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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ____________
Commission file number 33-22426-D
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CONTINENTAL CAPITAL CORPORATION (Formerly known as PlanCapital U.S.A., Inc.,
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Club America, Inc. and Lexington Capital Corp.)
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(Exact name of Registrant as specified in charter)
Colorado 95-4047540
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(State or other jurisdic- (IRS Employer
tion of incorporation) Identification No.)
8950 Fullbright Avenue, Chatsworth, California 91311
- ---------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 886-0008
----------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
NONE
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 be 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. [_]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall
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be computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within 60
days prior to the date of filing. See "Security Ownership of Certain Beneficial
Owners and Management."
The Common Stock of the Company is not currently publicly traded.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
9,000,000 shares as of August 22, 1996
DOCUMENTS INCORPORATED BY REFERENCE
NONE
THE INDEX TO EXHIBITS IS FOUND ON PAGE 38.
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PART I
Item 1. Business.
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General
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Continental Capital Corporation (formerly known as PlanCapital U.S.A.,
Inc.; Club America, Inc. and Lexington Capital Corporation and hereinafter
referred to as the "Company" or "Registrant") was formed under the laws of the
State of Colorado on November 8, 1985.
The Company has entered into the business of marketing and leasing
various types of equipment, mainly in the transportation industry. The Company
intends to specialize specifically in commercial aircraft parts and equipment,
fleet commercial trucks and medical equipment. See "Aircraft Parts and
Equipment," below. There have been a large number of solicitations made in the
commercial airlines sector. There were a number of potential customers worked
with in the area of leasing, however, the only one which has entered into a
contract is CASC Shanghai (a China government agency) and Northern Airlines:
Sanya Limited. See "CASC Shanghai and Northern Airlines: Sanya Limited," below.
The Company has also entered into a formal letter of intent to formulate a joint
venture to market and distribute vending machines and products in China. See
"South China Construction & Development Company," below. Finally, the Company
has entered into the business of advertising on baggage claim carousels. See
"CarroSELL, Inc.," below.
There can be no assurance that the Company will be able to succeed in any
of these various endeavors. These businesses are in the formative stages.
Aircraft Parts and Equipment
- ----------------------------
With regard to the sale of parts and equipment on a retail basis, the
Company has acquired inventory and entered into a marketing agreement with
Jacman Aircraft, Inc. as described below. The inventory is listed for sale on
two international data bases (available to the commercial and military
industries). The two data bases are Airs Spec 200 and Inventory Locator Service
(ILS). These data bases are available to subscribers throughout the world. These
are two well known providers out of a number of data bases available to
marketers and purchasers of aircraft equipment. Users pay monthly fees
according to their usage. Jacman Aircraft, Inc. has not as yet assigned a
marketing team to market the Company's inventory. However, sales have commenced
through direct inquiries generated through the data bases. Jacman is not
expected to assign a marketing team to market the Company's inventory until the
owners of Jacman are satisfied that the common stock of the Company is being
publicly traded. Jacman is currently actively marketing its other inventories.
The owners of Jacman feel that they do not wish to complicate the transaction in
view of the length of the time it has taken for the Company's common stock to
resume public trading. The decision by the Company to sell the inventory on a
piece by piece basis, rather than as a package, was based upon management's
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business judgment that the Company will thereby recognize more revenue.
Effective March 31, 1995, the Company merged with J.S.A., Incorporated, a
California corporation ("JSA"). As a result of the merger the Company acquired
certain of the assets of JSA in exchange for 1,700,000 shares of the common
stock of the Company. The Aronowitz Family Trust, was the sole shareholder of
JSA. Prior to the merger, there was no affiliation between the Company and The
Aronowitz Family Trust. The Aronowitz Family Trust recently agreed to waive
certain rights contained in the original agreement of merger, including demand
stock registration rights and potential rights to additional shares of common
stock of the Company in the future. In addition, the Trust's right to rescind
the merger agreement in the event that the common stock of the Company has not
been publicly traded has been amended to provide such right only in the event
that the shares have not been publicly traded by December 31, 1996.
The assets acquired by the Company consist of aircraft parts and equipment
which have an agreed value of $8,950,851.00 (which is 62% of the list prices
quoted in the inventory list provided by JSA). The inventory consists of over
6,000 different parts and equipment from large pieces of equipment such as large
fuel tanks to electronics, tires and interior parts. The equipment is for many
different models of aircraft including military aircraft of various
manufacturers. The aircraft parts and equipment consist of both military and
civilian aircraft. See "Government Regulation" below. The inventory is stored by
Jacman Aircraft, Inc. in its warehouse in Chatsworth, California as part of a
marketing arrangement. Jacman Aircraft, Inc. is responsible for inventory
control, documentation, stocking levels, repairs and surplus parts disposal. As
described above these assets are listed on an international computer system and
are sold as orders are received. Parts are usually shipped to customers by UPS.
In connection with the merger, the Company agreed to retain Jacman
Aircraft, Inc. as the exclusive distributor of all aircraft parts and equipment
for the Company. Jacman Aircraft, Inc. was entitled to the first $60,000 of the
net sales price received by the Company for the inventory. Jacman also receives
a 20% sales commission (5% if the sale is not made by Jacman). Neither Mr.
Aronowitz, nor Jacman, make any warranty on the inventory, whether new or
rebuilt. Jacman has recently agreed to make the distribution arrangement non-
exclusive. Jacman Aircraft is a California based aircraft parts and equipment
marketing firm. Jacman Aircraft, Inc. has been in the aircraft parts and
equipment sales business for over ten years and is well-respected throughout the
aircraft industry. JSA, Jacman Aircraft, Inc. and the Aronowitz Family Trust are
all affiliated entities. See "Item 13 - Certain Relationships and Related
Transactions."
The agreed to valuation of the inventory was arrived at through the
negotiations of Milton J. Wilpon, Chief Executive Officer of the Company, and
Jack Aronowitz, Chief Executive Officer of JSA after receiving an appraisal from
BCA, USA, Inc. of Miami,
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Florida (previously known as Bramco Aviation). BCA was recommended to the
Company by an attorney in Florida who had previous dealings with BCA. The
Company retained and compensated BCA. Mr. Fred Van Acker of BCA physically
inspected the inventory in Jacman's warehouse in Chatsworth, California.
Management of the Company believes that BCA was a reliable source in evaluating
inventory for acquisition.
BCA's appraisal was based upon an evaluation of 64.12% of the amounts
supplied by JSA as sales prices in its Master Inventory List. In negotiations
between the Company and Jack Aronowitz, following receipt of BCA's appraisal,
the value was further discounted to 62% from 64.12%. The total estimated retail
value of the inventory was $14,436,856 as determined from billing statements of
government agencies or various commercial data bases available to the airline
industry. By discounting this amount by 62%, the agreed value of $8,950,851 was
reached. JSA's original cost basis in the inventory was $50,000.
The 1,700,000 shares of the common stock of the Company which were
transferred in exchange for the inventory were valued at $8,950,851 by the
Company and Jack Aronowitz, or approximately $5.265 per share. Shortly prior to
the issuance of these shares, other parties received shares of the Company's
common stock for $.03 per share. These issuances were unrelated to the inventory
acquisition and were made to fulfill long-standing commitments of the Company,
and therefore at a significantly lower price per share. It is pure coincidence
that 1.7 million shares times $.03 per share equals $51,000, the approximate
historical cost of the inventory.
CASC Shanghai and Northern Airlines: Sanya Limited
- --------------------------------------------------
As of June 28, 1995, the Company entered into a Master Lease Agreement
with joint lessees CASC Shanghai and Northern Airlines: Sanya Limited. CASC
Shanghai is an official purchasing representative of China for a number of
civilian airlines. Its purpose is to aid airlines to find provisions of needed
aircraft parts and equipment from sources throughout the world. It also aids the
airlines in their negotiations of prices and purchasing and leasing terms. In
addition, Northern Airlines is one of the four largest airlines in China.
Northern Airlines: Sanya Limited is a division of China Northern Airlines and
flies MD-82 aircraft. Northern Airlines is approximately 30-40% the size of Air
China. The equipment to be leased is for Boeing aircraft and are of various
nature. The term of the Master Lease commences on the shipping date of the
initial amount of equipment and shall continue for a period of five years with a
total of $5,000,000 in aircraft parts and equipment, which is the total amount
of the lease. The lease agreement requires that the equipment and/or parts to be
leased shall be purchased by the Company from Jacman Aircraft, Inc. Delivery of
equipment under this lease was expected to begin in early 1996. The Company is
currently awaiting reapproval by new management of the lessees as well as
resolution as to the specific equipment and/or parts to be leased, as well as
pricing. Financing for this transaction is being provided for by the NAB Bank in
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Chicago, Illinois.
South China Construction & Development Company
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The Company has also entered into a formal letter of intent to form a
joint venture with South China Construction & Development Company from the
People's Republic of China. The business of the joint venture, which is still
being formulated, will be the marketing and distribution of vending machines and
the products related to the business. The Company is currently negotiating with
a number of suppliers and investment sources. The Company expects to enter
into many joint ventures with investors and investment groups in China, similar
to the licensing or franchising concept in the United States. The Company
intends to initially market soda and soft drink vending machines and products
attributed thereto and ultimately enter such other products as food, cigarettes,
candy, snacks, beer, etc.
The joint venture also intends to create a distribution company for the
products for these vending machines and ultimately the production of the
products. Pursuant to the joint venture agreement, all products sold in the
vending machines will be supplied by the joint venture exclusively. The
locations where the vending machines will be installed will be superior
pedestrian traffic locations such as airports, train stations, bus stations,
public buildings, banks, department stores, universities and other government
controlled locations. There can be no assurance that the Company will be able
to successfully compete in the vending business.
CarroSELL, Inc.
- ---------------
On December 10, 1995, the Company entered into an Agreement of Purchase
and Sale of Stock with CarroSELL, Inc. and Paul Donner, the sole shareholder of
CarroSELL, Inc. whereby the Company acquired all of the capital stock of
CarroSELL, Inc. in exchange for 500,000 shares of the restricted common stock of
the Company. CarroSELL, Inc. will operate as a wholly owned subsidiary of the
Company. CarroSELL, Inc. is engaged in the business of advertising on baggage
claim carousels. With its proprietary process, CarroSELL, Inc. converts baggage
claim carousel panels into moving billboards. The Company agreed to transfer no
less than $250,000 to CarroSELL, Inc. on or before June 17, 1996, in order to
further the business of CarroSELL, Inc. These funds have been transferred. In
addition, Mr. Donner has waived his right to cancel the agreement in the event
that public trading of the common stock of the Company did not resume on or
before June 17, 1996.
Mr. Donner has an employment agreement with CarroSELL, Inc., a wholly
owned subsidiary of the Company, whereby he is employed as president of
CarroSELL, Inc. for a period of five years. Pursuant to this employment
agreement, Mr. Donner receives a compensation of $2,000 per month, health,
dental and life insurance as well as a leased vehicle and auto insurance. Mr.
Donner may terminate the employment agreement upon thirty days notice.
CarroSELL, Inc. has also retained Revolving Media Marketing, Inc., which is
owned by
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Mr. Donner, pursuant to a Business Consultant's Agreement dated December 10,
1995. For a term of five years, Revolving Media provides promotional and
marketing services in exchange for $5,000 per month plus 1 1/2% of gross sales.
In addition, Revolving Media is eligible to earn options to purchase a maximum
of 1,000,000 shares of common stock of the Company based upon net income after-
taxes of CarroSELL, Inc. during the next two fiscal years. See Item 11.
"Executive Compensation."
Former SEC Filing Delinquency
- -----------------------------
The Company had been delinquent for several years in making filings with
Securities and Exchange Commission as required by the Securities Exchange Act of
1934. The delinquencies predated the re-acquisition by Jamesburg Companies,
Inc. of substantial holdings in, and control of, the Company. The Company has
filed all delinquent reports with the Securities and Exchange Commission in
order to bring the Company current in its reporting obligations to the
Securities and Exchange Commission and is now current in such reporting
obligations.
Previous Business History
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The Company was originally formed to evaluate, structure and complete a
merger with, or acquisition of, prospects consisting of private companies,
partnerships, or sole proprietorships. On August 22, 1989, the Company acquired
all of the assets of Jamesburg Companies, Inc. related to a venture known as
Club America in exchange for Six Hundred Twenty-Five Thousand shares of the
Common Stock of the Company (as adjusted for two one-for-four reverse stock
splits which the Company has effected). The assets acquired by the Company
included all trademark applications, all rights to the use of the name Club
America, all sales contracts, provider agreements, inventory, royalty agreements
and all other assets related to Club America. The Company also assumed a
$25,000 obligation of Jamesburg. Jamesburg thereby acquired approximately 88.5%
of the Company's common capital stock then outstanding.
The Company thereby became engaged on a national, direct\multi-level
marketing basis in the business of offering the American public a wide range of
products and services intended to save money on everyday needs. This business
did not succeed due to insufficient funding. In addition Fund America, which
was in a similar business with a similar name, was closed down by the Attorneys
General in California, Texas and Florida. This made it very difficult to
overcome the funding deficit. There was never any affiliation or relationship
between Fund America and the Company.
On November 14, 1991, a merger agreement was agreed to in principle with
PlanCapital U.S.A., Inc., a California corporation, whereby the California
corporation would be merged in the Company and would take controlling interest
of the Company in exchange for all the stock and assets of the California
corporation. The agreement was finalized on January 15, 1992, and the Company
changed its name from Club America, Inc., to PlanCapital U.S.A., Inc. In
connection with the merger, the Company effected one of
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its two one-for-four reverse stock splits. In connection with the merger, a
majority of the Company's debts and accrued interest was converted into capital
contribution and/or exchanged for equity in the Company. The Company began
selling living trusts and prepaid legal services for individuals and small
businesses. The business was not successful because of inadequate financing.
Although the merger was not reversed, the assumption of long-term liabilities of
the California corporation and acquisition of certain notes receivable and
debentures in exchange for the Company's common stock and preferred stock were
reversed. The Company has no preferred stock outstanding.
During the years 1993 and 1994, the Company was not actively engaged in
any ongoing business.
A number of investors in the Company requested that Milton J. Wilpon and
members of his family regain control of the Company and attempt to resurrect the
Company through the acquisition of other new businesses. Milton J. Wilpon and
members of his family felt obligated, especially due to the fact that
PlanCapital failed to provide the Company with the additional funding it was
supposed to provide. Jamesburg Companies, Inc. provided the funds to go through
the process of reviving the Company. It paid legal fees, accounting fees, and
settled with creditors, including a tax lien of the Internal Revenue Service.
Milton, Ronald and Eugene Wilpon each contributed their time and effort without
compensation. It has taken over three years to go through the process. Due to
the reputation of the Wilpon family and their ability to put businesses together
they were able to negotiate and create the Company as it presently exists.
Jamesburg Companies, Inc. anticipates that the funds expended by it on behalf of
the Company will eventually lead to an investment that will yield a rate of
return in excess of other investment opportunities which have been considered by
Jamesburg.
Products and Manufacturing
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The process utilized by CarroSELL, Inc. to advertise on baggage claim
carousels is patented. All other products are non-proprietary. The Company
currently has no manufacturing facilities of its own and relies on independent
manufacturing firms to produce its products.
Marketing - General
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The Company has discussed distribution and marketing of its products
through licensing and/or joint venture agreements with a number of potential
distributors. The Company has retained Jamesburg Companies, Inc. ("JCI"), at a
cost of $6,000 per month, to complete the initial phase of the operations of the
Company. See "Item 13 - Certain Relationships and Related Transactions." The
Company has retained Jacman Aircraft, Inc. as a distributor of aircraft parts
and equipment for the Company. See "Aircraft Parts and Equipment," above.
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Marketing - CarroSELL, Inc.
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CarroSELL, Inc., a wholly owned subsidiary of the Company, has retained
Revolving Media Marketing, Inc., which is owned by Paul Donner, the president of
CarroSELL, Inc., pursuant to a Business Consultant's Agreement dated December
10, 1995. For a term of five years, Revolving Media provides promotional and
marketing services. See "Item 11 - Executive Compensation." Revolving Media
assisted in the development of the patents and trademarks for CarroSELL, Inc.
and helped to establish moving billboards on baggage carousels as a legitimate
advertising medium.
