<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-21821
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Consolidated Capital of North America, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 93-0962072
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 17th Street, Suite 400
Denver, Colorado 80202
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(Address of principal executive offices)
888-313-8051
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Issuer's telephone number
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 .
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 15,705,460 shares of
$.0001 per share common stock as of May 1, 1997.
Transitional Small Business Disclosure Format (check one);
Yes No X
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Consolidated Capital of North America, Inc.
Quarterly Report on Form 10-QSB for the
Quarter Ended March 31, 1997
Table of Contents
Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 159,564 $ 26,937
Accounts receivable, less allowance
for doubtful accounts of $227,572 2,454,967 --
Inventories, net 1,732,640 --
Prepaid expenses and other 79,948 --
Assets held for sale 30,000 131,125
---------- ----------
Total current assets 4,457,119 158,062
Property and equipment, net of
accumulated depreciation of $38,496 2,130,811 --
Goodwill 2,309,863 --
Other assets 13,451 --
---------- ----------
Total assets $8,911,244 $ 158,062
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
MARCH 31, 1997 AND DECEMBER 31, 1996
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
LIABILITIES AND STOCKHOLDERS EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 3,228,881 $ 24,632
Accrued liabilities 271,121 36,000
Current portion of long-term debt 246,441 --
Note payable to former officer 100,000 --
Note payable to affiliate 250,000 --
Other 83,430 20,000
----------- ---------
Total current liabilities 4,179,873 80,632
----------- ---------
Long-term debt - less current portion 4,210,366 --
----------- ---------
Stockholders' equity:
Preferred stock, par value $.01 per share:
Authorized - 10,000,000 shares, none issued -- --
Common stock, par value $.0001 per share:
Authorized - 50,000,000 shares, 15,705,460
and 1,570,546 shares outstanding, respectively 1,571 157
Additional paid-in capital 1,822,107 855,756
Accumulated deficit (1,302,673) (778,483)
----------- ---------
Total stockholders' equity 521,005 77,430
----------- ---------
Total liabilities and stockholders' equity $ 8,911,244 $ 158,062
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Net sales $ 5,330,147 $ --
Cost of goods sold 4,384,522 --
------------ -----------
Gross profit 945,625 --
------------ -----------
Operating expenses:
Selling and shipping 626,866 --
General and administrative 705,261 17,061
Depreciation and amortization 87,641 1,353
------------ -----------
Total expenses 1,419,768 18,414
------------ -----------
Loss from operations (474,143) (18,414)
------------ -----------
Other income (expense):
Interest expense (77,998) (5,350)
Other 27,951 11,258
------------ -----------
(50,047) 5,908
------------ -----------
Net loss $ (524,190) $ (12,506)
============ ===========
Net loss per share $ (.04) $ (.01)
============ ===========
Weighted average number of
common shares outstanding 12,407,313 1,529,546
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (524,190) $ (12,506)
Adjustments to reconcile net loss to net cash
used in operations:
Amortization and depreciation 87,641 1,353
Gain on sale of assets (1,000) --
Change in assets and liabilities:
Accounts receivable, net 63,114 --
Inventories, net 241,499 --
Prepaid expenses and other (47,592) --
Other assets 23,012 --
Accounts payable and accrued liabilities (133,365) 10,571
Other liabilities 63,430 --
Other -- (11,266)
----------- ---------
Net cash used in operating activities (227,451) (11,848)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash acquired (939,197) --
Purchase of property and equipment (17,755) --
Proceeds from sale of assets held for sale 70,000 --
Collection of notes receivable -- 105,000
Advance to related parties -- (16,024)
----------- ---------
Net cash (used in) provided by
investing activities (886,952) 88,976
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 511,686 824
Principal payments on long-term debt (46,557) (81,000)
Principal payments on note payable to former officer (185,000) --
Proceeds from issuance of common stock 966,901 --
----------- ---------
Net cash provided by (used in) financing activities 1,247,030 (80,176)
----------- ---------
NET INCREASE (DECREASE) IN CASH 132,627 (3,048)
CASH AT BEGINNING OF PERIOD 26,937 6,494
----------- ---------
CASH AT END OF PERIOD $ 159,564 $ 3,446
=========== =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 63,396 $ 5,350
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(unaudited)
1. GENERAL
The accompanying unaudited interim financial statements of Consolidated Capital
of North America, Inc. (the "Company") include the accounts of the Company and
its subsidiaries, after elimination of all significant intercompany
transactions, accounts and profits. These statements include all adjustments
(consisting solely of normal recurring adjustments) which, in the opinion of
management, are necessary to fairly present the financial position of the
Company as of March 31, 1997 and the results of its operations and its cash
flows for the three months then ended. The results of operations for this
interim period are not necessarily indicative of results to be expected for the
full year.
