privileges and is
in good legal standing in the State of California; and
That no information is available in this office on the financial
condition, business activity or practices of this corporation.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal
of the State of California this
31st day of March, 1995
[SEAL OF THE STATE OF CALIFORNIA]
/s/ BILL JONES
BILL JONES
Secretary of State
<PAGE> 22
[FIRST CERTIFIED CORPORATE RESOLUTION FOR BORROWING AUTHORIZATION
UNION LOGO]
I, the undersigned, hereby certify to FIRST UNION NATIONAL BANK OF
FLORIDA that I am
-------------------------------------------------------------
Secretary of AGRICULTURAL PRODUCTS, INC. , a corporation duly organized and
-------------------------------
(Full name of Corporation)
existing under the laws of the State of California; and in good standing and
fully authorized to transact business in the State of Florida; that the
following is a true copy of Resolutions duly adopted by the Board of Directors
of said Corporation at its meeting duly held on the day of February
---------
23, 1995, at which a quorum was present and acted throughout; and that such
Resolutions are in full force and effect, have not been amended or rescinded,
and that there is not provision in the Articles of Incorporation, Charter or
By-Laws of said Corporation limiting the power of the Board of Directors of
said Corporation to pass the following Resolutions, which are in full
conformity with the provisions of said Articles of Incorporation, Charter and
By-Laws:
1. RESOLVED, that / /, ONLY IF CHECKED HERE, ANY TWO - otherwise, EACH; of
the present holders of the following offices and/or positions of this
Corporation and his (their) successors in office or position, to wit:
President
- --------------------------------------------------------------------------------
(Here insert Title(s) of the Office(s) or Position(s) with Corporation)
- --------------------------------------------------------------------------------
is/are hereby authorized, on behalf of, in the name of and for the account of
this Corporation, upon such terms and conditions as he (they) deem desirable,
to borrow money and obtain or continue credit (with or without security) from
First Union National Bank of Florida (hereinafter termed the "Bank"), in such
amounts as he (they) deem desirable, to guarantee the obligations of others to
the Bank, to engage in business transactions of all nature and kind and/or to
enter into all manner and kinds of contractual relationships with said Bank.
2. RESOLVED FURTHER, that (without limiting the generality of the above
resolutions) the above identified or described officers or representatives of
this Corporation are herewith expressly authorized (on behalf of, in the name
of and for the account of this Corporation; and on behalf of, in the name of
and for the account of subsidiary, parent and affiliated corporations): To
pledge, assign, grant a security or other interest in, encumber or mortgage (as
security for payment or performance of any existing or hereafter arising or
contracted liabilities or obligations of said Corporation and of subsidiary,
parent and affiliated corporations to said Bank), and/or to sell, assign or
discount (with or without recourse) any acceptances, Accounts, Chattel Paper,
checks, drafts, contracts, contract rights, Choses in action, general
intangibles, Instruments, Investment Securities, Land Contracts, deeds of
trust, security deeds, real estate mortgages, Security Agreement, Purchase
Money Security Agreements (Conditional Sale Contracts of real and/or personal
property), Real and/or Personal Property Leases, real, personal or mixed
property of said Corporation, Bonds, Certificates of Deposit, moneys now or
hereafter on deposit with said Bank or any other financial institution, or any
other property and/or other instruments or evidences of indebtedness payable
to, owned or held by this Corporation to said Bank; to execute and/or indorse
all of the foregoing documents and any documents as may be necessary or
required by said Bank to evidence or consummate any such indebtedness, business
transactions and/or contractual relationships; and/or to lease and/or purchase
real, personal and/or mixed property from said Bank; and
3. RESOLVED FURTHER, that (without limiting the generality of any of the
foregoing resolutions) this Corporation, through the above identified or
described officers or representatives of this Corporation, is hereby expressly
authorized to enter into, execute and deliver, and perform this Corporation's
obligations under interest rate exchange agreements, interest rate cap
agreements and other interest rate hedging agreements and Instruments with the
Bank on such terms and in such manner as such officers and representatives
shall deem desirable; and such officers and representatives are hereby