CarroSELL, Inc. has an independent marketing company agreement with
Itochu Aviation Co., Ltd., in Japan for exclusive marketing rights in Japan and
Hong Kong. CarroSELL will receive 30% of gross receipts. Itochu is the third
largest company in the world according to Fortune and Forbes Magazine. CarroSELL
has also recently signed an agreement with one of the largest airport
advertising companies in the world, TMI of Chicago, Illinois. The contract
grants exclusive marketing rights to TMI for national advertising accounts for
the U.S.A. TMI currently has the advertising rights for some of the busiest
airports in the United States, including those in the cities of Chicago, Newark,
Denver, Boston, Dallas\Fort Worth and Atlanta.
Competition - General
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The Company anticipates substantial competition with respect to all of
its current and proposed products. The Company is engaged in fields
characterized by extensive research efforts and rapid and significant
technological change. There can be no assurance that research or discoveries by
others will not render the Company's plans superfluous or its products obsolete.
Many of the Company's competitors are well known and established companies with
vastly greater capital resources, larger research and development staffs and
more extensive marketing capabilities than those of the Company.
Competition - Marketing and Leasing Operations
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The markets for aircraft parts and equipment and the leasing thereof are
characterized by vigorous competition. See "Business-General." There are
hundreds of companies throughout the world which service the industry.
Competition - CarroSELL, Inc.
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The market for advertising in passenger travel terminals is characterized
by vigorous competition. There are a small number of large companies which
control the industry. CarroSELL's method of advertising on the carousels is
unique and proprietary. CarroSELL, Inc.'s method of affixing the advertising by
replacing the panels of the carousel is patented. See "Patents" below. The
Company's patents give it competitive advantages with regard to advertising on
the carousels and "snakes." See "Marketing - CarroSELL, Inc." above.
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Competition - South China Construction & Development Company
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Management is not aware of any significant vending machine competition in
the People's Republic of China. No assurance can be given that vigorous
competition will not develop, or that the proposed joint venture will be
successful.
Government Regulation
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The Company's inventory of aircraft parts and equipment consists of both
military and civilian aircraft. The parts are not certified by the Federal
Aviation Administration. Management believes military parts are often
interchangeable with civilian aircraft parts. A recent Advisory Circular of the
Federal Aviation Administration, dated May 24, 1996, provided as follows:
SURPLUS. Many materials, parts, appliances, and components that have
been released as surplus by the military service or by manufacturers may
originate from obsolete or overstocked items. Parts obtained from surplus
sources may be used, provided it is established that they meet the
standards to which they were manufactured, interchangeability with the
original part can be established, and they are in compliance with all
applicable [Advisory Directives]. Such items, although advertised as
"remanufactured," "high quality," "like new," "unused," or "looks good,"
should be carefully evaluated before they are purchased. The storage time,
storage conditions or shelf life of surplus parts and materials are not
usually known.
Foreign operations will be subject to general risks attendant to the
conduct of business in foreign countries including unsettled political
situations and economies, foreign governmental regulations and fluctuations in
currency values. In addition, certain countries in which the Company may
operate may maintain exchange controls on repatriation of earnings and capital.
Employees
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The Company has retained Jamesburg Companies, Inc., at a cost of $6,000 per
month, to complete the initial phase of the leasing and vending operations. See
"Item 13 - Certain Relationships and Related Transactions." Jamesburg Companies,
Inc. does business as a consulting business. There are currently no full-time
employees. Milton, Ronald and Eugene Wilpon contribute their time to the
operation of Jamesburg. Jamesburg had revenues of $63,000 in its last fiscal
year.
The Company does not have any other employees. The Company does retain
other companies, such as Jacman Aircraft, Inc. and Revolving Media Marketing,
Inc. See below. As the need for additional employees develops, employees will
be hired. Management is currently providing its services without payroll until
such time as the Company recognizes income or funds are otherwise available.
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In connection with the merger of the Company with JCI, Incorporated, the
Company agreed to retain Jacman Aircraft, Inc. as a distributor of aircraft
parts and equipment for the Company. See "Item 1 - Business - Aircraft Parts and
Equipment." Jacman Aircraft has been in the business of retailing aircraft parts
for over ten years and employs 28 people other than Mr. Jack Aronowitz.
Other than Paul Donner, the president of CarroSELL, Inc., CarroSELL, Inc.
does not have any employees. CarroSELL, Inc. does retain the services of
independent contractors as the need arises from time to time. As the need for
additional employees develops, employees will be hired.
Patents
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The process for obtaining a United States Patent begins with the filing of
a patent application in the U.S. Patent and Trademark Office. The patent laws
provide that inventions may be patented by the discoverer of the invention. The
patent application is examined by a patent examiner who may reject or allow all
or some of the claims of the patent application. The United States Patent Office
has granted three separate patents for converting baggage carousels to moving
billboards. These patents are owned by CarroSELL, Inc., a wholly owned
subsidiary of the Company. CarroSELL, Inc. owns foreign patents or applications
for these inventions which have either been issued or are pending in most
economically important foreign countries. There can be no assurance that any
patent that has been or may be granted or obtained by the Company in the future
will be enforceable or will provide the Company with meaningful protection from
competition.
Item 2. Properties.
- ------ ----------
The Company's offices and warehousing facilities are located at the site of
the principle offices. They are located on the premises of Jacman Aircraft and
are provided rent-free to the Company. The total space available to the Company
is approximately 10,000 square feet of storage space and approximately 1,500
square feet of office and administrative space. The arrangement with Jacman
Aircraft is month to month. The Company anticipates moving its executive offices
to a new location in the near future. The Company also has shared office space
available rent-free in New York City (approximately 1,200 square feet) from
Eugene L. Wilpon, a director of the Company, as well as in Chicago, Illinois
(approximately 1,000 square feet) from a consultant to the Company. See "Item 13
- - Certain Relationships and Related Transactions." These offices are available
to the Company whenever necessary to conduct its business, including meetings,
telephone conferences and secretarial assistance. Each of these arrangements are
on a month-to-month basis. CarroSELL, Inc. also has approximately 500 square
feet of administrative space at Dallas Fort Worth Airport in connection with its
operations at the airport.
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Item 3. Legal Proceedings.
- ------ -----------------
Management is not aware of any material litigation pending against the
Company, its subsidiary or their properties.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
A special meeting of shareholders of record on December 12, 1994, of the
Company was held on December 27, 1994, in Chatsworth, California to review,
discuss, consider, approve or disapprove the merger agreement with JSA,
Incorporated and to approve the change of the name of the Company to Continental
Capital Corporation and to approve the second one-for-four reverse split of the
common stock of the Company. All items were approved. 524,313 shares (as
adjusted for the reverse stock splits) voted in favor of the proposals. No
shares voted against the proposals.
PART II
Item 5. Market for Registrant's Common Equity and Related
- ------ -------------------------------------------------
Stockholder Matters.
-------------------
The Company's Common Stock is not currently being publicly traded. There
has been no trading during the two most recent fiscal years nor any subsequent
interim period for which financial statements are, or should be, included. There
have therefore been no reported quotations for the Company's Common Stock. As of
December 18, 1995, there were approximately 270 shareholders of record of the
Company's Common Stock.
The Company has not paid any dividends to its shareholders and has no
present intention of changing this policy.
Item 6. Selected Financial Data.
- ------ -----------------------
The following selected financial data, insofar as it relates to each of the
fiscal years ended October 31, 1993 through 1995, has been derived from annual
financial statements including the balance sheets at October 31, 1995 and 1994
and the related statements of operations and shareholder's equity and cash flows
for the three fiscal years ended October 31, 1995 and notes thereto appearing
elsewhere herein. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto.
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Twelve Month Twelve Month Twelve Month Twelve Month Twelve Month
Period ended Period ended Period ended Period ended Period ended
Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993 Oct. 31, 1992 Oct. 31, 1991
<S> <C> <C> <C> <C> <C>
Results of Operations:
Operating Revenues $ 61,120.00 $- $- $ 307,893.00 $ 239,566.00
Income (loss) $ 5,895.00 $ (800.00) $ (800.00) $(306,129.00) $ (756,575.00)
Income (loss) per share $- $- $- $ (0.09) $ (0.06)
Balance Sheet Data: Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993 Oct. 31, 1992 Oct. 31, 1991
Total Assets $208,876.00 $- $- $- $ 21,124.00
Total Liabilities $203,211.00 $ 508,711.00 $ 507,911.00 $ 507,111.00 $ 1,156,426.00
Total SH's Equity (Deficit) $ 5,665.00 $(508,711.00) $(507,911.00) $(507,111.00) $(1,135,302.00)
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations.
-------------------------
Liquidity and Capital Resources
- -------------------------------
Management believes that the Company has substantial assets to meet current
financial requirements due to the value of the inventory and the line of credit
from NAB Bank. For the year ended October 31, 1995, the Company experienced a
net increase in cash of $159,052. This increase resulted from receipt of the
line of credit financing from NAB Bank in the amount of $175,000 and the sale of
common stock for $12,500.
The Company has begun to recognize revenues from the sale of its inventory
of aircraft parts and equipment acquired in March 1995. See "Item 1 - Business -
Aircraft Parts and Equipment" and "Results of Operations," below. The Company
intends to sell the inventory on hand to generate cash. The Company also expects
to recognize revenue from the operations of its subsidiary, CarroSELL, Inc. See
below. The officers of the Company are currently donating their time and efforts
to the Company. The Company is not labor intensive. The Company also receives
free office, storage and other administrative services. See "Item 2 -
Properties." The Company has funded its activities through bank lines of credit,
advances from its principal shareholders, subordinated debt, the proceeds of its
1989 public offering and sales of its products. The Company currently has a
line of credit in the amount of $380,000 from NAB Bank which bears interest at a
per annum rate equal to the prime rate of interest as announced by the American
National Bank and Trust Company of Chicago plus two percent (2%). As of October
31, 1995, $175,000 had been drawn by the Company from this line of credit. The
Company has subsequently drawn down the remaining available balance on this line
of credit. Management anticipates that future cash needs will be met out of
revenues, the sale of its inventory, through additional loans or other potential
revenue and capital resources.
The Company anticipates that various equipment providers will extend
certain credit lines to the Company which will enable it to acquire equipment
when needed. The Company intends to conduct its leasing business in cooperation
with banks and existing leasing companies on a non-recourse basis until such
time as it has sufficient capital to extend its own direct funding. Transactions
are completed relatively quickly in the aircraft industry due to the fact that
down time of the aircraft is very costly. Therefore C.O.D. sales are quite
common.
The acquisition of CarroSELL, Inc. is expected to generate revenue for the
Company as well. See "Item 1 - Business - Marketing - CarroSELL, Inc." The
Company agreed to transfer no less than $250,000 to CarroSELL, Inc. on or before
June 17, 1996, in order to further the business of CarroSELL, Inc. The Company
has already completed this transfer.
14
<PAGE>
Mr. Paul Donner has an employment agreement with CarroSELL, Inc. whereby he
is employed as president of CarroSELL, Inc. for a period of five years. See
"Item 11 - Executive Compensation -Employment Agreements." Pursuant to this
employment agreement, Mr. Donner receives compensation of $2,000 per month,
health, dental and life insurance as well as a leased vehicle and auto
insurance. CarroSELL, Inc. has also retained Revolving Media Marketing, Inc. For
a term of five years, Revolving Media provides promotional and marketing
services in exchange for $5,000 per month plus 1 1/2% of gross sales. Financing
is expected to come from revenues of CarroSELL, Inc.
As of June 28, 1995, the Company entered into a Master Lease Agreement with
joint lessees CASC Shanghai and Northern Airlines: Sanya Limited. See "Item 1 -
CASC Shanghai and Northern Airlines: Sanya Limited." Shipments will not begin
until the agreement is reapproved by new management of the lessees and
resolution is reached as to the specific equipment and/or parts to be leased, as
well as pricing. Financing for this transaction is being provided by the NAB
Bank in Chicago, Illinois.
The Company has also entered into a formal letter of intent to form a joint
venture with South China Construction & Development Company from the People's
Republic of China. See "Item 1 - Business - South China Construction &
Development Company." The Company is currently negotiating with a number of
suppliers and investment sources. The Company expects to enter into many joint
ventures with investors and investment groups in China, similar to the licensing
or franchising concept in the United States. Funding for these joint ventures is
expected to come from joint venture partners.
Results of Operations
- ---------------------
The Company has recently entered into the business of marketing and leasing
various types of equipment, mainly in the transportation industry. Effective
March 31, 1995, the Company through a merger with J.S.A., Incorporated, a
California corporation ("JSA") acquired aircraft parts and equipment which have
an agreed value of $8,950,851.00. See "Item 1 - Business - Aircraft Parts and
Equipment." The sale of a portion of the acquired inventory resulted in revenues
for the Company which had been inactive for several years.
The Company realized revenue of $61,120 for the year ended October 31,
1996, as compared with $0 for 1994. These revenues consisted mainly of the sale
of aircraft parts and equipment in addition to an isolated brokerage transaction
which produced $8,638 in brokerage income. See "Note 6 to Financial Statements."
The Company's results of operations reflect net income of $5,895 (or $.OO per
share) for the year ended October 31, 1995, compared to a net loss of $800 (or
$.00 per share) for the same period in 1994.
Costs and expenses for 1995 totaled $55,225 ($.01 per share) compared to
$800 for 1994. These costs and expenses were primarily comprised of selling,
general and administrative expenses in the
15
<PAGE>
amount of $34,341 and management services of $6,000 incurred in connection with
the resumption of operations and rent in the amount of $14,000.
Management is not aware of any known trends or uncertainties that have had
or that the Company reasonably expects will have a material favorable or
unfavorable impact on net sales or revenue or income from continuing operations.
The Company does not know of any events that will cause a material change in the
relationship between costs and revenues.
Inflation
- ---------
The Company has limited experience with respect to the effect of inflation
on its business. However, the different industries in which the Company is
engaged are well developed and, based on management's understanding of each
industry experience, it believes that inflation will not have a significant
impact on the results of the Company's operations in the future.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
The financial statements required by this item are set forth as indicated
in Item 14(a)(i).
Item 9. Changes in and Disagreements With Accountants on Accounting
- ------ -----------------------------------------------------------
and Financial Disclosure.
------------------------
NONE.
PART III
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
The present directors and executive officers of the Company are listed
below, together with brief accounts of their experience and certain other
information.
<TABLE>
<CAPTION>
Year First
Name Age Office Elected
- ------------------- --- ---------------------------- -------
<S> <C> <C> <C>
Milton J. Wilpon 65 Chairman of the Board 1994
Chief Executive Officer 1994
Ronald L. Wilpon 37 Director 1989
Treasurer 1994
Eugene L. Wilpon 65 Director 1989
Secretary 1994
Paul Donner 40 President of CarroSELL, Inc. 1995
</TABLE>
All officers, except Mr. Donner, serve at the pleasure of the
16
<PAGE>
Board. Mr. Donner has an employment agreement with CarroSELL, Inc., and
Revolving Media Marketing, Inc. (which he owns) has a consultant's agreement
with CarroSELL, Inc. See "Item 11 - Executive Compensation." Ronald L. Wilpon is
the son of Milton J. Wilpon. Eugene L. Wilpon is a first cousin of Milton J.
Wilpon. See "Item 13 - Certain Relationships and Related Transactions."
Directors serve until the next annual meeting of shareholders and until their
respective successors are elected and qualified.
Business Experience of Directors and Executive Officers
- -------------------------------------------------------
Milton J. Wilpon has been Chairman of the Board of Directors and Chief
----------------
Executive Officer of the Company since October 1994. From 1989 to 1992, he
served in the same capacities. At the time of the Company's merger with
PlanCapital in 1992, Mr. Wilpon resigned from the Company. Mr. Wilpon worked as
a consultant for the Company from 1992 through 1994. He has been a consultant
for Jamesburg Companies, Inc. from 1989 to present.
