SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1997
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 0-15525
CAPITAL ASSOCIATES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1055327
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7175 WEST JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
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 .
--- ---
The number of shares outstanding of the Registrant's $.008 par value common
stock at September 30, 1997, was 5,023,206.
Exhibit Index - Page 15
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<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - August 31, 1997 and May 31, 1997 3
Consolidated Statements of Income - Three Months Ended
August 31, 1997 and 1996 4
Consolidated Statements of Cash Flows - Three Months Ended
August 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Exhibit Index 16
Signature 18
2 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
ASSETS
August 31, May 31,
1997 1997
---------- --------
Cash and cash equivalents $ 5,331 $ 6,194
Receivables from affiliated limited partnerships 520 726
Accounts receivable, net 462 417
Equipment held for sale or re-lease 891 1,242
Residual values and other receivables arising from
equipment under lease sold to private investors 4,734 4,334
Net investment in direct finance leases 7,002 7,700
Leased equipment, net 64,300 71,443
Investments in affiliated limited partnerships 5,874 6,642
Other 3,776 3,674
Deferred income taxes 2,300 2,300
Discounted lease rentals assigned to lenders
arising from equipment sale transactions 35,181 41,845
--------- ---------
$ 130,371 $ 146,517
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Recourse bank debt $ 16,613 $ 20,712
Accounts payable - equipment purchases 25,373 30,231
Other liabilities 8,478 10,607
Discounted lease rentals 56,265 61,466
--------- ---------
106,729 123,016
--------- ---------
Stockholders' equity:
Common stock 32 32
Additional paid-in capital 16,897 16,897
Retained earnings 6,994 6,854
Treasury stock (281 (282)
--------- ---------
Total stockholders' equity 23,642 23,501
--------- ---------
$ 130,371 $ 146,517
========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except earnings per share)
Three Months Ended
-----------------------
August 31, August 31,
1997 1996
---------- ----------
Revenue:
Equipment sales to affiliated limited
partnerships $ 11,382 $ 12,433
Other equipment sales 24,475 18,603
Leasing 4,417 3,976
Interest 955 1,178
Other 809 777
---------- ----------
Total revenue 42,038 36,967
---------- ----------
Costs and expenses:
Equipment sales 34,537 30,132
Leasing 2,804 2,084
Operating and other expenses 2,490 2,512
Provision for losses 170 25
Interest:
Non-recourse debt 1,349 1,551
Recourse debt 500 479
---------- ----------
Total costs and expenses 41,850 36,783
---------- ----------
Net income before income taxes 188 184
Income tax expense 47 46
---------- ----------
Net income $ 141 $ 138
========== ==========
Earnings per common and dilutive common
equivalent share $ 0.03 $ 0.03
========== ==========
Weighted average number of common and dilutive
common equivalent shares outstanding used in
computing earnings per share 5,357,000 5,325,000
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
-----------------------
August 31, August 31,
1997 1996
---------- ----------
Net cash provided by operating activities $ 14,920 $ 15,593
-------- --------
Cash flows from investing activities:
Equipment purchased for leasing (14,575) (13,876)
Investment in leased office facility and capital
expenditures (206) (88)
Net receipts from affiliated limited partnerships 643 246
-------- --------
Net cash used for investing activities (14,138) (13,718)
-------- --------
Cash flows from financing activities:
Proceeds from discounting of lease rentals 4,920 -
Principal payments on discounted lease rentals (2,467) (2,092)
Proceeds from sales of common stock 1 6
Purchase of non-employee stock options - (138)
Net borrowings (payments) on revolving credit
facilities (3,015) 1,112
Payments on Term Loan (1,084) (1,083)
-------- --------
Net cash used for financing activities (1,645) (2,195)
-------- --------
Net decrease in cash and cash equivalents (863) (320)
Cash and cash equivalents at beginning of period 6,194 2,851
-------- --------
Cash and cash equivalents at end of period $ 5,331 $ 2,531
======== ========
Supplemental schedule of cash flow information:
Recourse interest paid $ 500 $ 479
Non-recourse interest paid 394 369
Income taxes paid 77 59
Income tax refunds received 67 297
Supplemental schedule of non-cash investing and
financing activities:
Increase in residual values and other receivables
relating to equipment sale transactions 19 348
Discounted lease rentals assigned to lenders
arising from equipment sales transactions 949 -
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. For further
information, please refer to the financial statements of Capital Associates,
Inc. (the "Company"), and the related notes, included within the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (the "1997
Form 10-K"), previously filed with the Securities and Exchange Commission.
The balance sheet at May 31, 1997 has been derived from the audited
financial statements included in the Company's 1997 Form 10-K.
6 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations
---------------------
GENERAL COMMENTS
During the three months ended August 31, 1997 the Company reported net
income of $141,000 representing its twenty-first consecutive profitable
quarter.
Operating results are subject to fluctuations resulting from several
factors, including (i) the seasonality of lease originations, (ii)
variations in the relative percentages of the Company's leases entered
into during the period which are classified as DFLs or OLs, or are sold
for fee income and (iii) the level of fee income obtained from the sale of
leases in excess of lease equipment cost. The Company will adjust its mix
of OLs and DFLs and volume of leases sold to private investors from time
to time, when and as the Company determines that it would be in its best
interests, taking into account profit opportunities, portfolio
concentration, residual risk and its fiduciary duty to originate leases
for its PIFs.
Because the Company finances its lease transactions with recourse and
non-recourse debt, the ultimate profitability of leasing transactions is
dependent, in part, on the difference between the interest rate inherent
in the lease and the underlying debt rate ("rate spread"). Certain of the
Company's competitors have access to lower cost funds than the Company.
However, the Company has developed relationships with various private
investors and formed various strategic alliances with investors that have
a lower cost of capital enabling the Company to originate and sell leases
at competitive prices. Currently, as a result of the present relatively
low interest rate environment and resulting relatively low lease rates,
the Company sells the majority of leases it originates to private
investors having a lower cost of capital than the Company.
LEASE ORIGINATIONS
In the ordinary course of business, the Company will continue to (1) sell
new lease originations to its PIFs (to the extent the PIFs have funds
available for such purpose) or private investors and (2) sell seasoned
lease transactions (previously originated leases held in the Company's
portfolio) to private investors. Presented below is a schedule showing new
lease originations volume and the placement of new lease originations
during the three-month period ended August 31, 1997 as compared to the
comparable period for fiscal year 1997 (in thousands).
Three Months Ended
-----------------------
August 31, August 31,
1997 1996
---------- ----------
Placement of lease originations:
Equipment under lease sold to PIFs $11,000 $11,000
Equipment under lease sold to private
investors 14,000 13,000
Leases added to the Company's lease
portfolio (a significant portion of
which will be sold during fiscal year 1998) 8,000 18,000
------- -------
Total lease origination volume $33,000 $42,000
======= =======
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
LEASE ORIGINATIONS, continued
Leasing is an alternative to financing equipment with debt. Therefore, the
ultimate profitability of the Company's leasing transactions is dependent,
in part, on the general level of interest rates. Lease rates tend to rise
and fall with interest rates, although lease rate movements generally lag
interest rate movements.
The Company is able to originate a certain amount of leases with higher
lease rates. Such leases are generally sold to the PIF's because, as PIF
sponsor, the Company has a fiduciary responsibility to maximize investor
returns and does so by blending higher yielding transactions with
investment grade credit quality leases having lower lease rates. However,
given the present market environment, the number of higher yielding
transactions having adequate credit quality is limited, and consequently,
the volume of leases sold to the PIF's is limited. The Company's response
to these factors has been to limit the amount of funds it raises from PIF
investors. Consequently, future equipment sales to PIF's are expected to
comprise a smaller percentage of total placements of new lease
originations than in the past.
The Company continues to evaluate additional sources of capital (from
sources such as securitization or a private debt placement) which will
provide the liquidity necessary to significantly add leases to its own
portfolio. The goal of such financing will be to lower the Company's cost
of capital and expand the availability of capital. The Company believes
this will enable it to originate leases for its own portfolio which have
competitive market lease rates and good credit quality. The Company
believes that in the present market there are significant opportunities to
originate leases having these characteristics. However, the Company's
present capital structure (i.e., both cost of capital and amount
available) precludes taking full advantage of market opportunities for
such leases. Should the Company be successful in identifying and closing
on new financing meeting these criteria (for which no assurance can be
given), it intends to grow its own lease portfolio.