authorized, on behalf of, in the name of and for the account of this
Corporation, to execute any and all documents as may be necessary or required
by said Bank in connection with this Corporation's execution, delivery and
performance of any such agreements; and
4. RESOLVED FURTHER, that the Secretary or Assistant Secretary of this
Corporation shall furnish said Bank a certified copy of these Resolutions, and
said Bank is hereby authorized to deal with the above named or described
persons, officers, representatives and/or employees under the authority of
these Resolutions unless and until it shall be expressly notified in writing to
the contrary by this Corporation; and
5. RESOLVED FURTHER, that the Secretary or Assistant Secretary of this
Corporation shall, from time to time hereafter, as changes in the personnel of
said offices, positions, officers, representatives and/or employees of this
Corporation named or described in the foregoing Resolutions are made,
immediately certify such changes to said Bank. Said Bank shall be fully
protected in relying upon such certifications of the Secretary or Assistant
Secretary, and shall be indemnified and saved harmless from any claims,
demands, expenses, losses and/or damages resulting from, or growing out of,
honoring the signature of any officer(s), representative(s), agent(s), or
employee(s) so certified, or refusing to honor any signature not so certified
which is not described or stated in the foregoing Resolutions; and
6. RESOLVED FURTHER, that the Secretary or Assistant Secretary of this
Corporation is authorized and directed to certify to said Bank that the
foregoing Resolutions were duly adopted, and that the provisions thereof are in
full conformity with the Articles of Incorporation, Charter and By-Laws of this
Corporation; and
7. RESOLVED FURTHER, that all transactions by any officers,
representatives, employees or agents of this Corporation, on its behalf and in
its name with the Bank prior to delivery of a certified copy of the foregoing
Resolutions, are, in all respects, hereby ratified, confirmed and adopted, nunc
pro tunc.
I, finally, certify that the following are the persons who now hold the
offices and/or positions referred to in the first RESOLUTION above and that
their bonafide signatures are set forth below:
TYPED OR PRINTED NAMES: TITLES SIGNATURES
Lon Schultz President /s/ LON SCHULTZ
- ------------------------ ------------------------ ------------------------
- ------------------------ ------------------------ ------------------------
- ------------------------ ------------------------ ------------------------
- ------------------------ ------------------------ ------------------------
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the Seal of
this Corporation, this 14th day of April, 1995.
/s/ MARY LIVINGSTON
-------------------------------
Secretary
[AFFIX CORPORATE
SEAL HERE]
<PAGE> 23
CERTIFICATE OF INCUMBENCY
The undersigned, being the Secretary of CALNETICS CORPORATION, a
California corporation, (the "Corporation"), hereby certifies to the following:
1. The undersigned is the Secretary of the Corporation.
2. The officers and directors of the Corporation are as follows:
Officers
--------
Clinton G. Gerlach Chairman of the Board/
President
Michael A. Hornak Vice President
Steven L. Strawn Vice President
Teresa S. Louie Treasurer
Mary Livingston Secretary
Directors
---------
Fred E. Edward
Clinton G. Gerlach
Raymond H. Heller
Michael A. Hornak
Steven L. Strawn
3. Attached hereto as Exhibit "A" is a true and accurate copy of the
Articles of Incorporation of the Corporation.
5. Attached hereto as Exhibit "B" is a true and accurate copy of the
by-Laws of the Corporation.
Dated this 14th day of April, 1995.
CALNETICS CORPORATION
BY /s/ MARY LIVINGSTON
------------------------------------
Mary Livingston, Secretary
<PAGE> 24
STATE
OF
CALIFORNIA
SECRETARY OF STATE
CERTIFICATE OF STATUS
DOMESTIC CORPORATION
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That on the 18th day of July, 1960,
CALNETICS CORPORATION
became incorporated under the laws of the State of California by filing its
Articles of Incorporation in this office; and
That no record exists in this office of a certificate of dissolution of
said corporation nor of a court order declaring dissolution thereof, nor of a
merger or consolidation which terminated its existence; and
That said corporation's corporate powers, rights and privileges are
not suspended on the records of this office; and
That according to the records of this office, the said corporation is
authorized to exercise all its corporate powers, rights and privileges and is
in good legal standing in the State of California; and
That no information is available in this office on the financial
condition, business activity or practices of this corporation.