Ronald L. Wilpon has been a Director of the Company since 1989. He was
----------------
president of the Company from 1989 to 1994. He has worked only part-time for the
Company since 1992. Since 1992 he has worked with Eugene L. Wilpon in various
business ventures. He has been Treasurer of the Company since October 1994. He
received a bachelors degree in finance from the University of Hawaii in 1982.
Ronald L. Wilpon is the son of Milton J. Wilpon and a second cousin of Eugene L.
Wilpon, a director of the Company.
Eugene L. Wilpon has been a Director of the Company since 1989 and the
----------------
Secretary of the Company since October 1984. He has been self-employed as a tax
professional for over thirty years. He is admitted to the practice of law in
the States of New York and Florida. He is also a licensed C.P.A. in Florida.
Mr. Wilpon has taught Tax Law at New York University and served two terms as
President of the Lawyers' and Accountants' Society of New York. He also is part
owner of a restaurant, Ess-A-Bagel, Inc. He is a first cousin of Milton J.
Wilpon and second cousin of Ronald L. Wilpon
Paul Donner is the president and a director of CarroSELL, Inc., a wholly
-----------
owned subsidiary of the Company. See "Item 1 - Business - CarroSELL, Inc." He
has been President of Revolving Media Marketing, Inc. since 1991. Revolving
Media assisted in the development of the patents and trademarks for CarroSELL,
Inc. and helped to establish moving billboards on baggage carousels as a
legitimate advertising medium. From 1989 to 1992, Mr. Donner served as
president of NeuroSync, Inc. which was engaged in the development and marketing
of consumer electronic products through catalogs. From 1984 to 1989 he served as
President of Paradigms for Excellence, a company engaged in the design and
marketing of corporate training programs for businesses implementing changes.
Item 11. Executive Compensation.
- ------- ----------------------
For the fiscal year ended October 31, 1995, all executive officers of the
Company as a group, including Jamesburg Companies,
17
<PAGE>
Inc. (5 persons), had aggregate cash compensation of approximately $16,000. The
Company has retained Jamesburg Companies, Inc., at a cost of $6,000 per month,
to complete the initial phase of the leasing and vending operations. See "Item
13 - Certain Relationships and Related Transactions."
Employment Agreements
- ---------------------
Mr. Donner, on December 10, 1995, entered into an employment agreement with
CarroSELL, Inc., a wholly owned subsidiary of the Company whereby he is employed
as president of CarroSELL, Inc. for a period of five years. Pursuant to this
employment agreement, Mr. Donner receives a compensation of $2,000 per month,
health, dental and life insurance as well as a leased vehicle and auto
insurance. Mr. Donner may terminate the employment agreement upon thirty days
notice. CarroSELL, Inc. has also retained Revolving Media Marketing, Inc., which
is owned by Mr. Donner, pursuant to a Business Consultant's Agreement dated
December 10, 1995. For a term of five years, Revolving Media provides
promotional and marketing services in exchange for $5,000 per month plus 1 1/2%
of gross sales. In addition, Mr. Donner is eligible to earn options to purchase
a maximum of 1,000,000 shares of common stock of the Company based upon annual
net income after-taxes of CarroSELL, Inc. during the next two fiscal years
according to the following formula:
<TABLE>
<CAPTION>
Net Income of Number of Shares Exercise Price
CarroSELL, Inc. Subject to Option Per Share of Stock
- ------------------ ----------------- ------------------
<S> <C> <C>
$1,000,000 100,000 $2.00
$2,000,000 200,000 $1.75
$3,000,000 200,000 $1.50
$4,000,000 200,000 $1.25
$5,000,000 300,000 $1.00
</TABLE>
Any options granted based upon sales during the first fiscal year of the
agreement will not be available for grant during the second year. Any options
granted will be exercisable for a period of two years following the date of
grant.
The Company does not have employment agreements with any of its other
officers or directors. Competitive compensation and incentive programs will be
instituted when operations achieve a profitable performance acceptable to the
Company's Board of Directors. Directors who are not salaried employees of the
Company are compensated at the rate of $250 for each Board meeting attended.
18
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
The following table sets forth, as of December 18, 1995, certain
information concerning the ownership of shares of the Company's Common Stock by
persons owning more than 5% of the outstanding shares of the Common Stock and
the Directors of the Company and by Directors and Officers as a group.
<TABLE>
<CAPTION>
Name and Address Percentage of
of Beneficial Owner Shares Owned Outstanding Shares
- ------------------- ------------ ------------------
<S> <C> <C>
Jamesburg Companies, Inc. 4,655,109 (1) 51.72%
225 Broadway Suite 1008
New York, NY 10007
Milton J. Wilpon 0 0.00%
23814 Strathern Street
West Hills, California 91304
Ronald L. Wilpon 92,188 (2) 1.02%
7 Hallo Street
Edison, New Jersey
Eugene L. Wilpon 93,750 (3) 1.04%
225 Broadway
New York, NY
Paul Donner 0 (4) (5) 0.00%
315 First Street
Suite U-190
Encinitas, CA 92024
J & T Aronowitz Family Trust 1,700,000 (6) 18.89%
8950 Fulbright
Chatsworth, California 91311
Jamesburg Companies, Inc. 4,841,047 (1-6) 53.79%
and all directors and
officers as a group
(5 persons)
</TABLE>
(1) Ronald L. Wilpon, Milton J. Wilpon and Eugene L. Wilpon may be deemed
to have shared voting power with respect to the Company's Common Stock owned by
JCI. See "Item 13 - Certain Relationships and Related Transactions."
(2) Does not include 12,500 shares owned by Ronald L. Wilpon's daughter as
to which shares Ronald L. Wilpon disclaims any beneficial interest.
(3) 93,750 shares are owned by Eugene L. Wilpon's wife.
(4) Paul Donner is the President of CarroSELL, Inc., a wholly owned
subsidiary of the Company.
19
<PAGE>
(5) Does not include options which will be issuable to Mr. Donner in the
event that net income of CarroSELL, Inc. exceeds $1,000,000 in either or both of
the next fiscal years. See Item 11. "Executive Compensation."
(6) The Aronowitz Family Trust has "piggyback" registration rights for
these shares.
Jamesburg may be deemed a "parent" or "promoter" of the Company under the
Securities Act of 1933. Milton J. Wilpon, Eugene L. Wilpon and Ronald L. Wilpon
may be deemed a "parent" of JCI and therefore a "parent" of the Company under
the Securities Act of 1933. See Item 10 "Directors and Executive Officers of
the Registrant" and "Item 13 - Certain Relationships and Related Transactions."
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
Effective August 22, 1989, the Company sold Six Hundred Twenty-Five
Thousand (625,000) shares of the Common Stock of the Company (as adjusted for
two separate one-for-four reverse stock splits which the Company has effected)
to Jamesburg Companies, Inc. in exchange for all of the assets of Jamesburg
related to its use of the name Club America and all the assets related to the
Club America business. The Company assumed a $25,000 obligation of Jamesburg.
Jamesburg thereby acquired 88.5% of the Company's Common Stock. Jamesburg's
nominees were elected as Directors of the Company in August 1989. Management of
Jamesburg had no relationship with, and had not engaged in any transactions
with, the Company prior to Jamesburg's purchase of the Company's shares. There
were no board members in common at that time. Milton J. Wilpon, Ronald L.
Wilpon and Eugene L. Wilpon were directors of Jamesburg at the time of the
transaction. The purpose of the transaction was to provide a business
opportunity for the Company. The Company believes that the consideration for the
shares was as favorable as could be obtained from other companies with which the
Company was negotiating at the time. No independent valuation was established.
Jamesburg Companies, Inc. has loaned the Company funds for operations from
time to time on an unsecured basis without interest. The purpose of these loans
was to allow the Company to continue its operations. Pursuant to an exemption
under Regulation D, a total indebtedness of $92,145 was converted into 4,703,691
shares of the common stock of the Company in March 1995 (or approximately $.02
per share). The Company has also retained Jamesburg Companies, Inc., at a cost
of $6,000 per month, to complete the initial phase of the leasing and vending
operations. Jamesburg Companies, Inc. is owned by The Jamesburg Trust. Milton J.
Wilpon, Ronald L. Wilpon and Eugene L. Wilpon, directors of the Company, are
each trustees of The Jamesburg Trust. Ronald L. Wilpon is a 40% beneficiary of
The Jamesburg Trust. Milton J. Wilpon, the Company's President, is a director
of JCI. Ronald L. Wilpon is the President and a Director of JCI. Eugene L.
Wilpon is Vice President and a Director of JCI.
20
<PAGE>
In March 1995, William Gruits transferred certain contractual rights and
residual rights valued at $25,500 to the Company in exchange for 850,000 shares
of the common stock of the Company (or $.03 per share). The Company also sold
415,000 shares of the common stock of the Company to the Alan Stern Group in
exchange for $12,500 (or $.03 per share). These offerings were made pursuant to
exemptions provided by Regulation D.
Ronald L. Wilpon was employed as President of the Company in August 1989.
He has been Treasurer of the Company since October 1994. He does not presently
draw a salary from the Company. He is the son of Milton J. Wilpon, Chairman of
the Company's Board of Directors.
Eugene L. Wilpon has been a Director of the Company since August 1989. He
has been Secretary of the Company since October 1994. He does not presently
draw a salary from the Company. He is a first cousin of Milton J. Wilpon.
Effective March 31, 1995, the Company merged with J.S.A., Incorporated, a
California corporation ("JSA"). As a result of the merger the Company acquired
certain of the assets of JSA in exchange for 1,700,000 shares of the common
stock of the Company. Management of JSA had no relationship with, and had not
engaged in any transactions with, the Company prior to the acquisition. There
were no board members in common. The purpose of the transaction was to provide a
business opportunity for the Company. The Company believes that the
consideration for the shares was as favorable as could be obtained from other
companies with which the Company was negotiating at the time. No independent
valuation (other than the value of the inventory) was established. The stock
acquired by JSA's former shareholder has certain "piggyback" registration
rights. The assets acquired by the Company consist of aircraft parts and
equipment which have an agreed value of $8,950,851.00 (which is 62% of the list
prices quoted in the inventory list provided by JSA). In connection with the
merger, the Company agreed to retain Jacman Aircraft, Inc. as the exclusive
distributor of all aircraft parts and equipment for the Company. Jacman
Aircraft, Inc. was entitled to the first $60,000 of the net sales price received
by the Company for the inventory. Jacman also receives a 20% sales commission
(5% if the sale is not made by Jacman). This agreement has been amended to
provide for a non-exclusive arrangement. Jacman Aircraft is a California based
aircraft parts and equipment marketing firm. JSA, Jacman Aircraft, Inc. and the
Aronowitz Family Trust are all affiliated entities. Mr. Jack Aronowitz is the
chief executive officer of Jacman Aircraft, Inc. Mr. Aronowitz and his family
are the beneficiaries of the Aronowitz Family Trust which was the sole
shareholder of JSA. Mr. Aronowitz had been the chief executive officer of JSA
prior to the merger.
On December 10, 1995, the Company entered into an Agreement of Purchase and
Sale of Stock with CarroSELL, Inc. and Paul Donner, the sole shareholder of
CarroSELL, Inc. whereby the Company acquired all of the capital stock of
CarroSELL, Inc. in exchange for 500,000 shares of the restricted common stock of
the Company.
21
<PAGE>
CarroSELL, Inc. will operate as a wholly owned subsidiary of the Company.
CarroSELL, Inc. is engaged in the business of advertising on baggage claim
carousels. With its proprietary process, CarroSELL, Inc. converts baggage claim
carousel panels into moving billboards. The Company agreed to transfer no less
than $250,000 to CarroSELL, Inc. on or before June 17, 1996, in order to further
the business of CarroSELL, Inc. These funds have been transferred. In addition,
Mr. Donner has waived his right to cancel the agreement in the event that public
trading of the common stock of the Company did not resume on or before June 17,
1996.
Mr. Donner has an employment agreement with CarroSELL, Inc., a wholly owned
subsidiary of the Company whereby he is employed as president of CarroSELL, Inc.
for a period of five years. Pursuant to this employment agreement, Mr. Donner
receives compensation of $2,000 per month, health, dental and life insurance as
well as a leased vehicle and auto insurance. Mr. Donner may terminate the
employment agreement upon thirty days notice. CarroSELL, Inc. has also retained
Revolving Media Marketing, Inc., which is owned by Mr. Donner, pursuant to a
Business Consultant's Agreement dated December 10, 1995. For a term of five
years, Revolving Media provides promotional and marketing services in exchange
for $5,000 per month plus 1 1/2% of gross sales. In addition, Revolving Media
is eligible to earn options to purchase a maximum of 1,000,000 shares of common
stock of the Company based upon net income after-taxes of CarroSELL, Inc. during
the next two fiscal years. See Item 11. "Executive Compensation."
Milton J. Wilpon, the Company's President, has personally guarantied any
liabilities of the Company in excess of $50,000 which exist as of October 31,
1995 and are not reflected on the balance sheet of the Company as of that date.
Management is unaware of any liabilities which are not reflected on the
Company's balance sheet.
The Company currently has a line of credit in the amount of $380,000.
Milton J. Wilpon and Eugene L. Wilpon, directors of the Company, are guarantors
on this secured line of credit.
Management of the Company believes that all transactions as described above
have been on terms no less favorable to the Company than those that could have
been obtained from unaffiliated parties.
22
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- ------- ----------------------------------------------------------------
(a) Documents Filed with Report:
---------------------------
1. Financial Statements and Financial Statement Schedules.
The Financial Statements and Financial Statement Schedules listed
in the accompanying Index to Financial Statements are filed as
part of this report.
2. Exhibits.
The Exhibits listed on the accompanying Index to Exhibits are
filed as part of this report.
(b) Reports on Form 8-K:
-------------------
NONE.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
CONTINENTAL CAPITAL CORPORATION
Date: August 26, 1996 By:__________________________________
Milton J. Wilpon, President,
Principal Executive Officer and
Chairman of the Board
Date: August 26, 1996 By:_____________________________________
Ronald L. Wilpon, Principal Financial
and Accounting Officer and Director
Pursuant to the requirements of the 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.
Date: August 26, 1996 By:__________________________________
Milton J. Wilpon, President,
Principal Executive Officer and
Chairman of the Board
Date: August 26, 1996 By:______________________________________
Ronald L. Wilpon, Principal Financial
and Accounting Officer and Director
Date: August 26, 1996 By:_________________________________
Eugene L. Wilpon, Director
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
No annual report or proxy material has been sent to
security holders.
24
<PAGE>
CONTINENTAL CAPITAL CORPORATION
-------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
------------------------------------------
<TABLE>
<CAPTION>
Financial Statements Page
- -------------------- ----
<S> <C>
Independent Auditor's Report F-1
Balance Sheets - as of October 31, 1995 and 1994 F-2
Statements of Operations for the Years
Ended October 31, 1995, 1994 and 1993 F-3
Statements of Shareholders' Equity (Deficiency) for the
Years Ended October 31, 1995, 1994 and 1993 F-4
Statements of Cash Flows for the Years Ended
October 31, 1995, 1994 and 1993 F-5
Notes to Financial Statements F-6
</TABLE>
25
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholders of
Continental Capital Corporation
I have audited the accompanying balance sheets of Continental Capital
Corporation, as of October 31, 1995 and 1994, and the related statements of
operations, shareholders' equity (deficiency) and cash flows for each of the
three years in the period ended October 31, 1995. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Continental Capital Corporation as
of October 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended October 31, 1995 in
conformity with generally accepted accounting principles.
JON H. KLINE, C.P.A., P.C.