These interim financial statements should be read in conjunction with the
Summary of Significant Accounting Policies and other Notes to Financial
Statements included in the Company's annual audited financial statements for
the year ended December 31, 1996. Certain prior year amounts have been
reclassified to conform with the current period presentation.
2. BUSINESS ACTIVITIES
On January 21, 1997, Consolidated Land & Cattle Company, a subsidiary of the
Company, merged with Angeles Acquisition Corp., a privately held company (the
"Merger"). Angeles Acquisition Corp. survived the Merger and became a wholly
owned subsidiary of the Company. In the Merger transaction, the Company issued
8,638,003 new common shares to the sole stockholder of Angeles Acquisition
Corp. Concurrent with the Merger, the Company also sold 5,496,911 shares of
common stock for cash, in a private transaction exempt from registration under
Regulation S of the Securities Act of 1933, as amended, for an aggregate
purchase price of $1,000,000.
Prior to the Merger, Angeles Acquisition Corp. acquired Angeles Metal Trim Co.
and Subsidiary ("Angeles") for approximately $4.3 million, including related
fees and expenses. Angeles fabricates and sells steel framing materials for
commercial and residential structures.
Prior to January 21, 1997, the Company's operations were exclusively in the
real estate business. Since January 21, 1997, the Company has sold all of its
real estate related assets (the final sale occurred during April 1997), and
intends to focus its future business activities on the steel frame building
business and complementary businesses.
The net assets acquired by the Company as a result of the Merger were recorded
at an amount based upon the purchase price for the acquisition of Angeles.
Goodwill, representing the excess of the purchase price over the fair value of
the net identifiable tangible assets acquired, is being amortized on a
straight-line basis over ten years. Accumulated amortization amounted to
$49,145 as of March 31, 1997. The tangible depreciable assets acquired in the
Merger are being depreciated over their useful lives using the straight line
method after giving consideration to salvage value.
7
<PAGE> 8
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
(unaudited)
3. LONG-TERM DEBT
In connection with the Merger, Angeles incurred bank debt of approximately $4.2
million during January 1997 under two separate bank notes. $1 million of the
debt proceeds was utilized for the repayment of previously outstanding
indebtedness of Angeles and $3.2 million was utilized in connection with the
Merger.
Under the first note, Angeles borrowed $1.4 million at a fixed interest rate of
9.78%. The note is payable in 48 monthly installments commencing February 17,
1997 and is collateralized by all of Angeles' equipment and rolling stock.
Under the terms of the second note, Angeles can borrow up to $4.0 million,
limited to the amount of eligible accounts receivable and inventory. This
revolving line of credit bears interest, which is payable monthly, at a
variable rate equal to 2% per annum over the bank's LIBOR-Rate. The current
interest rate is 8.5%. The principal of the note is payable, in its entirety,
during December 1998 and the note is collateralized by all of Angeles' accounts
receivable, inventory and intangibles. The note was initially guaranteed by
Angeles Acquisition Corp. The note agreement contains a number of financial
covenants and Angeles was not in compliance with certain of these covenants
during the first quarter of 1997. During April 1997, Angeles and the bank
entered into an amendment to the loan agreement pursuant to which certain
covenants were amended and/or waived through December 31, 1997. In addition,
the Company agreed to also guaranty the repayment of the note.
