U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 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 0-16819
National Capital Management Corporation
(Name of small business issuer in its charter)
Delaware 94-3054267
(State or other jurisdiction of (I.R.S. Employer
Identification
incorporation or organization) Number)
50 California Street, San Francisco, CA 94111
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (415) 989-2661
Securities registered pursuant to Section 12(b) of the Exchange Act:
NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.01 Par
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 ___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year $13,078,705.
The aggregate market value of voting stock held by nonaffiliates of the
Registrant is approximately $2,495,738 as of April 8, 1996.
1,650,524
(Number of shares of common stock outstanding as of April 8, 1996)
Total number of pages in this document is: __
The exhibit index is on page 42
<PAGE>
PART I
Item 1 - Description of Business
Introduction
National Capital Management Corporation ("NCMC") is a holding
company that currently operates through its primary subsidiary,
National Capital Benefits Corp. (collectively with NCMC, the
"Company"), which purchases life insurance policies for cash, on
a discounted basis, from individuals having life threatening
illnesses, a transaction which is otherwise known as viatical
settlements.
The Company's focus for the future will be the continued
enhancement of its viatical settlement operations.
In the prior three years, the Company had been comprised of two
additional distinctly different operating businesses, the Real
Estate Segment and the Industrial Products Segment. However,
these segments were discontinued during 1995 through the sale of
principally all of their assets and/or stock.
Viatical Settlements
On March 17, 1994, the Company formed National Capital Benefits
Corp. ("NCBC") to engage in the business of purchasing life
insurance policies which insure the lives of individuals with
life threatening illnesses. Eighty five and one half percent of
NCBC's common stock, and all of its preferred stock, is owned by
the Company. NCBC generally seeks to purchase policies which
insure individuals having a projected life expectancy of 36
months or less. In March 1994, the Company funded NCBC with
initial cash investments of $1,490,000, consisting of $1,450,000
of preferred stock and $40,000 of common stock, and purchased an
additional $3,210,000 of preferred stock for cash through
December 31, 1995 and an additional $552,000 through April 10,
1996.
In addition, NCBC has a revolving line of credit ("The Facility")
up to $15 million, based on a formula of eligible policies
purchased, from an institutional lender to be used to provide
working capital and funds for the purchase of such policies. The
facility is secured by all of the assets of NCBC, including
purchased insurance policies, bears interest at 1/2% over the
lender's prime rate or 2-7/8% over the 90 day London Inter-Bank
Offer Rate ("Libor") at the option of NCBC, is subject to a
commitment fee of 1/4% on the average daily unused amount of the
line and expires in December 1998. NCBC had drawn approximately
$9,772,000 on this line of credit as of April 10, 1996 and had an
additional $1,834,000 available.
In addition, as of December 29, 1995, NCBC issued a $2,000,000
subordinated note (the "Note") bearing an interest rate of 14%
with interest payable monthly in arrears. The note is due
December 31, 1998, and is secured by NCBC's purchased insurance
policies, subject to the security interest granted to the
Facility lender. The purchaser of the Note was granted a warrant
to acquire 12% of the common stock of NCBC (68 shares) at a price
of $1.47 per share. The holder of the warrant can exercise a put
of the stock to NCBC under certain conditions. The warrant
expires December 31, 2000.
NCBC insures 90% of the net death benefit of the acquired
policies through a wholly-owned Bermuda insurance company which,
in turn, has reinsured the risk with a consortium of large
international insurance companies. At December 31, 1995, there
was $120,000 of cash restricted to the Bermuda insurance company
as required by statutory regulations. As of December 31, 1995,
the face value of NCBC's purchased insurance policies remaining
in its portfolio was approximately $14.4 million. During 1995,
approximately $1.8 million of policies matured.
A trust whose sole trustee is an executive officer of NCBC ("the
Minority Owner") owns 14-1/2% of the common stock of NCBC. The
Company has entered into an agreement with the Minority Owner
which prohibits the transfer of the stock held by it through July
1, 1997 and thereafter permits the Company a right of first
refusal on all other transfers through the tenth anniversary of
the agreement. In addition, during the period May 1, 1997
through June 30, 1997 either the Company or the Minority Owner
can notify the other of a conversion election in which event the
Company may at its option, either (a) issue shares of its common
stock plus, in certain instances, other consideration in the
amount of the appraised value (based on the fair market value of
NCBC after repayment of all preferred stock) for the NCBC shares,
(b) sell NCBC on or before the anniversary date of receipt of the
appraisal or (c) on or before said anniversary date distribute
the shares of NCBC held by NCMC to its shareholders. If the
Company issues to the Minority Owner shares of its common stock,
the Company has agreed to use its best efforts to promptly effect
the registration thereof if requested by the Minority Owner.
On July 29, 1994, NCBC entered into an agreement and acquired
certain assets of CAPX Corporation ("CAPX"), including the rights
to certain service marks, trade names and proprietary computer
software. The purchase price of the assets was $125,000 and the
issuance of 33,333 shares of the $.01 par value of NCMC's common
stock, which was valued at $5.25 per share, adjusted to reflect
the reverse stock split. In addition, the agreement which was
amended in January 1996, provides that NCBC will pay CAPX a
commission of up to .875% of all death benefits recognized from
insurance policies in its active portfolio as of December 31,
1995 and on policies purchased during the period January 1, 1996
to July 28, 1998. As part of the agreement, NCMC can also be
required by CAPX to repurchase all of its shares at $5.25 per
share on or before July 29, 1996.
Nature of Business
The viatical settlement business makes it possible for people
facing life threatening illnesses to sell their life insurance
policies for cash at a discount from the policies' stated death
benefit. The sales proceeds give them choices that they might
not otherwise have, such as selecting quality health care,
retaining ownership of a residence, retiring indebtedness or
sharing funds with family, friends or favorite charities.
A prospective seller's medical records are reviewed by physicians
retained by NCBC as consultants who specialize in treatment of
the individual's particular illness or disorder. A prognosis is
then made by each physician of the life expectancy of that
person, which is an essential element in determining NCBC's
purchasing of the policy and the terms of such purchase. Other
factors to be considered when purchasing policies are the
financial strength of the insurance company writing the policy,
the amount of coverage provided by the policy, assignment
restrictions contained in the policy, the amount of any loans
against the policies, prior assignments, the beneficiary, the
cost of policy premiums, issue date and type of policy.
NCBC markets its services through advertising in newspapers and
periodicals and in brochures mailed to various organizations and
support groups. In addition, NCBC relies on word-of-mouth, media
reports, referrals from brokers, healthcare professionals, life
insurance agents and life insurers as well as appearances before
associations of financial planners, support groups, insurance
groups and actuaries. As a result of privacy and other ethical
and legal considerations, NCBC does not solicit potential
applicants in person, by telephone or by direct mail.
NCBC competes with many other companies and individuals offering
to purchase life insurance policies from qualifying policy
holders. Insurance companies offering to advance a portion of
death benefits on their own life insurance policies to policy
owners who are terminally ill or who have suffered a catastrophic
illness, such as a stroke, heart attack or coronary artery
surgery, also compete with NCBC. NCBC competes with companies
offering similar services on the basis of both service and price.
It is expected that additional competitors may enter the viatical
settlement business and provide similar services in the future.
It is also anticipated that more insurance companies will make
available partial prepayments of death benefits to policyholders
facing life-threatening illnesses.
NCBC only purchases policies from residents of states where it
believes there is no statutory and/or judicial authority
prohibiting the enforcement of assignments of policies to
assignees without an insurable interest in the insured. NCBC
believes that there is no such prohibiting authority existing
today. However, all states have statutes that regulate insurance
businesses and, although NCBC believes there is generally no
existing judicial authority on point, there can be no assurance
that some or all of these statutes will not be interpreted in the
future to include viatical settlement and to preclude NCBC, which
is not an insurance company, from operating in the states
involved. Further, several states, including New York, New
Mexico, California, Kansas, Texas, Vermont, Washington, Oregon
and North Carolina, have adopted statutes specifically applicable
to the viatical settlement business and regulations are pending
in a number of other states including Florida, Illinois, Indiana
and Pennsylvania with respect to this business. Consequently,
there can be no assurance that additional states will not adopt
similar or dissimilar statutes regulating the industry in a
manner that could have an adverse impact on its profitability.
NCBC supports appropriate state regulation of viatical
settlements because it believes that consumer protection
provisions will increase the opportunity to expand its business.
NCBC is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting period.
The recognition of earned discount and the ultimate profitability
associated with purchased insurance policies is directly related
to NCBC's assumptions regarding the remaining life expectancy of
terminally ill individuals. Such estimates are made when the
insurance policy is purchased based upon facts and circumstances
then known, and are adjusted periodically, but not more than
annually, based upon actual experience. While NCBC believes that
its estimate of life expectancy, and the related recognition of
earned discount will closely approximate actual experience, given
the inherent scientific uncertainty of such estimates, including
the potential impact of medical treatments that might extend life
expectancies, there can be no assurance that these policies will
mature in accordance with management's estimates.
Under the United States Internal Revenue Code of 1986, as
amended, the net proceeds to a seller from the sale of his or her
life insurance policy while he or she is alive is deemed to
constitute taxable income. A bill has been passed by the current
United States Congress as part of the 1996 Budget Reconciliation
Act ("Act") to exempt from federal tax the proceeds of viatical
settlements as well as the prepayment by insurance companies of
death benefits on life insurance policies to individuals
certified by a physician as having an illness or physical
condition that can reasonably be expected to result in death in
twenty-four months or less. However, the Act was vetoed by the
President and efforts are presently underway to include the bill
in other current federal legislation.
Discontinued Operation - Real Estate Segment
On November 27, 1995, the Company elected to discontinue
operations of the Real Estate Segment to concentrate its efforts
on its viatical settlements business. The following is a
description of the Company's disposal activities:
The Mart Shopping Center: On July 28, 1995, the Company sold The
Mart Shopping Center ("the Mart") located on nine acres in the
high technology business area of Hillsboro, Oregon, a suburb of
Portland, to an individual affiliated with NCM Management Ltd., a
company which provides management services to the Company. The
sales proceeds included $960,000 in cash, an eighteen month note
secured by a second deed of trust on the property in the amount
of $910,000 and the buyer's assumption of the $1,232,501 first
deed of trust secured by the property for a total purchase price
of $3,102,501. The Company renegotiated payment of the note with
the purchaser whereby it received a total of $800,000 in exchange
for an early payoff on September 30, 1995, reducing the sale
proceeds by $110,000. A gain of $1,029,894 has been recognized
on this transaction in 1995.
Appletree Townhouses: The Company's wholly-owned subsidiary,
Georgia Properties, Inc. ("GPI"), received a loan of $650,000 on
December 21, 1995 and an additional $500,000 on February 1, 1996
from the same individual that purchased The Mart Shopping Center,
in exchange for an option to purchase Appletree Townhouses for
$3,500,000, which was exercised on April 3, 1996.
The sales price of $3,500,000 consisted of the aforementioned
advances by the buyer totaling $1,150,000, assumption of the
existing first deed loan by the buyer in the amount of $1,048,795
and a purchase money note for the balance equal to $1,301,205.
The purchase money note bears interest from the date of sale at
8% per annum until it is due on December 31, 1996. In addition,
the buyer is required to prepay $250,000 of this note on May 1,
1996, of which $125,000 was paid early on April 10, 1996. A gain
of approximately $1,030,000 will be reported during 1996.
Florida land: The Company owns undeveloped land in Ft.
Lauderdale, Florida which is zoned for commercial/industrial use.
This parcel is currently being marketed and is expected to be
sold during 1996.
Colony Ridge Apartments: Colony Ridge Apartments is an apartment
complex in Decatur, Georgia which was constructed in 1968 and
consists of 23 two-story buildings containing a total of 212
apartment units. This property is currently being marketed and
is expected to be sold during 1996.
Redbird Trails Apartments and North Oak Apartments: On June 13,
1994 and December 8, 1994, in accordance with previous agreements
dated December 30, 1993, the Company sold limited partnership
interests in Redbird Trails Associates, L.P. ("Redbird") and
Signature Midwest, L.P. ("Signature"), respectively, to two
unrelated entities. The Company retained a .9% interest in each
partnership through two wholly-owned subsidiaries serving as the
operating general partners. Such operating general partners are
obligated to provide loans of up to $150,000 and $75,000 to
Redbird and Signature, respectively, to fund any operating
deficits, as defined, for a three year period commencing December
8, 1994.
The Company retained a contingent interest in the cash flows of
these partnerships. It will receive any cash available from
property operations, to the extent it exceeds approximately
$61,000 annually, and any refinancing proceeds up to a total of
approximately $4.5 million, plus interest at 9.25% per annum on
the outstanding balance of this amount. Any proceeds of sale
will be allocated, first, 99.1% to the new partners until they
have received 135% of their investment, less any prior
distributions. Any remaining proceeds from a sale will be
allocated to the Company up to $6 million, less any distributions
from operations or refinancings as described above. These
arrangements have not been reflected in the Company's financial
statements since their ultimate realization cannot reasonably be
determined. In addition, at such time as the tax benefits have
been utilized, the Company has the right to purchase the
interests of the newly admitted partners for 135% of their
contributed capital (minus prior cash payments). Should the
Company choose not to exercise such right to purchase the
partners' interests, the newly admitted administrative general
partner has the right to require the Company to sell all of the
assets and liquidate the partnerships. The Company has not
funded any operating deficits and has not received any excess
cash flows during 1995 and 1994.
Discontinued Operation - Industrial Products Segment
The Industrial Products Segment consisted of the Company's wholly-
owned subsidiary, Jensen Corporation ("Jensen"), which
manufactures and distributes machinery used primarily by
commercial laundries, large institutions and hotels as well as
commercial compactor products for waste disposal. On November
10, 1995, the Company sold 100% of the common stock of Jensen,
located in Fort Lauderdale, Florida to AMKO USA, Inc. ("AMKO"),
an affiliate of AMKO International B.V. which is based in The
Netherlands, for $1,726,000. The sale proceeds included cash of
$415,000 and a promissory note receivable in the amount of
$1,311,000 which is secured by Jensen's stock, accounts
receivable and inventory. The $1,311,000 note is guaranteed in
its entirety by AMKO International B.V., and the sole shareholder
of AMKO International B.V. guaranteed the first $585,000 of
principal payments.
AMKO also agreed to cause Jensen to pay to the Company a $765,000
obligation in the form of a note, which was loaned to Jensen,
$500,000 of which was prior to the sale and $265,000 which was
simultaneous with the sale, and an intercompany balance payable
by Jensen to the Company of $337,650, which are secured by the
assets of Jensen. The first $765,000 of principal payments under
these notes are guaranteed by AMKO International B.V.
The $1,311,000 note bears interest at 2% over the prime rate per
annum and is payable in varying installments with the balance due
on June 1, 1997. The $765,000 note bears interest at 10% per
annum and is payable in varying installments with the balance due
on February 1, 1998. The $337,650 note bears interest at 2% over
the prime rate per annum and is payable in varying installments
with the balance due on May 1, 1997.
The Company believes that the assets securing the three notes,
and the operations of Jensen as they now exist, may not be
sufficient to provide for payment of the notes. The Company has
limited financial information concerning AMKO and the guarantors
of the notes. Consequently, no assurance can be given that the
principal or interest due on the notes will be realized in full.
As of April 10, 1996, AMKO had not paid the March and April
installments of interest and principal, and the Company is
currently in discussion with AMKO to assure that AMKO will pay
all amounts in arrears and make future payments on a timely
basis. AMKO, in conjunction with these discussions, has raised
certain claims concerning the financial operations of the Company
prior to sale. Management believes these claims have no merit.
The Company recorded a reserve of $1,000,000 for these notes as
of December 31, 1995. Based upon the guarantees and estimated
liquidation value of Jensen's assets which were pledged as
collateral for these notes, the Company believes that this
reserve is adequate.
<PAGE>
Item 2 - Description of Property
The Company maintains offices in New York and San Francisco for
use by its executive officers at the premises of Resource
Holdings, Ltd. ("Resource") and NCM Management Ltd. The Company
is not a party to the leases, but there is an understanding that
NCMC will pay the rent for the offices in New York until 1997.
In addition, in accordance with its agreement with Resource, the
Company has deposited with Resource's landlord the amount of
$37,746 which will be returned, plus interest, to the Company on
termination of the lease (see Item 13 - Certain Relationships and
Related Transactions).
NCBC maintains its headquarters in New York. Such premises
occupy approximately 1,800 square feet and are leased until June
30, 1996. NCBC is currently negotiating for additional space in
a different building and expects to finalize a new lease before
June 1, 1996. See Note 13 of the Notes to Financial Statements
which provides information with respect to the obligation.
The Company considers these properties to be suitable and
adequate for its present needs. The properties are being fully
utilized. See Item 1 "Business" for discussion of real
properties owned in connection with the discontinued operations
of the Real Estate Segment.
Item 3 - Legal Proceedings
The Company is a named defendant in a product liability lawsuit
related to Jensen Corporation. Jensen Corporation maintains
insurance to cover such claims. In the opinion of management,
the resolution of the existing litigation will not have a
material adverse impact on the financial position of the Company.
Item 4 - Submission of Matters to a Vote of Security Holders
None
<PAGE>
PART II
Item 5 - Market for Common Equity and Related Stockholder
Matters
a. Market Information
The Company's common stock trades on the NASDAQ National
Market System under the symbol NCMC.
The high and low bid prices of shares of common stock of the
Company for each quarter during the years ended December 31,
1995 and 1994, are as follows:
<TABLE>
<CAPTION>
For the Quarter Ended High Low
<C> <C> <C>
December 31, 1995 $ 1.5833 $1.1667
September 30, 1995 1.9167 1.5000
June 30, 1995 * 1.0208 0.7500
March 31, 1995 * 0.9375 0.8229
December 31, 1994 * 1.1094 0.8542
September 30, 1994 * 1.0625 0.9167
June 30, 1994 * 1.1667 1.0417
March 31, 1994 * 1.1771 0.9479
</TABLE>
* Does not reflect reverse stock
split.
Reverse Stock Split
Pursuant to the approval of the stockholders on June 28, 1995,
the Company implemented a reverse stock split which was
effective July 11, 1995, whereby each three shares of common
stock was converted into one share of Common Stock. As a
result of the reverse stock split, the Registrant has
6,666,666 shares of authorized common stock, of which
1,650,524 are issued and outstanding. All such shares are of
the par value of $.01.
b. Number of Holders of Common Stock
At April 8, 1996, the approximate number of holders of record
of shares of common stock of the Company was 2,703.
c.Dividends on Common Stock
The Company has not declared any dividends on its common stock
during the three year period ended December 31, 1995.
Item 6 - Selected Financial Data
Not Applicable.
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
During 1995, the Company continued to expand its Viatical
Settlement Subsidiary while it discontinued its Real Estate
Segment and its Industrial Products Segment.
FINANCIAL CONDITION AND LIQUIDITY
The Company's cash was approximately $750,000 of which $120,000
was restricted for use by the Viatical Settlement Segment as
required by statutory regulations. During 1995, cash used to
finance operating activities, the viatical settlement business
and Jensen Corporation operations was offset by the receipt of
$1,760,000 on the sale of The Mart Shopping Center, $650,000 from
a loan relating to the sale of Appletree Townhouses and $500,000
loaned from affiliates. The Company's cash position decreased to
$264,000 as of April 10, 1996, of which $120,000 is restricted
for use in the Viatical Settlement Segment, as a result of
financing operating activities and the viatical settlement
business and a $500,000 repayment of affiliate loans, offset by
the receipt of $625,000 relating to the sale of Appletree
Townhouses. As of April 10, 1996, NCBC would have been able to
borrow, under the terms of its revolving credit facility, an
additional $1,834,000.
Other than in its Viatical Settlement Subsidiary, the Company
does not have any existing general credit facilities to fund its
ongoing working capital requirements. The Company may seek
additional financing through the issuance of securities on a
private or public basis, or through long or short-term
borrowings.
On March 17, 1994, NCBC entered into a revolving credit facility
("Old Facility") with a credit limit of $10,000,000. Interest on
borrowings under the Old Facility was at 2% over a composite of
several large bank prime rates or the rate on 90 day dealer
commercial paper, whichever is higher, (10-3/4% and 11% at
December 31, 1995 and 1994, respectively), and was subject to a
commitment fee of .625% on the average daily unused amount of the
line.
Effective as of December 29, 1995, NCBC entered into a revolving
credit facility ("Facility") with a credit limit of up to
$15,000,000, which expires December 1998. The proceeds of the
loan were utilized to repay the Old Facility with another lender.
The closing of the transaction was January 8, 1996. The Facility
is secured by all the assets of NCBC, including purchased
insurance policies. The Facility bears interest at 1/2% over the
lender's prime rate or 2-7/8% over the 90 day London Inter-Bank
Offer Rate ("Libor") at the option of NCBC (8-3/8% at December
31, 1995), and is subject to a commitment fee of 1/4% on the
average daily unused amount of the line. Because the interest
rate on the Facility adjusts quarterly based on Libor, the fair
value of the borrowings under the Facility approximates the
carrying amount.
Under the terms of the Facility, the lender will loan NCBC a
specified percentage of the cost of the insurance policies
purchased. Under the Facility, the insurance policies purchased
by NCBC must meet certain underwriting criteria as established in
the Facility. Repayment of outstanding principal is required as
insurance proceeds from matured policies are collected. As of
April 10, 1996, NCBC would have been able to borrow, under the
terms of the Facility, an additional $1,834,000.
NCBC is required under the Facility to comply with covenants
relating to the maintenance of its business (including purchasing
a minimum level of insurance policies quarterly), insurance
coverage, tangible net worth, and limitations on dividends and
payments to affiliates. As of April 10, 1996, NCBC was in
compliance with the Facility covenants.
In addition, as of December 29, 1995, NCBC issued a $2,000,000
subordinated note (the "Note") bearing an interest rate of 14%
with interest payable monthly in arrears. The note is due
December 31, 1998, and is secured by NCBC's purchased insurance
policies, subject to the security interest granted to the
Facility lender. The purchaser of the Note was granted a warrant
to acquire 12% of the common stock of NCBC (68 shares) at a price
of $1.47 per share. The holder of the warrant can exercise a put
of the stock to NCBC under certain conditions. The warrant
expires December 31, 2000.
The proceeds from issuing the Note were received on January 8,
1996, and used to reduce the outstanding balance of the Facility.
On July 29, 1994, NCBC entered into an agreement and acquired
certain assets of CAPX Corporation ("CAPX"), including the rights
to certain service marks, trade names and proprietary computer
software. The purchase price of the assets was $125,000 and the
issuance of 33,333 shares of the $.01 par value of NCMC's common
stock, which was valued at $5.25 per share, adjusted to reflect
the reverse stock split. In addition, the agreement which was
amended in January 1996, provides that NCBC will pay CAPX a
commission of up to .875% of all death benefits recognized from
insurance policies in its active portfolio as of December 31,
1995 and on policies purchased during the period January 1, 1996
to July 28, 1998. As part of the agreement, NCMC can also be
required by CAPX to repurchase all of its shares at $5.25 per
share on or before July 29, 1996.
On November 27, 1995, the Company elected to discontinue
operations of the Real Estate Segment to concentrate its efforts
on its viatical settlements business. The following is a
description of Company's disposal activities:
The Mart Shopping Center: On July 28, 1995, the Company sold The
Mart Shopping Center ("the Mart") located on nine acres in the
high technology business area of Hillsboro, Oregon, a suburb of
Portland, to an individual affiliated with NCM Management Ltd., a
company which provides management services to the Company. The
sales proceeds included $960,000 in cash, an eighteen month note
secured by a second deed of trust on the property in the amount
of $910,000 and the buyer's assumption of the $1,232,501 first
deed of trust secured by the property for a total purchase price
of $3,102,501. The Company renegotiated payment of the note with
the purchaser whereby it received a total of $800,000 in exchange
for an early payoff on September 30, 1995, reducing the sale
proceeds by $110,000. A gain of $1,029,894 was recognized on
this transaction in 1995.
Appletree Townhouses: The Company's wholly-owned subsidiary,
Georgia Properties, Inc. ("GPI"), received a loan of $650,000 on
December 21, 1995 and an additional $500,000 on February 1, 1996
from the same individual that purchased The Mart Shopping Center,
in exchange for an option to purchase Appletree Townhouses for
$3,500,000, which was exercised on April 3, 1996.
The sales price of $3,500,000 consisted of the aforementioned
advances by the buyer totaling $1,150,000, assumption of the
existing first deed loan by the buyer in the amount of $1,048,795
and a purchase money note for the balance equal to $1,301,205.
The purchase money note bears interest from the date of sale at
8% per annum until it is due on December 31, 1996. In addition,
the buyer is required to prepay $250,000 of this note on May 1,
1996, of which $125,000 was paid early on April 10, 1996. A gain
of approximately $1,030,000 will be reported during 1996.
Florida land: The Company owns undeveloped land in Ft.
Lauderdale, Florida which is zoned for commercial/industrial use.
This parcel is currently being marketed and is expected to be
sold during 1996.
Colony Ridge Apartments: Colony Ridge Apartments is an apartment
complex in Decatur, Georgia which was constructed in 1968 and
consists of 23 two-story buildings containing a total of 212
apartment units. This property is currently being marketed and
is expected to be sold during 1996.
Redbird Trails Apartments and North Oak Apartments: On June 13,
1994 and December 8, 1994, in accordance with previous agreements
dated December 30, 1993, the Company sold limited partnership
interests in Redbird Trails Associates, L.P. ("Redbird") and
Signature Midwest, L.P. ("Signature"), respectively, to two
unrelated entities. The Company retained a .9% interest in each
partnership through two wholly-owned subsidiaries serving as the
operating general partners. Such operating general partners are
obligated to provide loans of up to $150,000 and $75,000 to
Redbird and Signature, respectively, to fund any operating
deficits, as defined, for a three year period commencing December
8, 1994.
The Company retained a contingent interest in the cash flows of
these partnerships. It will receive any cash available from
property operations, to the extent it exceeds approximately
$61,000 annually, and any refinancing proceeds up to a total of
approximately $4.5 million, plus interest at 9.25% per annum on
the outstanding balance of this amount. Any proceeds of sale
will be allocated, first, 99.1% to the new partners until they
have received 135% of their investment, less any prior
distributions. Any remaining proceeds from a sale will be
allocated to the Company up to $6 million, less any distributions
from operations or refinancings as described above. These
arrangements have not been reflected in the Company's financial
statements since their ultimate realization cannot reasonably be
determined. In addition, at such time as the tax benefits have
been utilized, the Company has the right to purchase the
interests of the newly admitted partners for 135% of their
contributed capital (minus prior cash payments). Should the
Company choose not to exercise such right to purchase the
partners' interests, the newly admitted administrative general
partner has the right to require the Company to sell all of the
assets and liquidate the partnerships. The Company has not
funded any operating deficits and has not received any excess
cash flows during 1995 and 1994.
The Industrial Products Segment was also discontinued during
1995. It consisted of the Company's wholly-owed subsidiary,
Jensen Corporation ("Jensen"), which manufactures and distributes
machinery used primarily by commercial laundries, large
institutions and hotels as well as commercial compactor products
for waste disposal. On November 10, 1995, the Company sold 100%
of the common stock of Jensen, located in Fort Lauderdale,
Florida to AMKO USA, Inc. ("AMKO"), an affiliate of AMKO
International B.V. which is based in The Netherlands, for
$1,726,000. The sale proceeds included cash of $415,000 and a
promissory note receivable in the amount of $1,311,000 which is
secured by Jensen's stock, accounts receivable and inventory.
The $1,311,000 note is guaranteed in its entirety by AMKO
International B.V., and the sole shareholder of AMKO
International B.V. guaranteed the first $585,000 of principal
payments.
AMKO also agreed to cause Jensen to pay to the Company a $765,000
obligation in the form of a note, which was loaned to Jensen,
$500,000 of which was prior to the sale and $265,000 which was
simultaneous with the sale, and an intercompany balance payable
by Jensen to the Company of $337,650, which are secured by the
assets of Jensen. The first $765,000 of principal payments under
these notes are guaranteed by AMKO International B.V.
The $1,311,000 note bears interest at 2% over the prime rate per
annum and is payable in varying installments with the balance due
on June 1, 1997. The $765,000 note bears interest at 10% per
annum and is payable in varying installments with the balance due
on February 1, 1998. The $337,650 note bears interest at 2% over
the prime rate per annum and is payable in varying installments
with the balance due on May 1, 1997.
The Company believes that the assets securing the three notes,
and the operations of Jensen as they now exist, may not be
sufficient to provide for payment of the notes. The Company has
limited financial information concerning AMKO and the guarantors
of the notes. Consequently, no assurance can be given that the
principal or interest due on the notes will be realized. in full.
As of April 10, 1996, AMKO had not paid the March and April
installments of interest and principal, and the Company is
currently in discussion with AMKO to assure that AMKO will pay
all amounts in arrears and make future payments on a timely
basis. AMKO, in conjunction with these discussions, has raised
certain claims concerning the financial operations of the Company
prior to sale. Management believes these claims have no merit.
The Company recorded a reserve of $1,000,000 for these notes as
of December 31, 1995. Based upon the guarantees and estimated
liquidation value of Jensen's assets which were pledged as
collateral for these notes, the Company believes that this
reserve is adequate.
On May 11, 1995, the Company repurchased 3,333 shares of its
common stock, adjusted to reflect the reverse stock split, for
treasury at a cost of $9,675.
RESULTS OF OPERATIONS FOR 1995 COMPARED TO 1994
National Capital Benefits Corp. ("NCBC") commenced operations on
March 17, 1994. During the periods ended December 31, 1995 and
1994, NCBC had purchased at face value (including those in
escrow) approximately $12.9 million and $3.6 million of policies,
respectively. During 1995 and 1994, $1,871,000 and $275,000,
respectively, of policies matured. These policies had related
direct costs of $1,518,000 and $226,680 and a corresponding gross
profit of $353,000 and $48,320 for the same periods. NCBC had
approximately $14.4 million at face value of such policies
remaining in its portfolio at December 31, 1995. Additional
gross revenues of $4,965,196 and $346,101 were accrued and
related direct costs of $3,988,685 and $332,485 were amortized
during 1995 and 1994, respectively, pursuant to NCBC's policy to
accrete such revenue and costs over the period from the purchase
of the policy to the estimated date of collection of the face
value of the policy. During 1995, as a result of its first full
year of operations and significant increase in purchased
policies, NCBC's earned discount increased to $1,329,511 from
$61,936 in 1994. NCBC incurred operating expenses of
approximately $1.4 million and $1.2 million for the periods ended
December 31, 1995 and 1994, respectively, primarily for wages,
advertising, consulting and professional fees, lender fees,
travel and entertainment and office supplies.
Additionally, during 1994, approximately $300,000 of costs were
capitalized prior to commencement of operations for organization
of the business and obtaining its credit line. NCBC expanded its
operations by acquiring from CAPX Corporation on June 29, 1994
substantially all of its operating assets (other than cash,
securities and purchased insurance policies), including the trade
names of its wholly-owned subsidiaries, Living Benefits Inc. and
American Life Resources, Inc.
Item 8 - Financial Statements and Supplementary Data
NATIONAL CAPITAL MANAGEMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants 16
Consolidated Balance Sheets at December 31, 1995 and 1994 17
Consolidated Statements of Operations for the years ended 18
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity for the years 19
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 20
31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements 21-33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
National Capital Management Corporation
We have audited the accompanying consolidated balance sheet of
National Capital Management Corporation (a Delaware corporation)
as of December 31, 1995, and the related consolidated statements
of operations, shareholders' equity and cash flows for the year
then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The
consolidated financial statements of the Company for the years
ended December 31, 1994 and 1993, were audited by other auditors
whose report dated March 24, 1995, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of National Capital Management Corporation at
December 31, 1995, and the consolidated results of its operations
and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/Arthur Andersen LLP
New York, New York
April 10, 1996
<PAGE>
<TABLE>
<CAPTION>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
<S> <C> <C>
ASSETS
Cash $ 634,892 $ 671,022
Restricted cash 120,000 120,000
Accounts receivable 39,730 1,321,207
Note and subscription receivable (Notes 4 and 5) 3,413,650 --
Accrued insurance proceeds 5,467,122 345,289
Pruchased insurance policies (notes 2 and 3) 7,977,044 2,703,859
Property and equipment, less accumulated
depreciation of $65,400 and $50,267 at
December 31, 1995 and 1994, respectively 82,254 80,958
Net assets of discontinued operations:
Real estate segment (Note 7) 3,051,277 4,627,288
Industrial products segment (Note 8) -- 1,758,805
Deferred financing costs 305,000 101,935
Other assets 253,531 646,305
Total assets $ 21,344,500 $ 12,376,668
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 1,770,789 $ 494,337
Revolving credit facility 9,570,830 2,184,242
Advances due affiliates (Note 12) 500,000 --
Subordinated note payable 2,000,000 --
Finder's fee payable 150,000 200,000
Total liabilities 13,991,619 2,878,579
Common stock repurchase obligation 175,000 175,000
Shareholders' equity (Notes 10 and 11):
Preferred stock, $0.01 par value, 3,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $0.01 par value, 6,666,666 shares
authorized, 1,790,390 shares issued 17,904 17,904
Additional paid-in capital 23,123,951 23,123,951
Accumulated deficit (15,739,757) (13,604,224)
Treasury stock, 139,866 and 136,533 shares at
December 31, 1995 and 1994, respectively (224,217) (214,542)
Total shareholders' equity 7,177,881 9,323,089
Total liabilities and shareholders' equity $ 21,344,500 $ 12,376,668
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenue accrued and received $ 6,836,196 $ 621,101 $ --
Cost of insurance policies 5,506,685 559,165 --
Earned discount 1,329,511 61,936 --
Interest expense 568,551 10,227 --
Earned discount after interest expense 760,960 51,709 --
Selling and administrative exps 1,186,606 1,044,268 --
Depreciation and amortization 392,334 99,338 --
Loss from continuing operations
before other income and expense (817,980) (1,091,897) --
Other (income) expense:
Corporate administrative expense 769,435 1,132,181 1,060,564
Other income -- -- --
Other interest income, net (61,333) (54,049) --
Loss from continuing operations
before income taxes (1,526,082) (2,170,029) (1,060,564
Income taxes (Note 9) -- -- --
Net loss from continuing operations (1,526,082) (2,170,029) (1,060,564
Discontinued operations:
Net operating loss:
Real estate segment (Note 7) (538,181) (562,673) (744,212)
Industrial products segment (Note 8) (1,192,209) (351,197) (394,883)
Net gain on sale of:
Real estate properties 1,029,894 2,141,858 828,659
Industrial products segment 91,045 -- --
Net income (loss) from
discontinued operations (609,451) 1,227,988 (310,436)
Net loss $(2,135,533) $ (942,041) $(1,371,000
Net loss from continuing
operations per share $ (0.92) $ (1.31) $ (0.63)
Net income (loss) from discontinued
operations per share (0.37) 0.74 (0.18)
Net loss per share $ (1.29) $ (0.57) $ (0.81)
Average number of shares
outstanding (Note 11) 1,651,711 1,656,271 1,691,224
</TABLE>
<TABLE>
<CAPTION>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Additional Total
Common Paid-In Accumulated Treausry Shareholders'
Stock Capital Deficit Stock Equity
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1992 $ 54,289 $23,673,649 $(11,291,183) $(535,500) $11,901,25
Net loss -- -- (1,371,000) -- (1,371,000)
Balances at
December 31, 1993 54,289 23,673,649 (12,662,183) (535,500) 10,530,255
Acquisition of treasury
stock -- -- -- (265,125) (265,125)
Balance of treasury
stock -- (157,000) -- 157,000 --
Net loss -- -- (942,041) -- (942,041)
Balances at
December 31, 1994 54,289 23,516,649 (13,604,224) (643,625) 9,323,089
Acquisition of treasury
stock -- -- -- (9,675) (9,675)
Reverse stock split (36,385) (392,698) - 429,083 --
Net loss -- -- (2,135,533) -- (2,135,533)
Balances at
December 31, 1995 $ 17,904 $23,123,951 $(15,739,757) $ (224,217) $7,177,881
</TABLE>
<TABLE>
<CAPTION>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,135,533) $ (942,041) $ (1,371,000)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
(Income) loss from discontinued
operations 609,451 (1,227,988) 310,436
Depreciation and amortization 496,818 116,995 -
Earned discounts on insurance
polciies (976,511) (13,616) -
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable 1,281,477 (1,298,725) -
Increase (decrease) in accounts
payable and accrued liabilities 1,276,452 (25,729) -
Increase (decrease) in finders'
fee payable (50,000) 200,000 -
Net cash provided by (used in)
operating activities 502,154 (3,191,104) (1,060,564)
Net cash related to
discontinued operations 1,311,715 2,795,577 1,315,394
Cash flows from investing activities:
Purchased insurance policies (11,289,507) (3,310,532) -
Proceeds from maturities of insurance
polciies 1,871,000 275,000 -
Additions to property and equipment (16,429) (37,734) -
Increase in other assets (291,976) (567,194) -
Net cash used in investing activities (9,726,912) (3,640,460) -
Cash flow from financing activities:
Additions to restricted cash - (120,000) -
Borrowings on revolving credit facility 9,257,297 2,435,000 -
Repayments on revolving credit facility (1,870,709) (250,758) -
Additions to advances due affiliates 500,000 - -
Acquisition of treasury stock (9,675) (265,125) -
Issuance of treasury stock - 175,000 -
Net cash provided by financing
activities 7,876,913 1,974,117 -
(Decrease) increase in cash
and equivalents (36,130) (2,061,870) 254,830
Cash and equivalents at beginning
of period 671,022 2,732,892 2,478,062
Cash and equivalents at end of period $ 634,892 $ 671,022 $2,732,892
</TABLE>
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
National Capital Management Corporation ("NCMC") is a holding
company that currently operates through its primary subsidiary,
National Capital Benefits Corp. ("NCBC") (collectively with NCMC,
the "Company").
NCBC purchases life insurance policies which insure the lives of
individuals with life threatening illnesses, a transaction which
is otherwise known as viatical settlements. NCBC becomes the
holder and beneficiary of these policies and receives the
proceeds from the insurance policy upon the death of the insured
(the "maturity date").
The Company's focus for the future will be the continued
enhancement of its viatical settlement operations.
In the prior three years, the Company had been comprised of two
additional distinctly different operating businesses, the Real
Estate Segment and the Industrial Products Segment. However,
these segments were discontinued during 1995 through the sale of
principally all of their assets and/or stock (see Notes 7 and 8).
Consolidation Principles
The consolidated financial statements include the accounts of the
Company and all of its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
Reclassifications
Certain amounts as presented in prior year financial statements
have been reclassified to conform with the current year
presentation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Restricted Cash - Certain cash held by NCBC is restricted as to
use under the terms of certain escrow agreements and Bermuda
insurance laws. Accordingly, this restricted cash has been
classified as such in the accompanying financial statements.
Purchased Insurance Policies - NCBC purchases life insurance
policies from terminally ill individuals at a discount from the
policy's net face value (amount paid by the insurance carrier
upon the death of the insured). The amount of the discount is
determined by the life expectancy of the insured. During 1995
and 1994, the majority of the policies purchased by NCBC were
from insureds with an estimated remaining life of less than 24
months.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Purchased insurance policies are stated at amortized cost. Costs
capitalized include the purchase price paid to the insured (or
"viator"), and certain direct and indirect costs related to the
acquisition of such policies (see Note 3). The insurance
policies purchased by the Company have been issued by various
credit worthy insurance carriers, none of which represent a
significant concentration of risk. NCBC has an insurance
contract with NCB Insurance Ltd. ("NCB"), a wholly-owned
subsidiary of NCBC, which automatically provides for payment of
90% of the face value of the policies purchased at a specified
period of time after the expected maturity date, in accordance
with the contract. NCB, in turn, has reinsured this risk with
several large, non-affiliated international reinsurance
companies. NCBC, through NCB, maintains a participation in the
residual 10%.
Accrued Insurance Proceeds - Accrued insurance proceeds
represents the accrued portion of insurance proceeds receivable
on purchased policies that have not yet matured and amounts due
on matured policies not yet received (see Note 3).
Revenue and Cost Recognition - Revenue related to expected
insurance proceeds is recognized by accreting the face value of
purchased policies ratably over the period from the policy
purchase date to the estimated maturity date ("accrual period").
Costs related to the purchase of insurance policies are also
recognized through the amortization of such capitalized costs
ratably over the accrual period. The difference between revenue
and costs recognized each period represents NCBC's earned
discount on purchased insurance policies.
The length of the accrual period is determined by NCBC based upon
its best estimate of the maturity date (i.e. date on which it
will collect the face value of the policy). Such life expectancy
estimates are based upon a review of the insured's medical
records by NCBC's panel of medical specialists, as adjusted for
actual collection experience on policies that have matured to
date. Should the policy mature earlier than expected, the entire
proceeds and costs will be recognized at that time, less any
amounts previously accrued or amortized.
NCBC periodically, but not more than annually, adjusts the
accrual period based upon actual collection experience on matured
policies. Adjustments to such estimates, if required, are
recognized in the period determined.
For 1994, given the limited number of policies purchased, and the
lack of actual collection experience, NCBC accreted 90% of the
expected face value of the policy over the accrual period, which
was estimated as the period from the policy purchase date to the
date on which the Company would receive proceeds under its
reinsurance contract with NCB. NCBC's actual collection
experience during 1995 suggests that the majority of purchased
policies will mature within their expected maturity date, as
adjusted for the Company's historical experience, and will not
represent a claim under its insurance contract with NCB. As
such, the Company revised its estimate of the ultimate insurance
proceeds to be collected from 90% to 100% of face value and its
estimate of the accrual period. The impact of such estimate
revisions on the 1994 earned discount reflected in the
accompanying financial statements were not material.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment - Property and equipment is stated at
amortized cost. Depreciation is computed using the straight-line
and accelerated methods over the estimated useful lives of the
assets.
Deferred Financing Costs - Costs that have been incurred to
establish NCBC's revolving credit facility are deferred and
amortized over the terms of the financing arrangement using the
effective interest rate method.
Amortization - Organization and other intangible costs are
amortized using the straight-line method over three to five
years. Closing costs relating to origination of the revolving
credit facility are being amortized over three years.
Income Taxes - Income taxes are accounted for in accordance with
the provisions of Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes". As required
under SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying
amounts of assets and liabilities and the respective tax basis
amounts. Deferred tax assets and liabilities are measured under
tax rates that are expected to apply to taxable income in the
years in which these differences are expected to be settled. The
effect of a change in tax rates on deferred tax assets and
liabilities is recognized in the period of the tax change.
Estimates - The preparation of financial statements in conformity
with generally accepted accounting principals requires the
Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting period.
The recognition of earned discount and the ultimate profitability
associated with purchased insurance policies is directly related
to NCBC's assumptions regarding the remaining life expectancy of
terminally ill individuals. Such estimates are made when the
insurance policy is purchased based upon facts and circumstances
then known, and are adjusted periodically, but not more than
annually, based upon actual experience. While NCBC believes that
its estimate of life expectancy, and the related recognition of
earned discount will closely approximate actual experience, given
the inherent scientific uncertainty of such estimates, including
the potential impact of medical treatments that might extend life
expectancies, there can be no assurance that these policies will
mature in accordance with management's estimates.
Statement of Cash Flows
The Company considers all short-term highly liquid investments
purchased with a maturity of three months or less to be cash and
equivalents for purposes of the Consolidated Statement of Cash
Flows.
Cash paid for interest was $913,447, $749,199 and $1,188,144 for
1995, 1994, and 1993, respectively. The Company paid no material
amounts for income taxes during these years.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
During 1995, the Company sold one real estate property in a
transaction in which the purchaser assumed a first mortgage
obligation of the Company in the amount of $1,232,501 and
recognized a gain of $1,029,894 in connection with the sale
during 1995.
During 1994, the Company sold 99.1% of its investment in Redbird
Trails Associates, L.P. and Signature Midwest, L.P. whereby the
Company accounts for its investments using the equity method and,
accordingly, two first mortgage obligations of the Company in the
amount of $5,202,698 were eliminated.
During 1993, the Company sold one real estate property in a
transaction in which the purchaser assumed a first mortgage
obligation of the Company in the amount of $3,659,476. The
Company also received a promissory note in the amount of $938,500
and recognized a gain in the same amount in connection with the
collection of this balance during 1994.
Per Share Amounts
Per share information has been computed based on the weighted
average number of common shares outstanding. Outstanding options
and warrants to purchase common shares have not been included in
the computation because their effect would be antidilutive. All
per share amounts have been adjusted to reflect the reverse stock
split on a retroactive basis (Note 11).
NOTE 3 - ACCRUED INSURANCE PROCEEDS AND PURCHASED INSURANCE
POLICIES
Purchased insurance policies and accrued insurance proceeds
consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Costs paid to viator $ 10,487,660 $ 2,727,596
Other direct and indirect
acquisition costs 1,051,510 308,748
Less amortized costs (3,562,126) (332,485)
Total purchased insurance policies $ 7,977,044 $ 2,703,859
Accrued insurance proceeds $ 4,219,216 $ 320,289
Insurance proceeds fully accrued:
Not yet matured 1,081,906 --
Matured not yet received 166,000 25,000
$ 5,467,122 $ 345,289
</TABLE>
At December 31, 1995 and 1994, the face value of purchased
insurance policies remaining in NCBC's portfolio was
approximately $14.4 million and $3.3 million, respectively.
During 1995, NCBC purchased policies with a face value of
approximately $12.9 million and approximately $1.8 million face
value of policies matured.
NOTE 4 - REVOLVING CREDIT FACILITY AND SUBORDINATED DEBT
On March 17, 1994, NCBC entered into a revolving credit facility
("Old Facility") with a credit limit of $10,000,000. Interest on
borrowings under the Old Facility was at 2% over a composite of
several large bank prime rates or the rate on 90 day dealer
commercial paper, whichever is higher, (10-3/4% and 11% at
December 31, 1995 and 1994, respectively), and was subject to a
commitment fee of .625% on the average daily unused amount of the
line.
Effective as of December 29, 1995, NCBC entered into a revolving
credit facility ("Facility") with a credit limit of up to
$15,000,000, which expires December 1998. The proceeds of the
loan were utilized to repay the Old Facility with another lender.
The closing of the transaction was January 8, 1996. The Facility
is secured by all the assets of NCBC, including purchased
insurance policies. The Facility bears interest at 1/2% over the
lender's prime rate or 2-7/8% over the 90 day London Inter-Bank
Offer Rate ("Libor") at the option of NCBC (8-3/8% at December
31, 1995), and is subject to a commitment fee of 1/4% on the
average daily unused amount of the line. Because the interest
rate on the Facility adjusts quarterly based on Libor, the fair
value of the borrowings under the Facility approximates the
carrying amount.
Under the terms of the Facility, the lender will loan NCBC a
specified percentage of the cost of the insurance policies
purchased. Under the Facility, the insurance policies purchased
by NCBC must meet certain underwriting criteria as established in
the Facility. The Facility requires that the Company pay one
year of regular premiums and the reinsurance premium on the
policy at the time such policies are purchased. Repayment of
outstanding principal is required as insurance proceeds from
matured policies are collected. As of April 10, 1996, NCBC would
have been able to borrow, under the terms of the Facility, an
additional $1,834,000.
NCBC is required under the Facility to comply with covenants
relating to the maintenance of its business (including purchasing
a minimum level of insurance policies quarterly), insurance
coverage, tangible net worth, and limitations on dividends and
payments to affiliates. As of April 10, 1996, NCBC was in
compliance with the Facility covenants.
In addition, as of December 29, 1995, NCBC issued a $2,000,000
subordinated note (the "Note") bearing interest at a rate of 14%
with interest payable monthly in arrears. The note is due
December 31, 1998, and is secured by NCBC's purchased insurance
policies, subject to the security interest granted to the
Facility lender. The purchaser of the Note was granted a warrant
to acquire 12% of the common stock of NCBC (68 shares) at a price
of $1.47 per share. The holder of the warrant can exercise a put
of the stock to NCBC under certain conditions. The warrant
expires December 31, 2000.
The proceeds from issuing the Note were received on January 8,
1996, and used to reduce the outstanding balance of the Facility.
NOTE 5 - NOTE AND SUBSCRIPTION RECEIVABLE
Note and subscription receivable consists of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Subscription receivable (Note 4) $ 2,000,000 $ --
Note receivable from AMKO USA, Inc.
(Note 8) 2,413,650 --
Less reserve (see Note 8) (1,000,000) --
$ 3,413,650 $ --
</TABLE>
NOTE 6 - TRANSACTIONS WITH AFFILIATES
For the three-year period ended December 31, 1995, the Company
had agreements with NCM Management Ltd., a company affiliated
with Mr. Herbert J. Jaffe, President and a director of the
Company, to provide management services to the Company. The
Company also provided the compensation and benefits of the
president. Costs incurred under these agreements amounted to
$307,322, $324,163 and $353,753 for 1995, 1994 and 1993,
respectively.
James J. Pinto serves as Chairmen of the Board of Directors.
Pursuant to an employment agreement entered into in 1990, and
subsequently modified effective January 1, 1994, Mr. Pinto has
acted in the same capacity. Pursuant to a Consulting Agreement
dated as of January 1, 1992, Mr. Shaw provided services as a
consultant to the Company on a nonexclusive basis through
December 31, 1993. This agreement was amended effective January
1, 1994 whereby Mr. Shaw acted in the capacity of Chief Executive
Officer through March 31, 1995.
Effective April 1, 1995, Messrs. Pinto and Shaw entered into new
agreements with the Company to act in the same capacities through
March 31, 1997, with options to extend these agreements for one
year if certain conditions are met. They will receive annual
compensation of $125,000 each plus Mandatory Incentive Bonuses
which are based on achieving certain Company operating
objectives, plus Discretionary Bonuses which may be granted at
the option of the Board of Directors. If these agreements are
terminated by the Company other than for cause, disability or
death, Messrs. Pinto and Shaw shall be entitled to receive their
base compensation through the existing term.
Messrs. Pinto and Shaw were each compensated $142,500, $257,500
and $247,500 for 1995, 1994 and 1993, respectively, pursuant to
these agreements, plus $108,659, $133,116 and $150,812,
respectively, was paid for other costs, certain office expenses,
including rent for the offices in New York, and related services
incurred for Company business.
NOTE 7 - DISCONTINUED OPERATIONS - REAL ESTATE SEGMENT
On November 27, 1995, the Company elected to discontinue
operations of the Real Estate Segment to concentrate its efforts
on its viatical settlements business. The following is a
description of the Company's disposal activities:
The Mart Shopping Center: On July 28, 1995, the Company sold The
Mart Shopping Center ("the Mart") located on nine acres in the
high technology business area of Hillsboro, Oregon, a suburb of
Portland, to an individual affiliated with NCM Management Ltd., a
company which provides management services to the Company. The
sales proceeds included $960,000 in cash, an eighteen month note
secured by a second deed of trust on the property in the amount
of $910,000 and the buyer's assumption of the $1,232,501 first
deed of trust secured by the property for a total purchase price
of $3,102,501. The Company renegotiated payment of the note with
the purchaser whereby it received a total of $800,000 in exchange
for an early payoff on September 30, 1995, reducing the sale
proceeds by $110,000. A gain of $1,029,894 was recognized on
this transaction in 1995.
Appletree Townhouses: The Company's wholly-owned subsidiary,
Georgia Properties, Inc. ("GPI"), received a loan of $650,000 on
December 21, 1995 and an additional $500,000 on February 1, 1996
from the same individual that purchased The Mart Shopping Center,
in exchange for an option to purchase Appletree Townhouses for
$3,500,000, which was exercised on April 3, 1996.
The sales price of $3,500,000 consisted of the aforementioned
advances by the buyer totaling $1,150,000, assumption of the
existing first deed loan by the buyer in the amount of $1,048,795
and a purchase money note for the balance equal to $1,301,205.
The purchase money note bears interest from the date of sale at
8% per annum until it is due on December 31, 1996. In addition,
the buyer is required to prepay $250,000 of this note on May 1,
1996, of which $125,000 was paid early on April 10, 1996. A gain
of approximately $1,030,000 will be reported during 1996.
Florida land: The Company owns undeveloped land in Ft.
Lauderdale, Florida which is zoned for commercial/industrial use.
This parcel is currently being marketed and is expected to be
sold during 1996.
Colony Ridge Apartments: Colony Ridge Apartments is an apartment
complex in Decatur, Georgia which was constructed in 1968 and
consists of 23 two-story buildings containing a total of 212
apartment units. This property is currently being marketed and
is expected to be sold during 1996.
Redbird Trails Apartments and North Oak Apartments: On June 13,
1994 and December 8, 1994, in accordance with previous agreements
dated December 30, 1993, the Company sold limited partnership
interests in Redbird Trails Associates, L.P. ("Redbird") and
Signature Midwest, L.P. ("Signature"), respectively, to two
unrelated entities. The Company retained a .9% interest in each
partnership through two wholly-owned subsidiaries serving as the
operating general partners. Such operating general partners are
obligated to provide loans of up to $150,000 and $75,000 to
Redbird and Signature, respectively, to fund any operating
deficits, as defined, for a three year period commencing December
8, 1994.
NOTE 7 - DISCONTINUED OPERATIONS - REAL ESTATE SEGMENT
(Continued)
The Company retained a contingent interest in the cash flows of
these partnerships. It will receive any cash available from
property operations, to the extent it exceeds approximately
$61,000 annually, and any refinancing proceeds up to a total of
approximately $4.5 million, plus interest at 9.25% per annum on
the outstanding balance of this amount. Any proceeds of sale
will be allocated, first, 99.1% to the new partners until they
have received 135% of their investment, less any prior
distributions. Any remaining proceeds from a sale will be
allocated to the Company up to $6 million, less any distributions
from operations or refinancings as described above. These
arrangements have not been reflected in the Company's financial
statements since their ultimate realization cannot reasonably be
determined. In addition, at such time as the tax benefits have
been utilized, the Company has the right to purchase the
interests of the newly admitted partners for 135% of their
contributed capital (minus prior cash payments). Should the
Company choose not to exercise such right to purchase the
partners' interests, the newly admitted administrative general
partner has the right to require the Company to sell all of the
assets and liquidate the partnerships. The Company has not
funded any operating deficits and has not received any excess
cash flows during 1995 and 1994.
The results of the Real Estate Segment have been reported
separately as discontinued operations in these consolidated
statements of operations. Prior period financial statements have
been restated to present the Real Estate Segment as a
discontinued operation.
Summarized below are the operations of the Company's Real Estate
Segment for the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Total revenues $ 2,260,458 $ 3,613,978 $ 5,219,325
Costs and expenses:
Operations and maintenance 1,368,620 1,916,210 2,803,479
Property taxes and insurance 286,335 432,916 667,726
Depreciation and 662,831 895,338 1,245,619
amortization .
Net interest 323,478 678,125 1,187,877
Corporate administrative
expenses 157,375 254,062 217,144
Other income - - (102,913)
Interest income - - (55,395)
Total costs and expenses 2,798,639 4,176,651 5,963,537
Loss from operations (538,181) (562,673) (744,212)
Income taxes - - -
Net loss $ (538,181) $ (562,673) $ (744,212)
</TABLE>
NOTE 7 - DISCONTINUED OPERATIONS - REAL ESTATE SEGMENT
(Continued)
The components of the Real Estate Segment net assets from
discontinued operations in the consolidated balance sheet as of
December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Rental properties, less accumulated
depreciation of $1,758,246 and $3,082,626
as of December 31, 1995 and 1994 $ 6,481,587 $ 8,710,068
respectively
Mortgage note payable (3,201,750) (3,961,497)
Other, net (228,560) (121,283)
$ 3,051,277 $ 4,627,288
</TABLE>
NOTE 8 - DISCONTINUED OPERATION - INDUSTRIAL PRODUCTS SEGMENT
On November 10, 1995, the Company sold 100% of the common stock
of Jensen Corporation ("Jensen"), located in Fort Lauderdale,
Florida to AMKO USA, Inc. ("AMKO"), an affiliate of AMKO
International B.V. which is based in The Netherlands, for
$1,726,000. The sale proceeds included cash of $415,000 and a
promissory note receivable in the amount of $1,311,000 which is
secured by Jensen's stock, accounts receivable and inventory.
The $1,311,000 note is guaranteed in its entirety by AMKO
International B.V., and the sole shareholder of AMKO
International B.V. guaranteed the first $585,000 of principal
payments.
AMKO also agreed to cause Jensen to pay to the Company a $765,000
obligation in the form of a note, which was loaned to Jensen,
$500,000 of which was prior to the sale and $265,000 which was
simultaneous with the sale, and an intercompany balance payable
by Jensen to the Company of $337,650, which are secured by the
assets of Jensen. The first $765,000 of principal payments under
these notes are guaranteed by AMKO International B.V.
The $1,311,000 note bears interest at 2% over the prime rate per
annum and is payable in varying installments with the balance due
on June 1, 1997. The $765,000 note bears interest at 10% per
annum and is payable in varying installments with the balance due
on February 1, 1998. The $337,650 note bears interest at 2% over
the prime rate per annum and is payable in varying installments
with the balance due on May 1, 1997.
The Company believes that the assets securing the three notes,
and the operations of Jensen as they now exist, may not be
sufficient to provide for payment of the notes. The Company has
limited financial information concerning AMKO and the guarantors
of the notes. Consequently, no assurance can be given that the
principal or interest due on the notes will be realized in full.
As of April 10, 1996, AMKO had not paid the March and April
installments of interest and principal, and the Company is
currently in discussion with AMKO to assure that AMKO will pay
all amounts in arrears and make future payments on a timely
basis. AMKO, in conjunction with these discussions, has raised
certain claims concerning the financial operations of the Company
prior to sale. Management believes these claims have no merit.
NOTE 8 - DISCONTINUED OPERATION - INDUSTRIAL PRODUCTS SEGMENT
(Continued)
The Company provided a reserve of $1,000,000 as of December 31,
1995. Based upon the guarantees and estimated liquidation value
of Jensen's assets which were pledged as collateral for these
notes, the Company believes that this reserve is adequate.
The results of the Industrial Products Segment have been reported
separately as discontinued operations in these consolidated
statements of operations. Prior period financial statements have
been restated to present the Industrial Products Segment as a
discontinued operation.
Summarized below are the operations of the Company's Industrial
Products Segment for the years ended December 31, 1995, 1994 and
1993.
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Total revenues $ 3,920,718 $ 5,691,585 $ 7,091,414
Costs and expenses:
Cost of sales 3,073,708 4,642,611 6,039,478
Selling and administrative 935,908 1,053,069 1,365,110
Reserve for inventory
obsolescence - 257,609 -
Reserve for note receivable 1,000,000 - -
Depreciation and amortization 15,493 18,591 19,491
Interest expense 4,956 11,101 23,264
Corporate administrative
expenses 82,862 59,801 102,406
Other income - - (63,452)
Total costs and expenses 5,112,927 6,042,782 7,486,297
Loss from operations (1,192,209) (351,197) (394,883)
Income taxes - - -
Net loss $(1,192,209) $ (351,197) $ (394,883)
</TABLE>
The components of the Industrial Products Segment net assets from
discontinued operations in the consolidated balance sheet as of
December 31, 1994, are as follows:
<TABLE>
<CAPTION>
As of
December 31, 1994
<S> <C>
Accounts receivable $ 853,882
Inventories 1,717,361
Accounts payable and accrued liabilities (927,802)
Other, net 115,364
$ 1,758,805
</TABLE>
NOTE 9 - INCOME TAXES
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the asset
and liability method required by FASB Statement No. 109,
"Accounting for Income Taxes". The implementation of Statement 109
did not have a material impact on the Company's financial
statements.
At December 31, 1995, the Company had federal net operating and
capital loss carryforwards of approximately $9.0 million. The net
operating losses will expire in the various years through December
31, 2009. The Company had state net operating loss carryforwards
of various amounts in the states in which it operates.
At December 31, 1995, the Company had federal alternative minimum
credits of approximately $13,000. The alternative minimum tax may
be carried forward indefinitely.
Federal and state laws impose limitations on the use of the net
operating losses and tax credits following certain changes in
ownership. If such an ownership change occurs, the limitation
could reduce the amount of the benefits of the net operating losses
and credit that would be available to offset future taxable income
starting in the year of the ownership change.
A reconciliation of income tax computed at the federal statutory
corporate tax rate to income tax expense is:
<TABLE>
<CAPTION>
Year ended Decmeber 31,
1995 1994 1993
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <S>
Income taxes at federal
statutory rate $(726,081)(34.0%)$(313,493)(34.0%)$(466,150)(34.0%)
Increase (decrease) in
income taxes resulting
from:
State and local income
taxes, net of federal
tax benefits -- - 20,000 2.1 -
Amortization of
goodwill and other
intangibles -- - 2,913 0.3 1,256 0.1
Change in valuation
allowance 717,221 33.6 303,534 32.9 464,894 33.9
Net operating loss
carryover -- - - -
Other 8,860 0.4 (12,954) (1.3) -
$ -- - % $ -- - % $ -- - %
</TABLE>
NOTE 9 - INCOME TAXES (Continued)
Deferred income taxes reflect the net effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's net deferred
tax assets from continuing operations as of December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 1,516,832 $ 475,531
Amortization 104,357 --
Capitalized costs 34,000 18,453
1,655,189 493,984
Deferred tax liabilities:
Depreciation 1,189 --
Earned discount on unmatured policies 317,733 --
1,336,267 493,984
Less valuation allowance (1,336,267) (493,984)
Net deferred tax asset $ -- $ --
</TABLE>
A valuation allowance has been established at December 31, 1995 and
1994 to reduce the net deferred tax asset to zero based upon the
uncertainty regarding realization of such tax benefits given the
Company's history of operating losses. The change in the valuation
allowance for the year ended December 31, 1995 as compared to 1994
was an increase of $842,283.
In addition, the Company has a net deferred tax asset related to
discontinued operations at December 31, 1995 and 1994 of $1,452,721
and $1,458,748, respectively. This amount consists primarily of
net operating losses and reserves recorded for book and not yet
deducted for tax. A valuation allowance has been established to
reduce this net deferred asset to zero based upon the uncertainty
regarding realization of such tax benefits given the Company's
history of operating losses.
NOTE 10 - SHAREHOLDERS' EQUITY
Outstanding warrants and options to purchase shares of the
Company's common stock, adjusted to reflect the reverse stock
split, together with the related grant and expiration dates as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Expiration Date
Description Shares Price GrantDate December 31,
<S> <C> <C> <C> <C>
Investor Warrants 658,333 $ 9.00 1988 1997
Investor Warrants 71,428 10.50 1988 1997
Management Warrants 133,333 9.00 1988 1997
Director Options 1,000 10.50 1993 1996
Consultant Options 8,333 10.50 1990 1996
</TABLE>
NOTE 10 - SHAREHOLDERS' EQUITY (Continued)
All warrants and options were exercisable at December 31, 1995.
During 1995 and 1994, 3,000 and 4,000 shares, adjusted to reflect
the reverse stock split, of director options expired, respectively.
No other warrants or options were exercised or expired during the
three-year period ended December 31, 1995.
On April 22, 1994, the Company repurchased 70,700 shares of its
common stock, adjusted to reflect the reverse stock split, for
treasury shares at a cost of $265,125.
On July 29, 1994, the Company issued 33,333 shares of its common
stock, adjusted to reflect the reverse stock split, to CAPX
Corporation in consideration for certain assets purchased
therefrom. As part of the agreement, NCMC can be required by CAPX
to repurchase all of its shares at $5.25 per share on or before
July 29, 1996.
On May 11, 1995, the Company repurchased 3,333 shares of its common
stock, adjusted to reflect the reverse stock split, for treasury at
a cost of $9,675.
NOTE 11 - REVERSE STOCK SPLIT
Pursuant to the approval of the stockholders on June 28, 1995, the
Company implemented a reverse stock split which was effective July
11, 1995, whereby each three shares of common stock was converted
into one share of Common Stock. As a result of the reverse stock
split, the Registrant has 6,666,666 shares of authorized common
stock, of which 1,650,524 are issued and outstanding. All such
shares are of the par value of $.01.
NOTE 12 - ADVANCES DUE AFFILIATES
The Company has obtained cash from an officer and a member of the
Board of the Company to continue operations, including advances
totaling $500,000 on October 26, 1995 bearing interest at 12% per
annum, payable in monthly installments of interest only until due
on January 31, 1996 and on demand thereafter. The advances were
repaid on February 1, 1996.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
NCBC, the Company's viatical settlement subsidiary, leases its
office under an operating lease with a monthly rental of $4,299.
The lease expires June 30, 1996. NCBC is currently negotiating for
additional space in a different building and expects to finalize a
new lease before June 1, 1996. Rental expense for 1995 and 1994
was approximately $51,588 and $38,000, respectively.
NOTE 14 - LITIGATION
The Company is a named defendant in a product liability lawsuit
related to Jensen Corporation. Jensen Corporation maintains
insurance to cover such claims. In the opinion of management, the
resolution of the existing litigation will not have a material
adverse impact on the financial position of the Company.
Item 9 - Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
Incorporated by reference from Form 8-K filed by the Company on
November 17, 1995 and Form 8-K filed by the Company on February 20,
1996.
PART III
Item 10 - Directors, Executive Officers, Promoters, and Control
Persons; Compliance With Section 16(a) of the Exchange Act
At April 8, 1996, there were five directors on the Company's Board
of Directors, two of which are also executive officers of the
Registrant. The principal occupations and affiliations during the
last five years of the directors and executive officers are
described in the following table. Each director's term of office
expires at the next meeting of shareholders following his election
and upon the election and qualification of his successor. The
executive officers serve at the pleasure of the Board of Directors.
James Pinto Chairman since 1989 NCMC
Chairman of the Board
Age 45 Director Biscayne Holdings, Inc.
Director since 1988 (apparel manufacturer
and distributor)
Director Anderson Group, Inc.
(dental and
electronics)
Director Electro Star, Inc.
(printer circuit board
manufacturer)
John C. Shaw Chief Executive NCMC
Director and Officer since 1994
Chief Executive
Officer Managing Director Resource Holdings, Ltd.
Age 42 since 1983 (investment firm)
Director since 1988
1989 to 1992 Co- NCMC
Chairman
Trustee Wedgestone Financial
(diversified lender and
truck parts
manufacturer)
Herbert J. Jaffe President since 1988 NCMC
Director and
President 1983-95 Chairman NCM Management Ltd.
Age 61 (management company of
Director since 1987 NCMC)
Timothy Graham 1994-1995 Executive WinStar Communications,
Director Vice President Inc.
Age 45 (communications, media,
Director since retail)
December 1994 1991-1994 Corporate
Secretary NCMC
Director TII Industries, Inc.,
(telecommunications and
power line equipment)
David Faulkner 1989-1995 Vice Memorex Telex Inc.
Director Chairman/CFO (computer industry)
Age 55
Director since July
1994
Kenneth M. Klein President since NCBC
President March 1994
NCBC
Age 57 1991 to 1994 Private Practice
Attorney
Jeffrey Goldstein Chief Executive NCBC
Chief Executive Officer since June
Officer 1995
NCBC
Age 50 President Wedgestone Financial
(diversified lender and
truck parts
manufacturer)
Item 11 - Executive Compensation
The following table sets forth information in respect to the
compensation of the Chief Executive Officer and each of the other
four most highly compensated executive officers of NCMC for
services in all capacities to the Corporation and its subsidiaries
in 1995, 1994 and 1993.
<TABLE>
<CAPTION>
__________Annual Compensation_________
Other Annual
Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
John C. Shaw 1995 142,500 -- --
Chief Executive 1994 257,500 -- 4,000
Officer 1993 247,500 -- 9,000
James Pinto 1995 142,500 -- --
Chairman 1994 257,500 -- 4,000
1993 247,500 -- 9,000
Herbert J. Jaffe 1995 100,000 -- --
President and 1994 100.000 10,000 4,000
Chief Officer 1993 100,000 -- 9,000
Operating
Ken M. Klein 1995 150,000 -- --
President 1994 170,835 -- 8,333
NCBC
Jeffrey Goldstein 1995 70,000 -- --
Chief Executive
Officer
NCBC
</TABLE>
The Company presently provides various non-cash benefits to its
executive officers, but it does not believe, except as noted, that
such benefits exceeds the lesser of $50,000 or 10% of the cash
compensation set forth for each of the executive officers of the
proceeding cash compensation table.
James J. Pinto serves as Chairmen of the Board of Directors.
Pursuant to an employment agreement entered into in 1990, and
subsequently modified effective January 1, 1994, Mr. Pinto has
acted in the same capacity. Pursuant to a Consulting Agreement
dated as of January 1, 1992, Mr. Shaw provided services as a
consultant to the Company on a nonexclusive basis through December
31, 1993. This agreement was amended effective January 1, 1994
whereby Mr. Shaw acted in the capacity of Chief Executive Officer
through March 31, 1995. Messrs. Pinto and Shaw were each
compensated at the base annual rate of $257,500 in 1994 and
$247,500 in 1993. From January 1, 1995 through March 31, 1995
their base annual compensation was lowered to $195,000, whereby
they received $48,750 for this three month period pursuant to this
arrangement.
Effective April 1, 1995, Messrs. Pinto and Shaw entered into new
agreements with the Company to act in the same capacities through
March 31, 1997, with options to extend these agreements for one
year if certain conditions are met. They will receive compensation
of $125,000 each plus Mandatory Incentive Bonuses which are based
on achieving certain Company operating objectives, plus
Discretionary Bonuses which may be granted at the option of the
Board of Directors. If these agreements are terminated by the
Company other than for cause, disability or death, Messrs. Pinto
and Shaw shall be entitled to receive their base compensation
through the existing term.