INTERIM FINANCIAL RESULTS
Presented below are schedules showing condensed income statement
categories and analyses of changes in those condensed categories derived
from the Consolidated Statements of Income (in thousands), prepared solely
to facilitate the discussion of results of operations that follows.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
INTERIM FINANCIAL RESULTS, continued
Condensed Consolidated The effect
Statements of Income for on net
the Three Months Ended net income
August 31, August 31, of changes
---------- ---------- between
1997 1996 years
---------- ---------- ----------
Equipment sales margin $ 1,320 $ 904 $ 416
Leasing margin (net of interest
expense on discounted lease
rentals) 1,219 1,519 (300)
Other income 809 777 32
Operating and other expenses (2,490) (2,512) 22
Provision for losses (170) (25) (145)
Interest expense on recourse debt (500) (479) (21)
Income taxes (47) (46) (1)
------- ------- -------
Net income $ 141 $ 138 $ 3
======= ======= =======
EQUIPMENT SALES
Equipment sales revenue (and the related equipment sales margin) consists
of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------- Increase
August 31, 1997 August 31, 1996 (Decrease)
------------------ -------------------- ---------------
Revenue Margin Revenue Margin Revenue Margin
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Transactions during initial lease term:
Equipment under lease sold to PIFs $ 11,382 $ 266 $ 12,433 $ 272
Equipment under lease sold to private investors 23,768 432 18,488 365
-------- ------- -------- -----
35,150 698 30,921 637 $ 4,229 $ 61
-------- ------- -------- ----- ------- -----
Transactions subsequent to initial lease termination:
Sales of off-lease equipment 128 43 224 127
Excess collections (cash collections in excess of the
associated residual value from equipment under
lease sold to private investors) 579 579 140 140
-------- ------- -------- -----
707 622 364 267 343 355
Deduct related provision for losses - (170) - (25) - (145)
-------- ------- -------- ----- ------- -----
Realizations of value in excess of provision for losses 707 452 364 242 343 210
Add back related provision for losses - 170 - 25 - 145
-------- ------- -------- ----- ------- -----
707 622 364 267 343 355
-------- ------- -------- ----- ------- -----
Total equipment sales $ 35,857 $ 1,320 $ 31,285 $ 904 $ 4,572 $ 416
======== ======= ======== ===== ======= =====
</TABLE>
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
EQUIPMENT SALES
Equipment Sales to PIF's
------------------------
Equipment sales to the PIFs decreased during the three months ended August
31, 1997 as compared to the comparable period in fiscal year 1997 and are
expected to decrease further in the remainder of fiscal year 1998 because
during 1997 three of the PIFs entered the planned liquidation stage. Once
a PIF enters the liquidation stage, it no longer acquires equipment under
lease. Presently, two PIFs are actively acquiring leases compared to four
PIFs which were actively acquiring leases in 1996.
Equipment Sales to Private Investors
------------------------------------
Equipment sales to private investors increased principally because more
leases were identified and closed as a result of increased productivity of
the field lease originations team. The increased volume of the field lease
originators is primarily due to (i) the Company's efforts to improve its
marketing activities, including focusing on customer relationships and
vertical integration (i.e., the development of specialized equipment and
remarketing expertise) and (ii) the establishment of a strategic alliance
with an investor having a lower cost of capital enabling the Company to
originate and sell leases at competitive prices.
During the three months ended August 31, 1997 and 1996, payments from one
lessee accounted for 11% and 7%, respectively, of total leasing revenue.
In addition, other equipment sales revenue related to equipment leased to
that lessee accounted for 33% and 63% of total other equipment sales
revenue during the three months ended August 31, 1997 and 1996,
respectively.
Remarketing of the Portfolio and Related Provision for Losses
-------------------------------------------------------------
The Company has been successful in realizing gains on the remarketing of
its equipment after the initial lease term for the past twenty-one
consecutive quarters. The remarketing of equipment for an amount greater
than its book value is reported as equipment sales margin (if the
equipment is sold) or as leasing margin (if the equipment is re-leased).
The realization of less than the carrying value of equipment (which is
typically not known until remarketing after the expiration of the initial
lease term) is recorded as provision for losses. As shown in the table
above, the realizations from sales exceeded the provision for losses
during the three month period ended August 31, 1997 and August 31, 1996,
even without considering realizations from remarketing activities recorded
as leasing margin.
10 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
EQUIPMENT SALES, continued
Remarketing of the Portfolio and Related Provision for Losses, continued
-------------------------------------------------------------
Residual values are established equal to the estimated value to be
received from the equipment following termination of the lease. In
estimating such values, the Company considers all relevant facts regarding
the equipment and the lessee, including, for example, the equipment's
remarketability, upgrade potential and the probability that the equipment
will continue to be installed in place at the end of the initial lease
term. The nature of the Company's leasing activities is that it has credit
exposure and residual value exposure and, accordingly, in the ordinary
course of business it will incur losses arising from these exposures. The
Company performs ongoing quarterly assessments of its assets to identify
other than temporary losses in value. The Company's policy is to record
allowances for losses as soon as any other- than-temporary declines in
asset values are known. However, chargeoffs are recorded upon the
termination or remarketing of the underlying assets. As such, chargeoffs
will primarily occur subsequent to the recording of the allowances for
losses.
Margins from remarketing sales (i.e., sales occurring after the initial
lease term) are affected by the number and dollar amount of equipment
leases that mature in a particular quarter. As shown in the table above,
(i) because the Company sold substantially all new lease originations to
its PIFs or private investors and retained very few lease originations for
its own account during the fiscal years preceding fiscal year 1995, and
(ii) in accordance with GAAP, the Company does not consolidate the results
of its PIFs, generally fewer leases have matured and less equipment has
been available for remarketing each quarter since May 31, 1993. However,
revenue from remarketing sales increased during the three months ended
August 31, 1997, as compared to the comparable period in fiscal 1997
primarily due to the sale of investor-owned grocery store furniture and
fixtures on which the Company had a retained residual interest. Although
fluctuations will occur as discussed in the preceding sentence, in
general, remarketing revenue and margin are expected to remain at levels
which are lower than fiscal 1996 and prior years. The Company's ability to
remarket additional amounts of equipment and realize a greater amount of
remarketing revenue in future periods is dependent on adding additional
leases to its portfolio. However, adding leases to the Company's portfolio
will not immediately increase the pool of maturing leases because new
leases typically are not remarketed until after their initial term (which
averages approximately four years).
The provision for losses recorded during the first three months of fiscal
1998 primarily related to the following:
* Other-than-temporary declines in the value of equipment which
occurred primarily because lessees returned equipment to the Company
at the end of lease. The Company had previously expected to realize
the carrying value of that equipment through lease renewals and
proceeds from sale of the equipment to the original lessee. The fair
market value of the equipment re-leased or sold to a third party is
considerably less than was anticipated, and
11 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
EQUIPMENT SALES, continued
Remarketing of the Portfolio and Related Provision for Losses, continued
-------------------------------------------------------------
* The anticipated sale of an off-lease commuter aircraft. The Company
engaged an expert third-party commuter aircraft remarketer (MCC
Financial) to remarket the aircraft. That agent determined that the
aircraft could be released within a reasonable remarketing period
for an amount that would recover the Company's full carrying value
over time, or sold for cash immediately but at a book loss. The
Company has elected to sell the aircraft immediately after
determining that the proceeds could be more effectively redeployed
in its vertical integration activities and for the equity portion of
a potential financing program for leases. The provision for loss
reflects a sales offer the Company has received, and a sale is
expected to occur during second quarter fiscal 1998.
The provision for losses recorded during the first three months of fiscal
1997 did not relate to any significant items because no significant
other-than-temporary declines in the value of the equipment were
identified in the quarterly assessments of the Company's assets.
LEASING MARGIN
Leasing margin consists of the following (in thousands):
Three Months Ended
-------------------------
August 31, August 31,
1997 1996
---------- ----------
Leasing revenue $ 4,417 $ 3,976
Leasing costs and expenses (2,804) (2,084)
Net non-recourse interest expense on related
discounted lease rentals (394) (373)
------- -------
Leasing margin $ 1,219 $ 1,519
======= =======
Leasing margin ratio 28% 38%
======= =======
The increase in leasing revenue and leasing costs during the three months
ended August 31, 1997, compared to the comparable period of fiscal 1997 is
primarily due to growth in the Company's lease portfolio.