There are no compensating balance requirements under either of these two
financing arrangements.
The following is a schedule by year of the maturities of the long-term portion
of these notes:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
------------ ------
<S> <C>
1998 $ 3,412,885
1999 362,445
2000 399,902
2001 35,134
-----------
$ 4,210,366
===========
</TABLE>
4. SUBSEQUENT EVENT
During April 1997, Angeles borrowed $300,000 from an affiliate of the Company's
major shareholder. Angeles agreed to pay a facility fee of $9,000, which was
added to the principal balance of the note, and the Company agreed to issue
50,000 of its common shares to the lender upon such funding and 10,000 common
shares on the first day of each month commencing July 1, 1997 until the note is
repaid in full. The note bears interest at 12% per annum, payable monthly in
arrears beginning May 1, 1997. The principal of the note is due, in its
entirety, during April 1999. While the note agreement provides that the note
may be prepaid at any time at the option of Angeles, any prepayment of the note
is currently prohibited by the terms of the amended bank note agreement
discussed above.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
INTRODUCTION AND PLAN OF OPERATION
Prior to January 21, 1997, the Company's operations were exclusively in the
real estate business. On January 21, 1997, Consolidated Land & Cattle Company,
a subsidiary of the Company, merged with Angeles Acquisition Corp., a privately
held company. Angeles Acquisition Corp. survived the Merger and became a wholly
owned subsidiary of the Company. In the Merger transaction, the Company issued
8,638,003 new common shares to the sole stockholder of Angeles Acquisition
Corp. Concurrent with the Merger, the Company also sold 5,496,911 shares of
common stock for cash, in a private transaction exempt from registration under
Regulation S of the Securities Act of 1933, as amended, for an aggregate
purchase price of $1,000,000.
Prior to the Merger, Angeles Acquisition Corp. acquired Angeles Metal Trim Co.
and Subsidiary for approximately $4.3 million, including related fees and
expenses. Angeles fabricates and sells steel framing materials for commercial
and residential structures.
Since January 21, 1997, the Company has sold all of its real estate related
assets (the final sale occurred during April 1997), and intends to focus its
future business activities on the steel frame building business and
complementary businesses. Acquisition plans, capital needs and the Company's
plans to raise addition capital are described below under "Liquidity, Capital
Resources and Financial Condition".
RESULTS OF OPERATIONS
The Company reported net sales of $5,330,147 from its steel fabrication
activities during the three months ended March 31, 1997. Cost of goods sold
totaled $4,384,522, resulting in a gross profit of $945,625, or 17.7% of net
sales. However, this gross profit was not sufficient to cover the selling and
shipping, general and administrative and depreciation and amortization expenses
incurred during the period. As a result, the Company reported a net loss for
the three months ended March 31, 1997 of $524,190 ($.04 per share).
A comparison of operating results for the three months ended March 31, 1997 to
the corresponding period of the prior year has not been made because such a
comparison would not be meaningful given the Merger and the resultant change in
the Company's business activities.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
As of March 31, 1997, the Company had working capital of $277,246 as compared
to the working capital at December 31, 1996 of $77,430, which was prior to the
Merger.
During January 1997, Angeles incurred $4.2 million of indebtedness, $1 million
of which was utilized for the repayment of previously outstanding indebtedness
of Angeles and $3.2 million of which was utilized in connection with the
acquisition of Angeles. Union Bank of California, N.A. provided $2.8 million in
financing under a revolving line of credit (the "Union Bank Facility") and
General Electric Capital Corporation provided $1.4 million in financing under a
term loan (the "GE Term Loan").
