U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission File No. 0-17069
Excal Enterprises, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 59-2855398
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 North Tampa Street, Suite 3575, Tampa, Florida 33602
(Address of principal executive offices)
(813) 224-0228
Issuer's telephone number
(Former Name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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
As of October 31, 1996, there were 4,001,594 shares of the issuer's common
stock, par value $0.001, outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
EXCAL ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
Current Assets
Cash and cash equivalents $ 12,551,367
Accounts receivable 140,633
Income tax receivable 94,691
Prepaid expenses and deposits 529,080
Net assets of discontinued operations 106,653
Deferred tax asset 325,000
----------
Total current assets 13,747,424
----------
Property, plant and equipment
Land 1,740,000
Buildings and improvements 6,274,341
Furniture, fixtures, vehicles and equipment 411,111
----------
8,425,452
Less accumulated depreciation and amortization 717,498
----------
Net property, plant and equipment 7,707,954
----------
Loan reserves 951,372
Capitalized clearing costs, less
accumulated amortization of $69,446 641,039
Commission costs, less accumulated amortization of $63,720 285,543
Loan costs 692,704
----------
Total Assets $ 24,026,036
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 462,225
Accrued liabilities 462,862
Reserve for litigation 586,480
Revolving line of credit 11,000
Current portion of long-term debt 137,537
----------
Total current liabilities 1,660,104
Long-term debt 13,362,463
Deferred tax liability 1,867,000
----------
Total Liabilities 16,953,669
----------
Stockholders' equity
Preferred stock, $.01 par value, 7,500,000 shares authorized,
5,000,000 shares issued, no shares outstanding --
Common stock, $.001 par value, 7,500,000 shares authorized,
4,738,866 shares issued, 4,001,594 shares outstanding 4,738
Additional paid-in capital 5,763,398
Retained earnings 3,893,712
Less 737,272 shares of common stock held
in treasury, shares at cost ( 2,525,379)
----------
Total stockholders' equity 7,136,469
----------
Total Liabilities and StockholdersO Equity $ 24,026,036
==========
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended September 30
--------------------------
1997 1996
---------- ---------
Net revenue $ 1,167,949 $ 806,986
---------- ---------
Operating costs 598,688 558,642
Depreciation and amortization 115,767 88,075
---------- ---------
Total operating costs 714,455 646,717
---------- ---------
Net operating profit 453,494 160,269
---------- ---------
Other income (expense)
Professional fees related to litigation ( 129,000) ( 233,166)
Dividend and interest income 12,088 30,937
Interest expense ( 3,635) ( 2,949)
Miscellaneous income 22,677 11,809
---------- ---------
Net other income (expense) ( 97,870) ( 193,369)
---------- ---------
Income (loss) before income taxes 355,624 ( 33,100)
Income tax provision (benefit) 145,000 ( 4,000)
---------- ---------
Net income (loss) $ 210,624 $( 29,100)
========== =========
Earnings (loss) per common and equivalent share $ .04 $( .01)
========== =========
Weighted average common and
equivalent shares outstanding 4,766,709 4,478,223
========== =========
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended September 30
--------------------------
1997 1996
---------- ----------
Cash provided by operating activities
Net income (loss) $ 210,624 $( 29,100)
Adjustments to reconcile net income (loss)
to net cash provided (used)
by operating activities:
Depreciation and amortization 118,882 133,247
Other adjustments ( 48,299) ( 110,599)
Increase in net operating assets ( 1,440,768) ( 97,555)
---------- ----------
Net cash used by operating activities ( 1,159,561) ( 104,007)
---------- ----------
Cash flows from investing activities
Proceeds from sale of assets 37,161 30,254
Property and equipment additions ( 28,393) ( 18,000)
---------- ----------
Net cash provided by investing activities 8,768 12,254
---------- ----------
Cash flows from financing activities
Net proceeds from line of credit 48 --
Proceeds from long-term debt 13,500,000 --
Principal repayments of long-term
debt and capital leases -- ( 7,868)
Loan costs ( 659,544) --
Issuance of common stock 73,000 --
Purchase right to outstanding options ( 110,000) --
Purchase of treasury stock ( 148,510) ( 2,116,198)
---------- ----------
Net cash provided (used)
by financing activities 12,654,994 ( 2,124,066)
---------- ----------
Increase (decrease) in cash and cash equivalents 11,504,201 ( 2,215,819)
Cash and cash equivalents at beginning of period 1,047,166 2,750,578
---------- ----------
Cash and cash equivalents at end of period $ 12,551,367 $ 534,759
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month periods ended September 30, 1997 and 1996, (b)
the financial position at September 30, 1997, and (c) cash flows for the three-
month periods ended September 30, 1997 and 1996, have been made.