Rochester Hills, Michigan
December 20, 1995 except for the second paragraph of
Note 9, as to which the date is June 7, 1996
F-1
<PAGE>
CONTINENTAL CAPITAL CORPORATION
BALANCE SHEETS
OCTOBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
------
Current Assets:
Cash on hand and in bank $ 159,052 $ -
Inventory 49,824 -
----------- -----------
Total current assets 208,876 -
----------- -----------
Total assets $ 208,876 $ -
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
- -------------------------------------------------
Current Liabilities:
Line of credit financing $ 175,000 $ -
Accounts payable and accrued expenses 28,211 125,545
Loans payable, shareholders - 383,166
----------- -----------
Total current liabilities 203,211 508,711
----------- -----------
Commitments and Other Matters
Shareholders' Equity (Deficiency) (Notes 1 and 3):
Preferred stock, no par value; authorized 2,000 shares Series A
and 1,00 shares Series B; none issued - -
Common stock, $.001 par value; authorized 100,000,000 shares
issued and outstanding 8,500,000 in 1995 and 831,309 in 1994 8,500 831
Additional paid-in capital 1,811,546 1,310,734
Deficit (1,814,381) (1,820,276)
----------- -----------
Total shareholders' equity (deficiency) 5,665 (508,711)
----------- -----------
Total liabilities and shareholders' equity $ 208,876 $ -
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
CONTINENTAL CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales of aircraft parts and equipment $ 52,482 $ - $ -
Brokerage income 8,638 - -
---------- -------- --------
Total revenues 61,120 - -
---------- -------- --------
Costs and Expenses:
Cost of sales 176 - -
Selling, general and administrative 34,341 - -
Management services 6,200 800 800
Rent 14,000 - -
Interest 508 - -
---------- -------- --------
Total costs and expenses 55,225 800 800
---------- -------- --------
Income (Loss) before Income Taxes 5,895 (800) (800)
Provision for Income Taxes - - -
---------- -------- --------
Net Income (Loss) $ 5,895 $ (800) $ (800)
========== ======== ========
Earnings (Loss) per Common Share $ (-) $ (-) (-)
========== ======== ========
Weighted Average Number of Common
Shares 5,912,501 831,309 831,309
========== ======== ========
</TABLE>
F-3
<PAGE>
CONTINENTAL CAPITAL CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Common Stock
-------------------
Paid-in
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, November 1, 1992 3,325,002 $ 3,325 $1,308,240 $(1,818,676) $(507,111)
One-for-four reverse split of common stock declared 1/31/95 (2,493,693) (2,494) 2,494 - -
---------- ------- ---------- ----------- ---------
Balance, November 1, 1992, as adjusted 831,309 831 1,310,734 (1,818,676) (507,911)
Year Ended October 31, 1993
Net (loss) - - - (800) (800)
---------- ------- ---------- ----------- ---------
Balance, October 31, 1993 831,309 831 1,310,734 (1,819,476) (507,911)
Year Ended October 31, 1994
Net (loss) - - - (800) (800)
---------- ------- ---------- ----------- ---------
Balance, October 31, 1994 831,309 831 1,310,734 (1,820,276) (508,711)
Year ended October 31, 1995
Issuance of common stock for:
Inventory 1,700,000 1,700 48,300 - 50,000
Cash 415,000 415 12,085 - 12,500
Contractual rights 850,000 850 24,650 - 25,000
Forgiveness of debt, net 4,703,691 4,704 395,577 - 400,281
Credit arising from contributed management services
and rent - - 20,200 - 20,200
Net income - - - 5,895 5,895
---------- ------- ---------- ----------- ---------
Balance, October 1, 1995 8,500,000 $ 8,500 $1,811,546 $(1,814,381) $ 5,665
========== ======= ========== =========== =========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
CONTINENTAL CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 5,895 $(800) $(800)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Contributed management services and rent 20,200 - -
Increase (decrease) in accounts payable and accrued
liabilities (54,719) 800 800
Decrease in inventory 176 - -
-------- ----- -----
Net cash provided by (used in) operating activities (28,448) - -
-------- ----- -----
Cash Flows from Financing Activities:
Proceeds from line of credit financing 175,000 - -
Proceeds from issuance of common stock 12,500 - -
-------- ----- -----
Net cash provided by financing activities 187,500 - -
-------- ----- -----
Net Increase in Cash 159,052 - -
Cash at Beginning of Period - - -
-------- ----- -----
Cash at End of Period $159,052 $ - $ -
======== ===== =====
Supplemental Cash Flow Information:
Cash paid during the year for interest $ 508
========
Non-cash financing and investing transactions:
Acquisition of inventory by issuance of common stock $ 50,000
========
Transfer of certain contractual rights and residual rights in
exchange for common stock $ 25,500
========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
Continental Capital Corporation (the "Company") was incorporated
under the laws of the State of Colorado on November 8, 1985. The
Company's articles of incorporation, as amended, provide for the
issuance of 100,000,000 shares of common stock, with a par value
of $.001 per share, and 2,000 shares of Series A and 1,000 shares
of Series B preferred stock with no par value. Series of the
preferred stock may be created and issued from time to time, with
such designations, preferences, conversion rights and other
rights, including voting rights, as adopted by the Board of
Directors.
On January 31, 1995, the Board of Directors of the Company
approved a one-for-four reverse stock split of the outstanding
common stock, which resulted in 831,309 shares of common stock
outstanding. Retroactive effect has been given to this reverse
stock split in the accompanying financial statements.
History
The Company's original name was Lexington Capital Corporation and
has changed a number of times since its incorporation in 1985. The
Company has additionally been known as Club America, Inc. and
PlanCapital U.S.A., Inc. During 1995, the Company changed its name
to its present name, Continental Capital Corporation.
Business
The Company has recently entered into the business of marketing
and leasing various types of equipment, mainly in the
transportation industry. The Company intends to specialize
specifically in commercial aircraft parts and equipment, fleet
commercial trucks and medical equipment.
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although these
estimates are based on management's knowledge of current events
and actions it may undertake in the future, they may ultimately
differ from actual results.
Inventory
Inventory is comprised of aircraft parts and equipment, and is
stated at the lower of cost or market. Cost is determined using
principally the average method, based upon the allocated
historical cost of the corporation from who the Company acquired
the aircraft parts and equipment (see Note 2).
F-6
<PAGE>
CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue on the sale of aircraft parts and
equipment of the time such goods are shipped.
Earnings (Loss) Per Common Share
Earnings (loss) per common share has been computed based upon the
weighted average number of shares of common stock outstanding
during the period. Retroactive application has been given to the
on-for-four reverse stock split effected in January 1995.
NOTE 2. BUSINESS ACQUISITION
Effective March 31, 1995, the Company merged with J.S.A.,
Incorporated, a California corporation ("JSA"). As a result of the
merger, the Company acquired certain of the assets of JSA, which
consisted of aircraft parts and equipment, in exchange for the
issuance of 1,700,000 shares of the Company's common stock. In
accordance with the terms of the agreement, the aircraft parts and
equipment had an agreed value of approximately $8,950,000. In
connection with the merger, the Company agreed to retain Jacman
Aircraft, Inc. ("Jacman"), a California based aircraft parts and
equipment marketing firm which is affiliated with the former
shareholder, as the exclusive distributor of all aircraft parts and
equipment for the Company.
The acquisition of these assets did not constitute a business
combination, and the Company has accounted for the acquisition of
these assets in a manner similar to the purchase method. However,
because of the significance of the ownership of the Company's common
stock created by the issuance of the 1,700,000 shares of common
stock to the former shareholder of JSA, together with the control
exercised by the related entity (Jacman) over the marketing of the
inventory of aircraft parts and equipment, the Company has recorded
the inventory of aircraft parts and equipment at the allocated
historical cost of JSA ($50,000), rather than the agreed value per
the agreement. As sales of the aircraft parts and equipment occur,
the proportionate amount of such historical cost will be charged to
cost of sales based upon a relative value calculation.
NOTE 3. LINE OF CREDIT FINANCING
The Company entered into a borrowing arrangement with NAB Bank,
Darien, Illinois. The line authorized for $200,000 has been drawn on
in the amount of $175,000 as of October 31, 1995. The loan is
unsecured and provides for interest 10.75%. Subsequent to October
31, 1995 this line of credit was increased to $475,000.
This line of credit expires in August, 1996 and is renewable
annually.
F-7
<PAGE>
CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 4. COMMITMENTS AND OTHER MATTERS
As of June 28, 1995, the Company entered into a Master Lease
Agreement with joint lessees CASC Shanghai and Northern Airlines:
Sanya Limited. The term of the Master Lease commences on the
shipping date of the initial amount of equipment and shall continue
for a period of five years with a total of $5,000,000 in aircraft
parts and equipment. Delivery of equipment under this lease is
expected to begin in early 1996. Financing for this transaction is
being provided by NAB Bank in Chicago, Illinois.
NOTE 5. COMMON STOCK TRANSACTIONS
In March 1995, the Company issued 850,000 shares of common stock in
exchange for the transfer of certain contractual rights and residual
rights valued at $25,500.
The Company also sold 415,000 shares of common stock in exchange for
$12,500 in March 1995.
In March 1995, indebtedness of $92,145 owing to JCI was converted
into 4,703,691 shares of common stock (see Note 6). Additionally,
loans payable, shareholders of $383,166 which arose in prior years,
and certain other accounts payable and accrued expenses which arose
in prior years, net of an adjustment of $75,030, were forgiven
during the year ended October 31, 1995. This forgiveness of debt
has been recorded as an addition to paid-in capital.
On January 31, 1995, the Board of Directors of the Company approved
a one-for-four reverse stock split of the outstanding common stock,
which results in 831,309 shares of common stock outstanding.
Retroactive effect has been given to this reverse stock split in the
accompanying financial statements.
NOTE 6. BROKERAGE INCOME
During fiscal 1995, the Company was involved in a certain leasing
transaction as an accommodation to the parties directly
participating in the lease. The Company's involvement was limited to
facilitating the transaction as among the lessor and lessee and
financial institution; did not encompass the receipt or payment or
guarantee of any rentals under the lease; and was limited in
occurrence to this isolated transaction. As compensation for this
accommodation, the Company received a brokerage fee of $8,638 which
is presented in the accompanying financial statements as brokerage
income.
NOTE 7. RELATED PARTY TRANSACTIONS
The Company has retained Jamesburg Companies, Inc. ("JCI"), the
major shareholder of the Company, to complete the initial phase of
the leasing and vending operations at a cost of $6,000 per month.
Fees paid to JCI during fiscal 1995 amounted to $10,200.
From time to time, JCI has loaned the Company funds for operations
on an unsecured basis without interest. In March 1995, indebtedness
of $92,145 owing to JCI was converted into 4,703,691 shares of
common stock.
F-8
<PAGE>
CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7. RELATED PARTY TRANSACTIONS
Management of the Company, who are also stockholders and directors,
has been providing its services without compensation until such time
as the Company recognized income or funds are otherwise available.
However, the Company has recognized the estimated value of the
services performed by management without compensation to be
approximately $6,200 and has charged this amount to expense, with a
corresponding credit to Paid-In-Capital.
The Company's principal offices and warehousing facilities are
located in the premises of Jacman Aircraft (see Note 2) on a month-
to-month arrangement, and are provided rent free. The Company also
has shared office space available in New York, which is provided
rent free from a director/shareholder of the Company. The Company
has recognized the estimated value of the rent provided by these
related parties without cost to be approximately $14,000, and has
charged this amount to expense, with a corresponding credit to Paid-
In Capital.
NOTE 8. INCOME TAXES
The Company accounts for income taxes under the provision of
Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes.
No provision or benefit for income taxes has been recognized for
1995, 1994 or 1993 because of the utilization of net operating loss
carryforwards or the losses incurred.
As of October 31, 1995, the Company had net operating loss
carryforwards for federal income tax reporting purposes amounting to
approximately $1,700,000, which expire in varying amount through
2010.
The Company has not recognized any benefit of such net operating
loss carryforwards in the accompanying financial statements in
accordance with the provisions of SFAS No. 109, as the realization
of this deferred tax benefit is not more than likely. A 100%
valuation allowance has been recognized to offset the entire effect
of the Company's net deferred tax asset. The Company's net deferred
tax asset position is composed primarily of the Company's tax loss
carryforwards.
NOTE 9. SUBSEQUENT EVENTS
On December 10, 1995, the Company entered into an Agreement of
Purchase and Sale of Stock with CarroSELL, Inc. and its sole
shareholder whereby the Company acquired all of the capital stock of
CarroSELL in exchange for 500,000 shares of the Company's common
stock. CarroSELL is engaged in the business of advertising on
baggage claim carousels, and with its proprietary process, converts
baggage claim carousel panels into moving billboards. The Company
agreed to transfer $250,000 to CarroSELL on or before June 17, 1996
to further its business. In the event that public trading of the
Company's common stock had not resumed or the $250,000 was not
transferred by June 17, 1996, the former shareholder had the option
to cancel the agreement.
The required transfer of $250,000 has been subsequently completed.
On June 7, 1996, this agreement to purchase CarroSELL, Inc. was
amended to eliminate the requirement of public trading by June 17,
1996 in exchange for the Company's agreeing to issue to the original
owner of CarroSELL, Inc. an additional 250,000 shares of the
Company's common stock.
F-9
<PAGE>
CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9. SUBSEQUENT EVENTS
CarroSELL entered into an employment agreement with the former
shareholder for a period of five years providing for an annual
salary of $24,000 plus certain benefits. CarroSELL also entered
into a consulting agreement with Revolving Media Marketing, Inc., a
company owned by the former shareholder, to provide promotional and
marketing services for a term of five years in exchange for $60,000
per annum plus 1 1/2% of gross sales. In addition, Revolving Media
is eligible to earn options to purchase a maximum of 1,000,000
shares of common stock of the Company based upon the net income of
CarroSELL during the next two fiscal years.
The Company anticipates accounting for this acquisition by the
purchase method.
F-10
<PAGE>
CONTINENTAL CAPITAL CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED
OCTOBER 31, 1995
INDEX TO EXHIBITS
- -----------------
(3) Article of Incorporation and Bylaws
3.1 Articles of Incorporation of Registrant (i)
3.2 Certificate of Amendment to Articles of Incorporation of Registrant,
filed September 12, 1989. (i)
3.3 Certificate of Amendment to Articles of Incorporation of Registrant
filed April 13, 1992 (i)
3.4 Certificate of Determination of Preferred Stock filed April 30, 1992.
(i)
3.5 Certificate of Amendment to Articles of Incorporation of Registrant
filed November 3, 1994 (i)
3.6 By-laws of Registrant. (i)
3.7 Articles of Incorporation of CarroSELL, Inc. (i)
(10) Material Contracts
10.1 Master Lease Agreement dated as of the 28/th/ day of June, 1995,
Registrant and CASC Shanghai and Northern Airlines: Sanya Limited. (i)
10.2 Agreement and Plan of Merger dated as of January 10, 1995, among
Registrant, Milton Wilpon, J.S.A., Incorporated, a California
corporation, Jack Aronowitz and the Aronowitz Family Trust. (i)
10.3 Exclusive Distribution Agreement dated as of January 10, 1995, between
Registrant and Jacman Aircraft, Inc. covering all aircraft parts and
equipment owned by the Company. (i)
10.4 Agreement of Purchase and Sale of Stock among Registrant CarroSELL,
Inc. and Paul Donner dated as of December 10, 1995. (i)
10.5 Employment Agreement between Registrant, CarroSELL, Inc. and Paul
Donner dated as of December 10, 1995. (i)
10.6 Business Consultant's Agreement between CarroSELL, Inc. and Revolving
Media Marketing, Inc. dated December 10, 1995. (i)
10.7 Agreement to Purchase and Transfer Stock dated the 24/th/
<PAGE>
day of August 1994 by and between the Company, Atlantic Funding,
Limited and AtlanticRe Limited. (i)
10.8 Compromise and Settlement of Claims between the Company and certain
persons solicited by prior management of the Company dated April, 1994.
(i)
10.9 Letter of Intent to Form a Joint Venture between the Company and Baker
Huang Corporation (South China Construction & Development Company)
dated August 25, 1995. (i)
10.10 Independent Marketing Company Agreement dated March 1, 1994, between
Revolving Media and Itochu Aviation Co., Ltd. (i)
10.11 Assignment of Patents dated November 25, 1995 from Revolving Media,
Limited to CarroSELL, Inc. (i)
10.12 Amendment to Agreement and Plan of Merger among Registrant, Milton
Wilpon, J.S.A., Incorporated, Jack Aronowitz and the Aronowitz Family
Trust Dated April 30, 1993, dated as of March 23, 1995. (p. __)
10.13 Amendment to Agreement and Plan of Merger among Registrant, Milton
Wilpon, J.S.A. Incorporated, Jack Aronowitz, The Aronowitz Family Trust
Dated April 30, 1993, dated as of May 7, 1996. (p. __)
10.14 Amendment to Exclusive Distribution Agreement between Registrant and
Jacman Aircraft, Inc., dated as of May 7, 1996. (p. __)
10.15 Independent Marketing and Sales Representative Agreement between
CarroSELL, Inc. and Transportation Media Inc. (TMI). (p. __)
10.16 Letter Agreement between Registrant and Paul Donner dated June 7, 1996.
(p. __)
10.17 Secured Note/Adjustable Rate executed by the Company on June 6, 1996.
(p. __).