Under the Union Bank Facility, Angeles can borrow up to a maximum of $4 million
determined by eligible accounts receivable and inventory and the compliance
with certain financial conditions. The Union Bank Facility is available,
subject to support by the appropriate levels of assets and compliance with the
applicable financial covenants, to provide financing for general corporate
purposes. The Union Bank Facility is due on December 15, 1998. Amounts drawn
under the
9
<PAGE> 10
Union Bank Facility bear interest at a base rate which is 2% per annum over
Union Bank's LIBOR-Rate for the interest period. The GE Term Loan is payable in
48 monthly installments of principal and interest at a fixed rate of 9.78% per
annum commencing February 17, 1997.
All of Angeles' equipment and rolling stock are pledged as security for the GE
Term Loan and all of Angeles' accounts receivable, inventory and intangibles
are pledged as security for the Union Bank Facility. The Union Bank Facility
was initially guaranteed by Angeles Acquisition Corp. The Union Bank Facility
agreement contains a number of financial covenants, including certain working
capital and profit requirements and limitations on total liabilities. Angeles
was not in compliance with certain of these loan covenants during the first
quarter of 1997. During April 1997, Angeles and Union Bank entered into an
amendment to the loan agreement pursuant to which certain of these covenants
were amended and/or waived through December 31, 1997. In addition, the Company
agreed to guaranty the repayment of the Union Bank Facility. A $5,000 fee was
paid to Union Bank in connection with the negotiation of this amendment.
The amended Union Bank loan agreement provides that Angeles may not make any
cash payments on any obligations owing by Angeles to the former majority
shareholder/officer of Angeles other than rental payments due and owing,
provided however, such obligations may be satisfied through the issuance of
equity securities of the Company. Accordingly, Angeles is prohibited from
making any cash payments under the outstanding promissory note of Angeles
payable to the former majority shareholder/officer of Angeles and is prohibited
from making any payments under the Non-Competition and Consulting Agreement
entered into between Angeles and such former shareholder/officer of Angeles in
connection with the acquisition of Angeles. The Company is in negotiations with
the former shareholder/officer of Angeles regarding these matters and matters
related to the acquisition of Angeles by the Company.
During April 1997, ERB Acquisition Group, LLC, a Nebraska limited liability
company, ("ERB") loaned $300,000 to Angeles (the "ERB Loan"), which loan is
evidenced by a promissory note payable to ERB (the "ERB Note"). The ERB Loan
proceeds were used to repay a portion of the outstanding balance on the Union
Bank Facility.
In consideration of the ERB Loan, Angeles agreed to pay ERB a facility fee of
$9,000, which was added to the principal balance of the ERB Note, and the
Company agreed to issue 50,000 of its common shares to ERB upon such funding
and 10,000 common shares on the first day of each month commencing July 1, 1997
until the ERB Note is repaid in full. The ERB Note bears interest at 12% per
annum, payable monthly in arrears beginning May 1, 1997. The principal of the
ERB Note and any accrued and unpaid interest is due and payable on April 9,
1999. While the ERB Note agreement provides that the ERB Note may be prepaid at
any time at the option of Angeles, any prepayment of the ERB Note is currently
prohibited by the terms of the amended Union Bank Facility agreement.
The obligations under the ERB Loan were guaranteed by the Company and Stone
Pine Colorado, LLC. All of the assets of the Company and all of the assets of
Stone Pine Colorado, LLC, including the Company's common shares owned by Stone
Pine Colorado, LLC, have been pledged as security for the obligations under the
ERB Loan. Stone Pine Colorado, LLC is the owner of approximately 42% of the
Company's outstanding common shares and all of the Company's directors have a
financial interest in Stone Pine Colorado, LLC. Two of the Company's directors
also have a financial interest in ERB.