Pursuant to an agreement between the Company and NCM Management
Ltd., Mr. Jaffe is entitled to receive $8,333 per month plus health
benefits. See Item 12 - Certain Relationships and Related
Transactions.
The bylaws of the Company provide for indemnification by it of its
officers and directors to the fullest extent permitted by law.
During 1995, members of the Board of Directors, who are not either
employees, officers or consultants of the Company, received
quarterly compensation of $2,000 and $250 for each meeting
attended. Directors are entitled to be reimbursed for reasonable
out of pocket expenses incurred with respect to meetings of the
Board.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of NCMC common stock as of April 8, 1996, by: (i) each person
known by the Company to own beneficially more than 5% of the shares of NCMC
common stock (ii) each person who is a director or executive officer of the
Company; and (iii) all directors and executive officers of the Company as a
group.
The Investor Warrants referred to below consist of warrants to acquire an
aggregate of 729,761 shares of NCMC common stock, at any time prior to
December 31, 1997. Of the aggregate Investor Warrants, 658,333 permit
acquisition of shares of NCMC common stock at an exercise price of $9.00
per share (the "$9.00 Investor Warrants") and 71,428 permit acquisition of
shares of NCMC common stock at an exercise price of $10.50 per share (the
"$10.50 Investor Warrants"). The Management Warrants, referred to below,
consist of warrants to acquire an aggregate of 133,333 shares of NCMC
common stock at any time prior to December 31, 1997 for an exercise price
of $9.00 per share. The Management Warrants and the Investor Warrants are
collectively referred to as the Warrants.
The Company implemented a reverse stock split which was effective July 11,
1995, whereby each three shares of common stock was converted into one
share of Common Stock. As a result of the reverse stock split, the
Registrant has 6,666,666 shares of authorized common stock, of which
1,650,524 are issued and outstanding. All such shares are of the par value
of $.01. The following amounts have been adjusted to reflect the reverse
stock split.
Beneficial Beneficial
Ownership of Ownership of
NCMC Common NCMC Common
Stock (1) Percent Stock (2) Percent
Name and address of NCMC Number of of Number of of
Beneficial Owner (3) Shares Class Shares Class
RHEC, L.P. 388,681 23.5% 757,728(4) 30.0%
10 East 53rd Street
New York, NY 10022
The Hawley Opportunity 142,695(5) 8.6% 201,028(6) 8.0%
Fund, L.P.
c/o Hawley and Wright,
Inc.
6053 S. Quebec Creekside
202
Englewood, CO 80111
Herbert J. Jaffe 11,512(7) 0.7% 51,512(8) 2.0%
James Pinto 144,571 8.8% 426,765(9) 16.9%
John C. Shaw 447,898(10) 27.1% 890,320(10) 35.3%
Timothy R. Graham 20,666(11) 1.2% 30,500(12) 1.2%
Kenneth M. Klein --(13) -- -- (13) --
All executive officers
and directors as a group
(5 persons) 624,647(14) 37.8% 1,399,097(15) 55.4%
NOTES TO TABLE OF BENEFICIAL OWNERS AND MANAGEMENT
1. This column assumes that none of the Warrants or Options
have been exercised.
2. This column assumes that all of the Warrants and Options
have been exercised.
3. Unless otherwise indicated, each shareholder listed has
the sole power to vote and direct the disposition of the
shares of the Company beneficially owned by such
shareholder.
4. Includes 369,047 shares of NCMC common stock which may be
issued upon the exercise of Investor Warrants. Mr. Shaw,
a director of the Company, is a managing director of
Resource Holdings, Ltd., the general partner of RHEC, L.P.
5. Hawley and Wright, Inc. and Mr. MacDonald Hawley may be
deemed to also beneficially own these shares by virtue of
Hawley and Wright, Inc. being the general partner of the
Hawley Opportunities Fund, L.P. and Mr. MacDonald Hawley
being the president and controlling shareholder of Hawley
and Wright, Inc.
6. Includes 58,333 shares of NCMC common stock issuable upon
exercise of Investor Warrants.
7. Includes 11,379 shares owned by NCM Holdings, a general
partnership of which Mr. Jaffe is a general partner, and
133 shares owned directly by Mr. Jaffe.
8. Includes 40,000 shares of NCMC common stock issuable on
exercise of Management Warrants, 11,379 shares owned by
NCM Holdings and 133 shares owned directly by Mr. Jaffe.
9. Includes 144,571 shares owned directly by Mr. Pinto and
282,194 shares upon exercise of Investor Warrants.
10.Mr. Shaw is a managing director of Resource Holdings,
Ltd., the general partner of RHEC, L.P. Except for 59,217
shares plus 73,375 shares of NCMC issuable on exercise of
Investor Warrants which are owned directly by Mr. Shaw,
the shares of NCMC common stock shown as beneficially
owned by Mr. Shaw are the same shares shown as
beneficially owned by RHEC, L.P.
11.Includes 5,000 Options.
12.Includes 20,667 shares owned directly by Mr. Graham, 8,333
Consultant Options and 1,500 Investor Options.
13.The VFC Trust, for which Kenneth Klein, an executive
officer of NCBC, serves as sole Trustee, owns 14.5% of the
outstanding common shares of NCBC. Pursuant to the terms
of a stockholders' agreement among this investor and the
Company, these shares, under certain circumstances, may be
converted into shares of the Company in 1997 at a then-
appraised value.
14.Includes 400,060 shares of NCMC common stock owned by NCM
Holdings and RHEC, L.P.
15.Includes 400,060 shares of NCMC common stock owned by NCM
Holdings and RHEC, L.P., and 783,449 shares of NCMC common
stock issuable on exercise of all the Warrants and the
Options.
Item 13 - Certain Relationships and Related Transactions
The Company and NCM Management Ltd. ("NCM") have agreed that NCM
will provide management services through March 1996 and provide
personnel, equipment and facilities for the day to day management
and operations of the Company including supervision of its
remaining real estate properties. As compensation for its
services, NCM is receiving a monthly payment of $8,333 plus
management fees of 4% of revenues from Colony Ridge Apartments and
6% from Redbird Trails Apartments and North Oak Apartments. In
addition, Mr. Jaffe is provided health insurance benefits. Mr.
Jaffe, a director and officer of the Company, is chairman and owns
approximately 33% of the outstanding capital stock of NCM and may
be deemed to have a material interest in all payments to NCM.
During 1995, NCM received an aggregate of $307,322 for management
services rendered to the Company, including therein Mr. Jaffe's
compensation.
In 1995, Resource Holdings, Ltd. ("Resource") provided office space
and related services at its principal office in New York City for
Mr. John C. Shaw, Mr. James Pinto and for use by officers and
directors of NCMC while in New York. Resource was reimbursed by
the Company in an amount equal to $75,492 for providing such office
space and related services in 1995. In addition, in accordance with
its agreement with Resource, the Company has deposited with
Resource's landlord the amount of $37,746 which will be returned,
plus interest, to the Company on termination of the lease. Mr.
Shaw, a director of the Company, is a managing director and
significant shareholder of Resource, and therefore may be deemed to
have an interest in payments to Resource.
Stock Transaction Reports by Officers, Directors and 10%
Stockholders
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of
more than 10% of the Company' common stock to file with the
Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the
Company. To the Company's knowledge, based solely on copies of
reports furnished to the Company and information furnished by the
reporting persons, each officer, director and 10% stockholder of
the Company was in compliance with all reporting requirements under
Section 16(a) for the year ended December 31, 1995.
PART IV
Item 14 - Exhibits and Reports on Form 8-K
The following documents are filed as part of this report:
(a) Exhibits:
3(I).1 Articles of Incorporation and By-Laws of
National Capital Management Corporation (the "Company"
or "NCMC") (incorporated by reference from Schedule 4
to the Prospectus included in the Registration
Statement on Form S-4 of the Company (No. 33 19149)
filed on December 18, 1987 (the "Registration
Statement")).
3(I).2 Certificate of Amendment of Certificate of
Incorporation of National Capital Management
Corporation implementing one for three reverse stock
split dated June 29, 1995.
3(ii).1 Resolution of Board of Directors amending
NCMC By-Laws dated April 12,1995 (incorporated by
reference from Exhibit 3(ii).1 of the Annual Report on
Form 10-K of the Company filed on April 17, 1995).
4.1 Form of Warrant for 2,400,000 shares of NCMC
common stock (incorporated by reference from Exhibit
4.1 of the Annual Report on Form 10-K of the Company
filed on March 29, 1988).
4.2 Form of Warrant for 214,285 shares of NCMC
common stock (incorporated by reference from Exhibit
4.2 of the Annual Report on Form 10-K of the Company
filed on March 29, 1988).
10.1 Registration Agreement dated February 25,
1988 between NCMC and certain other persons
(incorporated by reference from Exhibit 10.3 of the
Annual Report on Form 10-K of the Company filed on
March 29, 1988).
10.2 Employment Agreement dated September 1, 1990
between James J. Pinto and NCMC (incorporated by
reference from Exhibit 10.4 of the Annual Report on
Form 10-K of the Company filed on April 1, 1991).
10.3 Amended and Restated Employment Agreement
dated as of June 15, 1994 between James J. Pinto and
NCMC (incorporated by reference from Exhibit 10.3 of
the Annual Report on Form 10-K of the Company filed on
April 17, 1995).
10.4 Agreement dated as of April 1, 1995 between
James J. Pinto and NCMC (incorporated by reference
from Exhibit 10.4 of the Annual Report on Form 10-K of
the Company filed on April 17, 1995).
10.5 Consulting Agreement dated January 1, 1992
between John C. Shaw and NCMC (incorporated by
reference from Exhibit 10.5 of the Annual Report on
Form 10-K of the Company filed on April 15, 1992).
10.6 Amended and Restated Employment Agreement
dated as of June 15, 1994 between John C. Shaw and
NCMC (incorporated by reference from Exhibit 10.6 of
the Annual Report on Form 10-K of the Company filed on
April 17, 1995).
10.7 Agreement dated as of April 1, 1995 between
John C. Shaw and NCMC (incorporated by reference from
Exhibit 10.7 of the Annual Report on Form 10-K of the
Company filed on April 17, 1995).
10.8 Second Amended and Restated Agreement of
Limited Partnership of Redbird Trails Associates, L.P.
by and among NCQ Redbird, Inc. National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of November 23, 1994 (incorporated by
reference from Exhibit 10.3 of the Annual Report on
Form 10-K of the Company filed on April 17, 1995).
10.9 Operating Deficit and Rental Achievement
Agreement among Redbird Trails Associates, L.P.,
National Capital Management Corp., National Corporate
Tax Credit Fund and National Corporate Tax Credit,
Inc. dated as of June 6, 1994 (incorporated by
reference from Exhibit 10.7 of the Quarterly Report on
Form 10-QSB of the Company filed on August 15, 1994).
10.10 Second Amended and Restated Agreement of
Limited Partnership of Signature Midwest, L.P. by and
among NCQ North Oak, Inc. National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of November 23, 1994 (incorporated by
reference from Exhibit 10.3 of the Annual Report on
Form 10-K of the Company filed on April 17, 1995).
10.11 Operating Deficit and Rental Achievement
Agreement among Signature Midwest, L.P., National
Capital Management Corp., National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of November 23, 1994 (incorporated by
reference from Exhibit 10.3 of the Annual Report on
Form 10-K of the Company filed on April 17, 1995).
10.12 Employment Agreement dated as of March 1,
1994 between NCMC and Kenneth M. Klein (incorporated
by reference from Exhibit 10.15 of the Annual Report
on Form 10-KSB of the Company filed on March 31,
1994).
10.13 Loan Agreement by and between Bank
One and National Capital Benefits Corp. dated December
29, 1995.
10.14 Security Agreement and Assignment
by National Capital Benefits Corp. for the benefit of
Bank One dated December 28, 1995.
10.15 Senior Subordinated Note and
Warrant Purchase Agreement by and between National
Capital Benefits Corp. and Banc One Capital Partners
V, Ltd. dated December 29, 1995.
10.16 Warrant Certificate from National
Capital Benefits Corp. in favor of Banc One Capital
Partners V, Ltd. dated December 29, 1995.
10.17 Property Purchase Agreement by and
between National Capital Management Corporation and
William R. Dixon, Jr. for sale of The Mart Shopping
Center dated July 26, 1995.
10.18 Option Agreement by and between
Georgia Properties, Inc. and William R. Dixon, Jr. for
the sale of Appletree Townhouses dated December 21,
1995.
10.19 Promissory Note from William R.
Dixon, Jr. in favor of Georgia Properties, Inc. dated
March 29, 1996.
10.20 Agreement of Purchase and Sale of
Stock among AMKO USA, Inc., National Capital
Management Corporation and Jensen Corporation dated
October 30, 1995.
10.21 Promissory Note from AMKO USA, Inc.
in favor of National Capital Management Corporation
for $1,311,000 dated November 1995.
10.22 Guaranty of Note from AMKO
International B.V. in favor of National Capital
Management Corporation dated November 1995 related to
Promissory Note in amount of $1,311,000.
10.23 Promissory Note from Jensen
Corporation in favor of National Capital Management
Corporation for $765,000 dated November 1995.
10.24 Promissory Note from Jensen
Corporation in favor of National Capital Management
Corporation for $337,650 dated November 1995.
10.25 Guaranty of Note from AMKO
International B.V. in favor of National Capital
Management Corporation dated November 1995 related to
Promissory Note in amount of $765,000.
10.26 Guaranty of Note from Jan Oerlemans
in favor of National Capital Management Corporation
dated November 1995 related to Promissory Note in
amount of $1,311,000.
10.27 Letter of revisions of the Asset
Purchase Agreement between National Capital Benefits
Corp. and AutoLend Group, Inc. dated October 6, 1995.
10.28 Promissory Note between National
Capital Management Corporation and Fifth Avenue
Partners dated October 26, 1995.
10.29 Subsidiaries of NCMC (including controlled
partnerships).
(b) None
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.
NATIONAL CAPITAL MANAGEMENT CORPORATION
By:/s/ John C. Shaw
John C. Shaw
Chief Executive Officer,
Principal Financial Officer
and Principal Accounting Officer
By:/s/ Herbert J. Jaffe
Herbert J. Jaffe, President
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:
By:/s/ Herbert J. Jaffe
Herbert J. Jaffe
President and Director
April 30, 1996
By:/s/ James Pinto
James Pinto, Director
April 30, 1996
By:/s/ John C. Shaw
John C. Shaw, Director
April 30, 1996
By:/s/ Timothy R. Graham
Timothy R. Graham, Director
April 30, 1996
By:/s/David Faulkner
David Faulkner, Director
April 30, 1996
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
NATIONAL CAPITAL MANAGEMENT CORPORATION
It is hereby certified that:
1. The name of corporation ("Corporation") is National
Capital Management Corporation.
2. Herbert J. Jaffe is the president of the Corporation.
This Certificate is executed by Herbert J. Jaffe in his capacity
as president of the Corporation, and the facts stated in the
Certificate are true.
3. The Certificate of Incorporation of the Corporation is
hereby amended by deleting paragraph Fourth of the Certificate of
Incorporation and replacing it with the following:
"FOURTH. The total number of shares of
stock which the Corporation shall have authority to issue is
9,666,666 shares, of which 6,666,666 shares shall be Common
Stock and 3,000,000 shares shall be Preferred Stock (the
"Preferred Stock"). All such shares are of the par value of
.01. On the effectiveness of this amendment of the
Certificate of Incorporation, each outstanding share of
Common Stock shall be converted, automatically and without
further action on the part of any stockholder, into one-
third of one share of Common Stock; provided that on such
effectiveness, if any fractional shares result from such
conversion, the Corporation shall pay in cash to the
respective holders of such fractions the fair value of such
fractions."
4. The foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
Dated: June 29 , 1995
HERBERT J. JAFFE, PRESIDENT
ATTEST:
LESLIE A. FILLER
ASSISTANT SECRETARY
35
1035285-1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered
into as of December 29, 1995, between NATIONAL CAPITAL
BENEFITS CORP., a Delaware corporation ("Borrower"), and
BANK ONE, COLUMBUS, NA, a national banking association
("Lender").
W I T N E S E T H:
WHEREAS, Borrower desires to borrow funds from
Lender to refinance existing indebtedness and to finance
Borrower's working capital needs arising in the ordinary
course of business; and
WHEREAS, Lender is willing to make such loans upon
the terms and subject to the conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the parties
hereby agree as follows:
A G R E E M E N T:
Section 1. CERTAIN DEFINITIONS AND TERMS.
As used herein, the following terms shall have
the meanings herein indicated:
1.1 Abnormal Mortality Insurance Contract or
"AMIC"
Contract means that Abnormal Mortality Insurance Contract
issued to Borrower by NCB Insurance Limited, a wholly owned
subsidiary of Borrower, and any amendments or
endorsements thereto as provided to Lender by Borrower on
the date hereof; and, subject to the approval of Lender,
any amendments or endorsements of such contract.
1.2 Abnormal Mortality Stop Loss Reinsurance
Contract
or "AMSLRC" Contract means those Abnormal Mortality
Insurance Contracts issued to NCB Insurance Limited by
American Accident Reinsurance Group and Federal
Insurance Company and any amendments or endorsements
thereto as provided to Lender by Borrower on the date
hereof, and, subject to the approval of Lender, any
amendments or endorsements of such contracts or changes
in the companies which participate in the pools of
insurers under such contracts, which approval shall
not be unreasonably withheld.
1.3 Advance Request has the meaning set
forth in
Section 2.2.
1.4 Affiliate means any Person who (i) would
be an
"affiliate" of Borrower within the meaning of the
regulations promulgated pursuant to the Securities Act of
1933, as such regulations and Act are amended and in
effect on the date in question, if such Person were
subject to such Act and regulations, or (ii) owns
any legal or beneficial interest in such Person, is a
director or officer of Borrower, or is a relative of any of
the Persons described in this clause (ii).
1.5 Agreement means this loan Agreement,
including the Schedules and Exhibits hereto, as the same may
be in effect from
time to time after giving effect to any amendments,
supplements, increases, extensions, and renewals hereof.
1.6 Average Life Expectancy means the average of
all
estimates (at the time such estimates are given)
obtained by Borrower from qualified physicians acceptable
to Lender (not including the personal physician of the
insured) as to the life expectancy of the insured.
1.7 BOCP V Transaction means that certain
transaction
between Borrower and Banc One Capital Partners V, Ltd.,
dated as of December 29, 1995, and evidenced by a
certain Senior Subordinated Note and Warrant Purchase
Agreement and other effectuating documentation.
1.8 Borrowing Base means, at any date of
determination, an amount equal to (i) the aggregate
amount of Maximum Advances on each Eligible Policy, plus
(ii) the aggregate amount of Maximum," Advances on each
Unassigned Eligible Policy; provided, however, the
aggregate amount of Maximum Advances on each Unassigned
Eligible Policy shall not exceed the greater of (a) twenty-
five percent (25%) of the total Borrowing Base at any date
of determination or
(b) $1,600,000.
1.9 Borrowing Base Report means a
certificate
substantially in the form of Exhibit F, and containing such
other information as Lender may request concerning the
amount or calculation of the Borrowing Base.
1.10 Borrowing Date has the meaning set
forth in
Section 2.2.
1.11 Business Day means any day excluding Saturday
and
Sunday and excluding any other day on which Lender is
required or authorized to close.
1.12 Claim has the meaning set forth in Section
5.1(e).
1.13 Closing Date means the date of the initial
advance
hereunder.
1.14 Code means the Internal Revenue Code of
1986, as
amended, and all regulations promulgated and rulings
issued thereunder.
1.15 Collateral shall mean all present and
future
tangible or intangible property and rights of any kind in
which the Lender is granted a Lien pursuant to the Security
Documents (whether or not perfected) or this Agreement.
1.16 Commitment shall mean the commitment of the
Lender
to make Revolving Credit Loans to Borrower pursuant to
Section 2. 1 hereof in an aggregate principal amount at
any one time outstanding not to exceed $15,000,000, or
such lower amount as may be provided for pursuant to the
terms of this Agreement.
1.17 Commitment Period means the period from
and
including the Closing Date to, but not including, the
Commitment Termination Date.
1.18 Commitment Termination Date shall mean the
earlier
of (i) Noon, Eastern Standard Time, December 29, 1998, and
(ii) the date on which the Commitment is otherwise
terminated in accordance with the terms of this Agreement.
1.19 Cost of Policy means, for any Eligible
Policy, the sum of (i) proceeds remitted or to be remitted
by Borrower to the owner of such Eligible Policy or such
owner's designee, plus (ii) all fees paid to
acquire radical reviews of the insured
thereunder, plus (iii) all fees paid by Borrower to
agents or brokers for services related to such Eligible
Policy not to exceed, in the aggregate, 6% of the Death
Benefit of any Eligible Policy, plus (iv) all insurance
premiums paid by Borrower on such Eligible Policy within thirty
(30) days of purchase by Borrower,
plus (v) all insurance premiums paid by Borrower on such
Eligible Policy under its AMIC Contract, less any
commission payable by the reinsurer of such insurance
policy to NCB Insurance Ltd. or other Affiliate or
Subsidiaries of Borrower, provided, however, for purposes
of determining a Maximum Advance, the aggregate Cost of
Eligible Policies within each category below (measured on
the last day of each calendar quarter) may not
exceed the
corresponding percent of the Death Benefit as determined by
the insured's Average Life Expectancy, as follows:
Insureds' Average Life Cost of Policies
Expectancy as a percentage of
(in months) Aggregate Death Benefit
Within Category
Category 1: 6 months or less 84%
Category 2: 7-9 months 82%
Category 3: 10-12 months 80%
Category 4: 13-15 months 78%
Category 5: 16-18 months 76%
Category 6: 19-21 months 74%
Category 7: 22-24 months 72%
Category 8: 25-36 months 55%
1.20 Current Financials means the Financial
Statements of Borrower for the fiscal year ended December
31, 1994, and the month ended November 30, 1995.
1.21 Death Benefit means the amount which an
insurer is obligated to pay under a Purchased Policy upon
Policy Maturity, which amount is equal to the Face Amount
of the Purchased Policy minus Policy Loans, if any.
1.22 Debt of any Person includes, without
duplication, (i) all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon
such Person's balance sheet as liabilities, (ii) all
obligations of such Person for borrowed money, (iii) all
obligations of such Person evidenced by bonds, debentures,
notes and other similar instruments, (iv) all
obligations of such Person upon which interest charges
are customarily paid, (v) all obligations created or
arising under any conditional sale or other title
retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of
default are limited to repossession or sale of such
property), (vi) all obligations of such Person issued or
assumed as the deferred purchase price of property or
services (other than accounts payable to suppliers
incurred in the ordinary course of business and paid, in
each case, within thirty (30) days of the date when
each such account is payable), (vii) all obligations
under leases which shall have been or should be, in
accordance with GAAP, recorded as capitalized leases in
respect of which such Person is liable as lessee, (viii)
all Debt of the types referred to in clauses (i) through
(vii) above directly or indirectly guaranteed by such
Person, and (ix) all reimbursement obligations, contingent
or otherwise, in respect of letters of credit, surety
and appeal bonds and
performance bonds or similar instruments assuring any
other Person of the performance of any act or acts or the
payment of any obligation.
1.23 Default means any event which with the
passage of time or the giving of notice or both will be an
Event of Default.
1.24 Eligible Policy means a Purchased Policy,
which was purchased in strict compliance with the Purchase
Guidelines (subject to Lender's independent verification)
and which has been duly assigned to Lender, in which Lender
has been granted a first priority, perfected Lien or
enforceable absolute assignment or irrevocable beneficial
interest, including a first priority perfected Lien or
enforceable absolute assignment or irrevocable beneficial
interest in the proceeds and benefits of AMIC and AMSLRC
Contracts relative to such Purchased Policy such that the
Death Benefit and/or the proceeds and benefits of the AMIC
and AMSLRC Contracts are paid directly to Lender, for
which the original Purchased Policy has been delivered to
Lender and which is otherwise acceptable to Lender
pursuant to the terms and conditions herein, excluding
each of the following (in whole or in part):
(1) any life insurance policy underwritten
by an
insurer located or chartered outside of the United
States;
(2) any life insurance policy purchased
from an
insured whose primary residence is outside of the
United States or who is known by Borrower to be
residing outside of the United States;
(3) any life insurance policy for which
premium
payments have not been prepaid for one year;
(4) any life insurance policy with lapsed
premium
payments that renders such policy no longer in force;
(5) any life insurance policy purchased
from an
insured with a documented Average Life Expectancy
greater than thirty-six (36) months;
(6) any life insurance policy that has not
passed
contestability or suicide periods;
(7) any life insurance policy: (i) which is a
Matured
Policy, (ii) regarding which Borrower has been
notified of such maturity and has obtained all
necessary documentation of the death of the insured,
(iii) for which a final claim for Death Benefits was
submitted by Borrower within five (5) days of receipt
by Borrower of all necessary documentation of such
death and, (iv) for which the Death Benefit has not
been received by Lender within ninety (90) days of
such submission of claim for Death Benefit by
Borrower, or for which the Death Benefit is being
contested or disputed;
(8) any life insurance policy which has matured
and
for which the cash settlement has been received;
(9) any life insurance policy with respect to
which
Borrower has not provided to Lender written
evidence, in form and substance satisfactory to
Lender, of (a) terminal illness of the insured by
a duly licensed physician acceptable to Lender, (b)
voluntary and knowing consent of the insured to the
assignment of such policy, (c) mental competency of
the insured by a duly licensed physician acceptable
to Lender, (d) change of ownership, assignment or
irrevocable beneficial interest by the insurer, and (e)
any other information required by the Loan Documents;
(10) any life insurance policy that is not
reinsured with respect to the lesser of (i) the Death
Benefit or (ii) $550,000 under the AMIC Contract; and
reinsured under the AMSLRC Contracts; provided,
however, any life insurance policy which (i) meets all
Eligible Policy conditions and (ii) would otherwise
meet with AMIC/AMSLRC Contracts criteria except that
the Average Life Expectancy at the time of policy
purchase is greater than 24 months, would not be
excluded by this provision, provided that, the
Borrower reinsures such policy under the AMIC/AMSLRC
Contracts when the remaining life expectancy of the
insured as defined in the AMLC/AMSLRC Contracts)
reaches 24 months (the "Eligible Uninsured Policies");
(11) Eligible Uninsured Policies which (i) in
the aggregate comprise more than 10% of the Borrowing
Base or (ii) individually exceed more than $150,000
in Borrowing Base value or (iii) are covering an
insured not diagnosed with AIDS;
(12) any life insurance policy for which Borrower
has not filed for reimbursement due under the
AMIC/AMSLRC Contracts within 30 days of when such policy
is eligible for such reimbursement or for which Borrower
does not receive such reimbursement within 60 days of
when such policy is eligible for such reimbursement;
(13) any life insurance policy for which Borrower
has received proceeds under the AMIC/AMSLRC Contracts;
(14) any life insurance policy governed by the laws
of a state for which Borrower's counsel has not provided
Bank with a list of steps required for perfection of a
security interest in a life insurance policy governed by
the laws of such state;
(15) any life insurance policy issued or
underwritten by any government or government agency
unless governed by FEGLI and purchased utilizing forms
promulgated by FEGLI in compliance with federal
requirements;
(16) any life insurance policy that is an
industrial life insurance policy, assessment plan
life insurance policy, worker's compensation life
insurance policy, war risk life insurance policy or
mutual benefit life insurance policy;
(17) any life insurance policy the assignment of
which is not permitted by Law;
(18) based upon information available to the
Borrower through its usual purchase procedures at
the time of purchase, any life insurance policy that a
reasonable person would have suspected to have been
underwritten by the insurance company issuing such
policy based upon fraudulent or deceitful information
provided by the insured to such life insurance company;
(19) any life insurance policy for which the
estimates of life expectancy of the insured used in the
calculation of Average Life Expectancy are more than 12
months apart;
(20) any life insurance policy which would not
be
eligible for coverage under the AMIC/AMSLRC Contracts within
12 months from the date of purchase of such policy of life
insurance;
(21) any life insurance policy underwritten by an
insurance company with an A.M. Best & Co. rating of less
than "A-" or the fact amount of such policy is less than the
maximum amount provided for in the applicable state guaranty
fund; and, the aggregate amount of life insurance policies
underwritten by insurers with an A.M. Best & Co. rating of
less than "A" shall not exceed twenty-five percent (25%) of
the Borrowing Base at any date of determination;
The foregoing notwithstanding, if a Purchased Policy
meets all Eligible Policy requirements, but has not yet been
assigned to Borrower or Lender or otherwise collaterally assigned
to Lender such that Death Benefits will be paid directly to
Lender by the insurer under this policy, such policy will be
included as an Eligible Policy while such assignments are pending
(collectively the "Unassigned Eligible Policies," provided that,
(i) such pending period does not exceed thirty (30) days for any
Purchased Policy, (ii) advances under the Revolving Credit Loan
collateralized by an Unassigned Eligible Policy are funded
through Escrow with an Escrow Agent acceptable to Lender and
Escrow Agent is contractually obligated to refund to Lender any
such advances if the Escrow Agent has not received written
notification from the insurer of such Unassigned Eligible Policy
that such Unassigned Eligible Policy has been assigned in proper
form to Borrower and assigned to Lender within such thirty (30)
day period such that Death Benefits and proceeds and benefits of
AMIC and AMSLRC Contracts will be paid directly to Lender by the
insurer under the policy, and (iii) based on cost (calculated
pursuant to the calculation of Cost of Policy), Unassigned
Eligible Policies in aggregate do not exceed the greater of
(a) 25% of the total Borrowing Base or (b) $1,600,000.
Borrower hereby agrees and acknowledges that each life
insurance policy shall be reviewed on an individual basis by
Lender in determining whether such policy is an Eligible Policy
and that Lender shall have the right to determine whether a life
insurance policy is an Eligible Policy for a thirty (30) day
period after receipt by Lender of all information requested by
Lender describing and pertaining to such policy in the event such
policy is deemed to be an Eligible Policy pending receipt of such
information. Lender and Borrower may in writing agree to revise
from time to time reasonable standards of eligibility for
Eligible Policies and to establish from time to time reserves
against availability under the Borrowing Base.
1.25 Eligible Uninsured Policy is defined in the
definition of Eligible Policy above.
1.26 ERISA means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations promulgated
and rulings issued thereunder.
1.27 ERISA Affiliate means any Person who for purposes
of Title IV of ERISA is a member of Borrower's controlled group,
or under common control with Borrower, within the meaning of
Section 414 of the Code and the regulations promulgated and
rulings issued thereunder.
1.28 Escrow means an arrangement governed by an Escrow
Agreement, in a form acceptable to Lender, whereby Borrower
deposits funds to be used by Borrower for the purchase of a life
insurance policy into a bank account held at Lender in the name
of an Escrow Agent acceptable to Lender, which funds shall be
held by such Escrow Agent until all conditions precedent to
Borrower's purchase of the life insurance policy have been
fulfilled, at which time such funds shall be paid by the Escrow
Agent to the seller of such life insurance policy or such
seller's designee.
1.29 Escrow Agent means that Person so designated under
the Escrow Agreement to hold, disburse or return to Lender funds
held in Escrow pursuant to the Escrow Agreement.
1.30 Escrow Agreement means an escrow agreement signed
by Borrower, the Escrow Agent named therein and the seller of the
life insurance policy to be purchased by Borrower related
thereto, which shall set forth the terms and conditions upon
which the funds held in Escrow will be transferred to the seller
of such life insurance policy or such seller's designee.
1.31 Event of Default shall have the meaning set forth
in Section 6 of this Agreement and in the Loan Documents.
1.32 Face Amount means the maximum benefit amount of
the base policy without riders payable by an insurer under a
policy of life insurance for which there have been no Policy
Loans.
1.33 Financial Report Certificate means a certificate
substantially in the form of Exhibit G and containing such other
certifications,, statements, calculations, explanations, and
conclusions as Lender may reasonably request concerning
compliance with the Loan Documents.
1.34 Financial Statements means balance sheets, prof it
and loss statements, and statements of cash flows prepared in
comparative form with respect to the corresponding period of the
preceding fiscal year and prepared in accordance with GAAP.
1.35 GAAP means all applicable generally accepted
accounting principles of the Accounting Principles Board of the
American Institute of Certified Public Accountants and the
Financial Accounting Standards Board which are applicable as of
the date of the Current Financials.
1.36 Governmental Authority means any nation or
government, any state, county, or city and any political
subdivision of any of the foregoing and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.37 Guarantors means American Life Resources
Corporation and Living Benefits, Inc., wholly owned subsidiaries
of Borrower.
1.38 Guaranty means that certain Guaranty Agreement
(Unlimited/Unconditional) substantially in the form of Exhibit C
to this Agreement to be executed and delivered by Guarantors to
Lender, as amended, modified, restated, supplemented or renewed
from time to time.
1.39 Indemnified Party has the meaning set forth in
Section 5.1(e).
1.40 Indemnity Matters has the meaning set forth in
Section 5.1(e).
1.41 Law means all applicable statutes, laws,
ordinances, regulations, orders, writs, injunctions or decrees of
any Government Authority.
1.42 LIBOR Rate means the interest rate at which
deposits in immediately available funds in U.S. dollars are
offered by prime banks in the interbank eurodollar market for a
ninety (90) day period as published in the Wall Street Journal.
The LIBOR Rate shall be a fixed rate for the duration of each of
Borrower's fiscal quarters. The initial LIBOR Rate shall be the
rate in effect two (2) Business Days prior to the Closing Date
and shall be adjusted on the last day of each of Borrower's
fiscal quarters to the LIBOR Rate in effect two (2) Business Days
prior to such date.
1.43 Lien means any mortgage, pledge, assignment,
security interest, encumbrance, lien, charge or deposit
arrangement or other arrangement having the practical effect of
the foregoing and shall include the interest of a vendor or
lessor under any conditional sale agreement, capitalized lease or
other title retention agreement.
1.44 Litigation means any proceeding, claim, lawsuit or
investigation conducted or threatened by or before any
Governmental Authority.
1.45 Loan Documents means this Agreement, the Security
Documents, the Revolving Credit Note, the Validity and Support
Agreements and any and all other notes, mortgages, deeds of
trust, security agreements, pledge agreements, financing
statements, guaranties and other agreements, documents and
instruments ever delivered pursuant to or in connection with this
Agreement, in each case as the same may be amended, modified,
restated, supplemented, renewed, increased, extended, substituted
for or replaced from time to time.
1.46 Material Adverse Effect means any set of
circumstances or events which would reasonably be expected to
(i) have any adverse effect upon the validity or enforceability
of any Loan Document, (ii) be material and adverse to the
financial condition or business operations of Borrower, as
represented to Lender in the Current Financials, or to the
prospects of Borrower, (iii) impair Borrower's ability to fulfill
its obligations under the terms and conditions of the Loan
Documents, or (iv) cause a Default or an Event of Default.
1.47 Material Assets means any asset which has a book
or appraisal value of, or is sold for consideration of, $20,000
or more.
1.48 Matured Policy means a Purchased Policy for which
Policy Maturity has occurred.
1.49 Maximum Advance means the lesser of (i) up to
ninety two and one-half percent (92.5%) of the Cost of Eligible
Policy for each Eligible Policy or (ii) $428,000. The above
notwithstanding, for Eligible Policies which (a) have matured or
have become eligible for reimbursement under the AMIC/AMSLRC
Contracts, and (b) reimbursement has been requested in proper
form from the insurer, the Maximum Advance will be the lesser of
(i) up to ninety two and one-half percent (92.5%) of policy face
value or (ii) $509,000.
1.50 Maximum Rate means the maximum rate or amount of
interest which Lender is allowed to contract for, charge, take,
reserve or receive under applicable law.
1.51 Multiemployer Plan means a multiemployer plan as
defined in Sections 3(37) or 4001(a) (3) of ERISA or Section 414
of the Code.
1.52 Obligations means (i) the obligation of Borrower
for the due and punctual payment of the principal of and interest
on the Revolving Credit Note when due, whether at maturity, by
acceleration, by notice of voluntary prepayment or otherwise,
(ii) all other obligations and all out-of-pocket expenses and
indemnities now or hereafter existing of Borrower to Lender under
this Agreement, (iii) all out-of-pocket costs and expenses, now
or hereafter existing, that may be incurred by Lender in
connection with the administration (as set forth in Section
5.1(i)) and enforcement of the Loan Documents or the realization
on the security provided for by the Loan Documents, (iv) the
obligations of each of the pledgers, debtors, grantors,
mortgagors, guarantors or other Person obligated to Lender under
the Security Documents, and (v) all obligations of Borrower under
Section 5.1(e).
1.53 Permitted Liens has the meaning set forth in
Section 4.13.
1.54 Person means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party, or
Governmental Authority.
1.55 Plan means any employee pension benefit plan as
defined in Section 3(2) of ERISA that is covered by Title IV of
ERISA (including a Multiemployer Plan) or subject to the minimum
funding standards of Section 412 of the Code which is or has been
maintained for the employees of Borrower or any ERISA Affiliate.
1.56 Policy Loan means the aggregate of all loans or
other disbursements made by an insurer under a policy of life
insurance to, for the benefit of or at the designation of the
owner on such policy of life insurance prior to the purchase of
such policy by the Borrower which is to be repaid or reimbursed
to such insurer at Policy Maturity.
1.57 Policy Maturity means the date of death of the
insured under a Purchased Policy.
1.58 Prime Rate means, at any date of determination,
the prime commercial lending rate most recently announced by
Lender in effect at its principal office in Columbus, Ohio, which
prime commercial lending rate may not necessarily re resent the
lowest or best rate actually charged to a customer. Any change
in the Prime Rate shall become effective as of the date of such
change in the Prime Rate.
1.59 Purchase Guidelines means the purchase guidelines
supplied by Borrower and approved by Lender, pursuant to which
the terms, conditions and policies of the purchases of life
insurance policies by Borrower are set forth, and which are
attached hereto as Exhibit B.
1.60 Purchased Policy means a policy of life insurance
or portion of a policy of life insurance purchased by the
Borrower or in which the Borrower receives an irrevocable
interest.
1.61 Revolving Credit Loans has the meaning set f orth
in Section 2.1.
1.62 Revolving Credit Note has the meaning set forth in
Section 2.3.
1.63 Revolving Rate has the meaning set forth in
Section 2.5.
1.64 Rights means rights, remedies, powers, privileges
and benefits.
1.65 Security Agreements means those certain security
agreements by and between Borrower and the Lender and between
American Life Resources Corporation and Living Benefits, Inc.,
and Lender substantially in the form of Exhibit E attached
hereto, as the same may be amended, supplemented, or otherwise
modified from time to time.
1.66 Security Documents means (i) the Guaranty,
(ii) the Security Agreements, (iii) the Validity Agreements,
(iv) the Assignment of Rights of National Capital Benefits, Corp.
in NCB Insurance Limited Contract, (v) the Assignment of Rights
of NCB Insurance Limited in AMSLRC Contract, and (vi) all other
documents, certificates and instruments from time to time
securing or guaranteeing the obligations, in each case as the
same may be amended, modified, restated, supplemented, renewed,
extended, substituted for or replaced from time to time.
1.67 Subsidiary is every firm, corporation,
association, partnership, joint venture, trust, or other entity
of which an aggregate of fifty percent (50%) or more of the
equity interests or the issued and outstanding stock having
ordinary voting power (except directors' qualifying shares) is,
at the time the determination is being made, is owned, either
directly or indirectly, or is controlled by a Person or one or
more such Person's Subsidiaries.
1.68 Support Party(ies) means Kenneth Klein, Jeffrey S.
Goldstein and/or National Capital Management Corporation.
1.69 Tangible Net Worth means the excess, if any, of
the total assets of Borrower over all items of indebtedness,
obligation or liability which would be classified as liabilities
of Borrower, each to be determined in accordance with GAAP except
for indebtedness, obligations or liabilities which are
subordinated to the Obligations (the terms of such subordination
to be acceptable to Lender); provided, however, for purposes of
any computation of Tangible Net Worth, "assets" shall not include
(i) goodwill (whether representing the excess of cost over book
value of assets acquired or otherwise), (ii) patents, trademarks,
trade names, copyrights, and franchises and (iii) all other
similar assets which would be classified as intangible assets
under GAAP.
1.70 Taxes means all taxes, assessments, fees, levies,
imposts, duties, deductions, withholdings, or other charges of
any nature whatsoever from time to time or at any time imposed by
any Law or Governmental Authority.
1.71 UCC means the Uniform Commercial Code as enacted
in the State of Ohio or other applicable jurisdiction, as
amended.
1.72 Unassigned Eligible Policy is defined in the
definition of Eligible Policy above.
1.73 Unused Line Fee is defined in Section 2.14.
1.74 Validity Agreement means the Validity and Support
Agreement of Kenneth Klein, the Validity and Support Agreement of
Jeffrey S. Goldstein and the Validity and Support Agreement and
Guaranty of National Capital Management Corp., to be executed and
delivered by Kenneth Klein, Jeffrey S. Goldstein and by National
Capital Management Corp., respectively, to Lender on or about the
Closing Date, as amended, modified, restated, supplemented or
renewed from time to time, in the forms set forth in Exhibit D.
1.75 Working Capital means, at the end of each calendar
month, an amount equal to Borrower's cash plus seven and one-half
percent (7.5%) of Borrower's Death Benefit receivables and
receivables from AMIC/AMSLRC Contracts plus Borrower's
availability under the commitment minus accounts payable and
minus current accrued expenses.
Section 2. REVOLVING CREDIT FACILITY.
2.1 Revolving Credit Commitment. Subject to and in
reliance upon the terms, conditions, representations and
warranties contained in this Agreement, Lender agrees to make
revolving credit loans to Borrower in one or more advances (the
"Revolving Credit Loans") so long as the aggregate of the
Revolving Credit Loans outstanding never exceeds the lesser of
(a) an amount equal to the Borrowing Base minus the aggregate
amount of reserves, if any, established by Lender, or (b) the
Commitment. Lender shall have the right to establish reserves
with respect to outstanding loans against the Death Benefit of
Unassigned Eligible Policies or Eligible Policies in such amounts
as Lender shall deem necessary or appropriate in its credit
judgment. Lender shall have no obligation to make any Revolving
Credit Loan on a non-Business Day, or on or after the Commitment
Termination Date; provided that, Borrower's Obligations and
Lender's Rights under the Loan Documents shall continue in full
force and effect until the obligations are paid and performed in
full. During the Commitment Period, Borrower may borrow, repay
and reborrow the Revolving Credit Loans in whole or part, all in
accordance with terms and conditions of this Agreement.
2.2 Borrowing Procedure; Disbursement. Each Revolving
Credit Loan shall be made on Borrower's notice (the "Advance
Request") to Lender requesting an advance on a certain date (the
"Borrowing Date"). Each Advance Request shall be substantially
in the form of Exhibit A attached hereto and must be received by
Lender no later than Noon (Eastern Standard Time) one (1)
Business Day preceding the Borrowing Date.
2.3 Revolving Credit Note. All Revolving Credit Loans
shall be evidenced by one (1) promissory note executed by
Borrower, substantially in the form of Exhibit B attached hereto
(the "Revolving Credit Note"), payable to the order of Lender,
representing the obligation of Borrower to pay the aggregate
unpaid principal amount of all Revolving Credit Loans made by
Lender, together with interest thereon as prescribed by this
Agreement.
2.4 Manner of Payments. All payments made by Borrower
to Lender hereunder on account of principal, interest or
otherwise shall be received by Lender not later than 11:00 A.M.,
Eastern Standard Time, at Lender's account number 00000404443 at
Lender's banking office in Columbus, Ohio or at such other place
as Lender shall direct, in immediately available United States
funds. Any payments made by Borrower to Lender by mail shall not
be effective until received by Lender as set forth in this
Section 2.4. If any payment by Borrower under this Agreement or
the Revolving Credit Note is to be made on a day which is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time will in such case be
included in computing interest in connection with such payment.
2.5 Interest. The Revolving Credit Loans shall bear
interest from day to day at a rate per annum which shall from day
to day be equal to either (a) the lesser of (i) the sum of one
half percent (.50%) plus the Prime Rate in effect from day to
day, and (ii) the Maximum Rate, or (b) the lesser of (i) the sum
of two and seven eighths percent (2.875%) plus the LIBOR Rate
then in effect for such fiscal quarter, and (ii) the Maximum Rate
(the "Revolving Rate"). Borrower may choose a Revolving Rate
based on the LIBOR Rate or the Prime Rate only on the first day
of any calendar quarter as set f orth in the Revolving Credit
Note. Accrued and unpaid interest on the Revolving Credit Loans
for each month (or any shorter period) shall be payable monthly
in arrears on the last day of such month (or shorter period),
commencing on the first such date to occur after the date of this
Agreement and continuing regularly and monthly thereafter until
the Obligations evidenced by the Revolving Credit Note are paid
in full; and, interest shall also be paid on the Commitment
Termination Date (whether at, stated maturity, by acceleration or
otherwise) and, after the Commitment Termination Date, on demand.
2.6 Computation of Interest.
(1) Interest on the Revolving Credit Note shall be
calculated on the basis of actual days elapsed, but computed
as if each year consisted of 360 days, subject to the
provisions of Section 8.15 below. Further, for the purpose
of computing interest, all items of payment received by
Lender in immediately available funds shall be applied by
Lender against the obligations on the Business Day such
payment is received and, any other items of payment received
in a form other than immediately available funds shall be
applied by Lender (subject to final payment of all drafts
and other items) against the Obligations on the second
Business Day after receipt. The determination of when a
payment is received by Lender will be made in accordance
with Section 2.4. Any change in the Revolving Rate resulting
from a change in the Prime Rate shall become effective as of
the day on which such change in the Prime Rate becomes
effective and any change in the LIBOR Rate shall become
effective as of the first day of the succeeding fiscal
quarter of Borrower. Each determination of an interest rate
by Lender pursuant to any provision of this Agreement shall
be presumptively conclusive and binding on Borrower in the
absence of manifest error, subject, however, to the
provisions of Section 8.15 below.
(2) Notwithstanding anything to the contrary in the
Revolving Credit Note or herein contained, in the event that
the Revolving Rate should ever exceed the Maximum Rate,
thereby causing the interest accruing on any of the
indebtedness evidenced by the Revolving Credit Note to be
limited to such Maximum Rate, then any subsequent reduction
in the Prime Rate or the LIBOR Rate shall not reduce the
rate of interest charged hereunder below the Maximum Rate
until the total amount of interest accrued on such
indebtedness equals the amount of interest which would have
accrued on such indebtedness if the Revolving Rate had been
in effect at all times in the period during which the rate
charged thereon was limited to the Maximum Rate.
2.7 Default Rate. At Lender's option and to the
extent permitted by applicable Law and this Agreement, all past
due Obligations shall bear interest from maturity (whether at
stated maturity, by acceleration or otherwise) at the Revolving
Rate then in effect plus three percent (3.0%) until paid,
regardless of whether such payment is made before or after entry
of a judgment.
2.8 Principal Payments. Death Benefits and all
proceeds from any amount paid under the AMIC/AMSLRC Contracts as
to any Purchased Policy shall be paid directly to Lender and
shall be applied by Lender on the principal balance of the
Revolving Credit Note, subject to the provisions of Section 2.12
below. The unpaid principal balance of the Revolving Credit Note
shall be due and payable on the Commitment Termination Date.
2.9 Mandatory Payment of Revolving Credit Loans. If,
at any time during the Commitment Period, (i) the unpaid
principal balance of the Revolving Credit Note shall exceed the
lesser of (a) the Borrowing Base minus the aggregate amount of
reserves, if any, established by Lender pursuant to Section 2.1,
and (b) the Commitment, then, Borrower shall immediately repay,
without premium or penalty, the Revolving Credit Loans in an
amount equal to such excess, along with accrued unpaid interest
on the amount so repaid to the date of such repayment.
2.10 Cancellation of Commitment. The Commitment shall,
at the election of Lender, terminate upon the occurrence and
continuance of an Event of Default; provided, however, that the
Commitment shall automatically terminate upon the occurrence of
an Event of Default pursuant to Section 6.4(a) through (f) and
Section 6.4 (i) (with respect to Section 6.4(a) through (f)
inclusive). Borrower may terminate the Commitment and this
Agreement in its entirety by giving written notice of such
termination to Lender no less than twenty (20) days prior to the
designated termination date, and on the designated termination
date, all of the obligations shall become due and payable in
immediately available funds. If Borrower so terminates the
Commitment and this Agreement before the first anniversary of the
initial advance under this Agreement, Borrower will pay to Lender
a $50,000 fee; provided, however, if Borrower (i) has been
profitable for three consecutive months and (ii) is in compliance
with all terms and conditions of the Loan Document and
(iii) requests up to ten million dollars ($10,000,000) of funding
in addition to the Commitment herein under terms and conditions
substantially the same as the terms and conditions herein and
(iv) Lender refuses such request, the $50,000 fee will be waived.
2.11 Voluntary Principal Prepayments. Prior to the
Commitment Termination Date, the Revolving Credit Loans may be
prepaid in whole or in part at any time. Subject to the
conditions of this Agreement, amounts so prepaid may be
reborrowed hereunder, and this Agreement shall not be deemed to
be terminated or canceled prior to the expiration or termination
of Lender's commitment to lend hereunder solely because the
obligations may from time to time be paid in full. on such
prepayment in whole before the first anniversary of the initial
advance under this Agreement, Borrower will pay to Lender a
$50,000 prepayment fee, unless, such prepayment is funded by the
proceeds from a sale of the Eligible Policies or a stock
offering. If Borrower (i) has experienced positive after tax
income for three consecutive months and (ii) is in compliance
with all terms and conditions of the Loan Documents and
(iii) requests up to ten million dollars ($10,000,000) of funding
in addition to the Commitment herein under terms and conditions
substantially the same as the terms and conditions herein and
(iv) Lender refuses such request, the $50,000 prepayment fee will
be waived.
2.12 Order of Application. At any time during which a
Default or Event of Default has occurred and is continuing, all
payments and prepayments of the obligations, including proceeds
from the exercise of any Rights under the Loan Documents or
proceeds of any of the Collateral shall be applied to the
Obligations in the order and manner as Lender deems appropriate.
2.13 Use of Proceeds. Borrower shall use the proceeds
of the Revolving Credit Loans to refinance existing Debt owed to
Transamerica Lender Financing, a division of Transamerica
Business Credit, by Borrower and to finance the working capital
needs of Borrower arising in the ordinary course of business.
All loan proceeds shall be used by Borrower only for legal and
proper corporate purposes (duly authorized by its Board of
Directors) which are consistent with all applicable laws and
statutes.
2.14 Unused Line Fee. Borrower will be required to pay
to Bank an unused line fee equal to one-quarter of one percent
(.25%) per annum on the average amount of the unused portion of
the Revolving Loan (the "Unused Line Fee"). The Unused Line Fee
will be in addition to the interest charge provided for herein
and will be payable quarterly in arrears. The Unused Line Fee
shall be calculated on the basis of actual days elapsed, but
computed as if each year consisted of 360 days.
Section 3. CONDITIONS PRECEDENT.
3.1 Initial Loans. Lender will not be obligated to
make the initial Revolving Credit Loan unless it has received all
of the items described on Schedule 3.1 in form and substance
satisfactory to Lender and its legal counsel and unless Borrower
has complied with all the conditions and terms described on
Schedule 3.1 to the satisfaction of Lender and its legal counsel.
3.2 Each Loan. In addition, Lender will not be
obligated to make any Revolving Credit Loan unless (a) the Lender
has received an Advance Request with respect to such proposed
Revolving Credit Loan and each statement or certification made by
Borrower in its Advance Request shall be true and correct in all
material respects on the Borrowing Date; (b) at the time of each
Revolving Credit Loan (i) the representations and warranties made
in the Loan Documents are true and correct in all material
respects, and (ii) neither any change in the financial condition
or prospect of Borrower which could have a Material Adverse
Effect nor any Default or Event of Default shall have-occurred
and shall be continuing; (c) the making of each Revolving Credit
Loan is permitted by Law; (d) all conditions related to any
Revolving Credit Loan are satisfactory to Lender and its counsel,
and, if requested by Lender, Borrower shall have delivered to
Lender evidence substantiating any of the conditions contained in
this Agreement which are necessary to enable Borrower to qualify
for any Revolving Credit Loan; and (e) Lender shall have received
such other agreements, documents, instruments, information,
approvals or opinions as Lender may reasonably request.
The delivery of an Advance Request by Borrower and the
acceptance by Borrower of the proceeds of any Loan hereunder
shall each be deemed to constitute a representation and warranty
by Borrower as to the matters specified in this Section 3.2.
3.3 Waiver of Conditions. Lender may, at its
election, make any Revolving Credit Loan without all conditions
being satisfied, but this shall not be deemed to be a waiver of
the requirement that each such condition precedent be satisfied
as a prerequisite for any subsequent Revolving Credit Loan,
unless Lender specifically waives each such item in writing.
Section 4. REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants to Lender as follows:
4.1 Organization and Powers. Borrower (i) is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, (ii) has all requisite
corporate power and authority to own its property and assets and
to carry on its business as now conducted and as proposed to be
conducted, (iii) is qualified to do business in every
jurisdiction where such qualification is necessary, (iv) has the
corporate power and authority to execute, deliver and perform
each Loan Document to which it is or will be a party, and (v) has
taken all corporate action necessary to authorize the execution,
delivery and performance of the Loan Documents to which it is or
will be a party.
4.2 Validity and Binding Nature. This Agreement has
been duly executed and delivered by Borrower and is, and each
other Loan Document when executed and delivered by Borrower will
be, a legal, valid and binding obligation of Borrower enforceable
against it in accordance with its terms (except as enforcement
thereof may be limited by bankruptcy, reorganization, insolvency,
moratorium or other laws affecting the enforcement of creditors'
rights generally).
4.3 Compliance with Laws and Documents. Borrower is
not, nor will the execution, delivery and the performance of and
compliance with the terms of the Loan Documents cause Borrower to
be, in violation of any Laws or its bylaws or certificate of
incorporation (as each may be amended). The execution, delivery
and the performance of and compliance with the terms of the Loan
Documents are not inconsistent with, and will not conflict with
or result in any breach of, or constitute a default under, or
result in the creation or imposition of any Lien (except pursuant
to the Loan Documents) upon any of the property, assets or
revenues of Borrower pursuant to the terms of, any indenture,
mortgage, lease, deed of trust, agreement, contract instrument or
Law to which Borrower is a party or by which Borrower or any of
Borrower's property, assets or revenue is bound or to which it is
subject.
4.4 Prior Names. Except as disclosed on Schedule 4.4,
in the last five years, Borrower has not transacted business
under any other corporate or trade name, been a party to any
merger, combination, or consolidation or acquired all or
substantially all of the assets of any Person.
4.5 Relationship with Lender. No Person who may be
deemed to have "control" of Borrower is an "executive officer,"
"director," or "principal shareholder" of Lender or any
correspondent of Lender, as such quoted terms are defined in
Section 215.2 of Regulation 0 of the Board of Governors of the
Federal Reserve System, as amended.
4.6 Financial Statements. The Current Financials were
prepared in accordance with GAAP and present fairly the financial
condition and the result of operations of Borrower as of, and for
the portion of the fiscal year ending on, the date or dates
thereof. All material liabilities (direct or indirect, fixed or
contingent) of Borrower as of the date or dates of the current
Financials are reflected therein or in the notes thereto.
Between the date or dates of the Current Financials and the date
hereof, there has been no material adverse change in the
financial condition of Borrower, nor has Borrower incurred any
material liability (direct or indirect, fixed or contingent).
4.7 Registrations and Licenses. Borrower possesses
adequate authority and licenses including, without limitation
licenses and registrations as a viatical settlor, to continue to
conduct its business as presently conducted.
4.8 Litigation. Except for the Litigation described
on Schedule 4.8, Borrower is not involved in, nor is Borrower
aware of, any Litigation involving Borrower or any Guarantor, nor
are there any outstanding or unpaid judgments against Borrower or
any Guarantor. None of the Litigation described on Schedule 4.8
could, collectively or individually, have a Material Adverse
Effect if determined adversely against Borrower or any Guarantor.
4.9 Taxes. All tax returns and reports of Borrower
required to be filed have been filed, and all Taxes imposed upon
Borrower which are due and payable have been paid, other than
Taxes being contested in good faith for which the criteria for
Permitted Liens have been satisfied as set forth on
Schedule 4.13.
4.10 Government Regulation. Neither Borrower nor any
transaction contemplated hereunder is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power
Act, the Investment Company Act of 1940, the Interstate Commerce
Act (as any of the preceding acts have been amended), any
regulations promulgated by the Office of Foreign Assets Control
as codified in Chapter V of 31 C.F.R., or any other Law (other
than Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System) which regulates the incurrence of Debt.
4.11 Employee Benefit Plans. Borrower does not
currently sponsor or contribute to, nor has any contract or other
obligation to contribute to (nor has Borrower in the preceding
sixty (60) calendar months sponsored or contributed to, or
contracted to or become otherwise obligated to contribute to) any
Plan or any Multiemployer Plan.
4.12 Purpose of Loan. The proceeds of the Advances
will be used only for the purposes set forth in Section 2.13 and
shall not be used (a) to purchase or carry any "Margin Stock"
(within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System), or (b) for any purpose
in violation of Regulations G, T, U or X of said Board of
Governors.
4.13 Properties; Lions; Debt. Borrower has good and
marketable title to all of its property. Except for Liens
permitted by Lender to be listed on Schedule 4.13 and the Liens
in favor of Lender (collectively, the "Permitted Liens"), there
is no Lien on any of Borrower's property or income. Borrower has
no Debt other than that listed on Schedule 5.2(a).
4.14 Material Agreements. Borrower is not, nor will
the execution, delivery and performance of and compliance with
the terms of the Loan Documents cause Borrower to be, in default
(nor has any potential default occurred) under any material
agreement, document or instrument other than such defaults or
potential defaults which could not, individually or collectively,
cause a Material Adverse Effect.
4.15 No Consents. Except as set forth on
Schedule 4.15, no order, consent, approval, license, permit,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except as heretofore have been
obtained or made), or exemption by, any Person is required to
authorize, or is required in connection with, the execution,
delivery, performance, legality, validity, binding effect, or
enforceability of the Loan Documents.
4.16 Subsidiaries. Borrower has no Subsidiaries other
than American Life Resources corporation, Living Benefits, Inc.
and NCB Insurance Limited.
4.17 Capitalization and Control. The capitalization of
Borrower as set forth on Schedule 4.17 is true, correct and
complete. All of the Issued and outstanding stock of the
Borrower has been duly and validly issued in accordance with
Borrower's articles of incorporation and all applicable
requirements of law and is fully paid and nonassessable. There
are no options, warrants, rights, calls, commitments, plans,
contracts or other agreements granted or issued regarding the
stock of Borrower and none are authorized except as provided in
the BOCP V Transaction and as provided in the VFC Trust
Stockholder Agreement.
4.18 Business of NCB Insurance Limited. NCB Insurance
Limited conducts no business other than the issuance and
administration of the AMIC Contract between it and the Borrower
and the administration of the AMSLRC Contracts. All premiums
and/or fees to be paid by the Borrower to NCB Insurance Limited
arising from or on account of the AMIC Contract which were due
and payable prior to the date hereof have been paid in full by
the Borrower and the Borrower has caused NCB Insurance Limited to
pay any premiums and/or fees arising from or related to the
AMSLRC Contracts which were due and payable prior to the date
hereof and, accordingly, the AMIC Contract and the AMSLRC
Contracts are each in full force and effect.
4.19 General. There are no facts or conditions
relating to the Loan Documents, any of the Collateral or the
financial condition and business of Borrower or Guarantors which
could, individually or collectively, cause a Material Adverse
Effect and which have not been revealed in writing to Lender.
All writings heretofore or hereafter exhibited or delivered to
Lender by or on behalf of Borrower and Guarantors are and will be
genuine and in all respects what they purport and appear to be.
No information furnished to Lender by or on behalf of Borrower
and Guarantors contains any material misstatement of fact or
omits to state any fact necessary to make the statements
contained herein or therein, in light of the circumstances in
which they were made, not misleading which would result in a
Material Adverse Effect.
Section 5. COVENANTS.
5.1 Affirmative Covenants. Borrower covenants and
agrees with Lender, so long as this Agreement shall remain in
effect and the principal of or interest on the Revolving Credit
Note, or any other Obligation, shall be unpaid, as follows:
(1) Compliance with Law; Maintenance of Properties.
Borrower shall do or cause to be done all things necessary
(i) to preserve and keep in full force and effect at all
times its corporate existence and its rights, licenses and
franchises, (ii) to continue to conduct its business
substantially as now proposed to be conducted, (iii) to
comply with all applicable Laws, the violation of which
might have a Material Adverse Effect on the operations of
Borrower or the Collateral, and (iv) to preserve all
property in use or useful in the conduct of its
business and keep the same in good repair, working
order and condition and from time to time make, or
cause to be made, all necessary and proper
repairs, renewals and replacements, betterment and
improvements thereto so its business carried on in
connection therewith may be properly
and
advantageously conducted at all times.
(2) Insurance. Borrower shall maintain
comprehensive general liability and public liability
insurance and such other types of insurance
reasonably requested by Lender, all such insurance to
be maintained with financially sound and reputable
insurance companies, against such casualties, risks
and contingencies, and in such types and amounts, as
are consistent with customary practices and
standards of companies engaged in a similar business.
(3) Inspection. Borrower shall permit any
representative of the Lender to visit and inspect any
of its property, including the Collateral, to examine
its books and records and to make copies and take
extracts therefrom, and to discuss its affairs,
finances and accounts with its officers.
(4) Further Assurances. Borrower shall execute
any and all further documents and take all further
actions which may be required under applicable law,
or which the Lender may request, to grant, preserve,
protect and perfect the first priority Lien on
the Collateral created by the Security Documents
(subject only to Liens permitted by the Loan
Documents), including without limitation, those actions
required to perfect Liens in the Purchased
Policies in accordance with the laws of the
jurisdiction governing the assignment of such
Purchased Policies. Borrower shall execute any and
all further documents and take all further actions
which may be required or which the Lender may
request to cause all Death Benefits and all proceeds
from the AMIC/AMSLRC Contracts to be paid directly to
Lender.
(5) Indemnity. Borrower shall indemnify Lender
and its officers, directors, employees,
representatives, agents, attorneys and affiliates
(each, an "Indemnified Party") from, hold each of
them harmless against, promptly upon demand pay or
reimburse each of them with respect to any and all
actions, suits, proceedings (including
any
investigations,. litigation or inquiries), claims,
demands, causes of action, costs, losses,
liabilities, damages or expenses of any kind or
nature whatsoever other than those proximately
resulting from an Indemnified Party's gross
negligence or willful misconduct (collectively, the
"Indemnity Matters") which may be incurred by or
asserted against or involve any of them (whether or
not any of them is designated a party thereto) as a
result of, arising out of or in any way related to (i)
an actual or proposed use by Borrower of the
proceeds of any of the Revolving Credit Loans, (ii)
the breach of any representation or warranty set forth
in any Loan Document, or (iii) any other aspect of
this Agreement and the other Loan Documents,
including, without limitation, the fees and
disbursements of counsel (including allocated costs
of internal counsel), and all other expenses
incurred in connection with investigating, defending
or preparing to defend any such Indemnity Matter.
Borrower shall be obligated to pay or reimburse
each Indemnified Party for all out-of-pocket costs and
expenses (including, without limitation,
attorneys' fees
and
expenses) incurred by such Indemnified Party in
connection
with any Indemnity Matter at the time such costs
and expenses are incurred and such Indemnified Party
has given Borrower written notice thereof.
Borrower's obligations under this Section are subject
to Section 8.13 hereof. In
the event that any claim, demand, investigation,
litigation or inquiry (a "Claim") is brought. against
any Indemnified Party, the Indemnified Party agrees to
give written notice to Borrower with respect to same,
together with a copy of such Claim, and so long as
no Event of Default shall have occurred and be
continuing, Borrower shall have the right in good
faith and by appropriate proceedings to defend any
Indemnity Matter and to employ counsel acceptable to
Lender to conduct such defense (at Borrower's sole
expense) so long as such defense shall not involve
any danger of the foreclosure, sale, forfeiture or
loss of, or imposition of any Lien, other than a
Permitted Lien, on any part of the Collateral, or
subject any Indemnified Party to criminal liability.
Should Borrower elect to engage its own counsel
acceptable to Lender, Lender may continue to
participate in the defense of any such Indemnified
Matter and will retain the right to settle any such
matter on terms and conditions satisfactory to Lender.
All such settlements shall be paid by and remain the
sole responsibility of Borrower. In the event
Borrower does not accept the defense of the Indemnity
Matter as provided above, Lender shall have the full
right to defend against such Claim, in its sole
discretion, and pursue its rights hereunder.
(6) Books and Records. Borrower shall
keep, in accordance with GAAP, proper and complete
books, records and accounts.
(7) Taxes. Borrower shall promptly pay when due
any and all Taxes due, except Taxes for which the
criteria for Permitted Liens have been satisfied.
(8) Payment of Obligations. Borrower shall
promptly pay all of its Debt as it becomes due except
to the extent that any such Debt is being contested
in good faith and by appropriate and lawful
proceedings diligently conducted and for which
reserves or other provisions (if any) required by GAAP
shall have been made; provided, however, Borrower shall
not, directly or indirectly, make (i) any
prepayment of principal of or interest on any
Debt other than the Obligations, or (ii) any
payment of principal. of or interest on any Debt
subordinated to the Obligations (such subordination
to be in form and substance satisfactory to Lender),
without the prior written consent of Lender which
consent shall not be unreasonably withheld. The
foregoing notwithstanding, Borrower shall not, directly
or indirectly, make any payment of principal or
interest on any Debt or obligation to National
Capital Management Corporation, including, without
limitation, management fees or
reimbursements unless, during the immediately preceding
six (6) calendar months, National Capital Management
Corporation has not been obligated to perform under
Subparagraph 11(a) or Subparagraph 11(d) of its
Validity Agreement; provided, however, this limitation
shall not include reimbursement by the Borrower to
National Capital Management Corporation for the
Borrower's pro rata share of expenses incurred by
National Capital Management Corporation for goods and
services to the Borrower, which goods and services
were provided in an arms-length transaction with a
Person who is not an Affiliate or an employee of an
Affiliate of either the Borrower or National Capital
Management corporation.
(9) Expenses of Lender. Whether or not the
transactions contemplated by this Agreement shall be
consummated, Borrower shall pay on demand all out-of-pocket
expenses (including, without limitation, the fees and
expenses of counsel for Lender) in connection with the
negotiation, preparation, execution, filing, recording,
refiling, rerecording, modification, release, supplement and
waiver of the Loan Documents and the making, servicing and
collection of the Obligations including, without limitation,
the Obligations under Section 7.4. Notwithstanding the
foregoing, the expenses payable by Borrower pursuant to this
Section 5.1(i) shall not exceed $25,000 for out-of-pocket
expenses of Lender incurred in connection with the initial
negotiation, preparation and execution of this Agreement and
the other Loan Documents.
(10) Supplemented Schedules. Borrower shall as soon as
possible and in any event within fifteen (15) days after the
occurrence thereof, supplement in writing and deliver to
Lender revisions of the Schedules annexed to this Agreement
to the extent necessary to disclose new or changed facts or
circumstances after the Closing Date so as to cause the
representations and warranties set forth herein to remain
accurate and not misleading; provided, that, subsequent
disclosures shall not constitute a cure or waiver of any
Default or Event of Default resulting from the matters
disclosed.
(11) Premiums on Policies. Borrower shall be solely
responsible for, and shall promptly pay all premiums when
due on the Purchased Policies and all premiums, fees and
other charges and expenses on the AMIC/AMSLRC Contracts.
(12) Purchase Guidelines. The purchase of life
insurance policies by Borrower shall comply at all times
with the Purchase Guidelines, including without limitation,
the terms, conditions and disclosures in each contract of
purchase by and between Borrower and the owner of such life
insurance policy to be purchased pursuant thereto.
(13) Purchase Requirements. Commencing with the fiscal
quarter beginning on January 1, 1996, during each fiscal
quarter of the Commitment Period, Borrower shall purchase
Eligible Policies and Unassigned Eligible Policies with
cumulative average Death Benefits of four million dollars
($4,000,000).
(14) Maintenance of NCB Insurance Limited. Borrower
shall promptly take all actions necessary to ensure the
continued existence and solvency of NCB Insurance Limited,
including, without limitation, the making of loans,
advances, extensions of credit or capital contributions to
NCB Insurance Limited to the extent necessary to ensure the
continued existence and solvency of NCB Insurance Limited.
5.2 Negative Covenants. Borrower covenants and agrees
with Lender, so long as this Agreement shall remain in effect and
the principal of or interest on the Revolving Credit Note, or any
other Obligation, shall be unpaid, as follows:
(1) Debt. Without the prior written consent of
Lender, Borrower shall not, directly or indirectly, create,
incur or suffer to exist any direct, indirect, fixed or
contingent liability for any Debt, except for (i) the
obligations, (ii) the Debt described on Schedule 5.2(a),
(iii) obligations to pay Taxes, (iv) accounts payable in the
ordinary course of business, (v) salaries and
wages, (vi) accrued expenses, deferred credits
and loss contingencies which are properly classified
as liabilities or
indebtedness under GAAP, (vii) purchase money
indebtedness up to $100,000 in the aggregate from the
date hereof to the date the Obligations are paid and
performed in full for the purpose of financing the
purchase of equipment, and (viii) Debt owing to any
Person that is subordinated to the Obligations on
terms and conditions satisfactory to Lender.