12 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
LEASING MARGIN, continued
Leasing margin ratio fluctuates based upon (i) the mix of direct finance
leases and operating leases, (ii) remarketing activities, (iii) the method
used to finance leases added to the Company's lease portfolio, and (iv)
the relative age and types of leases in the portfolio (operating leases
have a relatively lower leasing margin early in the lease term and an
increasing leasing margin as the term passes. The majority of leases added
to CAI's portfolio have been operating leases). Interest expense arising
from non-recourse bank debt (discounted lease rentals) is reflected in
leasing margin, but interest arising from the warehouse facility is not
reflected in leasing margin. Leasing margin and the related leasing margin
ratio decreased primarily as a result of a decrease in the number of
leases in the remarketing phase and a related decline in the amount of
remarketing rents.
OTHER INCOME
Other Income consists of the following (in thousands):
Three Months Ended
-----------------------
August 31, August 31,
1997 1996
---------- ----------
Fees and distributions from the
Company-sponsored PIFs $680 $589
Interest on income tax refunds - 103
Other 130 85
---- ----
$810 $777
==== ====
OPERATING AND OTHER EXPENSES
The aggregate amount of operating and other expenses were unchanged for
the three months ended August 31, 1997 when compared to the comparable
period ended August 31, 1996. Salaries and wages increased approximately
$100,000 due primarily to an increase in sales and marketing personnel
(the Company has 25 sales and marketing employees as of August 31, 1997
compared to 17 as of August 31, 1996), offset by non-recurring costs
associated with the relocation of the Company's Chairman of the Board
incurred in the quarter ended August 31, 1996.
INTEREST INCOME AND EXPENSE
Interest income arises when equipment financed with non-recourse debt is
sold to investors. The accompanying Consolidated Statements of Income
reflect an equal amount of non-recourse interest expense. The decline in
interest income (and the related non-recourse interest expense) reflects a
decline in the average outstanding balance of non-recourse debt with
respect to equipment sold to investors.
13 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
I. Results of Operations, continued
---------------------
INCOME TAXES
Income tax expense is provided on income at the appropriate federal and
state statutory rates applicable to such earnings. The aggregate statutory
tax rate is 40%, adjusted for utilization of the Company's ITC
carryforward (see Note 10 to Notes to the Consolidated Financial
Statements to the 1997 Form 10-K).
II. Liquidity and Capital Resources
-------------------------------
The Company's Bank Facility extends through November 30, 1997. The Company
is presently negotiating a new Bank Facility which it expects to close
prior to November 30, 1997.
Currently the Company is offering units of CPYF-IV for sale to the public.
Through August 31, 1997, the Company sold $36.3 million of Class A units
of CPYF-IV. For the remainder of the offering period for CPYF-IV (which
ends in April 1998), the Company has $13.7 million of Class A units in
CPYF-IV available for sale, which represent a source of financing for the
placement of lease originations and acquisition fee income to the Company.
III. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act
--------------------------------------------------------------------------
of 1995
-------
The statements contained in this report which are not historical facts may
be deemed to contain forward-looking statements with respect to events,
the occurrence of which involve risks and uncertainties, and are subject
to factors that could cause actual future results to differ both adversely
and materially from currently anticipated results, including, without
limitation, the level of lease originations, realization of residual
values, the availability and cost of financing sources and the ultimate
outcome of any contract disputes. Certain specific risks associated with
particular aspects of the Company's business are discussed in detail
throughout Item 2 of this report and Parts I and II of the 1997 Form 10-K
when and where applicable.
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<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
(a) OTHER. The Company is involved in other routine legal
proceedings incidental to the conduct of its business.
Management believes that none of these legal proceedings will
have a material adverse effect on the financial condition or
operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
b. Reports on Form 8-K
-------------------
None
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<PAGE>
Item No. Exhibit Index
- -------- -------------
10.54 Fourth Amendment to Credit Agreement and Notes, dated as of July 3,
1997, by and among Capital Associates International, Inc., borrower, the
Lenders (as defined therein), Norwest Bank Colorado, National
Association, as Agent and Norwest Equipment Finance, Inc., as Collateral
Agent.
10.55 Consulting Agreement, effective as of June 1, 1996 by and among the
Company CAII and William H. Buckland.
10.56 Consulting Agreement, effective as of June 1, 1996 by and among the
Company CAII and James D. Walker.
10.57 Residual Sharing Note, dated as of June 1, 1997 by and among the Company
CAII and William H. Buckland.
10.58 Residual Sharing Note, dated as of June 1, 1997 by and among the Company
CAII and James D. Walker.
11A Computation of Primary Earnings Per Share. A computation of fully
diluted earnings per share is not presented as dilution is less than 3%.
27 Financial Data Schedule
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<PAGE>
Exhibit 11A
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended
--------------------------
August 31, August 31,
1997 1996
------------ ----------
Shares outstanding at beginning of period 5,016,000 4,994,000
Shares issued during the period
(weighted average) - 2,000
Dilutive shares contingently issuable upon
exercise of options (weighted average) 679,000 720,000
Less shares assumed to have been purchased
for treasury with assumed proceeds from
exercise of stock options (weighted average) (338,000) (327,000)
Effect of non-employee stock option buy-out - (64,000)
----------- -----------
Total shares, primary 5,357,000 5,325,000
=========== ===========
Net income $ 141,000 $ 138,000
=========== ===========
Income per common and common
equivalent share, primary $ 0.03 $ 0.03
=========== ===========
17 of 18
<PAGE>
CAPITAL ASSOCIATES INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements 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.
CAPITAL ASSOCIATES, INC.
Registrant
Date: October 3, 1997 By: /s/Anthony M. DiPaolo
---------------------
Anthony M. DiPaolo,
Senior Vice-President and
Chief Financial Officer
18 of 18
EXHIBHT 10.54
FOURTH AMENDMENT TO CREDIT AGREEMENT
This fourth Amendment, dated as of July 3, 1997, is made by and
among CAPITAL ASSOCIATES INTERNATIONAL, INC., a Colorado Corporation (the
"Borrower") and each of the financial institutions appearing on the signature
pages hereof (herein collectively the "Lenders" and individually each called a
"Lender") and NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a national banking
association, in its separate capacity as agent for the Lenders (in such
capacity, the "Agent") and NORWEST EQUIPMENT FINANCE, INC., a Minnesota
corporation, in its separate capacity as collateral agent for the Lenders (in
such capacity, the "Collateral Agent").
RECITALS
A. Norwest Bank Colorado, National Association (in its capacity as
Lender hereunder "Norwest Colorado"), Norwest Equipment Finance, Inc. (in its
capacity as Lender hereunder, "NEFI"), First National Bank of Boston ("First
Boston") and The Sumitomo Bank, Limited ("Sumitomo"), the Agent, the Collateral
Agent and the Borrower have entered into a Credit and Security Agreement dated
as of November 30, 1994, as amended by a First Amendment to Credit Agreement and
Notes dated November 30, 1995, an Assumption Certificate dated February 28,
1995, a Second Amendment to Credit Agreement and Notes dated January 31, 1996
and a Third Amendment to Credit Agreement dated as of November 27, 1996 ( as
amended, the "Credit Agreement"). Capitalized terms used in these Recitals have
the meanings given to them in the Credit Agreement unless otherwise specified.
B. Pursuant to the Credit Agreement, the Borrower executed and
delivered the following promissory notes: (i) a Working Capital Note dated
November 27, 1996 in the original principal amount of $2,500,000 payable to the
order of Norwest Colorado, (ii) a Warehousing Note dated November 27, 1996 in
the original principal amount of $2,967,591.10 payable to the order of Norwest
Colorado, (iii) a Term Note dated November 27, 1996 in the original principal
amount of $782,408.90 payable to the order of Norwest Colorado, (iv) a
Warehousing Note dated November 27, 1996 in the original principal amount of
$5,467,591.10 payable to the order of NEFI, (v) a Term Note dated November 27,
1996 in the original principal amount of $782,408.90 payable to the order of
NEFI, (vi) a Working Capital Note dated November 27, 1996 in the original
principal amount of $2,500,000 payable to the order of First Boston, (vii) a
Warehousing Note dated November 27, 1996 in the original principal amount of
$8,435,186.90 payable to the order of First Boston, (viii) a Term Note dated as
of November 27, 1996 in the original principal amount of $1,564,813.10 payable
to the order of First Boston, (ix) a Working Capital Note dated November 27,
1996 in the original principal amount of $2,500,000 payable to the order of
Sumitomo, (x) a Warehousing Note dated November 27, 1996 in the original
principal amount of $5,935,186.10 payable to the order of Sumitomo, and (xi) a
<PAGE>
Term Note dated November 27, 1996 in the original principal amount of
$1,564,813.10 payable to the order of Sumitomo (collectively, the "Notes").