10.18 Security Agreement between Registrant and NAB Bank dated June 6, 1996.
(p. __).
24.1 Consent of experts and counsel
See response to Item 14(a)(i),Financial Statements
(i) Incorporated by reference to the Registrant's Annual Report on Form 10-K,
File No. 33-22426-D, for the Fiscal Year ended October 31, 1995.
<PAGE>
EXHIBIT 10.12
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER among Continental Capital
Corporation (formerly known as PlanCapital U.S.A., Inc. and hereinafter referred
to as the "Corporation" or the "Buyer"), a Colorado Corporation, having its
principal office at 8950 Fulbright Avenue, Chatsworth, California 91311, Milton
Wilpon, having a business address at 8950 Fulbright Avenue, Chatsworth,
California 91311 (hereinafter referred to as "Wilpon"), J.S.A., Incorporated, a
California Corporation, having its principal office at 8950 Fulbright Avenue,
Chatsworth, California 91311 (hereinafter referred to as the "Target"), Jack
Aronowitz, having a business address at 8950 Fulbright Avenue, Chatsworth,
California 91311 (hereinafter referred to as "Selling Shareholder"), and The
Aronowitz Family Trust Dated April 30, 1993 having an address at 8950 Fulbright
Avenue, Chatsworth, California 91311 (hereinafter referred to as the "Trust") is
dated as of the 23rd day of March, 1995:
Background
----------
A. An Agreement and Plan of Merger was entered into as of January 10,
1995 among the Corporation, Wilpon, Target and Selling Shareholder.
B. The parties wish to clarify the parties to the agreement and to add
the Trust as a party to the agreement subject to the terms and conditions as set
forth in this Amendment.
Agreement
---------
The Corporation, Wilpon, Target, Selling Shareholder and the Trust hereby
agree to amend the Agreement and Plan of Merger (the "agreement") as follows:
1. The Trust represents and warrants that (i) it is the sole
shareholder of Target; (ii) it agrees to all of the terms and conditions of the
agreement; (iii) by its signature below it agrees to become a party to the
agreement; and (iv) that it will be treated as Selling Shareholder for all
purposes of the agreement.
2. The Corporation has not yet changed its name to Continental Capital
Corporation, although the name change has been approved by the directors and
shareholders of the Corporation.
3. In the event of a conflict between the terms and
<PAGE>
provisions of the Agreement and Plan of Merger and the terms and provisions of
this Amendment to Agreement and Plan of Merger, it is understood and agreed
among the parties that the terms and conditions of this Amendment to Agreement
and Plan of Merger shall supersede and prevail.
IN WITNESS WHEREOF, each of the parties has executed or caused this
Amendment to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
PLANCAPITAL U.S.A., INC. (Buyer) MILTON WILPON
By:______________________________ _________________________________
Milton Wilpon, President Milton Wilpon
J.S.A., INCORPORATED (Target) JACK ARONOWITZ
By:______________________________ _________________________________
Jack Aronowitz, President Jack Aronowitz
THE ARONOWITZ FAMILY TRUST DATED APRIL 30, 1993
By:_______________________________
Jack Aronowitz, Trustee
By:_______________________________
Tina Aronowitz, Trustee
2
<PAGE>
EXHIBIT 10.13
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER among Continental Capital
Corporation (formerly known as PlanCapital U.S.A., Inc. and hereinafter referred
to as the "Corporation" or the "Buyer"), a Colorado Corporation, having its
principal office at 8950 Fulbright Avenue, Chatsworth, California 91311, Milton
Wilpon, having a business address at 8950 Fulbright Avenue, Chatsworth,
California 91311 (hereinafter referred to as "Wilpon"), J.S.A., Incorporated, a
California Corporation, having its principal office at 8950 Fulbright Avenue,
Chatsworth, California 91311 (hereinafter referred to as the "Target"), Jack
Aronowitz, having a business address at 8950 Fulbright Avenue, Chatsworth,
California 91311 (hereinafter referred to as "Mr. Aronowitz"), and The Aronowitz
Family Trust Dated April 30, 1993 having an address at 8950 Fulbright Avenue,
Chatsworth, California 91311 (hereinafter referred to as the "Selling
Shareholder") is dated as of the 7th day of May, 1996:
Background
----------
A. An Agreement and Plan of Merger (the "Merger Agreement") was entered
into as of January 10, 1995, among the Corporation, Wilpon, Target and Mr.
Aronowitz and later amended to clarify the parties to the agreement and to add
the Selling Shareholder as a party to the agreement.
B. For valuable consideration, receipt of which is hereby acknowledged,
the parties wish to amend the Merger Agreement subject to the terms and
conditions as set forth in this Amendment.
Agreement
---------
The Corporation, Wilpon, Target, Mr. Aronowitz and Selling Shareholder
hereby agree to amend the Merger Agreement as follows:
1. Paragraph 2.3 is amended to read as follow:
The number of Shares set forth in paragraph 2.1 above is based upon an
appraised value of the Assets in the amount of $8,950,851.00. [The
rest of the paragraph is hereby deleted.]
2. Selling Shareholder has not exercised the right to rescind the Merger
Agreement. Paragraph 11.1 of the
<PAGE>
Merger Agreement is hereby amended to read as follows:
ARTICLE ELEVEN
RESCISSION BY SELLING SHAREHOLDER
11.1 In the event that the common stock of Buyer has not been publicly
traded at any time between the Effective Date and December 31, 1996, Selling
Shareholder will have a limited right to exchange the Shares for all of the
Assets still owned by Buyer on the date Buyer receives notice of Selling
Shareholder's exercise of this right. Selling Shareholder may give notice of
the exercise of this right for a period of thirty days commencing December 31,
1996. Failure to give notice during this time or the public sale of the common
stock of Buyer prior to receipt of proper notice from Selling Shareholder will
extinguish the right. Selling Shareholder must tender certificates representing
the Shares, duly endorsed with medallion signature guaranteed, at the time of
the notice. Upon receipt of a proper notice with the tendered shares, Buyer
will arrange for transfer to Selling Shareholder of title to the Assets still
owned by Buyer on that date. For purposes of this paragraph, publicly traded
shall mean that the common stock of the Buyer or the Surviving Corporation has
been quoted by a market maker, in the Pink Sheets, on the Electronic Bulletin
Board, NASDAQ or any other recognized public market.
3. Selling Shareholder desires to waive the right demand registration
rights as contained in the Merger Agreement. Paragraphs 12.1 is hereby deleted
from the Agreement.
4. In the event of a conflict between the terms and provisions of the
Merger Agreement, as amended, and the terms and provisions of this Amendment to
Agreement and Plan of Merger, it is understood and agreed among the parties that
the terms and conditions of this Amendment to Agreement and Plan of Merger shall
supersede and prevail.
IN WITNESS WHEREOF, each of the parties has executed or caused this
Amendment to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
CONTINENTAL CAPITAL CORP. (Buyer) MILTON WILPON
By:______________________________ ________________________
Milton Wilpon, President Milton Wilpon
2
<PAGE>
J.S.A., INCORPORATED (Target) JACK ARONOWITZ
By:______________________________ ________________________
Jack Aronowitz, President Jack Aronowitz
THE ARONOWITZ FAMILY TRUST DATED APRIL 30, 1993
By:_______________________________
Jack Aronowitz, Trustee
By:_______________________________
Tina Aronowitz, Trustee
3
<PAGE>
EXHIBIT 10.14
AMENDMENT TO EXCLUSIVE DISTRIBUTION AGREEMENT
---------------------------------------------
THIS AMENDMENT TO EXCLUSIVE DISTRIBUTION AGREEMENT between Continental
Capital Corporation (formerly known as PlanCapital U.S.A., Inc. and hereinafter
referred to as the "Corporation" or the "Buyer"), a Colorado Corporation, having
its principal office at 8950 Fulbright Avenue, Chatsworth, California 91311, and
Jacman Aircraft, Inc., a California Corporation, having its principal office at
8950 Fulbright Avenue, Chatsworth, California 91311 (hereinafter referred to as
the "Distributor") is dated as of the 7th day of May, 1996:
Background
----------
A. An Exclusive Distribution Agreement (the "Agreement") was entered
into as of January 10, 1995, between the Corporation and the Distributor.
B. For valuable consideration, receipt of which is hereby acknowledged,
the parties wish to amend the Agreement so as to make the Agreement non-
exclusive, subject to the terms and conditions as set forth in this Amendment.
Agreement
---------
The Corporation and Distributor hereby agree to amend the Distribution
Agreement as follows:
1. Distributor hereby waives its right to be the exclusive distributor
for the Corporation. All exclusive rights granted by the Distribution Agreement
are hereby deleted and made non-exclusive.
2. As long as the Distribution Agreement is in force, Distributor will
retain custody of the Equipment. If any of the Equipment is sold by anyone other
than Distributor, then upon such sale, the broker or other person making the
sale shall pay Distributor a storage and packing fee in the amount of five
percent (5%) of the selling price. Distributor shall pack the Equipment for
shipping, to be picked up by buyer at Distributor's warehouse, and Distributor
shall not be responsible for any other costs of selling or shipping such
Equipment.
3. In the event of a conflict between the terms and provisions of the
Agreement and the terms and provisions of this Amendment to Exclusive
Distribution Agreement, it is understood and agreed among the parties that the
terms and conditions of this Amendment to Exclusive Distribution Agreement shall
supersede and prevail.
IN WITNESS WHEREOF, each of the parties has executed or caused this
Amendment to be executed on its behalf by its duly authorized officers, all as
of the day and year first above
<PAGE>
written.
CONTINENTAL CAPITAL CORP. JACMAN AIRCRAFT, INC.
By:_________________________ By:___________________________
Milton Wilpon, President Jack Aronowitz, President
2
<PAGE>
INDEPENDENT MARKETING AND SALES REPRESENTATIVE AGREEMENT
--------------------------------------------------------
This Agreement is made and entered into this 29th day of February, 1996, by
and between CarroSELL, Inc. (the "Company") and Transportation Media Inc.
("TMI").
RECITALS:
---------
A. The Company has developed a proprietary baggage claim conveyor belt
display system known as CarroSELL(TM) (the "Product").
B. TMI owns and operates the static display advertising concessions at
many of the country's major airports and has many years of experience in
establishing and selling advertising through various media at airports.
C. The Company wishes to appoint TMI as an authorized United States
national marketing representative to assist it in placing its Product in various
airports, and, as its exclusive United States national sales representative, to
sell advertising space thereon, and TMI is willing to provide such services to
the Company, all on the terms and conditions set out herein.
AGREEMENTS:
-----------
Now Therefore, in consideration of the premises and the mutual promises
contained herein, the parties agree as follows:
1. Appointment and Business Territory. The Company hereby appoints TMI,
----------------------------------
and TMI hereby agrees, to act for the Company as an authorized United States
national marketing and sales representative for (i) the Product, having the
exclusive right to promote the Product's introduction at TMI airports (as
defined below), and (ii) sales of advertising space on installed Product systems
("Advertising"), having the exclusive right to solicit and sell Advertising to
National Accounts and their advertising agencies. For these purposes, "National
Accounts" means entities having or representing other entities that have control
or authority over a national advertising budget for a product or service that is
simultaneously distributed in more than one (1) regional market. The foregoing
notwithstanding, in the event that the Product is installed at any non-TMI
Airport, TMI shall only have such rights to solicit and sell Advertising as the
Company has, but to that extent, TMI will have the exclusive rights provided for
above with respect to National Accounts. At all times hereunder TMI shall be an
independent contractor to the Company and no other relationship, such as
employer-employee, partnership, joint venture or otherwise, is intended.
2. Terms of Sale. All sales of Advertising shall be at such prices and on
-------------
such terms as shall be established by and be acceptable to the Company, after
consultation with TMI. TMI shall have the authority to accept contracts in the
name and on behalf of the Company for sales of Advertising, to bill and collect
for all
<PAGE>
such Advertising and to remit collected proceeds of all such billing (net of
TMI's commissions) to the Company and applicable advertising agencies. TMI will
use reasonable commercial efforts to collect amounts due for sales of
Advertising, but shall bear no ultimate credit responsibility for uncollected
amounts due from advertisers.
3. Responsibilities of TMI. TMI's duties under this Agreement shall be as
-----------------------
follows: (a) TMI will use its best commercial efforts to adequately promote
sales of Advertising within the United States to National Accounts on a
continuing basis, in accordance with good business practices, and (b) TMI will
use its best commercial efforts to secure the introduction of the Product at the
following airports currently served by TMI-operated concessions: Chicago/O'Hare,
Atlanta/Hartsfield, Newark and Denver International, and all future airports
served by TMI (referred to herein as "TMI Airports"), as a subcontractor to TMI
under the terms of those concessions.
TMI acknowledges that the terms on which the Company is offered the
opportunity to participate as a subcontractor to TMI at TMI Airports must be
economically acceptable to the Company in its sole discretion.
4. Compensation. TMI shall be compensated for sales made under the terms
------------
of this Agreement as follows: For each initial contract of sale of Advertising
made to any advertiser, TMI shall receive 25% of the total invoice price of the
sale to the advertiser, excluding agency commissions and taxes, paid by the
advertiser with respect to such sale (the "Commission Base"); and for each
subsequent contract for sale of Advertising to any such advertiser, TMI shall
receive 20% of the Commission Base. Commissions due with respect to accounts
billed and collected by TMI may be deducted and retained by TMI as provided for
in paragraph 3, above. Commissions due with respect to collections made by the
Company shall be paid on a monthly basis, no later than the tenth (10th) day of
the calendar month following the Company's receipt of payments constituting part
of the Commission Base.
The foregoing notwithstanding, the parties acknowledge the Company's
relationship with certain "house accounts" with which it currently has contracts
for sale of Advertising. These "house accounts" are: MCI, Sky-Tel, Doubletree,
Avis, Samsonite and Citibank. TMI shall have no responsibility for initial
sales activities with respect to these "house accounts," but shall be
compensated for the initial exclusion of those "house accounts" from its
exclusive authority hereunder by being entitled to receive compensation at the
rate of 10% of the Commission Base derived from all contracts for sale of
Advertising heretofore made by the Company with any such advertiser.
In addition, exclusive sales responsibility for each of these "house
accounts" shall be turned over to TMI, and TMI shall be entitled to receive
commissions at the rate of 20% of the
- 2 -
<PAGE>
Commission Base from all subsequent contracts for sale of Advertising entered
into with such advertisers. Upon renewal or extension of existing contracts or
execution of new contracts, such advertisers will no longer be referred to as
"house accounts."
Further, the Company has made sales contacts with various advertisers who
are customers or clients of TMI at other venues or through other media. The
Company will turn over exclusive sales responsibility for these advertisers to
TMI, and TMI shall receive a commission at the rate of 20% of Commission Base
for all Advertising sales made to such advertisers.
The Company has also initiated sales contacts with various advertisers who
are not customers of TMI. The Company shall retain initial sales responsibility
for those accounts, and if sales contracts are consummated, TMI shall be
compensated, and assume subsequent responsibility, therefore to the same extent
as provided for "house accounts" above.