(2) Liens. Without the prior written
consent of
Lender, Borrower shall not, directly or
indirectly,
(i) create, incur or suffer or permit to be
created or incurred or to exist any Lien upon any of
its assets except for (a) the Liens in favor of
Lender, and (b) the Liens described on Schedule
4.13, if any, or (ii) enter into or permit to exist
any arrangement or agreement, other than the Loan
Documents, which directly or indirectly prohibits
Borrower from creating or incurring any Lien on any of
its assets.
(3) Acquisitions, Mergers and Dissolutions.
Without
the prior written consent of Lender, Borrower shall
not, directly or indirectly (i) acquire all or any
substantial portion of the assets or stock-of, or
interest in, any Person, (ii)
merge or consolidate with any Person,
(iii) liquidate, wind up, or dissolve itself (or suffer
any liquidation or dissolution) or (iv) otherwise
undergo a change in control.
(4) Loans, Advances and Investments. Borrower
shall
not directly or indirectly, make any loan,
advance or extension of credit, or capital
contribution to, make any investments in, or purchase
or commit to purchase any stock or other securities
or evidences of contractual obligations of, or
interests in, any Person, except for (i) investments in
obligations of the United States of America and
agencies thereof and obligations guaranteed by the
United States of America maturing
within one year from the date of
acquisition, and (ii) certificates of deposit
issued by commercial banks organized under the Laws
of the United States of America or any state thereof
and having a combined capital, surplus and undivided
profits of not less than $500,000, or completely
insured by the Federal Deposit Insurance
corporation; provided, however, this provision does
not prohibit the Borrower from purchasing policies of
life insurance in the ordinary course of its
business operations or from making loans, advances,
extensions of credit or capital contributions to NCB
Insurance Limited to the extent necessary for
Borrower's compliance with Section 5.1(n).
Any such loans, advances, extensions of
credit or capital contributions to NCB Insurance
Limited, which in the aggregate exceed $50,000 per year
shall require the prior written consent of Lender.
(5) Employee Benefit Plans. Borrower shall
not,
directly or indirectly, sponsor or contribute to, or
create or suffer to exist any contractual or other
obligation to contribute to, any Plan or Multiemployer
Plan.
(6) Dividends. Borrower shall not pay any
dividends
or distributions to any Person without Lender's
prior written consent.
(7) Issuance of Securities. Without Lender's
prior
written consent, Borrower shall not, directly or
indirectly, issue, sell or otherwise dispose of (i) any
of its shares of capital stock or other investment
securities of any class such as to result in a change
in the controlling interest in Borrower held by
National Capital Management Corporation, (ii) any
securities convertible into or exchangeable for any
such shares, or (iii) any carrying Rights,
warrants, options, or other rights to subscribe for
or purchase any such shares, except pursuant to the
provisions of the BOCP V Transaction.
(8) Transactions with Affiliates. Borrower shall
not, directly or indirectly, enter into any
transaction (including, but not limited to, the sale
or exchange of property or the rendering of
service) with any of its Affiliates, other than in
the ordinary course of business of Borrower and upon
fair and reasonable terms no less favorable than
Borrower could obtain or could become entitled
to in an arm's-length transaction with a Person
which was not an Affiliate. All existing
transactions of Borrower with any Affiliate are
described on Schedule 5.2(h) hereto.
(9) Sale of Assets. Without Lender's prior
written consent, Borrower shall not, directly or
indirectly, sell, lease or otherwise dispose of any
Material Assets other than in the ordinary course of
business without paying the net proceeds of such sale,
lease or other disposition to Lender to be applied to
the obligations.
(10) Change in Management of Borrower. Without
the prior written consent of Lender, which consent
shall not be unreasonably withheld, Borrower shall not
initiate a change in the management of Borrower
until replacement management acceptable to Lender has
been engaged by Borrower. If a change in
management occurs which is not initiated by
Borrower, Borrower shall obtain replacement
management acceptable to Lender within sixty (60)
days. During such sixty (60) day period, in
addition, and supplemental to all other Rights of
Lender under this Agreement, Lender may install an
auditor(s) in any of the business locations of
Borrower to ascertain Borrower's compliance with
this Agreement.
(11) Debt to Net Worth. Borrower shall not permit
its ratio of (i) Debt minus Debt subordinated to the
obligations on terms and
conditions satisfactory to Lender, to
(ii) Tangible Net Worth plus Debt subordinated to
the Obligations on terms and conditions satisfactory to
Lender, to exceed 12.0 to 1.0, as calculated on the
last day of each calendar month.
(12) Tangible Net Worth. Borrower shall not
permit its Tangible Net Worth plus Debt subordinated to
the obligations on terms and conditions satisfactory
to Lender to be less than (i) $2,500,000 during the
first year of the Commitment Period and (ii)
$3,000,000 during each successive year of the
Commitment Period, as calculated on the last day of
each calendar quarter.
(13) Working Capital. Borrower shall not permit
its Working Capital to be less than the aggregate
amount of its interest expense (irrespective of to
whom interest was paid) for the most recent three (3)
month period, as calculated on the last day of each
calendar month.
(14) Minimum Availability. Borrower will have a
minimum of $1,500,000 of excess Borrowing Base availability
at funding and Borrower will maintain excess Borrowing Base
availability (to be reserved against the Borrowing Base) AS
FOLLOWS:
During Month after Minimum
Initial Funding Availability
1 $1,120,000
2 $990,000
3 $860,000
4 $740,000
5 $630,000
6 $540,000
Thereafter $500,000
The above notwithstanding, the Minimum Availability
requirement will be reduced each month by the product of
(a) the cumulative Cost of Eligible Policies after the
Closing Date associated with the purchase of Eligible
Policies in excess of a cumulative $1,575,000 of Death
Benefits for each month subsequent to the Closing Date times
(b) seven and one-half percent (7.5%). For purposes of this
calculation, no Death Benefit in excess of $550,000 for any
Eligible Policy shall be included.
(15) Compliance with Laws and Documents. Borrower will
not, directly or indirectly, violate the provisions of any
Laws, its articles of incorporation or bylaws or any
agreements.
(16) New Businesses. Borrower will not, directly or
indirectly, engage in any business other than the purchase
of life insurance policies on terminally ill insureds at a
discount without the prior written consent of Lender, which
consent shall not be unreasonably withheld.
(17) Fiscal Year and Accounting Methods. Borrower will
not change its fiscal year, which currently end each
December 31, or method of accounting, other than immaterial
changes in methods to which its independent certified public
accountants concur without the prior written consent of
Lender, which consent shall not be unreasonable withheld.
(18) Use of Name Confidentiality. Without the prior
written consent of Lender, Borrower shall not use Lender's
name or trademark in connection with the operation of
Borrower's business, including, but not limited to, any
advertising undertaken by Borrower, and Borrower shall use
all reasonable efforts to keep confidential the terms and
conditions of the Loan Documents; provided, however,
Borrower may reveal such information as is necessary to
comply with all applicable Laws or as necessary to enter
into Escrow Agreements to consummate the purchase of
policies of life insurance.
5.3 Reporting Requirements. Borrower shall cause the
following to be furnished to Lender:
(1) As soon as available, but no later than ninety
(90) days after the last day of each fiscal year of
Borrower, audited consolidated and consolidating Financial
Statements showing the financial condition and result of
operations of Borrower as of, and for the year ended on,
such last day, accompanied by (i) the opinion of a firm of
independent certified public accountants acceptable to
Lender, based on an audit using generally accepted
auditing standards, that such Financial Statements
were prepared in
accordance with GAAP and present fairly the
financial condition and result of operations of
Borrower, and (ii) a Financial Report Certificate
with respect to such Financial Statements.
(2) As soon as available, but no later than
thirty (30) days after the last day of each
calendar month (i)
unaudited consolidated and consolidating Financial
Statements (balance sheet, income statement and
statements of cash flow) showing the financial
condition and results of operations of Borrower as of,
and for the period from the beginning of the current
fiscal year, to such last day, and (ii) a Financial
Report Certificate with respect to such Financial
Statements.
(3) As soon as available, but no later than
Tuesday of each week, as of Friday of the
preceding week (i) a Borrowing Base Report, (ii)
a Status of Life Insurance Policy Report
substantially in the form attached hereto as
Exhibit L, (iii) a Schedule of Life Insurance
Policies substantially in the form attached hereto as
Exhibit J, and (iv) a copy of each of the following
for each life insurance policy purchased by Borrower or
for which proceeds have been placed in Escrow by
Borrower during the preceding week: (a) contract of
purchase between Borrower and the owner of
such life insurance policy, setting forth the terms of
the transaction between Borrower and the owner, (b) a
Viator's Statement, executed by the insured and
duly notarized, evidencing (1) the insured's
consent to the
viatical
settlement, (2) the insured's acknowledgment of
his/her terminal illness, (3) the insured's
representation that he/she has a full and complete
understanding of the benefits of such life insurance
policy and acknowledgment that he/she has entered
into the settlement with Borrower freely and
voluntarily, and (4) the release of the insured's
medical records, (c) a written statement from a
licensed medical practitioner that the insured is of
sound mind and under no
constraint or undue influence, (d) confirmation
from at
least two (2) physicians retained by Borrower and
acceptable pursuant to the terms of the AMIC/AMSLRC
Contracts, that each has independently reviewed
all requested medical records of the insured and,
based upon such review, each has determined and set
forth the estimated life expectancy of
the insured (such physicians shall be deemed
acceptable to
Lender unless Lender notifies Borrower
otherwise),
(e) Waiver of Beneficiary Form, executed by all
beneficiaries of such life insurance policy, except for
such life insurance policies where the beneficiary is
the estate of the insured, (f) the Insurer
Questionnaire or written information, executed by the
insurer of such life insurance policy, setting forth
the material terms of such life insurance, and
confirming that such life insurance is
incontestable and that the suicide clause has been
satisfied, and (g) a disclosure statement,
executed by
Borrower and acknowledged by the insured making all
disclosures required by applicable law. The items
referred to in the immediately preceding clauses (i)
(iv) may be
furnished to Lender in one or more documents. Each
report prepared by Borrower shall be certified as true
and correct by the president, chief executive
officer or the vice president of administration of
Borrower.
(4) Within sixty (60) days prior to the end of
each
fiscal year, consolidated and consolidating financial
projections (balance sheet, income statement and cash flow
statement) of Borrower for the succeeding fiscal year on a
monthly basis, together with a certificate executed by the
chief financial officer of Borrower stating that such
financial projections are reasonable and the assumptions are
fair in light of current business conditions; provided,
however such projections for fiscal year 1996 shall be
provided on or before February 15, 1996.
(5) Notice, promptly after Borrower knows or has good
faith reason to believe, of (i) the existence and status of
any Litigation with respect to Borrower or any Guarantor
which could have a Material Adverse Effect, (ii) any change
in any material fact or circumstance represented or
warranted in any Loan Document, (iii) a Default or Event of
Default, specifying the nature thereof and what action
Borrower has taken, is taking, or proposes to take with
respect thereto, and/or (iv) any amendment or endorsement to
either the AMIC Contract or the AMSLRC Contract.
(6) Promptly, but within five (5) Business Days upon
request therefor by Lender, such information (not otherwise
required to be furnished under the Loan Documents)
respecting the business affairs, assets and liabilities of
Borrower or any Person guaranteeing or providing Collateral
to secure all or any part of the Obligations and such
opinions, certifications and documents, in addition to those
mentioned in this Agreement, as Lender may reasonably
request.
5.4 Use of Reports. Borrower acknowledges and agrees
that although Lender may rely on the unaudited financial
statements and reports delivered to Lender pursuant to
Section 5.3 to determine whether Borrower is in compliance with
the financial covenants set forth in Section 5.2, Lender may make
any adjustment consistent with GAAP to such reports and
statements, as it determines, in its sole discretion, which is
necessary to more accurately reflect the financial condition of
Borrower or to more accurately reflect the value of the
Collateral, including without limitation, the Cost of Eligible
Policies. Lender shall advise Borrower of any material
adjustments made pursuant to this Section 5.4.
Section 6. EVENTS OF DEFAULT.. The term "Event of Default"
means the occurrence of any one or more of the following events:
6.1 Payment of Obligation. The failure or refusal of
Borrower to pay any portion of the obligations as the same
becomes due in accordance with the terms of the Loan Documents,
including, without limitation, the failure of any Death Benefits
and/or any proceeds under the AMIC Contract or the AMSLRC
Contracts to be paid directly to Lender; provided, however, if
Death Benefits and/or proceeds under the AMIC Contract or the
AMSLRC Contracts are paid directly to the Borrower as a result of
inadvertence or mistake on the part of another Person, such
payments shall not constitute an Event of Default if the total
amount of such payments during any calendar month is less than
ten percent (10%) of all Death Benefits and/or proceeds under the
AMIC contract or the AMSLRC Contracts to be paid to Lender during
that calendar month and such payments are received by the Lender
from the Borrower on the next business day following receipt of
such payments by the Borrower.
6.2 Other Covenants. The failure or refusal of
Borrower to punctually and properly perform, observe and comply
with any covenant, agreement or condition contained in this
Agreement (other than those listed in Section 6.1) and such
failure or refusal shall continue for ten (10) Business Days from
the date of such failure or refusal.
6.3 Loan Documents and Security Documents. An Event
of Default shall occur and be continuing under any Security
Document or other Loan Document.
6.4 Bankruptcy. (a) Borrower or any Guarantor shall
commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy" as now or hereafter in
effect, or any successor thereto, (b) an involuntary case is
commenced against Borrower or any Guarantor and the petition is
not controverted within ten (10) days, or is not dismissed within
thirty (30) days, after commencement of the case, (c) a custodian
is appointed for, or takes charge of, all or any substantial part
of the property of Borrower or any Guarantor, (d) Borrower or any
Guarantor commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to
Borrower or any Guarantor or there is commenced against Borrower
or any Guarantor any such proceeding which remains undismissed
for a period of thirty (30) days, (e) Borrower or any Guarantor
is adjudicated insolvent or bankrupt, (f) Borrower or any
Guarantor makes a general assignment for the benefit of
creditors, (g) Borrower or any Guarantor shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due, (h) Borrower or any
Guarantor shall call a meeting of its creditors with a view to
arranging a composition or adjustment of its debts, or
(i) Borrower or any Guarantor shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of
the foregoing.
6.5 Attachment. The failure to have discharged within
a period of thirty (30) days after the commencement thereof any
attachment, sequestration or similar proceeding against any
Material Assets of Borrower.
6.6 Payment of Judgments. Borrower shall fail to pay,
bond, secure or obtain a stay of enforcement from a court of
competent jurisdiction of or with respect to any money judgment
in excess of $50,000 against it or its assets at least ten (10)
days prior to the date on which Borrower's assets may be sold
lawfully to satisfy such judgment.
6.7 Default Under Other Debt. Borrower shall default
in the due and punctual payment of the principal. of or the
interest on any Debt in excess of $50, 000 in the aggregate
principal amount, secured or unsecured, or in the due performance
or observance of any covenant or condition of any indenture or
other agreement executed in connection therewith, and such
default shall have continued beyond any period of grace provided
with respect thereto.
6.8 Material Adverse Effect. The occurrence of any
event or events which shall have or cause a Material Adverse
Effect. The failure by Borrower to comply with Section 5.11(k)
shall be presumed to cause a Material Adverse Effect.
6.9 Impairment of Collateral or Ability to Pay. The
discovery by Lender of reliable and accurate information that the
prospect of payment or performance of the Obligations is
reasonably likely to be materially impaired, or that the value of
the Collateral has or will be materially decreased.
6.10 Misrepresentation. Any statement, representation,
or warranty in the Loan Documents or in any writing ever
delivered by Borrower or any Guarantor or on behalf of Borrower
or any Guarantor to Lender pursuant to the Loan Documents is
false, misleading or erroneous in any material respect when made
or when deemed to be repeated.
6.11 Tangible Net Worth of National Capital Management
Corp. National Capital Management Corp. shall permit its Tangible
Net Worth plus subordinated debt (defined in accordance with
GAAP) to be less than $2,000,000, calculated on the last day of
each calendar month.
6.12 Receipt of Notice Under Validity Agreement. The
receipt by Lender of notice from National Capital Management
Corporation under paragraph 11 of that entity's Validity
Agreement.
Section 7. RIGHTS AND REMEDIES.
7.1 Remedies. Upon and after the occurrence of an
Event of Default, Lender may, at its election, do any one or more
of the following without notice of any kind, including, without
limitation, notice of acceleration or of intention to accelerate,
presentment and demand or protest, all of which are hereby
expressly waived by Borrower: (a) declare the entire unpaid
balance of the Obligations, or any part thereof, immediately due
and payable, whereupon it shall be due and payable (provided
that, upon the occurrence of an Event of Default under
Section 6.4 (a)-(f) inclusive, the entire obligations shall
automatically become due and payable without notice or other
action of any kind whatsoever); (b) terminate its commitment to
lend hereunder; (c) exercise the Rights of offset or banker's
lien against the interest of Borrower in and to every account and
other property of Borrower which are in the possession of Lender
to the extent of the full amount of the Obligations;
(d) foreclose any or all Liens held by Lender or otherwise
realize upon any and all of the Rights Lender may have in and to
the Collateral, or any part thereof; and (e) exercise any and all
other legal or equitable Rights afforded by the Loan Documents,
the Laws of the State of Ohio or any other jurisdiction as Lender
shall deem appropriate. Notwithstanding the foregoing, Lender
may, but shall be under no obligation, to use reasonable efforts
to notify Borrower of any of the foregoing; provided, however,
the parties hereto expressly agree that the failure of Lender to
provide notice shall not in any way affect or impair any action
taken by Lender, it being understood that any absolute obligation
of notice is hereby waived by Borrower.
7.2 Performance by Lender. If any covenant, duty or
agreement of Borrower is not performed in accordance with the
terms of the Loan Documents, Lender may, at its option, perform
or attempt to perform, such covenant, duty or agreement on behalf
of Borrower including, without limitation, the covenant, duty and
agreement of Borrower to pay all premiums when due on the
Purchased Policies, and all premiums, fees and other charges and
expenses on the AMIC Contract and the AMSLRC contracts and all
amounts necessary to ensure the continued existence and solvency
of NCB Insurance Limited. In such event, any amount expended by
Lender in such performance or attempted performance shall be
payable by Borrower to Lender on demand, shall become part of the
obligations and shall bear interest at the Maximum Rate f rom the
date of such expenditure by Lender until paid. Notwithstanding
the foregoing, it is expressly understood that Lender does not
assume and shall never have, except by express written consent of
Lender, any liability or responsibility for the performance of
any covenant, duty or agreement of Borrower.
7.3 Delegation of Duties and Rights. Lender may
perform any of its duties or exercise any of its Rights under the
Loan Documents by or through its officers, directors, employees,
attorneys, agents or other representatives.
7.4 Expenditures by Lender. Borrower shall indemnify
Lender for all court costs, attorneys' fees, other costs of
collection and other sums spent by Lender pursuant to the
exercise of any Right (including, without limitation, any effort
to collect or enforce the Revolving Credit Note) provided herein
shall be payable to Lender on demand, shall become part of the
obligations and shall bear interest at the Maximum Rate from the
date spent until the date repaid.
Section 8. MISCELLANEOUS.
8.1 Notices. All notices, requests and other
communications to be given hereunder shall be in writing and
shall be given to such party at its address or fax number set
forth on Schedule 8.1 hereto or such other address or fax number
as such party may hereafter specify by notice to Lender and
Borrower. Each such notice, request or other communication shall
be effective (i) if given by fax during the business hours of the
party receiving notice, when transmitted to the fax number
specified in this Section and a confirmation of receipt (which
may be telephonic) is given by the recipient, (ii) if given by
mail, on the third day after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means (including,
without limitation, by air courier), when delivered at the
address specified in this Section; provided, that, notices to
Lender shall not be effective until received. All notices shall
also be given, simultaneously and in like manner, to such party's
legal counsel at its address or fax number set forth on
Schedule 8.1 hereto or such other address or fax number as such
party may hereafter specify by notice to the other parties.
8.2 Amendments, Etc. No amendment or waiver of any
provision of this Agreement or any other Loan Document, nor
consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed
by Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given.
8.3 No Waiver; Remedies Cumulative. No failure or
delay on the part of Lender in exercising any right or remedy
hereunder and no course of dealing between Borrower and Lender
shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other
right or remedy hereunder. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights
or remedies which Lender would otherwise have.
8.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of Borrower and Lender and
their respective successors and permitted assigns. Borrower may
not assign or transfer any of its rights or obligations hereunder
without the written consent of Lender and any purported
assignment in violation of the foregoing shall be null and void.
8.5 Number and Gender of Words. Whenever in any Loan
Document the singular number is used, the same shall include the
plural where appropriate, and vice versa; and words of any gender
in any Loan Document shall include each other gender where
appropriate. The words "herein," "hereof," and "hereunder," and
other words of similar import refer to the relevant Loan Document
as a whole and not to any particular part or subdivision thereof.
8.6 Readings. The headings, captions, and
arrangements used in any of the Loan Documents are, unless
specified otherwise, for convenience only and shall not be deemed
to limit, amplify, or modify the terms of the Loan Documents, nor
affect the meaning thereof.
8.7 Exhibits and Schedules. If any Exhibit or
Schedule, which is to be executed and delivered, contains blanks,
the same shall be completed correctly and in accordance with the
terms and provisions contained and as contemplated herein prior
to, at the time of, or after the execution and delivery thereof
Each of the Exhibits and Schedules are incorporated herein by
this reference.
8.8 Form and Number of Documents. Each agreement,
document, instrument, or other writing to be furnished to Lender
under any provision of this Agreement must be in form and
substance and in such number of counterparts as may be
satisfactory to Lender and its counsel.
8.9 Conflicts. Except as otherwise provided in this
Agreement and except as otherwise provided in the other Loan
Documents by specific reference to the applicable provisions of
this Agreement, if any provision contained in this Agreement is
in conflict with or is inconsistent with any provision in the
other Loan Documents, the provision contained in this Agreement
shall govern and control.
8.10 WAIVERS BY BORROWER. TO THE FULLEST EXTENT
PERMITTED BY LAW, EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT, BORROWER WAIVES (A) PRESENTMENT, DEMAND AND PROTEST
AND NOTICE OF PRESENTMENT, NOTICE OF INTENT TO ACCELERATE THE
MATURITY OF THE OBLIGATIONS AND NOTICE OF SUCH ACCELERATION,
PROTEST, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION, OR RENEWAL; (B) ALL RIGHTS TO NOTICE OF A
HEARING PRIOR TO THE LENDER'S TAKING POSSESSION OR CONTROL OF, OR
THE LENDER'S REPLEVY, ATTACHMENT OR LEVY UPON, THE COLLATERAL OR
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR
TO ALLOWING THE LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; AND
(C) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS. BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL
WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS EVIDENCED BY
THIS AGREEMENT.
8.11 WAIVER OF JURY. LENDER AND THE BORROWER HEREBY
VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LENDER AND THE
BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE BORROWER
AND LENDER IN CONNECTION WITH THE LOAN DOCUMENTS, THIS AGREEMENT,
OR ANY OTHER
AGREEMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS RELATED HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT TO LENDER TO ENTER INTO THE FINANCING
TRANSACTION. IT SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND
OR MODIFY LENDER'S ABILITY TO PURSUE ITS REMEDIES INCLUDING, BUT
NOT LIMITED TO, ANY CONFESSION OR JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT RELATED
HERETO.
8.12 Changes in GAAP. All accounting and financial
terms used in any of the Loan Documents and the compliance with
each covenant contained in the Loan Documents which relates to
financial matters shall be determined in accordance with GAAP,
except to the extent that a deviation therefrom is expressly
stated in such Loan Documents. Should a change in GAAP require a
change in any method of accounting, then such change shall not
result in an Event of Default if, at the time of such change,
such Event of Default had not occurred and was not then
continuing, based upon the former methods of accounting used by
or on behalf of Borrower; provided that, after any such change in
accounting methods, the Financial Statements required to be
delivered to Lender pursuant to the terms hereof shall be
prepared in compliance with such new method or methods of
accounting but accompanied by such information, in form and
detail satisfactory to Lender, that will allow Lender to readily
determine the effect of such changes in accounting methods on
such Financial Statements, and, for the purpose of determining
whether an Event of Default has occurred, Lender shall look
solely to such Financial Statements as adjusted to reflect
compliance with such former method or methods of accounting.
8.13 Exceptions to Covenants. Borrower shall not take
any action or fail to take any action which is permitted as an
exception to any of the covenants contained in any of the Loan
Documents if such action or omission would result in the breach
of any other covenant contained in any of the Loan Documents.
8.14 Survival. All covenants, agreements,
undertakings, representations, and warranties made in any of the
Loan Documents shall survive all closings under the Loan
Documents and, except as otherwise indicated, shall not be
affected by any investigation made by any party. Borrower's
obligations under Sections 5.1(e) and 5.1(i) hereof shall remain
operative and in full force and effect regardless of the
termination of this Agreement, the repayment of the Revolving
Credit Note, or the existence of any investigation made on behalf
of the Lender regarding the representations and warranties made
by Borrower in connection with the Loan Documents. If and to the
extent that the obligations of Borrower under Sections 5.1(e) and
5.1(i) are unenforceable for any reason, Borrower hereby agrees
to make the maximum contribution to the payment and satisfaction
of such obligations that is permissible under applicable law.
8.15 GOVERNING LAW; THIS AGREEMENT AND ALL OTHER LOAN
DOCUMENTS AND COLLATERAL DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF OHIO.
VENUE FOR ANY PROCEDURE RELATED TO OR ARISING FROM THIS AGREEMENT
AND ALL OTHER LOAN DOCUMENTS AND COLLATERAL DOCUMENTS SHALL BE
FRANKLIN COUNTY, OHIO, AT THE OPTION OF LENDER.
8.16 Maximum Interest Rate. It is the intention of the
parties hereto to comply with applicable usury laws (now or
hereafter enacted); accordingly, notwithstanding any provision to
the contrary in this Agreement, the Revolving Credit Note, the
other Loan Documents, or any other document relating hereto, in
no event shall this Agreement or any such other document require
the payment or permit the collection of interest in excess of the
maximum amount permitted by such laws. If from any circumstances
whatsoever, fulfillment of any provision of this Agreement or of
any other document pertaining hereto or thereto, shall involve
transcending the limit of validity prescribed by law for the
collection or charging of interest, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstances Lender shall ever
receive anything of value as interest or deemed interest by
applicable law under this Agreement, the Revolving Credit Note,
the other Loan Documents, or any other document pertaining hereto
or otherwise an amount that would exceed the highest lawful rate,
such amount that would be excessive interest shall be applied to
the reduction of the principal amount owing under the Revolving
Credit Note or on account of any other indebtedness of Borrower
to Lender, and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of
such indebtedness, such excess shall be refunded to Borrower. In
determining whether or not the interest paid or payable with
respect to any indebtedness of Borrower to Lender, under any
specific contingency, exceeds the highest lawful rate, Borrower
and Lender shall, to the maximum extent permitted by applicable
law, (a) characterize any non-principal payment as an expense,
fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, (c) amortize, prorate,
allocate and spread the total amount of interest throughout the
full term of such indebtedness so that the actual rate of
interest on account of such indebtedness does not exceed the
maximum amount permitted by applicable law, and/or (d) allocate
interest between portions of such indebtedness, to the end that
no such portion shall bear interest at a rate greater than that
permitted by applicable law.
8.17 Severability. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable, such provision
shall be fully severable, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be
affected thereby.
8.18 Lender Not in Control. None of the covenants or
other provisions contained in this Agreement shall, or shall be
deemed to, give Lender the Right or power to exercise control
over the affairs or management of Borrower, the power of lender
being limited to the Right to exercise the remedies provided in
Section 7.
8.19 ENTIRETY AND AMENDMENTS. THIS AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. THIS AGREEMENT EMBODIES THE
ENTIRE AGREEMENT BETWEEN BORROWER AND LENDER AND SUPERSEDES ALL
PRIOR PROPOSALS, AGREEMENT AND UNDERSTANDINGS RELATING TO THE
SUBJECT MATTER HEREOF. BORROWER CERTIFIES THAT IT IS RELYING ON
NO REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT EXCEPT FOR
THOSE SET FORTH HEREIN AND THE OTHER LOAN DOCUMENTS OF EVEN DATE
HEREWITH.
8.20 Multiple Counterparts. This Agreement may be
executed in a number of identical counterparts, each of which
shall be deemed an original for all purposes and all of which
constitute, collectively, one Agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
EXECUTED at Columbus, Ohio, as of the day and year first
mentioned.
BANK ONE, COLUMBUS, NA
By:
Name:
Title:
NATIONAL CAPITAL BENEFITS
CORP.
By:
Name:
Title:
1035220-1
SECURITY AGREEMENT AND
ASSIGNMENT (NATIONAL CAPITAL
BENEFITS CORP.)
THIS SECURITY AGREEMENT AND ASSIGNMENT ("Agreement")
is executed as of December 28, 1995, by NATIONAL CAPITAL
BENEFITS CORP., a Delaware corporation ("Debtor"), for the
benefit of BANK ONE, COLUMBUS, NA, a national banking
association ("Secured Party").
FOR VALUABLE CONSIDERATION, the receipt and adequacy
of which are hereby acknowledged, Debtor hereby covenants and
agrees with Secured Party as follows:
1. Reference to Loan Agreement. This Agreement
is
being executed and delivered in connection with that certain
Loan Agreement (as the same may have been or hereafter be
renewed, extended, amended, supplemented, or modified,
the "Loan Agreement"), dated as of the date hereof,
between Debtor and Secured Party. The terms, conditions, and
provisions of the Loan Agreement are incorporated herein by
reference, the same as if set forth herein verbatim,
which terms, conditions,
and
provisions shall continue to be in full force and
effect hereunder so long as Secured Party is obligated to lend
under the Loan Agreement and thereafter until the Obligations
are paid and performed in full.
2. Certain Definitions. Unless otherwise
defined
herein, or the context hereof otherwise requires, each
term defined in either the Loan Agreement or in the UCC is
used in this Agreement with the same meaning; provided, that,
(a) if the definition given a term in the Loan Agreement
conflicts with the definition given that term in the UCC,
the Loan Agreement definition shall control to the extent
legally allowable, and (b) if any definition given a term in
Chapter 9 of the UCC conflicts with the definition given that
term in any other chapter of the UCC, the Chapter 9 definition
shall prevail. As used herein, the following terms have the
meanings indicated:
Collateral has the meaning set forth in Paragraph
4 hereof.
Insurance-Subsidiary means NCB Insurance Limited,
an insurance company chartered in Bermuda, that is wholly
owned by Debtor.
Obligor means any Person obligated with respect to
any of the Collateral, whether as an issuer of life
insurance policies, account debtor, obligor on an instrument,
issuer of securities, or otherwise.
Policy means any life insurance policy legally
or beneficially owned by Debtor.
Policy Subsidiaries means, collectively,
Living Benefits, Inc., a Delaware corporation, and
American Life Resources Corporation, a Delaware corporation,
each a whollyowned subsidiary of Debtor.
Security Interest means the security interest
granted and the pledge and assignment made under Paragraph 3
hereof.
Subsidiaries means, collectively, the
Insurance Subsidiary and the Policy Subsidiaries.
UCC means the Uniform Commercial Code as enacted in
the State of Ohio or other applicable jurisdiction, as amended
at the time in question.
3. Security Interest. In order to secure the
full
and complete payment of the Obligations when due and
performance under the Loan Agreement and other Loan Documents
and all other obligations of Borrower to Lender, whether
now existing or hereafter arising, Debtor hereby grants
to Secured Party a security interest in the Collateral
pledges and assigns the Collateral to Secured Party, all
upon and subject to the terms and conditions of this
Agreement. Such security interest is granted and pledge and
assignment are made as security only and shall not subject
Secured Party to, or transfer or in any way affect or modify,
any obligation of Debtor with respect to any of the Collateral
or any transaction involving or giving rise thereto.
4. Collateral. As used herein, the term
"Collateral" means all property of the Debtor, including,
without limitation, the following items and types of property:
(a) All of Debtor's right, title and interest in
any
and all Policies, and any supplementary contracts issued
in connection therewith, and all claims, options,
privileges, benefits, refunds, cash value, dividends,
rights, title and interest therein
and thereunder including, without
limitation, the right to collect from the issuer thereof
the Death Benefits upon Policy Maturity and the
right to surrender any such Policy for the surrender
value thereof (all of the above shall be referred to
as the "Policy Proceeds".
(b) All other present and future accounts,
contract
rights, general intangibles, chattel paper,
documents, instruments, inventory, equipment, computer
hardware and software, fixtures, securities, customer
lists, other goods, money, and deposit accounts, wherever
located, now owned or hereafter acquired by Debtor, and
any and all present and future tax refunds of any kind
whatsoever to which Debtor is now or shall hereafter
become entitled.
(c) All cash and securities (whether or
not
marketable) of Debtor, including capital stock of the
Policy Subsidiaries, provided that the Collateral shall
not include any capital stock of the Insurance
Subsidiary until such time as the consent of the
Bermuda Monetary Authority and the Registrar of
Companies has been obtained for the pledge of such stock.
(d) All of the Debtor's right, title and interest
in
and to any stop loss and reinsurance contracts,
including, without limitation, the AMIC Contract and
the AMSIRC Contract, including, without limitation,
all right to
receive proceeds of any nature or description arising
on account of such contracts (collectively, the
"AMIC/AMSLRC Proceeds"), all rights to enforce the terms
and provisions of such
contracts, all claims, options, privileges,
benefits, refunds, cash value, dividends, rights, title
and interest in and to such contracts, whether in the
ordinary course of the contractual relationship or upon
insolvency of the insurer(s) under such contracts. [The
Collateral under this subparagraph is assigned by Debtor
to Secured Party pursuant to the terms of Article I of
the AMIC Contract and Article I of the AMSLRC Contract.]
(e) All of the Debtor's licenses, patents,
patent applications, copyrights, trademarks,
trademark applications, trade names, assumed names,
service marks and service mark applications (including,
without limitation, the licenses, patents, patent
applications, copyrights, trademarks, trade applications,
trade names, assumed names, service marks and service
mark applications and related recordings and
registrations thereof identified
on
Schedule I (the "Intellectual Property").
(f) The balance of every deposit account of Debtor
and any other claim of Debtor against Secured Party,
now or hereafter existing, whether liquidated or
unliquidated.
(g) All present and future increases,
profits,
combinations, reclassification, improvements, and
products of, accessions, attachments, and other additions
to, tools, parts, and equipment used in connection
with, and
substitutes and replacements for, all or part of
the Collateral heretofore described.
(h) All present and future accounts, contract
rights, general intangibles, chattel paper, documents,
instruments, cash and non-cash proceeds, and other Rights
arising from or by virtue of, or from the voluntary or
involuntary sale, lease, or other disposition of, or
collections with respect to, or insurance proceeds
payable with respect to, or proceeds payable by
virtue of warranty or other claims against
manufacturers of, or claims against any other Person with
respect to, all or any part of the Collateral
heretofore described in this clause or otherwise.
(i) All present and future security for the payment
to Debtor of any of the Collateral heretofore described
and goods which gave or will give rise to any of such
Collateral or are evidenced, identified, or represented
therein or thereby.
(j) All books and records (including,
without
limitation, customers lists, credit files, tapes,
ledger cards, computer software and hardware,
electronic data processing software, computer programs,
computer printouts and other computer materials and
records) evidencing or containing information regarding
or otherwise pertaining to any of the foregoing.
The description of Collateral contained in
this Paragraph 4 shall not be deemed to permit any action
prohibited by this Agreement or by terms incorporated in this
Agreement.
4.1 Death Benefits and AMIC/AMSLRC
Proceeds.
Notwithstanding any other provision of this Agreement to
the contrary, all Death Benefits and AMIC/AMSLRC Proceeds
shall be delivered directly to the Secured Party by the
obligor thereon, whether prior to or after the occurrence of a
Default under this Agreement or under the Loan Agreement or
other Loan Documents and such Death Benefits and/or
AMIC/AMSLRC Proceeds shall be applied to the Obligations of
the Debtor pursuant to the terms of the Loan Agreement. If
any such Death Benefits and/or AMIC/AMSLRC Proceeds are
delivered to Debtor by the Obligor thereon, the Debtor shall
hold such Death Benefits and AMIC/AMSLRC Proceeds in trust
(and not commingle with other assets of Debtor) for the
Secured Party and shall promptly deliver such Death
Benefits and/or AMIC/AMSLRC Proceeds to the Secured Party
together with any documentation related thereto. Debtor
shall execute all
documents and take all actions necessary to cause such
Death
Benefits and AMIC/AMSLRC Proceeds to be delivered directly
to Secured Party.
5. Representations and Warranties. Debtor
represents
and warrants to Secured Party that:
(a) Debtor's chief executive office is located at
the
address as shown on Schedule II. The present
and
foreseeable location of Debtor's books and
records concerning the Collateral is its chief executive
office, and all such
books, records and Collateral are in Debtor's
possession. All of Debtor's assets are located at
the locations described on Schedule II.
(b) The Collateral that is or may be fixtures
is
located on or affixed to the real property described
on Annex A (but the failure of such description to be
accurate or complete shall not impair the Security
Interest in such Collateral).
(c) All Collateral that is Policies, accounts,
chattel paper, instruments, or general intangibles is free
from any claim for credit, deduction, or allowance of an
obligor and free from any defense, dispute, setoff, or
counterclaim, and there is
no extension or indulgence with respect thereto,
except for loans against the cash value of Policies
that have been disclosed in writing to Secured Party.
(d) The Death Benefits for all Collateral that
is
Policies will be paid directly to Lender by the
obligors thereon subject to the provisions of the Loan
Agreement. All Collateral that is accounts, contract
rights, chattel paper, or instruments will be paid in
full at maturity, and, if not paid, Debtor will, upon
demand, promptly pay the amount represented to be
owing on any thereof to Secured Party, or at Secured
Party Is option such unpaid amount may be deducted from
any payment then or thereafter due from Secured Party
to Debtor, and Secured Party may retain such Policy,
account, chattel paper, or instrument as Collateral for
any outstanding portion of the obligations.
(e) Schedule III sets forth a correct and
complete
listing of all real property owned by Debtor and a
legal description with respect thereto, all leases and
subleases of real or personal property by Debtor as
lessee or sublessee, and all leases and subleases or real
or personal property
by Debtor as lessor, lessee, sublessor
or
sublessee. All Collateral that is an assigned contract
or assigned lease is in full force and effect; there have
been no renewals or extensions of, or amendments,
modifications, or supplements to, any thereof about which
Secured Party has not been advised in writing, Debtor is
in possession of the property covered by each such
assigned lease; and no default or potential default has
occurred and is continuing under any such assigned
contract or assigned lease.
(f) Debtor owns all presently existing Collateral,
and will acquire all hereafter acquired Collateral,
free and clear of
all Liens, except Permitted Liens and any loans
against the cash value of Policies that have been
disclosed in writing to Secured Party.
(g) Schedule hereto identifies all of
the
Intellectual Property of the Debtor. Debtor owns,
is licensed or otherwise has the lawful right to use,
the
Intellectual Property and such use, to the best of
its knowledge, does not infringe upon the rights of any
other Person. The rights of Debtor to sell, franchise or
license under all such patents, trademarks and
copyrights may be transferred in connection with any
sale of assets or stock of the business of Debtor
related thereto. The registration of any of the
Debtor's Intellectual Property (for which registration
is required) is in force and has not expired. None of the
Debtor's Intellectual Property is subject to any licensing
or franchise agreement. No action is pending, nor has
any judgment or order been rendered which would in any
way adversely affect the Debtor's use of its
Intellectual Property or the rights granted to the Secured
Party in the Intellectual Property by this Agreement.
The delivery at any time by Debtor to Secured Party
of Collateral or of additional specific descriptions of
certain Collateral shall constitute a representation and
warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Paragraph 5 are true
and correct with respect to each item of such Collateral.
6. Certain Covenants. So long as Secured Party
is committed to extend credit to Debtor under the Loan
Agreement and thereafter until the obligations are paid and
performed in full, Debtor covenants and agrees with Secured
Party that Debtor will:
(a) Maintain. at Debtor's chief executive office
a current record of where all Collateral is located,
permit representatives of Secured Party to inspect
and make abstracts from such records, and furnish to
Secured Party, at such intervals as Secured Party
may request, such documents, lists, descriptions,
certificates, and other information as may be necessary
or proper to keep Secured Party informed with respect
to the identity, location, status, condition, and value
of the Collateral.
(b) Fully perform all of Debtor's duties under and
in connection with each transaction to which the
Collateral, or any part thereof, relates, so that the
amounts thereof shall actually become payable in their
entirety to Secured Party.
(c) Promptly notify Secured Party of any
dispute, claim, action, or proceeding which might have
a Material Adverse Effect on all or any of the
Collateral or the Security Interest and, at the
request of Secured Party, appear in and defend, at
Debtor's expense, any such action or proceeding.
(d) Hold in trust (and not commingle with other
assets of Debtor) for Secured Party all Collateral that
is chattel paper, instruments, or documents at any time
received by Debtor and promptly deliver same to Secured
Party unless Secured Party at its option (which may be
evidenced only by a writing signed by Secured Party
stating that Secured Party elects to permit Debtor to
go retain) permits Debtor to retain the same, but any
chattel paper, instruments, or documents so retained
shall be marked to state that they are assigned to Secured
Party and each such instrument shall be endorsed to the
order of Secured party (but the failure of same to be
so marked or endorsed shall not impair the Security
Interest thereon).
(e) Not sell, lease, or otherwise dispose of,
or permit the sale, lease, or disposition of, any
Collateral except for sales, leases, and other
dispositions permitted
by the terms of the Loan Agreement.
(f) Use, operate, maintain, and store the Collateral
that is equipment, with reasonable care, skill, and caution
and keep the same in good repair, working order, and
conditions, and promptly make all necessary repairs or
replacements to that end.
(g) At Debtor's expense and Secured Party's request,
before or after a Default, file or cause to be filed such
applications and take such other actions as Secured Party
may request to obtain the consent or approval of any
Governmental Authority to Secured Party's Rights hereunder,
including, without limitation, the right to sell all the
Collateral upon a Default without additional consent or
approval from such Governmental Authority (and, because
Debtor agrees that Secured Party's remedies at Law for
failure of Debtor to comply with this provision would be
inadequate and that such failure would not be adequately
compensable in damages, Debtor agrees that its covenants in
this provision may be specifically enforced).
(h) From time to time promptly execute and deliver to
Secured Party all such other assignments, certificates,
supplemental documents, and financing statements, and do all
other acts or things as Secured Party may reasonably request
in order to more fully create, evidence, perfect, continue,
and preserve the priority of the Security Interest.
(i) Not use any of the Collateral, or permit the same
to be used, for any unlawful purpose or in any manner
inconsistent with the provisions or requirements of any
policy of insurance thereon, nor affix or install any
accessories, equipment, or device on the Collateral or on
any component thereof if such addition will impair the
original intended function or use of the Collateral or such
component.
(j) Not modify or substitute, or permit the
modification or substitution of, any contract to which any
of the Collateral which is Policies or accounts relates, nor
extend or grant indulgences regarding any Policy or account
which is Collateral.
(k) Not relocate its chief executive of f ice or place
where Debtor's books and records related to accounts and
Policies are kept, or otherwise relocate any of the other
Collateral to a county, parish, or state other than as
indicated above unless prior thereto Debtor (i) gives
Secured Party thirty days prior written notice of such
proposed relocation (such notice to include, without
limitation, the name of the county or parish and state into
which such relocation is to be made) and (ii) (unless the
relocation is to a jurisdiction in which existing financing
statements or other required filings have previously been
made to perfect the Security Interest in such Collateral)
executes and delivers all such additional documents and
performs all additional acts as Secured Party, in its sole
discretion, may request in order to continue or maintain the
existence and priority of the Security Interest in such
Collateral, and not relocate any of the Collateral to any
commonwealth, nation, territory, possession, or country
outside the United States of America.
(l) Not change Debtor's name or address to which it is
entitled to receive notices hereunder unless prior thereto
Debtor gives Secured Party thirty days prior written notice
of such proposed change and executes and delivers all such
additional documents and performs all additional acts as
Secured Party, in its sole discretion, may request in order
to continue or maintain the existence and priority of the
Security Interest in all of the Collateral.
(m) As to its Intellectual Property:
(1) Debtor (either itself or through licensees)
will, for each of its trademarks: (i) to the extent
consistent with past practice continue to use such
trademark on each and every trademark class of goods
applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to
maintain such trademark in full force free from any
claim or abandonment for non-use; (ii) employ such
trademark with appropriate notice of application of
registration, (iii) maintain as in the past the quality
of products and services offered under such trademark;
and, (iv) not (and not permit any license or sublicense
thereof to) do any act or knowingly omit to do any act
whereby any trademark may become invalidated,
cancelled, abandoned or lost exempt as permitted by (i)
above.
(2) Debtor (either itself or through licensees)
will, for each of its patents not do any act, or omit
to do any act, whereby any patent which is material to
the conduct of Debtor's business may become abandoned
or dedicated.
(3) Debtor (either itself or through licensees)
will: (i) display the appropriate copyright notice as
required under the applicable copyright law for each
worked covered by a copyright of Debtor which is
published, reproduced, displayed, adopted or
distributed; (ii) not (and not permit any licensee or
sublicensee thereto to) do any act or knowingly omit to
do any act whereby any material copyright of Debtor may
become invalidated; and, (iii) not do any act, whereby
any material copyright of Debtor may become
invalidated, cancelled, abandoned or lost.
(4) Debtor shall notify the Secured Party within
a reasonable period of time, if it knows, or has reason
to know, that any material copyright of Debtor may
become invalidated, cancelled,, abandoned or lost or of
any adverse determination or development (including,
without limitation, the institution of, or any such
determination or development in, any proceeding by any
governmental authority in the United States or any
other country) regarding Debtor's ownership of any such
material copyright or the validity thereof.
(5) Debtor shall notify the Secured Party within
a reasonable period of time if it knows or has reason
to know that any application or registration relating
to any of its patents, trademarks or copyrights that is
material to the conduct of Debtor's business may become
abandoned, or of any adverse determination or
development (including, without limitation, the
institution of, or any such determination or
development in, any proceeding in the United States
Patent and Trademark Office, the United States
Copyright Office or any governmental authority in any
jurisdiction) regarding Debtor's ownership of any
patent, trademark or copyright which is material to the
conduct of Debtor's business, its right to register the
same, or to keep and maintain the same.
(6) In no event shall Debtor, either itself or
through any Person, employee, licensee or designee,
file an application for the registration of any patent,
trademark or copyright with the United States Patent
and Trademark office, the United States Copyright
office, or any governmental authority in any state of
the United States of America, any other country or any
political subdivision, agency or instrumentality of any
thereof, unless it contemporaneously therewith informs
the Secured Party, and, upon request of the Secured
Party, executes papers as the Secured Party may request
to evidence the Secured Party's lien and security
interest in such patent, trademark or copyright and the
goodwill and general intangibles of Debtor relating
thereto or represented thereby, and Debtor hereby
appoints secured Party its attorney-in-fact to execute
and fill all such writings for the foregoing purposes,
all acts of such attorney being hereby ratified and
confirmed$, such right, being coupled with an interest,
is irrevocable until the obligations are paid in full.
(7) Debtor will take all necessary steps that are
consistent with good business practices, taking into
account the advice of Debtor's counsel, in any
proceeding before the United States Patent and
Trademark Office, the United States Copyright Office,
or any other governmental authority, to maintain and
pursue each application relating to its patents,
trademarks and copyrights (and to obtain the relevant
registration) and to maintain each registration of its
patent, trademarks and copyrights material to the
conduct of Debtor's business, including without
limitation, filing of applications for renewal,
Affidavits of use, affidavits of incontestability, and
opposition, interference and cancellation proceedings.
(8) In the event that any Intellectual Property
is infringed, misappropriated or diluted by a third
party who continues such action after written
notification by Debtor, Debtor shall notify the Secured
Party and shall, upon the request of Secured Party,
promptly sue for infringement, unfair competition,
misappropriation or dilution and to obtain injunctive
relief and to recover any and all damages and prof its
for such infringement, unfair competition,
misappropriation or dilution, and take such other
actions as are appropriate under the circumstances to
protect such Intellectual Property.
6.1 Grant of License to Use Intellectual Property.
For the purpose of enabling Secured Party to exercise rights
hereunder at such time as Debtor shall be lawfully entitled to
exercise such rights, Debtor hereby grants to the Secured Party
an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to Debtor) to use,
license or sublicense any tradesman (and the goodwill associated
therewith), copyright, or patent now owned or hereafter acquired
by Secured Party, and wherever the same may be located, and
including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all
computer and automatic machinery software and programs used for
the compilation or
printout thereof.
7. Default; Remedies. Should a Default occur,
Secured Party may, at its election, exercise any and all Rights
available to a secured party under the UCC, in addition to any
and all other Rights afforded by the Loan Documents, at law, in
equity, or otherwise, including, without limitation, (a)
requiring Debtor to. assemble all or part of the Collateral and
make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to Debtor and
Secured Party, (b) surrendering any policies of commercial
insurance on all or part of the Collateral and receiving and
applying the unearned premiums as a credit on the Obligations,
(c) applying by appropriate judicial proceedings for appointment
of a receiver, without notice to Debtor either before or after
judgment is obtained against Debtor by Secured Party, for all or
part of the Collateral (and Debtor hereby consents to any such
appointment and to jurisdiction and venue of such appointment in
state or federal courts in Franklin County, Ohio, at the option
of Secured Party), (d) applying to the Obligations any cash held
by Secured Party under this Agreement, and (e) open Debtor's
commercial mail and collect any and all amounts due Debtor from
account debtors or insurers and exercise any and all of Debtor's
rights and remedies with respect to such accounts and Policies.
Secured Party shall provide Debtor not less than fifteen (15)
calendar days notice prior to any sale or other intended
disposition of the Collateral by Secured Party. The Secured
Party may sell the Collateral at public or private sale and may
purchase at such sale or sales the Collateral for its own account
(with whatever consequential credit to the obligations as may be
required herein or by law).
8. Notice and Application of Proceeds.
(a) Notice. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable
notification of the time after which any private sale or
other intended disposition of the Collateral is to be made,
shall be sent to Debtor and to any other Person entitled to
notice under the UCC; provided, that, if any of the
Collateral threatens to decline speedily in value or is of
the type customarily sold on a recognized market, Secured
Party may sell or otherwise dispose of the Collateral
without notification, advertisement, or other notice of any
kind. It is agreed that notice sent or given not less than
fifteen (15) calendar days prior to the taking of the action
to which the notice relates is reasonable notification and
notice for the purposes of this clause (a).
(b) Application of Proceeds. Secured Party shall
apply the proceeds of any sale or other disposition of the
Collateral under this Paragraph 8 in the following order:
first, to the payment of all its expenses incurred in
retaking, holding, and preparing any of the Collateral for
sale or other disposition,, in arranging for such sale or
other disposition, and in actually selling or disposing of
the same (all of which are part of the obligations) ;
second, toward repayment of amounts expended by Secured
Party under Paragraph 9; third, toward payment of the
balance of the obligations in such order and manner as
Secured Party, in its discretion, may deem advisable, or as
a court of competent jurisdiction may direct. If the
proceeds are insufficient to pay the Obligations in full,
Debtor shall remain liable for any deficiency.
9. Other Rights of Secured Party.
(a) Performance. In the event Debtor shall fail to
pay when due all Taxes on any of the Collateral, or to
preserve the priority of the Security Interest in any of the
Collateral as required by this Agreement, or otherwise fail
to perform any of its obligations under the Loan Documents
with respect to the Collateral, then Secured Party may, at
its option, but without being required to do so, pay such
Taxes, prosecute or defend any suits in relation to the
Collateral, or take all other action which Debtor is
required, but has failed or refused to take under the Loan
Documents. Any sun which may be reasonably expended or paid
by Secured Party under this clause (a) (including, without
limitation, court costs and attorneys, fees) shall bear
interest from the dates of expenditure or payment at the
rate of interest provided in the Loan Agreement until paid
and, together with such interest, shall be payable by Debtor
to Secured Party upon demand and shall be part of the
Obligations.
(b) Collection. Upon notice from Secured Party, each
Obligor with respect to any payments on any of the
Collateral (including, without limitation, dividends and
other distributions with respect to insurance proceeds
payable by reason or loss or damage to any of the
Collateral) is hereby authorized and directed by Debtor to
make payment directly to Secured Party, regardless of
whether Debtor was previously making collections thereon.
Except as provided in Subparagraph 4.1, subject to
Subparagraph 9(c), until such notice is given, Debtor is
authorized to retain and expend all payments made on
Collateral. Secured Party shall have the right in its own
name or in the name of Debtor to compromise or extend time
of payment with respect to all or any portion of the
Collateral for such amounts and upon such terms as Secured
Party may determine; to demand, collect, receive, receipt
for, sue for, compound, and give acquittances for any and
all amounts due or to become due with respect to Collateral;
to take control of cash and other proceeds of any
Collateral; to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders, or other
evidences of payment on Collateral that may come into the
possession of Secured Party; to sign the name of Debtor on
any invoice or bill of lading relating to any Collateral, on
any drafts against Obligors or other Persons making payment
with respect to Collateral, on assignments and verifications
of accounts or other Collateral and on notices to Obligors
making payment with respect to Collateral; to send requests
for verification of obligations to any Obligor; and to do
all other acts and things necessary to carry out the intent
of this Agreement. If any Obligor fails or refuses to make
payment on any Collateral when due, Secured Party is
authorized, in its sole discretion, either in its own name
or in the name of Debtor, to take such action as Secured
Party shall deem appropriate for the collection of any
amounts owed with respect to Collateral or upon which a
delinquency exists. Regardless of any other provision
hereof, Secured Party shall never be liable for its failure
to collect, or for its failure to exercise diligence in the
collection of, any amounts owed with respect to Collateral,
nor shall it be under any duty whatever to anyone except
Debtor to account for funds that it shall actually receive
hereunder. Without limiting the generality of the
foregoing, Secured Party shall have no responsibility for
ascertaining any maturities, calls, conversions, exchanges,
offers, tenders, or similar matters relating to any
Collateral, or for informing Debtor with respect to any of
such matters (irrespective of whether Secured Party actually
has, or may be deemed to have, knowledge thereof). The
receipt of Secured Party to any Obligor shall be a full and
complete release, discharge, and acquittance to such
Obligor, to the extent of any amount so paid to Secured
Party. The Rights granted Secured Party under this clause
(b) may be exercised only upon the occurrence of a Default
or an Event of Default and so long as such Default or Event
of Default is continuing.
(c) Certain Proceeds. Subject to the provisions of
Subparagraph 4.1, upon the occurrence of a Default or an
Event of Default and so long as such Default or Event of
Default is continuing, any cash proceeds of Collateral which
come into the possession of Secured Party (including,
without limitation, insurance proceeds) may, at Secured
Party's option, be applied in whole or in part to the
Obligations (to the extent then due) , be released in whole
or in part to or on the written instructions of Debtor for
any general or specific purpose, or be retained in whole or
in part by Secured Party as additional Collateral. Any cash
Collateral in the possession of Secured Party may only be
invested by Secured Party in certificates of deposit issued
by Secured Party (if Secured Party issues such certificates)
, or in securities issued or guaranteed by the United States
of America or any agency thereof. Secured Party shall never
be obligated to make any such investment and shall never
have any liability to Debtor for any loss which may result
therefrom. All interest and other amounts earned from any
investment of Collateral may be dealt with by Secured Party
in the same manner as other cash Collateral.
(d) Use and Operation of Collateral. Should any
Collateral come into the possession of Secured Party,
Secured Party may use or operate such Collateral for the
purpose of preserving it or its value pursuant to the order
of a court of appropriate jurisdiction or in accordance with
any other Rights held by Secured Party in respect of such
Collateral. Debtor covenants to promptly reimburse and pay
to Secured Party, at Secured Party's request, the amount of
all reasonable expenses (including, without limitation, the
cost of any insurance and payment of Taxes or other charges)
incurred by Secured Party in connection with its custody and
preservation of Collateral, and all such expenses, costs,
Taxes, and other charges shall bear interest at the Maximum
Rate until repaid and, together with such interest, shall be
payable by Debtor to Secured Party upon demand and shall
become part of the Obligations. However, the risk of
accidental loss or damage to, or diminution in value of,
Collateral is on Debtor, and Secured Party shall have no
liability whatever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in
force is adequate as to amount or as to the risks insured.
With respect to Collateral that is in the possession of
Secured Party, Secured Party shall have no duty to fix or
preserve Rights against prior parties to such Collateral and
shall never be liable for any failure to use diligence to
collect any amount payable in respect of such Collateral,
but shall be liable only to account to Debtor for what it
may actually collect or receive thereon. The provisions of
this clause (4) shall be applicable whether or not a Default
or an Event of Default has occurred and is continuing.
(e) Purchase Money Collateral. To the extent that
Secured Party has advanced or will advance funds to or for
the account of Debtor to enable Debtor to purchase or
otherwise acquire Rights in Collateral, except as otherwise
provided in the Loan Agreement, Secured Party, at its
option, may pay such funds (i) directly to the Person from
whom Debtor will make such purchase or acquire such Rights,
or (ii) to Debtor, in which case Debtor covenants to
promptly pay the same to such Person, and forthwith furnish
to Secured Party evidence satisfactory to Secured Party that
such payment has been made from the funds so provided by
Secured Party for such payment.
(f) Subrogation. If any of the Obligations are given
in renewal or extension or applied toward the payment of
indebtedness secured by any Lien, Secured Party shall be,
and is hereby, subrogated to all of the Rights, titles,
interests, and Liens securing the indebtedness so renewed,
extended, or paid.
(g) INDEMNIFICATION. DEBTOR HEREBY ASSUMES ALL
LIABILITY FOR THE COLLATERAL, FOR THE SECURITY INTEREST, AND
FOR ANY USE, POSSESSION, MAINTENANCE, AND MANAGEMENT OF, ALL
OR ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY
TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH, THE
TRANSACTIONS CONTEMPLATED HEREIN, AND AGREES TO ASSUME
LIABILITY FOR, AND TO INDEMNIFY AND HOLD SECURED PARTY
HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS, CAUSES OF
ACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS
AND DAMAGE TO PROPERTY, HOWSOEVER ARISING FROM OR INCIDENT
TO SUCH USE, POSSESSION, MAINTENANCE, AND MANAGEMENT,
WHETHER SUCH PERSONS BE AGENTS OR EMPLOYEES OF DEBTOR OR OF
THIRD PARTIES# OR SUCH DAMAGE BE TO PROPERTY OF DEBTOR OR OF
OTHERS. DEBTOR AGREES TO INDEMNIFY, SAVE, AND HOLD SECURED
PARTY HARMLESS FROM AND AGAINST, AND COVENANTS TO DEFEND
SECURED PARTY AGAINST, ANY AND ALL LOSSES, DAMAGES, CLAIMS,
COSTS, PENALTIES, LIABILITIES, AND EXPENSES, INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS I FEES,
HOWSOEVER ARISING OR INCURRED BECAUSE OF, INCIDENT TO, OR
WITH RESPECT TO COLLATERAL OR ANY USE, POSSESSION,
MAINTENANCE, OR MANAGEMENT THEREOF (A "CLAIM"). IN THE
EVENT THAT ANY CLAIM IS BROUGHT AGAINST SECURED PARTY,
SECURED PARTY AGREES TO GIVE PROMPT WRITTEN NOTICE TO DEBTOR
WITH RESPECT TO SAME, TOGETHER WITH A COPY OF SUCH CLAIM,
AND SO LONG AS NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND
BE CONTINUING, DEBTOR SHALL HAVE THE RIGHT IN GOOD FAITH AND
BY APPROPRIATE PROCEEDINGS TO DEFEND SECURED PARTY AGAINST
SUCH CLAIM AND EMPLOY COUNSEL ACCEPTABLE TO SECURED PARTY TO
CONDUCT SUCH DEFENSE (AT DEBTOR'S SOLE EXPENSE) SO LONG AS
SUCH DEFENSE SHALL NOT INVOLVE ANY DANGER OF THE
FORECLOSURE, SALE, FORFEITURE OR LOSS, OR IMPOSITION OF ANY
LIEN, OTHER THAN A PERMITTED LIEN, ON ANY PART OF THE
COLLATERAL, OR SUBJECT SECURED PARTY TO CRIMINAL LIABILITY.
SHOULD DEBTOR ELECT TO ENGAGE ITS OWN COUNSEL ACCEPTABLE TO
SECURED PARTY, SECURED PARTY MAY CONTINUE TO PARTICIPATE IN
THE DEFENSE OF ANY SUCH CLAIM AND WILL RETAIN THE RIGHT TO
SETTLE ANY SUCH MATTER ON TERMS AND CONDITIONS SATISFACTORY
To SECURED PARTY. ALL SUCH SETTLEMENTS SHALL BE PAID BY AND
REMAIN THE SOLE RESPONSIBILITY OF DEBTOR. IN THE EVENT
DEBTOR DOES NOT ACCEPT THE DEFENSE OF THE CLAIM AS PROVIDED
ABOVE, SECURED PARTY SHALL HAVE THE RIGHT TO DEPEND AGAINST
SUCH CLAIM, IN ITS SOLE DISCRETION, AND PURSUE ITS RIGHTS
HEREUNDER.
(h) Diminution in Value of Collateral. Secured Party
shall have no liability or responsibility whatsoever for any
diminution in or loss of value of any Collateral.
(i) Appointment of Attorney-In-Fact. Debtor hereby
irrevocably appoints Secured Party or its designee as
Debtor's attorney-in-fact, with full authority in the place
instead of Debtor, from time to time in Secured Party's
discretion prior to, upon, during, and after an Event of
Default, to take any action and to execute any instrument
which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, including without
limitation, (i) to perfect and continue to perfect the
security interests created by this Agreement; (ii) to ask,
demand, collect or sue for, recover, compound, receive and
give acquittance in receipts for any monies due or becoming
due under or in respect for any Collateral; (iii) to
receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with
the Collateral,, and (iv) to file any claims or take any
action or institute any proceeding which Secured Party may
deem necessary to desirable for the collection of any
Collateral or otherwise to enforce the rights of Secured
Party in the Collateral; and, in addition to the foregoing,
after an Event of Default, to sell or assign any Policy
and/or Policy Proceeds held as Collateral upon such terms,
for such amounts and at such time or times Secured Party
deems advisable.
10. Miscellaneous.
(a) Reference to Miscellaneous Provisions. This
Agreement is one of the "Loan Documents" referred to in the
Loan Agreement.
(b) Term. Upon full and final payment and performance
of the Obligations by Debtor, this Agreement shall
automatically thereafter terminate; provided, that, no
Obligor, if any, on any of the Collateral shall ever be
obligated to make inquiry as to the termination of this
Agreement, but shall be fully protected in making payment
directly to Secured Party.
(c) Actions Not Releases. The Security Interest and
Debtor's obligations and Secured Party's Rights hereunder
shall not be released, diminished, impaired, or adversely
affected by the occurrence of any one or more of the
following events: (i) the taking or accepting of any other
security or assurance for any or all of the Obligations;
(ii) any release', surrender, exchange, subordination, or
loss of any security or assurance at any time existing in
connection with any or all of the obligations; (iii) the
modification of, amendment to, or waiver of compliance with
any terms of any of the other Loan Documents without the
notification or consent of Debtor, except as required
therein (the Right to such notification or consent being
herein specifically waived by Debtor); (iv) any renewal,
extension, or rearrangement of the payment of any or all of
the obligations, or any adjustment, indulgence, forbearance,
or compromise that may be granted or given by Secured Party
to Debtor; (v) any neglect, delay, omission, failure, or
refusal of Secured Party to take or prosecute any action in
connection with any other agreement, document, guaranty, or
instrument evidencing, securing, or assuring the payment of
all or any of the Obligations; (vi) any failure of Secured
Party to notify Debtor of the release of any other security;
(vii) the illegality, invalidity, or unenforceability of all
or any part of the Obligations against any party obligated
with respect thereto by reason of the fact that the
obligations, or the interest paid or payable with respect
thereto, exceeds the amount permitted by Law, the act of
creating the obligations, or any part thereof, is ultra
vires, or the officers, partners, or trustees creating same
acted in excess of their authority, or for any other reason;
or (viii) if any payment by any party obligated with respect
thereto is held to constitute a preference under applicable
Laws or for any other reason Secured Party is required to
refund such payment or pay the amount thereof to someone
else.
(d) Waivers. Debtor WAIVES (i) any Right to require
Secured Party to proceed against any other Person, to
exhaust its Rights in the Collateral, or to pursue any other
Right which Secured Party may have; and (ii) with respect to
the Obligations, presentment and demand for payment,
protest, notice of protest and nonpayment, and notice of the
intention to-accelerate.
(e) Waiver of Marshalling. To the fullest extent
Debtor may do so, Debtor agrees that Debtor will not at any
time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter in force providing for
any appraisement, valuation, stay, extension or redemption,
and Debtor, for Debtor, Debtor's heirs, devisees,
representatives, receivers, trustees, successors and
assigns, and for any and all persons ever claiming any
interest in the Collateral, to the extent permitted by law,
hereby WAIVES and RELEASES all rights of redemption,
valuation, appraisement, stay of execution, notice of
intention to mature or declare due the whole of the secured
indebtedness, notice of election to mature or declare due
the whole of the secured indebtedness and all rights to a
marshalling of the assets of Debtor, including the
Collateral, or to a sale in inverse order of alienation in
the event of foreclosure of the security interest hereby
created.
(f) Financing Statement. Secured Party shall be
entitled at any time to file this Agreement or a carbon,
photographic, or other reproduction of this Agreement, as a
financing statement, but the failure of Secured Party to do
so shall not impair the validity or enforceability of this
Agreement.
(g) Amendments. This instrument may be amended only
by an instrument in writing executed jointly by Debtor and
Secured Party, and supplemented only by documents delivered
or to be delivered in accordance with the express terms
hereof.
(h) Multiple Counterparts. This Agreement has been
executed in a number of identical counterparts, each of
which shall be deemed an original for all purposes and all
of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(i) Parties Bound; Assignment. This Agreement shall
be binding on Debtor and Debtor's successors and assigns and
shall inure to the benefit of Secured Party and Secured
Party's successors and assigns. Debtor may not, without the
prior written consent of Secured Party, assign any Rights,
duties, or obligations hereunder. In the event of an
assignment of all or part of the Obligations, the Security
Interest and other Rights and benefits hereunder to the
extent applicable to the part of the Obligation so assigned,
may be transferred therewith.
(j) Entirety. THIS AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. This Agreement and the
other Loan Documents embody the entire agreement between
Debtor and Secured Party and supersede all prior proposals,
agreements and understandings relating to the subject matter
hereof.
EXECUTED, at Columbus, Ohio, as of the day and year
first herein set forth.
DEBTOR:
NATIONAL CAPITAL BENEFITS CORP.
By:
Its:
SECURED PARTY:
BANK ONE, COLUMBUS, NA
By:
Its:
SCHEDULE I
TO
SECURITY AGREEMENT AND ASSIGNMENT
INTELLECTUAL PROPERTY
OF
NATIONAL CAPITAL BENEFITS CORP., DEBTOR
AMERICAN LIFE RESOURCES CORPORATION* Reg. No. 1,782,90
International Class: 36
Reg. Date: July 20, 1993
LIVING BENEFITS and design* Reg. No. 1,531,252
International Class: 36
Reg. Date: March 21, 1989
LIVING BENEFITS* Reg. No. 1,780,550
International Class: 36
Reg. Date: July 6, 1993
"WE PUT LIFE BACK INTO LIFE INSURANCE* App. No. 74/459,373
International Class: 36
Filed: November 17, 1993
International Class: 36
"LIFELOAN" App. No. 74/459,373
Filed: March 15, 1995
"RED RIBBONS COVER THE HEART, Reg. No. VA 697-578
BUT NOT EXPENSES" Filed: August 8, 1994
SCHEDULE II
NATIONAL CAPITAL BENEFITS CORP.
LOCATIONS
A. LOCATION OF CHIEF EXECUTIVE OFFICE:
National Capital Benefits Corp.
540 Madison Avenue, Suite 1702
New York, New York 10022
B. LOCATION OF BOOKS AND RECORDS AS TO POLICIES AND ACCOUNTS:
National Capital Benefits Corp.
540 Madison Avenue, Suite 1702
New York, New York 10022
C. LOCATION OF OTHER COLLATERAL:
Description City County (or Parish), and State
(1) CASH - Chase Manhattan Bank 200
East 57th Street
Checking Acct No. 039 1 202850 New York, NY 10022
(2) Policies of Life Insurance Bank One, Columbus, NA
150 East Campview Bvd.
Suite 310
Columbus, Ohio 43235
SCHEDULE III
REAL PROPERTY; LEASES
NATIONAL CAPITAL BENEFITS CORP.
(1) Office Lease - 540 Madison Avenue - Suite 1702
New York, NY 10022
Madison Avenue Associates, Lessor National
Capital Benefits Corp., Lessee
ANNEX A DESCRIPTION
OF REAL PROPERTY
NATIONAL CAPITAL BENEFITS CORP.
Record Owner: None.
STATE OF OHIO )
) ss:
COUNTY OF FRANKLIN )
Before me, a notary public, in and for said county,
personally appeared before Jeffrey S. Goldstein, Chief Executive
Officer of National Capital Benefits Corp., a Delaware
Corporation, who acknowledged that he signed the foregoing
instrument on behalf of said corporation. In testimony whereof,
I have hereunto subscribed my name this ______ day of
, 1996.