IN WITNESS WHEREOF; I execute this
certificate and affix the Great Seal
[SEAL OF THE STATE OF CALIFORNIA] of the State of California this
31st day of March, 1995
/s/ BILL JONES
BILL JONES
Secretary of State
<PAGE> 25
[FIRST CERTIFIED CORPORATE RESOLUTION FOR BORROWING AUTHORIZATION
UNION LOGO]
I, the undersigned, hereby certify to FIRST UNION NATIONAL BANK OF
FLORIDA that I am
-------------------------------------------------------------
Secretary of CALNETICS CORPORATION , a corporation duly organized and
-------------------------------
(Full name of Corporation)
existing under the laws of the State of California; and in good standing and
fully authorized to transact business in the State of Florida; that the
following is a true copy of Resolutions duly adopted by the Board of Directors
of said Corporation at its meeting duly held on the day of February
---------
23, 1995, at which a quorum was present and acted throughout; and that such
Resolutions are in full force and effect, have not been amended or rescinded,
and that there is not provision in the Articles of Incorporation, Charter or
By-Laws of said Corporation limiting the power of the Board of Directors of
said Corporation to pass the following Resolutions, which are in full
conformity with the provisions of said Articles of Incorporation, Charter and
By-Laws:
1. RESOLVED, that /X/, ONLY IF CHECKED HERE, ANY TWO - otherwise, EACH; of
the present holders of the following offices and/or positions of this
Corporation and his (their) successors in office or position, to wit:
President
- --------------------------------------------------------------------------------
(Here insert Title(s) of the Office(s) or Position(s) with Corporation)
- --------------------------------------------------------------------------------
is/are hereby authorized, on behalf of, in the name of and for the account of
this Corporation, upon such terms and conditions as he (they) deem desirable,
to borrow money and obtain or continue credit (with or without security) from
First Union National Bank of Florida (hereinafter termed the "Bank"), in such
amounts as he (they) deem desirable, to guarantee the obligations of others to
the Bank, to engage in business transactions of all nature and kind and/or to
enter into all manner and kinds of contractual relationships with said Bank.
2. RESOLVED FURTHER, that (without limiting the generality of the above
resolutions) the above identified or described officers or representatives of
this Corporation are herewith expressly authorized (on behalf of, in the name
of and for the account of this Corporation; and on behalf of, in the name of
and for the account of subsidiary, parent and affiliated corporations): To
pledge, assign, grant a security or other interest in, encumber or mortgage (as
security for payment or performance of any existing or hereafter arising or
contracted liabilities or obligations of said Corporation and of subsidiary,
parent and affiliated corporations to said Bank), and/or to sell, assign or
discount (with or without recourse) any acceptances, Accounts, Chattel Paper,
checks, drafts, contracts, contract rights, Choses in action, general
intangibles, Instruments, Investment Securities, Land Contracts, deeds of
trust, security deeds, real estate mortgages, Security Agreement, Purchase
Money Security Agreements (Conditional Sale Contracts of real and/or personal
property), Real and/or Personal Property Leases, real, personal or mixed
property of said Corporation, Bonds, Certificates of Deposit, moneys now or
hereafter on deposit with said Bank or any other financial institution, or any
other property and/or other instruments or evidences of indebtedness payable
to, owned or held by this Corporation to said Bank; to execute and/or indorse
all of the foregoing documents and any documents as may be necessary or
required by said Bank to evidence or consummate any such indebtedness, business
transactions and/or contractual relationships; and/or to lease and/or purchase
real, personal and/or mixed property from said Bank; and
3. RESOLVED FURTHER, that (without limiting the generality of any of the
foregoing resolutions) this Corporation, through the above identified or
described officers or representatives of this Corporation, is hereby expressly
authorized to enter into, execute and deliver, and perform this Corporation's
obligations under interest rate exchange agreements, interest rate cap
agreements and other interest rate hedging agreements and Instruments with the
Bank on such terms and in such manner as such officers and representatives
shall deem desirable; and such officers and representatives are hereby
authorized, on behalf of, in the name of and for the account of this
Corporation, to execute any and all documents as may be necessary or required
by said Bank in connection with this Corporation's execution, delivery and
performance of any such agreements; and
4. RESOLVED FURTHER, that the Secretary or Assistant Secretary of this
Corporation shall furnish said Bank a certified copy of these Resolutions, and
said Bank is hereby authorized to deal with the above named or described
persons, officers, representatives and/or employees under the authority of
these Resolutions unless and until it shall be expressly notified in writing to
the contrary by this Corporation; and
5. RESOLVED FURTHER, that the Secretary or Assistant Secretary of this
Corporation shall, from time to time hereafter, as changes in the personnel of
said offices, positions, officers, representatives and/or employees of this
Corporation named or described in the foregoing Resolutions are made,
immediately certify such changes to said Bank. Said Bank shall be fully
protected in relying upon such certifications of the Secretary or Assistant
Secretary, and shall be indemnified and saved harmless from any claims,
demands, expenses, losses and/or damages resulting from, or growing out of,
honoring the signature of any officer(s), representative(s), agent(s), or
employee(s) so certified, or refusing to honor any signature not so certified
which is not described or stated in the foregoing Resolutions; and
6. RESOLVED FURTHER, that the Secretary or Assistant Secretary of this
Corporation is authorized and directed to certify to said Bank that the
foregoing Resolutions were duly adopted, and that the provisions thereof are in
full conformity with the Articles of Incorporation, Charter and By-Laws of this
Corporation; and
7. RESOLVED FURTHER, that all transactions by any officers,
representatives, employees or agents of this Corporation, on its behalf and in
its name with the Bank prior to delivery of a certified copy of the foregoing
Resolutions, are, in all respects, hereby ratified, confirmed and adopted, nunc
pro tunc.