C. The Borrower has requested that the due date for accrued interest
on Libo Advances and Libo Term Loans be amended. The Lenders are willing to
accommodate the Borrower's requests, pursuant to the terms and conditions set
forth in this Fourth Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, it is agreed as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized
terms used in this Fourth Amendment which are defined in the Credit Agreement
shall have the same meanings given to them in the Credit Agreement.
2. AMENDMENT OF CREDIT AGREEMENT DEFINITIONS.
(a) Section 2.11 of the Credit Agreement is amended as follows:
"Section 2.11 INTEREST DUE DATES. Accrued interest on each Floating
Rate Term Loan shall be payable in arrears on the last day of each
month and at maturity. Accrued interest on each LIBO Term Loan shall
be payable on the last day of the Interest Period relating to such
LIBO Term Loan; PROVIDED, HOWEVER, that if any such Interest Period is
longer than three (3) months, interest shall be payable monthly in
arrears on the last day of each three (3) month period after the
commencement of such Interest Period and on the last day of such
Interest Period."
(b) Section 4.11 of the Credit Agreement is amended as follows:
"Section 4.11 INTEREST DUE DATES. Accrued interest on each
Floating Rate Warehousing Advance shall be payable in arrears on the
last day of each month and at maturity. Accrued interest on each LIBO
Advance shall be payable on the last day of the Interest Period
relating to such LIBO Advance; PROVIDED, HOWEVER, that if any such
Interest Period is longer than three (3) months, interest shall be
payable monthly in arrears on the last day of each three (3) month
period after the commencement of such Interest Period and on the last
day of such Interest Period."
3. NO OTHER CHANGES. Except as explicitly amended by this
Amendment, all terms and conditions of the Credit Agreement and the other Loan
Documents shall remain in full force and effect. Notwithstanding anything to the
contrary contained herein or in any other instrument executed by the Borrower,
the Guarantors, any Lender, the Agent or the Collateral Agent, the agreements,
covenants and provisions contained herein shall constitute the only evidence of
the Lenders' agreement with respect to modification of any of the Loan
-2-
<PAGE>
Documents. The Borrower acknowledges and agrees that no express or implied
consent to any additional or further amendments or modifications of any
of the Loan Documents shall be inferred or implied by the execution and
delivery of this Amendment. Further, execution of this Amendment shall not
constitute a waiver (either express or implied) of any requirement set forth in
the Credit Agreement for the express written approval of the Lenders or Required
Lenders, as the case may be, for any other or future modifications or amendments
of the Loan Documents, and no such further approval (either express or implied)
has been given with respect thereto as of the date of this Amendment.
4. CONDITIONS PRECEDENT. This Fourth Amendment shall be effective
when the Agent has received:
(a) an original of this Fourth Amendment, duly executed on behalf
of the Borrower, each Lender, the Agent and the Collateral Agent;
(b) the Acknowledgment and Agreement of Guarantors set forth at the
end of this Fourth Amendment, duly executed by each Guarantor; and
(c) such other matters as the Agent may reasonably require.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Lenders as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder,
and this Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms, except to the
extent the enforcement thereof may be limited by any applicable
bankruptcy, insolvency or similar laws now or hereafter in effect
affecting creditors' rights generally.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action
and do not (i) require any authorization, consent or approval by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of
any law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the
articles of incorporation or by-laws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound
or affected.
-3-
<PAGE>
(c) All of the representations and warranties contained in the
Credit Agreement are correct on and as of the date hereof as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
6. REFERENCES. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended by this
Fourth Amendment and any and all references in the Security Documents or any
other Loan Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended by this Fourth Amendment.
7. NO WAIVER. The execution of this Amendment and acceptance of
any documents related hereto shall not be deemed to be a waiver of any Default
or Event of Default under the Credit Agreement or breach, default or event of
default under any Security Document or other document held by the Lender,
whether or not known to the Lender and whether or not existing on the date of
this Amendment.
8. RELEASE. The Borrower, and each Guarantor by signing the
Acknowledgment and Agreement of Guarantor set forth below, hereby absolutely and
unconditionally release and forever discharge each Lender, the Agent and the
Collateral Agent and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower or such Guarantor has had, now has or has made
claim to have against any such person for or by reason of any act, omission,
matter, cause or thing whatsoever arising from the beginning of time to and
including the date of this Amendment, whether such claims, demands and causes of
action are matured or unmatured or known or unknown.
9. COSTS AND EXPENSES. The Borrower hereby reaffirms its
agreement under the Credit Agreement to pay or reimburse the Agent on demand for
all costs and expenses incurred by the Agent in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Agent
for the services performed by such counsel in connection with the preparation of
this Fourth Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Agent may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and
expenses.
-4-
<PAGE>
10. MISCELLANEOUS. This Amendment and the Acknowledgment and
Agreement of Guarantors may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.
[SIGNATURE PAGES FOLLOW]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to Credit Agreement to be duly executed as of the date first written
above.
CAPITAL ASSOCIATES
INTERNATIONAL, INC.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION,
as Agent and a Lender
By /s/Sandra A. Sauer
---------------------------------
Sandra A. Sauer
Its Vice President
NORWEST EQUIPMENT FINANCE, INC.
as Collateral Agent and a Lender
By /s/Judy I. VanOsdel
--------------------------------
Judy I. VanOsdel
Its Vice President
<PAGE>
THE SUMITOMO BANK, LIMITED,
as a Lender
By /s/Judith M. Bresnen
---------------------------------
Judith M. Bresnen
Its Vice President
FIRST NATIONAL BANK OF BOSTON,
as a Lender
By /s/Deirdre M. Holland
---------------------------------
Deirdre M. Holland
Its Vice President
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS
Each of the undersigned, a guarantor of the indebtedness of
Capital Associates International, Inc. (the "Borrower") to the Lenders described
in the foregoing Fourth Amendment (the "Lenders") pursuant to their separate
Guaranties dated as of November 30, 1994 for each of the undersigned other than
CAI Equipment Leasing V Corp., whose Guaranty is dated as of November 27, 1996
(each a "Guaranty"), hereby acknowledges receipt of the foregoing Fourth
Amendment; (ii) consents to the terms (including without limitation the release
set forth in paragraph 8 of the Fourth Amendment) and execution thereof; (iii)
reaffirms its obligations to the Lenders pursuant to the terms of its Guaranty;
and (iv) acknowledges that the Lenders may amend, restate, extend, renew or
otherwise modify the Credit Agreement and any indebtedness or agreement of the
Borrower, or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the liability of the undersigned under its Guaranty for
all of the Borrower's present and future indebtedness to the Lenders.
CAPITAL ASSOCIATES, INC.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
CAI EQUIPMENT LEASING I CORP.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
CAI EQUIPMENT LEASING III CORP.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
<PAGE>
CAI EQUIPMENT LEASING IV CORP.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
CAI PARTNERS MANAGEMENT
COMPANY
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
CAPITAL EQUIPMENT CORPORATION
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
CAI LEASE SECURITIZATION I CORP.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
CAI EQUIPMENT LEASING V CORP.
By /s/Anthony M. DiPaolo
---------------------------------
Anthony M. DiPaolo
Its Senior Vice President
EXHIBIT 10.55
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (the "Agreement") is effective as of
this 1st day of June, 1996 (the "Effective Date"), by and between WILLIAM H.
BUCKLAND (the "Consultant"), whose mailing address is 10015 Windy Hollow Road,
Grant Falls, Virginia, 22066, and CAPITAL ASSOCIATES, INC., a Delaware
corporation and Capital Associates International, Inc. A Colorado corporation
(collectively the "Company"), whose principal place of business is 7175 West
Jefferson Avenue, Suite 4000, Lakewood, Colorado 80235.