Notary Public, State of Ohio
Printed Name:
My Commission Expires:
I N P U T
AUTHOR: Crudden, Kevin x0826/8475 28th floor
DATE/TIME: 3/27/967 11:14 am
ATTORNEY TIME NUMBER: 321 DATASET: MP 2
FILE NO.: 910000-8006 DATE/TIME NEEDED: 3/27/96]
DOC# AND VERSION: 2035220-1 Security agr & assign
ORIGINAL TYPIST: B.Garvey/L.Dressel
Note: Word Processing only works on the most recent version.
FINAL FORMAT: 8 1/2 x 11 Single Spaced Input Ethical Wall? No
Right Justified? Yes DATE/TIME DELIVERED: 3/28
10:45 am
SHOULD THIS DOCUMENT BE
SUBMITTED FOR THE BRIEF BANK? No
FOR BLACKLINED DOCUMENTS: PLEASE CIRCLE ONE
Continue Blacklining Blackline NEW changes only
Copy and create new document called:
Other:
SPECIAL INSTRUCTIONS:
R E V I S I O N S
TO BE COMPLETED BY ATTORNEY TO BE COMPLETED BY W.P.
DATE/ DATE/TIME
ATTORNE TIME DRAFT FINAL F/L SPECIALI DELIVERED
Y DELIV. NEEDED ST
_______________________________
* Subject to a License Agreement by National Capital
Benefits Corp. in favor of Living Benefits, Inc. and American
Life Resources Corporation.
National Capital Benefits Corp.
Senior Subordinated Note
and
Warrant Purchase Agreement
Dated as of December 29, 1995
TABLE OE CONTENTS
Page
BACKGROUND
A. Seller
B. Line of Credit
1
C. Purchase and Sale of Note
1
D. Use of Proceeds
1
E. Warrants
1
F. Security for Payment of the Note
1
G. Intercreditor Agreement
1
STATEMENT OF AGREEMENT
2
Section 1. Defined Terms
2
Section 2. Purchase and Sale of the Note
12
Section 3. Issuance of Warrants
13
Section 4. Conditions to Closing
13
Section 5. Representations and Warranties of the Seller
15
Section 6. Representations and Warranties of the
Purchaser 19
Section 7. Affirmative Covenants
20
Section 8. Negative Covenants
23
Section 9. Events of Default
26
Section 10. Consequences of Event of Default
28
Section II. Miscellaneous
29
Note Between the Seller and Purchaser
Exhibit A
Subordinated Security Agreement
Exhibit B
Certificate of Compliance
Exhibit C
Validity and Support Agreement of Kenneth Klein
Exhibit D-1
Validity and Support Agreement of Jeffrey S. Goldstein
Exhibit D-2
Validity and Support Agreement of National Capital
Management Corporation
Exhibit D-3
Bank One Loan Agreement
Exhibit F
Security Agreement-Pledge of Capital Stock
Exhibit F
Transactions with Affiliates
Exhibit G
Itemized Transaction Costs
Schedule 1
Subordinated Indebtedness at Closing
Schedule 2
Other Indebtedness Schedule 3
i
Senior Subordinated Note
and Warrant Purchase Agreement
This is a SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
dated as of December 29, 1995 ("Agreement") by and between
National Capital Benefits Corp. ("Benefits"), a Delaware
corporation, as seller, and Banc One Capital Partners V, Ltd.
("BOCP V"), an Ohio limited liability company, as purchaser.
Seller, together with its respective successors and assigns, is
referred to as "Seller". BOCP V, together with its successors and
assigns, is referred to as "Purchaser". The Seller and the
Purchaser are referred to individually as a "Party" and
collectively as the "Parties."
BACKGROUND
A. Seller.
The Seller is engaged in the business of purchasing Life
Insurance Policies (as defined herein) insuring the lives of
terminally ill individuals at a discount from the Death Benefit
of such policies (the "Business").
B. Line of Credit.
Pursuant to a Loan Agreement dated as of December 29, 1995 and a
corresponding Security Agreement and Assignment dated December
29, 1995 between Bank One Columbus, N.A. ("Bank One Lender") and
the Seller, (collectively, the Bank One Credit Agreement"), the
Bank One Lender has agreed to advance up to a maximum of
$15,OOO,OOO principal amount at any one time outstanding to
Seller 01, a revolving credit basis ("Bank One Loans"). As
provided for in the Bank One Credit Agreement, the Bank One Loans
will be secured by a first priority security interest in all of
the assets of the Seller, including, but not limited to the
assignment of certain Life Insurance Policies (as defined herein)
to the l3ank One Lender.
C. Purchase and Sale of Note.
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell to Purchaser a
$2,000,000 aggregate principal amount Senior Subordinated Note
due December 31, 1998 (the "Note").
D. Use of Proceeds.
The proceeds of the Bank One Loans and the Note shall be used to
repay all of the Seller's outstanding borrowings from
Transamerica Lender Finance, a division of Transamerica Business
Credit Corporation and for working capital and other general
corporate purposes.
E. Warrants.
Upon the terms and subject to the conditions set forth in this
Agreement, Seller shall issue and sell to Purchaser warrants
("Warrants") to purchase sixty-eight (68) shares of Non-Voting
Stock (as defined herein)
The shares of Non-Voting Stock issued or issuable upon exercise
of the Warrants are referred to as the "Warrant Shares".
F. Security for Payment of the Note.
Pursuant to the Security Agreement (as defined herein) Seller
has, as security for the obligations evidenced by the Note and
other obligations hereunder, granted to the Purchaser a second
priority security interest in all of the assets of Seller,
including, but not limited to all of the Life Insurance Policies,
the AMIC and AMRC Insurance Contracts (all as defined herein) and
related rights and documents and the proceeds thereof and an
assignment and pledge of all of the outstanding Capital Stock of
the Subsidiaries (as defined herein) of Seller, all of which
Capital Stock is owned beneficially and of record by Seller.
G. lntercreditor Agreement.
The Purchaser and the Bank One Lender are parties to a
Intercreditor Agreement dated as of January _, 1996
("Intercreditor Agreement"), which provides for the subordination
of obligations evidenced by the Note to the Bank One Loans and
the manner of allocation of Collateral under the Bank One Credit
Agreements and Security Agreements.
STATEMENT OF AGREEMENT
In consideration of their mutual promises set forth in this
Agreement, the Parties hereby agree as follows.
Section 1. Defined Terms.
As used herein, the following terms shall have the following
meanings, unless the context otherwise requires, as modified,
amended or restated from time to time as provided for herein.
1.1 "Affiliate" means with respect to any Person: (i) any
person directly or indirectly controlling, controlled by, or
under common control with such Person; (ii) any person owning or
controlling 10% or more of the outstanding voting securities of
such Person; (iii) any officer, director, member or general
partner of such Person; or (iv) any Person who is an officer,
director, general partner, trustee, member or holder of 10% or
more of the voting securities of any Person described in clauses
(i) through (iii) of this subparagraph.
2
1.2 "Accountants" means with respect to the Seller, the
independent certified public accountants selected by the Seller
with the approval of the Purchaser or the Bank One Lender.
1.3 "Agreement" means this agreement.
1.4 "AMIC Insurance Contract" means that Abnormal Mortality
Insurance Contract issued to Seller by NCB Insurance Limited and
any amendments or endorsements thereto as provided to Purchaser
at Closing by Seller; and, subject to the approval of Purchaser,
any amendments or endorsements of such contract.
1.5 "AMRC Insurance Contract" means those Abnormal Mortality
Stop Loss Reinsurance Contracts issued to NCB Insurance Limited
by American Accident Reinsurance Group and Federal Insurance
Company and any amendments or endorsements thereto as provided to
Purchaser at Closing by Seller and, subject to the approval of
Purchaser, any amendments or endorsements of such contracts or
changes in the companies which participate in the pools of
insurors under such contracts, which approval shall not be
unreasonably withheld.
1.6 "Annual Financial Statements" means with respect to the
Seller a consolidated statement of financial condition (balance
sheet), a consolidated statement of income or earnings, and a
consolidated statement of changes in cash position, customarily
prepared by the Seller, for each Fiscal Year of the Seller,
including the consolidating schedules or statements used to
prepare the above statements, which statements of financial
condition and income or earnings shall be prepared in accordance
with GAAP, be presented in reasonable detail with appropriate
accompanying notes, present a comparison to the prior Fiscal Year
and be accompanied by the audit report of the Accountants and any
management or similar letter delivered by such Accountants.
1.7 "Average Monthly Operating Expenses" means for the month for
which the calculation is being made, the monthly average
calculated using the month for which the calculation is being
made and the prior five months of consolidated operating expenses
incurred by Seller (including, but not limited to the
compensation, rent, utilities, professional fees, supplies,
advertising, marketing and other expenses not directly related to
the purchase of Life Insurance Policies, but excluding the
commissions payable pursuant to the Asset Purchase Agreement with
(CAPX Corporation dated July 29, 1994).
1.8 "Average Monthly Policy Purchases" means for the month for
which the calculation is being made, the monthly average
calculated using the month for which the calculation is being
made and the prior five months of the Death Benefit of all
Eligible Policies purchased by the Seller.
1.9 "Bank One Credit Agreement" shall have the meaning set forth
in Background Paragraph B, and including all extensions and
renewals thereof.
1.10 "Bank One" means Bank One, Columbus, N.A., together with its
successors and assigns.
3
1.11 "Bank One Lender" means Bank One, Columbus, N.A., in its
capacity as lender under the Bank One Credit Agreement, together
with its successors and assigns in such capacity.
1.12 "Bank One Loans" have the meaning specified in Background
Paragraph B, including any Indebtedness related to the collection
efforts of the Bank One Loans, and all extensions and renewals
thereof
1.13 "Benefits" shall mean National Capital Benefits Corp., a
Delaware corporation, together with its successors and assigns.
1.14 "Benefits Value Ratio" shall have the meaning set forth in
Section 8(e).
1.15 "BOCP V" means Banc One Capital Partners V, Ltd., an Ohio
limited liability company, together with its successors and
assigns.
1.16 "Business" shall have the meaning set forth in Background
Paragraph A.
1.17 "Business Day" means any day other than a Saturday, Sunday
or day upon which banking institutions are authorized or required
by law or executive order to be closed in the City of Columbus,
Ohio.
1.18 "Capital Stock" of any Person means, any and all shares,
interests, participations or other equivalents (however
designated) of corporate stock, including each class of common
stock and preferred stock of such Person or partnership interests
and any warrants, options or other rights to acquire such stock
or interests.
1.19 "Certificate of Compliance" means a certificate, in the form
of Exhibit C, to be prepared monthly by the Seller and, in
connection with the Annual Financial Statements, verified in
writing by the Accountants, which certificate shall set forth the
calculation of the financial covenants as and to the extent
required by Section 8 and certify that no Event of Default has
occurred. Such Certificate of Compliance shall be delivered to
the Purchaser within thirty (30) days of the end of each calendar
month for the Monthly Financial Statements, and ninety (90) days
of the end of each calendar year for the Annual Financial
Statements.
1.20 "Change of Control" means (i) an event or series of events
by which any Person or Persons or other entities acting in
concert as a partnership or other group (a "Group of Persons")
shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases, merger, consolidation
or otherwise, have become the beneficial owner (within the
meaning of' Rule 13d-3 under the Securities Exchange Act), of 50%
or more of the Voting Power of the Seller, or (ii) the Seller is
merged with or into another corporation with the effect that
immediately after such transaction the stockholders of the Seller
immediately prior to such transaction hold less than a majority
of the combined Voting Power of the Person surviving the
transaction.
4
1.21 "Closing Date" means the date of the "Closing" of the
purchase and sale of the Note and the Warrant Certificate
pursuant to the terms of this Agreement as provided in Section 4
hereof.
1.22 "Collateral" means the collateral collectively described in
the Security Agreements.
1.23 "Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities
Exchange Act of 1934.
1.24 "Commitment" means, as of any Date of Determination, the
amount presently available under the Bank One Loans.
1.25 "Common Stock" means the shares of Voting Stock arid Non-
Voting Stock of Seller treated as a single class of stock, at any
time outstanding.
1.26 "Convertible Securities" shall have the meaning set forth in
the Warrant Certificate.
1.27 "Date if Determination" means the date upon which a
calculation or an event is to be made or determined under this
Agreement.
1.28 "Death Benefit" means the amount which an insurer is
obligated to pay under a Purchased Policy upon Policy Maturity,
which amount is equal to the Face Amount of the Purchased Policy
minus Policy Loans, if any.
1.29 "ERISA Affiliate" shall mean all members of the group of
corporations and trades or businesses (whether or not
incorporated) which, together with the Seller, are treated as a
single employer under Section 414 of the Code.
1.30 "ERISA Plan" shall mean any pension benefit plan subject to
Title IV of ERISA or Section 41 2 of the Code maintained or
contributed to by the Seller or any ERISA Affiliate with respect
to which the Seller has a fixed or contingent liability.
1.31 "Eligible Policies" means any Life Insurance Policy which
qualifies as an "Eligible Policy" under the Bank One Credit
Agreement as such term is defined as of the date of Closing and
in which the Purchaser has been granted a second priority
security interest; provided, however, that if there is any
modification, revision or amendment to the term "Eligible Policy"
in the Bank One Credit Agreement or any replacement credit
agreement which has been approved by the Purchaser in its
reasonable discretion or any of the defined terms used or
contained in such definition of "Eligible Policy", such
modification, revision or amendment, for purposes of this
Agreement. shall not, during the period the Note is outstanding,
be effective without the prior written consent of the Purchaser,
which consent shall not be unreasonably withheld.
1.32 "Event of Default" shall have the meaning set forth in
Section 9.
5
1.33 "Face Amount" means the maximum benefit amount of the base
policy without riders payable by an insurer under a Life
Insurance Policy against which there have been no Policy Loans.
1.34 "Financial Statements" means the Annual Financial Statements
and Monthly Financial Statements of the Seller
1.35 "Finder's Fees" means the fees payable to R. Bachenheimer
under the Finder's Fee Agreement dated March 10, 1994.
1.36 "Fiscal Year" means the one-year period ending December 31
of each year.
1.37 "GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the Financial
Accounting Standards Board (or any generally recognized
successor) and which, in the case of the Seller, are applied for
all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the
Financial Statements delivered to the Purchaser in connection
with the purchase of the Note. If any change in any accounting
principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such
principle or practice to continue as a generally accepted
accounting principle or practice, all reports and financial
statements required hereunder with respect to the Seller may be
prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance
with such change only after notice of such change is given to the
Purchaser and the Purchaser agrees to such change insofar as it
affects the accounting of the Seller.
1.38 "Indebtedness" with respect to the Seller on a consolidated
basis means, as of any Date of Determination, the sum (without
duplication) at such date of (i) all indebtedness of the Seller
for borrowed money or for the deferred purchase price of property
or services or which is evidenced by a note, bond, debenture, or
similar instrument, reflected on the most recent Financial
Statements (excluding trade payables and similarly accrued
operating expenses), (ii) all obligations of the Seller under any
financing lease (iii) all obligations of the Seller in respect of
letters of credit, acceptances, or similar obligations issued or
created for the account of the Seller, (iv) all guaranty
obligations of the Seller, and (v) all liabilities secured by any
lien on any property owned by the Seller, whether or not the
Seller have assumed or otherwise become liable for the payment
thereof
1.39 "Intercreditor Agreement" shall have the meaning set forth
in Background Paragraph G, as amended or restated from time to
time.
1.40 "Investment" means any loan, advance or capital contribution
to, or investment in, or purchase or otherwise acquisition of any
Capital Stock, securities or evidences of indebtedness of any
Person.
6
1.41 "Investor's Equity" means, collectively, the shares of
Capital Stock of Management owned beneficially or of record on
September 30, 1995 by James Pinto, John Shaw, Jerry Seslowe and
the proportionate share ownership of Resource Holdings Associates
through its ownership in REHC, L.P. The number of shares owned by
such individuals and Resource Holdings Associates on September
30, 1995 and as of the date of Closing is listed on Exhibit A to
the Warrant Certificate.
1.42 "Life Expectancy" means, determined at the date of the
purchase of the Life Insurance Policy by Seller, the later of the
estimated life expectancy of the insured, expressed in months, as
determined in accordance with the Purchase Guidelines.
1.43 "Life Insurance Policy(ies)" shall mean life insurance
policies purchased in whole or in part by the Seller, subject to
Bank One Lender's independent verification of purchase, in strict
compliance with the Purchase Guidelines, which have been duly
assigned to the Bank One Lender as agent and in which the
Purchaser has been granted a second priority security interest.
1.44 "Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (whether
statutory or otherwise), or preference, priority or other
security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation any conditional
sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the
uniform commercial code or comparable law of any jurisdiction in
respect of any of the foregoing).
1.45 "Management" shall mean National Capital Management
Corporation, a Delaware corporation, together with its successors
and assigns.
1.46 "Management Agreement" means, collectively, (i) the
Management Agreement dated December 28, 1995, by and between
Management and Seller and (ii) the Management Agreement dated
March 11, 1994, by and between Management and Seller, providing
for the payment of the Management Fees by Seller to Management.
1.47 "Management Fees" means the fees payable to Management
pursuant to the Management Agreement. The Management Fees accrued
as of the date of Closing are shown on Schedule 2.
1.48 "Matured Policy Performance" means, with respect to a Life
Insurance Policy, an amount equal to a fraction whose numerator
is equal to number of months for which the Seller owned the Life
Insurance Policy before Policy Maturity and whose denominator is
equal to the Life Expectancy of such Life Insurance Policy.
1.49 "Maturity Date means, with respect to the Note, December 31,
1998.
7
1.50 "Monthly Financial Statements" means, with respect to the
Seller, a consolidated statement of financial condition (balance
sheet), a consolidated statement of income or earnings, a
consolidated statement of changes in cash position and other
statements prepared by the Seller (including the consolidating
schedules or statements used to prepare the above
statements)(except for NCB, whose results for the periods
reported in the consolidated statements shall be included only to
the extent available, provided that such results shall be
consolidated no less often than quarterly). for each month and
for the Fiscal Year to date, which statements of financial
condition and income or earnings shall be prepared in accordance
with GAAP (subject to any applicable year-end adjustments and the
absence of footnotes), to be presented in reasonable detail and
present a comparison to the comparable monthly and year-to-date
periods for the preceding Fiscal Year.
1.51 "NCB" means NCB Insurance Limited, an insurance company
chartered in Bermuda, and a wholly-owned subsidiary of Seller,
together with its successors and assigns.
1.52 "Net Income" of' any Person shall mean, for the period
ending on a particular date, the net income (after federal, state
and local income taxes) of such Person which would appear on
statements of income and cash flows of such Person for such
period prepared in accordance with
GAAP.
1.53 "Net Worth" any Person shall mean, as of any date, the total
shareholder's equity (including capital stock additional paid-in
capital and retained earnings after deducting treasury stock)
which would appear on a balance sheet of such Person prepared as
of such date in accordance with GAAP.
1.54 "Non-Voting Stock" shall have the meaning set forth in
Section 5(f).
1.55 "Note" means the Senior Subordinated Note due December 3 1,
1998 issued and sold by the Seller to the Purchaser pursuant to
this Agreement. The Note is in the form of Exhibit A.
1.56 "Obligations" shall mean (i) all amounts owed by the Seller
to the Purchaser evidenced by the Note, (ii) all amounts owed by
the Seller under the terms of the Purchase Agreement, and (iii)
all other present and future indebtedness and obligations of the
Seller to the Purchaser however created, arising or evidenced,
direct or indirect, absolute or contingent, due or to become due,
now or hereafter existing (including the payment of the
Repurchase Price ( as defined in the Warrant Certificate) upon
exercise of the Put Option (as defined in the Warrant
Certificate) granted pursuant to the Warrant Certificate).
1.57 "Outstanding Common Stock" means, as of any date, all shares
of Common Stock then outstanding plus the maximum number of
shares of Common Stock issuable in respect of Convertible
Securities and options and warrants to purchase shares of Common
Stock or Convertible Securities outstanding on such date (whether
or not the rights to convert, exchange or exercise thereunder are
presently exercisable), including the maximum number of shares
issuable under the Warrants; provided that the maximum number of
shares of Common Stock issuable in respect of Convertible
8
Securities and options and warrants to purchase shares of Common
Stock or Convertible Securities outstanding on such date shall be
adjusted in accordance with the "treasury stock" method
determined under generally accepted accounting principles
pursuant to Accounting Principles Board Opinion 15.
1.58 "Parties" means the Seller and the Purchaser collectively,
and "Party" means any one of the Parties.
1.59 "Person" shall mean any individual, corporation, limited
liability company, partnership, joint venture, association, joint
stock company, trust, unincorporated organization, governmental
authority or any other form of equity.
1.60 "Pledge Agreement" means the Security Agreement - Pledge of
Capital Stock dated as of the date hereof by and between the
Seller and the Purchaser whereby the Seller has granted to the
Purchaser a second priority security interest in the Capital
Stock of the Subsidiaries.
1.61 "Preferred Stock" shall have meaning set forth in Section
5(f).
1.62 "Prime Rate" means, at any Date of Determination, the prime
rate most recently announced by Bank One, Columbus, N.A. in
effect at its principal office in Columbus, Ohio Any change in
the Prime Rate shall become effective as of the date of such
change in the prime rate.
1.63 "Policy Loan" means the aggregate of all loans or other
disbursements made by an insurer under a Life Insurance Policy
to, or for the benefit of or at the designation of the owner on
such Life Insurance Policy prior to the purchase of such policy
by the Seller which is to be repaid or reimbursed to such insuror
at Policy Maturity.
1.64 "Policy Maturity" means, with respect to a Purchased Policy,
the death of the insured under such Purchased Policy.
1.65 "Purchased Policy" means a Life Insurance Policy or portion
of a Life Insurance Policy purchased by the Seller or in which
the Seller receives an irrevocable interest.
1.66 "Purchase Guidelines" means the guidelines to be used by the
Seller in purchasing Eligible Policies (as submitted to Purchaser
prior to Closing). The Purchase Guidelines are attached to the
Bank One Credit Agreement which is attached as Exhibit E.
1.67 "Purchaser" means BOCP V, together with its successors and
assigns.
1.68 "Qualified Expense(s)" means an amount expensed or accrued
by the Company under GAAP which is a reimbursement to an
Affiliate for amounts incurred by the Affiliate on an arm's-
length basis and which are owed by the Affiliate to a third-party
who is not an Affiliate of(i) the Affiliate paying or accruing
such expense or (ii) the Company.
9
1.69 "Related Documents" means the Security Agreements, Warrant
Certificate, Intercreditor Agreement, Co-Sale Agreement and the
Validity and Support Agreements.
1.70 "Remaining Life Expectancy" means, as of any Date of
Determination, the Life Expectancy with regard to a Life
Insurance Policy less the number of months between the Date of
Determination and the original date of purchase of the Life
Insurance Policy by the Seller; provided, however, that for
purposes of calculating the Weighted Average Adjusted Remaining
Life Expectancy, if such sum is equal to or less than zero, the
Remaining Life Expectancy shall be equal to fifty percent (50%)
of the Life Expectancy.
1.71 "Security Agreements" means, collectively, (i) the
Subordinated Security Agreement and (ii) the Pledge Agreement,
both dated as of the date hereof for the benefit of the
Purchaser, all as modified, amended or restated from time to
time, together with any other agreements securing the payment of
the obligations evidenced by the Note or under this Agreement.
1.72 "Seller" means Benefits, together with its successors and
assigns.
1.73 "Subordinated Indebtedness" means all Indebtedness which is
subordinated to the Note, including the Management Fees and the
escrow fees which amounts accrued as of the date of Closing are
shown on Schedule 2.
1.74 "Subordinated Security Agreement" means the Subordinated
Security Agreement dated as of the date hereof between the Seller
and Purchaser, whereby Seller has granted a security interest in
the Collateral to the Purchaser during the time the Note is
outstanding.
1.75 "Subsidiaries" means, collectively, Living Benefits, Inc., a
Delaware corporation, American Life Resources Corporation, a
Delaware corporation and NCB Insurance Limited, an insurance
company chartered in Bermuda, together with their respective
successors and assigns.
1.76 "Tangible Net Worth" of any person shall mean, as of any
date, the Net Worth of the Person less all amounts appearing on
the balance sheet of such Person used for determining the Net
Worth related to (i) goodwill, (ii) patents, trademarks, trade
names, copyrights and franchises, and (iii) all other similar
assets which would be classified as intangible assets under GAAP.
1.77 "Total Liabilities" of any Person shall mean, as of any Date
of Determination, all amounts which would be included as
liabilities on a balance sheet of such Person as of such date
prepared in accordance with GAAP.
1.78 "Total Net Benefits Value" means, as of any Date of
Determination, the sum of the Death Benefits of all Eligible
Policies.
1.79 "UCC" means the Uniform Commercial Code as in effect in the
State of Ohio.
10
1.80 "Unmatured Policy Performance" means, with respect to a Life
Insurance Policy that has not reached Policy Maturity as of the
Date of Determination, a fraction whose numerator is equal to the
number of months the Seller has owned such Life Insurance Policy
as of the Date of Determination and whose denominator is equal to
the Life Expectancy of such Life Insurance Policy.
1.81 "Validity and Support Agreements" means collectively, the
Validity and Support Agreement of Kenneth Klein, the Validity and
Support Agreement of Jeffrey S. Goldstein, and the Validity and
Support Agreement of National Capital Management Corporation, to
be executed and delivered by Kenneth Klein, Jeffrey S. Goldstein
and National Capital Management Corporation to the Purchaser at
or about the Closing, as amended, modified, restated,
supplemented or renewed from time to time in the form set forth
in Exhibit D-l, D-2 and D-3, respectively.
1.82 "Voting Power" means with respect to any corporation the
power to vote for or designate members of the board of directors
of such corporation, whether exercised by virtue of the record
ownership of stock, under a close corporation or similar
agreement or under an irrevocable proxy.
1.83 "Voting Stock" shall have the meaning set forth in Section
5(f).
1.84 "Warrant Certificate" means the certificate issued by the
Seller to the Purchaser evidencing the Warrants.
1.85 "Warrant Shares" means the shares of Non-Voting Stock of the
Seller issuable upon exercise of the Warrants, together with
other shares of Common Stock or Convertible Securities purchased
or acquired as provided for in the Warrant Certificate.
1.86 "Warrants" means the warrants to purchase an aggregate of
sixty-eight (68) shares of Non-Voting Stock issued and sold to
the Purchaser by the Seller pursuant to this Agreement. The
Warrants are evidenced by a Warrant Certificate.
1.87 "Weighted Average Adjusted Remaining Life Expectancy" means,
as of any Date of Determination, a fraction (i) the numerator of
which is equal to the total for all Eligible Policies of (A) the
product of the Remaining Life Expectancy for such Eligible Policy
multiplied by (B) the Death Benefit for such Eligible Policy; and
(ii) the denominator is equal to the sum of the Death Benefits of
all the Eligible Policies used in calculating the numerator.
1.88 "Weighted Average Policy Performance Factor" means, as of
any Date of Determination an amount equal to a fraction whose (i)
numerator is equal to the sum of (A) Matured Policy Performance
multiplied by the Death Benefit for each such Life Insurance
Policy; plus (B) Unmatured Policy Performance multiplied by the
Death Benefit for each such Life Insurance Policy; and (ii) whose
denominator is the sum of the Death Benefits for all Life
Insurance Policies used in the calculation of the numerator.
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1.89 "Working Capital" means, at the end of each calendar
month an amount equal to (i) the Seller's cash; plus (ii) seven
and one-half (7.5%) of Seller's accounts receivable with respect
to the AMIC insurance Contract, AMRC Insurance Contract and the
Death Benefit of Life Insurance Policies which have reached
Policy Maturity; plus (iii) Seller's availability under the
Commitment; minus (iv) the Seller's accounts payable (as
determined under GAAP); minus (v) the Seller's current accrued
expenses (as determined under GAAP).
Section 2. Purchase and Sale of the Note.
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell to Purchaser and
Purchaser shall purchase from the Seller a Note in the aggregate
principal amount of $2,000,000, for a purchase price of
$2,000,000. Such purchase and sale shall be consummated on the
Closing Date as provided for in this Agreement, and on such date
the Purchaser shall make payment of the purchase price of the
Note by wire transfer to an account designated in writing by the
Seller.
The Note shall include the following terms and shall be
substantially in the form of Exhibit A.
(a) Term. The Note shall be dated the date of this Agreement and
shall be due and payable in fall on or before the Maturity Date.
(b) Interest Rate. The Note shall accrue interest (computed on
the basis of the actual number of days elapsed over a 360 day
year comprised of twelve months of 30 days each with monthly
compounding) on the unpaid principal balance thereof at a fixed
rate per annum equal to fourteen percent (14%).
(c) Interest Payment Dates. Interest on the Note shall be
payable monthly in arrears on the last Business Day of each
month, commencing January 31, 1996.
(d) Principal Payments. The unpaid principal amount of the Note
shall be due and payable in a single installment on the Maturity
Date.
(e) Prepayments. The Note may be prepaid in whole or in part at
any time without penalty upon fifteen (15) day's notice to
Purchaser in increments of not less than $100,000, provided that
any interest due must be paid concurrent with and in addition to
any principal prepayment. The Note is not a revolving loan
facility No principal repaid may be reborrowed pursuant to this
Agreement.
(f) Subordination. The Note will be subordinated to the Bank One
Loans, including all renewals, extensions or continuations
thereof.
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(g) Payments. All payments and prepayments, if applicable, to be
made by the Seller, with respect to principal, interest or
penalties on the Note shall be due at .30 p.m. Columbus, Ohio
time on the day when due and shall be made to the Purchaser in
federal funds or other immediately available lawful money of the
United States of America. Whenever any payment to be made
hereunder shall be due other than on a Business Day, such payment
shall be made on the Business Day preceding the due date.
(h) Default Rate. Notwithstanding anything to the contrary
contained herein or in the Note, upon the occurrence and during
the continuation of an Event of Default resulting from the
failure to timely pay principal of or interest on the Note or
upon the occurrence and during the continuation of any other
Event of Default (subject to any applicable notice and cure
provisions provided herein), the Note shall bear interest at a
rate per annum equal to the Prime Rate plus nine percent (9%)
from the date of such Event of Default until paid in full.
(i) Security. Until payment in frill of the Note, as security
for the payment of the Note and for the performance of and
compliance with all of the terms, covenants, conditions and
stipulations and agreements contained in this Agreement and in
the Note, the Seller, by the Security Agreements and by other
instruments, including UCC financing statements, shall, as
provided in the Security Agreements, assign and grant to the
Purchaser a second priority security interest in all of the Life
Insurance Policies and the AMIC and AMRC Insurance Contracts and
related rights and documents and the proceeds thereof and all of
the outstanding Capital Stock of the Subsidiaries (excluding NCB,
until such time as the consent of the Bermuda Monetary Authority
and the Registrar of Companies has been obtained for the pledge
of the Capital Stock), all of which Capital Stock is owned
beneficially and of record by Seller.
Section 3. Issuance of Warrants.
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell to the Purchaser and
the Purchaser shall purchase from the Seller for a purchase price
of $100, Warrants to purchase sixty-eight (68) shares of Non-
Voting Stock, which shares of Non-Voting Stock represent, as of
the date hereof, in the aggregate 12% of the Outstanding Common
Stock, of the Seller, after giving effect to the issuance of such
Warrant Shares. The sale shall be consummated on the Closing
Date. The terms and conditions of exercise of such Warrants,
including the time of exercise, and the number of Warrant Shares
which may be purchased upon exercise shall be as provided in the
Warrant Certificate.
Section 4. Conditions to Closing.
The obligation of the Purchaser to purchase the Note and the
Warrants is subject to the fulfillment, in a manner reasonably
satisfactory to the Purchaser and its counsel, of each of the
following conditions precedent on or before the date of purchase
of the Note and Warrants ("Closing").
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(a) No Event of Default. No Event of Default or event which with
notice, lapse of time or both would constitute an Event of
Default has occurred.
(b) Representations and Warranties. Each of the representations
and warranties of the Seller set forth in this Agreement and the
Security Agreements shall be true and correct in all material
respects as of the date of Closing.
(c) Bank One Credit Agreement. The Bank One Credit Agreement
shall have been duly executed and delivered by the Seller and the
Bank One Lender, shall remain in frill force and effect as of the
date of Closing, and no event of default or event which with
notice, lapse of time or both would constitute an event of
default thereunder shall have occurred thereunder.
(d) Execution and Delivery of Documents. Each of the following
documents, in form and substance reasonable satisfactory to the
Purchaser and its counsel, shall have been duly executed and
delivered:
(i) a Note in the principal amount of $2,000,000 payable to
Purchaser;
(ii) a Warrant Certificate for the purchase of sixty-eight
(68) Warrant Shares issued in the name of Purchaser;
(iii) the Bank One Credit Agreement;
(iv) the Related Documents;
(v) certified copies of the corporate resolutions of the
Seller and Subsidiaries authorizing the execution,
delivery and performance of its obligations under this
Agreement, the Note, the Related Documents and any
other documents to be delivered pursuant to this
Agreement;
(vi) certified copies of the Certificate of Incorporation,
including any and all amendments thereto, and a
certified copy of the by-laws of the Seller and the
Subsidiaries as in effect on the date of Closing;
(vii) the certificate of the Secretary of the Seller
certifying the names of the officers of the Seller and
the Subsidiaries authorized to sign this Agreement, the
Note, the Related Documents and any other documents or
certificates to be delivered pursuant to this Agreement
by the Seller and the Subsidiaries, together with the
true signatures of such officers;
(viii)an opinion of counsel for the Seller, addressed to the
Purchaser, in form and substance satisfactory to the
Purchaser and its counsel; and
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(ix) such other opinions, certificates, affidavits,
documents and filings., including any and all UCC
filings, as the Purchaser may deem reasonably necessary
or appropriate.
(e) Warrant Shares. Creation and reservation of the Warrant
Shares in the capital structure and the books and records of
Seller.
(f) Fees and Disbursements. Payment at or before Closing of all
fees and disbursements under this Agreement, the Related
Documents and the Note, including, but not limited to attorneys'
fees and expenses.
(g) Proforma Balance Sheet. Purchaser shall have received from
Seller a proforma balance sheet of Seller dated as of the date of
Closing, taking into account all transactions contemplated by
this Agreement, in form and substance satisfactory to Purchaser
in its reasonable discretion.
(h) Proforma Projections. Purchaser shall have received from
Seller, not later than March 3 1, 1996, proforma projections of
Seller's future performance for each of the three Fiscal Years
following the Closing Date, on a consolidated basis, including a
balance sheet, statement of income or earnings and a statement of
changes in cash flow, dated as of the Closing, in form and
substance satisfactory to the Purchaser in its reasonable
discretion.
Section 5. Representations and Warranties of the Seller.
The representations and warranties of the Seller set forth in
this Section 5 shall survive the purchase and sale of the Note
and Warrants, and any investigation made by the Purchaser shall
not diminish the right of the Purchaser to rely upon such
representations and warranties. The Seller represents and
warrants to the Purchaser the following effective, as of the
original date of this Agreement
(a) Organization. The Seller is a corporation duly organized and
validly existing under the laws of the state of Delaware and the
execution, delivery and performance of this Agreement, each of
the Related Documents and of any instrument or agreement required
by this Agreement and each of the Related Documents are within
the Seller's and Subsidiaries powers, have been duly authorized,
and are not in conflict with the terms of any charter, bylaw or
other organizational documents of the Seller or any Subsidiary.
(b) No Conflicts. The execution, delivery and performance of
this Agreement, the Related Documents and any other instrument or
agreement required by this Agreement are not in conflict with any
law or any material indenture, agreement or undertaking to which
the Seller or any Subsidiary is a party or by which the Seller or
any Subsidiary is bound or affected.
15
(c) Enforceability. This Agreement is a legal, valid and binding
agreement of the Seller, enforceable against the Seller in
accordance with its terms and each Related Document, and any
instrument or agreement required under this Agreement, when
executed and delivered, will be similarly legal, valid, binding
and enforceable in accordance with their respective terms,
except, in either case, as enforcement thereof may be affected by
bankruptcy, moratorium, insolvency or similar laws affecting
creditors' rights generally or by the application by a court of
equitable principles.
(d) Good Standing. The Seller and each Subsidiary is properly
licensed or has properly applied for and is actively pursuing
such license, where required by any state and in good standing in
each state in which the Seller and each Subsidiary is doing
business and the Seller and each Subsidiary has qualified under,
and complied with, where required, the fictitious name statute of
each state in which the Seller and each Subsidiary is doing
business and where the failure to do so would have a material
adverse affect on the Seller's consolidated financial condition
or operations.
(e) Compliance with Laws. To the best of the knowledge of the
Seller after due inquiry, (i) the Seller and each Subsidiary has
complied with all federal, state and local laws, rules and
regulations affecting the Business of the Seller or such
Subsidiary; and (ii) there has been no material change in any law
or regulation which impacts the Business of the Seller or any
Subsidiary.
(f) Capitalization. Management and VFC Trust, of which Kenneth
Klein, the President of Seller is the sole trustee, own 85.5% and
14.5%, respectively, of the Capital Stock of Seller. The
authorized shares of Capital Stock of Seller consist of 600
shares of $0.01 par value with vote ("Voting Stock") of which 500
shares are presently issued and outstanding, 100 shares of $0.01
par value without vote ("Non-Voting Stock") of which no shares
are presently issued and outstanding., and 68 shares are reserved
for issuance upon the exercise of the outstanding Warrant, and
750 shares of Series A preferred stock $0.01 par value, $10,000
liquidation value without vote ("Preferred Stock") of which 5 19
shares are presently issued and outstanding.
(g) Ownership of Collateral. All Collateral is owned by the
Seller free and clear of all security interests, liens,
encumbrances and rights of others except for the rights of the
Bank One Lender under the security agreement required under the
Bank One Credit Agreement.
(h) Litigation. There is no litigation, tax claim, proceeding or
dispute pending, or, to the knowledge of the Seller threatened,
against or affecting the Seller or any Subsidiary or its
property, the adverse determination of which will have a material
adverse affect the Seller's consolidated financial condition or
operation or impair the Seller's ability to perform its
obligations hereunder or under any instrument or agreement
required hereunder.
(i) No Event of Default. No event has occurred and is continuing
or would result from the transactions described in this Agreement
which constitutes or would constitute an Event of Default or
which, upon a lapse of time or notice or both, would become an
Event of Default
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(j) Perfected Security Interest in Collateral. Except for the
filing of financing statements with respect to the Collateral and
the delivery to the Purchaser of any Collateral as to which
possession is the only method of perfecting a security interest
therein, no further action is necessary in order to establish and
perfect the Purchaser's lien on or perfected security interest in
the Collateral, which lien shall be second only to the lien of
the Bank One Lender in the Collateral.
(k) Information Submitted. The audited Annual Financial
Statements and unaudited Monthly Financial Statements of the
Seller through November 30, 1995 submitted by the Seller to the
Purchaser have been prepared in accordance with GAAP consistently
applied, are true and correct in all material respects and are
complete insofar as may be necessary to give the Purchaser a true
and accurate knowledge of the subject matter thereof. There are
no undisclosed contingent liabilities in the aggregate in the
excess of $50,000.
(l) No Material Adverse Change. There has been no material
adverse change in (i) the consolidated financial condition of the
Seller since the date of the most recent Financial Statements
submitted to the Purchaser or (ii) in the Business of Seller.
(m) Absence of Derivatives Transactions. There have been no
derivatives transactions during the past five (5) years and no
conditional or contingent liabilities remain with regard to any
such transaction which predates the last five years.
(n) Taxes. All tax returns required to be filed by the Seller in
any jurisdiction have been filed or extended and all taxes,
assessments, fees and other governmental charges upon the Seller
or upon any of us properties, income or franchises have been paid
prior to the time that such taxes could give rise to a lien
thereon, unless protested in good faith by appropriate
proceedings and with respect to which reserves in conformity with
GAAP have been established on the books of the Seller. The Seller
has no knowledge of any proposed tax assessment against the
Seller or any Subsidiary.
(o) Securities Act. The Seller has not issued any unregistered
securities in violation of the registration requirements of the
Securities Act of 1933, any applicable state securities law, or
of any other requirement of law, and are not violating any rule,
regulation, or requirement under the Securities Act of 1933, as
amended, or the Securities and Exchange Act of 1934, as amended.
The Seller is not required to qualify an indenture under the
Trust Indenture Act of 1939, as amended, in connection with its
execution and delivery of the Note.
(p) Disclosure. To the best knowledge of the Seller, (i) none of
the Financial Statements or documents furnished by the Seller to
the Purchaser in connection with their evaluation of the purchase
of the Note contained any material misstatement of material fact
or omitted to state any material fact necessary in order to make
the statements contained therein not misleading and (ii) no
officer, employee or representative has made any material
misstatement of fact or any materially misleading statement of
fact to the Purchaser in connection with its evaluation of the
purchase of the Note which would have a material adverse effect
on the financial condition or Business of the Seller or any
Subsidiary.
17
(q) Indebtedness. Immediately after the date of Closing, the
Seller will not have any outstanding Indebtedness other than: (i)
the Note; (ii) the Bank One Loans; (iii) the Finder's Fees, (iv)
Subordinated Indebtedness as shown on Schedule 2; and (v) other
Indebtedness as shown on Schedule 3
(r) Subsidiaries. Immediately after Closing, the Seller will
not have any subsidiaries or own any Capital Stock, partnership
interest, membership interest or other equity interest in or of
any other entity, other than its ownership interest in the
Subsidiaries.
(s) ERISA Plan. The Seller has no ERISA Affiliates and does not
currently maintain, contribute to, have any requirements to
contribute to or have any liability, whether absolute or
contingent, with respect to any ERISA Plan.
(t) Use of Proceeds. The proceeds of the Bank One Loans and the
Note will be used to repay all of Seller's outstanding borrowings
from Transamerica Lender Finance, a division of Transamerica
Business Credit Corporation and for working capital and other
general corporate purposes.
(u) Availability of Borrowing Capacity. At Closing, the Seller
has no less than $3,150,000 of available borrowing capacity under
the Bank One Loans net of all related transaction expenses.
(v) Transaction Costs. Except as itemized on Schedule I to this
Agreement, there are no costs, fees or expenses, including
without limitation, broker's, finders, or placement fees or
commissions, that have been paid or that will be payable by
Seller or any of its Subsidiaries in connection with the issuance
of the Note, Warrants and the Bank One Loans.
(w) Solvency. Upon and immediately after consummation of the
transactions contemplated herein, Seller and each of its
Subsidiaries is solvent, has tangible and intangible assets
having a fair market value in excess of the amount required to
pay its probable liabilities on its existing debts as they become
absolute and matured, and has access to adequate capital for the
conduct of its business and the ability to pay its debts from
time to time incurred in connection therewith as such debts
mature.
(x) Proforma Balance Sheet. The proforma consolidated balance
sheet of Seller referred to in Section 4(g) has been prepared by
the management of Seller on a reasonable basis, taking into
consideration the effect of the transactions contemplated hereby
and by the Related Documents, and Seller is not aware of any fact
which casts doubt on the accuracy or completeness thereof. To the
best of Seller's management's knowledge, after giving effect to
the transactions contemplated hereby, neither Seller nor any of
the Subsidiaries will have any material liabilities, contingent
or otherwise, which are not referred to in such balance sheet or
the notes thereto.
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(y) Proforma Projections. The projections referred to in Section
4(h) are based upon reasonable assumptions for the assessment of
the future performance of Seller and its Subsidiaries during the
periods indicated therein, and all such material assumptions used
in the preparation of the projections are set forth in the notes
thereto. Seller and Purchaser acknowledge that the projections
are good faith estimates only, and there is no guaranty or
assurance that the future performance of Seller reflected in the
projections will be achieved.
Section 6. Representations and Warranties of the Purchaser.
The representations and warranties of the Purchaser set forth in
this Section 6 shall survive the purchase and sale of' the Note
and Warrants, and any investigation made by the Seller shall not
diminish the right of the Seller to rely upon such
representations and warranties. Purchaser represents and warrants
to the Seller as follows.
(a) Organization. Purchaser represents and warrants that
Purchaser is a limited liability company duly organized and
validly existing under the laws of the State of Ohio and the
execution, delivery and performance of this Agreement and each
Related Document and of any instrument or agreement required by
this Agreement, or each of the Related Documents are within its
powers, have been duly authorized, and are not in conflict with
the terms of any provision of its articles of organization,
operating agreement or other organizational documents.
(b) No Conflicts. The execution, delivery and performance of
this Agreement, the Related Documents and any other instrument or
agreement required by this Agreement are not in conflict with any
law or of any material indenture, agreement or undertaking to
which Purchaser is a party or by which Purchaser is bound or
affected.
(c) Enforceability. This Agreement is a legal, valid and binding
agreement of Purchaser, enforceable against Purchaser in
accordance with its terms, the Related Documents and any other
instrument or agreement required under this Agreement, when
executed or delivered, will be legal, valid, binding and
enforceable.
(d) Authorization and Consents. No approval, consent,
compliance, exemption, authorization or other action by, or
notice to, or filing with, any governmental authority or any
other person pursuant to applicable law, and no lapse of the
waiting period under the applicable law, is necessary or required
in connection with the execution, delivery and performance by
Purchaser or enforcement against Purchaser of this Agreement or
the transactions contemplated hereby.
(e) Experience. Purchaser is an accredited investor within the
meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and
has substantial experience in evaluating and investing in
securities of companies similar to the Seller and has made
investments of securities other than those of the Seller.
Purchaser acknowledges that by reason of its business or
financial experience and financial condition, it has the ability
to analyze and bear the entire risk of its investment pursuant to
this Agreement.
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(f) Investment Intent. Purchaser is acquiring its Note, Warrant
Certificate and Warrant Shares for investment for its own
account, not as a nominee and not with a view to, or for resale
in connection with, any distribution thereof. Purchaser
understands that the issuance and sale of such securities
purchased by it hereunder (and the issuance to Purchaser of
Warrant Shares upon the conversion of the Warrant Certificate)
have not been, and will not be, subject to a registration
statement filed under the Securities Act or any applicable state
securities law by reason of a specific exemption from the
registration provisions of the Securities Act and such state
securities laws which depend upon, among other things, the bona
fide nature of the investment intent and the accuracy of
Purchaser's representation as expressed herein.
(g) Rule 144. Purchaser acknowledges that the securities which
could be acquired hereunder are restricted securities within the
meaning of Rule 144 promulgated under the Securities Act and must
be held indefinitely unless subsequently registered under the
Securities Act and applicable state securities laws or unless an
exemption from such registration is available. Purchaser is aware
of the provisions of Rule 144 promulgated under the Securities
Act which permits the limited resale of securities purchased in a
private placement subject to the satisfaction of certain
conditions including, without limitation, the existence of a
public market for the securities, the availability of certain
current public information about the Seller, the resale occurring
not less than two years after a party has purchased and paid for
any security to be sold, the sale being effected through a
"broker 5 transaction" or a transaction directly with a "market
maker" as provided by Rule 144(f), and the number of securities
being sold during any three-month period not exceeding specified
limitations.
(h) No Public Market. Purchaser understands that no public
market now exists for any of the securities to be purchased by it
hereunder and that the Seller has given no assurance that a
public market will ever exist for the Seller's securities.
(i) Knowledge of Offer. Purchaser is aware of and has
investigated the Seller's business, management and financial
condition, has had the opportunity to inspect the Seller's
facilities and has had access to such other information about the
Seller as Purchaser has deemed necessary and desirable to reach
an informed and knowledgeable decision to acquire the securities
to be purchased by it hereunder. The purchase of such securities
is not a result of an advertisement of an offering in connection
with the sale of such securities.
Section 7. Affirmative Covenants.
Until payment in full of the Note, no Warrants or Warrant Shares
are outstanding and the performance by the Seller of all of its
other Obligations hereunder, the Seller shall, unless the
Purchaser waives compliance therewith in writing:
(a) Notices of Certain Events. Promptly give written notice to
the Purchaser of:
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(i) all litigation affecting the Seller or any Subsidiary
where the amount claimed is Two Hundred and Fifty
Thousand Dollars ($250,000) or more, unless such
litigation is in regards to purchased Eligible Policies
in which case such notice shall be given if the amount
claimed is One Hundred Thousand Dollars ($100,000) or
more;
(ii) any dispute which may exist between the Seller or any
Subsidiary and any governmental regulatory body or law
enforcement authority the result of which may have a
material adverse effect on the financial condition or
Business of the Seller or any Subsidiary;
(iii) any Event of Default or any event which, upon a
lapse of time or notice or both, would become an Event
of Default;
(iv) any other matter which has resulted or might result in
a material adverse change in the Seller's or any
Subsidiary's financial condition or operations; and
(v) the intent of the Seller or any Subsidiary to
liquidate, at least thirty (30) days prior to the
effective date of the liquidation
(b) Financial and Other Information Deliver to Purchaser in
form and detail reasonably satisfactory to Purchaser:
(i) within ninety (90) days after the end of each Fiscal
Year, the audited consolidated Annual Financial
Statements, including but not limited to a balance
sheet, income statement, and statement of change in
cash position, and promptly upon receipt thereof any
management or similar letter delivered by the
Accountants;
(ii) within thirty (30) days after the end of each month of
each Fiscal Year the Monthly Financial Statements;
(iii) if an Event of Default has occurred and is
continuing, promptly upon submission, copies of any of
the Seller's periodic requests for funding under the
Bank One Credit Agreement and list of Collateral
submitted to the Bank One Lender;
(iv) on January 1 and July 1 of each year for which the Note
has an unpaid balance, a proforma budget for the next
twelve (12) months and a management report regarding
the financial condition and the Business of the Seller
in form and substance acceptable to Purchaser in its
reasonable discretion;
21
(v) a Certificate of Compliance in the form of Exhibit C,
showing compliance with the terms and conditions of
this Agreement from (a) the Accountants with regard to
the Annual Financial Statements and (b) the Chief
Executive Officer of Seller with regard to the Monthly
Financial Statements;
(vi) within seven (7) Business Days of filing, any filings
by Seller, Management or the Subsidiaries with the
Commission; and
(vii) promptly upon request of Purchaser, such other
statements, lists of property and accounts, budgets,
forecasts or reports as Purchaser may reasonably
request.
(c) Books Records Audits and Inspections. Maintain adequate
books, accounts and records and prepare all Financial Statements
required hereunder in accordance with GAAP consistently applied,
and in compliance with the regulations of any governmental
regulatory body having jurisdiction over the Seller or the
Seller's Business. For so long as the Security Agreements are in
effect, permit employees or agents of the Purchaser at any
reasonable time to inspect the Collateral and the Seller's
properties to conduct appraisals of the Collateral, and to
examine or audit the Seller's books, accounts and records and
make copies and memoranda thereof. In the event any Collateral,
properties, books, accounts or records are in the possession of
or under the control of a third party, the Seller shall direct
and hereby authorize such third party to permit access to the
Purchaser's employees or agents for the purpose of performing the
inspections, appraisals, examinations or audits permitted under
this Section, and to respond to any reasonable requests from the
Purchaser for information concerning the amount, status or
condition of any Collateral in a third party's possession or
control. Seller shall give 30 days written notice to Purchaser of
Seller's annual shareholders' meeting, to which meeting Seller
shall invite Purchaser.
(d) Insurance. Seller and each Subsidiary shall insure and
maintain insurance upon all of its assets and business properties
and public and product liability insurance with responsible and
reputable insurers of such character and in such amounts as are
usually maintained by companies engaged in like Business.
(e) AMIC and AMRC Insurance Contracts. Until payment in full of
the Not, the Seller and each Subsidiary shall maintain in full
force and effect the AMIC and AMRC Insurance Contracts.
(f) Life Insurance Policies. Seller shall maintain all Life
Insurance Policies in full force and effect and shall pay all
premiums when due.
(g) Payment of Taxes and Claims. Seller and each Subsidiary
shall pay all taxes, assessments and other governmental charges
imposed upon its properties or assets or in respect of
22
any of its franchises, Business, income or profits before any
penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by
law have or might become due and payable or become a lien or
charge upon any of its properties or assets, provided that
(unless any material item of property would be lost, forfeited or
materially damaged as a result thereof) no such charge, tax,
assessment or claim need be paid if the amount, applicability or
validity thereof is currently being contested in good faith and
if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefore.
(h) Compliance with Laws. Seller and each Subsidiary shall
comply in all material respects with all applicable statutes,
laws, ordinances and governmental rules, regulations and orders
to which it is subject or which are applicable to its Business,
properties and assets if noncompliance therewith would materially
adversely affect such Business.
(i) Preservation of Existence. Seller and each Subsidiary
shall preserve and maintain its corporate existence, as the case
may be, and its rights, franchises and privileges in the
jurisdiction of its incorporation and qualify and remain
qualified as a foreign corporation in each jurisdiction in which
the failure to do so would have a material adverse affect on the
Seller's consolidated financial condition or operations;
provided, however, that the Subsidiaries may merge with each
other or with Seller upon 30 days prior written notice to
Purchaser.
(j) Maintenance of Tangible Assets. Seller and each Subsidiary
shall maintain its tangible assets in good condition and repair
in accordance with the requirements of its Business and shall not
permit any action or omission which might materially impair the
value thereof normal wear and tear excepted.
(k) Performance of Contracts. Seller and each Subsidiary shall
perform and comply with, in accordance with its terms, all
material provisions of each and every material contract,
agreement or instrument now or hereafter binding upon it, except
to the extent it may contest the provisions thereof in good faith
and by proper proceedings.
(I) Change in Management. Without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld,
Seller shall not initiate a change in the management of Seller
until replacement management acceptable to Purchaser has been
engaged by Seller. If a change in management occurs which is not
initiated by Seller, Seller shall obtain replacement management
acceptable to Purchaser within sixty (60) days. During such sixty
(60) day period, in addition, and supplemental to all other
rights of Purchaser under this Agreement, Purchaser may install
an auditor(s) in any of the business locations of the Seller to
ascertain Seller's compliance with this Agreement.
23
Section 8. Negative Covenants.
Until payment in full of the Note and with respect to Sections
8(o), 8(q) and 8(r) the performance by the Seller of all of its
other Obligations hereunder, Seller shall not, unless the prior
written consent of the Purchaser is obtained:
(a) Tangible Net Worth. Calculated as of the end of each
calendar quarter, permit, on a consolidated basis, the Seller's
Tangible Net Worth plus Subordinated Indebtedness to be less than
One Million Dollars ($1,000,000) commencing with the quarterly
accounting period ending March 31, 1996
(b) Monthly Operating Expenses. Calculated as of the end of
each calendar month beginning June 30, 1996, permit the Seller's
Average Monthly Operating Expenses to exceed: (i) $125,000 if
Seller's Average Monthly Policy Purchases is less that
$1,500,000; (ii) $175,000 if Seller's Average Monthly Policy
Purchases is less than $2,500,000, but greater than $1,500,000;
(iii) $250,000 if Seller's Average Monthly Policy Purchases is
less than $4,000,000 but greater than $2,500,000; or (iv)
$250,000 plus 5% of the amount by which Average Monthly Policy
Purchases exceeds $4,000,000.
(c) Bank One Loans to Tangible Net Worth. Calculated as of the
end of' each calendar month, permit the total Bank One Loans of
the Seller to exceed twelve (12) times the sum of (i) the
Seller's Tangible Net Worth; (ii) the outstanding principal
balance of the Note; and (iii) Subordinated Indebtedness.
(d) Available Working Capital. Calculated as of the end of each
calendar month, permit Working Capita] to be less than $500,000.
(e) Benefits Value Ratio. Permit the ratio, calculated at as of
the end of' each calendar month, of (a) Total Net Benefits Value
plus the Seller's consolidated cash and marketable securities in
excess of $50,000 (excluding amounts on deposit with any agency
of the Nation of Bermuda in satisfaction of insurance company
capital requirements) to (b) the sum of Seller's outstanding
balance under the Bank One Loans and the Note plus $500,000, to
be less than 125% ("Benefits Value Ratio").
(f) Minimum Life Expectancy. Permit the Weighted Average
Adjusted Remaining Life Expectancy of all Eligible Policies to
exceed 12 months; provided, however, that the Weighted Average
Adjusted Remaining Life Expectancy of all Eligible Policies may
exceed 12 months, but in no case more than 15 months if the
Benefits Value Ratio, calculated as of the end of each calendar
month, is greater than or equal to 130%.
(g) Policy Maturity Performance Factor. Permit the Weighted
Average Policy Performance Factor for all Eligible Policies, that
in the prior twelve months reached Policy Maturity
24
or whose Remaining Life Expectancy was less than or equal to
zero, to exceed 1.5, calculated as of' the end of each calendar
month.
(h) Other Indebtedness. Create or incur any Indebtedness;
provided, however, that this Section shall not be deemed to
prohibit:
(viii) the Bank One Loans;
(ii) the Indebtedness under the Note;
(iii) the acquisition of goods, supplies or merchandise
on normal trade credit;
(iv) the endorsement of negotiable instruments received in
the ordinary course of business as presently conducted;
(v) the Subordinated Indebtedness as shown on Schedule 2;
and
(vi) Finder's Fees.
(i) Liens. Create, assume or suffer to exist any security
interest, lien (including the lien of an attachment, judgment, or
execution) or encumbrance, securing a charge or obligation, on or
any of its property, real or personal, whether now owned or
hereafter acquired, except:
(i) security interest(s) in the Collateral in favor of the
Bank One Lender;
(ii) security interest(s) in the Collateral in favor of the
Purchaser;
(iii) Liens, security interests and encumbrances in
existence as of the date of this Agreement which have
been disclosed to the Purchaser in writing;
(iv) Liens for current taxes, assessments or other
governmental charges which are not delinquent or remain
payable without any penalty; and
(v) Liens on fixed or capital assets securing Indebtedness
incurred or assumed for the sole purpose of financing
all or part of the cost of acquiring such fixed or
capital assets.
(j) Leases. In any of its Fiscal Years, enter into leases of any
real or personal property where the total of all payments due
under such leases exceeds $125,000.
25
(k) Capital Assets. In any Fiscal Year, expend or incur
obligations including capital leases of more than Fifty Thousand
Dollars ($50,000) for the acquisition of fixed or capital
interests.
(I) Acquisition. Acquire or purchase the assets or business of
any other person, firm or corporation (except any such
acquisition or purchase which qualifies as a purchase of Eligible
Policies under the Bank One Credit Agreement), provided, however,
that Subsidiaries may merge with or into Seller upon not less
than thirty (30) days prior written notice to the Purchaser.
(m) Investments. Acquire or purchase securities other than
obligations issued or guaranteed by the United States; or
obligations having a maturity of less than one year which are
rated in the highest rating category of Standard & Poors
Corporation or Moody's Investors Service, Inc.
(n) Sales and Leasebacks. Dispose of any of its assets except
for full, fair and reasonable consideration, or enter into any
sale and leaseback agreement covering any of its fixed or capital
assets.
(o) Dividends. Declare or pay any dividends on any of its
Capital Stock, and not purchase, redeem or otherwise acquire for
value any of its shares, or create any sinking fund in relation
thereto, or redeem, retire, purchase or otherwise acquire
directly or indirectly, any of the Capital Stock of the Seller or
rights, warrants or options pertaining thereto or other security
convertible into any of the foregoing, except the redemption of
the Warrants, Warrant Shares or Purchase Shares pursuant to the
terms of the Warrant Certificate (i) until repayment in frill of
the Note after which time, subject to (ii) below, such dividends
may be paid to the extent they will not cause an Event of Default
under the Bank One Credit Agreement or this Agreement and (ii)
during the period beginning on the date of the Notice of Exercise
of the Put Option (as defined in the Warrant Certificate) and the
date of payment of the Repurchase Price (as defined in the
Warrant Certificate).
(p) Business Activities. Engage in any business activities or
operation substantially different from or unrelated to the
Business.
(q) Transactions with Affiliates. Enter into any transaction,
including without limitation, the purchase, sale or exchange of
property or the rendering of any services, with any Affiliate
other than reimbursement of Qualified Expenses incurred by the
Affiliate or any partner, officer or director thereof', enter
into, assume or suffer to exist any employment or consulting
contract with any Affiliate or any partner, officer or director
thereof or any former or current officer or director of the
Seller, except any transaction or contract which is in the
ordinary course of the Seller's Business and which is upon fair
and reasonable terms no less favorable to the Seller than it
would obtain in a comparable arms-length transaction with a
Person not an Affiliate. Provided that during the period
beginning on the date of the Notice of Exercise of the Put Option
(as defined in the Warrant Certificate) and the date of payment
of the Repurchase Price (as defined in the Warrant Certificate),
no such amounts other than Qualified Expenses shall be paid to
Affiliates. All existing
26
transactions of Seller with any Affiliate are described and
itemized on Exhibit G, and shall, with the exception of the
Qualified Expenses, be subordinated to the Obligations.
(r) Management Fees. The Seller shall not pay any Management
Fees (i) while the Note is outstanding or (ii) during the period
beginning on the date of Notice of Exercise of the Put Option (as
defined in the Warrant Certificate) and the date of payment of
the Repurchase Price (as defined in the Warrant Certificate).
(s) Issuance or Sale of Capital Stock. Except for purchases of
Preferred Stock by Management pursuant to the Validity and
Support and Guaranty Agreement dated as of the date hereof by and
between Management and Bank One, without the prior written
consent of the Purchaser, permit the sale or issuance of any
Preferred Stock of the Seller.
(t) Creation of Class of Capital Stock. Without the prior
written permission of the Purchaser, create any additional class
of Capital Stock.
(u) ERISA Plans. Adopt or agree to maintain or contribute to
any ERISA Plan without the prior written consent of the Purchaser
which consent shall not be unreasonably withheld. The Seller
shall promptly notify the Purchaser in writing in the event an
ERISA Affiliate adopts an ERISA Plan.
Section 9. Events of Default.
The occurrence of any of the following events shall, at the
option of the Purchaser, constitute an Event of Default ("Event
of Default") hereunder and under the Note.
(a) Failure to Pay. The Seller fails to pay when due, any
installment of interest or any other sum due under this Agreement
or the Note in accordance with the terms hereof or thereof;
(b) Breach of Representation or Warranty. Any representation or
warranty herein or in any agreement, instrument or certificate
executed pursuant hereto or in connection with any transaction
contemplated hereby proves to have been false or misleading in
any material respect when made and which a reasonably prudent
businessman would believe would have an material adverse effect
on the Seller's or any Subsidiary's financial condition or
Business,
(c) Falsity of Information. Any financial or other information
delivered by the Seller to the Purchaser proves to be false or
misleading in any material respect when delivered;
(d) Security Interest. The Purchaser fails to have a valid and
enforceable perfected security interest in or lien on any
material part of the Collateral or such security interest or lien
in the Collateral fails to be prior to the rights and interest of
all others except the Bank One Lender in the
27
Collateral, except as such failure is caused by the negligence of
the Purchaser in filing the financing statements with regard to
the Collateral or a tax lien which the Seller is in good faith
contesting;
(e) Judgments. A final nonappealable judgment or judgments is or
are entered against the Seller or any Subsidiary in the aggregate
amount of Fifty Thousand Dollars ($50,000) or more on a claim or
claims not covered by insurance;
(f) Failure to Pay Debts Voluntary Bankruptcy. Management, the
Seller or any Subsidiary fails to pay its debts generally as they
come due, or files any petition, proceeding, case or action for
relief under any bankruptcy, reorganization, insolvency, or
moratorium law, or any other law or laws for the relief of, or
relating to, debtors;
(g) Involuntary Bankruptcy. An involuntary petition is filed
under any bankruptcy or similar statute against Management, the
Seller or any Subsidiary or a receiver, trustee, liquidator,
assignee, custodian, sequestrator or other similar official is
appointed to take possession of the properties of Management, the
Seller, or any Subsidiary and such petition or appointment is not
dismissed within ninety (90) days;
(h) Governmental Action. Any governmental regulatory authority
takes or institutes action which will materially adversely affect
the Seller's consolidated condition, operations or ability to pay
the Seller's obligations under this Agreement, the Note or any
instrument or agreement required under this Agreement;
(i) Default of Other Financial Obligations. Any default occurs
under the Bank One Credit Agreements, any agreement, note or
document related to any such agreement or any other agreement
involving the borrowing of money or the advance of credit to
which the Seller may be a party as obligor or guarantor, if such
default consists of the failure to pay any Indebtedness in an
aggregate principal amount greater than $25,000 when due and such
default gives to the holder of the obligation concerned the right
to accelerate such Indebtedness;
(j) Default Under Security Agreements Warrant Certificate or
Other Agreement. The Seller breaches or defaults in any material
respect under any of its obligations contained in the Security
Agreements, the Validity and Support Agreements, the Warrant
Certificate or any other agreement with the Purchaser;
(k) Material Adverse Change. Any material adverse change occurs
in the consolidated financial condition or results of operations
of the Seller or in the Seller's ability to perform their
obligations under this Agreement, the Note or under any
instrument or agreement required by this Agreement;
(1) Change of Control. There is a Change of Control of the
Seller;
28
(m) Tangible Net Worth of Management. The Tangible Net Worth
plus all subordinated indebtedness (as defined in accordance with
GAAP) of Management shall be less that $2,000,000, calculated at
the end of each calendar month;
(n) Investor's Equity. There is a sale of more than 25% of the
Investor's Equity; provided, however, that for purposes of this
Section 9(n), Resource Holding Associates shall be excluded from
the definition of Investor's Equity; and
(o) Other Breach Under Agreement. The Seller breaches, or
defaults in any material respect under, any term, condition,
provision, representation or warranty contained in this Agreement
not specifically referred to in this Section, provided that with
respect to any of the foregoing (other than (a), (f) and (g))
that is capable of being cured, the Seller has failed to cure the
same within thirty (30) days (sixty (60) days with respect to the
covenants of Section 8(f) and 8(g)) from the receipt of notice
thereof from the Purchaser;
Section 10. Consequences of Event of Default.
(a) If any Event of Default specified under Section 9, other
than subsections (f) and (g) thereof, shall occur and be
continuing, the Purchaser may, by written notice to the Seller,
declare the principal and interest accrued on the Note and all
other obligations of the Seller hereunder to be forthwith due and
payable, and the same shall thereupon become immediately due and
payable, without any other or further presentment, demand,
protest, notice of default, notice of intent to accelerate,
notice of acceleration or other notice of any kind, all of which
are hereby expressly waived.
(b) If an Event of Default specified under subsections (f) and
(g) of Section 9 hereof shall occur, the unpaid balance of the
principal and interest accrued on the Note and all other
obligations of the Seller hereunder shall be immediately due and
payable automatically without presentment, demand, protest,
notice of default, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby
expressly waived.
Section 11. Miscellaneous.
(a) No Implied Rights or Waivers. No notice to or demand on the
Seller in any case shall entitle the Seller to any other or
further notice or demand in the same, similar and other
circumstances. Neither any failure nor any delay on the part of
the Purchaser in exercising any right, power or privilege
hereunder or under the Note or Warrant Certificate shall operate
as a waiver thereof nor shall a single or partial exercise
thereof preclude any other or further exercise of the same or the
exercise of any other right, power or privilege.
(b) Modifications, Amendments or Waivers. Seller and Purchaser
may from time to time enter into written agreements amending or
changing any provision of this Agreement or the rights hereunder
or give waivers or consents to a departure from the due
performance of their
29
obligations hereunder provided that no departure from the
Seller's due performance of its obligations hereunder shall be
effective unless agreed to in writing by the Purchaser.
(c) Expenses. The Seller shall pay or cause to be paid and save
the Purchaser harmless against liability for the payment of all
reasonable out-of-pocket expenses, including counsel fees
(including fees of the Purchaser's Legal Department not to exceed
$25,000) and disbursements, incurred or paid by the Purchaser in
connection with (i) the due diligence inquiries, negotiation,
development, preparation, execution and performance of this
Agreement, the Note, the Security Agreements, the Warrant
Certificate, the Intercreditor Agreement, the Validity and
Support Agreement. and the related transactions, (ii) any
requested amendments, waivers or consents pursuant to the
provisions hereof and thereof and (iii) the enforcement of this
Agreement, the Note, the Security Agreements, the Warrant
Certificate, Validity and Support Agreement, the Co-Sale
Agreement and the Intercreditor Agreement, including such
reasonable expenses as may be incurred by the Purchaser in
collection of the Note.
(d) Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with all
Financial Statements of the Seller referred to herein shall be
prepared, consistently applied.
(e) Entire Agreement. This Agreement including the Exhibits or
Schedules hereto, constitutes the entire agreement relating to
the subject matter hereof among the Parties hereto. Each Party
acknowledges that no representation, inducement, promise or
agreement has been made, orally or otherwise, by any other Party,
or anyone acting on behalf of any other Party, unless such
representation, inducement, promise or agreement is embodied in
this Agreement expressly or by incorporation.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
(g) Severability. If any provision of this Agreement is held to
be invalid, void or unenforceable, the remaining provisions of
this Agreement shall nevertheless continue in full force and
effect.
(h) Third Party Beneficiaries. The obligations of each Party
under this Agreement shall inure solely to the benefit of the
other Parties, and no other person or entity shall be a third
party beneficiary of this Agreement.
(i) Rules of Construction. Unless otherwise specified, the
following rules shall be applied in construing the provisions of
this Agreement.
(i) Terms that imply gender shall be construed to apply all
genders.
30
(ii) References to Sections, Schedules and Exhibits refer to
the numbered Sections of the Schedules of and the
Exhibits attached to this Agreement.
(iii) Headings to the various Sections of this Agreement
are included solely for purposes of reference and shall
be ignored in construing the provisions of this
Agreement.
(iv)The Exhibits and Schedules attached to this Agreement
are incorporated herein by reference.
(v) "Herein", "here to", "hereof" and words of similar
import refer to this Agreement.
(vi) The word "and" connotes "each and every", and the word
"or" connotes "any one or more".
(vii) The word "including" connotes "including without
limitation".