The unaudited consolidated financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The
accompanying consolidated financial statements and notes should be read in
conjunction with the audited financial statements and notes of the Company for
the fiscal year ended June 30, 1997. The results of operations for the three-
month period ended September 30, 1997 are not necessarily indicative of those
to be expected for the entire year.
NOTE 2 - DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 1996, the Company decided to terminate
the agency agreements with its licensed agents effective June 30, 1997. The
Company has sold the existing machines to former licensed agents. There was
no revenue from discontinued operations in the first quarter of fiscal 1998,
compared to revenue of $83,640 in the first quarter of fiscal 1997. At June
30, 1996, management estimated proceeds of $458,607 from the sale of Combi-
Matchers and inventory resulting in a loss of $1,319,956 and a loss from
operations during the disposal period of $262,687, resulting in a total loss
from disposal of $1,582,643. During fiscal 1997, the Company revised its
estimate to $614,043 in proceeds from disposal of assets and a loss from
operations during the disposal period of $162,123, excluding depreciation,
decreasing the estimated total loss on disposal to $1,326,643. To date, the
Company has recorded $577,113 in proceeds from disposal of assets, resulting
in a loss of $978,470 and a loss from operations of $278,103, including
depreciation of $114,946. The amounts the Company will ultimately realize
could differ materially in the near term from the amounts originally estimated
as the loss on disposal of the discontinued operations. The net assets of the
discontinued operations, excluding inter-company assets, at September 30, 1997
are as follows:
Current assets $ 82,577
Property and equipment, net 50,000
-------
Total assets 132,597
-------
Current liabilities 25,924
-------
Net assets $106,653
=======
NOTE 3 - LONG-TERM DEBT
On September 30, 1997, the Company closed on a $13,500,000 mortgage
secured by the Imeson Center property located in Jacksonville, Florida. The
mortgage bears a 9% interest rate with a monthly payment of $113,292 based on
a twenty-five year amortization. The mortgage matures on October 1, 2002. As
a requirement of the mortgage, $950,000 was placed in an interest bearing
reserve for future tenant improvements and leasing commissions. In addition,
$1,372 per month is required to be placed in an interest bearing reserve for
certain future maintenance items. The mortgage does not allow early repayment
during the first two years of the loan term and provides for an early
repayment penalty of 3%, 2% and 1% of the outstanding loan amount during the
third year, fourth year and first six months of the fifth year of the loan
term, respectively. As part of the mortgage transaction, all of the assets of
Imeson Center, Inc. were transferred to a new, single-purpose, wholly-owned
subsidiary, Jacksonville Holdings, Inc.
NOTE 4 - STOCKHOLDERSO EQUITY
As part of the restructuring in connection with the mortgage loan from
Love Funding Corporation, Jacksonville Holdings, Inc. acquired 5,000,000
shares of Excal Enterprises Series B Participating Preferred Stock. These
shares are shown as issued but not outstanding and all transactions related to
their issuance have been eliminated in consolidated.
During the three months ended September 30, 1997, the Company repurchased
26,000 shares of its common stock through open-market purchases at a cost of
$102,030 and received 8,000 shares with a value of $46,480 as payment for
withholding taxes due on exercise of options. The Company also paid $110,000
for the right to repurchase three options to purchase a total of 285,000
shares of common stock. Future payments of $110,000, $120,500 and $95,000 are
due upon termination of each of the options but not later than January 15,
1998, January 15, 1999 and January 15, 2000, respectively. On September 30,
1997, options for the purchase of 25,000 shares of common stock were
exercised, generating $73,000 in proceeds and tax savings for the Company.
During the three months ended September 30, 1996, the Company purchased
641,272 shares of its common stock for an aggregate cash purchase price of
$2,116,198.
NOTE 5 - EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is based upon the weighted average number
of common shares outstanding and the dilutive effect of common stock
equivalents consisting of stock options and purchase warrants. Fully diluted
earnings per share are not presented because they approximate earnings per
common share.
Item 2. ManagementOs Discussion and Analysis.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company and the notes
thereto appearing elsewhere herein and in conjunction with ManagementOs
Discussion and Analysis set forth in the Company's Form 10-KSB for the fiscal
year ended June 30, 1997.