I, finally, certify that the following are the persons who now hold the
offices and/or positions referred to in the first RESOLUTION above and that
their bonafide signatures are set forth below:
TYPED OR PRINTED NAMES: TITLES SIGNATURES
Chairman of the Board &
Clinton G. Gerlach President /s/ CLINTON G. GERLACH
- ------------------------ ------------------------ ------------------------
- ------------------------ ------------------------ ------------------------
- ------------------------ ------------------------ ------------------------
- ------------------------ ------------------------ ------------------------
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the Seal of
this Corporation, this 14 day of April, 1995.
/s/ MARY LIVINGSTON
-------------------------------
Mary Livingston, Secretary
[AFFIX CORPORATE
SEAL HERE]
<PAGE> 26
FIRST UNION UNCONDITIONAL GUARANTY MARCH 31, 1995
--------------------------
(Date of Execution and
Delivery)
OBLIGOR(S): AGRICULTURAL PRODUCTS, INC., 3857 West Lake Hamilton Drive,
-------------------------------------------------------------------
(Print Full Name) (No. Street or RFD)
Winter Haven, Polk, FL 33881
-------------------------------------------
(City) (County) (State) (Zip)
GUARANTOR(S): CALNETICS CORPORATION, 20401 Prairie Street,
--------------------------------------------------
(Print Full Name) (No. Street or RFD)
Chatsworth, Los Angeles, CA 91311
--------------------------------------------------
(City) (County) (State) (Zip)
OBLIGEE: FIRST UNION NATIONAL BANK OF FLORIDA
P.O. Box 193, 203 Avenue A, N.W., Winter Haven, Polk, FL 33880
---------------------------------------------------------------------
(Mailing Address) (No. and Street) (City) (County) (State) (Zip)
WHEREAS, the above OBLIGOR(S) (hereinafter jointly and severally termed
"Customer"), desire(s) to obtain extensions of credit and/or a continuation of
credit extensions and/or to engage in business transactions and enter into
various contractual relationships and otherwise to deal with FIRST UNION
NATIONAL BANK OF FLORIDA (hereinafter termed "FUNB") and
WHEREAS, FUNB is unwilling to extend or continue to extend credit to and/or
engage in business transactions and enter into various contractual
relationships with, and otherwise to deal with Customer; unless it receives and
unconditional and continuing, joint and several guaranty from the above
identified, undersigned GUARANTOR(S) (hereinafter collectively termed
"Guarantor"), covering all "Obligations of Customer," as hereinafter defined.
NOW, THEREFORE, in consideration of the premises and of other good and valuable
consideration, and in order to induce FUNB to extend or continue to extend
credit to Customer in the principal amount of TWO HUNDRED SEVENTY-NINE THOUSAND
SIX HUNDRED TWENTY-SIX AND 21/100 dollars ($279,626.21), plus interest, as
evidenced by that certain promissory note dated March 31, 1995 in favor of
Lender (the "Note"), and to enter into any loan agreement of even date
therewith executed in conjunction with the transaction (the "Loan Agreement"),
which term shall be deemed to include any construction loan and/or development
agreement),which Note is secured by that certain Mortgage and Security
Agreement of even date therwith encumbering the real and personal property
described therein, (the "Mortgage"), (with or without recourse) pursuant to
which Customer, jointly or severally, is liable as maker, or otherwise, and to
otherwise deal with Customer, Guarantor (jointly and severally, if more than
one) hereby absolutely and unconditionally guarantees to FUNB and to
successors and assigns, the due and punctual payment of all Obligations of
Customer. The full and prompt payment of principal, interest and any other
amounts due or to become due, whether by acceleration or otherwise, under the
Note or the Loan Agreement; the performance of any and all obligations of
Customer under the Loan Agreement, the Note, the Mortgage and any other Loan
Documents (as that term is hereinafter defined) including, without limitation,
obligations for the payment of insurance premiums and taxes, assessments and
other impositions with respect to or against the Property; and the full payment
and performance of all Customer's obligations, now or hereafter existing, to
any person who shall heretofore or hereafter deposit any sum of money with
Customer or any agent or escrow agent designated by Customer, on account of any
contract of agreement regarding the purchase of any condominium unit or other
portion of the property, including all renewals, extensions and/or
modifications thereof (all liabilities and obligations of the Customer to FUNB,
pursuant to the foregoing, being hereinafter termed "Obligations of Customer")
provided, however, that if and only if an amount is here specified; to wit:
$279,626.21 $ (LEAVE BLANK, IF LIABILITY HEREUNDER IS UNLIMITED.)