WHEREAS, the Company desires to engage Consultant to provide,
and Consultant desires to provide, consulting services for the Company as
provided herein, all in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. CONSULTING AGREEMENT. The Company hereby engages
Consultant as a consultant to the Company and Consultant hereby accepts such
engagement for the period extending from the Effective Date to the fifth
anniversary of the Effective Date or the earlier termination of such engagement
as provided in paragraph 5 hereof (the "Consulting Term"). The Consulting Term
may be extended for additional one (1) year periods upon mutual consent of the
parties hereto.
2. CONSULTING DUTIES. During the Consulting Term, Consultant
will provide services on a project basis, at the request of the Executive
Committee of the Board of Directors (the "Board"),including (a) assisting the
Company in locating and negotiating with candidates for acquisitions or other
business combinations and reviewing the terms of such transactions, (b)
assisting the Company with corporate finance projects, such as raising equity or
debt, in accordance with the Company's strategic goals,(c) assisting the Company
with the development of marketing programs, (d) assisting the Company with the
development of management programs and (c) such other services as the Executive
Committee (or the Board) may request Consultant to perform.
Consultant will perform his services under the direction of
the Executive Committee and the Board, consistent with the best interests of the
Company, to the best of his ability, in a diligent manner and consistent with
1
<PAGE>
the policies and guidelines of the Company as in effect at any time and from
time to time.
3. CONSULTING FEE. During the Consulting Term, the Company
agrees to pay to Consultant fees (the "Consulting Fees") as follows:
(a) $187,500 per fiscal year of the Company (the "Base
Consulting Fee"), payable in twice monthly installments of $7,812.50 per
installment, in arrears.
(b) In addition, to compensate Consultant for his
contributions to the overall success of the Company as reflected in its earnings
and in enhanced value to stockholders, and to the extent that the Company
reaches the goals in the Business Plan for the fiscal year ended May 31, 1997,
incentive compensation will be in such form and amount as the Special Committee
of the Board shall determine, in its sole discretion.
(c) In addition, to compensate for his contribution to
the overall success of the Company as reflected in its earnings and in enhanced
value to stockholders, and to the extent that the Company reaches the goals in
the Business Plan for each of the fiscal years ending May 31, 1998 and 1999,
Consultant will be entitled to receive a bonus payment of 4% (the "Base
Incentive Payment Percentage") of the Company's pre-tax earnings for each such
fiscal year (the "Base Incentive Payment"). The Base Incentive Payment will be
adjusted either up or down by adjusting the Base Incentive Payment Percentage in
an amount equal to the percentage change in the average closing price of the
Company's stock for the last four months of the applicable fiscal year as
compared to the same period in the prior fiscal year; provided, however, that in
no event shall the Base Incentive Payment Percentage adjusted lower than 3% or
higher than 6%. The portion of the compensation described in this subparagraph
(b) is referred to herein as the "Incentive Payment".
(d) The Company will reimburse Consultant for his
reasonable expenses which are incurred during the Consulting Term in connection
with his engagement with the Company, provided that standard documentation
and/or receipts are submitted to the Company by Consultant in accordance with
the Company's standard policies and practices.
(e) Payments due to Consultant hereunder will be reduced
by any payments received by Consultant from June 1, 1996 under the former
Executive Committee Compensation Plan.
4. INDEPENDENT CONTRACTOR. The parties hereby acknowledge,
understand and agree that Consultant is an independent contractor and shall not
2
<PAGE>
be considered an employee or agent of the Company pursuant to the terms of this
Agreement for any purposes whatsoever and Consultant shall have no right or
authority to assume or create any obligation or liability, express or implied,
on behalf of the Company or any of its affiliates, or to bind the Company or
such affiliates in any manner or thing whatsoever, without the Company's express
prior written consent.
5. TERMINATION.
-----------
(a) Anything herein to the contrary notwithstanding, upon
the happening of any one of the following events, the Company may terminate this
Agreement by giving Consultant written notice of such termination: (i) an act or
omission of Consultant constituting Cause (as defined below); or (ii) a
violation by Consultant of any of the provisions of Section 6. hereof. For the
purpose of clause (i) of this paragraph (a), "Cause" shall mean (A) conviction
in a court of law of any crime or offense involving money or other property of
the Company or any of its affiliates, or (B) the determination by the Company,
acting in good faith, that the Consultant has knowingly and willfully committed
an offense described in clause (A) above or committed an act of fraud with
respect to money or other property of the Company or an affiliate of the
Company. Termination pursuant to this paragraph (b) shall be effective five (5)
days after the date of such notice or as otherwise provided therein.
(b) The Company's right of termination pursuant to
paragraph (a) shall be in addition to the rights and remedies available to the
Company at law or in equity and such rights and remedies shall survive
termination of this Agreement.
(c) In the event of termination of this Agreement
pursuant to paragraph (a), Consultant shall have no right to receive any
compensation for any period subsequent to the date of such termination, except
for any pro-rated or other amounts earned prior to such termination.
(d) In the event of termination of this Agreement for any
reason other than as set forth in paragraph (a), Consultant shall be entitled to
receive the greater of (i) three (3) times the annual Base Consulting Fee or
(ii) the Base Consulting Fee for the remainder of the Consulting Term, plus the
pro-rated amount of the Incentive Payment for the fiscal year in which such
termination occurs.
6. CONFIDENTIALITY AGREEMENT. Consultant agrees that he
shall not disclose, during the Consulting Term or any extension thereof and for
a period of two (2) years after the expiration of the Consulting Term or any
3
<PAGE>
extension thereof, any Confidential Information (as defined below) to which he
becomes privy to any person, firm, corporation, association, partnership or
other entity for any reason or purpose whatsoever, other than employees of the
Company who have a need to know such information in connection with the
performance of their duties on behalf of the Company, or as required in the
performance of his duties hereunder, or use any Confidential Information for any
purpose not expressly authorized in writing by the Company. For purposes of this
Agreement, "Confidential Information" means any information, whether disclosed
electronically, in writing or orally, heretofore or hereafter designated or
otherwise treated as "confidential" by the Company, including, but not limited
to, all financial statements, corporate records and other information and data
relating to the operations, assets, liabilities, financial condition, future
prospects, employees, customers, financing and litigation of the Company or any
of its affiliates, all technical and business information, know-how or trade
secrets, or any other information relating to the Company or its affiliates,
which is of a confidential or proprietary nature.
7. INDEMNIFICATION. The Company shall indemnify, defend and
hold Consultant harmless from and against any and all losses, claims, damages,
liabilities, expenses (including, without limitation, reasonable attorneys'
fees) or costs (collectively, the "Claims") incurred by Consultant arising from
the services provided by Consultant to the Company under this Agreement;
PROVIDED, HOWEVER, that such indemnification shall not extend to Claims which
arise from, relate to or are caused by the Consultant's gross negligence or
willful misconduct.
8. MISCELLANEOUS.
--------------
(a) NOTICES. Any notice to any party under this
Agreement shall be in writing and shall be delivered by facsimile transmission,
overnight delivery or certified mail, return receipt requested, to the parties
at the following addresses:
If to Consultant:
William H. Buckland
MCC Financial Corporation
8180 Greensboro Drive, Suite 1000
McLean, VA 22102
Telecopy number: (703) 734-1474
If to the Company:
Capital Associates, Inc.
Capital Associates International, Inc.
7175 West Jefferson Avenue, Suite 4000
4
<PAGE>
Lakewood, Colorado 80235
Attention: Chief Executive Officer
Telecopy number: (303) 980-7065
(b) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective successors in interest and assigns, but in no event shall any party
be relieved of its obligations hereunder without the express written consent of
the other party.
(c) ENTIRE AGREEMENT. This Agreement, together with the
instruments and agreements contemplated hereby, represents the entire agreement
of the parties with respect to the subject hereof, and all agreements entered
into prior hereto with respect to the subject matter hereof are revoked and
superseded by this Agreement, and no representations, warranties, inducements or
oral agreements have been made by any of the parties except as expressly set
forth herein, or in other contemporaneous written agreements. This Agreement may
not be changed, modified or rescinded except in writing, signed by the parties
hereto.
(d) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of Colorado, excluding its
laws regarding choice of law.
(e) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
may be executed simultaneously in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument. Each party hereto agrees to be bound by its own facsimile
signature and to accept the facsimile signature of the parties to this
Agreement.
(f) SEVERABILITY. If any provisions of this Agreement
shall be held to be excessively broad as to duration, geographical scope,
activity or subject, such provisions shall be construed by limiting or reducing
the same so as to render such provision enforceable to the extent compatible
with applicable law.