(viii)Any reference to any law or regulation refers to that
law or regulation as amended from time-to-time after
the date of this Agreement and to the corresponding
provision of any successor law or regulation.
(ix) Any reference to any agreement or other document in
this Agreement refers to that agreement or other
document as amended from time-to-time after the date of
this Agreement.
(x) The recitals included in this Agreement are the mutual
representations of the Parties and are a part of this
Agreement.
(j) Notices. Any notice or other communication required or
permitted to be made or given under this Agreement, shall be in
writing and shall be deemed to have been received by the Party to
whom it is addressed: (i) on the date indicated on the certified
mail return receipt if sent by certified mail return receipt
requested; (ii) on the date actually received if hand delivered
or if transmitted by telefax (receipt of which is confirmed to
sender); (iii) three business days after such notice was
deposited in the United States Mail postage prepaid; or (iv) one
business day after such notice was delivered to an overnight
delivery service addressed, delivered or transmitted in each case
as follows:
PURCHASER:
Banc One Capital Partners V, Ltd.
90 North High Street
31
Columbus, Ohio 43215
ATTENTION: Phillip J. Sbrochi
Telephone: (614) 227-7729
Telefax: (614)221-2441
With A Copy to:
Banc One Capital Corporation
90 North High Street
Columbus, Ohio 43215
ATTENTION: Legal Department
Telephone: (614) 227-7727
Telefax: (614) 227-7750
Seller:
National Capital Benefits Corp.
540 Madison Avenue, Suite 1702
New York, New York 10022
ATTENTION: Kenneth Klein
Telephone: (212) 750-1000
Telefax: (212) 750-8860
With a copy to:
Resource Holdings Associates
520 Madison Avenue, 40th Floor
New York, New York 10022
ATTENTION: John Shaw
Telephone: (212) 980-3883
Telefax: (212)935-3851
Robins, Kaplan, Miller & Ciresi
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, Minnesota 55402-2015
ATTENTION: Kevin L. Crudden
Telephone: (612)349-8500
Telefax: (612)339-4181
A Party's address for notice may be changed from time-to-time
only by written notice given to each of the other Parties in
accordance with this Section.
32
(k) Assignment. Neither this Agreement nor any of the rights or
duties hereunder may be assigned by any Party without the prior
written consent of each of the other Parties, and any assignment
attempted without such prior consent shall be null and void.
(1) Further Acts and Documents. Each of the Parties hereby
agrees to execute and deliver such further instruments and to do
such further acts and things as may be necessary or desirable to
carry out the purposes of this Agreement.
(m) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and
all of which shall constitute one in the same agreement
The remainder of this page is intentionally left blank.
33
The Parties have caused this Agreement to he executed and
delivered effective as of the date first written above.
SELLER: PURCHASER:
NATIONAL CAPITAL BENEFITS BANC ONE CAPITAL PARTNERS V,
CORP. LTD.
By: BOCP Holdings Corporation,
By:/s/Kenneth Klein Manager
Kenneth Klein, President By:/s/Phillip J. Sbrochi
Phillip J. Sbrochi, Vice President
34
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD,
TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS THERE IS IN
EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURUITES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
ISSUER OR A NO-ACTION LETTER FROM THE COMMISSION STATING THAT
SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR
OFFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT AND LAWS.
National Capital Benefits Corp.
Warrant Certificate
Common Stock Purchase Warrant
of
Banc One Capital Partners V, Ltd.
Dated as of December 29, 1995
TABLE OF CONTENTS
Page
Section 1. Definitions
1
Section 2. Duration and Exercise of Warrant
7
2.1 Warrant Exercise Period
7
2.2 Manner of Exercise 7
2.3 When Exercise Effective
7
2.4 Delivery of Stock Certificates, etc. 7
Section 3. Antidilution Adjustment
7
3.1 Number of Warrant Shares 7
3.2 Adjustment Event
7
3.3 Reorganization Event
8
3.4 Other Event
8
3.5 Rights Offering
8
3.6 Preemptive Rights
8
Section 4. Restrictions on Transfer
9
4.1 Restrictive Legends 9
4.2 Notice of Proposed Transfer; Opinions of Counsel
10
Section 5. Availability of Information
10
i
Section 6. Reservation of Stock, Etc.
11
Section 7. Due Organization; No Violation
11
Section 8. Issuance of Common Stock; Company's Representation
11
Section 9. Ownership. Registration of Transfer. Exchange and
Substitution
of Warrant
11
9.1 Ownership of Warrant
12
9.2 Registration of Transfers
12
9.3 Replacement of Warrant Certificate
12
9.4 Expense 12
Section 10. Registration Rights
12
10.1 "Piggyback" Registration 12
10.2 Demand Registration 13
10.3 General Requirements
13
Section 11. Put Option
17
11.1 Put Option Exercise Period
17
11.2 Manner of Exercise 17
11.3 The Repurchase Price
17
11.4 Closing and Payment 17
11.5 Exchange for Voting Stock
18
ii
Section 12. No Rights or Liabilities as Stockholder
18
Section 13. Notices
18
Section 14. Miscel1aneous
19
Section 15. Expiration
19
Section 16. Assignment
19
Investor's Equity
Exhibit A
Notice of Exercise Exhibit B
Form of Assignment Exhibit C
Notice of Exercise of Put Option
Exhibit D
Notice of Attempt to Sell the Company
Exhibit E
iii
Warrant Certificate
Dated as of December 29, 1995
This certifies that, for value received, Banc One Capital
Partners V, Ltd. (the "Holder"), an Ohio limited liability
company, is entitled, subject to the terms set forth below, to
purchase from National Capital Benefits Corp., (the "Company") a
Delaware corporation in a single exercise sixty-eight (68) shares
of common stock, $0.01 par value without vote ("Non-Voting
Stock") of the Company at the principal office of the Company,
with the Notice of Exercise attached hereto as Exhibit B duly
executed, and simultaneous payment therefor in lawful money of
the United States or otherwise as hereinafter provided, for the
aggregate purchase price of $100 ("Price").
This Warrant is being issued by the Company pursuant to the
Senior Subordinated Note and Warrant Purchase Agreement dated as
of January _, 1996 by and between the Company, as seller, and the
Holder, as purchaser ("Purchase Agreement").
Section 1. Definitions.
As used herein, unless the context otherwise requires, the
following terms have the following respective meanings (the
definitions to be applicable to both the singular and the plural
forms of the terms defined where either such form is used in this
Warrant).
1.1 "Accountants" means with respect to the Company, the
independent certified public accountants selected by the Company
with the approval of the Holder or the Bank One Lender.
1.2 "Additional Shares of Common Stock" means all shares of
Common Stock issued by the Company after the Original Issue Date
other than Warrant Shares.
1.3 "Adjusted EBITDA" means, as of any Date of Determination,
EBITDA for the twelve-month period ended immediately prior to any
such Date of Determination, reduced by. (i) (A) the amount of
interest expense related to the Bank One Loans and (B) the
aggregate amount of all capital expenditures permitted by the
Purchase Agreement incurred by and reflected on the consolidated
balance sheet and income statement of the Company and its
subsidiaries for such twelve month period and increased by (ii)
all amounts deducted as expenses which are owed to Affiliates,
other than Qualified Expenses owed to Affiliates.
1.4 "Adjustment Event" means any of the following events (except
if the event constitutes a Preemption Offering, under which
circumstances this Section 1.4 and Sections 3.1 through 3.5 shall
not apply):
(i) the Company declares a dividend or makes a distribution
on its Outstanding Common Stock in Common Stock or
Convertible Securities, or
(ii) the Company subdivides or reclassifies any of its
outstanding Common Stock into a greater number of
shares, or
(iii) the Company combines or reclassifies any of its
outstanding Common Stock into a smaller number of
shares.
1.4 "Affiliate" means with respect to any Person: (i) any person
directly or indirectly controlling, controlled by, or under
common control with such Person; (ii) any person owning or
controlling 10% or more of the outstanding voting securities of
such Person; (iii) any officer, director member or general
partner of such Person; or (iv) any Person who is an officer,
director general partner, trustee, member, or holder of 10% or
more of the voting securities of any Person described in clauses
(i) through (iii) of this subparagraph.
1.5 "Annual Financial Statements" means with respect to the
Company, a consolidated statement of financial condition (balance
sheet), a consolidated statement of income or earnings, and a
consolidated statement of changes in cash position, customarily
prepared by the Company, for each Fiscal Year of the Company,
including the consolidating schedules or statements used to
prepare the above statements, which statements of financial
condition and income or earning shall be prepared in accordance
with GAAP, be presented in reasonable detail with appropriate
accompanying notes, present a comparison to the prior Fiscal Year
and be accompanied by the audit report of the Accountants and any
management or similar letter delivered by such Accountants.
1.6 "Bank One Lender" shall have the meaning set forth in the
Purchase Agreement.
1.7 "Business Day" means, any day other than a Saturday, Sunday
or day upon which banking institutions are authorized or required
by law or executive order to be closed in the City of Columbus,
Ohio.
1.8 "Calculated Valuation Amount" means, as of any Date of
Determination, the greater of: (i) the Capitalized Earnings
Amount; (ii) the Yield Calculation Amount; and (iii) the Fair
Market Value Amount.
1.9 "Capitalized Earnings Amount" means, as of any Date of
Determination, an amount equal to five times Adjusted EBITDA
reduced by (i) the outstanding principal balance of the Note and
(ii) the stated liquidation value of the outstanding Preferred
Stock; provided that, for purposes of this calculation, the value
of such Preferred Stock, including any accrued dividends shall
not exceed an amount equal to the sum of (A)$2,450,000, and (B)
the liquidation value of any Preferred Stock (but not accrued
dividends) issued after Original Issue Date to NCMC pursuant to
2
the Validity and Support and Guaranty Agreement dated as of the
date hereof and by and between NCMC and the Bank One Lender.
1.10 "Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however
designated) of corporate stock, including each class of common
stock and preferred stock of such Person or partnership interests
and any warrants, options or other rights to acquire such stock
or interests.
1.11 "Change of Control" means (i) an event or series of events
by which any Person or Persons or other entities acting in
concert as a partnership or other group (a "Group of Persons")
shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases, merger, consolidation
or otherwise, have become the beneficial owner (within the
meaning of Rule 13 d-3 under the Securities Exchange Act), of 50%
or more of the Voting Power of the Company, or (ii) the Company
is merged with or into another corporation with the effect that
immediately after such transaction the stockholders of the
Company immediately prior to such transaction hold less than a
majority of the combined Voting Power of the Person surviving the
transaction
1.12 "Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities
Act.
1.13 "Company" means National Capital Benefits Corp., a Delaware
corporation, and includes any corporation which shall succeed to
or assume the obligations of the Company.
1.14 "Common Stock" means the shares of Voting Stock and Non-
Voting Stock treated as a single class of stock, at any time
outstanding.
1.15 "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional
consideration in cash or property, or options, warrants or other
rights that are exercisable for, shares of Common Stock that,
when issued, would constitute Additional Shares of Common Stock,
either immediately or upon the occurrence of a specified date or
a specified event, but excluding the shares of Common Stock
issuable upon exercise of the Warrants.
1.16 "Date of Determination" means the date upon which a
calculation or an event is to be made or determined under this
Agreement.
1.17 "Disposition" means (i) a merger, consolidation or other
business combination in which the Company is the surviving entity
and the Company's stockholders receive cash or non-cash
consideration in exchange for or in respect of their shares of
Capital Stock of the Company or (ii) the sale lease, conveyance,
transfer or other disposition (other than the grant of a security
interest) in any single transaction or series of related
transactions of all or substantially all of the assets of the
Company
3
1.18 "EBITDA" means, as of any Date of Determination,
consolidated earnings of the Company and its consolidated
subsidiaries (as reflected on the most recent Financial
Statements delivered pursuant to the Purchase Agreement) for the
twelve-month period ended immediately prior to any such Date of
Determination determined excluding all amounts expensed during
such twelve month period with respect to. (i) interest expense;
(ii) federal and state income tax expense; (iii) depreciation
expense; (iv) amortization expense; and (v) amounts paid to
Affiliates other than Qualified Expenses and Management Fees to
the extent they exceed one percent (1%) of Purchased Policies (as
defined in the Purchase Agreement).
1.19 "Event of Default" means an event of default under the
Purchase Agreement.
1.20 "Fair Market Value Amount" means the fair market value of
the Common Stock, reduce by (i) the stated liquidation value of
the outstanding Preferred Stock; provided, that for purposes of
this calculation, the value of such Preferred Stock, including
any accrued dividends shall not exceed an amount equal to the sum
of (A) $2,450,000 and (B) the liquidation value of any Preferred
Stock (but not accrued dividends) issued after Original Issue
Date to NCMC pursuant to the Validity and Support and Guaranty
Agreement dated as of the date hereof and by and between NCMC and
the Bank One Lender, and increased by (ii) all amounts accrued as
liabilities or deducted as expenses which relate to amounts owed
to Affiliates (other than Qualified Expenses and Management Fees
to the extent they exceed one percent (1%) of Purchased Policies
(as defined in the Purchase Agreement)), determined by an
independent appraiser mutually acceptable to the Company and the
Holder; provided, however, that. if the Company and the Holder
are unable to agree within a period often (10) days after written
request therefor by either party upon a mutually acceptable
appraiser, the Company and the Holder shall each at their own
expenses select an independent appraiser (which shall be an
accounting firm or investment banking firm) within a further
period of ten (1 0) days, such appraisers shall select an
independent appraiser (which shall be an accounting or investment
banking firm) within a further period of thirty (30) days, and
such appraiser shall determine such fair market value of the
Common Stock. The cost of the appraiser which determines such
fair market value of the Common Stock shall, in either case, be
shared equally by the Company and the Holder.
1.21 "Final Term Sheet" means a disclosure of all terms,
covenants, arrangements and fees for a transaction required under
Section 11.1.
1.22 "Financial Statements" means the Annual Financial Statements
and Monthly Financial Statements of the Company.
1.23 "Fiscal Year" means the one-year period ending on December
31 of each year.
1.24 "Form of Assignment" means the form attached as Exhibit C to
be given by the Holder of the Warrant Certificate to the Company
upon assignment of the Warrant Certificate.
4
1.25 "GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the Financial
Accounting Standards Board (or any generally recognized
successor) and which, in the case of the Company, are applied for
all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the
Financial Statements delivered to the Holder in connection with
the purchase of the Note. If any change in any accounting
principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such
principle or practice to continue as a generally accepted
accounting principle or practice, all reports arid financial
statements required hereunder with respect to the Company may be
prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance
with such change only after notice of such change is given to the
Holder and the Holder agrees to such change insofar as it affects
the accounting of the Company.
1.26 "Holder" means Banc One Capital Partners V, Ltd., an Ohio
limited liability company, together with its successors and
assigns.
1.27 "Indebtedness" shall have the meaning set forth in the
Purchase Agreement.
1.28 "Initial Public Offering" means the first offer and sale to
the public by the Company or any holders of shares of any class
of its Capital Stock, pursuant to a registration statement that
has been declared effective by the Commission.
1.29 "Investor's Equity" means, collectively, the shares of
Capital Stock of NCMC owned beneficially or of record on
September 30, 1995 by James Pinto, John Shaw, Jerry Seslowe and
the proportionate share ownership of Resource Holding Associates
through its ownership in REHC, L.P. The number of shares owned by
such individuals and Resource Holding Associates on September 30,
1995 and as of the date of Closing is listed on Exhibit A.
1.30 "Market Determined Value Amount" means the fair market value
of the Common Stock reduced by (i) the stated liquidation value
of the outstanding Preferred Stock; provided that for purposes of
this calculation the value of such Preferred Stock, including any
accrued dividends shall not exceed an amount equal to the sum of
(A) $2,450,000, plus (B) the liquidation value of any Preferred
Stock (but not accrued dividends) issued after Original Issue
Date to NCMC pursuant to the Validity and Support and Guaranty
Agreement dated as of the date hereof and by and between NCMC and
the Bank One Lender), and increased by (ii) all amounts accrued
as liabilities or deducted as expenses which relate to amounts
owed Affiliates (other than Qualified Expenses and Management
Fees to the extent they exceed one percent (1%) of Purchased
Policies (as defined in the Purchase Agreement)), determined in
good faith in connection with a Trigger Event which has occurred
during the Sale Period.
1.31 "Marketable Securities" means securities that are freely
traded on a national exchange in a quantity that, based on the
average daily volume of the five (5) days immediately preceding
the consummation of the transaction, exceeds one percent (1%) of
the outstanding shares
5
of such securities before consummation of the transaction. For
valuation purposes if there is a bid and ask quotation, the bid
price shall be used, otherwise the closing price on the Date of
Determination shall be used.
1.32 "Monthly Financial Statement" means, with respect to the
Company, a consolidated statement of financial condition (balance
sheet), a consolidated statement of income or earnings, and a
consolidated statement of changes in cash position, customarily
prepared by the Company, fur each month and for the Fiscal Year
to date of the Company, including the consolidating schedules or
statements used to prepare the above statements, (except for NCB,
whose results for the periods reported in the consolidated
statements shall be included only to the extent available,
provided that such results shall be consolidated no less often
than quarterly) which statements of financial condition and
income or earnings shall be prepared in accordance with GAAP
(subject to any applicable year end adjustments and the absence
of footnotes), to be presented in reasonable detail and a
comparison to the comparable month and year-to-date periods for
the preceding Fiscal Year.
1.33 "NCB" means NCB Insurance Limited, an insurance company
chartered in Bermuda, and a wholly-owned subsidiary of the
Company, together with its successors and assigns.
1.34 "NCMC" means National Capital Management Corporation, a
Delaware corporation and the majority owner of the Company,
together with its successors and assigns.
1.35 "Non-Surviving Combination" means any merger, consolidation
or other business combination by the Company with one or more
other entities in a transaction in which the Company is not the
surviving entity.
1.36 "Non-Voting Stock" means the shares of common stock, $0.01
par value without vote of the Company at any time outstanding.
1.37 "Note" means the Senior Subordinated Note due December 31,
1998 in the aggregate principal amount of $2,000,000 issued and
sold to the Holder by the Company pursuant to the terms of the
Purchase Agreement.
1.38 "Notice of Attempt to Sell the Company" means the notice, in
the form attached as Exhibit E, of the Company's election to
attempt to sell the Company as provided for in Section 11.3.
1.39 "Notice of Exercise" means the notice, in the form attached
as Exhibit B of exercise of Warrants given by the Holder to the
Company.
1.40 "Notice of Put Option Exercise" means the notice, in the
form attached as Exhibit D, given by the owner of the Warrants,
Warrant Shares, and/or Purchase Shares, to the Company of owner's
intent to exercise the Put Option granted pursuant to the Warrant
Certificate.
6
1.41 "Number of Warrant Shares" shall have the meaning set forth
in Section 3.1.
1.42 "Original Issue Date" means the date on which this Warrant
and the Note were first issued pursuant to the Purchase
Agreement.
1.43 "Outstanding Common Stock" means, as of any date, all shares
of Common Stock then outstanding plus the maximum number of
shares of Common Stock issuable in respect of Convertible
Securities and options and warrants to purchase shares of Common
Stock or Convertible Securities outstanding on such date (whether
or not the rights to convert, exchange or exercise thereunder are
presently exercisable), including the maximum number of shares
issuable under the Warrants; provided that the maximum number of
shares of Common Stock issuable in respect of Convertible
Securities and options and warrants to purchase shares of Common
Stock or Convertible Securities outstanding on such date shall be
adjusted in accordance with the "treasury stock" method
determined under generally accepted accounting principles
pursuant to Accounting Principles Board Opinion 15.
1.44 "Person" means any individual, corporation, limited
liability company, partnership, joint venture, trust, estate,
unincorporated organization or government or any agency or
political subdivision thereof'
1.45 "Preemption Offering" means any proposed issuance and sale
by the Company after the Original Issue Date and prior to the
date of the Initial Public Offering of any shares of Common Stock
or any Convertible Securities other than the following:
(i) the issuance of the Warrant Shares subject to this
Warrant;
(ii) the issuance or sale of Common Stock pursuant to a
Rights Offering in which the holder hereof elects to
participate under the provisions of Section 3.5; or
(iii) the issuance or sale of Common Stock or
Convertible Securities in connection with the
acquisition by the Company of a business or assets made
at arm's length, which issuance or sale has been
approved in good faith by the board of directors of the
Company.
1.46 "Preferred Stock" means the shares of Series A preferred
stock, $0.01 par value, $10,000 liquidation value, without vote
of the Company.
1.47 "Price" means One Hundred Dollars ($100), which is the
exercise price for all of the Warrant Shares subject to this
Warrant.
7
1.48 "Prime Rate" means, at any Date of Determination, the prime
rate most recently announced by Bank One, Columbus, N.A. in
effect at its principal office in Columbus, Ohio. Any change in
the Prime Rate shall become effective as of the date of such
change in the prime rate.
1.49 "Purchase Agreement" means the Senior Subordinated Note and
Warrant Purchase Agreement, dated as of January __, 1996, between
the Company, as seller, and the Holder, as purchaser, as amended,
modified or restated.
1.50 "Purchase Shares" means, as of any Date of Determination,
any shares of' Common Stock purchased by the Holder prior to such
Date of Determination pursuant to the exercise of its rights
under Section 3.5 or Section 3.6 hereof, or directly from the
Company in any other transaction after the Original Issue Date.
For purposes of this definition, Purchase Shares shall include
any shares of Common Stock issuable upon the conversion of any
Convertible Securities purchased by the Holder pursuant to the
exercise of its rights under Section 3.5 and Section 3.6 hereof
1.51 "Put Option" shall have the meaning set forth in Section 11
1.
1.52 "Qualified Expense(s)" means an amount expensed or accrued
by the Company under GAAP which is a reimbursement to an
Affiliate for amounts incurred by the Affiliate on an arm's-
length basis and which are owed by the Affiliate to a third-party
who is not an Affiliate of (i) the Affiliate paying or accruing
such expense or (ii) the Company.
1.53 "Reorganization Event" means any of the following events:
(i) capital reorganization or reclassification or
recapitalization of the Capital Stock of the Company
(other than any Adjustment Event);
(ii) any merger or consolidation of the Company with or into
another corporation; and
(iii) the sale or transfer of the property of the
Company as an entirety or substantially as an entirety.
1.54 "Repurchase Price" shall have the meaning set forth in
Section 11.3.
1.55 "Repurchase Price Adjustment" means, if at any time within
ninety (90) days after the payment of the Repurchase Price, a
Trigger Event occurs, or the Company or its shareholders enter
into any agreement of letter of intent with regards to a Trigger
Event, the Company shall pay to the Holder an amount equal to the
difference (if positive) between: (i) the amount the Holder would
have received for its Warrant Shares (or Warrant Shares issuable
upon exercise of the Warrant) if such Warrant Shares had not been
previously repurchased and (ii) the amount of the Repurchase
Price actually received by the Holder. Such difference shall be
paid to the
8
Holder within ten (10) days of the consummation of the Trigger
Event. If any of the consideration received as a result of the
Trigger Event was other than cash, the Holder shall receive such
Repurchase Price Adjustment in the same proportion of cash and
non-cash consideration as received by the Company or the
shareholders.
1.56 "Restricted Securities" means (a) any Warrant bearing the
applicable legend set forth in Section 4.1 (b) any Warrant Shares
which are evidenced by a certificate or certificates bearing the
applicable legend set forth in Section 4.1.., and (c) unless the
context otherwise requires, any shares of Common Stock which are
at the time issuable upon the exercise of any Warrant and which,
when so issued, will be evidenced by a certificate or
certificates bearing the applicable legend set forth in section
4.
1.57 "Rights Offering" shall have the meaning set forth in
Section 3.5.
1.58 "Sale Date" means the earlier of (i) the date, during the
Sale Period, upon which the Company effects a Trigger Event; or
(ii) the last day of the Sale Period.
1.59 "Sale Period" means the 180 day period beginning on the date
of receipt by the Company of the notice by the Holder of its
intent to exercise the Put Option; provided, however, that such
Sale Period shall terminate immediately upon the occurrence of an
Event of Default, provided that if such Event of Default is cured
as provided for in the Purchase Agreement, the Sale Period shall
continue as if such Event of Default had never occurred.
1.60 "Sale Valuation Amount" means, as of any Date of
Determination, the greater of: (i) the Yield Calculation; and
(ii) the Market Determined Value Amount.
1.61 "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute replacing said statute,
and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
1.62 "Securities Exchange Act" means the Securities Exchange Act
of 1934, or any similar Federal statute replacing said statute,
and the rules and regulations of the Commission thereunder., all
as the same shall be in effect at the time.
1.63 "Transfer" means with respect to any Restricted Securities,
any sale, assignment, pledge or other disposition thereof, or of
any interest therein, which could constitute a "sale" thereof, as
that term is defined in Section 2(3) of the Securities Act.
1.64 "Trigger Event" means any of the following events, each
undertaken in good faith and at-arms length: (i) a Change of
Control; (ii) a Disposition; (iii) a Reorganization Event; or
(iv) a Non-Surviving Combination.
9
1.65 "Voting Power" of any Person means the aggregate number of
votes of all classes of Capital Stock of such Person which
ordinarily has voting power for the election of the Board of
Directors or their equivalents of such Person.
1.66 "Voting Stock" means the shares of common stock, $0.01 par
value with vote, of the Company at any time outstanding.
1.67 "Warrant Exercise Expiration Date" means that date which is
the later of (i) December 31, 2000, (ii) the date which is thirty
(30) clays after the date upon which the Note is paid in full;
and (iii) the end of the Sale Period.
1.68 "Warrant Shares" means the shares of Non-Voting Stock
issuable upon exercise of this Warrant.
1.69 "Warrant" mean this Warrant.
1.70 Yield Calculation Amount" means, an internal rate of return
equal to an annual rate of return of eighteen percent (18%)
compounded monthly to be realized by the Holder of the Note on
the principal amount of the Note calculated based on actual
payments of principal and interest received by Holder using
standard internal rates of return formulas as available in
computer software packages such as Lotus 1-2-3 for Windows
version 5.0.
Section 2. Duration and Exercise of Warrant.
2.1 Warrant Exercise Period. This Warrant shall be exercisable
in a single exercise at any time after the date hereof and on or
before the Warrant Exercise Expiration Date.
2.2 Manner of Exercise. This Warrant may be exercised by the
Holder in a single exercise upon surrender of this Warrant and
Notice of Exercise attached hereto as Exhibit B duly completed
and executed on behalf of the Holder, at the principal office of
the Company (or at such other office or agency of the Company as
it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of The Company),
upon payment of the Price by delivery of a certified or cashier's
check to the Company. The Holder may, in lieu of paying the Price
by delivery of a certified or cashier's check to the Company,
reduce the unpaid principal amount of the Note by an amount equal
to the funds which would otherwise have been delivered.
2.3 When Exercise Effective. Subject to the requirements of any
state or federal insurance or finance company licensing laws or
regulations to which the Company may be subject, the exercise of
this Warrant shall be deemed to have been effected immediately
prior to the close of business on the Business Day on which this
Warrant shall have been surrendered and the Company receives
payment of the Price as provided in Section 2.2, and immediately
prior to the close of business on such Business Day the Holder
shall be deemed to have become the holder of record of the
Warrant Shares.
10
2.4 Delivery of Stock Certificates, etc. As soon as practicable
after the exercise of this Warrant, and in any event within ten
(10) Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the Holder a
certificate or certificates for the number of Warrant Shares to
which the Holder shall be entitled upon such exercise, plus, in
lieu of any fractional share to which the Holder would otherwise
be entitled, cash in an amount equal to the same fraction
(calculated to the nearest 1/100th of a share) of one full share
of Common Stock based on the Capitalized Earning Amount on the
Business Day next preceding the date of such exercise.
Section 3. Antidilution Adjustment.
3.1 Number of Warrant Shares. The number of Warrant Shares that
may be purchased by the Holder in consideration of the payment of
the Price is initially sixty-eight (68) shares of Non-Voting
Stock, which shall represent 12% of the fully diluted Common
Stock of the Company, provided, however, that such number of
shares is subject to adjustment as provided for in this Section
3, which number of Warrant Shares, as so adjusted from time, to
time is referred to as the "Number of Warrant Shares." The Price
is not subject to adjustment.
3.2 Adjustment Event. Upon the occurrence of any Adjustment
Event, the Number of Warrant Shares shall be adjusted immediately
after the applicable record date with respect to such Adjustment
Event as follows. The adjusted Number of Warrant Shares shall be
a number equal to the Number of Warrant Shares immediately prior
to such event multiplied by a fraction (i) the numerator of which
is the number of shares of Outstanding Common Stock immediately
after the record date with respect to such Adjustment Event, and
(ii) the denominator of which is the number of shares of
Outstanding Common Stock immediately before such record date. Any
such adjustment shall be calculated to the nearest 0.001 Warrant
Share.
3.3 Reorganization Event. Upon the occurrence of a
Reorganization Event, there shall thereafter be issuable or
deliverable upon the exercise of this Warrant (in lieu of the
Warrant Shares), as appropriate, the number of shares of stock,
other securities or property to which the Holder of the number of
shares of Common Stock equal to the Number of Warrant Shares at
the date of the Reorganization Event would have been entitled to
as a result of such Reorganization Event.
Prior to and as a condition of the consummation of any
Reorganization Event, the Company shall cause effective
provisions to be made to effect the purposes of this Section 3.3,
including, if appropriate, an agreement among the Company, any
successor to the Company and the Holder.
3.4 Other Event. In case any event shall occur as to which the
other provisions of this Section 3 are not strictly applicable
but the failure to make any adjustment would not fairly protect
the purchase rights represented by this Warrant in accordance
with the essential intent and principles hereof, then the Holder
may request in writing within one hundred twenty (120) days after
11
the occurrence of such event that the Company examine the
propriety of an adjustment to the Number of Warrant Shares.
Unless the Company and the Holder shall have mutually agreed upon
an adjustment, or that no adjustment is required, within thirty
(30) days after the receipt of such request., the Company shall
appoint a firm of independent certified public accountants of
recognized national standing (which may be the regularly engaged
accountants of the Company), to give an opinion upon the
adjustment, if any, on a basis consistent with the essential
intent and principles established in this Section 3, necessary to
preserve, the purchase rights represented by this Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy
thereof to the holder of this Warrant and shall make the
adjustments described therein. If such opinion states that no
such adjustment is necessary, the holder hereof shall reimburse
the Company for the reasonable cost and expense of such opinion.
3.5 Rights Offering. in the event the Company shall effect an
offering of Common Stock or Convertible Securities pro rata among
its stockholders, the Holder shall be entitled, at its option, to
elect to participate in each and every such offering as if this
Warrant had been exercised and such Holder were, at the time of
any such rights offering, then a holder of that number of shares
of Common Stock to which such holder is then entitled on the
exercise hereof ("Rights Offering").
3.6 Preemptive Rights. In the event of any Preemption Offering,
(i) the Company shall notify the Holder in writing of the number
of shares of Common Stock or Convertible Securities subject to
such Preemption Offering and the cash or cash equivalent purchase
price (determined by the board of directors of the Company in
good faith) thereof, and (ii) the Holder shall have the right for
a period of thirty (30) days following the consummation of such
Preemption Offering to purchase (A) prior to the exercise of
this Warrant, up to that number of shares of Common Stock or
Convertible Securities that is sufficient to permit the Holder to
maintain the percentage of shares of Outstanding Common Stock
which the Holder owns or would be entitled to purchase upon
exercise of this Warrant and after giving effect to such purchase
and the sale of all remaining shares subject to such Preemption
Offering, and (B) after the exercise of this Warrant, up to that
percentage of such shares of Common Stock or Convertible
Securities determined by dividing (a) the total number of shares
of Common Stock then owned by the Holder, and (b) the total
number of shares of Outstanding Common Stock.
The Holder shall have the right, during the period specified in
the Preemption Offering, to purchase any or all of the new shares
that it is entitled to purchase under this provision at the
purchase price and on the terms stated in the Preemption
Offering. Notice by the Holder of its acceptance, in whole or in
part, of the Preemption Offering shall be in writing and signed
by the Holder and shall be delivered to the Company prior to the
end of the period specified in the Preemption Offering, setting
forth the number of new shares of Common Stock the Holder elects
to purchase. With respect to any of the new shares of Common
Stock not purchased by the Holder hereunder, the Company may
during the period of sixty (60) days following the date of
expiration of the Preemption Offering sell to any other person or
persons all or any part of such shares, but only on terms and
conditions that are no more favorable to such person or persons
or less favorable to the Company than those set forth in the
Preemption Offering.
12
Section 4. Restrictions on Transfer.
4.1 Restrictive Legends. Except as otherwise permitted by this
Section 4, this Warrant and each Warrant issued in exchange or
substitution for any Warrant, and each Warrant issued upon the
registration of transfer of any Warrant and each certificate
representing Warrant Shares and each certificate issued upon the
registration of transfer of any Warrant Shares, shall be stamped
or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR
OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT
UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE
ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER OR
A NO-ACTION LETTER FROM THE COMMISSION STATING THAT SUCH
DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR
OFFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS."
4.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Restricted Securities, the Holder will give
written notice to the Company of the Holder s intention to effect
such transfer and to comply in all other respects with this
Section 4.2. Each such notice of a proposed transfer (a) shall
describe the manner and circumstances of the proposed transfer in
sufficient detail to enable counsel to render the opinion
referred to below, and (b) shall designate counsel for the Holder
The Holder will submit a copy thereof to the counsel designated
in such notice and the Company will promptly submit a copy
thereof to its counsel. The following provisions shall then
apply:
(i) If in the opinion of counsel to the Company the
proposed transfer may be effected without registration
of such Restricted Securities under the Securities Act,
the Company will promptly notify the Holder and the
Holder shall thereupon be entitled to transfer such
Restricted Securities in accordance with the terms of
the notice delivered by the Holder to the Company. Each
Warrant or certificate, if any, issued upon or in
connection with such transfer shall bear the applicable
restrictive legend set forth in section 4.1, unless in
the opinion of such counsel such legend is no longer
required to ensure compliance with the Securities Act.
If for any reason counsel for the Company (after having
been furnished with the information required to be
furnished by clause (a) of this Section 4.2) shall fail
to deliver an opinion to the
13
Company, or the Company shall fail to notify the Holder
as aforesaid, within thirty (30) days after receipt of
notice of the Holder's intention to effect a transfer,
then for all purposes of this Warrant the opinion of
counsel for the Holder shall be sufficient to authorize
the proposed transfer and the opinion of counsel for
the Company shall not be required in connection with
such proposed transfer; and
(ii) If in the opinion of counsel to the Company the
proposed transfer may not be effected without
registration of such Restricted Securities under the
Securities Act, the Company will promptly so notify the
Holder and the Holder shall not be entitled to transfer
such Restricted Securities until receipt of a further
notice from the Company under clause (i) above or until
registration of such Restricted Securities under the
Securities Act has become effective.
Section 5. Availability of Information.
Within ninety (90) days after a registration statement under the
Securities Act is declared effective with respect to an Initial
Public Offering, the Company will comply with the reporting
requirements of Sections 13 and 15(d) of the Securities Exchange
Act insofar as they are applicable to the Company and will comply
with all other public information reporting requirements of the
Commission (including the requirements of Rule 144 promulgated by
the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities or the
sale of securities by affiliates The Company will also cooperate
with the Holder at the Holder's expense to complete and file any
information reporting forms presently or hereafter required by
the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Restricted Securities
or the sale of securities by affiliates.
Section 6. Reservation of Stock, Etc.
The Company will at all times reserve and keep available, solely
for issuance and delivery upon the exercise of this Warrant and
free from preemptive rights, a sufficient number of shares of
Common Stock to cover the Warrant Shares issuable upon the
exercise of this Warrant. All such shares shall be duly
authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable with no liability on the
part of the holders thereof.
Section 7. Due Organization; No Violation.
7.1 The Company shall at all times be a corporation duly
organized and existing and in good standing under the laws of the
State of Delaware
14
7.2 The Company shall not be in violation of (i) any applicable
statute, regulation or ordinance (including, without limitation
the Internal Revenue Code) of any federal, state, local or other
jurisdiction or any agency thereof, in any respect materially and
adversely affecting its financial or business condition, and (ii)
any material indenture, mortgage, deed, agreement, instrument or
document to which it is or may become a party or by which it is
or may become bound; provided, however, that the Company may
exercise in good faith its right to protest and actively pursue
the same diligently and by appropriate proceedings.
Section 8. Issuance of Common Stock:; Company's
Representation.
The Company represents and warrants that NCMC and VFC Trust of
which Kenneth Klein, the President of the Company is the sole
trustee, own 85.5% and 14.5%, respectively, of the Voting Stock
of the Company. The authorized shares of Capital Stock of the
Company consist of 600 shares of Voting Stock of which 500 shares
are presently issued and outstanding, 100 shares of Non-Voting
Stock of which no shares are presently issued and outstanding,
and 68 shares are reserved for issuance upon the exercise of the
outstanding Warrant and 750 shares of Preferred Stock of which
519 shares are presently issued and outstanding. All of the
shares of issued and outstanding Capital Stock of the Company are
duly authorized, validly issued, fully paid and nonassessable and
are not subject to any preemptive rights of stockholders. There
are no outstanding options, warrants or other rights to acquire
from the Company any shares of its Capital Stock, other than this
Warrant.
Section 9. Ownership. Registration of Transfer. Exchange and
Substitution of Warrant.
9 1 Ownership of Warrant. Until due presentment for
registration, the Company may treat the Person in whose name this
Warrant is registered on the register kept at the Company's
principal office as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except
that, if and when this Warrant is properly assigned to another
Person, the Company may (but shall not be obligated to) treat
such Person as the owner of this Warrant for all purposes,
notwithstanding any notice to the contrary. Subject to the
foregoing provisions and to Section 4, this Warrant, if properly
assigned, may be exercised by the assignee without first having a
new Warrant issued.
9.2 Registration of Transfers. Subject to Section 4 hereof, the
Company shall register the transfer of this Warrant permitted
under the terms hereof upon records to be maintained by the
Company for that purpose, upon surrender of this Warrant, with
the Form of Assignment attached hereto as Exhibit C duly
completed and signed, to the Company at the Company's principal
office. Upon any such registration of transfer, a new Warrant, in
substantially the form of this Warrant, shall be issued to the
transferee.
9.3 Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and upon delivery of
indemnity reasonably satisfactory to the Company in form and
amount, or, in the case of
15
any such mutilation, upon surrender of this Warrant for
cancellation at the Company's principal office, the Company at
its expense will promptly execute and deliver, in lieu thereof, a
new Warrant of like tenor.
9.4 Expenses. The Company will pay all expenses, taxes (other
than transfer and income taxes) and other charges payable by the
Holder in connection with the preparation, issuance and delivery
from time to time of this Warrant or the Warrant Shares.
Section 10. Registration Rights.
10.1 "Piggyback" Registration. Within two (2) years after
exercise of this Warrant, but no later than December 31, 2002,
whenever the Company proposes to file under the Securities Act a
registration statement relating to any of its Capital Stock
(other than a registration statement on Form S-4 or S-8 or filed
in connection with an exchange offer or an offering of securities
solely to existing shareholders of the Company), whether on its
own behalf or on behalf of any holders of (Capital Stock or
warrants of the Company, the Company shall, at least fifteen (1
5) Business Days prior to such filing, give effective written
notice of such proposed filing to the Holder. Upon receipt by the
Company not more than fifteen (15) Business Days after such
effective notice of a written request from the Holder, the
Company shall (i) include in such registration statement, and
shall use its best efforts to cause such registration statement
to become effective with respect to, the Warrant Shares and/or
Purchase Shares as to which the Holder requests registration and
(ii) if such proposed registration is in connection with an
underwritten offering of Capital Stock for the benefit of the
Company, upon request of the Holder, use its best efforts to
cause the managing underwriter therefor to include in such
offering the Warrant Shares and/or Purchase Shares as to which
the Holder requests such inclusion, on terms and conditions
comparable to those of the securities offered on behalf of the
Company. Notwithstanding the foregoing, if the Company's
underwriter delivers a written opinion to the Holder that the
total amount or kind of securities which the Holder, the Company
and any other person or entities intend to include in such
offering is sufficiently large as to potentially have an adverse
effect on the distribution of all such securities, then the
amount or kind of securities to be offered for the account of the
Holder and such other persons or entities, but not the Company,
shall be reduced pro rata to the extent necessary to reduce all
of the securities proposed to be offered by the Holder, the
Company and such other persons or entities to the amount
recommended by the Company's underwriter. The Company shall not
be required to effect more than two registrations pursuant to
this Section 10.1.
10.2 Demand Registration. From and after the 180th day following
the date on which a registration statement under the Securities
Act is declared effective with respect to an Initial Public
Offering, whenever the Holder shall make a written request to the
Company to register under the Securities Act, Warrant Shares
and/or Purchase Shares either issuable upon exercise of this
Warrant or held by the Holder, the Company shall thereupon
promptly use its best efforts to register the Warrant Shares
and/or Purchase Shares on or before the sixtieth day after the
effective date of such request (the "Request Date"); provided,
however, that the Company shall not be required to effect more
than one registration pursuant to Section 10.2. and that the
Company will not be required
16
to effect a registration under this Section 10.2 unless the
Warrant Shares and/or Purchase Shares sought to be registered by
the Holder represent 100% of the Warrant Shares and/or Purchase
Shares then owned by the Holder. Each such request for
registration under this Section 10.2 shall specify that the
number of Warrant Shares and/or Purchase Shares proposed to be
sold, the intended method of distribution thereof and the
jurisdictions in which registration is desired.
10.3 General Requirements. In connection with any registration
pursuant to Section 10.1 or 10.2:
(i) Upon the request of the Holder, the Company will
cooperate with any underwriters (as defined in the
Securities Act) for the Holder, reasonably satisfactory
to the Company including, without limitation, providing
such customary information certificates, comfort
letters of accountants and opinions of counsel as may
be reasonably requested by such underwriters and
executing all customary documents reasonably requested
by the underwriters; and upon the request of the
Company, the Holder will cooperate with any
underwriters (as defined in the Securities Act) for the
Company, including, without limitation, providing such
customary information, certificates and opinions of
counsel as may be reasonably requested by such
underwriters and executing all customary documents
reasonably requested by the underwriters.
(ii) The Company shall not be required to maintain the
effectiveness of any registration statement under
Section 10.1 or 10.2 for a period in excess of six (6)
months or, in the case of any registration statement
under Section 10.1 or 10.2 filed on a Form S-3
Registration Statement under the Securities Act, for a
period in excess of twelve (12) months.
(iii) The Company will furnish to the Holder (A) at
least seven (7) Business Days prior to the filing
thereof with the Commission, a copy of the registration
statement in substantially the form in which the
Company proposes to file the same with the Commission
and, not later than the effective date thereof, a copy
of any and all amendments to such registration
statement, (B) within five (5) Business Days of the
filing thereof with the Commission, a copy of any and
all post-effective amendments to such registration
statement, and (C) at the request of the Holder a
reasonable number of copies of a preliminary prospectus
and a final prospectus (each of which shall as of their
respective dates, comply with Section 10 of the
Securities Act and shall not, as of such dates include
an untrue statement of a material fact or omit to state
a material fact required to be stated therein or
necessary to make statements therein not misleading)
17
covering the offering and sale by the Holder of the
Warrant Shares and/or Purchase Shares to be covered
thereby as aforesaid.
(iv) The Company will advise the Holder of the entry of any
stop order suspending the effectiveness of such
registration statement or of the initiation of any
proceeding for that purpose, and, if such stop order
should be entered, use its best efforts promptly to
cause such stop order to be lifted or removed.
(v) For such period of time (not exceeding the maximum
period of time for which the Company is required to
maintain the effectiveness of such registration
statement) as the Holder may be required by law to
deliver a prospectus in connection with a sale of any
Warrant Shares and/or Purchase Shares pursuant to such
registration statement, if any event shall occur as a
result of which it is necessary to amend or supplement
the prospectus forming a part of such registration
statement in order to correct an untrue statement of a
material fact, or an omission to state a material fact
necessary to make statements therein, in the light of
the circumstances existing when such prospectus is
delivered to a purchaser not misleading and the Holder
shall notify the Company of any such statement or
omission of which it has actual knowledge or if it is
necessary to amend or supplement such prospectus to
comply with any law, the Company will forthwith prepare
and furnish to the Holder a reasonable number of
amended or supplemented prospectuses so that statements
in the prospectuses as so amended or supplemented will
not, in the light of the circumstances then existing,
be misleading, or so that such prospectuses will comply
with law.
(vi) The Company will use its best efforts to qualify, file
or register the Warrant Shares and/or Purchase Shares
being registered under the securities laws of such
states of the United States of America as may be
reasonably designated by the Holder and to obtain the
consent, authorization or approval of any governmental
agency (other than any such consent, authorization or
approval required under any statute or regulation
applicable to the Holder and not applicable to
investors generally) required in connection with the
issuance of the Warrant Shares and/or Purchase Shares
being registered or in order that the Holder may
publicly sell the Warrant Shares and/or Purchase Shares
covered by such registration statement; provided that
the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for
18
this provision, (B) subject itself to taxation in any
such jurisdiction or (C) consent to genera service
process in such jurisdiction.
(vii) All fees, disbursements and expenses incurred by the
Company in connection with the registration pursuant to Section
10.1 or 10.2 (excluding underwriters' discounts and commissions)
shall be borne by the Company, including, without limitation, all
registration and filing fees, all costs of preparation and
printing (in such quantities as the Holder may reasonably
request) of any registration statement and related prospectus and
any amendments or supplements thereto, all fees and disbursements
of counsel for the Company, accounting fees, the expenses of
complying with applicable securities or blue sky laws, and all
costs in connection with the preparation and delivery of such
customary legal opinions, auditors' comfort letters or other
closing documents as the Holder shall reasonably request, but
excluding all internal overhead expenses of the Company or any
Affiliate ("Expenses"); provided, however, that the Company shall
only be responsible for up to $50,000 of Expenses in connection
with the registration pursuant to Section 10.2 and the Holder
shall be responsible for the Expenses in excess of $50,000
provided. (A) the Holder has approved such expenses or an
estimate of such expenses in advance of their being incurred or
has arranged for the providing of such services and (B) if any
shares other than the Holder's shares are registered pursuant to
such registration 10.2 the Person owning such shares shall pay
their pro-rata share of such excess Expenses. If Holder does not
approve of the Expenses or arrange for the providing of such
services within fifteen (T 5) days of receipt of such estimate
the Company shall not be obligated to register the Warrant Shares
and/or Purchase Shares and the demand shall be deemed to have
been withdrawn.
(viii)The Company will indemnify arid hold harmless the
Holder, any underwriter (as defined in the Securities
Act) for the Holder and each person or entity, if any,
who controls the Holder or such underwriter within the
meaning of the Securities Act, against any losses,
claims, damages, liabilities, costs or expenses, joint
or several, or actions in respect thereof to which the
Holder or such underwriter or controlling person or
entity may become subject under the Securities Act, or
otherwise, insofar as such losses, claims, damages,
liabilities, costs, expenses or actions in respect
thereof arise out of, or are based upon, or are related
to, any untrue statement or alleged untrue statement of
any material fact contained in any registration
statement under which the Warrant Shares and/or
Purchase Shares were registered under the Securities
Act, any preliminary prospectus, amended preliminary
19
prospectus, or final prospectus contained therein, or
any amendment or supplement thereto, or arise out of,
or are based upon, or are related to, the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse
the Holder or underwriter or controlling person or
entity for any legal or other expenses reasonably
incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or
action; provided that to the extent that any such loss,
claim, damage or liability arises out of, or is based
upon, an untrue statement or alleged untrue statement
or omission or alleged omission made in said
registration statement, said preliminary prospectus,
said amended preliminary prospectus or said final
prospectus or any said amendment or supplement in
reliance upon, and in conformity with, written
information furnished to the Company in an instrument
duly executed by the Holder or by any underwriter for
the Holder specifically for use in the preparation
thereof, the Company will not be so liable to the
Holder or such underwriter.
(ix) The Holder will indemnify and hold harmless the
Company, its directors, its officers who sign any
registration statement and each person or entity, if
any, who controls the Company within the meaning of the
Securities Act to the same extent as the indemnity from
the Company set forth in Section 10.3 (viii), but only
with respect to the information relating to the Holder
furnished in writing by the Holder expressly for use in
such registration statement.
(x) The Company may require the Holder to furnish in
writing to the Company such information regarding the
distribution of the Warrant Shares and/or Purchase
Shares being sold pursuant to such registration as the
Company may from time to time request in writing.
(xi) In order to participate in a registration effected
hereby, the Holder agrees not to effect any public sale
or distribution of Capital Stock (except as part of
such registration), including a sale pursuant to Rule
i44 under the Securities Act, during such period
reasonably requested by the Company in case of a non-
underwritten public offering or during such period
reasonably requested by the Company's underwriter in
the case of an underwritten public offering; provided,
however, that the Holder shall not, without its
consent, be prevented from effecting any such public
sale for a period which commences any earlier than 0th
Business Day immediately preceding, and terminates
20
any later than the 120th day immediately following, the
effective date of such registration statement.
Section 11. Put Option.
11.1 Put Option Exercise Period. The Holder shall have the option
(the "Put Option") to require the Company to purchase all, but
not less than all, of the Warrants or Warrant Shares and Purchase
Shares, if any, at any time after the earlier of (i) the third
anniversary of the Original Issue Date; (ii) notification of a
transaction involving the Capital Stock of the Company to be
consummated by the Company or NCMC which would involve the sale
of any of the Company's Capital Stock without the Holder's
written approval; (iii) a Trigger Event; (iv) prepayment of the
Note in full (v) the occurrence of an Event of Default which has
not been cured within the allowable cure period; (vi) a sale of
25% or more of the Investor's Equity; (vii) notification of the
intent to adopt a plan of liquidation; or (viii) an Initial
Public Offering. The Holder shall have thirty (30) days from the
date of receipt of notice of a transaction under (ii), (iii),
(iv) or (vi) above, together with a Final Term Sheet, in which to
give the Notice of Put Option Exercise or the transaction
described in the notice and only the particular transaction
described in the notice shall not enable the Put Option. If there
is a material change in the actual transaction of any of the
terms, covenants, arrangements or fees versus those disclosed in
the Final Term Sheet, the time period for giving the Notice of
Put Option shall not begin until such revised Final Term Sheet is
given to the Holder as required under Section 11.1, as such
thirty (30) days shall begin upon receipt by Holder of such
revised Final Term Sheet.
11.2 Manner of Exercise. The Put Option may be exercised by the
Holder giving the Notice of Put Option Exercise attached hereto
as Exhibit D to the Company that the Holder elects to sell the
Warrant or Warrant Shares and Purchase Shares then held by the
Holder to the Company at the repurchase price set forth in
Section 11.3 (the "Repurchase Price"). Such Notice of Put Option
Exercise by the Holder shall be irrevocable. Upon final
determination of the Repurchase Price as set forth in Section I
.3, the Company shall be required to repurchase the Warrant or
Warrant Shares and Purchase Shares, if any, then held by the
Holder. The Company shall not be obligated to repurchase the
Warrant, Warrant Shares or Purchase Shares, if any, if the
Company shall be unable to do so without a breach or violation of
the provisions of applicable law. Notwithstanding the foregoing,
the Company shall use its best efforts to remove all limitations
upon its ability to repurchase the Warrant or Warrant Shares and
Purchase Shares, if any, such obligation shall remain a
continuing obligation of the Company and shall repurchase the
Warrant or Warrant Shares and Purchase Shares, if any,
immediately after all such limitations have been removed.
11.3 The Repurchase Price. The Repurchase Price per share shall
be equal to the Calculated Valuation Amount per share of
Outstanding Common Stock determined as of the date of the Notice
of the Put Option Exercise. If none of the events in Section
11.1(iii) or (vii) has occurred, upon receipt of the Notice of
Put Option Exercise, the Company may, by notification to the
Holder, by the Notice of Attempt to Sell the Company, attached
hereto as Exhibit E, attempt to cause a Trigger Event to occur
and satisfy the Repurchase Price through such effort during the
Sale Period.
21
If such Trigger Event is consummated during the Sale Period, the
Repurchase Price shall be equal to the Sale Valuation Amount per
share of Outstanding Common Stock determined as of the Sale Date.
In addition to paying the Repurchase Price determined under this
Section 11.3, the Company shall pay to the Holder the Repurchase
Price Adjustment, if applicable.
11.4 Closing and Payment. The closing for the repurchase of the
Warrant or Warrant Shares and Purchase Shares, if any, by the
Company pursuant to this Section 11 shall occur within five (5)
Business Days following the Date of the Determination of the
Repurchase Price, provided that if none of the events in Section
11.1 (ii) through (viii), inclusive has occurred the Repurchase
Price shall be payable within sixty (60) days, and shall be
payable by the Company by delivery of a certified or cashiers'
check, wire transfer of immediately available funds or the
transfer of Marketable Securities to the Holder. Such Repurchase
Price and Repurchase Price Adjustment, if applicable, shall bear
interest at the Prime Rate plus nine percent (9%) per annum,
compounded monthly, based on a 360 day year consisting of twelve
30 day months beginning on the date payment of the Repurchase
Price is due and continuing until the total amount of the
Repurchase Price, together with accrued interest is paid in full.
11.5 Exchange for Voting Stock. The Company shall, upon the
written request of Holder, issue and exchange shares of Voting
Stock on a share-for-share basis for Warrant Shares issued or
issuable upon exercise of or acquired pursuant to this Warrant
and/or Purchase Shares to the extent that the Holder:
(i) sells such Warrant Shares and/or Purchase Shares
pursuant to a public offering under registration
statement under the Securities Act (including without
limitation any registration provided for in Section
10.1 or 10.2 hereof), provided that such offering is
underwritten on a firm commitment basis or otherwise
provides for a widely dispersed distribution of the
shares;
(ii) sells such Warrant Shares and/or Purchase Shares in a
private placement pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act, provided that no
purchaser or related group of purchasers acquires more
than 2% of the outstanding shares of Voting Stock;
(iii) sell such Warrant Shares and/or Purchase Shares as
part of a direct sale, together with other shareholders
of the Company, to a third party that is not related to
or affiliated with the Holder, provided that pursuant
to such sale the purchaser acquires at least a majority
of the outstanding Voting Stock without regard to any
shares purchased from the Holder; or
22
(iv) the Holder does not own or have the right to receive
upon exercise of the Warrants or otherwise, more than
4.9% of the Voting Stock that would be outstanding
after such exchange.
11.6 Expiration of Put Option. The Put Option shall expire upon
the Company effecting an Initial Public Offering; provided,
however, that the Holder shall have received a representation
from the underwriter of such Initial Public Offering,
satisfactory to the Holder, that Holder will not be subject to
any restrictions by the underwriter and an opinion of Company's
counsel, satisfactory to Holder, addressed to the Holder, that
the Holder will not be subject to any restrictions under any
state or federal securities law, on the sale of all of its
Warrant Shares, (assuming exercise of the Warrant if such
exercise has not previously occurred), in such Initial Public
Offering or will not be subject to any such restrictions by the
underwriter or securities laws on the sale of all of its Warrant
Shares beginning on the 180th day after the Initial Public
Offering and thereafter.
Section 12. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder any rights as a stockholder of the
Company or as imposing any liabilities on the Holder to purchase
any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the
Company.
Section 13. Notices.
All notices and other communications provided for herein shall be
mailed by first class mail, postage prepaid, addressed (a) if to
the Holder, at the registered address of the Holder as set forth
in the register kept at the Company's Office, or (b) if to the
Company, at its principal office, being on the date of original
issuance of this Warrant, 540 Madison Avenue, Suite 1702, New
York. New York 10022, or at such other address of which the
Company shall have given written notice to the Holder, with a
copy to John Shaw, Resource Holdings Associates, 520 Madison
Avenue, 40th Floor, New York New York 10022, and Kevin Crudden,
Robins Kaplan Miller & Ciresi, 2800 LaSalle Plaza, 800 LaSalle
Avenue, Minneapolis, Minnesota, 55402-2015, provided that the
exercise of this Warrant shall be effective if effected in the
manner provided in Section 2.
Section 14. Miscellaneous.
This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be
governed by the laws of the State of Ohio. The headings in this
Warrant are inserted for convenience only and shall not be deemed
to constitute a part hereof
23
Section 15. Expiration.
The right to exercise this Warrant shall expire on the Warrant
Exercise Expiration Date.
Section 16. Assignment.
The Holder may not assign or otherwise transfer this Warrant or
any of its rights hereunder without the express written consent
of the Company, which will not be unreasonably withheld. Any
transferee of Warrant Shares exceeding less than all of the
Warrant Shares shall not be entitled to any rights hereunder and
any transferee of all of the Warrant Shares shall only be
entitled to such rights as provided in the foregoing sentence.
The remainder of this page is intentionally left blank.
24
NATIONAL CAPITAL BENEFITS CORP.
By:/s/ Kenneth Klein
Kenneth Klein, President
ACKNOWLEDGMENT AND CONSENT
National Capital Management Corporation ("NCMC"), a Delaware
corporation, acknowledges that it is the owner of record and
beneficially, as of January __, 1996, of all of the issued and
outstanding Series A, $0.01 par value, $10,000 liquidation value,
preferred stock without vote ("Preferred Stock") of National
Capital Benefits Corp. ("Company"), a Delaware corporation. NCMC
hereby acknowledges the existence of the right granted by the
Company to Banc One Capital Partners V., Ltd. ("BOCP V") pursuant
to this Warrant Certificate - Common Stock Purchase Warrant
("Warrant Certificate") for BOCP V to require the Company to
repurchase from BOCP V the warrant ("Warrant") represented by
this Warrant Certificate, any shares of common stock owned by
BOCP V as a result of the exercise of the Warrant ("Warrant
Shares"), including any shares acquired in the exercise of its
preemption rights under the Warrant Certificate ("Purchase
Shares").
In consideration for BOCP V purchasing the Senior Subordinated
Note and this Warrant Certificate from the Company., which is
majority owned by NCMC, NCMC hereby grants to the Company, the
consent required pursuant to the terms of the Preferred Stock for
the Company to repurchase the Warrant, Warrant Shares or Purchase
Shares. Such consent is effective now and shall continue for so
long as any Warrant, Warrant Shares or Purchase Shares are
outstanding.
National Capital Management Corporation
By: /s/ John Shaw
John Shaw, Chief Executive Officer
25
Exhibit A
INVESTOR'S EQUITY
IN
NATIONAL CAPITAL MANAGEMENT CORPORATION
AS OF
SEPTEMBER 30, 1995
AND
DATE OF CLOSING
Number of Shares (see note
below)
James Pinto 103,568.67 shares
John C. Shaw 16,880.00 shares
Jerry Seslowe 15,233.33 shares
Resource Holdings Associates has a 26.5% profit participation in
RHEC L.P., which owns shares of National Capital Management
Corporation.
Note: The shares above are after a 3 for 1 reverse stock
split by National Capital Management Corporation which was
effective July 11, 1995.
26
Exhibit B
NOTICE OF EXERCISE
NATIONAL CAPITAL BENEFITS CORP.
The undersigned, hereby elects to exercise the Warrant evidenced
by this Warrant Certificate, and to purchase thereunder, covered
by said Warrant Certificate and herewith makes payment in full
therefor [by delivery herewith of a certified or official bank
check payable to the order of the Company in the amount of
$______] [by agreeing hereby to reduce the outstanding principal
balance of the Company's Senior Subordinated Note payable to the
undersigned by the amount of $________] and requests that
certificates for such shares be issued in the name of and
delivered to ______, whose address is ___________
Signature guaranteed:
Dated:_________________________________
27
Exhibit C
FORM OF ASSIGNMENT
FOR VALUED RECEIVED, ___________________ hereby sells, assigns
and transfers to the _______________ all of the rights of the
undersigned in and to this Warrant in and to the foregoing
Warrant Certificate with respect to said Warrant and the shares
of Common Stock issuable upon exercise of said Warrant.
Name of
Holder
(Print):________________
Dated: _________________
(By:)___________________
(Title:)________________
28
Exhibit D
NOTICE OF PUT OPTION EXERCISE
NATIONAL CAPITAL BENEFITS CORP.
The undersigned hereby elects to exercise the Put Option as
defined and granted to pursuant to the Warrant Certificate dated
January __, 1996 ("Warrant Certificate") and to sell all, but not
less than all, of the Warrants, Warrant Shares and Purchase
Shares (all as defined in the Warrant Certificate) held by the
undersigned and request payment of the Repurchase price as
defined, calculated, and paid pursuant to the Warrant
Certificate. Such payment to be made by certified or official
bank check payable to the order
of_______________________________________
By __________________
Name: _______________
Printed Name
Title:_______________
Dated _______________
29
Exhibit E
NOTICE OF ATTEMPT TO SELL THE COMPANY
National Capital Benefits Corp. ("Company"), hereby elects to
exercise its right to attempt to sell the Company upon receipt of
the Notice of Put Option Exercise as defined and granted to
pursuant to the Warrant Certificate dated January __, 1996
("Warrant Certificate"). The Company shall for the Sale Period
(as defined in the Warrant Certificate) attempt to sell the
Company and shall pay the Repurchase Price (as defined in the
Warrant Certificate) to the person or entity giving the Notice of
Put Option Exercise in the manner provided for in the Warrant
Certificate.
NATIONAL CAPITAL BENEFITS CORP.
By:__________________
Name: _______________
Printed Name
Title: ______________
Date: _______________
30
PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 26 day of July,
1995, by and between NATIONAL CAPITAL MANAGEMENT CORPORATION, a
Delaware corporation ("Seller"), and WILLIAM R. DIXON, JR., a
single man ("Buyer").
1. Property to be Purchased. Seller agrees to sell to Buyer and
Buyer agrees to purchase from Seller, upon the terms and
conditions set forth in this Agreement, that certain real
property located at 2065 S.E. Tualatin valley Highway, Hillsboro,
Washington County, Oregon, the legal description of which is
attached hereto as Exhibit "A" and by this reference incorporated
herein (the "Property"). The Property is commonly known as "The
Mart Shopping Center".
2. Purchase Price.
(a) The purchase price for the Property, which Buyer agrees to
pay to Seller, shall be the sum of THREE MILLION ONE HUNDRED two
thousand five hundred one and 27/100 ($3,102,501.27)payable as
follows:
(i) The sum of NINE HUNDRED SIXTY THOUSAND AND 00/100
($960,000.00) DOLLARS in cash at Closing (less any earnest money
previously paid by Buyer)
(ii) Buyer's acquisition of the Property subject to the terms of
the existing first loan secured by the Property in the principal
amount of ONE MILLION THIRTY-TWO HUNDRED TWO THOUSAND FIVE
HUNDRED ONE AND 27/100 ($1,232,501.27) DOLLARS. Buyer, at
Buyer's sole cost and expense, shall be responsible for obtaining
any and all approvals of this transaction from the holder of said
first loan. Such approval is not a condition of this
transaction.
(iii) Buyer's execution and delivery to Seller of Buyer's
Promissory Note secured by a Second Trust Deed on the Property.
Said promissory Note shall be in the amount of NINE HUNDRED TEN
THOUSAND AND 00/100 ($910,000.00) DOLLARS. Said Promissory Note
shall be payable interest only monthly and shall not include any
prepayment penalty or premium. For the first six months of the
term of the Promissory Note, interest shall accrue at the rate of
eight (8%) percent per annum, and thereafter interest shall
accrue at the rate of ten (10%) percent per annum. The Promissory
Note shall be due and payable on the earlier of eighteen (18)
months from the date of closing, sale or refinance of the
Property. In the event any such refinance of the Property is
Page 1. Property Purchase Agreement 7/25/95
insufficient to pay said Promissory Note in full, Seller agrees
to subordinate Seller's Second Trust Deed to the lien of a new
first encumbrance so long as all net proceeds from such refinance
which are not used to pay off the existing first loan on the
Property and which are not used to pay the cost of refinance are
paid to Seller on account of the Promissory Note. Said
Promissory Note shall be a nonrecourse obligation of Buyer unless
the holder of the first loan on the Property prohibits secondary
financing on the Property, in which case Buyer acknowledges that
said Promissory Note shall be a recourse obligation of Buyer and
be unsecured.
3. Seller's Delivery. Seller agrees to or has previously
delivered the following to Buyer:
(a) A First Supplemental Title Report dated as of July 6, 1995
(the "Title Commitment") issued by Chicago Title Insurance
Company (the "Title Company"), with copies of all exceptions or
conditions referred to therein. The Title Commitment shall set
forth the state of title to the Property, together with all
exceptions or conditions to title, including, without limitation,
all easements, restrictions, rights-of-way, covenants, reser
vations, consents and all other encumbrances affecting the
Property, which will appear in the Standard Owner's Title
Insurance Policy to be issued at Closing. Buyer shall have
three (3) business days following receipt of the Title Commitment
to approve the condition of title.
(b) A survey to the Property, prepared by a surveyor licensed in
Oregon showing the exact location (by courses and distance) and
the exact dimensions of the Property, the surface and subsurface
structures and improvements and the location and dimensions of
all defects and encumbrances shown on the Title Commitment
described in subparagraph (a) above or defects or encumbrances
visible on the Property.
(c) A 1992 Level I Environmental Report on the Property prepared
by an environmental engineer licensed in the State of Oregon,
disclosing the extent of any hazardous materials or
environmental hazards contained on the Property.
(d) A schedule and copies of all of the service contracts,
management agreements and all other agreements affecting the
Property or the operation or maintenance thereof.
(e) A complete and accurate rent roll for the Property as of
July 1, 1995.
4. Seller's Representations.
(a) Seller represents and warrants to Buyer:
Page 2. Property Purchase Agreement
(i) That from the date of this Agreement to the Date of Closing,
Seller will operate the Property diligently and only in the
ordinary course of business.
(ii) That Seller, prior to Closing, (A) will keep and maintain
the Property in as good of condition as exists on the date
hereof, reasonable wear and tear excepted, (B) will make or cause
to be made all reasonable and ordinary repairs and
maintenance with respect to the improvements and personal
property used in the operation of the Property, (C) will not
violate or breach any law or regulation nor permit any waste or
nuisance and (D) will promptly advise Buyer of any litigation1
arbitration or administrative hearing before any governmental
authority concerning or affecting the Property arising or
threatened after the date hereof.
(iii) Seller is currently negotiating with BiMart in connection
with common area and maintenance expense reconciliation for the
years 1989 through 1994. Seller anticipates that all issues with
the exception of Seller's claim for reimbursement of management
fees will be resolved. Said litigation may have an effect on
Buyer's ability to collect common area and maintenance charges
relating to management fees in the future. Seller agrees that it
is Seller's sole cost and expense to prosecute said litigation
concerning management fees. Seller agrees to indemnity, defend
and hold harmless Buyer from and against any claims for
reimbursement by BiMart of any overpayment of management fees or
other common area maintenance expenses prior to the close of
escrow hereunder.
(iv) That Seller has discussed with Waremart issues relating to
common area maintenance expense reconciliation. Waremart has
paid said expenses in full. Seller does not anticipate litigation
with Waremart concerning these matters. However, Waremart
objected to the payment of management fees at the time of such
payment. Seller agrees to indemnity, defend and hold harmless
Buyer from and against any claims for reimbursement by Waremart
of any overpayment of management fees or other common area
maintenance expenses prior to the close of escrow hereunder.
(v) That the Oregon Department of Transportation has on May 2,
1995 submitted a proposal to Seller to pay to Seller TWELVE
THOUSAND TWO HUNDRED AND 00/100 ($12,200.00) DOLLARS for a strip
of land along Tualatin Valley Highway. Seller has delivered a
copy of said proposal to Buyer, attached hereto as Exhibit "B"
and by this reference incorporated. Seller caused a response to
be sent to the Oregon Department of Transportation by letter
dated May 5, 1995, a copy of which has been delivered by Seller
to Buyer. To date Seller has received no response to said
letter.
(vi) That the existing first loan on the Property is current and
not in default (except as may be caused by the
Page 3. Property Purchase Agreement
closing of this transaction); that the unpaid principal balance
as of July 1, 1995 is $1,232,501.27 that the interest rate on
said loan is 10% per annum; that the monthly payment required is
$11,945.18; that the loan is due and payable in full on December
1, 1997; and that exceptions 24 and 47 as set forth on the Title
Commitment secure the same first loan on the Property as
described in this subparagraph.
(vii) The execution of this Agreement and the transaction
contemplated hereby have been duly authorized by all requisite
action on the part of the Seller and the persons executing this
Agreement have the authority to execute same, and their
signatures are sufficient to bind Seller in every respect.
(viii)That Seller shall indemnify1 defend and hold Buyer harmless
from all claims by tenants of the Property arising from acts or
events occurring prior to Closing.
(ix) That the Lease of March 4, 1976 between Charles A. Spicer
and Faye A. Spicer as lessor and Fred H. Bender as lessee
affecting Parcel II of the Property and the Option to Purchase
Agreement now owned by Seller and shown as exception 25 on the
Title Commitment are in full force and effect and have not been
assigned or encumbered except as set forth on the Title
Commitment.
(b) Seller further represents and warrants that to the best of
Seller's knowledge the following statements are true and correct
as of the date hereof and will be true and correct as of Closing:
(i) All documents delivered to Buyer by Seller are true and
correct copies of the originals and represent the factual matters
stated therein.
(ii) The rent roll is accurate and represents all tenants with an
interest in the Property, and all leases furnished to Buyer are
in full force and effect, and are complete and are without any
amendments.
(iii) As of Closing, there will be no outstanding contracts or
agreements for any improvements to the Property which have not
been paid in full. Seller shall cause to be discharged any
mechanic's liens arising prior to Closing.