Results of Continuing Operations
Net revenue of the Company consists of commercial real estate rental
revenue from the lease and management of property located in Jacksonville,
Florida (Imeson Center). The property consists of approximately 1,392,000
square feet of warehouse space and 274,000 square feet of office space. The
Company's lease agreements are structured to include a base minimum rental
fee, a contingent rental fee to reimburse the Company for operating expenses,
common area maintenance costs, insurance and property taxes, and a requirement
that the tenant pay for its own utilities.
Net revenue increased by 45% to $1,167,949 in the first quarter of fiscal
1998 from $806,986 in the first quarter of fiscal 1997. This increase was
primarily related to the lease of 139,000 square feet of office space to
Prudential Insurance Company effective June 16, 1997.
Operating costs increased by 7% to $598,688 in the first quarter of fiscal
1998 from $558,642 in the first quarter of fiscal 1997. The increase was the
result of higher costs for property maintenance from the expansion of the
office space at the facility and other general maintenance expenditures. The
increased costs were partially offset by a decrease in professional fees.
Depreciation and amortization increased primarily as a result of the
amortization of lease commission costs related to the lease of office space to
Prudential Insurance Company.
Professional fees related to litigation were $129,000 in the first quarter
of fiscal 1998 compared to $233,166 in the first quarter of fiscal 1997. A
significant portion of the prior year costs were related to the preparation
and trial of the KFM Venture, Inc. lawsuit. The jury found that the contract
was unenforceable and awarded the plaintiff no compensation. In addition, the
judge awarded the Company reimbursement of a limited amount of its costs.
Results of Discontinued Operations
Until fiscal 1995, the Company derived substantially all of its revenue
from its automotive services operations. The Company's automotive services
revenue significantly declined in fiscal 1995 and fiscal 1996. During the
fourth quarter of fiscal 1996, the Company decided to terminate the agency
agreements with its licensed agents effective June 30, 1997 and report the
automotive services division as discontinued operations. There was no revenue
from the automotive services division in the first quarter of fiscal 1998,
compared to revenue of $83,640 in the first quarter of fiscal 1997. The
decline in revenue was related to the cessation of operations effective June
30, 1997. Automotive services operating costs, excluding depreciation,
decreased 72% to $47,370 in the first quarter of fiscal 1998 from $168,803 in
the first quarter of fiscal 1997 as a result of the cessation of operations.
Depreciation and amortization costs decreased from $47,172 in the first
quarter of fiscal 1997 to $3,114 in the first quarter of fiscal 1998, as a
result of the sale of assets of the automotive services division during fiscal
1997.
At June 30, 1997, management estimated proceeds of $458,607 from the sale
of Combi-Matchers and inventory resulting in a loss of $1,319,956 and a loss
from operations during the disposal period of $262,687, resulting in a total
loss from disposal of $1,582,643. During fiscal 1997, the Company revised its
estimate to $614,043 in proceeds from disposal of assets and a loss from
operations during the disposal period of $162,123, excluding depreciation,
decreasing the estimated total loss on disposal to $1,326,643. To date, the
Company has recorded $577,113 in proceeds from disposal of assets, resulting
in a loss of $978,470 and a loss from operations of $278,103, including
depreciation. The amounts the Company will ultimately realize could differ
materially in the near term from the amounts originally estimated as the loss
on disposal of the discontinued operations.
Liquidity and Capital Resources
The cash used by operating activities was $1,159,561 in the first quarter
of fiscal 1998 compared to cash used of $104,007 in the first quarter of
fiscal 1997. The other adjustments are primarily the cash operating costs of
the discontinued operations. The increase in net operating assets in the
first quarter of fiscal 1998 includes $951,372 of loan proceeds placed in
reserves for future tenant improvements, leasing commissions and certain items
of maintenance. The Company also placed $301,219 in escrow for payment of
property taxes and insurance. In addition, accounts payable and accrued
liabilities were reduced by $388,559. These liabilities were higher than
normal at June 30, 1997, primarily as a result of costs associated with the
lease of office space to Prudential Insurance Company. In the first quarter of
fiscal 1998 the Company's operations provided $281,207 in working capital
compared to the use of $6,542 in working capital in the first quarter of
fiscal 1997.
The proceeds from sales of assets in the first quarter of both fiscal 1998
and fiscal 1997 represent proceeds from the sale of the discontinued
operations. Property and equipment additions in the first quarter of both
fiscal 1998 and fiscal 1997 were for equipment, and renovations used at Imeson
Center.