- -----------
then, the maximum liability, jointly and severally, of the undersigned
Guarantors hereunder, at any one time outstanding, with respect to the
aggregate principal amount of the "Obligations of Customer," shall not exceed
the sum of money above specified, plus all interest or Finance Charges, Costs
of Court, penalty interest, late payment charges and the reasonable attorney's
fees of FUNB (the Note, Mortgage, Loan Agreement and all other agreements,
documents and instruments evidencing or securing the obligations of Customer
being herein collectively called the "Loan Documents").
/ / If checked here, this Unconditional Guaranty is secured by a Mortgage,
incorporated herein by reference.
This Guaranty is in addition to and is not intended to supercede any prior
existing Guaranty of Guarantor.
Further, whether or not suit is brought by FUNB to acquire possession of any
collateral of Guarantor or Customer or to enforce collection of any unpaid
balance(s) hereunder, Guarantor expressly hereby agrees to pay all legal
expenses and the reasonable attorney's fees (including those relative to
appellate proceedings, if any) actually incurred by FUNB.
(If no amount is specified in the blank above provided, the joint and several
liability of the undersigned Guarantors hereunder shall be unlimited.)
In order to implement the foregoing and as additional inducements to FUNB,
Guarantor further covenants and agrees:
1. This guaranty is and shall remain an unconditional and continuing
guaranty of payment and not of collection, shall remain in full force and
effect irrespective of any interruption(s) in the business or other dealings
and relations of Customer with FUNB and shall apply to and guarantee the due
and punctual payment of all "Obligations of Customer" due by Customer to FUNB.
To that end, Guarantor hereby expressly waives any right to require FUNB to
bring any action against any Customer or any other person(s) or to require that
resort be had to any security or to any balance(s) of any deposit or other
account(s) or debt(s) or credit(s) on the books of FUNB in favor of Customer or
any other person(s) Guarantor acknowledges that its liabilities and obligations
hereunder are primary rather than secondary, recognizing that Customer is first
above identified as "OBLIGOR" and undersigned are identified first above as
"GUARANTOR(S)", solely for convenience in identification of the parties involved
in this Guaranty Agreement and in the obligation being secured hereby. To that
end and without limiting the generality of the foregoing, undersigned Guarantor
herwith expressly waives any rights he otherwise might have had under
provisions of the law of the state of the FUNB office set forth herein to
require FUNB to attempt to recover against Customer and/or to realize upon any
securities or collateral security which FUNB holds for the obligations evidenced
or secured nhereby. Notwithstanding the satisfaction or performance of the
"Obligations of Customer," Guarantor's liability shall continue to exist for so
long as the satisfaction of the "Obligations of Customer" could be set aside or
such "Obligations of Customer" otherwise be reinstated under the bankruptcy,
insolvency, fraudulent conveyance, debtor relief, or other similar laws of any
Federal, State or other competent jurisdiction.
2. TIME IS OF THE ESSENCE HEREOF. Any notice(s) to Guarantor shall be
sufficiently given, if mailed to the first above stated address(es) of
Guarantor.
3. If any process is issued or ordered to be served upon FUNB, seeking
to seize Customer's and/or Guarantor's rights and/or interests in any deposit
or other account(s) maintained with FUNB, the balance(s) in any such account(s)
shall immediately be deemed to have been and shall be set-off against any and
all "Obligations of Customer" and/or all obligations and liabilities of
Guarantor hereunder, as of the time of the issuance of any such writ or
process; whether or not Customer, Guarantor and/or FUNB shall then have been
served therewith.