(iv) Except as disclosed to Buyer in writing, Seller has not
executed or otherwise entered into any written or unwritten
leases, tenancies, occupancy agreements, service agreements, or
other agreements with respect to rights affecting possession of
the Property or any portion thereof, and to the best of Seller's
knowledge, there are no such agreements entered into or executed
by a third party.
Page 4. Property Purchase Agreement
(v) Except as disclosed in subparagraph 4 (a) (v) above, there
are not presently pending or threatened any special assessment
proceedings, condemnations, requirements by any jurisdictional
agency, or any other actions against the Property.
(vi) There is no current labor dispute with any maintenance or
other personnel or employees of Seller or any contracts with
respect to the Property which could adversely affect the use,
operation or value of the Property.
(vii) There are no commissions, finder's fees or other
compensation owing or which may become due to any broker or any
other person or entity with respect to any tenant lease or
occupancy agreement including, without limitation, any such
compensation with respect to any future renewals, extensions or
expansion thereof.
(viii)Except as might be claimed by BiMart or Waremart as
disclosed in subparagraphs 4(a)(iii) and 4(a)(iv) above, there
are no credits or rent offsets due to tenants. Nor are there any
claims or causes of action concerning the Property or any portion
thereof.
(ix) There are no material defects of the Property nor is it in
violation of any law, zoning, use, ordinance and/or regulation
affecting the Property.
(x) Based solely on the 1992 Level I delivered by Seller to
Buyer, there is no contamination, hazardous waste or toxic
substance existing on or below the surface of the Property,
including, without limitation contamination of the soil, subsoil,
or groundwater which constitutes a violation of any law, rule, or
regulation of any government entity having jurisdiction therefore
which exposes Buyer to liability to third parties. At no time
has Seller nor any third party used, generated, manufactured,
stored, or disposed of or allowed to accumulate on, under, or
about the Property or transported. to or from the Property any
flammable explosives, radioactive materials, hazardous waste,
toxic substances, or related materials ("Hazardous Materials").
For the purpose of this paragraph, Hazardous Materials shall
include but not be limited to substances defined as "Hazardous
Substances", "Hazardous Materials", or "Toxic Substances" in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. 6901,. et seq.;
Oregon Hazardous Waste Management Act, ORS Chapter 466, Oregon
Underground Storage Tank Act, ORS 468.909; and in the regulations
adopted and publications promulgated pursuant to said laws.
(xi) All representations and warranties contained or referred to
in this Agreement shall survive the execution and delivery of
this Agreement, transfer of title to the Property, and
Page 5. Property Purchase Agreement
transfer of possession of the Property. Seller shall promptly
advise Buyer if Seller acquires any information which would
affect the continued validity of the representations and
warranties set forth in the Agreement. If any of said
representations and warranties of Seller set forth in this
paragraph 4 shall not be true and correct at the time the same is
made or as of the Closing hereunder, then upon written notice
from Buyer to Seller on or prior to such Closing, this Agreement
shall terminate at Buyer's election except with respect to any
rights, obligations or liabilities arising out of any breach of
this Agreement by either party hereto. Seller shall indemnify,
defend and hold harmless Buyer from and against any losses,
damages, claims, liabilities, actions, causes of action, costs or
expenses (including, without limitation, attorney's fees and
court costs) incurred or suffered by Buyer as a result of the
inaccuracy in or breach of any representation or warranty of
Seller contained in this Agreement which is discovered after the
Closing hereunder.
5. As Is With All Faults. Except as set forth in paragraph 4
above, Seller desires to dispose of the Property without
continuing liability following the disposition. Accordingly,
Buyer shall purchase the Property on an "AS IS, WITH ALL FAULTS"
basis. If this Agreement required Seller to make any
representation or warranty, express or implied, relating to the
Condition of the Property (hereafter defined), or to accept any
liability with respect to the Condition of the Property, Seller
would have required a materially higher purchase price for the
Property because of contingent risk to Seller of post-closing
liability, or refuse to sell the Property. Buyer acknowledges
and represents:
(a) Buyer has taken the "AS IS, WITH ALL FAULTS" basis for sale
of the Property into account in determining the Purchase Price of
the Property, and the Purchase Price incorporates whatever
adjustment deemed necessary to reflect the risk Buyer is assuming
in purchasing the Property "AS IS, WITH ALL FAULTS."
(b) Buyer assumes and accepts the entire responsibility for
interpreting and assessing the Condition of the Property,
including the extent, if any, to which the information contained
in documents furnished to or obtained by Buyers is accurate,
complete, or should be relied upon by Buyer.
(c) Except as may be stated expressly in this Agreement or any
document to be delivered as part of the Closing1 Seller and
Seller's agents and employees shall have absolutely no liability
for any warranty, representation, or other promise or statement
regarding the Condition of the Property.
(d) The term "Condition of the Property" means all material
facts about the Property, including but not limited to:
Page 6. Property Purchase Agreement
(i) The quality, nature and adequacy of the physical condition
of the Property, including but not limited to the quality of the
design, labor, and materials used to construct the improvements
thereof, if any; structural elements, roofs, glass, mechanical,
plumbing, HVAC, sewage or utility components and systems,
irrigation, access, fixtures, and the presence of any asbestos or
other hazardous or toxic substance or waste, including, without
limitation, friable asbestos, gasoline, petroleum products,
explosives, urea, formaldehyde, polychlorinated biphenyl and
radioactive materials;
(ii) The development potential, economic feasibility,
habitability, merchantability and fitness, suitability or
adequacy of the Property for any particular use;
(iii) Compliance or non-compliance of Seller or any other person
or the Property or its operation in accordance with, and the
content of, applicable codes, laws, restrictions, licenses,
permits, approvals, and applications of or with any governmental
authority asserting jurisdiction over the Property, including but
not limited to those relating to zoning, building, public works,
subdivision, subdivision sales, asbestos and hazardous and toxic
substances and waste, including but not limited to those
enumerated in paragraph (i) above; and
(iv) Compliance or non-compliance of Seller or any other person
or the Property or its operation in accordance with, and the
contents of, all other applicable agreements, covenants,
conditions and restrictions, leases, development agreements, and
other instruments and documents governing the use, management and
operation of the Property.
(e) The provisions of this paragraph (5) shall not abrogate or
limit Buyer's reliance upon the representations in paragraph 4.
6. Items to be Delivered by Seller at Closing. At Closing,
Seller agrees to deliver or cause to be delivered the following
items to Buyer or to the Title Company.
(a) A duly executed Special Statutory Warranty Deed conveying to
Buyer fee title to the Property, subject to no encumbrances or
defects, except as shown on the Title Commitment to be approved
by Buyer.
(b) A Standard Owner's Title Insurance Policy, issued by the
Title Company, insuring that fee title to the Property is vested
in Buyer, subject to no defects or encumbrances, except as shown
on the approved Title Commitment to be approved by Buyer. Said
Policy of Title Insurance shall be for the sum of THREE MILLION
ONE HUNDRED TWO THOUSAND FIVE HUNDRED AND 27/100 ($3,l02,501.27)
DOLLARS.
Page 7. - Property Purchase Agreement
(c) A duly executed Bill of Sale (the form of which is to be
approved by Buyer), executed by Seller, with an inventory
attached, conveying to Buyer that portion of the property which
is or may be considered to be personal property.
(d) A duly executed assignment of leases (the form of which is
to be approved by Buyer), executed by Seller.
(e) A letter to the tenants of the Property stating that the
Property and the tenants' security deposits, if any, have been
conveyed to Buyer in accordance with Oregon law and that rent
thereafter should be paid to Buyer.
(f) Complete lease files for all tenants of the Property.
(g) A duly executed assignment of Seller's Option to Purchase
Agreement shown as exception 25 to the Title Commitment (the form
of which is to be approved by Buyer), executed by Seller.
(h) A duly executed assignment of warranties, service contracts
and intangibles (the form of which is to be approved by Buyer),
executed by Seller.
7. Items to be Delivered by Buyer at Closing. At Closing,
Buyer agrees to deliver to Seller or to the Title Company:
(a) The cash portion of the purchase price, which sum shall be
adjusted to reflect credits, Closing costs and prorations of all
items as set forth herein.
(b) The Promissory Note described herein.
(c) A Second Trust Deed securing the Promissory Note (unless
disallowed by the holder of the first loan secured by the
Property).
(d) Uniform Commercial Code financing statements.
(e) Collateral Assignment of Leases.
8. Time and Place of Closing:
(a) Closing shall take place on or before July 31, 1995.
(b) Closing shall occur at the offices of the Title Company or
such other place as Buyer and Seller may agree. Each party
agrees to execute and deliver to the Title Company closing escrow
instructions to implement and coordinate the Closing as set forth
in this Agreement.
Page 8. Property Purchase Agreement
9. Closing Costs:
(a) The following items shall be prorated as of the Date of
Closing:
(i) collected rent and rent not more than thirty (30) days
delinquent;
(ii) advance deposits and prepaid rent shall be credited to
Buyer;
(iii) real property taxes;
(iv) utility, water and sewer charges where said utilities
have not been cancelled by Seller;
(v) payments under service contracts, if any;
(vi) operating expenses, and
(vii) non-delinquent interest on the first loan secured by
the Property.
At Closing, the net adjustment, in favor of Seller, shall be paid
in cash or by certified check or, if in favor of Buyer, shall be
paid by set-off against the cash portion of the purchase price.
At Closing, Seller shall transfer to Buyer the sum equal to the
aggregate of tenants' refundable deposits.
(b) To the extent the amount of any prorated item is not known
on the Date of Closing, an initial proration shall be based upon
a reasonable estimate thereof and such initial proration shall be
subsequently adjusted as soon as practical after the actual
amount shall become known to either party.
(c) Seller shall pay one-half (1/2) of Title Company's closing
escrow fees, the entire title insurance premium for the Title
Insurance Policy required hereunder, and one-half (1/2) of the
Washington County Transfer Tax. Buyer's closing costs shall be
one-half (1/2) of the Title Company's closing escrow fee, the
entire recording fee for the Deed, and one-half (1/2) of the
Washington County Transfer Tax. Each party shall bear its own
attorney's fees.
10. Casualty Loss:
(a) If prior to Closing the Property is damaged as a result of
fire or other casualty, Buyer shall have the option to:
(i) accept title to the Property without any abatement of
the purchase price whatsoever, in which event, at Closing, all of
the insurance proceeds shall be assigned by Seller
Page 9. Property Purchase Agreement
to Buyer and any monies theretofore received by Seller in
connection with such fire or other casualty shall be paid over to
Buyer or
(ii) cancel this Agreement if the Property is materially
damaged, and thereupon neither party shall have any further
liability to the other.
(b) Seller shall not settle any fire or casualty loss claims or
agree to any award or payment in condemnation or eminent domain
(unless any proceeds are used for repairs to the Property)
without obtaining Buyer's prior consent in each case, which
consent shall not be unreasonably withheld or delayed.
11. Time. Time is of the essence of this Agreement.
12. Commissions and Disclosure. Each party represents and
warrants that such party has not been represented or contacted by
a real estate broker in connection with this transaction. Seller
agrees to indemnify and hold Buyer harmless from any and all
claims for a real estate commission in connection with this
transaction arising out of a claim that Seller has retained a
real estate broker. Buyer agrees to indemnify and hold Seller
harmless from any and all claims for a real estate commission in
connection with this transaction arising out of a claim that
Buyer has retained a real estate broker.
13. Notices. All notices, demands, consents, approvals and
other communications which are required or desired to be given by
either party to the other hereunder shall be in writing and shall
be hand delivered or sent by United States registered or
certified mail, postage prepaid, return receipt requested,
addressed to the appropriate party at its address set forth
below, or such other address as such party shall have last
designated by notice to the other. Notices, demands, consents,
approvals and other communications shall be deemed given when
delivered or two days after mailing.
To Seller: National Capital Management Corporation
Attention: Herbert J. Jaffee
33rd Floor
50 California Street
San Francisco, CA 94111
With a copy to: David P. Weiner, Esq.
Samuels, Yoelin, Weiner,
Kantor & Seymour
200 Willamette Wharf
4640 SW Macadam Avenue
Portland, Oregon 97201
Page 10. Property Purchase Agreement
To Buyer: William R. Dixon, Jr.
33rd Floor
50 California Street
San Francisco, CA 94111
With a copy to: Samuel L. Farb, Esq.
Berliner Cohn
Ten Almaden Boulevard, 11th Floor
San Jose, CA 95113
14. General Provisions:
(a) This Agreement constitutes the entire Agreement between the
parties and cannot be changed or modified, other than by a
written Agreement executed by both parties.
(b) The provisions of this Agreement shall extend to, bind and
inure to the benefit of the parties hereto and their respective
personal representatives, heirs, successors and assigns.
(c) The provisions of this Agreement shall survive Closing.
(d) This Agreement shall be governed and construed in accordance
with the laws of the State of Oregon.
(e) This Agreement is the entire, final and complete agreement
of the parties pertaining to the sale and purchase of the
Property, and supersedes and replaces all written and oral
agreements heretofore made or existing by and between the parties
or their representatives insofar as the Property is concerned.
None of the parties shall be bound by any promises,
representations or agreements except as are herein expressly set
forth.
(f) This Agreement may be executed in one or more identical
counterparts. If so executed, each of the counterparts is to be
deemed an original for all purposes and all such counterparts
shall collectively constitute one Agreement, but, in making proof
of this Agreement, it shall not be necessary to produce or
account for more than one of such counterparts. The parties
hereto acknowledge that a facsimile signature shall be deemed an
original when followed by an exchange of originally signed
documents.
(g) In the event Buyer becomes the debtor in any bankruptcy
proceeding, voluntarily, involuntarily or otherwise, either
during the period this Agreement is in effect or while there
exists any outstanding obligation of Buyer created by this
Agreement in favor of Seller, Buyer agrees to pay Seller's
reasonable attorney fees and costs which Seller may incur as the
result of Seller's participation in such bankruptcy proceedings.
It is understood and agreed by both parties that applicable
federal
Page 11. Property Purchase Agreement
bankruptcy law or rules of procedure may affect, alter, reduce or
nullify the attorney fee and cost awards mentioned in the
preceding sentence.
(h) In case litigation is instituted arising directly or
indirectly out of this Agreement, the losing party shall pay to
the prevailing party its reasonable attorney's fees, together
with all expenses, which may reasonably incur in taking such
action, including, but not limited to, costs incurred in
searching records and the costs of title reports and expert
witness fees. If an appeal is taken from any Judgment or Decree
of the trial court, the losing party shall pay the prevailing
party in the appeal its reasonable attorney's fees in such
appeal. Said sums shall be in addition to all other sums
provided by law.
(i) Failure by either party at any time to require performance
by the other party of any of the provisions hereof shall in no
way affect the party's rights hereunder to enforce the same nor
shall any waiver by the party of any breach hereof be held to be
a waiver of any succeeding breach or a waiver of this non-waiver
clause.
(j) In construing this Agreement, it is understood that Seller
or Buyer may be more than one person, that, if the context so
requires, the singular pronoun shall be taken to mean and include
the plural, the masculine, the feminine and the neuter and that
generally all grammatical changes shall be made, assumed and
implied to make the provisions hereof apply equally to one or
more individuals and/or corporations and partnerships. All
captions and paragraph headings used herein or intended solely
for the convenience of reference shall in no way limit any of
the provisions of this Agreement.
15. Required Notices:
(a) THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED
IN THIS INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND
REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE
PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE
APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY USES AND
TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST
PRACTICES AS DEFINED IN ORS 30.930.
(b) THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN
A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY
IS SUBJECT TO LAND USE LAWS AND REGULATIONS, WHICH, IN FARM OR
FOREST ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING OF A
RESIDENCE AND WHICH LIMIT LAWSUITS AGAINST FARMING OR FOREST
PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES. BEFORE SIGNING
OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO
THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY
PLANNING
Page 12. Property Purchase Agreement
DEPARTMENT TO VERIFY APPROVED USES AND EXISTENCE OF FIRE
PROTECTION FOR STRUCTURES.
16. Disclaimer. This Agreement has been prepared by the law
firm of Samuels, Yoelin, Weiner, Kantor & Seymour ("SYWK&S") in
its capacity as counsel to Seller. Buyer is hereby advised that
SYWK&S has not performed any legal services for and on behalf of
Buyer in connection with this Agreement. Prior to executing this
Agreement, Buyer should seek independent legal advice in
connection with the matters set forth herein.
IN WITNESS WHEREOF, the parties have caused this Property
Purchase Agreement to be duly executed and delivered the day and
year first above written.
NATIONAL CAPITAL MANAGEMENT
CORPORATION, a Delaware
corporation
By /s/ Herbert J. Jaffe /s/ William R. Dixon, Jr.
Title: President William R. Dixon, Jr.
SELLER BUYER
Page 13. Property Purchase Agreement
EXHIBIT "A"
LEGAL DESCRIPTION
PARCEL I:
A tract of land in Tract 11 and Tract 12, FAIRVIEW ADDITION TO
HILLSBORO, AMENDED, in the City of Hillsboro, County of
Washington and State of Oregon, said tract being more
particularly described as follows:
Beginning at the Southeast corner of that certain tract of land
described in Deed to Payless Drug Stores of the Northwest, Inc.,
recorded in Book 1044, Page 21, Washington County, Oregon Deed
Records, a point on the Northerly right of way line of Tualatin
valley Highway and running thence along the Easterly line of said
Payless Drug Stores Tract, North 00039 East 230.67 feet to the
Northeasterly corner thereof; thence along the Northerly line of
said Payless Drug Stores Tract, North 59028 West 261.40 feet;
thence North 00o2l'40" West 326.08 feet to a point on the
Southerly line of Lot 9, HUGHES PARK, a plat of record in said
county; thence along the Southerly line of said Lot 9, and the
Easterly extension thereof, South 89o02'20" East 641.51 feet to
the Northeast corner of that certain tract of land conveyed to
Fred Bender, by Deed recorded in Book 1070, Page 818, said Deed
Records, a point on the Easterly line of Tract 11, said FAIRVIEW
ADDITION TO HILLSBORO, a point in the center of SE 21st Avenue
(County Road No. 287); thence along said Easterly line of Tract
11, and the Southerly extension thereof, in the center of said
avenue South 00"39' West 918.59 feet to the Southeasterly corner
of that certain tract of land conveyed to Charles A. Spicer, et
ux, by Deed recorded in Book 286. Page 131, said Deed Records, a
point on the Norther1y right of way line of said Tualatin Valley
Highway; thence along said Northerly right of way line, North
59o28' West 471.96 feet to the point of beginning.
EXCEPTING THEREFRCM that portion conveyed to the State of Oregon,
by and through its Department of Transportation, by Deed recorded
April 15, 1981 as Recorder's Fee No. 81012861.
EXCEPTING the following described parcel:
A portion of Tract 12, FAIRVIEW ADDITION TO HILLSBORO, AMENDED,
in the City of Hillsboro, County of Washington and State of
Oregon, said tract being more particularly described as follows.
Beginning at the Southeast corner of that certain tract of land
conveyed to Charles A. Spicer, et ux, by Deed recorded in Book
286, Page 131, Deed Records of Washington County, said point
being in the center of SE 21st Avenue (County Road No. 287) and
on the Northerly right of way line of the Tualatin Valley
Highway; thence North along the center line of said SE 21st
Avenue 195.8 feet, more or less, to the Northeast corner of said
Spicer Tract; thence West 174.5 feet to a point; thence South to
the Northerly right of way line of Tualatin valley Highway;
thence Southeasterly along the Northerly right of way line of the
Tualatin valley Highway to the point of beginning.
(Continued)
LEGAL DESCRIPTION
PARCEL II:
A leasehold in and to the following described land:
A portion of Tract 12, FAIRVIEW ADDITION TO HILLSBORO, AMENDED,
in the City of Hillsboro, County of Washington and State of
Oregon, said tract being more particularly described as follows:
Beginning at the Southeast corner of that certain tract of land
conveyed to Charles A. Spicer, et ux, by deed recorded in Book
286, Page 131, Deed Records of Washington County. said point
being in the center of SE 21st Avenue (County Road No. 287) and
on the Northerly right of way line of the Tualatin valley
Highway; thence North along the center line of said SE 21st
Avenue 195.8 feet, more or less, to the Northeast corner of said
Spicer tract; thence West 174.5 feet to a point; thence South to
the Northerly right of way line of the Tualatin valley Highway;
thence Southeasterly along the Northerly right of way line of the
Tualatin valley Highway to the point of beginning.
TOGETHER WITH that portion of SE 21st Avenue insures thereto by
reason of vacation Ordinance recorded November 21, 1989 as Fee
No. 89-56920.
As created by that certain lease dated March 4, 1976 and recorded
March 4, 1976 in Book 1071, Page 835, Washington County Deed
Records, between Charles A. Spicer and Faye A. Spicer, Lessor and
Fred H. Bender, Lessee, for the term and upon and subject to all
the provisions therein contained.
EXHIBIT "B" OREGON
DEPARTMENT OF
May 17,1995 TRANSPORTATION
CERTIFIED MAIL FILE CODE:
National Capital Management Corp. File 57514
50 California St. SE 21st-SE Main St.
(Hillsboro) Section
San Francisco, CA 94111 Tualatin Valley Highway
Washington County
Beverly Hills Savings and Loan
24422 Avenida De La Carlota
Laguna Hills, CA 92653
The Department of Transportation has planned a project to improve
the above captioned section of highway.
For this needed public improvement the Oregon Transportation
Commission has found that the following described acquisition is
necessary in order to accomplish the planned project. The
acquisition is:
Title in fee simple to the property described as Parcel I in
the Exhibit A attached hereto.
A permanent easement across the property described as Parcel
2 in the Exhibit A attached hereto, for the purpose of
constructing, reconstructing, operating and maintaining
slopes, telephone, power line, gas, drainage Curb,
landscaping and T.V. cable facilities. Since fee simple
title is not being acquired, any use may be made of the real
property provided that such use shall not interfere with the
purpose of this easement or endanger the lateral support of
the highway.
A permanent easement across the property described as Parcel
3 in the Exhibit A attached hereto, for the purpose of a
sign. Since fee simple title is not being acquired, any use
may be made of the real property provided that such use
shall not interfere with the purpose of this easement or
endanger the lateral support of the highway.
Transportation Building
Salem OR 97310
Page 2 File 57514
A temporary easement across the property described as Parcel
4 in the Exhibit A attached hereto, for the purpose of
constructing a road approach. Since fee simple title is not
being acquired, any use may be made of the real property
provided that such use shall not interfere with the purpose
of this easement. This easement automatically terminates on
completion of the project.
The Oregon Transportation Commission makes this offer to you for
delivery of a warranty deed to the State of Oregon, by and
through its Department of Transportation, conveying the
acquisition described herein. The conveyance must be free and
clear of all taxes, liens and encumbrances (except those the
State is willing to take subject to), including the proportionate
part of the real property taxes for the fiscal year during which
the State takes possession of, or receives title to, the
acquisition. For this conveyance I have been authorized by the
Oregon Transportation Commission to offer to you, and do hereby
offer to you, the sum of $12,200.00.
The State will, however, accept the warranty deed subject to the
interest of others than yourselves in the following encumbrances:
Easement for sanitary sewer line in favor of the City of
Hillsboro recorded August 29,1958, in Book 408, Page 513, Records
of Washington County, Oregon.
Easement for sanitary sewer line in favor of the City of
Hillsboro recorded September 2, 1958, in Book 405, Page 517,
Records of Washington County, Oregon.
Easement for sanitary sewer line in favor of the City of
Hillsboro recorded August 17, 1961, in Book 448, Page 151,
Records of Washington County, Oregon.
Easement for waterline in favor of the City of Hillsboro
recorded September 24, 1979, as Recorder's Fee No. 79038922,
Records of Washington County, Oregon.
Easement for waterline in favor of the City of Hillsboro
recorded September 24, 1979 as Recorder's Fee No. 79038923,
Records of Washington County, Oregon.
Easement for water lines in favor of the Utilities
Commission of the City of Hillsboro recorded July 17, 1986,
as Recorder's Fee No. 86031331, Records of Washington
County, Oregon.
Page 3 File 57514
Cross Easements and Restrictive Covenants by and between
Waremart, Inc., an Idaho corporation and National Capital
Management Corporation, a Delaware corporation, dated July
17,1990, recorded October 30, 1990 as Recorder's Fee
No.90059951, Records of Washington County, Oregon.
Various leasehold interests.
Negotiations to reach an agreement to purchase the above
described acquisition have been unsuccessful to this point. As a
result it may become necessary to institute condemnation
proceedings which will involve all addressed parties having an
interest in the acquisition. First, however, you must decide if
the Commission's offer is acceptable. I ask that you immediately
consider this offer. Marty Petersen, Department of Justice/ODOT
Liaison Agent, will be contacting the property owners
specifically for that decision. If acceptable, she is available
to complete the details for the acquisition. My other parties of
interest who have questions regarding this acquisition may
contact her at 503-986-3631. I sincerely hope that condemnation
proceedings can be avoided by reaching such an agreement with you
/s/ Deolinda G. Jones
DEOLINDA G. JONES
Acting Right of Way Manager
cc: Alan M. Spinrad, Attorney
Marty Petersen
tw
EXHIBIT A
File R575l4
National Capital
Management Corp.
MSS 10-O4-94 9B-31-4
Parcels 1, 2, 3 and 4
Survey Approval Project
Section: S.E. 21st Ave.-S.E. Main St. (Hillsboro)
Highway: Tualatin Valley
Non-throughway
PARCEL 1 - Fee
A parcel of land lying in the SW1/4 of Section 5, Township 1
South, Range 2 West, W.M., Washington County, Oregon and being a
portion of that property described in that deed to University
Real Estate Trust, recorded as Microfilm Document No. 78-057099
of Washington County Book of Records; the said parcel being that
portion of said property included in a strip of land variable in
width, lying on the Northeasterly side of the center line of the
Tualatin Valley Highway as said highway has been relocated, which
center line is described as follows:
Beginning at Engineer's center line Station 377+46.20, said
station being 553.58 feet North and 28S9.45 feet West of the
Southeast corner of Section 5, Township 1 South, Range 2 West,
W.M.; thence North 57o 45' 35" West 2855.3l feet to Engineer's
center line Station 406+01.51.
The widths in feet of the strip of land above referred to are as
follows:
Station to Station Width on Northeasterly
Side of Center Line
380+30 380+70 59 in a straight line to 50
380+70 385+30 50
EXCEPT therefrom that property described in that deed to the
State of Oregon, by and through its State Highway Commission,
recorded October 9, 1961 in Book 451, Page 2, Deed Records of
Washington County Book of Records.
ALSO EXCEPT therefrom that property described in that deed to the
State of Oregon, by and through its Department of Transportation,
Highway Division, recorded as Microfilm Document No. 81-012861 of
Washington County Book of Records.
(CONTINUED ON PAGE 2)
EXHIBIT A CONTINUED - Page 2 File RS7514
Bearings are based upon the Oregon Co-ordinate System, North
Zone.
The parcel of land to which this description applies contains
1,135 square feet, more or less.
PARCEL 2 - Permanent Easement for Slopes, Telephone, Power
Line, Gas, Drainage Curb, Landscaping and T.V. Cable Facilities
A parcel of land lying in the SW1/4 of Section 5, Township 1
South, Range 2 West, W.M., Washington County, Oregon and being a
portion of that property described in that deed to University
Real Estate Trust, recorded as Microfilm Document No. 78-057O99
of Washington County Book of Records; the said parcel being that
portion of said property included in a strip of land variable in
width, lying on the Northeasterly side of the center line of the
Tualatin Valley Highway as said highway has been relocated, which
center line is described in Parcel 1.
The widths in feet of the strip of land above referred to are as
follows:
Station to Station Width on Northeasterly
Side of Center Line
380+30 380+75 64 in a straight line to 54
380+75 381+80 54
381+80 383+18 65
383+l8 384+00 54
EXCEPT therefrom Parcel 1.
The parcel of land to which this description applies contains
2,650 square feet, more or less.
PARCEL 3 - Permanent Easement for Sign
A parcel of land lying in the SW1/4 of Section 5, Township 1
South, Range 2 West, W.M., Washington County, Oregon and being a
portion of that property described in that deed to University
Real Estate Trust, recorded as Microfilm Document No. 78-057099,
Washington County Book of Records; the said parcel being that
portion of said property lying between lines at right angles to
the center line of the relocated Tualatin Valley Highway at
Engineer's Stations 381+70 and 381+80 and included in a strip of
land 60 feet in width, lying on the Northeasterly side of said
center line which center line is described in Parcel 1.
(CONTINUED ON PAGE 3)
EXHIBIT A CONTINUED - Page 3 File R57514
EXCEPT therefrom Parcel 1.
The parcel of land to which this description applies contains 100
square feet, more or less.
PARCEL 4 - Construction Permit for Road Approach
A parcel of land lying in the SW1/4 of Section 5, Township I
South, Range 2 West, W.M., Washington County, Oregon and being a
portion of that property described in that deed to University
Real Estate Trust, recorded as Microfilm Document No. 78-057099,
Washington County Book of Records; the said parcel being that
portion of said property lying between lines at right angles to
the center line of the relocated Tualatin Valley Highway at
Engineer's Stations 380+75 and 381+55 and included in a strip of
land 65 feet in width, lying on the Northeasterly side of said
center line which center line is described in Parcel 1.
EXCEPT therefrom Parcel 1.
The parcel of land to which this description applies contains
1,180 square feet, more or less.
tw
5-17-95
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
OPTION AGREEMENT
IN CONSIDERATION of TEN DOLLARS ($10.00) (hereinafter
referred to as the
"Option Consideration"), in hand paid to GEORGIA
PROPERTIES, INC., a
Delaware corporation (hereinafter referred to as "Seller"),
the receipt of
which is hereby acknowledged, Seller hereby grants, conveys
and extends to
WILLIAM R. DIXON, JR., an individual resident of
California (hereinafter
referred to as "Purchaser"), the exclusive right and
option to purchase,
upon the terms and conditions set forth herein, .the
"Property" more
particularly described below.
1. Option Period.
1.1 Expiration Date. This Option shall expire and be
of no further
force and effect, unless sooner exercised, at
twelve o'clock
midnight, Eastern Time, on April 30, 1996
(hereinafter referred
to as the "Expiration Date").
1.2 Notice of Exercise. Purchaser may exercise this
Option by giving
Seller written notice of its election to exercise
this Option,
which notice shall be given on or before the
Expiration Date. The
date of such written notice is hereinafter
referred to as the
"Exercise Date."
2. Contract. Upon exercise, this Option shall be
deemed a contract
between the parties hereto and the Option Consideration
shall thereupon
become the "Earnest Money" hereunder.
3. Conveyance. Seller agrees to sell and convey and
Purchaser agrees to
purchase and take title to that certain parcel of real
estate lying and
being in Land Lot 186 of the 14th District, Fulton County,
Georgia, and
being more particularly described on Exhibit "A" attached
hereto and by
this reference made a part hereof, including all
improvements, fixtures,
rights, privileges, personal property, leases,
rental agreements,
easements, hereditaments and appurtenances thereto,
together with all
right, title and interest of Seller in and to the land lying
in the bed of
any street, road, avenue or alley, open or proposed, public
or private, in
front of or adjoining said property to the center line
thereof (hereinafter
collectively referred to as the "Property").
4. Purchase Price and Payment. The purchase price
(hereinafter referred
to as the "Purchase Price") of the Property shall
be the sum of
$3,500,000.00, which Purchase Price shall be paid as
follows:
4.1 Earnest Money. The Option Consideration has
been paid by
Purchaser's check to Seller upon the
execution hereof by
Purchaser. The Option Consideration became the
Earnest Money
upon exercise of this Option by Purchaser. Such
Earnest Money
shall be applied to the Purchase Price due at
Closing.
4.2 Existing Note. Payment of a portion of the
Purchase Price shall
be made by Purchaser's assumption of the
obligations of Seller
pursuant to the instruments listed at Items 4, 5
and 6 of Exhibit
"B" (hereinafter collectively referred to as
the "Existing
Security Deed") and the assumption of the
indebtedness evidenced
by the note which said instruments
were given to
secure(hereinafter referred to as the "Existing
Note"). Seller
shall continue to make all payments due under the
Existing Note
up to the time of closing. Seller will request
from the holder
thereof and, if received, will present at
Closing an estoppel
letter from the holder of the Existing Note and
the Existing
Security Deed, dated
not more than five (5) days prior to the Closing
Date, verifying
the principal amount then outstanding, setting
forth the accrued
and unpaid interest and any requirements of
such holder for
transferring the loan evidenced thereby, stating
that no default
or situation which would, given the passage of
time, become a
default, exists thereunder, that consummation of
the transaction
contemplated hereby will not constitute a
default thereunder,
that any "open-end" or "dragnet" clause
contained therein is
waived, and that the Existing Note may be prepaid
at any time, in
whole or in part, without premium, penalty, or
the payment of
unearned interest. Interest on the Existing
Note shall be
prorated and accounted for at Closing. Purchaser
shall pay any
transfer charges (up to a maximum of one percent
(1%) of the
unpaid principal balance of the Existing Note)
required by the
holder of the Existing Note. Seller shall
request from said
holder a release of the obligations of Seller
under the Existing
Note and Existing Security Deed, but obtaining
said release shall
not be a condition precedent to Seller's
obligation to close
hereunder.
4.3 Indebtedness of Seller to Purchaser. Seller
is indebted to
Purchaser pursuant to the terms of a certain Note
by Seller to
Purchaser, dated as of the date hereof, in the
original principal
amount of $1,150,000.00 (hereinafter referred to
as the "GPI
Note") payment of which is secured by a certain
Second Priority
Deed to Secure Debt and Security Agreement,
dated of even date
herewith, by Seller in favor of Purchaser which
encumbers the
Property (hereinafter referred to as the "GPI
Security Deed").
The unpaid principal balance of the GPI Note,
together with all
accrued but unpaid interest thereon (hereinafter
referred to as
the "GPI Debt"), shall be applied as a
credit against the
Purchase Price due at Closing. At Closing,
Purchaser shall
deliver to Seller the GPI Note, marked "PAID IN
FULL," the GPI
Security Deed, marked "FOR SATISFACTION OF RECORD"
and all other
documents or instruments evidencing or securing
the GPI Debt
shall be terminated and cancelled.
4.4 Purchase Money Note and Security Deed. The
remainder of the
Purchase Price shall be paid by Purchaser
executing and
delivering to Seller a purchase money
promissory note
(hereinafter referred to as the "Purchase Money
Note") in the
amount of such remainder, which Purchase Money
Note shall be
secured by a purchase money second priority deed
to secure debt
conveying Property (hereinafter referred to as
the "Purchase
Money Security Deed"). The indebtedness of the
Purchase Money
Note shall be payable as follows:
"From and after the date thereof (until default
or maturity as
therein provided), interest on the outstanding
principal balance
shall accrue at the rate of eight percent
(8%) per annum.
Interest at said rate shall be due and
payable, in arrears,
monthly, commencing on the first day of each and
every calendar
month during the term hereof. The entire
outstanding principal
balance, together with all accrued but unpaid
interest and all
other sums due thereunder, shall be due and
payable in full on
December 31, 1996."
4.4.1 Prepayment. Purchaser or. assigns
shall have the
privilege of prepaying said Purchase Money
Note in whole or
in part, without any penalty or premium,
whatsoever, or the
payment of unearned interest, at any time. In
addition,
2
the Purchase Money Note shall require a
prepayment of
principal in the amount of $250,000.00 on the
LATER TO OCCUR
of: (a) May 1, 1996; or (b) the date of the
conveyance by
Deed of the Property by Seller to Purchaser
hereunder.
4.4.2 Application of Payments. Installment
payments, when
made, shall be applied first toward the
payment of interest
and then to the payment of principal.
Prepayments of
principal shall be accompanied by interest at
said rate on
the amount of principal so prepaid, computed
from the last
regular installment payment date, or the
date of the
Purchase Money Note, whichever is the most
recent.
4.4.3 Form of Documents. The Purchase Money
Note and Purchase
Money Security Deed shall be in the form
reasonably required
by Seller's counsel and reasonably approved
by Purchaser.
Specifically, Purchaser shall not have
any personal
liability for payment of the indebtedness
evidenced by the
Purchase Money Note or performance of
obligations under the
Purchase Money Security Deed. In addition,
Purchaser agrees
to execute such affidavits and other
documents reasonably
required by Seller's counsel in order to
obtain a Loan
Policy of Title Insurance in favor of Seller.
4.4.4 Notice and Opportunity to Cure.
4.4.4.1 The Purchase Money Note shall
contain the
following provision:
"Notwithstanding any provisions
herein contained
to the contrary, in the event a
default should
occur under this instrument or the
Deed to Secure
Debt securing this instrument, the
Holder shall
provide the Maker with written
notice of such
default and allow the Maker fifteen
(15) days from
receipt of such notice to cure
same before the
Holder may accelerate the
indebtedness evidenced
hereby or take any action under the
power of sale
contained in such Deed to Secure
Debt."
4.4.4.2 The Purchase Money Security Deed
shall contain the
following provision:
"Notwithstanding any provisions
herein contained
to the contrary, in the event a
default should
occur under this instrument or
the Note secured
hereby, Grantee shall provide
Grantor with written
notice of such default and allow
Grantor fifteen
(15) days from receipt of such
notice to cure same
before the Grantee may accelerate
the indebtedness
hereby secured or take any action
under the power
of sale contained herein."
The Purchase Money Security Deed
shall contain the
following provisions:
3
"This Deed and the lien hereof
is subject and
subordinate to that certain Deed
to Secure Debt
and Security Agreement from
Trustees of University
Real Estate Trust to Life
Insurance Company of
Georgia dated September 14, 1977,
recorded at Deed
Book 6791, Page 138, Fulton
County, Georgia
Records, in the original
principal amount of
$1,610,000.00, as modified from
time to time (the
"Prior Security Deed"). In the
event of any
default in performance of any of
the obligations
and covenants of the Prior
Security Deed, or any
other prior security deed, Grantee
may make any
payment or perform any act
necessary to relieve
any such default and the cost
thereof shall be
added to the indebtedness secured
hereby. Any such
default in any prior security
deed may, at the
option of Grantee, be deemed an
event of default
under this instrument giving
Grantee the right to
accelerate the maturity of the
indebtedness
secured hereby and to foreclose
pursuant to the
terms hereof. Grantor hereby
assigns unto
Grantee all surplus funds which may
come into the
hands of the holder of any prior
security deed
upon foreclosure of the same,
hereby directing
that such excess proceeds be
forthwith paid over
to Grantee upon the debt hereby
secured upon
demand. If the principal amount
of any prior
security deed is increased over the
amount of the
then unpaid principal thereof, then
a sum equal to
the amount of said increase
shall immediately
become due and payable in
reduction of the
indebtedness secured by this
instrument."
"Should Grantor sell, lease,
convey, assigns,
pledge, encumber or transfer all
or any part of
the Premises, or any interest
therein, voluntarily
or involuntarily, whether by
operation of law or
otherwise, except for sales or
transfers of
equipment and the granting of
leasehold interests
to tenants for occupancy in the
ordinary course of
business, said occurrence shall
constitute an
`Event of Default' under this
Deed."
5. Closing; Deed. This transaction shall be closed by
delivery by Seller
to Purchaser of a properly executed limited warranty
deed (hereinafter
referred to as the "Deed") conveying the Property,
against receipt by
Seller of the Purchase Price and upon performance of
all the other
obligations respectively incurred hereunder to be delivered
to the offices
of Scoggins, Ivy & Goodman, P.C., 245 Peachtree Center
Avenue, N.E., 2800
Marquis One Tower, Atlanta, Georgia 30303, at a specific
time and date
selected by Purchaser (hereinafter referred to as the
"Closing Date")
giving notice thereof to Seller at least five (5) days
prior to the
selected time, but in no event later than thirty (30) days
after the "Date
of This Agreement" (as hereinafter defined), subject to
adjournment to
permit Seller to remove title objections under Paragraph 7
hereof.
4
6. Warranties and Representations of Seller. In
consideration of
Purchaser entering into this Agreement, and as an
inducement to Purchaser
to purchase the Property, Seller makes the following
representations and
warranties in this paragraph 6, each of which is important
and is being
relied upon by Purchaser:
6.1 Title. At Closing Seller shall convey "good and
marketable, fee
simple title" to the Property to Purchaser,
subject only to the
following exceptions (hereinafter referred to as
the "Permitted
Exceptions"):
(a) Liens for ad valorem taxes not yet due and
payable; and
(b) Those exceptions shown on Exhibit "B" attached
hereto and by
this reference made a part hereof.
"Good and marketable, fee simple title" shall be
such fee. title
as is insurable by First American Title
Insurance Company
(hereinafter referred to as the "Title
Company"), at standard
rates on American Land Title Association Owner's
Policy Form B-
1992 (hereinafter referred to as the "Title
Policy") free and
clear of all exceptions except the Permitted
Exceptions.
6.2 Authorization. Seller is a Delaware corporation,
duly organized,
validly existing, and licensed to do business in
the State of
Georgia as a foreign corporation. Seller has the
right, power and
authority to make and perform its
obligations under this
Agreement and the execution, delivery and
performance of this
Agreement does not violate the Articles of
Incorporation or
Bylaws of Seller or any contract, agreement or
commitment to
which Seller is a party or by which Seller
is bound. The
execution and delivery of this Agreement and the
performance by
Seller of its obligations hereunder have been duly
authorized by
all necessary action on the part of Seller;
6.3 Ownership. Seller is the sole owner of, and has
the full power.
and authority to sell and convey, the Property;
6.4 Leases. Seller has not received notice of nor is
Seller aware of
(a) any pending or threatened claims by any
tenant(s) or
occupant(s) of the Property against Seller or by
way of offset
against Rental due from such tenant(s) or
occupant(s), and (b)
the breach or non-performance of any agreement or
covenant with
respect to any tenant(s) or occupant(s), except
as is otherwise
noted in the documentation to be delivered by
Seller to Purchaser
respecting the leases. The leases described in
the rent roll
delivered to Purchaser are in full force and
effect, and no rent
has been prepaid for the
benefit of tenants, nor security deposits paid,
other than as
disclosed to Purchaser in the rent roll and,
except as set forth
on Exhibit "B" attached hereto, the leases have
not previously
been assigned, conveyed, pledged, hypothecated
or otherwise
alienated by Seller. The rental rates set forth
on the rent roll
accurately state the rentals that are being
charged by Seller and
paid by tenants of the Property;
6.5 Limitation on Entering New Leases. Seller shall
not enter into
any rental agreements, leases or occupancy
agreements with any
third party with respect to any portion of the
Property unless
the same are at a market rental rate, on market
terms and for a
term not greater than one (1) year.
5
6.6 Litigation. Seller has not initiated, has not
received written
notice of, and is not aware of any actions, suits,
proceedings or
governmental investigations, pending or
threatened, before any
agency, court or other governmental authority
which relates to
the Property or the use thereof;
6.7 Violation of Laws. Seller has received no notice
of any violation
of applicable law, ordinance, rule,
regulation, code or
requirement of any governmental agency, body
or subdivision
affecting or relating to the Property,
including, without
limitation, any subdivision, zoning,
building, use or
environmental law, ordinance, rule, requirement or
regulation.
6.8 Condemnation. Except as set forth on Exhibit "B,"
Seller has not
received notice of nor is Seller aware of
any pending or
threatened proceedings, in eminent domain or
otherwise, which
would affect the Property or any portion thereof;
6.9 Existing Debt. All documents delivered to
Purchaser by Seller
pursuant to this Agreement are and will be
true and correct
copies of originals, to the extent not the
originals thereof.
Attached hereto as Exhibits "C" and "D,"
respectively, are true
and complete copies of the Existing Security
Deed and Existing
Note. As of the date of this Agreement, the
unpaid principal
balance under the Existing Note is $1,063,368.21.
Seller agrees
not to modify or amend the Existing Security
Deed or Existing
Note without Purchaser's approval (which may
be withheld in
Purchaser's sole discretion).
6.10 Assessments. Except as disclosed in writing
by Seller to
Purchaser prior to the Closing, Seller has not
received any
notice of any intended public improvements which
will result in
any charge being levied or assessed against the
Property or any
delinquent taxes, assessments (special, general or
otherwise), or
bonds of any nature affecting the Property
or any portion
thereof;
6.11 Liens and Other Claims. Seller has not received
notice of any
liens or encumbrances on, or claims to,
covenants, conditions,
restrictions, easements, rights- of-way or
possession or use
rights affecting the Property (or any part
thereof) other than as
identified on Exhibit "B," the rent roll or
otherwise disclosed
in this Agreement.
6.12 Mechanic's Liens. There are no sums due, owing
or unpaid for
labor or materials furnished to the Property
(or any part
thereof) or on behalf of Seller which might
give rise to a
mechanic's lien;
6.13 Encroachments. Except as disclosed in documents
furnished by
Seller to Purchaser or revealed by a current
survey delivered to
Purchaser, Seller is not aware of any
encroachments of
improvements from adjoining land onto the Property
(or any part
thereof) nor from the Property onto adjacent land;
6.14 Permits. Seller has obtained (a) building
permits for all
construction performed by Seller on the
Property and all
alterations and improvements constructed by
tenants that Seller
has approved pursuant to the leases to the
extent building
permits were required for such construction,
alterations and
improvements, (b) certificates of occupancy for
all portions of
the Property, and (c) to Seller's best knowledge,
all other
6
required permits and governmental authorizations
necessary for
the construction, occupancy and operation of
the Property;
6.15 Condition of Property. To the best of Seller's
knowledge, the
improvements and buildings situated on the
Property are
structurally sound and there are no structural,
latent or other
physical defects in the same, except that
Buildings T, U, V and W
are settling and contain cracks therein.
The preceding
notwithstanding, in the event this transaction
closes, Seller
shall pay to Purchaser, upon request made by
Purchaser to Seller
during the first three (3) years following the
Closing, the cost
to correct the settling or cracking of Buildings
T, U, V and/or W
in excess of $5,000.00.
6.16 Hazardous Substances. As of the date of this
Agreement and as of
the Closing, to the best of Seller's knowledge
the Property is
not in violation of any laws, rules, regulations,
ordinances or
statutes related to hazardous or toxic materials
and there are
not present any hazardous or toxic materials in,
on, under or
about the Property, including the soil and
groundwater, in
quantities that would violate applicable
hazardous materials
laws, rules, regulations, ordinances or statutes.
Seller further
represents and warrants that during the
period of Seller's
ownership of the Property, neither Seller nor any
third party has
used, generated, manufactured, stored or
disposed of in, on,
under or about the Property or transported to or
from the Real
Property any hazardous or toxic materials.
6.17 Indemnification. Except as expressly herein
otherwise provided,
the representations and warranties of Seller set
forth in this
Agreement shall be true on and as of the
Closing as if such
representations and warranties were made on and as
of such time.
Seller shall indemnify, defend and hold
Purchaser free and
harmless from and against any and all claims,
losses, damages,
liabilities, costs or expenses (including,
without limitation,
attorneys' fees) incurred by Purchaser as a
result of the
inaccuracy in or breach of any of the
representations or
warranties of Seller contained in this
Agreement. Seller's
obligations pursuant to this Section 6.17
shall survive the
Closing.
7. Title Objections. Purchaser shall have fifteen (15)
days after the
"Date of This Agreement" in which to search title to the
Property and in
which to furnish Seller with a written statement of any
title objections
affecting the marketability of said title other than
the Permitted
Exceptions. Seller shall have five (5) days after
receipt of such
objections (hereinafter referred to as the "Title Cure
Period") to cure all
valid title objections. Within five (5) days after the end
of the Title
Cure Period, Seller shall give Purchaser written notice as
to whether or
not all valid title objections have been cured. If Seller
fails to cure
such valid title objections within the Title Cure Period,
then, at the
option of Purchaser, evidenced by written notice to Seller
given within
five (5) days after the receipt of the written notice from
Seller required
by the previous sentence, Purchaser may: (a) elect
to rescind the
transaction contemplated hereby, in which event the Earnest
Money shall be
refunded to Purchaser and no party shall have any
further rights or
obligations hereunder; (b) elect to extend the Closing Date
for a period of
up to sixty (60) days to allow Seller further time to cure
such valid title
objections; (c) elect to close the transaction
contemplated hereby and
receive the instruments required herein from the Seller
irrespective of
such title objections and without reduction of the Purchase
Price. Seller
shall not be required and is not obligated hereby to bring
any
7
action or proceeding or otherwise to incur any expense to
render title to
the Property free of any liens, leases, encumbrances or
other objections,
but Seller agrees not to voluntarily further encumber the
Property. If
Purchaser elects to extend the Closing Date as permitted by
Subsection (b)
above, and on the extended Closing Date Seller has still
not cured such
valid title objections, Purchaser shall have the further
right to elect
Subsection (a) or (c). Purchaser shall have the right to re-
examine title
prior to Closing and notify Seller at Closing of any
title objections
(other than the Permitted Exceptions) which appear of
record after the
effective date of Purchaser's initial title examination and
before Closing.
The Closing Date will be adjourned as necessary to
comply with this
Paragraph. The acceptance of the Deed by Purchaser shall
be deemed to be
full performance of and discharge of every agreement and
obligation on the
part of Seller to be performed pursuant to the
provisions of this
Agreement, except those pursuant to any provision hereof
which are herein
specifically stated to survive the Closing.
8. Survey. Purchaser or its agents shall have the
privilege of going on
Property prior to Closing to make surveys, soil tests,
percolation tests,
hydrological studies, and other tests and inspections of
Property and the
parties performing such surveys or soil tests shall have the
right to cut
brush and limbs necessary to survey the lines of Property
and to make soil
borings. Any such survey shall be performed by a Georgia
Registered Land
Surveyor selected by Purchaser, at Purchaser's sole
expense, with the
survey so made indicating the number of acres comprising
the Property to
the nearest one-hundredth of an acre, exclusive of the
rights-of-way of
public roads and utility transmission lines (hereinafter
referred to as the
"Survey"). The legal description to be used in the Deed
shall be the legal
description attached hereto as Exhibit "A." If Purchaser so
desires, Seller
shall execute a quitclaim deed conveying the Property
pursuant to a legal
description prepared from the Survey.
9. Closing Costs. Seller shall pay the State of
Georgia property
transfer tax applicable to this transaction at Closing.
Seller shall also
pay its attorneys' fees, the costs of recording the Deed,
and the cost of
recording any documents necessary to cure title
objections. Purchaser
shall pay the cost of the Title Policy, any intangibles
taxes due as a
result of this transaction, and its attorneys' fees.
10. Apportionment of Taxes. All city, state and county
ad valorem taxes
and annual special charges (e.g., street lighting,
sewer, garbage
collection, etc.) (hereinafter collectively referred to as
the "Taxes") for
the calendar year of Closing shall be prorated and
accounted for between
Seller and Purchaser at Closing based on the latest
mileage rate and
assessment available. Should such proration be inaccurate
based on the
actual bills, when received, either party hereto may demand
and shall be
entitled to receive on demand, a payment from the other
correcting such
malapportionment. Seller shall be responsible for all
assessments (special
or otherwise) placed against Property prior to Closing,
irrespective of
when payable. In the event any of the Taxes are due and
payable at the time
of Closing, the same shall be paid at Closing. If the
Taxes are not paid
at Closing, Seller shall deliver to Purchaser the bills
for the Taxes
promptly upon receipt thereof and Purchaser shall thereupon
be responsible
for the payment in full of the Taxes within the time
fixed for payment
thereof and before the same shall become delinquent. In
addition, Seller
shall retain all security deposits, if any, held under
leases affecting the
Property. The total of said security deposits shall be
applied as a credit
against the Purchase Price at Closing. The provisions of
this Paragraph
shall survive the Closing.
11. Casualty Loss. Until the Closing is consummated, the
risk of ownership
and loss of the Property shall belong to Seller. Seller
shall not in any
manner disturb, cut or remove the timber,
8
pulpwood, trees, shrubs or bushes from the Property or
commit waste to the
Property. The Property shall be in the same condition on
the Closing Date
as it is on the date of this Option, natural wear and tear
excepted. In the
event of damage to or destruction of the Property by fire or
other casualty
prior to the Closing, Purchaser may, at its option, elect:
(a) not to close
the transaction contemplated hereby, in which event the
Earnest Money shall
be refunded to Purchaser and no party shall have any
further rights or
obligations hereunder, or (b) to close the transaction
contemplated hereby
and receive the instruments required herein from Seller
irrespective of
such damage or destruction and without reduction of the
Purchase Price, but
with Seller's right to applicable insurance proceeds.
Seller agrees to
maintain existing casualty insurance policies, if any, on
Property until
Closing.
12. Condemnation. Seller agrees to give Purchaser written
notice of any
action or proceeding pending or threatened for condemnation
of any part of
Property by friendly acquisition or statutory proceeding
which may result
in the taking of all or any part of Property. Upon such
notification,
Purchaser shall have the right, to be exercised within ten
(10) days after
receipt of such notice, to rescind this Agreement and
receive a refund of
Earnest Money. If Purchaser does not elect to rescind, this
Agreement shall
remain in full force and effect and Seller will credit
Purchaser at Closing
with any monies received by Seller by reason of such
taking. If Purchaser
does not elect to rescind after receipt of the required
notice, all actions
taken by Seller with regard to such proceedings, including
but not limited
to, negotiations, litigation, settlement, appraisals and
appeals, shall be
subject to the approval of Purchaser, which approval
shall not be
unreasonably withheld. Provided Purchaser does not
rescind, Seller will
assign at Closing all of the Seller's interest in and to
any condemnation
award or offers, relating to Property and Purchaser shall
be entitled to
participate in and direct such proceedings and any
settlement related
thereto.
13. Environmental Compliance. Seller hereby represents
and warrants to
Purchaser as follows: The Property has in the past, does now
and at Closing
will conform to all applicable state and federal
environmental protection
legislation and regulations, including, without limitation,
The Resource
Conservation and Recovery Act of 1976 and The Comprehensive
Environmental
Response, Compensation and Liability Act of 1980, as each
may be amended
from time to time; there have been, are now and at
Closing will be no
handling, storage, treatment, transportation or disposal of
any solid or
hazardous waste or hazardous substances on or across the
Property; there
have been and are no actions, suits, administrative agency
orders or other
actions, or any other legal proceedings against the Seller
or the Property
to enforce any state or federal environmental protection
legislation or
regulations; the Seller agrees to indemnify, defend and
hold harmless the
Purchaser from all liability, loss or damage which the
Purchaser may incur
by reason of the assertion of a claim or demand by any
person, federal or
state government, political subdivision or administrative
agency thereof
based on an alleged failure of the Seller, the Property,
or the Purchaser
(as to conditions existing on the Property at Closing) to
conform to any
environmental protection legislation or regulation. Should
Purchaser incur
any such liability, loss or damage, the amount thereof,
including costs,
expenses and reasonable attorneys' fees shall be
reimbursed to the
Purchaser by the Seller immediately on written demand. The
agreement of the
Seller to indemnify the Purchaser will not be deemed to
obligate the
Purchaser to appear in or defend any action or proceeding
relating to any
such enforcement of environmental protection legislation or
regulation or
obligate the Purchaser to perform any obligation of the
Seller by reason of
any such environmental protection legislation or
regulation. The
warranties, representations and agreements of the Seller in
this Paragraph
shall survive the Closing.
9
14. Closing Documents. At Closing, the following documents,
in addition to
the other documents called for herein, shall be executed
and/or delivered:
14.1 Affidavit of Seller. Seller shall execute an
affidavit warranting
that Seller has caused no repairs or improvements
to be made to
the Property within the last ninety-five (95)
days prior to
Closing which remain unpaid at the time of
Closing; that there
are no judgments, bankruptcies, liens, leases or
other claims
against the Property or against Seller that
would create an
encumbrance upon the Property, except as
otherwise specified
herein. Such affidavit shall, in any event, be
sufficient to
induce the Title Company to issue the Title
Policy without
exception for mechanics' and materialmen's liens
or the rights of
parties in possession not shown by the public
records.
14.2 FIRPTA Affidavit. Seller shall execute a
Certificate of
Nonforeign Status in accordance with Section 1445
of the Internal
Revenue Code of 1954, as amended, and the
Regulations thereunder
(hereinafter referred to as "Section 1445").
14.3 Georgia Withholding Tax. Seller shall execute
and deliver to
Purchaser an Affidavit of Seller's Residence
or a Seller's
Certificate of Exemption establishing that Seller
is exempt from
the requirements of O.C.G.A. 48-7-128 and
the regulations
promulgated thereunder (hereinafter referred to
as the "Georgia
Withholding Statute"). If Seller is unable to
furnish such
Affidavit or Certificate, the closing attorney
shall withhold
three percent (3%) of the Purchase Price [or
three percent (3%)
of the "net taxable gain" shown on an
Affidavit of Seller's
Gain], and shall pay such sum to the Department of
Revenue of the
State of Georgia ("Department of Revenue")
pursuant to the
Georgia Withholding Statute. Any such amount
withheld and paid to
the Department of Revenue shall be deemed to have
been paid to
the Seller in cash at the Closing and shall be
credited against
the Purchase Price.
14.4 Purchase Money Note and Security Deed. The
Purchaser shall
execute and deliver to Seller the Purchase Money
Note and the
Purchase Money Security Deed, along with
other documents
reasonable requested by Seller's counsel.
14.5 Authority of Seller. Seller shall deliver to
Purchaser evidence
satisfactory to Purchaser and the Title Company of
its due and
proper authority and power to perform its
obligations hereunder.
14.6 Blanket Bill of Sale. Seller shall deliver
to Purchaser a
Blanket Bill of Sale and Assignment conveying
the personal
property.
14.7 Assignment and Assumption of Leases. Seller and
Purchaser shall
execute and deliver an Assignment of Seller's
Interest in Leases
affecting the Property, and the obligations of
Seller as landlord
thereunder shall be assumed as of the date
of Closing by
Purchaser.
14.8 Rent Roll. Seller shall deliver a rent roll
certified as true and
correct describing all leases affecting the
Property, the names of
tenants thereunder, the expiration date thereof,
the amount of
rental due thereunder, and security deposits held
by Seller, if any.
10
14.9 Miscellaneous Documents. Seller and Purchaser
shall also execute
and deliver a memorandum reflecting all
adjustments of the
Purchase Price, and such other documents as may
be reasonably
required by Purchaser or Seller to close this
transaction in
accordance with the terms and conditions set
forth in this
Agreement.
15. Assignment. The rights of Purchaser under this
Agreement cannot be
assigned in whole or in part without the prior written
consent of Seller,
which consent will not be unreasonably withheld. Seller
acknowledges that
Purchaser is contemplating a 1031 like-kind exchange
and Seller will
reasonably cooperate to effectuate such exchange,
including, without
limitation, consenting to assignments made to effectuate
said like-kind
exchange.
16. Brokerage Commission. Seller and Purchaser hereby
represent and
warrant, each to the other, that no party is entitled, as a
result of the
actions of Seller or Purchaser, as the case may be, to
a real estate
commission or other fee resulting from the execution of
this Agreement or
the transaction contemplated hereby, and Seller and
Purchaser hereby agree
to indemnify, defend and hold each other harmless from and
against any and
all costs, damages and expenses (including attorneys'
fees) resulting
directly or indirectly from any such claim arising out of
the actions of or
contact with Seller or Purchaser, as the case may be. The
representations,
warranties and indemnities contained in this Paragraph
shall survive the
rescission, cancellation, termination or consummation of
this Agreement.
17. Notices. Any notice or communications required
or permitted
hereunder shall be in writing and shall be sent either by:
(i) personal
delivery service with charges therefor billed to shipper;
(ii) expedited
delivery service with charges therefor billed to shipper;
(iii) United
States Mail, postage prepaid, registered or certified mail,
return receipt
requested; or (iv) facsimile transmission, addressed
to Seller or
Purchaser, at the address set forth hereinbelow, or at such
other address
as the parties may have designated by notice to the other
given as provided
above. Any notice or communication sent as hereinabove
provided shall be
deemed given or delivered: (i) upon receipt if
personally delivered
(provided that such delivery is confirmed by the courier
delivery service);
(ii) if sent by United States Mail, on the date. appearing
on the return
receipt therefor, or if there is no date on such return
receipt, the
receipt date shall be presumed to be the postmark date
appearing on such
return receipt; (iii) on the date of delivery by any
expedited delivery
service; or (iv) if sent by facsimile, upon receipt
provided that an
original of such notice is given in accordance with any
other delivery
method provided herein within twenty-four (24) hours after
the sending of
such facsimile transmission. Any notice or
communication required or
permitted hereunder shall be addressed as follows:
To Seller: Georgia Properties, Inc.
c/o National Capital Management
Corporation
50 California Street, Suite 3300
San Francisco, California 94111
Attention: Mr. Leslie A. Filler
With a copy to:
Scoggins, Ivy & Goodman, P.C.
2800 Marquis One Tower
245 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Kim A. Roberson, Esq.
11
To Purchaser: Mr. William R. Dixon, Jr.
Tiburon Capital Corporation
50 California Street, Suite 3300
San Francisco, California 94111
With a copy to:
Samuel L. Farb, Esq.
Berliner Cohen
Ten Almaden Boulevard, 11th Floor
San Jose, California 95113-2233
18. Remedies.
18.1 Remedies of Seller. In the event of Purchaser's
default under
this Agreement, either before or after the
Exercise Date, Seller
agrees to provide Purchaser
with written notice of such default specifying the
nature of such
default. Purchaser shall have five (5) days from
the date of
receipt of said notice to cure such default.
In the event
Purchaser does not cure such default within such 5-
day period and
provided that Seller has fully performed all of
its obligations
hereunder, then the Earnest Money shall be paid to
Seller as full
liquidated damages and Purchaser shall be
released from all
liability or obligation hereunder to Seller and no
other remedy,
including the remedy of specific performance,
shall be available
for Purchaser's breach of this Agreement and
Seller specifically
waives any rights to pursue any other remedy.
Purchaser and
Seller acknowledge that it would be difficult to
ascertain the
actual damages suffered by Seller as a result of
any default by
Purchaser and agree that such liquidated damages
are reasonable
and are not intended as a penalty, but as full
liquidated damages
pursuant to O.G.C.A. 13-6-7.
18.2 Remedies of Purchaser. In the event of
Seller's default under
this Agreement, Purchaser agrees to provide Seller
with written notice of
such default specifying the nature of such default.
Seller shall have ten
(10) days from the date of receipt of said notice to
cure such default.
In the event Seller does not cure such default within
such 10-day period,
Purchaser's sole remedies shall be: (i) to terminate
this Agreement,
receive a refund of the Earnest Money and
reimbursement of Purchaser's
out-of-pocket expenses incurred in connection with
this Agreement, the
Property and this transaction; or (ii) to pursue a
decree of specific
performance (and to file or record a lis pendens or
notice of pending
action in connection with such specific performance
action) excluding
damages except Purchaser's reasonable attorneys'
fees, which shall be
paid by Seller if Purchaser prevails in such action.
No other remedy
shall be available for Seller's breach of this
Agreement and Seller
hereby specifically waives any rights to pursue any
other remedy.
Purchaser shall bring any action for specific
performance hereunder
within thirty (30) days after the expiration of the
ten (10) day period
set forth in this Paragraph or its right to bring
such action shall be
waived.
19. Miscellaneous.
19.1 Entire Agreement. This Agreement constitutes
the entire
agreement between the parties hereto and it is
understood and
agreed that all undertakings and agreements
heretofore had
between these parties are merged herein and
superseded hereby.
No representation,
12
promise or inducement not included herein shall
be binding upon
any party hereto. The terms "Seller"
"Purchaser" shall be
construed in the plural and the appropriate gender
will be read
into all pronouns used herein to reference any
of said parties
whenever the sense of this Agreement so requires.
19.2 No 0ral Modifications. This Agreement shall not
be modified or
amended except by an instrument in writing
executed by or on
behalf of Purchaser and Seller.
19.3 Binding Effect. The provisions of this Agreement
shall inure to
the benefit of and shall be binding upon the
parties hereto and
their respective heirs, successors
and assigns and the legal representatives of
their estates, as
the case may apply.
19.4 Closing. The word "Closing" or words of similar
import as used in
this Agreement shall be construed to mean the
originally fixed
time and Closing Date specified herein or any
adjourned time and
date provided herein or agreed to in writing by
the parties.
19.5 Time of Essence. Time is of the essence of this
Agreement.
19.6 Delivery of Possession. Possession of the
Property shall be
granted to Purchaser no later than Closing,
subject to the rights
of tenants in possession.
19.7 Calculation of Time. If the time period by
which any right,
option or election provided under this Agreement
must be exercised, or
by which any act required hereunder must be
performed, or by which the
Closing must be held, expires on a Saturday,
Sunday or legal holiday,
then such time period shall be automatically
extended through the
close of business on the next regular business
day.
19.8 Counterparts. This Agreement may be executed in
any number of
counterparts, any one of which shall be deemed an
original, and
all of which shall constitute one and the same
Agreement.
19.9 Captions. Captions contained in this Agreement are
inserted only
as a matter of convenience and for reference,
and in no way
define, limit, extend or describe the scope of
this Agreement nor
the intent of any provision hereof.
19.10 Governing Law. This Agreement shall be
governed by and
construed under the laws of the State of Georgia.
19.11 Earnest Money. The Option Consideration
shall be held by
Seller pending the Closing.
19.12 Date of This Agreement. The "Date of This
Agreement" means
the Exercise Date.
19.13 Legal Advice. Seller has received legal
advice from the
Firm of Scoggins, Ivy & Goodman, P.C. with
respect to the terms
and conditions of this Agreement. Scoggins, Ivy &
Goodman, P.C.
represents only the Seller, and has not
represented the Purchaser
in connection herewith. This Agreement shall be
construed in
accordance with its meaning and not for or
against any party
based upon attribution to such party as the
source of the
language in question.
13
19.14 Recording. It is expressly agreed and
understood that this
Agreement shall not be recorded in any manner
whatsoever, as an
exhibit or attachment to any other instrument
so filed, or
otherwise, in the office of the Clerk of the
Superior Court of
Fulton County, Georgia.
19.15 Inspection of Property. Purchaser represents
that Purchaser
has fully inspected the Property and agrees to
purchase the
Property wholly "AS IS," it being agreed
that except as
specifically set forth herein, Seller has made no
warranties or
representations whatsoever pertaining to the
Property, the
condition thereof, the value thereof, or any
other matter with
respect to the Property.
THIS AGREEMENT has been executed first by Purchaser and
shall be deemed a
continuing offer by said party to purchase, until the day of
______, 199_,
at 6:00 o'clock P.M. Eastern Time. If an executed and
unaltered acceptance
hereof is not returned to the address noted herein of
Purchaser by said
time, this offer shall be deemed withdrawn.
IN WITNESS WHEREOF, the parties hereto set their
respective hands and
affixed their seals on the day and year indicated below.
Signed, sealed and delivered PURCHASER:
in the presence of:
Date Executed by
Purchaser:
/s/Tania Tully December 21, 1995
Witness /s/William R. Dixon. Jr.
WILLIAM R. DIXON, JR.
an individual
/s/Claudia Courtade
Notary Public
My Commission Expires:
December 26, 1998
Signed, sealed and delivered SELLER:
in the presence of:
Date Executed by Seller:
December 20, 1995
/s/Jennifer M. Constantinides
Witness GEORGIA PROPERTIES, INC.,
a Delaware corporation
/s/ Susan Ford
Notary Public
By: /s/ Herbert J. Jaffe
Name: Herbert J. Jaffe
Title: President
My Commission Expires:
April 13, 1999 (CORPORATE SEAL)
14
EXHIBIT "A"
All that tract or parcel of land lying and being in Land
Lot 186 of the
14th District of Fulton County, Georgia, and being
more particularly
described as follows:
BEGINNING at a point marked by an iron pin on the
southeasterly side of the
right of way of Campbellton Road 500.5 feet
northeasterly, as measured
along the southeasterly side of Campbellton Road, from a
point where the
southeasterly side of Campbellton Road intersects the west
line of Land Lot
186; thence North 71 degrees 20 minutes East along the
southeasterly side
of Campbellton Road 71.4 feet to an iron pin;
thence continuing
northeasterly along the southeasterly side of Campbellton
Road 480.4 feet
to an iron pin; thence South 0 degrees 30 minutes West
844.5 feet to an
iro6 pin; thence North 89 degrees 16. minutes West 547.0
feet to an iron
pin; thence North i degree 32 minutes East 702.2 feet to an
iron pin on the
southeasterly side of Campbellton Road and the point of
beginning.
LESS AND EXCEPT that tract of land condemned for
the widening of
Campbellton Road by the City of Atlanta by Civil Action No.
D-477, being
more particularly described as follows:
All that tract or parcel of land lying and being in Land
Lot 186 of the
14th District of Fulton County, Georgia, and being
more particularly
described as follows:
BEGINNING at a point 501.3 feet east of the west line of
land lot 186, as
measured along the southerly right-of-way of Campbellton
Road prior to the
1968 widening of Campbellton Road; thence running North
84 degrees 26
minutes 52 seconds East along the back of the sidewalk
77.75 feet to a
point; thence running. North 89 degrees 59 minutes East
along the back of
the sidewalk 155.05 feet to a point, said Point being five
(5) feet from
the curb; thence South 81 degrees 21 minutes 23 seconds
West fifty (50.0)
feet to a point, said point being twelve and five-tenths
(12.5) feet from
the curb; thence running South 89 degrees 59 minutes West,
one hundred and
eighty-three (183.0) feet to a point, said point being
the point of
beginning. Said tract of land containing 1,267.68 square
feet as shown on a
plat dated September 29, 1981.