Cash of $2,124,066 was used by financing activities in the first quarter
of fiscal 1997, as compared to cash provided by financing activities of
$12,654,994 in the first quarter of fiscal 1998. The Company closed on a
mortgage loan in the amount of $13,500,000 on September 30, 1997. Loan costs
associated with the loan were $692,704, of which $33,160 were incurred in the
prior fiscal year. The net proceeds of the mortgage are expected to be used
for continued development of the Imeson center property, funding of the
CompanyOs stock repurchase program, and the acquisition of new businesses.
During the three months ended September 30, 1997, the Company repurchased
26,000 shares of its common stock through open-market purchases at a cost of
$102,030. The Company also paid $110,000 for the right to repurchase three
options to purchase a total of 285,000 shares of common stock. Future
payments of $110,000, $120,500 and $95,000 are due upon termination of each of
the options but not later than January 15, 1998, 1999 and 2000, respectively.
On September 30, 1997, options for the purchase of 25,000 shares of common
stock were exercised, generating $73,000 in proceeds and tax savings for the
Company. Of the 25,000 shares, 8,000 shares were turned in to the Company as
payment for withholding taxes due on exercise. During the first quarter of
fiscal 1997, the Company purchased 641,272 shares of its common stock from a
group of shareholders (the "Smith Group") for $2,116,198 as part of settlement
of litigation. The board of directors believed this action was in the best
interests of the Company and its shareholders for several reasons, including:
(i) media coverage of the dispute with the Smith Group had caused concern
among current and prospective tenants for the Imeson Center; (ii) estimated
litigation costs could have exceeded $500,000 and business operations would
have been further disrupted; and (iii) by purchasing the Smith Group shares,
the percentage ownership and share of future returns increased proportionally
for each remaining shareholder.
The Company did not have any material commitments for capital expenditures
as of September 30, 1997 other than for ordinary expenses incurred during the
usual course of business. The Company is looking for additional tenants for
Imeson Center for the remaining 41,000 square feet of office space. It is
expected that any new tenant will require the Company to incur significant
costs related to renovation of the property to meet the tenant's needs.
Additionally, the Company is considering opportunities to develop the
outparcels of the Imeson Center. Although the Company has not identified any
specific acquisition opportunities, management is spending resources to
identify potential opportunities to expand the Company's business operations
into other areas. Any new business operation will likely involve a substantial
commitment of Company resources and a significant degree of risk. The Company
also has potential liability related to litigation. The Company believes the
proceeds from the recent mortgage obtained on its Imeson Center property will
be sufficient to meet its needs for at least the next year. However, any of
the above mentioned items could require significant capital resources in
excess of the Company's liquidity, requiring it to raise additional capital
through public or private debt or equity financing. The availability of these
capital sources will depend upon prevailing market conditions, interest rates,
and the then existing financial position and results of operations of the
Company. Therefore, no assurances can be made by the Company that such
additional capital will be available.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
No material events have occurred in the Company's ongoing litigation
matters other than those described below. For the history of such litigation,
please refer to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997.
ASX Investment Corporation
On October 30, 1997, the United States District Court granted the
Company's motion to dismiss with prejudice as to plaintiff ASX Investment
Corporation. The Court denied the motion as to plaintiff Steve Rosner,
stating that based upon the record before it at that time it could not
determine if Rosner was sufficiently connected to ASX to grant the Company's
motion. The Court suggested in its order that if the Company could show such
a connection, it would entertain a further motion directed to dismissing
Rosner's claim. The Company intends to take the necessary discovery to have
the claim by Rosner dismissed. In addition, the Court granted the Company's
motion for summary judgment in a separate class-action suit filed by Rosner.
Item 2. Changes in Securities
The Company designated 5,000,000 of its 7,500,000 shares of preferred
stock as Series B Participating Preferred Stock and issued all 5,000,000
shares to Jacksonville Holdings, Inc., a wholly-owned subsidiary. The Series
B Participating Preferred Stock pays a quarterly dividend equal to 6% of the
$2.00 per share liquidation value. No dividends can be paid on the Company's
common shares and the Company can not redeem, purchase, or otherwise acquire
for consideration any shares of its common stock unless and until the
quarterly dividend has been paid on the Series B Participating Preferred
Stock.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual shareholder meeting on November 5, 1997 to
elect one Class II director and ratify the election of Pender Newkirk &
Company as independent auditors for the fiscal year ended June 30, 1998. The
terms of office as director for R. Park Newton, III and John L. Caskey
continued after the meeting. The voting results were as follows:
Issue For Against Abstain
- ---------------------------------------------- --------- -------- --------
Elect W. Aris Newton as Class II director 2,921,380 33,847 651,190
Ratify selection of Pender Newkirk &
Company as auditors for fiscal 1998 3,003,651 597,746 5,020
Item 6. - Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EXCAL ENTERPRISES, INC.