5. Incentive Equity Compensation. As an additional incentive to TMI, TMI
-----------------------------
will be issued 10,000 shares of the common capital stock of the Company's
parent, Continental Capital Corporation. Half of those shares will be issued
concurrently with the execution of this Agreement and the balance will be issued
on the first anniversary of this Agreement. TMI acknowledges that the shares
will be issued as restricted stock under state and federal securities laws and
TMI will agree to hold them pursuant to applicable restrictions. In addition to
the foregoing shares, TMI will be issued rights to purchase the following number
of shares, at the prices indicated, at any time during the term of this
Agreement, or any extensions hereof, and for a period of 60 days thereafter,
based on sales of Advertising effected during the initial 18 month term of this
Agreement:
5,000 shares at a strike price of $5.00 will be issued after TMI
sells $500,000 of Advertising, and
an additional 7,000 shares at a strike price of $4.75 will be
issued after TMI sells $1,500,000 of Advertising, and
an additional 9,000 shares at a strike price of $4.50 will be
issued after TMI sells $2,500,000 of Advertising, and
an additional 11,000 shares at a strike price of $4.25 will be
issued after TMI sells $3,500,000 of Advertising, and
an additional 13,000 shares at a strike price of $4.00 will be
issued after TMI sells $4,500,000 of Advertising, and
- 3 -
<PAGE>
an additional 15,000 shares at a strike price of $3.75 will be
issued after TMI sells $5,500,000 of Advertising, and
an additional 17,000 shares at a strike price of $3.50 will be
issued after TMI sells $6,500,000 of Advertising.
For all purposes of this Agreement, TMI shall be deemed to have effected a
"sale" of Advertising hereunder as and when and to the extent of payments
received by the Company for sales of Advertising hereunder. For purposes of the
stock option provisions hereof, TMI will receive credit only for the amount of
those "sales" dollars paid to the Company in the first 18 months of this
Agreement (whether from TMI-generated sales or sales initiated or consummated by
others, including the Company), but will be entitled to receive the sales
commissions provided for above on all "sales" contract dollars, whenever paid.
6. Company Responsibilities. Company shall have the following
------------------------
responsibilities: (a) provide TMI with sales and technical support and
information regarding the Product; (b) provide TMI with a reasonable amount of
literature pertaining to Company and to the Product; (c) inform TMI within a
reasonable time of any changes in the Product, or Advertising prices, terms of
payment, delivery schedules and/or Product Warranties; (d) compensate TMI in
accordance with this Agreement.
7. Term and Termination. This Agreement shall have an initial term of
--------------------
five (5) years from its effective date, and such term and each term subsequently
shall be automatically extended for successive one (1) year periods subject to
earlier termination if either party materially fails to perform its obligations
under this Agreement. In such event, this Agreement can be terminated following
thirty (30) days after delivery of a written notice specifying the material
performance failure; provided that the party so notified shall have a thirty
(30) day period to cure any such alleged failure of performance, unless the
failure is not such that can be cured in thirty (30) days and, in that event,
the Agreement will continue in force so long as such party takes steps within
the thirty (30) day period to commence the cure and the cure is in fact effected
within sixty (60) days of the notice.
8. Continuation of Compensation for Product Introduction at TMI Airports.
---------------------------------------------------------------------
Notwithstanding the purported termination of this Agreement for any reason,
including the expiration of the initial term or any extension term hereof, or
without a reason, in the event that TMI has theretofore been successful in
assisting the Company in introducing the Product for use in a TMI Airport, TMI
shall be entitled to receive commissions, at the rates and times provided for
herein, on all sales of Advertising for display in conjunction with the Product
at that TMI Airport for the longer of (i) five (5) years from the date of first
sale of Advertising for display in conjunction with the Product at that TMI
Airport, or
- 4 -
<PAGE>
(ii) the remaining term of TMI's display advertising concession rights at such
TMI Airport.
9. Proprietary Information and Non-Disclosure. Each party acknowledges
------------------------------------------
that, in the course of performing its duties under this Agreement, it may obtain
information relating to the other party which is of a confidential and
proprietary nature ("Proprietary Information"). Such Proprietary Information may
include, but is not limited to, products, trade secrets, know-how, inventions,
techniques, processes, computer programs, schematics, data, customer lists,
financial information and sales and marketing plans. The parties and their
respective employees and agents shall at all times, both during the term of this
Agreement and after its termination, keep in trust and confidence all
Proprietary Information and shall not use such proprietary information disclosed
under this Agreement nor shall either party or its employees and agents disclose
any of such proprietary Information to any person without the other party's
prior written consent. Each party acknowledges that any such Proprietary
Information received by such party shall be received as a fiduciary of such
other party. Each party further agrees to immediately return to the other party
all Proprietary Information in such party's possession, custody or control in
whatever form held (including all copies of all written documents relating
thereto) upon termination of this Agreement or at any time, or from time to
time, upon the request of such other party.
10. Amendment and Assignment. This Agreement may be amended only in writing
------------------------
and only upon mutual consent of the parties. The terms and conditions of any
order placed through TMI as may conflict in whole or in part with the
provisions of this Agreement shall be of no force and effect whatsoever, and the
provisions of this Agreement shall be controlling in any such instance. This
Agreement may not be assigned by either party without the prior written consent
of the other.
11. Severability. If any term provision, covenant or condition of this
------------
Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of the provisions of this Agreement shall continue
in full force and effect and shall not be affected, impaired or invalidated in
any way.
12. Governing Law. The parties acknowledge that this Agreement has been
-------------
made in the State of California and shall be governed and construed in
accordance with the laws of said State.
13. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach of this Agreement shall be settled by arbitration
at the offices of Company in accordance with the then-existing rules of the
American Arbitration Association, provided, however, that the arbitrator shall
not have the authority to change or revise any decision made by Company where,
by the terms of this Agreement, Company has been given sole discretion and
-5-
<PAGE>
provided further, that judgment upon the award rendered may be entered in any
court having appropriate jurisdiction.
14. Attorney's Fees. If any legal action is necessary to enforce the terms
---------------
of this Agreement, the prevailing party shall be entitled to reimbursement of
reasonable attorney's fees in addition to any other relief to which he or it may
be entitled.
15. Notice. All communications, notices and demands of any kind which
------
either party may be required or may desire to give or serve upon the other party
shall be made in writing and be delivered in person or by facsimile transmission
confirmed with a written notice mailed within one (1) day by, or by notice given
by, first class certified mail, postage prepaid, return receipt requested.
Notice shall be considered given when delivered in person or when transmitted by
facsimile or on the fifth (5th) day after being deposited in the United States
mail. Notices shall be addressed as follows unless either party gives notice to
the other party of a change of address:
CarroSELL, Inc. Transportation Media, Inc.
315 First Street, Suite U-190 710 North Dearborn Street
Encinitas, CA 92024-3555 Chicago, IL 60610-3818
Fax No.: (619) 632-8069 Fax No.: (312) 642-7378
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
CarroSELL, Inc. Transportation Media, Inc.
By: /s/ Paul Donner By: /s/ Tamee V. Riley
-------------------------------- ---------------------------------
Paul Donner, President Tamee V. Riley, President
CONFIRMATION, ACCEPTANCE AND AGREEMENT
--------------------------------------
The undersigned, Continental Capital Corporation, being the parent
corporation of CarroSELL, Inc., a party to the foregoing Agreement, will derive
significant benefit from the existence and performance of the foregoing
Agreement and therefore, confirms, acknowledges and agrees to perform such
obligations as may be necessary in order to issue the shares and options, and
accept performance of option exercises, as are provided for in the foregoing
Agreement. The undersigned represents and warrants to Transportation Media, Inc.
that the shares and options provided for above ar duly authorized and available
for issuance and all corporate action necessary to effect such authorization has
been taken. The undersigned acknowledges that this undertaking constitutes a
significant portion of the inducement for Transportation Media Inc. to enter
into the foregoing Agreement and that Transportation Media Inc. is a direct
beneficiary of this
-6-
<PAGE>
undertaking and may look directly to Continental Capital Corporation for its
performance.
IN WITNESS WHEREOF, the undersigned has joined in and executed the
foregoing Agreement for purposes of confirming the foregoing this 29th day of
February, 1996, by signature of its duly authorized officer.
Continental Capital Corporation
By: /s/ SIGNATURE ILLEGIBLE
------------------------------------
Title: Chairman
---------------------------------
-7-
<PAGE>
EXHIBIT 10.16
EUGENE L. WILPON
ATTORNEY AT LAW
225 Broadway
New York, New York 10007
June 7, 1996
Mr. Paul Donner
CaroSELL, Inc.
315 First Street, Suite U-190
Encinitas, California 92024
Re: Additional Stock Issuance Continental Capital "CCC"
Dear Paul:
As per our recent conversations, CCC has offered and you have agreed to accept
250,000 additional shares of common stock in CCC as consideration for you and
your shareholders elimination of the time constraints on CCC in regard to the
June 10, 1996, deadline for CCC's stock to resume trading.
As we discussed, the documents are in the hands of the Securities and Exchange
Commission (SEC) and we expect final approval "any day now."
The additional funds required to bring CCC's current investment in CaroSELL up
to $250,000.00 should be in the CaroSELL bank account in Chicago early next
week.
Paul, please sign the bottom of this letter and fax it back to Eugene's office
at 212 267-0402, thank you. I'm looking forward to a very prosperous and
enjoyable relationship with you.
Sincerely,
Milton J. Wilpon
CEO, Continental Capital Corp.
Agreed to this 7th day of June, 1996
____________________________________
Paul Donner
President, CaroSELL, Inc.
<PAGE>
EXHIBIT 10.17
NAB BANK
SECURED NOTE/ADJUSTABLE RATE
$380,000.00 Date: June 6, 1996
Chicago, Illinois Due: June 6, 1997
FOR VALUE RECEIVED, the undersigned, (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of NAB BANK ("Bank"), at its
principal place of business in Chicago, Illinois or such other place as Bank may
designate from time to time hereafter, the principal sum of Three Hundred Eighty
Thousand and no/100ths Dollars ($380,000.00) or such lesser principal sum as may
be owed by Borrower to Bank hereunder, such payment to occur on June 6, 1997.
Beginning on July 1, 1996, and continuing on the same day of each month
thereafter, Borrower shall make a payment to Bank of all interest which shall
have accrued on the principal balance outstanding from time to time. The payment
of all then outstanding principal and interest shall be due on June 6, 1997. All
payments received hereunder shall be first applied to interest due and the
balance, if any, to principal. Borrower's obligations under this Note shall be
defined and referred to herein as "Borrower's Liabilities." Borrower's
obligations under this Note shall be defined and referred to herein as
"Borrower's Liabilities."
Borrower may prepay all or part of the principal, together with accrued
interest on the amount so prepaid. All prepayments shall be applied upon
installments of the most remote maturity.
Reference is hereby made to that certain Security Agreement executed
between the Borrower and Bank dated June 6, 1996, as amended from time to time,
(the "Security Agreement"). The Security Agreement sets forth the terms and
conditions under which the loan evidenced hereby has been made, is secured and
is to be repaid. The occurrence of an "Event of Default" (as defined in the
Security Agreement) shall constitute a default under this Note. Reference is
also made to the Security Agreement for a statement of Bank's remedies upon the
occurrence of an Event of Default. The terms and conditions of the Security
Agreement are incorporated herein by reference in their entirety.
Borrower's Liabilities unpaid from time to time shall bear interest
(computed on the basis of a 360 day year and actual days elapsed) from the date
hereof until paid at a per annum rate at all times equal the prime or equivalent
rate of interest as announced or published publicly by the American National
Bank and Trust Company of Chicago (the "Base Rate") plus two percent (2%). Thus,
interest shall be calculated for each day at 1/360th of the applicable per annum
rate. The "Base Rate" is not indicative of the lowest or best rate offered by
the Bank to any customer or group of customers. A change in the Base Rate shall
constitute a corresponding change in the interest rate hereunder effective on
and as
<PAGE>
of the date of such change in the Base Rate. Interest accruing prior to maturity
shall be payable by Borrower to Bank monthly at Bank's principal place of
business, or at such other place as Bank may designate from time to time
hereafter. All unpaid interest at maturity shall be paid with the principal
amount of Borrower's Liabilities due hereunder.
Borrower agrees to pay "late charges" of five percent (5%) of the amount of
any payment due hereunder which is ten (10) days or more in arrears. Upon the
occurrence of an Event of Default, interest on the unpaid principal balance
shall accrue at a rate equal to the then applicable Base Rate plus five percent
(5%) per annum.
If any payment becomes due and payable on a Saturday, Sunday or legal
holiday under the laws of the State of Illinois, the due date of such payment
shall be extended to the next business day. If the date for any payment of
principal is thereby extended or is extended by operation of law or otherwise,
interest thereon shall be payable at the then applicable interest rate for such
extended time.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes, and
consistently with all applicable laws and statutes.
Upon the occurrence of an Event of Default, Bank may, in its sole
discretion, with or without notice to Borrower:
(a) declare all of Borrower's Liabilities due and payable immediately;
(b) exercise any one or more of the rights and remedies accruing to it
under: (i) the Security Agreement; (ii) under any other agreement
delivered by Borrower to Bank; (iii) the Uniform Commercial Code of the
relevant jurisdiction; and (iv) any other applicable law upon default
by a debtor.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom, or waive any rights of Bank to enforce prompt payment
thereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver of
an Event of Default hereunder shall not suspend, waive or affect any other Event
of Default hereunder. Borrower and every endorser waive presentment, demand and
protest
-2-
NAB Bank
Secured Note/Adjustable Rate
<PAGE>
and notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note, and hereby ratify and
confirm whatever Bank may do in this regard. Borrower further waives any and all
notice or demand to which Borrower might be entitled with respect to this Note
by virtue of any applicable statute or law (except as required under the
Security Agreement and only to the extent permitted by law).
Borrower agrees to pay, upon Bank's demand therefor, any and all reasonable
costs, fees and expenses (including attorneys' fees, costs and expenses)
incurred in enforcing any of Bank's rights hereunder, and to the extent not paid
the same shall become part of Borrower's Liabilities hereunder. Fees and
expenses incurred by Bank in collecting any judgment which may be entered on
account of this Note shall also be paid by Borrower. The obligation of Borrower
set forth in this agreement shall be continuing and shall not be merged into any
judgment entered based upon this Note.
If any provision of this Note or the application thereof to any party or
circumstance is held invalid or unenforceable, the remainder of this Note and
the application thereof to other parties or circumstances will not be affected
thereby, the provisions of this Note being severable in any such instance.
This Note is submitted by Borrower to Bank at Bank's principal place of
business and shall be deemed to have been made thereat. This Note shall be
governed and controlled by the laws of the State of Illinois as to
interpretation, enforcement, validity, construction, effect, choice of law and
in all other respects. Any notice required hereunder shall be served consistent
with the terms and provisions of the Security Agreement relating to notice.
No modification, waiver, estoppel, amendment, discharge or change of this
Note or any related instrument shall be valid unless the same is in writing and
signed by the party against which the enforcement of such modification, waiver,
estoppel, amendment, discharge or change is sought.
This Note is given in renewal and substitution of that certain note dated
August 28, 1995 made by Borrower in favor of Bank in the original principal
amount of Two Hundred Thousand Dollars ($200,000.00) (the "Original Note"). All
security interests granted by Borrower to Bank in any collateral in order to
secure the Original Note are not discharged hereby and continue to secure the
payment of this Note.
-3-
NAB Bank
Secured Note/Adjustable Rate
<PAGE>
BORROWER AND BANK IRREVOCABLY AGREE THAT, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER AND BANK HEREBY CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE, OR
FEDERAL COURT LOCATED IN SAID CITY AND STATE AND WAIVE ANY OBJECTION THEY MAY
HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING HEREUNDER.
BORROWER AND BANK IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING: (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (II) ARISING FROM
ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY
SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
BORROWER:
CONTINENTAL CAPITAL CORPORATION,
a Colorado corporation
By: ______________________________
Name: Milton J. Wilpon
Title: Chief Executive Officer
Address: 8950 Fullbright Ave.