AND LESS AND EXCEPT:
All that tract or parcel of land and being in Land Lot
186 of the 14th
District, Fulton County, Georgia and being more
particularly described as
follows:
BEGINNING at a point located 19.61 feet right if
Centerline Station
211+25.88, according to plans in the office of the City of
Atlanta Bureau
of Highways and Streets entitled "Campbellton Road
Widening-Phase 1";
thence proceed South 01 degrees 54' 47" West for 15.29
feet along the
common line with B. R. Keappler to a point located 33.97
feet right of
Centerline Station 211+20.72; thence proceed Southwesterly
for 114.64 feet
following the arc of a curve to the right said arc having
a radius of
1840.00 feet and being subtended by a chord running south
76 degrees 37'
48" West for 114.62 feet to a point located 28.18 feet
right of Centerline
Station 210+.08.17' thence proceed South 78 degrees 24' 54"
West for 433.6
feet to a point located 31.58 feet right of Centerline
Station 205+76.45;
thence proceed North 03 degrees 08' 15" East for 11.90
feet along the
common line with Kermit G. Warren to a point to a point
located 20.00 feet
right of Centerline Station 205+79.27; thence proceed North
81 degrees 45'
46" East for 183.52 feet to a point located 27.50 feet
right of Centerline
Station 207+62.64; thence proceed North 70 degrees 47' 37"
East for 50.00
feet to a point located 20.00 feet right of Centerline
Station 208+12.07'
thence proceed North 79 degree 25' 14" East for 73.84
feet to a point
located 20.00 feet right of Centerline Station 208+85.91;
thence proceed
Northeasterly for 242,63 feet following the arc of a curve
to the left said
arc having a radius of 1820.00 feet and being subtended by
a chord running
North 75 degrees 30' 31" East for 242.43 feet to the
point of the
BEGINNING.
EXHIBIT "B"
1. Ad valorem taxes for the year 1996 and subsequent
years.
2. Easement in favor of Georgia Power Company, recorded
at Deed Book
4558, Page 205, Fulton County, Georgia Records.
3. Temporary Easement contained in Warranty Deed from
Georgia Properties,
Inc. to City of Atlanta, dated July 14, 1994 and
recorded at Deed Book
18465, Page 231, Fulton County, Georgia Records.
4. Deed to Secure Debt and Security Agreement from
Trustees of University
Real Estate Trust to Life Insurance Company of Georgia
dated September
14, 1977, recorded at Deed Book 6791, Page 138, Fulton
County, Georgia
Records, in the original principal amount of
$1,610,000.00,
1st Modification to Deed to Secure Debt between
Georgia Properties,
Inc., a Delaware corporation and Life Insurance Company
of Georgia, a
Georgia corporation, dated November 12, 1992, recorded
at Deed Book
16255, page 186, Fulton County, Georgia Records.
5. Assignment of Lessor's Interest in Leases from
the Trustees of
University Real Estate Trust to Life Insurance
Company of Georgia
dated September 14, 1977, recorded at Deed Book 6791,
Page 156, Fulton
County, Georgia Records.
1st Modification to Assignment of Lessor's Interest in
Leases between
Georgia Properties, Inc., a Delaware corporation and
Life Insurance
Company of Georgia, a Georgia corporation, dated
November 1, 1992,
recorded at Deed Book 16255, Page 186, Fulton County,
Georgia Records.
6. Second Modification to Deed to Secure Debt between
Georgia Properties,
Inc., a Delaware corporation, and Life Insurance
Company of Georgia, a
Georgia corporation, dated as of September 30, 1995,
and recorded on
or about the date thereof in Fulton County, Georgia
Records.
Second Modification to Assignment of Lessor's
Interest in Leases
between Georgia Properties, Inc., a Delaware
corporation, and Life
Insurance Company of Georgia, a Georgia corporation,
dated as of
September 30, 1995, and recorded on or about the
date thereof in
Fulton County, Georgia Records.
DEED TO SECURE DEBT AND SECURITY AGREEMENT
THIS INDENTURE, made this 14th day of September, 1977
between MARTIN L. ROSENZWEIG, GEORGE M. KLEIN, FRANK M.
McLAUGHLIN, HOWARD T. JASKOL AND GORDON D. WILLIAMS, not
individually, but as trustees of UNIVERSITY REAL ESTATE
TRUST (hereinafter called the "Borrower") and LIFE INSURANCE
COMPANY OF GEORGIA (hereinafter called the "Lender")
W I T N E S S E T H :
That for and in consideration of the sum of TEN DOLLARS
($10.00) in hand paid and the other considerations
hereinafter mentioned, receipt whereof is hereby
acknowledged, the Borrower does hereby bargain, sell, grant
and convey to the Lender, its successors and assignee, all
that tract or parcel of land lying and being in Land lot 186
of the 14th District of Futon County, Georgia, and being
more particularly described on Exhibit "A" attached hereto
and made a part hereof.
TOGETHER WITH all and singular the rights, members and
appurtenant thereto, whether now owned or hereafter acquired
by the Borrower including, but not limited to, all rent,
profits, issues and revenues of the premises from time to
time accruing, whether under leases or tenancies now
existing or hereafter created, reserving only the right to
the Borrower to collect the same so long as the Borrower is
not in default hereunder.
TOGETHER WITH the apparatus, chattels and fixtures now
or hereafter created or placed in or upon said real property
or any improvement thereon or now or hereafter attached to
or used in connection with said real property or any
improvement thereon, and all additions thereto and all
replacements or substitutions thereof, whether or not the
same have or would become a part of said real property by
attachment thereto, including without limiting the
generality of the foregoing, all furnace, heaters, stoves,
ranges, kitchen cabinets, dishwashers, gas and electric
light fixtures, refrigerating, ventilating, incinerating,
garbage disposal, laundry, kitchen, restaurant, bar, air
conditioning equipment, all elevators, screens, screen
doors, awnings, blinds, drapes, carpets, floor coverings,
furniture, furnishings, gas and oil tanks and equipment,
swimming pool maintenance equipment, pipes, wires and
plumbing, and also all shrubbery or plants sow or hereafter
located on aid real property or improvements, all of which
shall to the extent permitted by law be considered as
annexed to or forming a part of said real property.
TO HAVE AND TO HOLD the premises and all parts, rights,
members and appurtenance thereof, to the use, benefit and
behalf of the Lender, its successors and assigns, in fee
simple forever; and the Borrower covenants that it is
lawfully seized and possessed of the premises in fee simple
and has good right to convey the same, that the same are
unencumbered and that the Borrower will warrant and defend
the title thereto against the claims of all persons
whomsoever.
This conveyance is intended to operate and is to be
construed as a deed passing the title to the premises to the
Lender and is made under these provisions of the existing
laws of the State of Georgia relating to Deeds to Secure
Debt, and not as a mortgage, and is given to secure a debt
evidenced by a certain First Mortgage (Security Deed) Real
Estate Note including any extensions or renewals thereof,
(hereinafter called the "Note" and to which reference is
made for all purposes) of even date herewith executed by
the Borrower, payable to the order of the Lender at the
office and place of business of Lender in Atlanta, Georgia,
or at such other place as the Lender or any subsequent
holder may from time to time require, in the principal sum
of ONE MILLION SIX HUNDRED TEN THOUSAND DOLLARS
($1,610,000.00), interest thereon from date at the rate
specified, with the final installment of principal of
interest, if not sooner paid, due and payable on October 1,
1992.
The Borrower covenants with the Lender as follows:
ARTICLE I
1.01 Payment of Indebtedness. The Borrower will pay
the Note according to the tenor thereof and all other sums
secured hereby promptly as the same shall become due.
1.02 Monthly Deposits. At Lender's option, the
Borrower will deposit with the Lender, on the due date of
each monthly installment under the Note, a sum which, in the
estimation of the Lender, shall be equal to one-twelfth
(1/12) of the annual taxes and assessments; said deposits to
be held by the Lender, free of interest, and free of any
liens or claims on the part of creditors of the Borrower and
as a part of the security of the Lender, and to be used by
the Lender to pay current taxes and assessments on the
premises as the same accrue and are payable. Said deposits
shall not be, nor deemed to be, trust funds, but may be
commingled with the general funds of the Lender. If said
deposits are insufficient to pay the taxes and assessments
is full as the same become payable, the Borrower will
deposit with the Lender such additional sum or sums as may
be required is order for the Lender to pay such taxes and
assessments in full. Upon say default in the provisions of
this indenture or the Note, the Lender may, at its option,
apply say money in the fund resulting from said deposits to
the payment to the indebtedness secured hereby in such
manner as it may elect.
1.03 Taxes, Liens and Other Charges.
(a) In the event of the passage of any state, federal,
municipal or other governmental law, order, rule or
regulations, subsequent to the date hereof, in any manner
changing or modifying the laws now in force governing the
taxation of debts secured by deeds to secure debt or
security agreements or the manner of collecting taxes so as
to affect adversely the Lender, the Borrower will promptly
pay any such tax; if the Borrower fails to make such prompt
payment then the entire balance of the principal sum secured
by this indenture and all interest accrued thereon shall,
without notice, immediately become due and payable at the
option of the Lender.
(b) The Borrower will pay, before the same become
delinquent, all taxes, liens, assessments and charges of
every character already levied or assessed or that may
hereafter be levied or assessed upon or against said
premises and all utility charges, whether public or private,
and upon demand will furnish the Lender receipt bills
evidencing such payment.
(c) The Borrower will not suffer any mechanics',
materialman's, laborer's, statutory, or other lien which
might or could be prior to or equal to the lien of the
indenture to be created or to remain outstanding upon any
part of the premises.
1.04 Insurance. The Borrower will keep the
improvements, whether now standing on said premises or
hereafter created, continuously insured against loss or
damage by fire and against such other hazards as the Lender,
is its reasonable discretion, shall from time to time
require, for the benefit of the Lender; that all such
insurance at all times will be in an insurance company or
companies and in terms reasonably acceptable to the Lender,
with loss, if any, payable to the Lender as its interest may
appear, pursuant to a mortgage clause which shall be
satisfactory to the Lender; and that forthwith upon the
issuance of such policies the Borrower will deliver the same
and all renewals thereof to the Lender and will also deliver
to the Lender receipts for the premises paid thereon. Any
policies furnished Lender shall become its property in the
event Lender becomes the owner of said premises by
foreclosure or otherwise. The Lender, in conjunction with
the Borrower, is hereby authorized and empowered, at its
option, to adjust or compromise any loss under any insurance
policies on the premises, and to collect and receive the
proceeds from any such policy or policies. Each insurance
company is hereby authorized and directed to make payment
for all such losses, up to the balance owed on the
indebtedness secured hereby, directly to the Lender, instead
of to the Borrower and Lender jointly. In case of loss
under any such policy or insurance, the Lender may apply the
set proceeds to the payment of the indebtedness hereby
secured, whether due or not, or the Lender may require the
building to be repaired or replaced by the use of said net
proceeds.
1.05 Care of Premises.
(a) The Borrower will keep the improvements now or
hereafter erected on the premises in good condition and
repair, and will not commit or suffer any waste and will not
set do or suffer to be done anything which will increase the
risk of fire or other hazard to the premises or any part
thereof.
(b) The Borrower will not remove or demolish nor alter
the design or structural character of any building located
on the premises without the written consent of the Lender.
(c) If the premises or any part thereof is damaged by
fire or say other cause, the Borrower will give immediate
written notice of the same to the Lender.
(d) The Lender or its representative is hereby
authorized to enter upon and inspect the premises at any
time during normal business hours.
(e) The Borrower will promptly comply with all present
and future laws, ordinances, rules and regulations of any
governmental authority affecting the premises or any part
thereof.
(f) If all or any part of the premises shall be
damaged by fire or other casualty or if a part of the
premises shall be damaged through condemnation, the Borrower
will promptly restore, repair or alter the remaining
property in a manner satisfactory to the Lender.
(g) The Borrower will at all times during the term
hereof maintain utility services, including sewage disposal
and water supply facilities, approved by any and all
governmental or quasigovernmental agencies having
jurisdiction over the same.
1.06 Further Assurances. At any time, and from time to
time, upon request by the Lender, the Borrower will make,
execute and deliver or cause to be made, executed and
delivered, to the Lender, any and all other further
instruments, certificates and all other further instruments,
certificates and other documents as may, in the opinion of
the Lender be necessary or desirable in order to effectuate,
complete or perfect or to continue and preserve the
obligation of the Borrower under the Note and the lien of
this Deed of Secure Debt. Upon any failure by the Borrower
so to do, the Lender may make, execute and record any and
all such instruments, certificates and documents for and in
the name of the Borrower and the Borrower hereby irrevocably
appoints the Lender, the agent and attorney in fact of the
Borrower so to do.
1.07 Leases Affecting the Premises. The Borrower shall
perform all covenants to be performed by the landlord under
say and all leases on the premises or any part thereof.
1.08 Expenses. The Borrower will pay or reimburse the
Lender for all reasonable attorneys' fees, costs and
expenses incurred by the Lender in any proceedings necessary
to protect its rights and interest under this Deed to Secure
Debt, the Note secured hereby and collateral documents
pertaining thereto including, but not limited to, the
exercise of the power of sale of this deed, any condemnation
action involving the premises or any action to protect the
security hereof; and any such amounts paid by the Lender
shall be added to the indebtedness secured by the lien of
this deed.
1.09 Estoppel Affidavits. The Borrower or Lender, upon
ten (10) days' prior written notice, shall furnish to each
other a written statement, duly acknowledged, setting forth
the unpaid principal of, and interest on, the indebtedness
secured hereby and whether or not any effect or defenses
exist against such principal and interest.
1.10 Subrogation. The Lender shall surrogated to the
claims and liens of all parties whose claims or liens of all
parties whose claims or liens are discharged or paid with
the proceeds of the indebtedness secured hereby.
1.11 Performance by Lender of Defaults by Borrower. If
the Borrower shall default in the payment of any tax, lien,
assessment or charge levied or assessed against the
premises; in the payment of any utility charge, whether
public or private; in the payment of insurance premium; in
the procurement of insurance coverage and the delivery of
the issuance policies required hereunder or in the
performance or observance of any other covenant, condition
or term of this Deed to Secure Debt or other instrument
given to secure payment of said Note, then the Lender, at
its option, may perform or observe the same, and all
payments made for costs or incurred by the Lender in
connection therewith, shall be secured hereby and shall be,
without demand, immediately repaid by the Borrower to the
Lender with interest thereon at the maximum rate allowed by
the laws of the State of Georgia or at the rate of twelve
percent (12%) per annum, whichever is less. The Lender
shall be the sole judge of the legality, validity and
priority of any such tax, lien, assessment, charge, claim
and premium; and of the necessity for any such actions and
of the amount necessary to be paid in satisfaction thereof.
The Lender is hereby empowered to enter and to authorize
others to enter upon the premises or any part thereof for
the purpose of performing or observing any such defaulted
covenant, condition or term, without thereby becoming liable
to the Borrower or any person in possession holding under
the Borrower.
1.12 Condemnation. If all or such a substantial part
of the premises so as to make the premises unusable for the
purposes intended shall be damaged or takes through
condemnation (which term when used in this indenture shall
include any damage or taking by any governmental authority
or any entity having conferred upon it the power of
condemnation and any transfer by private sale in lieu
thereof), either temporarily or permanently, the Lender
shall be entitled to all compensation, awards and the Lender
shall be entitled to other payments or relief thereof, up to
the balance owed on the indebtedness secured hereby, and is
hereby authorized, at its option, to commence, appear in and
prosecute, in item own or the Borrower's name, any action or
proceedings relating to any condemnation, and to settle or
compromise any claim in connection therewith. all such
compensation, awards, damages, claims of action and proceeds
and the right thereto are hereby assigned by the Borrower to
the Lender, who after deducting therefrom all its expenses,
including attorneys' fees, may release any moneys so
received by it without affecting the lien of this deed and
may apply the same in such manner as the Lender shall
determine, to the reduction of the sums secured hereby, and
to any prepayment fee herein provided, and any balance of
such monies then remaining shall be paid to the Borrower.
The Borrower agrees to execute such further assignment of
any compensation, awards, damages, claims, rights of action
and proceeds as the Lender may require.
1.13 Annual Reports. The Borrower will furnish to the
Lender annually within sixty (60) days next following the
end of the Borrower's fiscal year statements, prepared by a
Certified Public Accountant, satisfactory to the Lender, of
annual income and expenses on the property described herein
for the previous fiscal year, itemized according to each
category of income and each classification of expenses and a
certification of the accuracy of each such statement.
ARTICLE II
2.01 Event of Default. The term default, or event of
default, wherever used is this indenture, shall mean any one
or more of the following events:
(a) Failure by the Borrower to pay as and when due and
payable any installment of principal, interest or escrow
deposits;
(b) Failure by the Borrower to duly observe any other
covenant, condition or agreement of the Note or of its
indenture or of any other instrument given to secure payment
of said Note following thirty (30) days' written notice by
Lender to Borrower of such default.
(c) The filing by the Borrower of a voluntary petition
in bankruptcy or the Borrower's adjudication as a bankrupt
or insolvent, or the filing by the Borrower of any petition
or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present
or future federal, state or other statute, law or regulation
relating to bankruptcy, insolvency or other relief for
debtors, or the Borrower's seeking or consenting to or
acquiescence in the appointment of any trustee, receiver or
liquidator of the Borrower or of all or any substantial part
of the premises or of any or all the rents, revenues,
issues, earnings, profits or income thereof, or the making
of any general assignment for the benefit of creditors, or
the admission in writing of its inability to pay its debts
generally as they become due.
2.02 Acceleration of Maturity. If an event of default
shall have occurred and shall have continued for ten (10)
days after notice and demand, then the whole unpaid
principal sum of the indebtedness secured hereby with
interest accrued thereon shall, at the option of the Lender,
become due and payable without further notice or demand,
time being of the essence of this indenture; and so omission
on the part of the Lender to exercise such option when
entitled so to do shall be considered as a waiver of such
right.
2.03 Right of Lender to Enter and Take Possession.
(a) If an event of default shall have occurred and be
continuing, the Borrower, upon demand of the Lender, shall
forthwith surrender to the Lender the actual possession of
the premises and if (and to the extent) permitted by law,
the Lender may enter and take possession of the premises and
may exclude the Borrower and the Borrower's agents and
employees wholly therefrom.
(b) Upon every such entering and taking possession,
the Lender may hold, store, use, operate, manage, control
and maintain the premises and conduct the business thereof,
and from time to time (i) make all necessary and proper
repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon and purchase or otherwise
acquire additional fixtures, personally and other property;
(ii) insure or keep the premises insured; (iii) manage and
operate the premises and exercise all the rights and powers
of the Borrower in its name or otherwise, with respect to
the name; and (iv) enter into any and all agreements with
respect to the exercise by others of any of the powers
herein granted the endure, all as the Lender may from time
to time determine to be to its best advantage; and the
Lender may collect and receive all of the income, rents,
profits, issues and revenues of the premises, including the
past due as well as those accruing thereafter and after
deducting (aa) all expenses of taking, holding managing and
operating the premises (including compensation for the
services of all persons employed for such purposes); (bb)
the cost of all such maintenance, repairs, renewals,
replacements, additions, betterments, improvements,
purchases and acquisitions; (cc) the cost of such insurance;
(dd) such taxes, assessments and other charges prior to the
lien of this indenture as the Lender may determine to pay;
(ee) other proper charges upon the promises or any part
thereof; and (ff) the reasonable compensation and expenses
of attorneys and agents of the Lender, shall apply the
remainder of the money so received by the Lender, first to
the payment of accrued interest; then to the payment of
escrow deposits as may be required in Paragraph 1.02 and any
sums due under the terms of Paragraph 1.11 and finally to
the payment of overdue installments of principal.
(c) For the purpose of carrying out the previsions of
this Paragraph 2.03, the Borrower hereby constitutes and
appoints the Lender the true and lawful attorney in fact of
the Borrower to do and perform, from time to time, any and
all actions necessary and incidental to such purpose.
(d) Whomever all such events of default have been
cured and satisfied, the Lender shall surrender possession
of the premises to the Borrower, provided that the right of
the Lender to take possession, from time to time, pursuant
to subparagraph 2.03(a) shall exist if any subsequent event
of default shall occur and be continuing.
2.04 Appointment of a Receiver.
(a) If an event of default shall have occurred and be
continuing, the Lender, upon application to a court of
competent jurisdiction, shall be entitled, without notice
and without regard to the adequacy of any security for the
indebtedness hereby secured or the solvency of any party
bound for its payment to the appointment of a receiver to
take possession of and to operate the premises and to
collect the rents, profits, issues, and revenues thereof.
(b) The Borrower will pay to the Lender upon demand
all expenses, including receiver's fees, attorneys' fees,
costs and agent's compensation, incurred pursuant to the
provisions contained in this Paragraph 2.04; and all such
expenses shall be secured by this indenture.
2.05 Power of Sale. If the indebtedness secured hereby
shall not be paid when it becomes due, whether by
acceleration or otherwise, the Lender, at its option, may
sell the premises or any part of the premises at public sale
or sales before the door of the courthouse of the County in
which the premises or any part of the premises is situated,
to the highest bidder for cash in order to pay the
indebtedness secured hereby and accrued interest thereon and
insurance premiums, liens, assessments, taxes and charges,
if any, with accrued interest thereon, and all expenses of
the sale and of all proceedings in connection therewith,
including reasonable attorneys' fees, after advertising the
time, place and terms of sale once a week for four (4)
weeks, immediately preceding such sale, (but without regard
to the number of days) in any newspaper published or having
general circulation in said County, or in the newspaper in
which Sheriff's sales are advertised in said County. The
Lender may bid and purchase at such sale.
2.06 Authority to Convey. At any such public sale, the
Lender may execute and deliver to the purchaser a conveyance
of the premises or any part of the premises in fee simple
with full warranties of title and to this and, the Borrower
hereby constitutes and appoints the Lender the agent and
attorney in fact of the Borrower to make such sale and
conveyance, and thereby to divest the Borrower of all right,
title or equity that the Borrower may have in and to the
premises and to vest the same in the purchaser or purchasers
at such sale or sales, and all the acts and doings of said
agent and attorney in fact are hereby ratified and confirmed
and any recitals in said conveyance or conveyances as to the
facts essential to a valid sale shall be binding on the
Borrower. The aforesaid power of sale and agency hereby
granted are coupled with an interest and are irrevocable by
death or otherwise, are granted as cumulative of the other
remedies provided by law for collection of the indebtedness
secured hereby and shall not be exhausted by one exercise
thereof but may be exercised until full payment of all sums
secured hereby.
2.07 Application of the Proceeds of Sale. Upon any
such public sale pursuant to the aforementioned power of
sale and agency, the proceeds of said sale shall be applied
first to payment of the indebtedness secured hereby and
accrued interest thereon, then to said insurance premiums,
liens, assessments, taxes and charges including utility
charges with accrued interest thereon and then to the
expenses of such sale and of all proceedings in connection
therewith, including fifteen percent (15%) thereof as
attorney's fees, and finally, the remainder, if any, shall
be paid to the Borrower.
2.08 Borrower as tenant Holding Over. In the event of
any such public sale pursuant to the aforesaid power of sale
and agency, the Borrower shall be deemed a tenant holding
over and shall forthwith deliver possession to the purchaser
or purchasers at such sale or be summarily dispossessed
according to provisions of law applicable to tenants holding
over.
2.09 Discontinuance of Proceedings and Restoration of
the Parties. In case the Lender shall have proceeded to
enforce any right or remedy under this indenture by
receiver, entry or otherwise, and such proceedings shall
have been discontinued or abandoned for any reason or shall
have been determined adversely to the Lender, then and in
every such case the Borrower and the Lender shall be
restored to their former positions and rights hereunder, and
all rights, powers and remedies of the Lender shall continue
as if no such proceeding had been taken.
2.10 Remedies Cumulative. No rights, power or remedy
conferred upon or served to the Lender by this indenture is
intended to be exclusive of any other right, power or
remedy, but each and every such right, power and remedy
shall be cumulative and concurrent and shall be in addition
to any other right, power and remedy gives hereunder or now
or hereafter existing at law or in equity or by statute.
ARTICLE III
3.01 Successors and Assigns Included in Parties.
Whenever in this indenture one of the parties hereto is
named or referred to, the heirs, legal representatives,
successors and assigns of such parties shall be included and
all covenants and agreements contained in this indenture by
or on behalf of the Borrower or by or on behalf of the
Lender shall bind and inure to the benefit of their
respective heirs, legal respresentatives, successors and
assigns, whether so expressed or not.
3.02 Headings. The headings of the sections,
paragraphs and subdivisions of this indenture are for the
convenience of reference only, are not to be considered a
part hereof, and shall not limit or otherwise affect any of
the terms hereof.
3.03 Invalid Provisions to Affect No Others. If
fulfillment of any provisions hereof or any transaction
related hereto or to the Note, at the time performance of
such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, the ipso facto, the
obligations to be fulfilled shall be reduced to the limit of
such validity; and if any clause or provisions herein
contained operates or would prospectively operate to
invalidate this indenture in whole or in part, then such
clause or provisions only shall be held for naught, as
though not here contained, and the remainder of this
indenture shall remain operative and in full force and
effect.
3.04 Number and Gender. Whenever the singular or
plural number, masculine or feminine or neuter gender is
used herein, it shall equally include the other.
ARTICLE IV
4.01 Leader shall be surrogated to the claim and liens
of all parties whose claims or liens are discharged or paid
with the proceeds of the loan secured hereby.
4.02 The insurance required by Paragraph 1.04 shall be
in the amount of the full replacement value of the
improvements located on the premises with an extended
endorsement and a mortgage clause making loss, if say,
payable to Lender.
4.03 Lender herein shall have, and is hereby granted,
the right to inspect the premises and the improvements
thereas at any time and from time to time without giving
advance notice to, and without obtaining the advance
approval of, Borrower or of any lessee or lessees of the
premises.
4.04 Notwithstanding any provisions of this Deed to
Secure Debt to the contrary, Leader shall not seek a
personal judgment order of decree against the Borrower for
failure to comply with any of the terms, provisions or
covenants contained in this Deed to Secure Debt, nor seek or
assert a deficiency judgment against the Borrower, its
successors or assigns, is any foreclosure or power of sale
proceeding under this Deed to Secure Debt; provided that the
aforesaid exculpation shall not impair the lien or priority
of this Deed to Secure Debt or the right of Lender to
exercise the power of sale and other remedies herein against
the Premises or the Borrower's interest in the Premises
conveyed herein.
4.05 This Agreement is entered into by UNIVERSITY REAL
ESTATE TRUST ( the "Trust"), which was organized pursuant to
a Declaration of Trust, dated December 14, 1973; recorded in
the City of San Francisco, California. Section 9.6 of said
Declaration of Trust provides that any written instrument
creating an obligation of the Trust shall be conclusively
taken to have been executed or done by trustees or by a
trustee, officer, employee or agent, respectively. The
obligation of the Trust under this Agreement, and under all
agreements and documents relating to or entered into is
connection with this Agreement, is not personally binding
upon, nor shall resort be had to the private property of,
any of the trustees, shareholders, officers, employees,
attorneys or agents of the Trust.
IN WITNESS WHEREOF, the undersigned has caused this
instrument to be executed and sealed on the day and year
first above written.
MARTIN L. ROSENZWEIG, GEORGE E.
KLEIN, FRANK M. McLAUGHLIN, HOWARD
T. JASKOL and GORDON D. WILLIAMS,
not individually, but as trustees
of UNIVERSITY REAL ESTATE TRUST, a
California real estate trust.
BY:
_________________________________
MARTIN L. ROSENZWEIG, a
trustee
whose personal liability is
excluded
as aforesaid.
Signed, sealed and delivered
in the presence of:
/s/___________________________
WITNESS
/s/___________________________
NOTARY PUBLIC
INTANGIBLE TAX CERTIFICATE FULTON COUNTY GEORGIA
Grantor Trustee of university Real Estate Trust
Grantee Life Insurance Co. of Ga
Location of Real Estate, City Atlanta 186 Div. 14
Date of Execution of Notes --19-- Final Maturity Oct 1 1992
Term 15 yrs
Date of Execution of Security Deed Sept 14 1977 Face Amount
of Deed $1,610,000.00
I certify that the Intangible Tax required by law on
the notice prior to the recording of Security Debt (@$1.50
per $500 or section on shown by lose Security Deed) in the
amount of $4830.00 has been paid this 16 day of Sept 1977.
WILLIAM LEE ROBERTS, Tax Commissioner By /s/
G.J.Markwell, Deputy.
ALL THAT TRACT or parcel of land lying and being in Land Lot
186 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at a point marked by an iron pin on the
southeasterly side of Campbellton Road 501.3 feet
northeasterly, as measured along the southeasterly side of
Campbellton Road, from a point where the southeasterly side
of Campbellton Road intersects the west line of Land Lot
186; thence continuing northeasterly along the southeasterly
side of Campbellton Road 550 feet to an iron pin; thence
south 0 degrees 30 minutes west, along the west side of
property of K.W. Keappler 844.5 feet to an iron pin; thence
north 89 degrees 16 minutes west 547 feet to an iron pin;
thence north 1 degree 32 minutes east along the east side of
property of Kermit G. Warren 709.2 feet to an iron pin on
the southeasterly side of Campbellton Road and the point of
beginning.
Subject to:
Ad valorem taxes for the year 1977 and subsequent
years.
Easement in favor of Georgia Power Company recorded in
Deed Book 4558, page 205, Fulton County, Georgia Records.
Drainage, sewer and power-line easements and rights as
disclosed on Plat of Survey prepared by Eston Pendley,
Surveyor, dated September 21, 1964.
Rights of tenants is possession.
GEORGIA FULTON COUNTY
FILED AND RECORDED
STATE OF CALIFORNIA CROSS REFERENCE TO:
COUNTY OF SAN FRANCISCO DEED BOOK 6791, PAGE
138,
FULTON COUNTY, GEORGIA
RECORDS
FIRST MODIFICATION TO DEED TO SECURE DEBT AND SECURITY
AGREEMENT (Original Deed to Secure Debt and Security
Agreement recorded at Deed Book 6791, Page
138, Fulton County, Georgia Records)
THIS FIRST MODIFICATION TO DEED TO SECURE DEBT AND
SECURITY AGREEMENT ( the "First Modification") is made and
entered into as of this 1st day of November, 1992, by and
between GEORGIA PROPERTIES, INC., a Delaware Corporation
(hereinafter "Granter"), and LIFE INSURANCE COMPANY OF
GEORGIA, a Georgia corporation, (hereinafter "Grantee"),
whose mailing address is 5700 Powers Ferry Road, NW,
Atlanta, Georgia 30327.
W I T N E S S E T H :
WHEREAS, MARTIN L. ROSENZWEIG, GEORGE H. KLEIN, FRANK
H. McLAUGHLIN, HOWARD T. JASKEL AND GORDON D. WILLIAMS, not
individually, but trustees of University Real Estate Trust
(the "Trust") did execute and deliver to Grantee a Deed to
secure Debt and Security Agreement, dated September 14,
1977, recorded at the Deed Book 6791, Page 138, Fulton
County, Georgia Records (the "Security Deed"); and
WHEREAS, the Security Deed was given to secure a
certain First Mortgage (Security Deed) Real Estate Note from
Granter to Grantee, dated September 14, 1977 in the original
principal amount of ONE MILLION SIX HUNDRED TEN THOUSAND AND
00/00 DOLLARS ($1,610,000.00), bearing interest as provided
therein, and becoming due and payable on or before October
1, 1992 (the "Note"), and
WHEREAS, Granter succeeded to the interest of the Trust
as owner of the real property encumbered by the Security
Deed pursuant to that certain Deed under Power of Sale dated
March 2, 1972, and recorded in Deed Book 15047, Page 309,
aforesaid records.
WHEREAS, Grantor and grantee have modified the Note by
First Modification to First Mortgage (Security Deed) Real
Estate Note, dated as of the date hereof, which Modification
provides, among other things, for a change in interest rate,
change in payment terms, and a change in final maturity and
WHEREAS, Grantor and Grantee wish to modify the
Security Deed to confirm that the Security Deed secures the
Note as modified by the First Modification to First Mortgage
(Security Deed) Real Estate Note.
NOW, THEREFORE, for and in consideration of the
foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged Grantor and Grantee hereby agree that
the Security Deed shall be modified as follows:
1. The term "Note" as used in the Security Deed shall
refer to and men the "First Mortgage (Security Deed) Real
Estate Note, dated September 14, 1977, from the Trust to
Grantee in the original principal amount of ONE MILLION SIX
HUNDRED TEN THOUSAND AND 00/000 DOLLARS ($1,610,000.00) as
modified by First Modification to First Mortgage (Security
Deed) Real Estate Note, dated as of November 1, 1992,
between Grantor and Grantee with interest thereon all being
due and payable on or before September 30, 1995.
2. The Security Deed shall secure all indebtedness
evidenced by the Note referred to in paragraph 1 hereof as
modified, including all other indebtedness as that term is
used in the Security Deed, the indebtedness as of October
31, 1992 being $1,221,950.98.
3. Except as herein expressly amended, each and every
term, condition, warranty and provision of the Security
Deed, including the non-recourse provision set forth
therein, shall remain unchanged and, except as otherwise
disclosed to Grantee, is hereby ratified, confirmed and
approved by Grantor. Nothing contained herein shall be
construed to alter or affect the priority of the lien or
title, created by the Security Deed, as amended hereby, in
favor of any junior encumbrances, grantee or purchaser, or
any purchaser requiring or holding an interest in the
Secured Property, and any provision of this First
Modification construed to be in conflict with the desire of
Grantee that the lien of the Security Deed, as amended
hereby, be maintained and preserved prior to (i) any and all
execution of encumbrances affecting the Secured Property
subsequent to the execution of the Security Deed, and (ii)
any and all encumbrances affected the Secured Property
arising prior to the execution of the Security Deed, shall,
at Grantee's option, be void and of no force or effect, it
being the expressed declared intention of Grantee that no
novation of the security Deed be created by this First
Modification.
4. The Security Deed, as amended by this First
Modification contains the complete understanding of the
parties with respect to the subject matter thereof,
supersedes all prior negotiations and proposals with respect
thereto, may not be amended except in writing executed by
the party to be bound hereunder. This First Modification
shall be governed by and construed, interpreted and enforced
in accordance with the laws of the State of Georgia without
reference to Georgia conflicts of law principles. The
parties hereto waive application of the legal principle that
an instrument is to be construed against the party drafting
it.
5. The First Modification shall be binding upon and
shall inure to the benefit of the parties hereto, and their
respective heirs, successors, legal representatives, and
permitted assigns, whether voluntary by act of the parties,
or involuntary by operation of law, as the case may be.
IN WITNESS WHEREOF, the Grantor by it duly authorized
trustee has hereunto executed and delivered this First
Modification to Grantee and the undersigned Grantee by it
duly authorized officers has hereunto executed this First
Modification under seal all as of the day and year first
above written.
GRANTOR:
Signed, Sealed and Delivered GEORGIA PROPERTIES,
INC., a
in the presence of: Delaware corporation
/s/Susan M. Newton____
WITNESS By: _/s/ Herbert J.
Jaffe____
Its: President
/s/Francie A. Herbowy__
NOTARY PUBLIC [CORPORATE SEAL]
GRANTEE:
Signed, Sealed and Delivered
in the presence of: LIFE INSURANCE COMPANY OF
GEORGIA, a Georgia
corporation
/s/ ____________________
WITNESS By:
/s/______________________
Its: Senior Vice
President
/s/_____________________
NOTARY PUBLIC
EXHIBIT "D"
FIRST MORTGAGE (SECUITY DEED) REAL ESTATE NOTE
$1,610,000.00
September 14, 1977
Atlanta,
Georgia
FOR VALUE RECEIVED, the undersigned promises to pay to the
order of LIFE INSURANCE COMPANY OF GEORGIA, its successors
and assigns, the principal sum of ONE MILLION SIX HUNDRED
TEN THOUSAND DOLLARS ($1,610,000.00) or so much of said
principal sum as has been from time to time disbursed by the
payee to the maker hereof, with interest thereon follows:
The aforesaid principal sum shall bear interest at the rate
of eight and one-quarter percent (8 1/4%) per annum, and
principal and interest shall be payable as follows:
Interest only at the stated rate shall be due and payable
in consecutive monthly installments of ELEVEN THOUSAND
SIXTY-EIGHT AND 75/100 DOLORS ($11,068.75) each,
commencing on November 1, 1977 and on the first day of each
month thereafter through to and including the first day of
October 1978.
Commencing on October 1, 1978 the aforesaid principal sum
shall be due and payable in one hundred sixty-eight (168)
consecutive principal and interest monthly installments,
installments No. 1 to 167 both inclusive, being for the sum
of TWELVE THOUSAND THREE HUNDRED THREE DOLLARS ($12,303.00)
each and installment 168 being for the balance of principal
and interest then owing; the first of said monthly
amortized installments being due and payable November 1,
1978 and said monthly amortized shall continue to be due
and payable on the first day of
each month thereafter until all are fully paid (the final
installment being due and payable if not sooner paid, on
October l, l992, which said monthly installment shall applied
first to the payment of interest at the rate of eight and
one-quarter percent (8 1/4%) per annum, and any amount
remaining after payment of interest sha11 be applied to
the unpaid part of the principal.
This indebtedness may be prepaid in any amount or at any
time without penalty.
Should any default occur in the payment as stipulated above
of either the interest or principal or in the performance of
any of the terms, covenants, conditions, requirements or
articles contained in that certain Deed to Secure Debt
and Security Agreement herein mentioned and executed to
secure this obligation of this Note and shall have continued
for ten (10) days after notice and demand, then and in
that event, the principal of this Note or any unpaid part
thereof and all interest accrued thereon shall, in the sole
discretion of the holder, at once become due and payable and
may be collected forthwith without notice to the
undersigned, regardless of the stipulated date of
maturity, TIME BEING OF THE ESSENCE OF THIS CONTRACT; also,
if any monthly amortized payment or any part thereof is
not paid within fifteen (15) days of the date it is due, the
holder of this Note may collect a late charge up to an
amount equal to four percent (4%) of the amount of the
monthly payment; the collection of such a late charge by the
holder shall not be deemed a waiver by the holder of any
of its rights hereunder or under any other document given
to secure this Note and in the event this Note or any part
hereof is collected by law, by or through an attorney at
law, the undersigned hereby agrees to pay all costs of
collection, including fifteen percentum (15%) of the
principal and interest
2
as attorneys' fees. The maker, and any endorsers or any
guarantors hereof, waive protest, demand, presentment and
notice of dishonor and agree that
this Note may be extended in whole or in part without
limit as to the number of such extensions or the period
or periods thereof, and without notice to them and
without affecting their liability thereon. Failure to
accelerate the debt by reason of default in the full payment
of a monthly payment or in the acceptance of a past due
payment, or in the performance of any of the terms,
covenants, conditions, requirements or articles contained
in that certain Deed to Secure Debt and Security Agreement
or indulgence granted from time to time, shall not be
construed as a novation of the contract or a waiver of the
right of the holder to thereafter insist upon strict
compliance with the terms of the contract without previous
notice of such intention being given to the undersigned.
The undersigned hereby waives and renounces, for itself, its
successors or assigns, any and all rights to the benefits of
any appraisements, exemption and homestead now provided, or
which may hereafter be provided, by the Constitution and
laws of the United States of America and of any state
thereof to and in all its property, real and personal,
intangible and mixed, against the enforcement and collection
of this Note.
If any party to this Note shall become insolvent and be
adjudged a bankrupt or file a general assignment for the
benefit of creditors or file a petition under any of the
rehabilitative provisions of the Bankruptcy Act, then and
in either of these events the holder of this Note shall have
the option to treat this Note as all due and payable at once.
3
This Note is secured by a certain Deed to Secure Debt
and Security Agreement of even date herewith made by and
between the undersigned, as Borrower and LIFE INSURANCE
COMPANY OF GEORGIA, as Lender, conveying title to certain
real estate in Land Lot 186, 14th District, Fulton
County, Georgia.
It is understood and agreed by all the parties to this Note
that the taking or releasing of any security under
aforesaid Deed to Secure Debt and Security Agreement in
no way release or affect the liability of the
undersigned.
This obligation is made and intended as a Georgia contract
and is to be construed and governed by the laws of the
State of Georgia.
Notwithstanding any provisions of this Note or in any
instrument or document now or hereafter securing
indebtedness, the total liability of maker or any endorsers
or guarantors for payments in the nature of interest shall
not exceed the limits imposed on the date of this Note by the
usury laws of the State of Georgia.
In any action or proceeding brought on this Note or any
instrument securing this Note or the indebtedness evidenced
hereby, no personal or deficiency judgment or decree shall
be sought or obtained against the undersized or against the
successors and assigns of the undersigned. The holder this
Note shall rely solely upon the real and/or personal property
described in any instrument securing this Note for the
satisfaction of the indebtedness evidenced hereby.
This Agreement is entered into by University Real
Estate Trust (the "Trust"}, which was organized pursuant
to a Declaration of Trust, dated December 14, 1973,
recorded in the City of San Francisco, California.
Section 9.6 of said
Declaration of Trust provides that any written
instrument
4
creating an obligation of the Trust shall be conclusively
taken to have been executed or done by trustees or by a
trustee, officer, employee or
agent, respectively. The obligation of the Trust under this
Agreement, and under all agreements and documents
relating to or entered into in connection with this
Agreement, is not personally binding upon, nor shall resort
be had to the private property of, the trustees,
shareholders, officers, employees
or agents of the Trust.
IN WITNESS WHEREOF, the undersigned has caused this document
to be executed and sealed the day and year first above
written.
MARTIN L. ROSENZWEIG, GEORGE H.
KLEIN, FRANK H. McLAUGHLIN, HOWARD T. JASKOL and
GORDON D. WILLIAMS, NOT individual1y, but as
trustees of UNIVERSITY REAL ESTATE TRUST, a
California real estate trust
By: /s/Martin L. Rosenzweig MARTIN L. ROSENZWEIG,
a trustee whose personal liability is excluded as
aforesaid.
FIRST MODIFICATION TO FIRST MORTGAGE
(SECURITY DEED) REAL ESTATE NOTE
THIS FIRST MODIFICATION TO FIRST MORTGAGE (SECURITY DEED)
REAL ESTATE NOTE (hereinafter the "First Modification") is
entered into as of the 1st day of November, 1992, by and
between GEORGIA PROPERITES, INC., a Delaware corporation
(hereinafter "Borrower") and LIFE INSURANCE COMPANY OF
GEORGIA, a Georgia corporation (hereinafter "Holder").
WHEREAS, MARTIN L. ROSENZWEIG, GEORGE H. KLEIN, FRANK A.
McLAUGHLIN, HOWARD T. JASKOL and GORDON D. WILLIAMS, not
individually, but as trustees of University Real Estate
Trust, a California real estate trust (hereinafter the
"Trust") did execute and deliver to Holder a FIRST MORTGAGE
(SECURITY DEED) REAL ESTATE NOTE dated September 14, 1977,
in the original principal amount of ONE MILLION SIX HUNDRED
TEN THOUSAND AND N0/100 ($1,610,000.00) DOLLARS (the "Note");
and
WHEREAS, Borrower succeeded to the interest of the Trust as
owner of the real property securing the Note pursuant to
that certain Deed under Power of Sale dated march 3, 1992,
and recorded in Deed Book 15047, Page 309, Fulton County,
Georgia records.
WHEREAS, Borrower and Holder wish to modify the Note to
provide for among other things, a change in interest rate,
payment terms and loan term; and
WHEREAS, Borrower and Holder wish to enter into this First
Modification for that purpose.
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower
and Holder hereby agree that the Note shall be modified
as follows:
1. Borrower and Holder hereby acknowledge that ONE
MILLION SIX HUNDRED
TEN THOUSAND AND N0/100 ($1,610,000.00) DOLLARS have been
advanced under the Note and that the outstanding principal
balance is $1,211,950.98 as of October 31, 1992.
2. The term of the Note is modified as follows:
Notwithstanding any provisions to the contrary contained
in the Note, the Note shall have a final maturity
thereof of September 30, 1995.
3. The interest rate on the Note shall be modified as
follows:
Notwithstanding any provision contained in the Note to
the contrary, interest on the unpaid principal balance
of the Note from time to time outstanding shall accrue
and be due and payable at an interest rate of nine and
one-eighth (9.125%) percent per annum, effective as
of September 30, 1992.
4. Payment terms of the Note shall be modified as follows:
Notwithstanding any provisions contained in the Note to
the contrary, the Note is payable in monthly
installments of principal and interest in an amount of
$12,906.94, due and payable on the first day of each
month, commencing on November 1, 1992, and continuing on
the first day of each month thereafter, with the
final payment of the then outstanding principal
balance, together with any accrued and unpaid interest
being due and payable on September 30, 1995.
5. Except as expressly modified herein, the Note,
including the non-
recourse provisions set forth therein, shall otherwise remain
in full force and effect.
6. This First Modification contains the complete
understanding of the
parties with respect to the subject matter thereof,
supersedes all prior negotiations and proposals with
respect thereto, and may not be amended except in writing
executed by the party to be bound hereunder. This First
Modification shall be governed by and construed, interpreted
and enforced in accordance with the laws of the State of
Georgia without reference to Georgia conflicts of law
principles. The parties hereto waive application of the
legal principle that an instrument is to be construed against
the party drafting it.
7. Borrower and Holder hereby agree that this First
Modification shall
not constitute a novation of the Note nor release any
security given to secure the repayment of the Note.
8. This First Modification shall be binding upon and shall
inure to the
benefit of the parties hereto, and their respective
heirs, successors, legal representatives, and
2
authorized officer has hereunto executed this Second
Modification under seal all as of the day and year first
above written.
BORROWER:
GEOGIA PROPERTIES,
INC.
a Delaware
Corporation
By: /s/ Herbert J.
Jaffe
Herbert J.
Jaffe,
President
[CORPORATE
SEAL]
HOLDER:
LIFE INSURANCE
COMPANY OF GEORGIA,
a Georgia
corporation
By: /s/
Its:
[CORPORATE
SEAL] .
SECOND MODIFICATION TO FIRST MORTGAGE
(SECURITY DEED) REAL ESTATE NOTE
THIS SECOND MODIFICATION TO FIRST MORTGAGE (SECURITY DEED)
REAL ESTATE NOTE (hereinafter the "Second Modification") is
entered into as of the 30th day of September, 1995, by and
between GEORGIA PROPERTIES, INC., a Delaware corporation
(hereinafter "Borrower") and LIFE INSURANCE COMPANY OF
GEORGIA, a Georgia corporation (hereinafter "Holder").
WHEREAS, MARTIN L. ROSENZWEIG, GEORGE H. KLEIN, FRANK A.
McLAUGHLIN, HOWARD T. JASKOL and GORDON D. WILLIAMS, not
individually, but as trustees of University Real Estate
Trust, a California real estate trust (hereinafter the
"Trust") did execute and deliver to Holder a FIRST MORTGAGE
(SECURITY DEED) REAL ESTATE NOTE dated September 14, 1977,
in the original principal amount of ONE MILLION SIX HUNDRED
TEN THOUSAND AND NO/100 ($1,610,000.00) DOLLARS (the "Note");
and
WHEREAS, Borrower succeeded to the interest of the Trust as
owner of the real property securing the Note pursuant to
that certain Deed under Power of Sale dated March 3, 1992,
and recorded in Deed Book 15047, Page 309, Fulton County,
Georgia records.
WHEREAS, Borrower and Holder did modify the Note by First
Modification to First Mortgage (Security Deed) Real Estate
Note dated as of November 1, 1992, which modification
provided, among other things, for a change in interest
rate, change in payment terms, and a change in final maturity
of payment; and
WHEREAS, Borrower and Holder wish to again modify the Note
by this Second Modification for the purpose of extending
the final maturity for the payment of the Note.
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower
and Holder hereby agree that the Note shall be modified
as follows:
1. Borrower and Holder hereby acknowledge that ONE
MILLION SIX HUNDRED
TEN THOUSAND AND NO/100 ($1,610,000.00) DOLLARS have been
advanced under the Note and that the outstanding principal
balance is $1,077,613.77 as of September 30, 1995.
2. The term of the Note is modified as follows:
Notwithstanding any provisions to the contrary contained
in the Note, the Note shall have a final maturity
thereof of December 31, 1996.
3. Payment terms of the Note shall be modified as follows:
Notwithstanding any provisions contained in the Note to
the contrary, the Note is payable in monthly
installments of principal and interest in an amount of
$12,906.94, due and payable on the first day of each
month, commencing on October 1, 1995, and continuing on
the first day of each month thereafter, with the
final payment of the then outstanding principal
balance, together with any accrued and unpaid interest
being due and payable on December 31, 1996.
4. Except as expressly modified herein, the Note,
including the non-
recourse provisions set forth therein, shall otherwise remain
in full force and effect.
5. This Second Modification contains the complete
understanding of the
parties with respect to the subject matter thereof,
supersedes all prior negotiations and proposals with
respect thereto, and may not be amended except in writing
executed by the party to be bound hereunder. This Second
Modification shall be governed by and construed, interpreted
and enforced in accordance with the laws of the State of
Georgia without reference to
Georgia conflicts of law principles. The parties hereto
waive application of the legal principle that an
instrument is to be construed against the party drafting it.
6. Borrower and Holder hereby agree that this Second
Modification shall
not constitute a novation of the Note nor release any
security given to secure the repayment of the Note.
7. This Second Modification shall be binding upon and
shall inure to the
benefit of the parties hereto, and their respective
heirs, successors, legal representatives, and permitted
assigns, whether voluntary by act of the parties, or
involuntary by operation of law, as the case may be.
8. Borrower acknowledges and agrees that it shall perform
all of its
obligations under the Loan Documents and this Second
Modification, including, without limitation, payment of the
principal and interest, and that Borrower does not have,
shall not assert and hereby voluntarily and knowingly
waives any claim, right, defense, setoff, cause of action
or counterclaim that would permit Borrower to avoid or
reduce, in whole or in part, any of such obligations.
Borrower further acknowledges and agrees that any failure
on its part to perform any of its obligations under this
Second Modification shall, without notice to any
person or entity, constitute a default and event of default
under the Note.
IN WITNESS WHEREOF, the undersigned Borrower has, by its
duly authorized officer, hereunto executed and delivered
this Second Modification to Holder and the undersigned Holder
by its duly
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permitted assigns, whether voluntary by act of the parties,
or involuntary by operation of law, as the case may be.
9. Borrower acknowledges and agrees that it shall perform
all of its
obligations under the Loan Documents and this First
Modification, including, without limitation, payment of the
principal and interest, and that Borrower does not have,
shall not assert and hereby voluntarily and knowingly
waives any claim, right, defense, setoff, cause of action
or counterclaim that would permit Borrower to avoid or
reduce, in whole or in part, any of such obligations.
Borrower further acknowledges and agrees that any failure
on its part to perform any of its obligations under this
First Modification shall, without notice to any
person or entity, constitute a default and event of
default under the Note. Nothing herein shall be construed
to create any rights in Holder greater than those
provided in the Note, as modified by paragraphs numbered 1 -
4 above.
IN WITNESS WHEREOF, the undersigned Borrower has, by its
duly authorized trustee, hereunto executed and delivered
this First Modification to Holder and the undersigned
Holder by its duly authorized officers has hereunto
executed this First Modification under seal all as of the
day and year first above written.
BORROWER:
GEORGIA PROPERTIES, INC.,
a Delaware Corporation
By: /s/ Herbert J. Jaffe
Its: President
HOLDER:
LIFE INSURANCE COMPANY OF
GEORGIA, a Georgia
corporation
By: /s/ Reggie Dawson
Its.: Senior Vice
President
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
SECOND MODIFICATION TO DEED TO SECURE DEBT AND
SECURITY AGREEMENT (Original Deed to Secure Debt
and Security
Agreement recorded at Deed Book 6791,
Page 138, Fulton County, Georgia
Records)
THIS SECOND MODIFICATION TO DEED TO SECURE DEBT AND
SECURITY AGREEMENTS (The "Second Modification") is made and
entered into as of the 30th day of September, 1995, by
and between GEORGIA PROPERTIES, INC., a Delaware
corporation (hereinafter "Grantor"), and LIFE INSURANCE
COMPANY OF GEORGIA, a Georgia corporation (hereinafter
"Grantee"), whose mailing address is c/o ING NA Investment
Centre, 300 Galleria Parkway, N.W,, Suite 1200, Atlanta,
Georgia 30339-3149.
W I T N E S S E T H :
WHEREAS, MARTIN L. ROSENZWEIG, GEORGE H. KLEIN, FRANK H.
McLAUGHLIN, HOWARD T. JASKOL and GORDON D. WILLIAMS, not
individually, but as trustees of University Real Estate
Trust (the "Trust") did execute and deliver to Grantee a
Deed to Secure Debt and Security Agreement, dated September
14, 1977, recorded at Deed Book 6791, Page 138, Fulton
County, Georgia Records (The "Security Deed"); and
WHEREAS, the Security Deed was given to secure a certain
First Mortgage (Security Deed) Real Estate Note from
Grantor to Grantee, dated September 14, 1977, in the
original principal amount of ONE MILLION SIX HUNDRED TEN
THOUSAND AND NO/100 DOLLARS ($1,610,000.00), bearing
interest as provided therein, and becoming due and payable
on or before October 1, 1992 (the "Note"); and
WHEREAS, Grantor succeeded to the interest of the Trust as
owner of the real property encumbered by the Security Deed
pursuant to that certain Deed under Power of Sale dated
March 3, 1992, and recorded in Deed Book 15047, Page 309,
aforesaid records.
WHEREAS, Grantor and Grantee did modify the Note by First
Modification to First Mortgage (Security Deed) Real Estate
Note, dated as of November 1, 1992, which modification
provided, among other things, for a change in interest
rate, change in payment terms, and a change in final maturity
of payment; and
WHEREAS, Grantor and Grantee did modify the Deed to
Secure Debt and Security Agreement by First Modification
to Deed to Secure Debt and Security Agreement, dated as
of November 1, 1992 and recorded at Deed Book 16255, Page
186, Fulton County, Georgia Records; and
WHEREAS, Grantor and Grantee have modified the Note by
Second Modification to First Mortgage (Security Deed) Real
Estate Note dated as of the date hereof, which
modification provided, among other things, for a change in
final maturity of payment; and
WHEREAS, Grantor and Grantee wish to again modify the
Security Deed to confirm that the Security Deed secures
the Note as modified by the Second Modification to First
Mortgage (Security Deed) Real Estate Note.
NOW, THEREFORE, for and in consideration of the foregoing
premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Grantor and Grantee hereby agree that the Security Deed shall
be modified as follows:
1. The Term "Note" as used in this Agreement shall refer
to and mean the
First Mortgage (Security Deed) Real estate Note dated
September 14, 1977 from the Trust to Assignee in the
original principal amount of ONE MILLION SIX HUNDRED TEN
THOUSAND AND NO/100 DOLLARS ($1,610,000.00), as modified by
First Modification to First Mortgage (Security Deed) real
Estate Note dated as of November 1, 1992 between Grantor
and Grantee and as modified by Second Modification to
First Mortgage (Security Deed) Real estate Note dated as
of September 30, 1995 between Grantor and Grantee, with
principal and interest thereon, all being due and payable on
or before December 31, 1996.
2. The Security Deed shall secure all indebtedness
evidenced by the Note
referred to in paragraph 1 hereof as modified,
including all other indebtedness as that term is used in
the Security Deed, the principal indebtedness as of
September 30, 1995 being $1,077,613.77.
3. Except as herein expressly amended, each and every
term, condition,
warranty and provision of the Security Deed, including the
non-recourse provisions set forth therein, shall remain
unchanged and, except as otherwise disclosed to Grantee,
is hereby ratified, confirmed and approved by Grantor.
Nothing contained herein shall be construed to alter or
affect the priority of the lien or title, created by the
Security Deed, as amended hereby, in favor of any junior
encumbrances, grantee or purchaser, or any purchaser
acquiring or holding an interest in the Secured Property, and
any provision of this Second Modification construed to be in
conflict with the desire of Grantee that the lien of the
Security Deed, as amended hereby, be maintained and
preserved prior to (i) any and all encumbrances affecting
the Secured Property subsequent to the execution of the
Security Deed; and (ii) any and all encumbrances affecting
the Secured Property arising prior to the execution of the
Security Deed which have been subordinated to the lien of
the Security Deed, shall, at Grantee's option, be void and
of no force or effect, it being the expressed declared
intention of
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Grantee that no novation of the Security Deed be created by
this Second Modification.
4. The Security deed, as amended by this Second
Modification contains the complete understanding of the
parties with respect to the subject matter thereof,
supersedes all prior negotiations and proposals with
respect thereto, may not be amended except in writing
executed by the party to be bound hereunder. This Second
Modification shall be governed by and construed,
interpreted and enforced in accordance with the laws of
the State of Georgia without reference to Georgia conflicts
of law principles. The parties hereto waive application
of the legal principle that an instrument is to be
construed against the party drafting it.
5. This Second Modification shall binding upon and shall
inure to the
benefit of the parties hereto, and their respective
heirs, successors, legal representatives, and permitted
assigns, whether voluntary by act of the parties, or
involuntary by operation of law, as the case may be.
IN WITNESS WHEREOF, the Grantor by its duly authorized
officer has hereunto executed and delivered this Second
Modification to Grantee and the undersigned Grantee by
its duly authorized officers has hereunto executed this
Second Modification under seal all as of the day and year
first above written.
GRANTOR:
GEORGIA PROPERTIES, INC.,
a Delaware Corporation
By: /s/ Herbert J. Jaffe
Herbert J. Jaffe,
President
[CORPORATE SEAL]
Signed, sealed and delivered
this 26 day of September,
1995, in the presence of:
/s/ Clarke
Unofficial Witness
/s/ Claudia Courtade
Notary Public
My Commission Expires:
12-26-98
[Notarial Seal]
[SIGNATURES CONTINUED ON FOLLOWING PAGE] -3-
[SIGNATURES CONTINUED ON PREVIOUS PAGE]
GRANTEE:
LIFE INSURNACE COMPANY OF
GEORGIA a Georgia
Corporation
By:/s/
Its:
[CORPORATE SEAL]
Signed, sealed and delivered
this __ day of September,
1995, in the presence of:
/s/
Unofficial Witness
/s/
Notary Public
My Commission Expires:
[Notarial Seal]
PROMISSORY NOTE
$1,301,204.76 March 29, 1996
San Francisco, California
FOR VALUE RECEIVED, the undersigned, WILLIAM R. DIXON, JR., an individual
resident of California (hereinafter referred to as the "Maker"), promises
to pay to the order of GEORGIA PROPERTIES, INC., a Delaware corporation
(hereinafter referred to as "Payee"; the Payee, together with any
subsequent holder hereof, hereinafter referred to as the "Holder"), without
grace, at the office of Payee, 50 California Street, Suite 3300, San
Francisco, California 94111, or at such other place as the Holder may
designate to the Maker in writing from time to time, the principal sum of
ONE MILLION, THREE HUNDRED ONE THOUSAND, TWO HUNDRED FOUR AND 76/100THS
DOLLARS ($1,301,204.76), or so much thereof as shal1 have been advanced,
together with interest thereon on the unpaid principal balance from the
date hereof or so much thereof as shall remain outstanding and unpaid, at
the rates hereinafter set forth, in lawful money of the United States of
America, which shall at the time of payment be legal tender in payment of
all debts and dues,
public and private; such principal and interest at the rate hereinafter set
forth to be paid in the manner following, to wit:
From and after the date hereof (until default or maturity as herein
provided), interest on The outstanding principal balance shall accrue
at the rate of eight percent (8%) per annum. Interest at said rate
shall be due and payable, in arrears, monthly, commencing on the first
day of each and every calendar month during the term hereof. A payment
of principal in the amount of $250,000.00, together with interest as
aforesaid, shall be due and payable on May 1, 1996. The entire
remaining outstanding principal balance, together with all accrued but
unpaid interest and all other sums due thereunder, shall be due and
payable in full on December 31, 1996.
The indebtedness evidenced by this Note and the obligations created hereby
are secured by, among other things, that certain Second Priority Deed to
Secure Debt and Security Agreement (hereinafter referred to as the "Deed to
Secure Debt") entered into on even date herewith between the Maker, as
"Grantor" therein, and the Payee, as "Grantee" therein, concerning the
Premises therein, described (hereinafter referred to as the "Premises"),
including, but not limited to, certain real property located in Fulton
County, Georgia, which Deed to Secure Debt is to be filed for record on or
about the date hereof with the Office of the Clerk of the Superior Court of
Fulton County, Georgia.
It is hereby expressly agreed that should any default be made in the
payment as stipulated above of either principal or interest, or should any
default be made in the performance of any of the covenants or conditions
contained in the Deed to Secure Debt, or in
1
any, other document given as security for the indebtedness evidenced
hereby, then the principal of this obligation or any unpaid part thereof
and all interest accrued thereon and any other sums advanced by the Holder
under the Deed to Secure Debt shall, at the option of the Holder, and
without notice to the Maker (except as may specifically be set forth in the
Deed to Secure Debt), at once become due and payable and may be collected
forthwith, regardless of the stipulated date of maturity. Interest shall
accrue on the outstanding principal balance of this Note from the date of
any default hereunder, regardless of whether or not there has been an
acceleration of the payment of principal as set forth herein, at a rate of
twelve percent (12%) per annum. Time is of the essence of this Note. If,
and as often as this Note is given to an attorney for collection or to
defend or enforce any of Holder's rights hereunder or under any other
document executed and delivered in connection with the loan, the Maker
agrees to pay the Holder's attorney's fees not to exceed fifteen percent
(15%) of the amount of principal and interest then due, and all court costs
and other expenses incurred in connection therewith. All payments made
under this Note shall be applied first to the payment of all attorney's
fees, costs and expenses due hereunder and under any other documents
executed in connection with the loan, then to the payment of accrued but
unpaid interest, and finally to the payment of the outstanding principal
balance of the indebtedness evidenced by this Note.
Notwithstanding any provisions herein contained to the contrary, in the
event a default should occur under this instrument or the Deed to Secure
Debt securing this instrument, the Holder shall provide the Maker with
written notice of such default and allow the Maker fifteen (15) days from
receipt of such notice to cure same before the Holder may accelerate the
indebtedness evidenced hereby or take any action under the power of sale
contained in such Deed to Secure Debt.
The Maker shall have the privilege of prepaying this Note, in whole or in
part, at any time and from time to time, without any penalty or premium
whatsoever, but with interest accrued to the date of prepayment on the
outstanding principal balance.
It is not the intention of Holder to collect, contract for, charge, demand
or receive any interest on account of this Note which is in excess of the
maximum lawful rate of interest permitted under applicable law. Anything in
this Note, the Deed to Secure Debt or any other agreements or arrangements
by Maker in connection with the indebtedness evidenced hereby to the
contrary notwithstanding, if from any circumstances whatsoever fulfillment
of any provision of any of the foregoing documents or agreements at the
time performance of any such provision shall be due, including the payment
of any fee or late charge to Holder, shall involve transcending the limit
of validity presently prescribed by any applicable usury statute or any
other applicable law with regard to obligations of like character and
amount, then ipso facto the
2
obligation to be fulfilled shall be reduced to the limit of such validity,
so that in no event shall exaction of interest be possible under any of the
aforesaid documents or agreements in excess of the limit of such validity,
but such obligation shall be fulfilled to the limit of such validity, and
if under any circumstances whatsoever interest in excess of the limit of
such validity will have been paid by Maker in connection with the
indebtedness evidenced by this Note, such excess shall be considered for
all purposes as payment on principal and applied by Holder to the unpaid
principal balance under this Note or refunded to Maker should such
principal be paid, the manner of handling such excess to be determined at
the Holder's election, and/or if any such excess interest shall have
accrued, Holder shall eliminate such excess interest so that under no
circumstances shall interest on the indebtedness evidenced by this Note
exceed the maximum lawful rate allowed by applicable law. To the extent
permitted by applicable law, the determination of the legal maximum amount
of interest shall at all times be made by amortizing, prorating, allocating
and spreading in equal parts during the period of the full stated term of
the loan all interest at any time contracted for, charged or received from
Maker in connection with the Loan so that the actual rate if interest on
the indebtedness is uniform throughout the term or period hereof.
The Maker waives and renounces for itself, its successors and assigns, all
rights to the benefits of any appraisement, exemption and homestead now
provided, or which may hereafter be provided by The Constitution and laws
of the United States if America and of any state thereof to and in all its
property, real and personal, against the enforcement and collection of this
obligation.
Except in the event of an action seeking recovery for waste, conversion or
fraud (and then only to the extent of such waste, conversion or fraud),
Holder agrees that: (i) it shall not seek or enforce any judgment for
deficiency against the Maker in any action
to foreclose the Deed to Secure Debt; and (ii) in the event any suit is
brought on this Note, the Deed to Secure Debt or any other document
evidencing or securing the indebtedness evidenced by this Note, any
Judgment obtained in a such a suit will be enforced only against the
Premises, the rents, issues and profits therefrom, the funds held by Holder
pursuant to the terms of the Deed to Secure Debt, including security
deposits, if any, and any insurance proceeds or condemnation awards payable
in respect to the Premises. Nothing contained herein: (a) shall constitute
a bar to, or otherwise limit Holder's recourse against Maker in the event
of any action seeking damages for or injunctive relief against waste,
conversion or fraud (to the extent of such waste, conversion or fraud), or
any action for damages or injunctive relief if and to
the extent: (i) Maker collects any rentals in advance in violation of the
provisions of the Deed to Secure Debt, or after Maker's default hereunder
or any of the documents evidencing or securing the indebtedness evidenced
by this Note (subject to any applicable
notice and cure periods contained therein, if any), Maker collects
3
rentals which are not properly applied to this Note or to the normal
operating expenses of the Premises; (ii) Maker holds security deposits and
does not promptly deliver same to Holder; or (iii) Maker comes into
possession of any casualty insurance awards or proceeds resulting from any
condemnation (or settlement in lieu of condemnation) of the Premises, or
any part thereof, and fails to promptly deliver all such sums to Holder;
(b) shall be deemed to be a release or impairment of the Indebtedness
evidenced hereby or of the lien of the Deed to Secure Debt upon the
Premises; (c) shall preclude Holder from foreclosing the Deed to Secure
Debt in case of any default thereunder or under this Note or under any of
the documents now or hereafter evidencing or securing the indebtedness
evidenced by this Note or from enforcing any of its rights except as stated
in this Paragraph; (d) shall prejudice the rights of Holder as to any of
the conditions of the Deed to Secure Debt or this Note; (e) shall prejudice
the right of Holder as against any entity other than Maker now or hereafter
liable under any guaranty, bond, policy of insurance or other agreement for
compliance with any of the terms, covenants or conditions of such guaranty,
bond, policy of insurance or other agreement or this Note, Deed to
Secure Debt of any other document; or (f) shall relieve Maker of any
personal liability arising out of the obligation to pay Holder's attorneys
fees, as set forth in the indemnities contained in the Deed to Secure Debt
or for the misapplication of trust funds, including, without limitation,
any insurance proceeds or condemnation awards of which Maker gains
possession or control.
This Note, the indebtedness evidenced hereby, and the obligations created
hereunder are made and intended as a contract under, and are to be
construed in accordance with, the laws of the State of Georgia.
This Note may not be changed orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, changes,
modification or discharge is sought.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors and assigns, whether voluntary by
operation of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the Maker has caused these presents to be executed,
sealed and delivered, all as of the date first above written.
MAKER:
/s/ William R. Dixon, Jr.
WILLIAM R. DIXON, JR. (SEAL)
4
AGREEMENT OF PURCHASE AND SALE OF STOCK
This Agreement is made as of October 30, 1995, among AMKO USA, Inc.
(Buyer), a Colorado corporation, which is an affiliate of AMKO
International B.V., which has its principal office at Postbus 10, 5330 AA
Kerkdriel, Kerkstraat 108, 5331 CJ Kerkdriel, The Netherlands, National
Capital Management Corporation (Shareholder), having its principal office
at 50 California St., San Francisco, California, and Jensen Corporation
(Corporation), a Delaware Corporation, having its principal office at 2775
Northwest 63rd Court, Fort Lauderdale, FL. 33309. Shareholder and
Corporation are collectively referred to in this Agreement as Selling
Parties.
Shareholder represents that it owns all the outstanding stock of
Corporation. Buyer desires to purchase from Shareholder and Shareholder
desires to sell to Buyer all the outstanding stock of Corporation (the
Shares); Corporation desires that this transaction be consummated. In
consideration of the mutual covenants, agreements, representations, and
warranties contained in this Agreement, the parties agree as follows:
ARTICLE ONE
PURCHASE AND SALE OF SHARES
1. Subject to the terms and conditions set forth in this Agreement, on
the Closing Date, Shareholder will transfer and convey the Shares to
Buyer, and Buyer will acquire the Shares from Shareholder.
2. Buyer shall pay $1,726,000 to Shareholder for the Shares, as follows:
a. $150,000 as a downpayment, the receipt of which is acknowledged;
b. $265,000 in the form of a bank cashier's check payable to the
order of Shareholder or by a bank wire transfer of funds to Shareholder's
account; and
c. $1,311,000 in the form of a promissory note executed by Buyer in
favor of Shareholder (Buyer's Note), dated as of the Closing Date. Buyer's
Note shall be in the form of Exhibit 1.
3. Buyer's Note shall be secured by a pledge of the Shares and by a
pledge of Corporation's accounts receivable and inventory under a security
agreement in the form of Exhibit 2, which shall be executed and delivered
by Buyer to Shareholder on the Closing Date. Shareholder shall be the
pledge holder, and Buyer shall deliver to Shareholder on the Closing Date
a
Agreement of Purchase and Sale of Stock Page 1 of
15
certificate or certificates representing the Shares, together with an
undated assignment of the Shares executed by Buyer in blank.