Registrant
Dated: November 11, 1997 /s/ W. CAREY WEBB
W. Carey Webb
President and Chief Executive Officer
Dated: November 11, 1997 /s/ TIMOTHY R. BARNES
Timothy R. Barnes
Vice President and Chief Financial
Officer
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTERLY REPORT
ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 12,551,367
<SECURITIES> 0
<RECEIVABLES> 235,324
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,747,424
<PP&E> 8,425,452
<DEPRECIATION> 717,498
<TOTAL-ASSETS> 24,026,036
<CURRENT-LIABILITIES> 1,660,104
<BONDS> 13,362,463
0
0
<COMMON> 4,738
<OTHER-SE> 7,131,731
<TOTAL-LIABILITY-AND-EQUITY> 24,026,036
<SALES> 1,167,949
<TOTAL-REVENUES> 1,167,949
<CGS> 0
<TOTAL-COSTS> 714,455
<OTHER-EXPENSES> 94,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,635
<INCOME-PRETAX> 355,624
<INCOME-TAX> 145,000
<INCOME-CONTINUING> 210,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210,624
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
CERTIFICATE OF DESIGNATIONS
OF
SERIES B PARTICIPATING PREFERRED STOCK
OF
EXCAL ENTERPRISES, INC.
(Pursuant to Section 151 of the Delaware General Corporation Law)
EXCAL ENTERPRISES, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law by unanimous written consent on September 29, 1997:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board"), in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation, the Board of Directors hereby
creates a series of Preferred Stock, par value $0.01 per share (the "Preferred
Stock"), of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof as
follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as the "Series B Participating Preferred Stock" (the "Series B
Preferred Stock"). The number of shares constituting the Series B Preferred
Stock shall be 5,000,000. Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided that such increase, together
with the aggregate number of authorized shares of all other series' of
preferred stock of the Corporation, does not exceed the total number of
authorized shares of preferred stock of the Corporation and provided further
that no decrease shall reduce the number of shares of Series B Preferred Stock
to a number less than the number of shares of such series then outstanding.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series B Preferred Stock, in
preference to the holders of shares of Series A Preferred Stock and in
preference to the holders of Common Stock, par value $0.001 per share of
the Corporation (the "Common Stock"), and in preference to any other
junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
preferential dividends, payable in cash on the first day of January,
April, July, and October of each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fractional share of Series B Preferred Stock, at a rate per annum
(rounded to the nearest cent) equal to six percent (6%) of the
Liquidation Value of the Series B Preferred Stock, as defined in Section
6 hereof.
(B) Dividends shall begin to accrue on outstanding shares of Series
B Preferred Stock from the Quarterly Dividend Payment Date following the
date of issue of such shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series B Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Dividends paid on the shares of Series B Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share by share
basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of
shares of Series B Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not
more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. Holders of shares of Series B Preferred Stock
shall have no voting rights.
Section 4. Certain Restrictions.
(A) In the event that quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided in
Section 2 are unpaid, the Corporation shall not in such quarter:
(i) declare or pay dividends, or make any other
distributions, on any share of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series B Preferred Stock, except dividends paid ratably on the
Series B Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock, provided that the corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (both as to dividends and upon dissolution, liquidation or
winding up) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series B Preferred Stock, or any shares of stock ranking
on a parity with the Series B Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock without designation as to series and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the Restated Certificate of
Incorporation, or in any other Certificate of Designation creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of Common Stock, Series A Preferred
Stock, or any other stock ranking junior to the Series B Preferred Stock upon
liquidation, distribution or winding up, unless prior thereto, the holders of
shares of Series B Preferred Stock shall have received $2 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon
declared for such quarter (the "Liquidation Value"), or (2) to the holders of
shares of stock ranking on a parity with the Series B Preferred Stock upon
liquidation, dissolution or winding up, except distributions made ratably on
the Series B Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 7. No Redemption. Shares of the Series B Preferred Stock shall
not be redeemable.
Section 8. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series B Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President this 8th day of October, 1997.
EXCAL ENTERPRISES, INC.
By: /S/ W. CAREY WEBB
-----------------------------
W. Carey Webb
Its: President