Chatsworth, CA 91311
Subscribed and sworn before me
this _________ day of June, 1996
_______________________________
Notary Public
-4-
NAB Bank
Secured Note/Adjustable Rate
<PAGE>
EXHIBIT 10.18
NAB BANK
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated June 6, 1996, by and
between NAB BANK formerly known as New Asia Bank ("Bank"), with its principal
place of business at 222 West Cermak Road, Chicago, Illinois 60616 and
CONTINENTAL CAPITAL CORPORATION, formerly known as PlanCapital U.S.A., Inc.,
Club America, Inc. and Lexington Capital Corp., a Colorado corporation having
its principal place of business at 8950 Fullbright Avenue, Chatsworth,
California 91311, (the "Borrower"), has reference to the following facts and
circumstances:
WHEREAS, on August 28, 1995, Borrower executed and delivered to Bank, among
other things, that certain security agreement (as amended from time to time the
"Original Agreement") whereby Borrower granted a security interest in favor of
Bank to secure certain loans made by Bank to Borrower;
WHEREAS, Borrower and Bank now wish to redefine and restructure the terms
and conditions of their lending relationship and wish to substitute, replace and
amend the Original Agreement with this Agreement; and
WHEREAS, pursuant to Borrower's request, Bank, in the event it accepts this
Agreement in writing, will lend monies to Borrower pursuant hereto.
NOW, THEREFORE, in consideration of the promises set forth herein, Borrower
agrees to borrow monies from Bank, and Bank agrees to lend monies to Borrower,
upon the following terms and conditions.
1. DEFINITIONS AND TERMS
1.1 For purposes of this Agreement, the following definitions shall apply:
(a) "Borrower's Liabilities": all obligations and liabilities of Borrower
to Bank (including without limitation all debts, claims, and
indebtedness) whether primary, secondary, direct, contingent, fixed,
joint and several or otherwise, heretofore now and/or from time to
time hereafter owing, due or payable, however evidenced, created,
incurred, acquired or owing and however arising, whether under this
Agreement or the "Other Agreements" (hereinafter defined), or by oral
agreement or operation of law or otherwise, including, without
limitation, the debt evidenced by Borrower's Secured Note/Adjustable
Rate date of even date herewith in the amount of $380,000.00 (the
"Term Note") and all substitutions, replacements, renewals and
amendments thereto.
<PAGE>
(b) "Other Agreements": All agreements, instruments and documents,
including without limitation guaranties, mortgages, deeds of trust,
loan agreements, notes, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases,
financing statements and all other written matter heretofore, now
and/or from time to time hereafter executed by or on behalf of
Borrower and delivered to Bank, including, without limitation, the
Term Note.
1.2 Except as otherwise defined in this Agreement or the Other Agreements,
all words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the Uniform Commercial Code of the
State of Illinois.
2. COLLATERAL
2.1 To secure the prompt payment to Bank of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of all of the provisions to be
kept, observed or performed by Borrower under this Agreement and/or the Other
Agreements, Borrower grants to Bank a Uniform Commercial Code security interest
in and to, and collaterally assigns to Bank, all of Borrower's property,
wherever located, whether now or hereafter acquired, existing, owned, licensed,
leased (to the extent of Borrower's ownership interest therein) and/or arising,
including without limitation all of Borrower's:
(a) Accounts and accounts receivable, including, without limitation, any
and all now existing or hereafter arising rights to payment or
amounts due Borrower in the form of obligations or receivables from
whatever source for services rendered or products sold or leased,
whether or not such right has been earned by performance and
specifically including all payments due to Borrower under any leases
relating to Borrower's Inventory ("Inventory Leases");
(b) General Intangibles (including, without limitation, patents,
copyrights, trademarks, trade names, trade secrets and also including
all goodwill of the business associated with such);
(c) Chattel Paper, contract rights, leases (including Inventory Leases),
leasehold interests, letters of credit and certificates of deposit;
(d) certificated and uncertificated securities;
-2-
NAB Bank
Security Agreement
<PAGE>
(e) Goods, including without limitation all its Consumer Goods, machinery,
Equipment, Farm Products, Fixtures and Inventory (including without
limitation goods held by Borrower for sale or lease or furnished by
Borrower under any contracts of service or held by Borrower as raw
materials, work in progress or material used or consumed in a
business);
(f) Documents and Instruments;
(g) liens, guaranties and other rights and privileges pertaining to any of
the Collateral;
(h) monies, reserves, deposits, deposit accounts and interest or
dividends thereon, cash or cash equivalents;
(i) all property now or at any time or times hereafter in the possession
or under the control of Bank or its bailee;
(j) all accessions to the foregoing and all substitutions, renewals,
improvements and replacements of and additions to the foregoing;
(k) all books, records and computer records in any way relating to the
property herein described; and
(l) all products, Proceeds, rents, issues, profits and returns of the
foregoing, including without limitation proceeds of insurance
policies insuring the foregoing.
All of the foregoing shall be individually and collectively referred to as
the "Collateral". Borrower shall make appropriate entries upon its financial
statements and its books and records disclosing Bank's security interest in the
Collateral.
2.2 All of Borrower's Liabilities shall constitute one loan secured by
Bank's security interest in the Collateral and by all other security interests,
liens, claims and encumbrances heretofore, now and/or from time to time
hereafter granted by Borrower to Bank.
2.3 Borrower shall execute and deliver to Bank, at the request of Bank,
all agreements, instruments and documents (the "Supplemental Documentation")
that Bank may reasonably request, in form and substance acceptable to Bank, to
perfect and maintain
-3-
NAB Bank
Security Agreement
<PAGE>
perfected Bank's security interest in the Collateral and to consummate the
transactions contemplated in or by this Agreement of the Other Agreements.
Borrower agrees that a carbon, photographic or photostatic copy, or other
reproduction, of this Agreement or of any financing statement, shall be
sufficient as a financing statement.
2.4 Bank (or its authorized agents) shall have the right, at any time
during Borrower's usual business hours, to inspect the Collateral and all
related records (and the premises upon which it is located) and to verify the
amount and condition of or any other matter relating to the Collateral. Borrower
shall pay the costs of all such field inspections and verifications.
2.5 Borrower warrants and represents to and covenants with Bank that the
offices and/or locations where Borrower keeps the Collateral are specified at
the end of this Section 2.5 and (except for sales of Collateral authorized
hereunder) Borrower shall not remove such Collateral therefrom and shall not
keep any of such Collateral at any other office or location unless Borrower
gives Bank written notice thereof at least thirty days prior thereto and the
same is within the continental United States of America. The addresses specified
at the end of this Section 2.5 designate Borrower's chief executive offices,
chief places of business and Borrower's other offices and places of business.
Borrower, by written notice delivered to Bank at least thirty days prior
thereto, shall advise Bank of Borrower's opening of any new office or place of
business or its closing of any existing office or place of business and any new
office or place of business shall be within the continental United States of
America. Locations of Collateral, Borrower's principal place of business and all
other offices and places of business:
8950 Fullbright Avenue
Chatsworth, California 91311
2.6 Bank, in its sole and absolute discretion, may, at any time or times
hereafter but shall be under no obligation, pay, acquire and/or accept an
assignment of any security interest, lien, encumbrance or claim asserted by any
person or entity against the Collateral.
2.7 Immediately upon Borrower's receipt of that portion of the Collateral
evidenced by an agreement, Instrument and/or Document ("Special Collateral"),
Borrower shall mark the same to show that such Special Collateral is subject to
a security interest in favor of Bank and shall deliver the original thereof to
Bank, together with appropriate endorsement and/or specific evidence of
assignment (in form and substance acceptable to Bank) thereof to Bank.
-4-
NAB Bank
Security Agreement
<PAGE>
2.8 In no event shall Borrower make any sale, transfer or other
disposition of any of the Collateral except in the ordinary course of its
business and as authorized in a writing executed by Bank and delivered to
Borrower. No such authorization given by Bank to sell any specified portion of
Collateral or any items thereof, and no waiver by Bank in connection therewith
shall establish a custom or constitute a waiver of the prohibition contained in
this Agreement against such sales, with respect to any portion of the Collateral
or any item thereof not covered by said authorization.
2.9 Regardless of the adequacy of any collateral securing Borrower's
Liabilities hereunder, any deposits or other sums at any time credited by or
payable or due from Bank to Borrower, or any monies, cash, cash equivalents,
securities, instruments, documents or other assets of Borrower in the possession
or control of Bank or its bailee for any purpose may at any time be reduced to
cash and applied by Bank to or setoff by Bank against Borrower's Liabilities
hereunder.
2.10 The security interests granted under this Agreement shall be in
addition to any and all security interests, liens and pledges made by Borrower
in favor of Bank prior to the date hereof including those made in the Original
Agreement or in any agreement executed in connection with the Original
Agreement (collectively "Prior Security Interests"). Borrower hereby agrees
that, notwithstanding the execution of this Agreement and the Other Agreements,
the Prior Security Interests shall also secure the repayment of Borrower's
Liabilities and such Prior Security Interest shall be governed, administered
and enforced in accordance with the terms and provisions of this Agreement.
2.11 Borrower agrees, within seven (7) days of receipt of a written
request from Bank, to purchase and collaterally assign to Bank life insurance
policies (the "Life Policies") on such principal officers of Borrower as Bank
may reasonably request. The purchase and assignment to Bank of the life
policies shall be additional Collateral and security for the repayment of
Borrower's Liabilities. If Bank elects to request the purchase and assignment
of the Life Policies, Borrower agrees to execute all documents which Bank or the
applicable life insurance company deems necessary to effectuate the purchase and
assignment of the Life Policies including, without limitation a form collateral
assignment of insurance policy. Bank's decision to request the purchase and
assignment of the Life Policies may be made at any time, whether or not an
"Event of Default" (as defined below) shall have occurred and without reference
to the status of Borrower's performance of Borrower's Liabilities. Borrower's
failure to comply with this paragraph shall be an Event of Default under this
Agreement.
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3. WARRANTIES, REPRESENTATIONS AND COVENANTS: INSURANCE AND TAXES
3.1 Borrower, at its sole cost and expense, shall keep and maintain; (a)
the Collateral insured for the full insurable value against all hazards and
risks ordinarily insured against by other owners or users of such properties in
similar businesses; and (b) business interruption insurance and insurance for
public liability and property damage relating to Borrower's ownership and use of
its assets. All such policies of insurance shall be in form, with insurers and
in such amounts as is satisfactory to Bank and shall contain a standard form
lender's loss payable clause. Borrower shall deliver to Bank the original (or
certified) copy of each policy of insurance, or a certificate of insurance, and
evidence of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability and product liability) shall contain
a standard form lender's loss payable clause, in form and substance acceptable
to Bank, showing loss payable to Bank and shall provide that: (1) the insurance
companies will give Bank at least thirty days written notice before any such
policy or policies of insurance shall be altered or cancelled; and (2) no act or
default of Borrower or any other person or entity shall affect the right of Bank
to recover under such policy or policies of insurance in case of loss or
damage. Borrower hereby directs all insurers under such policies of insurance
(except those of public liability and product liability) to pay all proceeds
payable thereunder directly to Bank and hereby authorize Bank to make, settle
and adjust claims under such policies of insurance and endorse the name of
Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance.
3.2 Borrower shall pay promptly, when due, all taxes (including any
employment, income, sales, use, ad valorem or real estate taxes), levies,
assessments, charges, liens, claims or encumbrances imposed by any federal,
state or local agency, body or department upon Borrower, Borrower's business,
assets, income or receipts and shall not permit the same remain delinquent, and
will promptly discharge the same.
4. WARRANTIES, REPRESENTATIONS AND COVENANTS: GENERAL
4.1 Affirmative Covenants, Representations and Warranties. Borrower
-----------------------------------------------------
represents and warrants to and covenants with Bank that:
(a) Borrower has the right, power and capacity and is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement
and Other Agreements:
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(b) the execution, delivery and/or performance by Borrower of this
Agreement and Other Agreements shall not constitute a violation of
any applicable law or a breach of any provision contained in
Borrower's Articles of Incorporation, By-Laws, or similar document,
or contained in any agreement, instrument or document to which
Borrower is now or hereafter a party or by which it is or may be
bound;
(c) Borrower has and at all times hereunder shall have good, indefeasible
and merchantable title to and ownership of the Collateral (including,
without limitation the Inventory) free and clear of all liens,
claims, security interests and encumbrances except those of Bank;
(d) Borrower is now and at all times hereafter, shall be solvent and
generally paying its debts as they mature and Borrower now owns and
shall at all times hereafter own property which, at a fair valuation,
is greater than the sum of its debts;
(e) Borrower is not now and will not be during the term hereof in
violation of any applicable federal, state or local statute,
regulation or ordinance, in any respect materially and adversely
affecting its business, property, assets, operations or condition,
financial or otherwise;
(f) Borrower is not in default with respect to any indenture, loan
agreement, mortgage, deed or other similar agreement relating to the
borrowing of monies to which it is a party or by which it is bound;
(g) the security interest Borrower hereby grants to Bank in any
Collateral is and will remain a first priority lien;
(h) any financial statements or other financial information heretofore,
now or hereafter delivered by Borrower to Bank in connection with the
loan(s) or with this Agreement shall fairly and accurately present
the financial condition and results of operations of the Borrower as
of and for the period ending on the date as of which such financial
statements or other financial information is dated and have been or
will be prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") consistently applied;
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(i) since the date of the financial statements of the Borrower most
recently furnished to the Bank, there has been no material adverse
change in the financial condition, results of operations, business or
assets of the Borrower;
(j) Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Colorado;
(k) Borrower has all powers and all governmental licenses, authorization
and consents required to carry on its business as now conducted or as
proposed to be conducted and Borrower has made all filings required
under applicable law including those required by the Securities and
Exchange Commission;
(l) Borrower has duly qualified and is in good standing and is authorized
to do business in all jurisdictions where failure to do so would have
a material adverse change in the financial condition, results of
operations, business or assets of Borrower or cause Borrower to be
unable to perform any of its material obligations hereunder;
(m) Borrower is not a defendant in any pending litigation in which the
amount claimed due from Borrower is in excess of $1,000.00, nor is
Borrower a defendant in any litigation in which equitable relief of
any nature is sought against Borrower. Borrower is not aware of any
threatened, but not yet filed litigation in which Borrower would be
joined as a defendant.
4.2 Negative Covenants, Representations and Warranties. Borrower warrants
--------------------------------------------------
and represents to and covenants with Bank that Borrower shall not, without
Bank's prior written consent thereto:
(a) assign, sell or transfer any of the Collateral outside of the ordinary
course of Borrower's business;
(b) grant a security interest in, or allow a lien, claim or encumbrance
upon any of the Collateral;
(c) enter into any transaction not in the ordinary course of business
which materially and adversely affects the Collateral or Borrower's
ability to repay Borrower's Liabilities or Indebtedness;
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<PAGE>
(d) other than as specifically permitted in or contemplated by this
Agreement, encumber, pledge, mortgage, sell, lease or otherwise
dispose of or transfer, whether by sale, merger, consolidation or
otherwise, any of Borrower's assets.
4.3 Reporting Requirements. Borrower represents and warrants to and
----------------------
covenants with Bank that Borrower shall furnish to Bank, in a form acceptable to
Bank in its sole discretion:
(a) as soon as available but not later than ninety (90) days after the
close of each fiscal year of Borrower, the financial statements of
Borrower, prepared in accordance with GAAP, consistently applied and
audited by a certified public accountant acceptable to Bank;
(b) as soon as available but no later than thirty (30) days after filing,
copies of all reports submitted to the Securities and Exchange
Commission;
(c) such other data and information (financial and otherwise) as Bank may
reasonably request from time to time.
4.4 Borrower represents and warrants to and covenants with Bank that it
will not, without giving 30 days prior written notice to Bank: (1) change its
corporate name or place of incorporation; (2) make any material change in its
corporate structure or its principal officers or management; or (3) make any
material change in its ownership or make any material acquisition of or
investment in another entity.
4.5 Environmental Conditions. Borrower agrees not to cause or permit
------------------------
any toxic or hazardous substance or waste, or underground storage tanks, or any
other pollutants which could be detrimental to any real property controlled,
occupied or utilized by Borrower ("Premises"), to human health, or to the
environment, or that would violate any local, state or federal laws or
regulations (collectively, "Environmental Conditions") to be present on or
affect the Premises. Borrower warrants and represents that no Environmental
Conditions exist on the Premises as of the date of this Agreement. If Borrower
determines that Environmental Conditions either do or may exist at the Premises,
upon demand, Borrower shall take at its own expense any and all measures
necessary to eliminate the Environmental Condition. If at any time Environmental
Conditions are present or affect the Premises, Borrower agrees to indemnify,
defend, and save Bank, its successors and assigns, harmless, from and against
any liability, loss, cost, damage or expense (including, without limitation,
attorneys' fees and expenses) arising from the imposition or recording of a
lien, the incurrence of any clean-up and removal costs under any hazardous
waste, environmental protection,
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spill compensation, clean air and water, or other local, state or federal laws
(collectively, the "Environmental Laws") with respect to the Premises, or to any
other real or personal property owned by Borrower, or liability to any third
party in connection with any violation of the Environmental Laws or other action
by Borrower or its agents. Borrower has made a physical investigation of its
Premises, and no Environmental Conditions are present on or affect the Premises.