4. All moneys available to and/or received by FUNB for application
toward payment of (or reduction of) the "Obligations of Customer" may be
applied by FUNB to such individual debt(s) in such manner, and apportioned in
such amount(s) and at such time(s), as FUNB, in its sole discretion, may deem
suitable or desirable.
(CONTINUED ON REVERSE SIDE)
WITNESS the Hand(s) and Seal(s) of the undersigned, this Unconditional
Guaranty Agreement being executed and delivered on the date first above
written. Each Guarantor has adopted as his seal the word "SEAL" appearing
beside his signature.
CALNETICS CORPORATION
WITNESS MARY LIVINGSTON BY: CLINTON G. GERLACH [SEAL]
------------------------------- ------------------------------
Clinton G. Gerlach,
Chairman of the Board & President
WITNESS [SEAL]
------------------------------ ---------------------------------
(GUARANTOR)
WITNESS [SEAL]
------------------------------ ---------------------------------
(GUARANTOR)
WITNESS [SEAL]
------------------------------ ---------------------------------
(GUARANTOR)
(If Guarantor is a corporation, a Corporate Resolution is required and the
corporate name should be signed by a duly authorized officer, with the Seal of
the Corporation affixed and attested by the Secretary or Assistant Secretary of
the corporation.)
<PAGE> 1
EXHIBIT 10.37
Option Number 93-3
CALNETICS CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
("1993 AGREEMENT UNDER THE 1993 NONSTATUTORY STOCK OPTION PLAN")
This 1993 Agreement, dated as of this 18th day of July, 1994, is
entered into by and between CALNETICS CORPORATION, a California corporation
(the "Company"), and Lon Schultz (the "Option Holder").
WHEREAS, the Company has adopted the 1993 Nonstatutory Stock Option
Plan (the "1993 Plan") which is incorporated herein by reference and made a
part of this Agreement; and
WHEREAS, pursuant to the Company's Plan, the Board of Directors of the
Company (the "Board") or a committee (the "Committee") appointed by the Board to
administer the Plan has granted to Option Holder a stock option upon the terms
and conditions hereinafter stated.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto contained herein, it is hereby agreed:
1. Grant Option
Effective as of the date hereof, the Company hereby grants to Option
Holder an option (the "Option") to purchase, upon and subject to the terms and
conditions of this 1993 Agreement and the 1993 Plan, all or part of 50,000
shares (the "Shares") of Common Stock (as defined below) at the price of $3.00
per share. The number of Shares subject to the Option and the price per share
thereof are subject to adjustment under certain circumstances, as provided in
the Plan. The Option is not intended to qualify as an Incentive Stock Option
within the meaning of Section 422A of the Internal Revenue Code.
2. Definitions
Unless the context clearly indicates otherwise, and subject to the
terms and conditions of the 1993 Plan as the same may be amended from time to
time, the following terms, when used in this Agreement, shall have the meanings
set forth in this Section 2:
(a) "Common Stock" shall mean the Common Stock, without par value,
of the Company or such other class of shares or other securities as may be
applicable pursuant to the provisions of Section 10 of this Agreement.
<PAGE> 2
(b) "Terminating Event" shall mean any of the following:
(i) the dissolution or liquidation of the Company; or
(ii) the reorganization, merger or consolidation of the Company
with one or more corporations as a result of which the Common
Stock of the Company is exchanged for or converted into cash or
property or securities not issued by the Company, unless the
reorganization, merger or consolidation shall have been affirmatively
recommended to the Company's stockholders, by a majority of the members
of the Board and provision shall have been made for the Option to be
continued in effect, adjusted as provided in Section 10 of this 1993
Agreement and to continue in effect as so adjusted.
3. Term of Option
This Option shall expire on the date ten years from the date hereof.
4. Exercisability of Option
The Option shall become exercisable as to (a) 16,667 Shares on July 19,
1995; (b) 16,667 Shares on July 19, 1996; and (c) 16,666 Shares on July 19,
1997, provided, however, that the Option shall become fully exercisable prior
to such dates upon the earlier of (a) the occurrence of a Terminating Event, or
(b) the dissemination of the stockholders of the Company of a proxy statement
seeking stockholder approval of a Terminating Event of the type described in
subsection 2(b)(ii) above. Upon becoming exercisable, the Option shall remain
exercisable as to all unexercised Shares until expiration, termination or
modification of the Option in accordance with the terms of this Agreement or
the 1993 Plan. Furthermore, in order for the Option to be exercisable on any
date, Option Holder must then be and must continuously, since grant of the
Option, have been in the employ of the Company, subject, however, to the
provisions of Sections 6 and 7 hereof.