The Company needs to raise additional capital to meet the Company's needs and
to satisfy the Company's obligations through the end of the current fiscal year
based on the Company's current plan of operation. The Company is seeking to
obtain additional capital of at least $1 million though the sale of common
shares. The Company will need such additional capital for principal and
interest payments under the existing financing arrangements and for the other
obligations of the Company described herein, as well as for working capital
purposes. There can be no assurances that the Company will be successful in
obtaining this equity capital.
10
<PAGE> 11
The Company believes that its operating cash flows, funds available under the
Union Bank Facility together with funds raised in an equity issuance will
provide adequate resources to fund ongoing operating requirements and future
capital expenditures related to the development of its business for the fiscal
year. The Company may be required to obtain additional lines of credit for
working capital purposes and possibly make periodic public offerings or private
placements in order to meet the liquidity needs of such growth. While the
Company does not believe it will be restricted in financing such growth, there
can be no assurances that such sources of financing will be available to the
Company in sufficient amounts or on acceptable terms. Under such circumstances,
the Company would expect to manage its growth within the financing available.
The Company also plans to engage in strategic acquisitions. As these
investments are identified and funds are needed to complete such acquisitions,
additional funding will be necessary.
During April 1997, the Company entered into a non-binding letter of intent to
acquire all of the assets of Capitol Metals Co., Inc. ("CMC"), a Los Angeles
based steel service and distribution center which specializes in the processing
of hot and cold rolled steel. The Company intends to acquire the assets of CMC
for consideration consisting of cash, stock and the assumption of debt with an
estimated value totaling approximately $13.7 million. The consummation of the
transaction is contingent upon a number of closing conditions, including the
negotiation and execution of the definitive agreement and the Company's ability
to secure financing for the transaction.
SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 provides a new "safe
harbor" for certain forward-looking statements. Statements contained in this
report that are not historical facts are forward looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those stated in the forward-looking statements. Factors that
could cause actual results to differ materially include, among others: general
economic conditions, changes in laws and government regulations, fluctuations
in demand for the Company's products, the Company's ability to consummate
strategic acquisitions and the Company's ability to successfully finance any
such future acquisitions, as well as its current ongoing operations.
11
<PAGE> 12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits to be filed:
Exhibit No. Description
----------- -----------
10.25 Loan Agreement, dated as of April 9, 1997, between
Angeles Metal Trim Co., Consolidated Capital of
North America, Inc., Stone Pine Colorado, LLC and
ERB Acquisition Group, LLC.
10.26 Promissory Note, dated April 9, 1997, of Angeles
Metal Trim Co. in the principal amount of $309,000,
payable to ERB Acquisition Group, LLC.
10.27 Guaranty, dated April 9, 1997, and delivered by
Consolidated Capital of North America, Inc. and
Stone Pine Colorado, LLC to and for the benefit of
ERB Acquisition Group, LLC.
10.28 Security Agreement, dated as of April 9, 1997, made
and delivered by Consolidated Capital of North
America, Inc. in favor of ERB Acquisition Group,
LLC.
10.29 First Amendment and Waiver to Business Loan
Agreement, dated as of April 11, 1997, by and
between Angeles Metal Trim Co. and Union Bank of
California, N.A
27.1 Financial Data Schedule.
(b) The Registrant filed a Form 8-K on January 23, 1997 to report the
Merger and related transactions.
The Registrant filed a Form 8-K on February 7, 1997 to report a change
in accountants.
12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Consolidated Capital of North America, Inc.
(Registrant)
Date: May 13, 1997 By: /s/ Thompson H. Rogers
-----------------------------------
Thompson H. Rogers
Chairman of the Board and Director
(Principal Executive Officer)
By: /s/ Donald R. Jackson
-----------------------------------
Donald R. Jackson
Secretary, Treasurer, Chief Financial
Officer and Director (Principal Financial
and Accounting Officer)
13
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.25 Loan Agreement, dated as of April 9, 1997, between
Angeles Metal Trim Co., Consolidated Capital of
North America, Inc., Stone Pine Colorado, LLC and
ERB Acquisition Group, LLC.