(g) WAIVER. Failure on the part of the Company to
exercise any right or option arising out of a breach of this Agreement shall not
be deemed a waiver of any right or option with respect to any subsequent or
different breach, or the continuance of any existing breach.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement effective as of the date first above written.
CONSULTANT:
/s/W. H. Buckland
--------------------------------------
Name: William H. Buckland
COMPANY:
Capital Associates, Inc.
a Delaware corporation
By: /s/Dennis Lacey
------------------------------
Name: Dennis Lacey
------------------------------
Title: President and CEO
Capital Associates International, Inc.
a Colorado corporation
By: /s/Dennis Lacey
------------------------------
Name: Dennis Lacey
------------------------------
Title: President and CEO
6
EXHIBIT 10.56
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (the "Agreement") is effective as of
this 1st day of June, 1996 (the "Effective Date"), by and between JAMES D.
WALKER(the "Consultant"), whose mailing address is 15 Red Fox Lane, Greenwood
Village, Colorado 80111, and CAPITAL ASSOCIATES, INC., a Delaware corporation
and Capital Associates International, Inc., a Colorado corporation(collectively
the "Company"), whose principal place of business is 7175 West Jefferson Avenue,
Suite 4000, Lakewood, Colorado 80235.
WHEREAS, the Company desires to engage Consultant to provide,
and Consultant desires to provide, consulting services for the Company as
provided herein, all in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. CONSULTING AGREEMENT. The Company hereby engages
Consultant as a consultant to the Company and Consultant hereby accepts such
engagement for the period extending from the Effective Date to the fifth
anniversary of the Effective Date or the earlier termination of such engagement
as provided in paragraph 5 hereof (the "Consulting Term"). The Consulting Term
may be extended for additional one (1) year periods upon mutual consent of the
parties hereto.
2. CONSULTING DUTIES. During the Consulting Term, Consultant
will provide services on a project basis, at the request of the Executive
Committee of the Board of Directors (the "Board"),including (a) assisting the
Company in locating and negotiating with candidates for acquisitions or other
business combinations and reviewing the terms of such transactions, (b)
assisting the Company with corporate finance projects, such as raising equity or
debt, in accordance with the Company's strategic goals,(c) assisting the Company
with the development of marketing programs, (d) assisting the Company with the
development of management programs and (c) such other services as the Executive
Committee (or the Board) may request Consultant to perform.
Consultant will perform his services under the direction of
the Executive Committee and the Board, consistent with the best interests of the
Company, to the best of his ability, in a diligent manner and consistent with
1
<PAGE>
the policies and guidelines of the Company as in effect at any time and from
time to time.
3. CONSULTING FEE. During the Consulting Term, the Company
agrees to pay to Consultant fees (the "Consulting Fees") as follows:
(a) $250,000 per fiscal year of the Company (the "Base
Consulting Fee"), payable in twice monthly installments of $10,416.67 per
installment, in arrears.
(b) In addition, to compensate Consultant for his
contributions to the overall success of the Company as reflected in its earnings
and in enhanced value to stockholders, and to the extent that the Company
reaches the goals in the Business Plan for the fiscal year ended May 31, 1997,
incentive compensation will be in such form and amount as the Special Committee
of the Board shall determine, in its sole discretion.
(c) In addition, to compensate for his contribution
to the overall success of the Company as reflected in its earnings and in
enhanced value to stockholders, and to the extent that the Company reaches the
goals in the Business Plan for each of the fiscal years ending May 31, 1998 and
1999, Consultant will be entitled to receive a bonus payment of 4% (the "Base
Incentive Payment Percentage") of the Company's pre-tax earnings for each such
fiscal year (the "Base Incentive Payment"). The Base Incentive Payment will be
adjusted either up or down by adjusting the Base Incentive Payment Percentage in
an amount equal to the percentage change in the average closing price of the
Company's stock for the last four months of the applicable fiscal year as
compared to the same period in the prior fiscal year; provided, however, that in
no event shall the Base Incentive Payment Percentage adjusted lower than 3% or
higher than 6%. The portion of the compensation described in this subparagraph
(b) is referred to herein as the "Incentive Payment".
(d) The Company will reimburse Consultant for his
reasonable expenses which are incurred during the Consulting Term in connection
with his engagement with the Company, provided that standard documentation
and/or receipts are submitted to the Company by Consultant in accordance with
the Company's standard policies and practices.
(e) Payments due to Consultant hereunder will be reduced
by any payments received by Consultant from June 1, 1996 under the former
Executive Committee Compensation Plan.
4. INDEPENDENT CONTRACTOR. The parties hereby acknowledge,
understand and agree that Consultant is an independent contractor and shall not
2
<PAGE>
be considered an employee or agent of the Company pursuant to the terms of this
Agreement for any purposes whatsoever and Consultant shall have no right or
authority to assume or create any obligation or liability, express or implied,
on behalf of the Company or any of its affiliates, or to bind the Company or
such affiliates in any manner or thing whatsoever, without the Company's express
prior written consent, or except as specifically provided in the Company's
Articles of Incorporation or By-Laws.
5. TERMINATION.
------------
(a) Anything herein to the contrary notwithstanding, upon
the happening of any one of the following events, the Company may terminate this
Agreement by giving Consultant written notice of such termination: (i) an act or
omission of Consultant constituting Cause (as defined below); or (ii) a
violation by Consultant of any of the provisions of Section 6. hereof. For the
purpose of clause (i) of this paragraph (a), "Cause" shall mean (A) conviction
in a court of law of any crime or offense involving money or other property of
the Company or any of its affiliates, or (B) the determination by the Company,
acting in good faith, that the Consultant has knowingly and willfully committed
an offense described in clause (A) above or committed an act of fraud with
respect to money or other property of the Company or an affiliate of the
Company. Termination pursuant to this paragraph (b) shall be effective five (5)
days after the date of such notice or as otherwise provided therein.
(b) The Company's right of termination pursuant to
paragraph (a) shall be in addition to the rights and remedies available to the
Company at law or in equity and such rights and remedies shall survive
termination of this Agreement.
(c) In the event of termination of this Agreement
pursuant to paragraph (a), Consultant shall have no right to receive any
compensation for any period subsequent to the date of such termination, except
for any pro-rated or other amounts earned prior to such termination.
(d) In the event of termination of this Agreement for any
reason other than as set forth in paragraph (a), Consultant shall be entitled to
receive the greater of (i) three (3) times the annual Base Consulting Fee or
(ii) the Base Consulting Fee for the remainder of the Consulting Term, plus the
pro-rated amount of the Incentive Payment for the fiscal year in which such
termination occurs.
6. CONFIDENTIALITY AGREEMENT. Consultant agrees that be
shall not disclose, during the Consulting Term or any extension thereof and for
a period of two (2) years after the expiration of the Consulting Term or any
3
<PAGE>
extension thereof, any Confidential Information (as defined below) to which he
becomes privy to any person, firm, corporation, association, partnership or
other entity for any reason or purpose whatsoever, other than employees of the
Company who have a need to know such information in connection with the
performance of their duties on behalf of the Company, or as required in the
performance of his duties hereunder, or use any Confidential Information for any
purpose not expressly authorized in writing by the Company. For purposes of this
Agreement, "Confidential Information" means any information, whether disclosed
electronically, in writing or orally, heretofore or hereafter designated or
otherwise treated as "confidential" by the Company, including, but not limited
to, all financial statements, corporate records and other information and data
relating to the operations, assets, liabilities, financial condition, future
prospects, employees, customers, financing and litigation of the Company or any
of its affiliates, all technical and business information, know-how or trade
secrets, or any other information relating to the Company or its affiliates,
which is of a confidential or proprietary nature.
7. INDEMNIFICATION. The Company shall indemnify, defend and
hold Consultant harmless from and against any and all losses, claims, damages,
liabilities, expenses (including, without limitation, reasonable attorneys'
fees) or costs (collectively, the "Claims") incurred by Consultant arising from
the services provided by Consultant to the Company under this Agreement;
PROVIDED, HOWEVER, that such indemnification shall not extend to Claims which
arise from, relate to or are caused by the Consultant's gross negligence or
willful misconduct.
8. MISCELLANEOUS.
--------------
(a) NOTICES. Any notice to any party under this
Agreement shall be in writing and shall be delivered by facsimile transmission,
overnight delivery or certified mail, return receipt requested, to the parties
at the following addresses:
If to Consultant:
James D. Walker
c/o Capital Associates, Inc.