4. Buyer's Note shall be guaranteed by AMKO International B.V. in the
form of guaranty appearing in Exhibit 3, and Buyer shall cause AMKO
International B.V. to execute the guaranty as of the Closing Date. In
addition, Jan Oerlemans shall guaranty the first $585,000 of principal
payments required by the Buyer's Note and Buyer shall cause Jan Oerlemans
to execute the guaranty in the form of Exhibit 16 as of the Closing Date.
AMKO International B.V. shall also guaranty the first $765,000 of
principal payments required by the $337,650 note and the $765,000 note,
both payable by Corporation and described in paragraphs 6 and 7 below.
Buyer shall cause AMKO International B.V. to execute the guaranty in the
form of Exhibit 15 as of the Closing Date.
5. If this Agreement is not consummated, Shareholder shall, 12 months
after the execution of this Agreement, repay the amount of the downpayment
plus interest at the annual rate of Bank of America's prime rate plus two.
Shareholder shall pledge the stock of Corporation to secure Shareholder's
obligation to repay the downpayment. Shareholder shall execute a
promissory note in favor of Buyer in the form of Exhibit 4 and a security
agreement in the form of Exhibit 5. Buyer shall be the pledge holder, and
Shareholder shall deliver to Buyer upon execution of this Agreement a
certificate representing the. Shares, together with an undated assignment
of the Shares executed by Shareholder in blank.
6. At the Closing, on one business day notice from Buyer, Shareholder
agrees to loan a maximum of $765,000 to Corporation. Any such loan shall
be repaid plus annual interest at the rate of 10%. Interest shall accrue
between November 1, 1995 and March 31, 1996 and shall be paid on February
1, 1998. Principal payments of $25,000 plus accrued interest will be
required monthly between May 1, 1996 and April 1, 1997. Principal payments
of $50,000 plus accrued interest will be required monthly between May 1,
1997 and January T, 1998. All unpaid principal and interest will be due
on February 1, 1998. All advances made to Corporation by Shareholder
subsequent to September 1, 1995 shall be considered part of the obligation
to lend $765,000. Exhibit 6 is a list of all such advances as of the
Closing. Corporation shall execute a promissory note in the form of
Exhibit 7 evidencing the loan and the note shall be amended as additional
advances are made. The note shall be secured by Corporation's inventory
and accounts receivable and Corporation shall execute a security agreement
in the form of Exhibit 8.
7. The parties agree that the Buyer will acquire ownership of the
Corporation, including all of its assets and liabilities, with the
exception of the assets and liabilities of the
Agreement of Purchase and Sale of Stock Page 2 of
15
Corporation's "compactor division." Prior to the closing Shareholder will
forgive all accrued management fees owed by Corporation to Shareholder and
any other indebtedness or obligation owed by Corporation to Shareholder or
any affiliate or subsidiary of Shareholder, except for advances made
pursuant to paragraph 6 above and except for the existing intercompany
loan in the amount of $337,650. The parties agree that, in addition to the
advances made pursuant to paragraph 6 above, Corporation owes $337,650 to
Shareholder. Buyer will cause Corporation to pay this obligation to
Shareholder plus interest at the annual rate of Bank of America's prime
rate plus 2%. Interest shall accrue between November 1, 1995 and March 31,
1996 and shall be paid on May 1, 1997. Beginning on May 1, 1996 and
continuing through April 1, 1997, monthly payments of $25,000 plus accrued
interest shall be paid. All unpaid principal and interest shall be due on
May 1, 1997. This obligation is evidenced by a promissory note, which is
attached as Exhibit 9 and which is secured by the inventory and
receivables of Corporation and the Shares pursuant to the security
agreement attached as Exhibit i0. Buyer and Corporation agree that
Corporation shall not make any payments or distributions to Buyer, AMKO
International B.V. or any affiliate of Buyer or AMKO International B.V.
until the $337,650 note referred to in this paragraph and the $765,000
note referred to in paragraph 6 have been paid in full. The preceding
sentence shall not restrict Corporation from purchasing, for fair and
reasonable value, goods and services in the ordinary course of business.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
OF SELLING PARTIES
8. Selling Parties, jointly and severally, represent and warrant that:
a. Corporation is a corporation duly organized, validly existing,
and in good standing under the laws of Delaware, is in good standing under
the laws of Florida and all other jurisdictions in which it conducts
business, has all necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it;
b. The authorized capital stock of Corporation consists of 1500
shares of no par common stock, of which 900 shares (the Shares) are
outstanding. All the Shares are validly issued, fully paid, and
nonassessable, and such shares have been so issued in full compliance with
all federal and state securities laws. There are no outstanding
subscriptions, options, rights,. warrants, convertible securities, or
other agreements or
Agreement of Purchase and Sale of Stock Page 3 of
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commitments obligating Corporation to issue or to transfer from treasury
any additional shares of its capital stock of any class;
c. Shareholder is the owner, beneficially and of record, of all the
Shares free and clear of all liens, encumbrances, security agreements,
equities, options, claims, charges, and restrictions. Shareholder has full
power to transfer the Shares to Buyer without obtaining the consent or
approval of any other person or governmental authority. Immediately after
the Closing, Buyer shall have good and marketable title to the Shares,
free and clear of all liens, encumbrances, security agreements, equities,
options, claims, charges, and restrictions, other than as contemplated by
this Agreement.
9. Since January 1, 1995 with respect to subparagraphs a through i and
since July 1, 1995 with respect to subparagraphs j through p, there has
not been any:
a. Transaction by Corporation except in the ordinary course of
business as conducted on that date;
b. Destruction, damage to, or loss of any asset of Corporation
(whether or not covered by insurance) that materially and adversely
affects the financial condition, business, or prospects of Corporation;
c. Revaluation by Corporation of any of its assets;
d. Declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of Corporation, or any direct
or indirect redemption, purchase, or other acquisition by Corporation of
any of its shares of capital stock, excluding payment of intercompany
debt;
e. Sale or transfer of any asset of Corporation, except in the
ordinary course of business;
f. Loan by Corporation to any person or entity, or guaranty by
Corporation of any loan;
g. Mortgage, pledge, or other encumbrance of any asset of
Corporation other than as provided in this Agreement and other than
Corporation's computer lease with Barnett Bank;
h. Waiver or release of any right or claim of corporation, except
in the ordinary course of business;
i. Issuance or sale by Corporation of any shares of its capital
stock of any class, or of any other of its securities;
Agreement of Purchase and Sale of Stock Page 4 of
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j. Commencement or notice or threat of commencement of any
governmental proceeding against or investigation of Corporation or its
affairs;
k. To the best of Shareholder's knowledge, the books and records of
Corporation contain a complete and accurate description, and specify the
location of all tangible personal property owned by, in the possession of,
or used by Corporation in connection with its business, work in process,
and finished goods;
l. Corporation has good and marketable title to all its assets and
interests in assets, whether real, personal, mixed, tangible, or
intangible, which constitute all the assets and interests in assets that
are used in the business of Corporation. All these assets are free and
clear of restrictions on or conditions to transfer or assignment, and free
and clear of mortgages, liens, pledges, charges, encumbrances, equities,
claims, easements, rights of way, covenants, conditions, or restrictions,
except for (1) the lien of current real estate taxes not yet due and
payable; (2) possible minor matters that, in the aggregate, are not
substantial in amount and do not materially detract from or interfere with
the present or intended use of any of these assets or materially impair
business operations; (3) those pledges provided in this Agreement; and (4)
Corporation's computer lease with Barnett Bank. All real property and
tangible personal property of Corporation is in good operating condition
and repair, ordinary wear and tear excepted. Corporation is in possession
of all premises leased to it from
others;
m. To the best of Shareholder's knowledge and after due inquiry,
except as disclosed in Exhibit 11, Corporation has not received notice of
any violation of any applicable federal, state, or local statute, law, or
regulation (including, without limitation, any applicable building,
zoning, environmental protection, or other law, ordinance, or regulation)
affecting its properties or the operation of its business;
n. The consummation of the transactions contemplated by this
Agreement will not result in or constitute any of the following: (1) a
breach of' any term or provision of this Agreement; (2) a default or an
event that, with notice or lapse of time or both, would be a default,
breach, or violation of the articles of incorporation-or bylaws of
Corporation or Shareholder or any lease, license, promissory note
conditional sales contract, commitment, indenture, mortgage, deed of
trust, or other agreement, instrument, or arrangement to which Corporation
or Shareholder is a party or by which it or its property is bound; (3) an
event that would permit any party to terminate any agreement or to
accelerate the maturity of any indebtedness or other obligation of
Corporation or Shareholder;
Agreement of Purchase and Sale of Stock Page 5 of
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or (4) the creation or imposition of any lien, charge, or encumbrance
on any of the properties of Corporation or Shareholder;
o. Other event of any type caused or known to either of the Selling
Parties adversely affecting in a material respect the results of
operations of the business or financial condition of the Corporation;
p. Addition to, or deletion from, the assets reflected on the
Corporation's financial statements, except those occurring in the ordinary
course of business.
10. Selling Parties have the right, power, legal capacity, and authority
to enter into, and perform their respective obligations under, this
Agreement; and no approvals or consents of any persons other than Selling
Parties are necessary in connection with it. The execution and delivery
of this Agreement by 'Corporation has been duly authorized by all
necessary corporate action.
11. Selling Parties will furnish to Buyer for its examination (1)
copies of the articles of incorporation and bylaws of Corporation; (2) the
minute books of Corporation containing all records required to be set
forth of all proceedings, consents, actions, and meetings of the
shareholders and boards of directors of Corporation; (3) the stock
transfer books of Corporation setting forth all transfers of any capital
stock; (4) Shareholder's consolidated and consolidating balance sheet as
of December 31, 1994 and 1993 and consolidated and consolidating
statements of operations, shareholders' equity, and cash flows for each of
the two years in the period ended December
31, 1994, all consolidated statements as audited and certified by Ernst &
Young LLP; and (5) Corporation's unaudited balance sheet and income
statement as of December 31, 1994 and June 30, 1995.
12. To the best of Shareholder's knowledge, none of the representations
and warranties made by Shareholder, or made in any certificate or
memorandum furnished or to be furnished by it, contains or will contain
any untrue statement of a material fact, or omits to state any material
fact necessary to make the statements made, in the light of the
circumstances under which they were made, not misleading.
13. There is no litigation, arbitration, governmental investigation or
proceeding pending against the Corporation, its properties, or business,
except as disclosed in Exhibit 12. To the best of the Selling Parties'
knowledge and excluding claims made by vendors, other than written claims
made by attorneys for vendors, which have not been paid promptly by
Corporation, there is no litigation, arbitration, governmental
investigation, or proceeding threatened against or relating to the
corporation, its
Agreement of Purchase and Sale of Stock Page 6 of
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properties or business. The Corporation is not subject to, nor in default
of, any order or award of any court, arbiter or governmental body,
domestic or foreign.
14. The Corporation does not have any deferred compensation, profit
sharing or retirement arrangements, either legally binding or not,
relating to the employees of the Corporation, nor is it presently paying
any pension, deferred compensation or retirement allowance to any employee
of the Corporation.
15. The Corporation has not entered into any employment contracts.
16. The Corporation has not registered, is not the owner of and has not
been granted a license or right to use any Intellectual Property except as
disclosed in Exhibit 13. The term "Intellectual Property" shall mean
all patents, trademarks, service marks, registered designs, copyrights,
trade and business names, fictitious names, inventions, discoveries,
improvements, designs, techniques, computer programs, other confidential
processes and know-how and any licenses relating to the same (and any
applications for any or all of the above), which belong to the
Corporation. In addition, the Corporation has not infringed or violated in
any way any Intellectual Property right of others, and the Corporation has
not received any notice, except as disclosed in Exhibit 14, of any claim
or protest respecting any such violation or infringement.
17. To the best of Shareholder's knowledge after due inquiry, and except
as disclosed on Exhibits 11, 12, and 14, no claims. have been asserted to
either of the Selling Parties regarding the Corporation with respect to
any express or implied representation, warranty, agreement or guaranty
made or imposed or asserted to be imposed by operation of law in
connection with the Corporation, nor have any customers, employees or
other persons made any claim relating to any personal injury or damage or
loss to property caused by an employee or customer of. the Corporation or
the Corporation itself.
18. No insolvency proceedings, including bankruptcy, receivership,
reorganization, merger, consolidation, composition or arrangement with
creditors are pending or threatened against, or contemplated by the
Corporation.
19. The Corporation has filed all federal, state and local tax returns
required to be filed in connection with its business and has timely paid
all taxes shown to be due on such returns as well as all other taxes,
assessments, governmental charges, penalties, fines and interest which
have become due.
Agreement of Purchase and Sale of Stock Page 7 of
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20. To the best of Shareholder's knowledge after due inquiry, the
Corporation has all licenses, permits, bonds and insurance necessary to
operate its business.
21. The Corporation has no subsidiaries.
22. None of the Corporation's employees are members of any union nor has
any union approached any of its employees. In addition, the Corporation
does not currently, nor has it ever, experienced any labor trouble which
has had or does have any adverse effect on the financial condition or
earnings of the Corporation.
23. To the best of Shareholder's knowledge, all property of the
Corporation, whether owned or leased (the "Premises"), is in full
compliance with all federal, state and local environmental laws and
regulations, including but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and the
Superfund Amendments and Reauthorization Act of 1986, as amended. No
hazardous materials, substances, waste or other environmentally-regulated
substances (including without limitation, any materials containing
asbestos) are located on, in or under any of the Premises or used in
connection with the Premises or the Corporation's business. Shareholder
has 'fully disclosed to Buyer in Exhibit 11 the existence, extent and
nature of any such hazardous material, substance, waste or other
environmentally-regulated substance currently present, or which the
Corporation is legally authorized and empowered to maintain, on, in or
under the Premises or use in connection therewith. The Corporation has
obtained and will maintain all licenses, permits and approvals required
with respect thereto, and is and will remain in full compliance with all
of the terms, conditions and requirements of such licenses, permits and
approvals. Shareholder has provided Buyer with copies of all citations,
orders, notices or other governmental or other communications received
with respect to any hazardous materials, substances, waste or other
environmentally-regulated substance affecting the Premises.
24. To the best of Shareholder's knowledge after due inquiry, there is no
agreement pursuant to which Buyer or Corporation is required to pay any
brokerage fee or commission in connection with this Agreement.
ARTICLE THREE
BUYER'S REPRESENTATIONS AND WARRANTIES
25. Buyer represents and warrants that:
a. Buyer is a corporation duly organized, existing, and in good
standing under the laws of the State of Colorado. The
Agreement of Purchase and Sale of Stock Page 8 of
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execution and delivery of this Agreement and the consummation of this
transaction by Buyer have been duly authorized, and no further corporate
authorization is necessary on the part of Buyer.
b. No consent, approval, or authorization of, or declaration,
filing, or registration with, any governmental or regulatory authority is
required to be made or obtained by Buyer in connection with the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement.
ARTICLE FOUR
SELLING PARTIES' OBLIGATIONS BEFORE CLOSING
26. Selling Parties covenant that from the date of this Agreement until
the Closing:
a. Buyer and its counsel, accountants, and other representatives
shall have full access during normal business hours to all employees,
equipment, inventory, properties, books, accounts, records, contracts, and
documents of or relating to Corporation. Selling Parties shall timely
furnish or cause to be timely furnished to Buyer and its representatives
all data and information concerning the business, finances, and properties
of Corporation that may reasonably be requested.
b. Corporation will carry on its business and activities diligently
and in substantially the same manner as it previously has been carried out
and shall not make or institute any unusual or novel methods of
manufacture, purchase, sale, lease, management; accounting, or operation
that vary materially from those methods used by Corporation as of the date
of this Agreement.
c. To the best of Selling Parties' knowledge, all representations
and warranties of Selling Parties set forth in this Agreement will also be
true and correct as of the Closing Date as if made on that date, except to
the extent that any of them may become untrue because of events beyond the
control of Selling Parties, who are unable to make them true as of the
Closing Date despite their reasonable efforts to do so. In any such event,
the Selling Parties shall immediately notify Buyer in writing, providing
reasonable details of the event.
ARTICLE FIVE
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
27. The obligations of Buyer to purchase the Shares under this Agreement
are subject to the satisfaction, at or before the
Agreement of Purchase and Sale of Stock Page 9 of
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Closing, of all the conditions set out below in this paragraph. Buyer may
waive any or all of these conditions in whole or in part without prior
notice.
28. Except as otherwise permitted by this Agreement, all representations
and warranties by each of the Selling Parties in this Agreement, or in any
written statement that shall be delivered to Buyer by any of them under
this Agreement, shall be true on and as of the Closing Date as though made
at that time.
29. Selling Parties shall have performed, satisfied, and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by them, or any of them, on or before the
Closing Date.
ARTICLE SIX
CONDITIONS PRECEDENT TO SHAREHOLDER'S PERFORMANCE
30. The obligations of Shareholder to sell and transfer the Shares under
this Agreement are subject to the satisfaction, at or before the Closing,
of all the following conditions. Shareholder may waive any or all of these
conditions in whole or in part without prior notice.
31. All representations and warranties by Buyer contained in this
Agreement or in any written statement delivered by Buyer under this
Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of that date.
32. Buyer shall have performed and complied with all covenants and
agreements and satisfied all conditions that it is required by this
Agreement to perform, comply with, or satisfy before or at the Closing.
ARTICLE SEVEN
THE CLOSING
33. The transfer of the Shares by Shareholder to Buyer (the Closing)
shall take place at the offices of Steven C. Elkin, Tripp, Scott, Conklin
& Smith, 110 S.E. 6th St., Fort Lauderdale, FL., 33301 at 10 a.m. local
time, on November 3, 1995, or at such other time and place as the parties
may agree to in writing (the Closing Date).
34. At the Closing, Shareholder shall deliver to Buyer the following
instruments, in form and substance satisfactory to Buyer:
Agreement of Purchase and Sale of Stock Page 10
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a. A certificate or certificates representing the Shares,
registered in the name of Shareholder, duly endorsed by Shareholder for
transfer or accompanied by an assignment of the Shares duly executed by
Shareholder, with signatures guaranteed by a member of the New York Stock
Exchange or by a bank or trust company. On submission of that certificate
or certificates to Corporation for transfer, Corporation shall issue to
Buyer a certificate representing the Shares, registered in the Buyer's
name;
b. The Corporation's corporate minute book, corporate seal,
articles of incorporation, bylaws, stock ledger, stock certificates (both
canceled and unissued), minutes of meetings of shareholders, board of
directors and committees of directors.
c. A resolution of Shareholder and the board of directors of
Shareholder approving this Agreement.
35. At the Closing, Buyer shall deliver to Shareholder the following
instruments and documents:
a. A bank cashier's check or bank wire transfer in the amount of
$265,000;
b. Buyer's note dated the Closing Date, in the principal amount of
$1,311,000 in the form of Exhibit 1;
c. A security agreement executed by Buyer, dated the Closing Date,
in the form of Exhibit 2;
d. Guaranties executed by AMKO INTERNATIONAL B.V. in the form of
Exhibit 3 and 15 and a guaranty executed by Jan Oerlemans in the form of
Exhibit 16;
e. Jensen Corporation's note in the form of Exhibit 7 in the
principal amount of the advances made as of the Closing as referred to in
paragraph 6 above; and
f. A security agreement executed by Jensen Corporation, dated the
Closing Date, in the form of Exhibit 8.
ARTICLE EIGHT
INDEMNIFICATION
36. Shareholder shall indemnify, defend and hold harmless Buyer, its
shareholders, directors, officers, employees and agents, and AMKO
INTERNATIONAL B.V., its shareholders, directors, officers, employees and
agents from and against any and all claims, damages, actions, demands,
liability, suits, proceedings, penalties, taxes, fines, costs and expenses
(including attorneys' fees for all pretrial, trial, post trial and
appellate work)
Agreement of Purchase and Sale of Stock Page 11
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relating to (i) any breach of this Agreement by any of the Selling
Parties; (ii) any failure or material delay by Shareholder in advancing
any funds pursuant to Shareholder's loan to the Corporation pursuant to
Section 6 of this Agreement, and (iii) any claim for any finder's fee,
brokerage fee or other commission arising by reason of any services
rendered with respect to this Agreement or any transactions contemplated
hereby. The obligations under this section shall be joint and several
between Shareholder and Corporation, except that upon closing, the
obligations under this section shall be solely that of Shareholder. This
section shall survive closing.
ARTICLE NINE
FORM OF AGREEMENT
37. Shareholder shall pay any and all documentary stamps and other taxes
payable in connection with the promissory notes issued pursuant to this
Agreement. Shareholder shall also pay all fees necessary to file any UCC
financing statements and any other document perfecting its security
interest. Buyer shall pay all fees necessary to file any UCC financing
statements and any other document perfecting its security interest.
38. The subject headings of the paragraphs and subparagraphs of this
Agreement are included for convenience only and shall not affect the
construction or interpretation of any of its provisions.
39. This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all prior
and contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement
shall be binding unless executed in writing by all the parties. No waiver
of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party taking the waiver.
40. 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.
ARTICLE TEN
PARTIES
41. Nothing in this Agreement, whether express or implied, intended to
confer any rights or remedies under or by reason
Agreement of Purchase and Sale of Stock Page 12
of 15
of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action over or against any party
to this Agreement.
42. This Agreement shall be binding on, and shall inure to the benefit
of, the parties to it and their respective heirs, legal representatives,
successors, and assigns; provided, however, that Buyer may not assign any
of its rights under this Agreement, except to a wholly owned subsidiary
corporation of Buyer. No such assignment by Buyer to its wholly owned
subsidiary shall relieve Buyer of any of its obligations or duties under
this Agreement.
ARTICLE ELEVEN
REMEDIES
43. Any dispute arising out of or relating to this Agreement, the terms
or provisions hereof, any writings executed hereto, or any purported
breach hereof shall be settled by arbitration in Broward County, Florida,
in accordance with the commercial arbitration rules of JAMS/ENDISPUTE then
in effect, and judgment on the award rendered by the arbitrator(s)
selected therein may be enforced in any Florida court having jurisdiction
to enforce or vacate such award. The parties agree that the matter may be
resolved by one mutually agreeable arbitrator. In the event the parties
are unable to agree on one arbitrator, then each party shall pick an
arbitrator and they shall in turn pick a third arbitrator. The parties
shall share the costs of the arbitrators.
44. Each party's obligation under this Agreement is unique. if any party
should default in its obligations under this Agreement, the parties each
acknowledge that it would be extremely impracticable to measure the
resulting damages; accordingly, the nondefaulting party or parties, in
addition to any other available rights or remedies, may sue in equity for
specific performance, and the parties each expressly waive the defense
that a remedy in damages will be adequate. Notwithstanding any breach or
default by any of the parties of any of their respective representations,
warranties, covenants, or agreements under this Agreement, if the purchase
and sale contemplated by it shall be consummated at the Closing, each of
the parties waives any rights that it or they may have to rescind this
Agreement or the transaction consummated by it; provided, however, that
this waiver shall not affect any other rights or remedies available to the
parties under this Agreement or under the law.
Agreement of Purchase and Sale of Stock Page 13
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45. If any legal action or any arbitration or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the parties shall pay their own attorneys'
fees and other costs incurred in that action or proceeding and shall share
the cost of the arbitrators.
ARTICLE TWELVE
NOTICES
46. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, or the date of receipt if sent by facsimile or overnight
courier, and properly addressed as follows:
To Selling Parties at: National Capital Management Corporation
50 California Street, Suite 3300
San Francisco, CA 94111
Jeff Goldstein
c/o Resource Holdings, Ltd.
520 Madison Avenue, 40th Floor
New York, NY 10022
To Buyer at: AMKO USA, Inc.
c/o AMKO International B.V.
Postbus 10
5330 AA Kerkdriel,
Kerkstraat 108,
5331 CJ Kerkdriel
The Netherlands
Steven C. Elkin
Tripp, Scott, Conklin & Smith
110 S.E. 6th Street
Fort Lauderdale, FL 33301
Any party may change its address or .the person entitled to receive notice
for purposes of this paragraph by giving the other parties written notice
of the new address or name in the manner set forth above.
Agreement of Purchase and Sale of Stock Page 14
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ARTICLE THIRTEEN
GOVERNING LAW
47. This Agreement shall be construed in accordance with, and governed
by, the laws of the State of Florida as applied to contracts that are
executed and performed entirely in Florida.
ARTICLE FOURTEEN
SEVERABILITY
48. If any provision of this Agreement is held invalid or 'unenforceable
by any court of final jurisdiction, it is the intent of the parties that
all other provisions of this Agreement be construed to remain fully valid,
enforceable, and binding on the parties.
ARTICLE FIFTEEN
SIGNATURES
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the day and year first above written.
SHAREHOLDER: NATIONAL CAPITAL MANAGEMENT CORPORATION
A Delaware Corporation
By /s/ Herbert J. Jaffe
Its President
BUYER: AMKO USA, Inc.
A Colorado Corporation
By /s/ Jan Oerlemans
Its Chairman of the Board
CORPORATION: JENSEN CORPORATION
A Delaware Corporation
By /s/ Howard Eglowstein
Its President
Agreement of Purchase and Sale of Stock Page 15
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EXHIBIT 1
PROMISSORY NOTE
$1,311,000 November __,
1995
FOR VALUE RECEIVED, AMKO USA, Inc. (the "Maker"), promises to pay to the
order of National Capital Management Corporation (the "Payee"), at San
Francisco, California, the principal sum of $1,311,000, in lawful monies
of the United States of America plus annual interest at the Bank of
America's prime rate plus 2%. Payments shall be made as follows:
1. An interest payment shall be paid on December 1, 1995.
2. Principal payments of $50,000 plus accrued interest shall be paid
monthly on the first day of 'each month between January 1, 1996 and March
1, 1996.
3. Principal payments of $97,500 plus accrued interest shall be paid
monthly on the first day of each month between April 1, 1996 and June 1,
1996.
4. A principal payment of $142,500 plus accrued interest shall be paid
on July 1, 1996.
5. Interest only payments shall be paid monthly on the first day of
each month between August 1, 1996 and November 1, 1996.
6. Principal payments of $50,000 plus accrued interest shall be paid
monthly on the first day of each month between December 1, 1996 and May
1, 1997.
7. All unpaid principal and interest shall be paid on June 1, 1997.
The Maker waives presentment, demand for payment, notice of dishonor and
all other notices and demands in connection with the delivery,
acceptance, performance, default, endorsement or guarantee of this Note.
The Maker hereby waives any defense or right of offset against payment to
Payee or to any subsequent holder of this Note.
In the event (a) of the nonpayment of any installment hereunder and the
continuation of such default for a period of fifteen days thereafter, (b)
of the nonpayment of any installment in either (i) the promissory note
dated November __, 1995 in the principal amount of $765,000 between
Jensen Corporation as maker and National Capital Management Corporation
as payee, or (ii) the promissory note dated September 30, 1995 in' the
principal amount of $337,650 between Jensen Corporation as maker and
National Capital Management Corporation as payee, and the continuation of
Buyer's Promissory Note Page 1
of 3
such default for a period of fifteen days thereafter, or (c) that the
Maker shall enter into an assignment for the benefit of creditors or
admit in writing its inability to pay debts as they become due or shall
file a voluntary petition in bankruptcy or be adjudicated bankrupt or
insolvent or shall file any petition or answer seeking any arrangement,
composition, readjustment, dissolution or similar relief under present or
future statute, law or regulation or shall file any answer admitting or
shall fail to deny the material allegations of any petition filed against
it for any such relief or shall seek or consent to or act within the
appointment of any trustee or receiver for itself of any substantial part
of its property, then, and in any such event, the holder of this Note, at
its option, may (unless the default shall have theretofore been remedied)
by notice to the Maker, declare all installments under this Note
immediately due and payable, whereupon the same shall forthwith mature
and become due and payable, without presentment, protest or notice, all
of which are hereby waived.
It is understood and agreed that in the event of a default in payment of
this Note, then at the option of the holder, it may resort to legal
action for the collection of all sums due hereunder; and a failure to
assert any rights of holder shall not be deemed a waiver thereof.
This Note may not be changed or terminated orally, but only by an
agreement in writing and signed by the party against whom enforcement of
any waiver, change, modification or discharge is sought, with such
agreement being effective and binding only upon the attachment hereto.
This Note and the rights and obligations of Payee and the Maker shall be
governed and construed in accordance with the laws of the State of
Florida. Venue shall be in Broward County, Florida.
Any dispute arising out of or relating to this Agreement, the terms or
provisions hereof, any writings executed hereto, or any purported breach
hereof shall be settled by arbitration in Broward County, Florida, in
accordance .with the commercial arbitration rules of JAMS/ENDISPUTE then
in effect, and judgment on the award rendered by the arbitrator(s)
selected therein may be enforced in any Florida court having jurisdiction
to enforce or vacate such award. Each party shall bear its own costs,
including attorneys' fees, in maintaining and pursuing such arbitration
or any other proceedings and at levels of appeal. The parties agree that
the matter may be resolved by one mutually agreeable arbitrator. In the
event the parties are unable to agree on one arbitrator, then each party
shall pick an arbitrator and they shall in turn pick a third arbitrator.
The parties shall share the costs of the arbitrators.
Buyer's Promissory Note Page 2
of 3
This note shall be secured by the stock of Jensen Corporation and Jensen
Corporation's accounts receivable and inventory.
The full amount of this note is guaranteed by AMKO International B.V. Jan
Oerlemans has guaranteed the first $585,000 of principal payments of this
note.
PAYEE: NATIONAL CAPITAL MANAGEMENT CORPORATION
By /s/ Herbert J. Jaffe
Its President
MAKER: AMKO USA, INC.
By /s/ Jan Oerlemans
Its Chairman of the Board
Buyer's Promissory Note Page 3
of 3
EXHIBIT 16
GUARANTY OF NOTE
This Guaranty of Note ("Guaranty") made as of November __, 1995, by
and between National Capital Management Corporation, a Delaware
corporation, ("Lender") and Jan Oerlemans ("Guarantor"), having his
principal place of business at Postbus 10, 5330 AA Kerkdriel, Kerkstraat
108, 5331 CJ Kerkdriel, The Netherlands.
WHEREAS, Lender is contemplating making a $1,311,000 loan (the "Loan")
to AMKO USA, Inc. (the "Borrower").
WHEREAS, the Loan will be evidenced by a Promissory Note in the form
attached (the "Note"); and
WHEREAS, Lender is willing to enter into the Loan with Borrower only if
Guarantor agrees to guarantee the full, prompt, complete and faithful
performance and payment of the first $585,000 of principal payments
required by the Note and all other terms, covenants, conditions and
payments on Borrower's part to be performed or made under the Note.
NOW THEREFORE, in consideration of Lender's making the Loan, and other
good and valuable consideration, Guarantor hereby agrees as follows:
1. Guarantor hereby absolutely and unconditionally guarantees to
Lender: (i) the punctual payment, at Lender's address, as and when
due (whether by acceleration or otherwise) of the first $585,000 of
principal payments required by the Note after receiving five days prior
notice; and (ii) performance by Borrower, as and when required, of all
obligations pursuant to the Note.
2. Guarantor agrees that this Guaranty shall remain in full force and
effect and will not be discharged except by complete performance of the
first $585,000 of principal payments required by the Note in accordance
with its terms. Guarantor further agrees that the invalidity,
irregularity, or unenforceability of all or any part of the Note or any
security therefor shall not affect, impair or be a defense to this
Guaranty or affect in any manner the liability of the Guarantor.
3. This is a guaranty of payment of $585,000 of principal payments
required by the Note and not of collection and the Guarantor expressly
waives any right to require that any action be brought against Borrower
or to require that resort be had to any security or to any other right
or remedy which may be available to Lender.
Oerlemans Guaranty of $585,000 of Note Payments
Page 1 of 5
4. The Guarantor hereby further expressly waives:
(i) notice of the acceptance of this Guaranty;
(ii) presentment and demand for payment of the Note;
(iii) protest and notice of dishonor or default to the
Guarantor or to any other person with respect to the Note;
(iv) until the Note is paid in full, any right of subrogation to
any of Lender's rights against Borrower or any collateral securing the
Note and any right of reimbursement, indemnity, or other recourse
against Borrower; and
(v) any defenses to a guaranty under the laws of Florida.
5. During such times as the Guaranty shall be effective, the Guarantor
agrees to notify Lender promptly when he learns of any condition or
event which constitutes, or would constitute with the passage of time or
giving of notice, or both, an event of default.
6. If an event of default shall occur, then or at any time thereafter,
while such event of default shall continue, Lender may declare the Note,
for the purposes of this Guaranty, together with all obligations of the
undersigned hereunder, to be due and payable.
For purposes of this Guaranty, "event of default" means:
(i) any default with respect to payment or performance of the
Note; or
(ii) default in the observance or performance of any covenant or
agreement of Borrower set forth in any mortgage deed, security agreement
or any other document or instrument delivered in connection with and
securing performance of the Note.
7. Lender shall have, by way of example and not of limitation, the
rights and remedies set forth below at all times prior to and/or after
the occurrence of an event of default:
a. Lender shall have, in addition to the rights and remedies
contained in this Guaranty, any other rights and remedies contained in
any mortgage deed, security agreement, or other documents or instruments
now or at any time or times hereafter executed and delivered by the
Guarantor or Borrower in connection with this Guaranty and securing the
obligations of Lender.
Oerlemans Guaranty of $585,000 of Note Payments
Page 2 of 5
b. Lender may, from time to time, upon notice to the Guarantor,
sell, assign, transfer, or otherwise dispose of all or any part of the
Note and/or rights under this Guaranty. In such event, each and every
immediate and successive purchaser, assignee, transferee, or holder of
all or any part of the Note shall have the right to enforce this
Guaranty, by legal action or otherwise, for its own benefit as fully as
if such purchaser, assignee, transferee or holder were herein by name
specifically given such right. Lender shall have an unimpaired right to
enforce this Guaranty for its benefit with respect to that portion of
the Note as Lender has not sold, assigned, transferred or otherwise
disposed of.
c. All rights, powers and remedies of Lender hereunder or under
any document or instrument delivered in connection herewith are
cumulative and non-exclusive and shall be in addition to all rights,
powers and remedies given to Lender by law.
d. The Guarantor shall pay Lender, within five days of receipt of
notice, for all costs, attorneys' fees and other expenses which Lender
may incur in the enforcement of this Guaranty or in the enforcement of
its rights with respect to any property of the undersigned which is
security for this Guaranty.
8. This Guaranty is a continuing guaranty which shall remain in effect
until the first $585,000 of principal payments required by the Note has
been paid in full.
9. Each reference herein to Lender shall be deemed to include its
successors and assigns, and each reference to Borrower and the Guarantor
and any pronouns referring thereto as used herein shall be construed in
the masculine, feminine, or neuter, singular or plural, as the context
may require, and shall be deemed to include the heirs, administrators,
legal representatives, successors and assigns of the Guarantor, all of
whom shall be bound by the provisions hereof.
10. No delay on the part of Lender in exercising any rights hereunder
or failure to exercise the same shall operate as a waiver of such
rights; no notice to or demand on any of the Guarantor shall be deemed
to be a waiver of any obligation of any of the Guarantor or of the right
of Lender to take other or further action without notice or demand as
provided herein. In any event, no modification or waiver of the
provisions hereof shall be effective unless in writing and signed by
Lender nor shall any waiver be applicable except in the specific
instance or matter for which given.
11. The Guarantor hereby certifies and covenants that all acts,
conditions and things required to be done and performed and to have
happened precedent to the creation and issuance of
Oerlemans Guaranty of $585,000 of Note Payments
Page 3 of 5
this Guaranty and to constitute the same the valid and legally binding
obligation of the Guarantor in accordance with its terms, have been done
and performed and have happened in due and strict compliance with all
applicable laws.
12. This Guaranty is and shall be deemed to be a contract entered into
and made pursuant to the laws of the State of Florida and shall in all
respects be governed, construed, applied and enforced in accordance with
the laws of said state.
13. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable
law. Should any portion of this Guaranty be declared invalid for any
reason in any jurisdiction, such declaration shall have no effect upon
the remaining portions of this Guaranty; furthermore, the entirety of
this Guaranty shall continue in full force and effect in all other
jurisdictions and said remaining portions of this Guaranty shall
continue in full force and effect in the subject jurisdiction as if this
Guaranty had been executed with the invalid portions thereof deleted.
14. Any notice given by the Guarantor shall be effective only upon
actual receipt by an officer of Lender, at Lender's address. Any notice
given by Lender or any assign of Lender shall be deemed to be given upon
actual receipt by Guarantor or the agent for service of process of
Guarantor specified in paragraph 14 of this Agreement. Notice shall be
in writing and sent via facsimile, overnight courier or United States
mail, return receipt requested, postage prepaid. Any notice to the
Guarantor shall also be sent to the address appearing on the books and
records of Lender for the Guarantor.
15. Any dispute arising out of or relating to this Agreement, the terms
or provisions hereof, any writings executed hereto, or any purported
breach hereof shall be settled by arbitration in Broward County,
Florida, in accordance with the commercial arbitration rules of
JAMS/ENDISPUTE then in effect, and judgment on the award rendered by the
arbitrator(s) selected therein may be enforced in any Florida court
having jurisdiction to enforce or vacate such award. Each party shall
bear its own costs, including attorneys' fees, in maintaining and
pursuing such arbitration or any other proceedings and at levels of
appeal. The parties agree that the matter may be resolved by one
mutually agreeable arbitrator. In the event the parties are unable to
agree on one arbitrator, then each party shall pick an arbitrator and
they shall in turn pick a third arbitrator. The parties shall share the
costs of the arbitrators.
16. Guarantor consents to the jurisdiction of the courts and law of the
State of Florida and, if needed, the courts and law of the United
States, with respect to this Agreement. Guarantor appoints Steven C.
Elkin, Tripp, Scott, Conklin & Smith, 110 S.E. 6th Street, Fort
Lauderdale, Florida 33301 as his
Oerlemans Guaranty of $585,000 of Note Payments
Page 4 of 5
agent for service of process for any proceeding initiated pursuant to
this Agreement and for any notice to Guarantor required in this
Agreement.
LENDER: NATIONAL CAPITAL MANAGEMENT CORPORATION
A Delaware Corporation
By /s/Herbert J. Jaffe
Its President
GUARANTOR: /s/Jan Oerlemans
JAN OERLEMANS
EXHIBIT 7
PROMISSORY NOTE
$765,000 November __, 1995
FOR VALUE RECEIVED, Jensen Corporation (the "Maker"), promises
to pay to the order of National Capital Management Corporation (the
"Payee"), at San Francisco, California, the principal sum of $765,000, in
lawful monies of the United States of America plus annual interest at the
rate of 10%. Interest shall accrue between November 1, 1995 and March 31,
1996 and shall be paid on February 1, 1998. Principal payments of $25,000
plus accrued interest shall be paid monthly on the first day of each
month beginning on May 1, 1996 and continuing until April 1, 1997.
Principal payments of $50,000 plus accrued interest shall be paid monthly
on the first day of each month beginning on May 1, 1997 and continuing
until January 1, 1998. All unpaid principal and interest shall be due and
paid on February 1, 1998.
The Maker waives presentment, demand for payment, notice of
dishonor and all other notices and demands in connection with the
delivery, acceptance, performance, default, endorsement or guarantee of
this Note. The Maker hereby waives any defense or right of offset against
payment to Payee or to any subsequent holder of this Note.
In the event (a) of the nonpayment of any installment hereunder
and the continuation of such default for a period of fifteen days
thereafter, (b) of the nonpayment of any installment in either (i) the
promissory note dated November 1995 in the principal amount of
$1,311,000 between AMKO USA, Inc. as maker and National Capital
Management Corporation as payee or (ii) the promissory note dated
September 30, 1995 in the principal amount of $337,650 between Jensen
Corporation as maker and National Capital Management Corporation as
payee, and the continuation of such default for a period of fifteen days
thereafter or (c) that the Maker shall enter into an assignment for the
benefit of creditors or admit in writing its inability to pay debts' as
they become due or shall file a voluntary petition in bankruptcy or be
adjudicated bankrupt or insolvent or shall file any petition or answer
seeking any arrangement, composition, readjustment, dissolution or
similar relief under present or future statute, law or regulation or
shall file any answer admitting or shall fail to deny the material
allegations of any petition filed against it for any such relief or
shall seek or consent to or act within the appointment of any trustee or
receiver for itself of any substantial part of its property, then, and in
any such event the holder of this Note, at its option, may (unless the
default shall have theretofore been remedied) by notice to the Maker,
declare all installments under this Note immediately due and payable
whereupon the same shall forthwith' mature and become
Jensen Promissory Note to NCMC Page 1 of 2
due and payable, without presentment, protest or notice, all of which are
hereby waived.
It is understood and agreed that in the event of a default in
payment of this Note, then at the option of the holder, it may resort to
legal action for the collection of all sums due hereunder; and a failure
to assert any rights of holder shall not be deemed a waiver thereof.
This Note may not be changed or terminated orally, but only by
an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought, with such
agreement being effective and binding only upon the attachment hereto.
This Note and the rights and obligations of Payee and the Maker
shall be governed and construed in accordance with the laws of the State
of Florida.
Any dispute arising out of or relating to this Agreement, the
terms or provisions hereof, any writings executed hereto, or any
purported breach hereof shall be settled by arbitration in Broward
County, Florida, in accordance with the commercial arbitration rules of
JAMS/ENDISPUTE then in effect, and judgment on the award rendered by the
arbitrator(s) selected therein may be enforced in any Florida court
having jurisdiction to enforce or vacate such award. Each party shall
bear its own costs, including attorneys' fees, in maintaining and
pursuing such arbitration or any other proceedings and at levels of
appeal. The parties agree that the matter may be resolved by one mutually
agreeable arbitrator. In the event the parties are unable to agree on
one arbitrator, then each party shall pick an arbitrator and they shall
in turn pick a third arbitrator. The parties shall share the costs of the
arbitrators.
This note shall be secured by Jensen Corporation's accounts
receivable and inventory.
MAKER: JENSEN CORPORATION
By /s/ Howard Eglowstein
Its President
Jensen Promissory Note to NCMC Page 2
of 2
EXHIBIT 9
PROMISSORY NOTE
$337,650 September 30, 1995
FOR VALUE RECEIVED, Jensen Corporation (the "Maker"), promises
to pay to the order of National Capital Management Corporation (the
"Payee") , at San Francisco, California, the principal sum of $337,650,
in lawful monies of the United States of America plus annual interest at
the Bank of America's prime rate plus 2%. Interest shall accrue between
November 1, 1995 and March 31, 1996 and shall be paid on May 1, 1997.
Principal payments of $25,000 plus accrued interest shall be paid
monthly beginning on May 1, 1996 and continuing through April 1, 1997.
All unpaid principal and interest shall be due and paid on May 1, 1997.
The Maker waives presentment, demand for payment, notice of
dishonor and all other notices and demands in connection with the
delivery, acceptance, performance, default, endorsement or guarantee of
this Note. The Maker hereby waives any defense or right of offset
against payment to Payee or to any subsequent holder of this Note.
In the event (a) of the nonpayment of any installment
hereunder and the continuation of such default for a period of fifteen
days thereafter, (b) of the nonpayment of any installment in either (i)
the promissory note in the principal amount of $765,000 between Jensen
Corporation as maker and National Capital Management Corporation as
payee, or (ii) the promissory note in the principal amount of $1,311,000
between AMKO USA, Inc. as maker and National Capital Management
Corporation as payee, both of which are to be executed in connection
with the purchase of Jensen Corporation by AMKO USA, Inc., and the
continuation of such default for a period of fifteen days thereafter, or
(c) the Maker shall enter into an assignment for the benefit of
creditors or admit in writing its inability to pay debts as they become
due or shall file a voluntary petition in bankruptcy or be adjudicated
bankrupt or insolvent or shall file any petition or answer seeking any
arrangement, composition, readjustment, dissolution or similar relief
under present or future statute, law or regulation or shall file any
answer admitting or shall fail to deny the material allegations of any
petition filed against it for any such relief or shall seek or consent
to or act within the appointment of any trustee or receiver for itself
of any substantial part of its property, then, and in any such event,
the holder of this Note, at its option, may (unless the default shall
have theretofore been remedied) by notice to the Maker, declare all
installments under this Note immediately due and payable, whereupon the
same shall forthwith mature and become
Jensen Promissory Note to NCMC re Intercompany Loan
Page 1 of 2
due and payable, without presentment, protest or notice all of which are
hereby waived.
It is understood and agreed that in the event of a default in
payment of this Note, then at the option of the holder, it may resort to
legal action for the collection of all sums due hereunder; and a failure
to assert any rights of holder shall not be deemed a waiver thereof.
This Note may not be changed or terminated orally, but only by
an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought, with such
agreement being effective and binding only upon the attachment hereto.
This Note and the rights and obligations of Payee and the
Maker shall be governed and construed in accordance with the laws of the
State of Florida.
Any dispute arising out of or relating to this Agreement, the
terms or provisions hereof, any writings executed hereto, or any
purported breach hereof shall be settled by arbitration in Broward
County, Florida, in accordance with the commercial arbitration rules of
JAMS/ENDISPUTE then in effect, and judgment on the award rendered by the
arbitrator(s) selected therein may be enforced in any Florida court
having jurisdiction to enforce or vacate such award. Each party shall
bear its own costs, including attorneys' fees, in maintaining and
pursuing such arbitration or any other proceedings and at levels of
appeal. The parties agree that the matter may be resolved by one
mutually agreeable arbitrator. In the event the parties are unable to
agree on one arbitrator, then each party shall pick an arbitrator and
they shall in turn pick a third arbitrator. The parties shall share the
costs of the arbitrators.
This note shall be secured by Jensen Corporation's accounts
receivable and inventory.
MAKER: JENSEN CORPORATION
By /s/Howard Eglowstein
Its President
Jensen Promissory Note to NCMC re Intercompany Loan
Page 2 of 2
EXHIBIT 15
GUARANTY OF NOTE
This Guaranty of Note ("Guaranty") made as of November __, 1995, by and
between National Capital Management Corporation, a Delaware corporation,
("Lender") and AMKO INTERNATIONAL B.V., a Netherlands corporation
("Guarantor"), having its principal place of business at Postbus 10, 5330
AA Kerkdriel, Kerkstraat 108, 5331 CJ Kerkdriel, The Netherlands.
WHEREAS, Lender is contemplating making a $765,000 loan and a $337,650
Loan (collectively referred to as the "Loans") to Jensen Corporation (the
"Borrower"), which is being purchased by an affiliate of Guarantor; and
WHEREAS, the Loans will be evidenced by Promissory Notes in the forms
attached (the "Notes"); and
WHEREAS, Lender has been informed that Guarantor has significantly more
assets than Borrower and Lender is willing to enter into the Loans with
Borrower only if Guarantor agrees to guarantee the full, prompt, complete
and faithful performance and payment of the first $765,000 of principal
payments required by the Notes and all other terms, covenants, conditions
and payments on Borrower's part to be performed or made under the Notes.
NOW THEREFORE, in consideration of Lender's making the Loans, and other
good and valuable consideration, Guarantor hereby agrees as follows:
1. Guarantor hereby absolutely and unconditionally guarantees to
Lender: (i) the punctual payment, at Lender's address, as and when due
(whether by acceleration or otherwise) of the first $765,000 of principal
payments required by the Notes after receiving five days prior notice;
and (ii) performance by Borrower, as and when required, of all other
obligations pursuant to the Notes.
2. Guarantor agrees that this Guaranty shall remain in full force and
effect and will not be discharged except by complete performance of the
first $765,000 of principal payments required by the Notes in accordance
with their terms. Guarantor further agrees that the invalidity,
irregularity, or unenforceability of all or any part of the Notes or any
security therefor shall not affect, impair or be a defense to this
Guaranty or affect in any manner the liability of the Guarantor.
3. This is a guaranty of payment of $765,000 of principal payments of
the Notes and not of collection and the Guarantor expressly waives any
right to require that any action be brought against Borrower or to
require that resort be had to
AMKO's Guaranty of Jensen Notes Page 1
of 5
any security or to any other right or remedy which may be available to
Lender.
4. The Guarantor hereby further expressly waives:
(i) notice of the acceptance of this Guaranty;
(ii) presentment and demand for payment of the Notes;
(iii) protest and notice of dishonor or default to the Guarantor
or to any other person with respect to the Notes;
(iv) until the Notes are paid in full, any right of subrogation to
any of Lender's rights against Borrower or any collateral securing the
Notes and any right of reimbursement, indemnity, or other recourse
against Borrower; and
(v) any defenses to a guaranty under the laws of Florida.
5. During such times as the Guaranty shall be effective, the Guarantor
agrees:
(i) to notify Lender promptly when it learns of any condition or
event which constitutes, or would constitute with the passage of time or
giving of notice, or both, an event of default;
(ii) to furnish Lender with monthly income statements and balance
sheets for Borrower; and
(iii) at any time that Borrower's net worth is less than an
amount equal to two times the aggregate of Borrower's and AMKO USA,
Inc.'s outstanding debt to Lender, to furnish Lender with quarterly
balance sheets for Guarantor and AMKO USA, Inc. and annual audited
financial statements of Guarantor and AMKO USA, Inc.
6. If an event of default shall occur, then or at any time thereafter,
while such event of default shall continue, Lender may declare the Notes
or either of them, for the purposes of this Guaranty, together with all
obligations of the undersigned hereunder, to be due and payable.
For purposes of this Guaranty, "event of default" means:
(i) any default with respect to payment or performance of either of
the Notes; or
(ii) default in the observance or performance of any covenant or
agreement of Borrower set forth in any mortgage
AMKO's Guaranty of Jensen Notes Page 2
of 5
deed, security agreement or any other document or instrument delivered in
connection with and securing performance of either of the Notes.
7. Lender shall have, by way of example and not of limitation, the
rights and remedies set forth below at all times prior to and/or after
the occurrence of an event of default:
a. Lender shall have, in addition to the rights and remedies
contained in this Guaranty, any other rights and remedies contained in
any mortgage deed, security agreement, or other documents or instruments
now or at any time or times hereafter executed and delivered by the
Guarantor or Borrower in connection with this Guaranty and securing the
obligations of Lender.
b. Lender may, from time to time, upon notice to the Guarantor,
sell, assign, transfer, or otherwise dispose of all or any part of the
Notes and/or rights under this Guaranty. In such event, each and every
immediate and successive purchaser, assignee, transferee, or holder of
all or any part of the Notes shall have the right to enforce this
Guaranty, by legal action or otherwise, for its own benefit as fully as
if such purchaser, assignee, transferee or holder were herein by name
specifically given such right. Lender shall have an unimpaired right to
enforce this Guaranty for its benefit with respect to that portion of the
Notes as Lender has not sold, assigned, transferred or otherwise disposed
of.
c. All rights, powers and remedies of Lender hereunder or under
any document or instrument delivered in connection herewith are
cumulative and non-exclusive and shall be in addition to all rights,
powers and remedies given to Lender by law.
d. The Guarantor shall pay Lender, within five days of receipt of
notice, for all costs, attorneys' fees and other expenses which Lender
may incur in the enforcement of this Guaranty or in the enforcement of
its rights with respect to any property of the undersigned which is
security for this Guaranty.
8. This Guaranty is a continuing guaranty which shall remain in effect
until the first $765,000 of principal payments required by the Notes has
been paid in full.
9. Each reference herein to Lender shall be deemed to include its
successors and assigns, and each reference to Borrower and the Guarantor
and any pronouns referring thereto as used herein shall be construed in
the masculine, feminine, or neuter, singular or plural, as the context
may require, and shall be deemed to include the heirs, administrators,
legal representatives, successors and assigns of the Guarantor, all of
whom shall be bound by the provisions hereof.
AMKO's Guaranty of Jensen Notes Page 3
of 5
10. No delay on the part of Lender in exercising any rights hereunder or
failure to exercise the same shall operate as a waiver of such rights; no
notice to or demand on any of the Guarantor shall be deemed to be a
waiver of any obligation of any of the Guarantor or of the right of
Lender to take other or further action without notice or demand as
provided herein. In any event, no modification or waiver of the
provisions hereof shall be effective unless in writing and signed by
Lender nor shall any waiver be applicable except in the specific instance
or matter for which given.
11. The Guarantor hereby certifies and covenants that all acts,
conditions and things required to be done and performed and to have
happened precedent to the creation and issuance of this Guaranty and to
constitute the same the valid and legally binding obligation of the
Guarantor in accordance with its terms, have been done and performed and
have happened in due and strict compliance with all applicable laws.
12. This Guaranty is and shall be deemed to be a contract entered into
and made pursuant to the laws of the State of Florida and shall in all
respects be governed, construed, applied and enforced in accordance with
the laws of said state.
13. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable
law. Should any portion of this Guaranty be declared invalid for any
reason in any jurisdiction, such declaration shall have no effect upon
the remaining portions of this Guaranty; furthermore, the entirety of
this Guaranty shall continue in full force and effect in all other
jurisdictions and said remaining portions of this Guaranty shall continue
in full force and effect in the subject jurisdiction as if this Guaranty
had been executed with the invalid portions thereof deleted.
14. Any notice given by the Guarantor shall be effective only upon
actual receipt by an officer of Lender, at Lender's address. Any notice
given by Lender or any assign of Lender shall be deemed to be given upon
actual receipt by Guarantor or the agent for service of process of
Guarantor specified in paragraph 14 of this Agreement. Notice shall be in
writing and sent via facsimile, overnight courier or United States mail,
return receipt requested, postage prepaid. Any notice to the Guarantor
shall also be sent to the address appearing on the books and records of
Lender for the Guarantor.
15. Any dispute arising out of or relating to this Agreement, the terms
or provisions hereof, any writings executed hereto, or any purported
breach hereof shall be settled by arbitration in Broward County, Florida,
in accordance with the commercial arbitration rules of JAMS/ENDISPUTE
then in effect, and judgment on the award rendered by the arbitrator(s)
selected
AMKO's Guaranty of Jensen Notes Page 4
of 5
therein may be enforced in any Florida court having jurisdiction to
enforce or vacate such award. Each party shall bear its own costs,
including attorneys' fees, in maintaining and pursuing such arbitration
or any other proceedings and at levels of appeal. The parties agree that
the matter may be resolved by one mutually agreeable arbitrator. In the
event the parties are unable .to agree on one arbitrator, then each party
shall pick an arbitrator and they shall in turn pick a third arbitrator.
The parties shall share the costs of the arbitrators.
16. Guarantor consents to the jurisdiction of the courts and law of the
State of Florida and, if needed, the courts and law of the United States,
with respect to this Agreement. Guarantor appoints Steven C. Elkin,
Tripp, Scott, Conklin & Smith, 110 S.E. 6th Street, Fort Lauderdale,
Florida 33301 as its agent for service of process for any proceeding
initiated pursuant to this Agreement and for any notice to Guarantor
required in this Agreement.
LENDER: NATIONAL CAPITAL MANAGEMENT CORPORATION
A Delaware Corporation
By /s/ Herbert J. Jaffe
Its President
GUARANTOR AMKO INTERNATIONAL B.V.
By /s/ Jan Oerlemans
Its President
AMKO's Guaranty of Jensen Notes Page 5
of 5
EXHIBIT 3
GUARANTY OF NOTE
This Guaranty of Note ("Guaranty,,) made as of November __, 1995, by and
between National Capital Management Corporation, a Delaware corporation,
("Lender") and AMKO INTERNATIONAL B.V., a Netherlands corporation
("Guarantor",), having its principal place of business at Postbus 10, 5330
AA Kerkdriel, Kerkstraat 108, 5331 CJ Kerkdriel, The Netherlands.
WHEREAS, Lender is contemplating making a $1,311,000 loan (the "Loan") to
AMKO USA, Inc. (the "Borrower,,), which is an affiliate of Guarantor; and
WHEREAS, the Loan will be evidenced by a Promissory Note in the form
attached (the "Note"); and
WHEREAS, Lender has been informed that Guarantor has significantly more
assets than Borrower and Lender is willing to enter into the Loan with
Borrower only if Guarantor agrees to guarantee the full, prompt, complete
and faithful performance and payment of all the terms, covenants,
conditions and payments on Borrower's part to be performed or made under
the Note.
NOW THEREFORE, in consideration of Lender's making the Loan, and other good
and valuable consideration, Guarantor hereby agrees as follows:
1. Guarantor hereby absolutely and unconditionally guarantees to Lender:
(i) the punctual payment, at Lender's address, as and when due (whether by
acceleration or otherwise) of the Note after receiving five days prior
notice; and (ii) performance by Borrower, as and when required, of all
obligations pursuant to the Note.
2. Guarantor agrees that this Guaranty shall remain in full force and
effect and will not be discharged except by complete performance of the
Note in accordance with its terms. Guarantor further agrees that the
invalidity, irregularity, or unenforceability of all or any part of the
Note or any security therefor shall not affect, impair or be a defense to
this Guaranty or affect in any manner the liability of the Guarantor.
3. This is a guaranty of payment and not of collection and the Guarantor
expressly waives any right to require that any action be brought against
Borrower or to require that resort be had to any security or to any other
right or remedy which may be available to Lender.
AMKO's Guaranty of Buyer's Note Page
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4. The Guarantor hereby further expressly waives:
(i) notice of the acceptance of this Guaranty;
(ii) presentment and demand for payment of the Note;
(iii) protest and notice of dishonor or default to the Guarantor
or to any other person with respect to the Note;
(iv) until the Note is paid in full, any right of subrogation to any
of Lender's rights against Borrower or any collateral securing the Note and
any right of reimbursement, indemnity, or other recourse against Borrower;
and
(v) any defenses to a guaranty under the laws of Florida.
5. During such times as the Guaranty shall be effective, the Guarantor
agrees:
(i) to notify Lender promptly when it learns of any condition or
event which constitutes, or would constitute with the passage of time or
giving of notice, or both, an event of default;
(ii) to furnish Lender with monthly income statements and balance
sheets for Jensen Corporation; and
(iii) at any time that Jensen Corporation's net worth is less than
an amount equal to two times the aggregate of Borrower's and Jensen
Corporation's outstanding debt to Lender, to furnish Lender with quarterly
balance sheets for Guarantor and Borrower and annual audited financial
statements of .Guarantor and Borrower.
6. If an event of default shall occur, then or at any time thereafter,
while such event of default shall continue, Lender may declare the Note,
for the purposes of this Guaranty, together with all obligations of the
undersigned hereunder, to be due and payable.
For purposes of this Guaranty, "event of default" means:
(i) any default with respect to payment or performance of the Note;
or
(ii) default in the observance or performance of any covenant or
agreement of Borrower set forth in any mortgage deed, security agreement or
any other document or instrument
AMKO's Guaranty of Buyer's Note Page
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delivered in connection with and securing performance of the Note.
7. Lender shall have, by way of example and not of limitation, the rights
and remedies set forth below at all times prior to and/or after the
occurrence of an event of default:
a. Lender shall have, in addition to the rights and remedies
contained in this Guaranty, any other rights and remedies contained in any
mortgage deed, security agreement, or other documents or instruments now or
at any time or times hereafter executed and delivered by the Guarantor or
Borrower in connection with this Guaranty and securing the obligations of
Lender.
b. Lender may, from time to time, upon notice to the Guarantor,
sell, assign, transfer, or otherwise dispose of all or any part of the Note
and/or rights under this Guaranty. In such event, each and every immediate
and successive purchaser, assignee, transferee, or holder of all or any
part of the Note shall have the right to enforce this Guaranty, by legal
action or otherwise, for its own benefit as fully as if such purchaser,
assignee, transferee or holder were herein by name specifically given such
right. Lender shall have an unimpaired right to enforce this Guaranty
for its benefit with respect to that portion of the Note as Lender has not
sold, assigned, transferred or otherwise disposed of.
c. All rights, powers and remedies of Lender hereunder or under any
document or instrument delivered in connection herewith are cumulative and
non-exclusive and shall be in addition to all rights, powers and remedies
given to Lender by law.
d. The Guarantor shall pay Lender, within five (5) days of receipt
of notice, for all costs, attorneys, fees and other expenses which Lender
may incur in the enforcement of this Guaranty or in the enforcement of its
rights with respect to any property of the undersigned which is security
for this Guaranty.
8. This Guaranty is a continuing guaranty which shall remain in effect
until the Note has been paid in full.
9. Each reference herein to Lender shall be deemed to include its
successors and assigns, and each reference to Borrower and the Guarantor
and any pronouns referring thereto as used herein shall be construed in the
masculine, feminine, or neuter, singular or plural, as the context may
require, and shall be deemed to include the heirs, administrators, legal
representatives, successors and assigns of the Guarantor, all of whom shall
be bound by the provisions hereof,
AMKO's Guaranty of Buyer's Note Page
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10. No delay on the part of Lender in exercising any rights hereunder or
failure to exercise the same shall operate as a waiver of such rights; no
notice to or demand on any of the Guarantor shall be deemed to be a waiver
of any obligation of any of the Guarantor or of the right of Lender to take
other or further action without notice or demand as provided herein. In any
event, no modification or waiver of the provisions hereof shall be
effective unless in writing and signed by Lender nor shall any waiver be
applicable except in the specific instance or matter for which given.
11. The Guarantor hereby certifies and covenants that all acts, conditions
and things required to be done and performed and to have happened precedent
to the creation and issuance of this Guaranty and to constitute the same
the valid and legally binding obligation of the Guarantor in accordance
with its terms, have been done and performed and have happened in due and
strict compliance with all applicable laws.
12. This Guaranty is and shall be deemed to be a contract entered into and
made pursuant to the laws of the State of Florida and shall in all respects
be governed, construed, applied and enforced in accordance with the laws of
said state.
13. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable
law. Should any portion of this Guaranty be declared invalid for any
reason in any jurisdiction, such declaration shall have no effect upon the
remaining portions of this Guaranty; furthermore, the entirety of this
Guaranty shall continue in full force and effect in all other jurisdictions
and said remaining portions of this Guaranty shall continue in full force
and effect in the subject jurisdiction as if this Guaranty had been
executed with the invalid portions thereof deleted.
14. Any notice given by the Guarantor shall be effective only upon actual
receipt by an officer of Lender, at Lender's address. Any notice given by
Lender or any assign of Lender shall be deemed to be given upon actual
receipt by Guarantor or the agent for service of process of Guarantor
specified in paragraph 14 of this Agreement. Notice shall be in writing and
sent via facsimile, overnight courier or United States mail, return receipt
requested, postage prepaid. Any notice to the Guarantor shall also be
sent to the address appearing on the books and records of Lender for the
Guarantor.
15. Any dispute arising out of or relating to this Agreement, the terms or
provisions hereof, any writings executed hereto, or any purported breach
hereof 'shall be settled by arbitration in Broward County, Florida, in
accordance with the commercial arbitration rules of JAMS/ENDISPUTE then in
effect, and judgment on the award rendered by the arbitrator(s) selected
therein may be enforced in any Florida court having jurisdiction
AMKO's Guaranty of Buyer's Note Page
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to enforce or vacate such award. Each party shall bear its own costs,
including attorneys' fees, in maintaining and pursuing such arbitration or
any other proceedings and at levels of appeal. The parties agree that the
matter may be resolved by one mutually agreeable arbitrator. In the event
the parties are unable to agree on one arbitrator, then each party shall
pick an arbitrator and they shall in turn pick a third arbitrator. The
parties shall share the costs of the arbitrators.
16. Guarantor consents to the jurisdiction of the courts and law of the
State of Florida and, if needed, the courts and law of the United States,
with respect to this Agreement. Guarantor appoints Steven C. Elkin, Tripp,
Scott, Conklin & Smith, 110 S.E. 6th Street, Fort Lauderdale, Florida 33301
as its agent for service of process for any proceeding initiated pursuant
to this Agreement and for any notice to Guarantor required in this
Agreement.
LENDER: NATIONAL CAPITAL MANAGEMENT CORPORATION
A Delaware Corporation
By /s/ Herbert J. Jaffe
Its President
GUARANTOR AMKO INTERNATIONAL B.V.
By /s/Jan Oerlemans
Its Chairman of the Board
AMKO's Guaranty of Buyer's Note Page
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October 6, 1995
Mr. Steve Simon
CEO
AutoLend Group Inc.
420 Jefferson Avenue
Miami Beach, FL 33139
Dear Steve:
As per our conversation, this letter will confirm our proposed
revisions to Paragraph 7.1 ("Commissions") of the Asset Purchase
Agreement of July 29, 1994 ("the Agreement").
In consideration of our agreement to prepay AutoLend its
commission within 15 days of our purchase of all "New Policies"
(rather than upon our receipt of the net death benefit from the
maturity of said policies as per the Agreement), AutoLend will
agree as follows;
(1) the commission due and payable to AutoLend will be
revised to equal 0.875% of the net death benefit of each Policy
which is purchased by National Capital Benefits Corp. ("NCBC")
during the period January 1, 1996-July 29, 1998 (the "New
Policies").
(2) with regard to any policy which was purchased by NCBC
between July 19, 1994 (the Closing Date of the Agreement) and
December 31, 1995 and still in force as of the latter date, (the
"Existing Portfolio") NCBC will pay AutoLend on a monthly basis a
revised commission equal to 0.875% of the policy net death
benefit for all policies which mature within the month. Payment
will be made by the 15th of each succeeding month. This payment
schedule replaces the quarterly-in-arrears schedule set forth in
the Agreement. For your information the aggregate net death
benefit of the Existing Portfolio is approximately $13 million.
If the foregoing revisions are acceptable, please so indicate in
the space provided below.
Very truly yours,
/s/ Kenneth Klein
Kenneth Klein
President
KK:sk
AGREED AND ACCEPTED;
AUTOLEND, INC.
Steve Simon, CEO
PROMISSORY NOTE
$500,000 October
26, 1995
FOR VALUE RECEIVED, National Capital Management
Corporation (the "Maker"), promises to pay to the order of Fifth
Avenue Partners (the "Payee"), at 520 Madison Avenue, New York,
NY 10022 the principal sum of $500,000, or so much as may be
outstanding, in lawful monies of the United States of America
plus interest at the annual rate of 12% from the date of each
advance. Interest shall be paid monthly in arrears with the first
payment due on the first day of the month following the date of
this Note. All unpaid interest and principal shall be due and
payable on January 31, 1996 or on demand thereafter.
This Promissory Note evidences a revolving line of
credit. A three day advance notice is required from Maker for
draws under this agreement.
The Maker waives presentment, demand for payment, notice
of dishonor and all other notices and demands in connection with
the delivery, acceptance, performance, default, endorsement or
guarantee of this Note. The Maker hereby waives any defense or
right of offset against payment to Payee or to any subsequent
holder of this Note.
In the event of the nonpayment of any installment
hereunder and the continuation of such default for a period of
fifteen days thereafter, or in the event that the Maker shall
enter into an assignment for the benefit of creditors or admit in
writing his inability to pay debts as they become due or shall
file a voluntary petition in bankruptcy or be adjudicated
bankrupt or insolvent or shall file any petition or answer
seeking any arrangement, composition, readjustment, dissolution
or similar relief under present or future statute, law or
regulation or shall file any answer admitting or shall fail to
deny the material allegations of any petition filed against Maker
for any such relief or shall seek or consent to or act within the
appointment of any trustee or receiver for himself of any
substantial part of its property, then, and in any such event,
the Payee, at Payee's option, may (unless the default shall have
theretofore been remedied) by notice to the Maker, declare all
installments under this Note immediately due and payable,
whereupon the same shall forthwith mature and become due and
payable, without presentment, protest or notice, all of which are
hereby waived. In the event of such a default with respect to
the payment of the principal portion of this note, the interest
rate will increase to the highest rate allowable by California
law.
It is understood and agreed that in the event of a
default in payment of this Note, then at the option of the Payee,
Payee may resort to legal action for the collection of all sums
due hereunder; and a failure to assert any rights of Payee shall
not be deemed a waiver thereof.
In the event that this Note is placed in the hands of any
attorney for collection, the Maker agrees to pay all costs of
collection, whether suit be brought or not, including, but not
limited to, court costs, attorneys' fees and disbursements.
This Note may not be changed or terminated orally, but
only by an agreement in writing and signed by the party against
whom enforcement of any waiver, change, modification or discharge
is sought, with such agreement being effective and binding only
upon the attachment hereto.
This Note and the rights and obligations of Payee and the
Maker shall be governed and construed in accordance with the laws
of the State of California.
This Note may be prepaid without penalty.
Maker shall not encumber, transfer or assign any of its
assets, other than in the ordinary course of business, without
prior written permission from Payee.
National Capital Management
Corporation
By _/s/ Herbert J. Jaffe______
Its President______________
Fifth Avenue Partners agrees with the terms of this note.
Fifth Avenue Partners
By _/s/PFG Corp.______________
Its _General Partners______
NATIONAL CAPITAL MANAGEMENT CORPORATION
LIST OF SUBSIDIARIES
NAME OF SUBSIDIARY STATE OR COUNTRY OF
ORGANIZATION
NCQ Realty, Inc. Delaware
NCQ Redbird, Inc. Delaware
NCQ North Oak, Inc. Delaware
Georgia Properties, Inc. Georgia
Alexemma Corp. Texas
National Capital Benefits Corporation Delaware
NCB Insurance Limited Bermuda
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS IN FORM
10-KSB FOR THE PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 754,892
<SECURITIES> 0
<RECEIVABLES> 39,730
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 147,654
<DEPRECIATION> 65,400
<TOTAL-ASSETS> 21,344,500
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 17,904
0
0
<OTHER-SE> 7,159,977
<TOTAL-LIABILITY-AND-EQUITY> 21,344,500
<SALES> 0
<TOTAL-REVENUES> 6,897,529
<CGS> 0
<TOTAL-COSTS> 5,506,685
<OTHER-EXPENSES> 2,348,375
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 568,551
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,526,082)
<DISCONTINUED> (609,451)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,135,533)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> 0
</TABLE>