5. Manner of Exercise
The Option may be exercised by written notice delivered to the Company
stating the number of Shares with respect to which the Option is being
exercised, together with (a) such additional information or forms as the
Committee may require, and (b) the purchase price of such Shares in the form of
either cash or check.
Page 2
<PAGE> 3
6. Expiration on Termination of Employment
(a) If Option Holder shall cease to be employed by the Company either
voluntarily or because of Option Holder's discharge for cause, of which the
Committee shall be the sole judge, this Option shall expire concurrently
with such cessation of employment.
(b) If Option Holder ceases to be employed by the Company for any
reason other than Option Holder's death (Section 7), voluntary
termination or discharge for cause, this Option shall, subject to earlier
termination pursuant to Section 3 hereof, expire three months thereafter,
and during such three-month period this Option shall be exercisable only
as to those Shares, if any, with respect to which the Option Holder could
have exercised the Option as of the date of such cessation of employment.
7. Assignment or Transfer
The Option shall not be assigned or transferred, in whole or in part,
except by will or by the laws of descent and distribution, and shall be
exercisable only by the Option Holder during Option Holder's lifetime, except
as provided in this Section 7. If Option Holder shall die while in the employ
of the Company, or in the three-month period referred to in Section 6(b)
hereof, the person or persons to whom Option Holder's rights under the Option
shall have passed by will or by the applicable laws of descent and distribution
shall have the right, at any time within six months after the date of Option
Holder's death, to exercise the Option as to those Shares, if any, with respect
to which the Option Holder could have exercised the Option as of the date of
the Option Holder's death; provided, that all rights under such Option shall
expire in any event on the date specified in Section 3 hereof.
8. Option Holder' Employment
This 1993 Agreement shall not obligate the Company to employ Option
Holder for any period of time, nor constitute a contract or agreement of
employment with Option Holder, nor shall it interfere in any way with the right
of the Company to reduce Option Holder's compensation or terminate Option
Holder's employment at any time with or without cause.
9. No Rights as Shareholder
Option Holder shall have no rights as a shareholder with respect to
Shares of the Common Stock covered by this Option until the date of the
issuance of a stock certificate or stock certificates representing such Shares.
No adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificate or certificates are issued,
except as is expressly provided in Section 10.
Page 3
<PAGE> 4
10. Adjustment
(a) Subject to provisions of Section 10(b), if the outstanding
shares of Common Stock are increased, decreased, changed into or exchanged for
a different number or kind of shares or securities of the Company as the result
of any one or more reorganizations, recapitalizations, reclassifications, stock
dividends, stock splits, reverse stock splits and the like, upon proper
authorization of the Board an appropriate and proportionate adjustment shall be
made in (a) the number or kind of shares or other securities subject to the
Option, but only to the extent this Option then remains unexercised, and (b)
the price for each share or other unit of any securities subject to this
Option, but only to the extent this Option then remains unexercised, and
without change in the aggregate purchase price as to which this Option remains
unexercised.
(b) No such adjustment need be made if, upon advice of counsel, the
Board or the Committee determines that such adjustment may result in the
receipt of federally taxable income to holders of Common Stock or other classes
of the Company's securities.
(c) No fractional interests shall be issued on account of any such
adjustment.
11. Securities Matters
(a) Option Holder acknowledges that any Common Stock to be acquired
upon exercise of the Option may be restricted stock which may not have been
registered under the Securities Act of 1933, as amended ("Securities Act"), and
any certificate representing the Shares to be issued may contain a legend or
legends with respect to restrictions on transfer as counsel to the Company
deems to be required by applicable provisions of law and this Agreement. If
required by the Company, Option Holder agrees to give satisfactory assurance in
writing, signed by Option Holder or his or her legal representative, that such
Common Stock is not being purchased with a view to the distribution thereof;
provided, however, that such assurance shall be deemed inapplicable to (1) any
sale of such Shares by the Option Holder subject to a registration statement
covering such sale, which has heretofore been (or may hereafter be) filed and
become effective under the Securities Act, and with respect to which the
registration statement is current and no stop order suspending the
effectiveness thereof has been issued, and (2) any other sale of such Shares
with respect to which, in the opinion of counsel for the Company, such
assurance is not required to be given in order to comply with the provisions of
the Securities Act.