7175 West Jefferson Avenue, Suite 4000
Lakewood, Colorado 80232
Telecopy number: (303)980-7065
If to the Company:
Capital Associates, Inc.
4
<PAGE>
Capital Associates International, Inc.
7175 West Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
Attention: Chief Executive Officer
Telecopy number: (303) 980-7065
(b) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective successors in interest and assigns, but in no event shall any party
be relieved of its obligations hereunder without the express written consent of
the other party.
(c) ENTIRE AGREEMENT. This Agreement, together with the
instruments and agreements contemplated hereby, represents the entire agreement
of the parties with respect to the subject hereof, and all agreements entered
into prior hereto with respect to the subject matter hereof are revoked and
superseded by this Agreement, and no representations, warranties, inducements or
oral agreements have been made by any of the parties except as expressly set
forth herein, or in other contemporaneous written agreements. This Agreement may
not be changed, modified or rescinded except in writing, signed by the parties
hereto.
(d) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of Colorado, excluding its
laws regarding choice of law.
(e) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
may be executed simultaneously in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument. Each party hereto agrees to be bound by its own facsimile
signature and to accept the facsimile signature of the parties to this
Agreement.
(f) SEVERABILITY. If any provisions of this Agreement
shall be held to be excessively broad as to duration, geographical scope,
activity or subject, such provisions shall be construed by limiting or reducing
the same so as to render such provision enforceable to the extent compatible
with applicable law.
(g) WAIVER. Failure on the part of the Company to
exercise any right or option arising out of a breach of this Agreement shall not
be deemed a waiver of any right or option with respect to any subsequent or
different breach, or the continuance of any existing breach.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement effective as of the date first above written.
CONSULTANT:
/s/J. D. Walker
-------------------------------------
Name: James D. Walker
COMPANY:
Capital Associates, Inc.
a Delaware corporation
By: /s/Dennis Lacey
------------------------------
Name: Dennis Lacey
------------------------------
Title: President and CEO
Capital Associates International, Inc.
a Colorado corporation
By: /s/Dennis Lacey
------------------------------
Name: Dennis Lacey
------------------------------
Title: President and CEO
6
EXHIBIT 10.57
RESIDUAL SHARING NOTE PAYABLE
$ 111,500.00 Dated as of June 1, 1997
FOR VALUE RECEIVED, the undersigned, CAPITAL ASSOCIATES INTERNATIONAL INC.
("CAII") hereby agrees to pay to WILLIAM H. BUCKLAND at 8180 Greensboro Drive -
Suite 1000, McLean, Virginia 22102 ("Buckland"), without set-off or defense,
solely out of 2.70735 percent of the residual proceeds derived from the
Equipment (defined below) subject to the Existing Underlying Leases (defined
below) described in the SCHEDULE A attached hereto and made a part hereof
("Residual Proceeds") and without additional recourse to CAII, the sum of One
Hundred Eleven Thousand Five Hundred and No/100 Dollars ($ 111,500.00) and any
excess that may be realized, which shall be deemed contingent interest. Subject
to the provisions with respect to prepayment set forth in SECTION 3 below, the
amount due hereunder shall become due to Buckland on the expiration dates of the
Existing Underlying Leases and payable to Buckland on such earlier or later
date(s) when CAII actually receives the Residual Proceeds.
1. BACKGROUND
----------
CAII is a party to certain purchase agreements ("Purchase Agreements") and
assignments of leases ("Assignments of Leases"), pursuant to which CAII has sold
and assigned the equipment ("Equipment") and the leases with respect thereto
("Existing Underlying Leases") described on the SCHEDULE A attached hereto. The
parties ("Parties") listed in SCHEDULE A and CAII have also entered into
remarketing agreements pursuant to which CAII is responsible for remarketing the
Equipment ("Remarketing Agreements") and will be compensated for such services
by sharing a portion of the Residual Proceeds.
This Agreement is a non-negotiable, non-recourse promissory note and shall be so
construed. Payment hereunder is to be made only from and to the extent of the
Residual Proceeds actually received by CAII, which are payable by the Parties to
CAII pursuant to the Purchase Agreement and/or Remarketing Agreements, and not
otherwise.
2. SECURITY INTEREST
-----------------
CAII hereby grants, conveys, assigns and transfers to Buckland a Uniform
Commercial Code ("UCC") security interest in 2.70735 percent of CAII's interest
in the Residual Proceeds. The grant of the security interest contained herein is
subject and subordinate to the rights of the holders of Permitted Liens (defined
below), as well as the rights of the lessees under the Existing Underlying
Leases and any extensions thereof. Payment by CAII shall be due and payable
within five (5) business days after collection by CAII of the net Residual
Proceeds (if any) received by CAII from any sale, lease or other disposition of
the Equipment after the obligations under the Remarketing Agreements and
Permitted Liens are satisfied.
1
<PAGE>
As used herein, the term "Permitted Liens" means the UCC security interests, if
any, granted to a lender of the non-recourse financing obtained by CAII on any
of the Existing Underlying Leases.
3. PREPAYMENT
----------
The amounts payable under this Agreement may be prepaid at any time and from
time to time and shall be prepaid if the Residual Proceeds are received earlier
than expected (e.g., upon a casualty or an early termination of the Underlying
Leases).
4. DEFAULT
-------
4.1 EVENT OF DEFAULT. The term "Event of Default" as used herein shall mean
the occurrence and continuation of any one or more of the following
events:
(a) The failure of CAII to promptly remit any of the Subject Proceeds
received by it, which failure continues for ten (10) days after receipt of
written notice of such failure;
(b) If CAII shall:
(i) make an assignment for the benefit of its creditors;
(ii) consent to the appointment of a receiver for itself or for
the whole or substantially all of its property;
(iii) file a petition or answer seeking or consenting to
reorganization or arrangement or other aid or relief under
any bankruptcy or insolvency laws or any other law for the
relief of debtors; or
(iv) Default under any other provision of this Agreement.
4.2 REMEDIES. Upon an Event of Default, CAII shall execute such additional
documents as Buckland may reasonably request to confirm Buckland's rights in the
in the Residual Proceeds (which may include but is not limited to a written
direction to the lessees under the Existing Underlying Leases or those in
possession of the Equipment specifying Buckland's interest in the Residual
Proceeds and requesting that it be apportioned and paid to CAII and Buckland
pursuant to their respective interests therein. Buckland's rights and remedies,
whether pursuant hereto or pursuant to the UCC or any other statute or rule of
law conferring rights similar to those conferred by the UCC, shall be cumulative
and not in the alternative.
5. NOTICES
-------
Any notice, request or other communication to either party by the other
hereunder shall be given in writing and shall be deemed given upon personal
delivery or three (3) days after the date the same is mailed by certified mail,
2
<PAGE>
return receipt requested, postage prepaid, and addressed to the party for which
it is intended at the address set forth in this Agreement. The place to which
notices or copies of notices are to be given to either party may be changed from
time to time by such party by written notice to the other party.
6. MISCELLANEOUS
-------------
6.1 RESTRICTIONS ON TRANSFER. CAII and Buckland shall not sell, transfer,
encumber, grant, or permit as a result of CAII's or Buckland's acts or
omissions, any lien or security interest with respect to the Residual Proceeds
(other than the Permitted Liens and the lien created pursuant hereto) or
otherwise dispose of all or any portion of the Residual Proceeds without the
prior written consent of the other party hereto, which consent shall not be
unreasonably withheld or delayed. Any such transfer by CAII will be subject to
Buckland's rights pursuant to this Agreement.
6.2 FINANCING STATEMENTS. CAII hereby authorizes Buckland from time to time to
file financing or other statements in such form as may be necessary to perfect a
security interest in the Residual Proceeds in any and all relevant jurisdictions
and, in this regard, to execute and record such UCC-1 Financing Statements for
himself, as secured party, and for CAII, as debtor, as its agent.
6.3 COURSE OF DEALING. No delay in exercising any rights or remedies hereunder
or under any communication, report, notice or other document or instrument
referred to herein, shall operate as a waiver of any of the rights and remedies
of CAII and Buckland.
6.4 AMENDMENTS. This Agreement may be amended or varied only by a document, in
writing, of even or subsequent date hereof, executed by CAII and Buckland and
specifically identifying and incorporating this Agreement therein.