5. DEFAULT
5.1 The occurrence of any one of the following events shall constitute a
default ("Event of Default") by Borrower under this Agreement:
(a) if Borrower fails to pay any of Borrower's Liabilities when due and
payable or properly declared due and payable and such payment is not
made within five (5) days of the original due date;
(b) if Borrower fails or neglects to perform, keep or observe any term,
provision, condition, covenant, warranty or representation contained
in this Agreement or in the Other Agreements, which is required to be
performed, kept or observed by Borrower;
(c) if Bank demands payment under any demand note executed by Borrower and
delivered to Bank and payment is not received;
(d) if the Collateral or any other of Borrower's assets are attached,
seized, subjected to a writ of distress warrant, or are levied upon,
or become subject to any lien, or come within the possession of any
receiver, conservator, trustee, custodian or assignee for the benefit
of creditors;
(e) if Borrower becomes insolvent or generally fails to pay, or admits its
inability to pay, debts as they become due;
(f) if a petition under Title 11, United States Code or any similar law or
regulation shall be filed by Borrower, or if Borrower shall make an
assignment for the benefit of its creditors or if any case or
proceeding is filed by Borrower for its dissolution or liquidation;
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(g) if a petition under Title 11, United States Code or any similar law or
regulation shall be filed against Borrower, or if a case or proceeding
is filed against Borrower for its dissolution or liquidation;
(h) if Borrower is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its business
affairs;
(i) if a notice of lien, levy or assessment is filed of record or given to
Borrower with respect to all or any of Borrower's assets by any
federal, state or local department agency;
(j) if a contribution failure occurs with respect to any pension plan
maintained by Borrower or any corporation, trade or business that is,
along with Borrower, a member of a controlled group of corporations or
controlled group of trades or business (as described in Section 414(b)
and (c) of the Internal Revenue Code of 1986 or Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
sufficient to give rise to a lien under Section 302(f) of ERISA;
(k) if Borrower is in default in the payment or performance of any
material obligation, indebtedness or other liability to any third
party and such default is not cured within any cure period specified
in any agreement or instrument governing the same;
(l) if any material statement, report or certificate made or delivered to
Bank by Borrower, any of Borrower's officers, employees or agents, or
any guarantor of Borrower's Liabilities is not true and correct;
(m) any material adverse change in the financial condition, operations,
business or assets of Borrower and Borrower shall fail to remedy such
within ten (10) days of being served with written notice from Bank;
(n) the occurrence of a default or Event of Default under any agreement,
instrument and/or document executed and delivered by Borrower to Bank,
including but not limited to the Other Agreements which is not cured
by Borrower within any applicable cure period set forth in any such
agreement, instrument and/or document;
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(o) the occurrence of a default or event of default under any guaranty
relating to Borrower's Liabilities or under any agreement, instrument
and/or document executed and delivered to Bank by any guarantor of
Borrower's Liabilities; or
(p) the reasonable insecurity of Bank.
Borrower will advise Bank promptly, in reasonable detail: (i) of any
material change in the composition of the Collateral or of any event which would
have a material adverse effect on the Collateral and (ii) of the occurrence of
any event which, after any notice and passage of any cure period, may become an
Event of Default.
5.2 Upon an Event of Default, which after any required notice is not cured
within any applicable grace period, Bank may declare Borrower's Liabilities due
and payable immediately.
5.3 Upon an Event of Default, Bank, in its sole and absolute discretion,
may exercise any one or more of the rights and remedies accruing to it under (a)
this Agreement; (b) the Other Agreements; (c) the Uniform Commercial Code of the
relevant state; and/or (d) any other applicable law upon default by a debtor.
5.4 Upon the occurrence of an Event of Default, Bank shall have the right
without notice thereof to Borrower: (a) to notify any or all obligors of any
Accounts and Special Collateral that the Accounts and Special Collateral have
been assigned to Bank and the Bank has a security interest therein; (b) to
direct such obligors to make all payments due from them to Borrower upon the
Accounts and Special Collateral directly to Bank; and (c) to enforce payment of
and collect, by legal proceedings or otherwise, the Accounts and Special
Collateral in the name of Bank and Borrower.
5.5 Upon an Event of Default, Borrower shall receive, as the sole and
exclusive property of Bank and as trustee for Bank, all monies, checks, notes,
drafts and all other payment for and/or proceeds of Collateral which come into
the possession or under the control of Borrower and immediately upon receipt
thereof, Borrower shall remit the same (or cause the same to be remitted), in
kind, to Bank or at Bank's direction.
5.6 Upon an Event of Default, Bank, now or at any time or times
thereafter, in its sole and absolute discretion, may take control of, in any
manner, and may endorse Borrower's name to any of the items of payment or
proceeds described in Paragraph 5.5 above and shall apply the same to and on
account of Borrower's Liabilities.
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5.7 Upon an Event of Default, Borrower, immediately upon demand by Bank,
shall assemble the Collateral and make it available to Bank at a place or places
to be designated by Bank which is reasonably convenient to Bank and Borrower.
Borrower recognizes that in the event Borrower fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement or the
Other Agreements, no remedy of law will provide adequate relief to Bank and
agrees that Bank shall be entitled to temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages.
5.8 All of Bank's rights and remedies under this Agreement and the Other
Agreements are cumulative and non-exclusive.
5.9 Any notice required to be given by Bank of a sale, lease, other
disposition of the Collateral or any other intended action by Bank, deposited in
the United States mail, postage prepaid and duly addressed to Borrower at the
address specified at the beginning of this Agreement not less than fourteen (14)
days prior to such proposed action, shall constitute commercially reasonable and
fair notice to Borrower thereof.
5.10 Upon an Event of Default, Borrower agrees that Bank may, if Bank deems
it reasonable, postpone or adjourn any such sale of the Collateral from time to
time by an announcement at the time and place of sale or by announcement at the
time and place of such postponed or adjourned sale, without being required to
give a new notice of sale. Borrower agrees that Bank has no obligation to
preserve rights against prior parties to the Collateral. Further, to the extent
permitted by law, Borrower waives and releases any cause of action and claim
against Bank as a result of Bank's possession, collection or sale of the
Collateral, any liability or penalty for failure of Bank to comply with any
requirement imposed on Bank relating to notice of sale, holding of sale or
reporting of sale of the Collateral, and any right of redemption from such sale.
6. GENERAL
6.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Liabilities and Borrower agrees that Bank shall have the continuing
exclusive right to apply and re-apply any and all such payments in such manner
as Bank may deem advisable, notwithstanding any entry by Bank upon any of its
books and records.
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6.2 This Agreement and the Other Agreements may not be modified, altered
or amended except by an agreement in writing signed by Borrower and Bank. This
Agreement and Other Agreements shall be binding upon and inure to the benefit of
the heirs, representatives, successor and assigns of Borrower and Bank.
6.3 The terms and provisions of this Agreement and the Other Agreements
shall supersede any prior agreement or understanding of the parties hereto, and
contain the entire agreement of the parties hereto with respect to the matters
covered hereby. Except as limited herein, this Agreement and the Other
Agreements shall supersede, replace, substitute and amend the Original Agreement
and all other agreements executed in connection therewith. Notwithstanding the
foregoing and as referenced in Section 2.10 hereof, all Prior Security Interests
shall continue to be effective and shall also secure the repayment of Borrower's
Liabilities. For all other purposes, the terms and provisions of this Agreement
and the Other Agreement shall control in the event they conflict with the terms
and provisions of Original Agreement and the other agreements executed in
connection therewith.
6.4 No waiver, estoppel, discharge or change of this Agreement, any
instrument related thereto, and the Other Agreements shall be valid unless the
same is in writing and signed by the party against which the enforcement of such
waiver, estoppel, discharge or change is sought.
6.5 If any provision of this Agreement or the Other Agreements or the
application thereof to any person, entity or circumstance is held invalid or
enforceable, the remainder of this Agreement and the Other Agreements and the
application of such provision to other persons, entities or circumstances will
not be affected thereby and the provision of this Agreement and the Other
Agreements shall be severable in any such instance.
6.6 This Agreement shall continue in full force and effect so long as any
portion or component of Borrower's Liabilities shall be outstanding. Should a
claim ("Recovery Claim") be made upon the Bank at any time for recovery of any
amount received by the Bank in payment of Borrower's Liabilities (whether
received from Borrower or otherwise) and should the Bank repay all or part of
said amount by reason of (1) any judgment, decree or order of any court or
administrative body having jurisdiction over Bank or any of its property; or (2)
any settlement or compromise of any such Recovery Claim effected by the Bank
with the claimant (including Borrower), this Agreement and the security
interests granted Bank hereunder shall continue in effect with respect to the
amount so repaid to the same extent as if such amount had never originally been
received by the Bank, notwithstanding any prior termination of this Agreement,
the return of this Agreement to
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Borrower, or the cancellation of any note or other instrument evidencing
Borrower's Liabilities.
6.7 Bank's failure to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Bank thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Bank of an Event of Default by Borrower under this
Agreement or the Other Agreements shall not suspend, waive or affect any other
Event of Default by Borrower under this Agreement or the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or the Other Agreements
and no Event of Default by Borrower under this Agreement or the Other Agreements
shall be deemed to have been suspended or waived by Bank unless such suspension
or waiver is by an instrument in writing signed by an officer of Bank and
directed to Borrower specifying such suspension or waiver.
6.8 Except as otherwise specifically provided in this Agreement, Borrower
waives presentment, demand and protest and notice of presentment, protest,
default, dishonor, non-payment, maturity, release, compromise, settlement,
extension or renewal of any and all agreements, instruments or documents at any
time held by Bank on which Borrower may in any way be liable.
6.9 Borrower hereby appoints Bank as Borrower's agent and attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any agreement, instrument or document which Bank may deem
necessary or advisable to accomplish the purposes hereof which appointment is
irrevocable and coupled with an interest. All monies paid for the purposes
herein, and all costs, fees and expenses paid or incurred in connection
therewith, shall be part of Borrower's Liabilities, payable by Borrower to Bank
on demand.
6.10 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to receive
by virtue or any applicable statute or law, and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any and all
agreements, instruments or documents at any time held by Bank on which Borrower
may in any way be liable.
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6.11 Whenever a notice is required or permitted to be given under this
Agreement or the Other Agreements, it shall be in writing and either delivered
personally, or sent via certified mail, return receipt requested. Notice sent
via certified mail shall be deemed given two (2) days after such notice is sent.
Notice served by hand delivery shall be deemed served on the day delivered.
Notice shall be delivered or sent to the following addresses unless either party
gives notice to the other of a change in such address:
To Bank: NAB Bank
222 West Cermak Road
Chicago, Illinois 60616
Attn: Loan Department
With a copy to: Smith Lodge & Schneider Chartered
55 West Monroe Street
Suite 1800
Chicago, Illinois 60603
Attn: Thomas G. Jaros
To Borrower: Continental Capital Corporation
8950 Fullbright Avenue
Chatsworth, California 91311
Attn: Chief Executive Officer
6.12 This Agreement and the Other Agreements, shall be governed and
controlled by the laws of the State of Illinois as to interpretation,
enforcement, validity, construction, effect, choice of law and in all other
respects.
6.13 If at anytime or times hereafter whether or not Borrower's
Liabilities are outstanding at such time, Bank, in its reasonable discretion:
(a) employs counsel for advice or other representation (i) with respect
to the Collateral, this Agreement, the Other Agreements or the
administration of Borrower's Liabilities, (ii) to represent Bank in
any litigation, arbitration, contest, dispute, suit or proceeding or
to commence, defend or intervene or to take any other action in or
with respect to any litigation, arbitration, contest, dispute, suit
or proceeding (whether instituted by Bank, Borrower or any other
person or entity) in any way or respect relating to the Collateral,
this Agreement, the Other Agreements, or Borrower's affairs, or (iii)
to enforce
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any rights of Bank against Borrower or any other person or entity
which may be obligated to Bank by virtue of this Agreement or the
Other Agreements;
(b) takes any action with respect to administration of Borrower's
Liabilities or to protect, collect, sell, liquidate or otherwise
dispose of the Collateral; and/or
(c) attempts to or enforces any of Bank's rights or remedies under this
Agreement or the Other Agreements, including without limitation,
Bank's rights or remedies with respect to the Collateral,
then, the reasonable cost and expenses incurred by Bank in any manner or way
with respect to the foregoing, shall be part of Borrower's Liabilities, payable
by Borrower to Bank on demand. Fees and expenses incurred by Bank in collecting
any judgment which may be entered on account of this Note shall also be paid by
Borrower. The obligation of Borrower set forth in this paragraph 6.13 shall be
continuing and shall not be merged into any judgment entered based upon this
Agreement. Borrower shall be able to review, without the right to alter, legal
bills incurred in connection with the foregoing as they become available.
Notwithstanding the foregoing, Borrower hereby also agrees to pay
concurrent with the execution of this Agreement: (i) a fee of $2,700.00 to Bank
for the initial funding of the Term Note; and (ii) all of Bank's costs and
expenses incurred in connection with the preparation and documentation of
the loans to be made pursuant hereto, including the Bank's attorney's fees and
costs. Bank shall be under no obligation to make the loans contemplated by this
Agreement until such time as those fees and expenses are paid.
6.15 Borrower releases Bank from any and all causes of action or claims,
which Borrower may now or hereafter have for any asserted loss or damage to
Borrower claimed to be caused by or arising from:
(a) any failure of Bank to protect, enforce or collect in whole or in
part any of the Collateral except for Bank's willful misconduct;
(b) Bank's notification to any person or entity of Bank's security
interests in the Collateral;
(c) Bank's directing any person or entity to pay any sums owing to
Borrower directly to Bank; and
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(d) any other act or omission to act on the part of Bank, its officers,
agents or employees, except for willful misconduct.
6.16 Forum Selection. BORROWER AND BANK IRREVOCABLY AGREE THAT, ALL
---------------
ACTIONS OR PROCEEDINGS IN AN WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE
LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE COUNTY OF COOK, STATE OF
ILLINOIS. BORROWER AND BANK HEREBY CONSENT AND SUBMIT TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. BORROWER AND
BANK HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT.
Acknowledged by Borrower:
------------------------
6.17 Jury Waiver. BORROWER AND BANK HEREBY IRREVOCABLY WAIVE ANY RIGHT
-----------
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING: (I) TO ENFORCE
OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER
AGREEMENTS, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
(II) ARISING FROM ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH OR
RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS, OR ANY SUCH AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREE THAT ANY SUCH ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Acknowledged by Borrower:
------------------------
[signature page follows as page 19]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
BORROWER:
CONTINENTAL CAPITAL CORPORATION, a
Colorado corporation
By:
---------------------------------
Name: Milton J. Wilpon
Title: Chief Executive Officer
ACCEPTANCE
Accepted this day of June, 1996, at Bank's principal place of
---------
business in the City of Chicago, State of Illinois.
BANK:
NAB BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Subscribed and sworn
before me this day
-----
of June, 1996.
- ------------------
Notary Public
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Security Agreement
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 159,052
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 49,824
<CURRENT-ASSETS> 208,876
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 208,876
<CURRENT-LIABILITIES> 203,211
<BONDS> 0
0
0
<COMMON> 8,500
<OTHER-SE> (2,835)
<TOTAL-LIABILITY-AND-EQUITY> 208,876
<SALES> 52,482
<TOTAL-REVENUES> 61,120
<CGS> 176
<TOTAL-COSTS> 176
<OTHER-EXPENSES> 54,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 508
<INCOME-PRETAX> 5,895
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,895
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,895
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