Page 4
<PAGE> 5
(b) As a condition to the exercise of any portion of the
Option, the Company may require Option Holder to make any
representation and/or warranty to the Company as may, in the judgment
of counsel to the Company, be required under any applicable law or
regulation.
12. Withholding
The Company may make such provisions as it may deem appropriate
for the withholding of any taxes which the Company determines it is required to
withhold in connection with this 1993 Agreement and the transactions
contemplated hereby.
13. No Encumbrance
Neither this 1993 Agreement, nor this Option nor any rights and
privileges under this Agreement may be assigned or subjected to any
encumbrance, pledge or charge of any nature, except that, under such rules and
regulations as the Board of Directors or the Committee may establish pursuant
to the terms of the 1993 Plan, a beneficiary may be designated in respect of
the Option in the event of the death of the Option Holder, and except, also
that if such beneficiary shall be the executor or administrator of the estate
of the Option Holder, any rights in respect of this Option may be transferred
to the person or persons or entity (including a trust) entitled thereto under
the will of the Option Holder, or, in the case of intestacy, under the laws
relating to intestacy.
14. Other Plans
Nothing contained in this 1993 Agreement shall affect the right
of the Option Holder to participate in and receive benefits under and in
accordance with the then current provisions of any pension, insurance, profit
sharing or other employee welfare plan or program of the Company.
15. Amendment
The Option hereby granted is subject to, and the Company and
Option Holder agree to be bound by, all of the terms and conditions of the 1993
Plan as the same may be amended from time to time in accordance with the terms
thereof, but no such amendment may adversely affect the Option Holder's rights
under this 1993 Agreement without the Option Holder's consent.
16. Applicable Law
The interpretation, performance and enforcement of this 1993
Agreement shall be governed by the laws of the State of California.
<PAGE> 6
17. Notice
Any notice or other written communication required or permitted to be
given under the terms of this Agreement shall be addressed to the Company in
care of its Secretary at the principal executive offices of the Company and any
notice to be given to Option Holder shall be addressed to Option Holder at the
address given beneath his or her signature hereto, or such other address as
Option Holder or the Company may hereafter designate in writing to the other.
Any such notice shall be deemed to have been duly given when enclosed in a
properly sealed envelope addressed as aforesaid, registered or certified and
deposited (postage and registration or certification fee prepaid) in a post
office or branch post office regularly maintained by the United States.
18. Binding Effect of Agreement
This Agreement shall be binding upon any inure to the benefit of any
successors and assigns of the Company and upon Option Holder and Option
Holder's heirs, executors, administrators, personal representatives, permitted
assignees and successors in interest.
IN WITNESS WHEREOF, the parties hereto have executed this 1993
Agreement as of the date first above written.
COMPANY:
CALNETICS CORPORATION, a
California corporation
By: /s/ CLINTON GERLACH
------------------------------
President
OPTION HOLDER:
/s/ LON SCHULTZ
---------------------------------
ADDRESS: 2060 Temple Hills Dr.
Laguna Beach, CA 92651
Page 6
<PAGE> 1
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Subsidiary State of Incorporation
- ---------- ----------------------
<S> <C>
Agricultural Products, Inc. California
Manchester Plastics Co., Inc. California
Ny-Glass Plastics, Inc. California
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,580,974
<SECURITIES> 0
<RECEIVABLES> 4,711,526
<ALLOWANCES> 263,000
<INVENTORY> 4,962,037
<CURRENT-ASSETS> 11,576,533
<PP&E> 6,648,036
<DEPRECIATION> 2,776,164
<TOTAL-ASSETS> 17,122,578
<CURRENT-LIABILITIES> 4,342,148
<BONDS> 5,551,284
<COMMON> 2,397,635
0
0
<OTHER-SE> 4,738,511
<TOTAL-LIABILITY-AND-EQUITY> 17,122,578
<SALES> 29,172,106
<TOTAL-REVENUES> 29,172,106
<CGS> 21,739,246
<TOTAL-COSTS> 21,739,246
<OTHER-EXPENSES> 6,500
<LOSS-PROVISION> 93,531
<INTEREST-EXPENSE> 506,760
<INCOME-PRETAX> 1,745,066
<INCOME-TAX> 739,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,006,066
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