6.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF.
6.6 SUCCESSORS AND ASSIGNS. Subject to SECTION 6.1, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
6.7 SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any of the other
provisions herein.
6.8 HEADINGS. The descriptive headings in this Agreement are for convenience
of reference only, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
3
<PAGE>
IN WITNESS WHEREOF, CAII and Buckland have executed this Agreement on the day
and year first above written.
"CAII"
CAPITAL ASSOCIATES INTERNATIONAL, INC. Address:
7175 West Jefferson Avenue
Suite 4000
By: /s/Dennis Lacey Lakewood, Colorado 80235
--------------------------------
Title: President and CEO
--------------------------------
"Buckland"
/s/W. H. Buckland
- --------------------------------------
WILLIAM H. BUCKLAND
EXHIBIT 10.58
RESIDUAL SHARING NOTE PAYABLE
$ 111,500.00 Dated as of June 1, 1997
FOR VALUE RECEIVED, the undersigned, CAPITAL ASSOCIATES INTERNATIONAL INC.
("CAII") hereby agrees to pay to JAMES D. WALKER at 7175 West Jefferson Avenue,
Suite 4000, Lakewood, Colorado 80235 ("Walker"), without set-off or defense,
solely out of 2.70735 percent of the residual proceeds derived from the
Equipment (defined below) subject to the Existing Underlying Leases (defined
below) described in the SCHEDULE A attached hereto and made a part hereof
("Residual Proceeds") and without additional recourse to CAII, the sum of One
Hundred Eleven Thousand Five Hundred and No/100 Dollars ($ 111,500.00) and any
excess that may be realized, which shall be deemed contingent interest. Subject
to the provisions with respect to prepayment set forth in SECTION 3 below, the
amount due hereunder shall become due to Walker on the expiration dates of the
Existing Underlying Leases and payable to Walker on such earlier or later
date(s) when CAII actually receives the Residual Proceeds.
1. BACKGROUND
----------
CAII is a party to certain purchase agreements ("Purchase Agreements") and
assignments of leases ("Assignments of Leases"), pursuant to which CAII has sold
and assigned the equipment ("Equipment") and the leases with respect thereto
("Existing Underlying Leases") described on the SCHEDULE A attached hereto. The
parties ("Parties") listed in SCHEDULE A and CAII have also entered into
remarketing agreements pursuant to which CAII is responsible for remarketing the
Equipment ("Remarketing Agreements") and will be compensated for such services
by sharing a portion of the Residual Proceeds.
This Agreement is a non-negotiable, non-recourse promissory note and shall be so
construed. Payment hereunder is to be made only from and to the extent of the
Residual Proceeds actually received by CAII, which are payable by the Parties to
CAII pursuant to the Purchase Agreement and/or Remarketing Agreements, and not
otherwise.
2. SECURITY INTEREST
-----------------
CAII hereby grants, conveys, assigns and transfers to Walker a Uniform
Commercial Code ("UCC") security interest in 2.70735 percent of CAII's interest
in the Residual Proceeds. The grant of the security interest contained herein is
subject and subordinate to the rights of the holders of Permitted Liens (defined
below), as well as the rights of the lessees under the Existing Underlying
Leases and any extensions thereof. Payment by CAII shall be due and payable
within five (5) business days after collection by CAII of the net Residual
Proceeds (if any) received by CAII from any sale, lease or other disposition of
the Equipment after the obligations under the Remarketing Agreements and
Permitted Liens are satisfied.
1
<PAGE>
As used herein, the term "Permitted Liens" means the UCC security interests, if
any, granted to a lender of the non-recourse financing obtained by CAII on any
of the Existing Underlying Leases.
3. PREPAYMENT
----------
The amounts payable under this Agreement may be prepaid at any time and from
time to time and shall be prepaid if the Residual Proceeds are received earlier
than expected (e.g., upon a casualty or an early termination of the Underlying
Leases).
4. DEFAULT
-------
4.1 EVENT OF DEFAULT. The term "Event of Default" as used herein shall mean
the occurrence and continuation of any one or more of the following
events:
(a) The failure of CAII to promptly remit any of the Subject Proceeds
received by it, which failure continues for ten (10) days after receipt of
written notice of such failure;
(b) If CAII shall:
(i) make an assignment for the benefit of its creditors;
(ii) consent to the appointment of a receiver for itself or for
the whole or substantially all of its property;
(iii) file a petition or answer seeking or consenting to
reorganization or arrangement or other aid or relief under
any bankruptcy or insolvency laws or any other law for the
relief of debtors; or
(iv) Default under any other provision of this Agreement.
4.2 REMEDIES. Upon an Event of Default, CAII shall execute such additional
documents as Walker may reasonably request to confirm Walker's rights in the in
the Residual Proceeds (which may include but is not limited to a written
direction to the lessees under the Existing Underlying Leases or those in
possession of the Equipment specifying Walker's interest in the Residual
Proceeds and requesting that it be apportioned and paid to CAII and Walker
pursuant to their respective interests therein. Walker's rights and remedies,
whether pursuant hereto or pursuant to the UCC or any other statute or rule of
law conferring rights similar to those conferred by the UCC, shall be cumulative
and not in the alternative.
5. NOTICES
-------
Any notice, request or other communication to either party by the other
hereunder shall be given in writing and shall be deemed given upon personal
delivery or three (3) days after the date the same is mailed by certified mail,
return receipt requested, postage prepaid, and addressed to the party for which
2
<PAGE>
it is intended at the address set forth in this Agreement. The place to which
notices or copies of notices are to be given to either party may be changed from
time to time by such party by written notice to the other party.
6. MISCELLANEOUS
-------------
6.1 RESTRICTIONS ON TRANSFER. CAII and Walker shall not sell, transfer,
encumber, grant, or permit as a result of CAII's or Walker's acts or omissions,
any lien or security interest with respect to the Residual Proceeds (other than
the Permitted Liens and the lien created pursuant hereto) or otherwise dispose
of all or any portion of the Residual Proceeds without the prior written consent
of the other party hereto, which consent shall not be unreasonably withheld or
delayed. Any such transfer by CAII will be subject to Walker's rights pursuant
to this Agreement.
6.2 FINANCING STATEMENTS. CAII hereby authorizes Walker from time to time to
file financing or other statements in such form as may be necessary to perfect a
security interest in the Residual Proceeds in any and all relevant jurisdictions
and, in this regard, to execute and record such UCC-1 Financing Statements for
himself, as secured party, and for CAII, as debtor, as its agent.
6.3 COURSE OF DEALING. No delay in exercising any rights or remedies hereunder
or under any communication, report, notice or other document or instrument
referred to herein, shall operate as a waiver of any of the rights and remedies
of CAII and Walker.
6.4 AMENDMENTS. This Agreement may be amended or varied only by a document, in
writing, of even or subsequent date hereof, executed by CAII and Walker and
specifically identifying and incorporating this Agreement therein.
6.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF.
6.6 SUCCESSORS AND ASSIGNS. Subject to SECTION 6.1, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
6.7 SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any of the other
provisions herein.
6.8 HEADINGS. The descriptive headings in this Agreement are for convenience
of reference only, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
3
<PAGE>
IN WITNESS WHEREOF, CAII and Walker have executed this Agreement on the day and
year first above written.
"CAII"
CAPITAL ASSOCIATES INTERNATIONAL, INC. Address:
7175 West Jefferson Avenue
Suite 4000
By: /s/Dennis Lacey Lakewood, Colorado 80235
--------------------------------
Title: President and CEO
--------------------------------
"Walker"
/s/J. D. Walker
- --------------------------------------
JAMES D. WALKER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1997
<CASH> 5,331
<SECURITIES> 0
<RECEIVABLES> 982
<ALLOWANCES> 30
<INVENTORY> 891
<CURRENT-ASSETS> 0
<PP&E> 64,300
<DEPRECIATION> 0
<TOTAL-ASSETS> 130,371
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 23,610
<TOTAL-LIABILITY-AND-EQUITY> 130,371
<SALES> 35,857
<TOTAL-REVENUES> 42,038
<CGS> 34,537
<TOTAL-COSTS> 41,850
<OTHER-EXPENSES> 2,490
<LOSS-PROVISION> 170
<INTEREST-EXPENSE> 1,849
<INCOME-PRETAX> 188
<INCOME-TAX> 47
<INCOME-CONTINUING> 141
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