10.26 Promissory Note, dated April 9, 1997, of Angeles
Metal Trim Co. in the principal amount of $309,000,
payable to ERB Acquisition Group, LLC.
10.27 Guaranty, dated April 9, 1997, and delivered by
Consolidated Capital of North America, Inc. and
Stone Pine Colorado, LLC to and for the benefit of
ERB Acquisition Group, LLC.
10.28 Security Agreement, dated as of April 9, 1997, made
and delivered by Consolidated Capital of North
America, Inc. in favor of ERB Acquisition Group,
LLC.
10.29 First Amendment and Waiver to Business Loan
Agreement, dated as of April 11, 1997, by and
between Angeles Metal Trim Co. and Union Bank of
California, N.A
27.1 Financial Data Schedule.
E-1
<PAGE> 1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made this 9th day of April, 1997,
between Angeles Metal Trim Co., a California corporation ("Borrower"),
Consolidated Capital of North America, a Colorado corporation ("Consolidated
Capital") and Stone Pine Colorado, LLC, a Colorado limited liability company
("Stone Pine Colorado" and together with Consolidated Capital, the
"Guarantors") and ERB Acquisition Group, LLC, a Nebraska limited liability
company ("Lender").
RECITAL
Borrower has requested that Lender make a loan to or for the benefit
of Borrower in the amount of Three Hundred Thousand Dollars ($300,000.00), and
Lender is willing to do so on the following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, Borrower and Lender agree as follows:
1. LOAN.
1.1 Loan. Subject to all of the terms and conditions contained in this
Agreement, Lender agrees to advance to Borrower, on or before April 9, 1997,
the principal sum of Three Hundred Thousand Dollars ($300,000.00) (the "Loan").
The Loan, together with Borrower's obligation to pay a commitment fee of
$9,000.00 in connection with the Loan (the "Commitment Fee"), shall be
evidenced by and repayable in accordance with the terms of Borrower's
promissory note ("Note"), the form of which is attached as Exhibit A. The
Commitment Fee will be added to the principal balance of the Note and paid in
accordance with the terms of the Note.
1.2 Equity Shares. (a) As additional consideration for the advancement
of the Loan, Consolidated Capital shall issue to Lender Common Shares of
Consolidated Capital as follows: (i) 50,000 Common Shares upon advancement of
the Loan and (ii) 10,000 Common Shares on the first day of every month
beginning with the 1st day of July, 1997 until such time as all obligations
under the Note are paid in full (collectively, the "Common Shares").
(b) The Common Shares will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and accordingly, will constitute
"restricted securities" for purposes of the Securities Act and Lender will not
be able to transfer such Common Shares except upon compliance with the
registration requirements of the Securities Act and applicable state securities
laws or an exemption therefrom. The certificates evidencing the Common Shares
shall contain a legend to the foregoing effect.
<PAGE> 2
(c) Consolidated Capital, shall upon the demand of any holder of the
Common Shares, file a registration statement with the SEC to permit the sale of
the Common Shares by the holders of such shares from time to time. The holders
of the Common Shares shall also have "piggyback" registration rights.
2. CONDITIONS TO THE LOAN.
2.1 Documents. The making of the Loan is conditioned upon the
execution and/or delivery to Lender of the following agreements, instruments
and documents by the parties thereto: (a) this Agreement; (b) the Note; (c) the
Guaranty in the form attached as Exhibit B (the "Guaranty"); (d) the Stock
Pledge Agreement in the form attached as Exhibit C (the "Pledge Agreement");
(e) the Security Agreement of Consolidated Capital in the form attached as
Exhibit D (the "Consolidated Capital Security Agreement"); (f) the Security
Agreement of Stone Pine Colorado in the form attached as Exhibit E (the "Stone
Pine Colorado Security Agreement"); (g) stock powers executed in blank relating
to 6,556,867 Common Shares of Consolidated Capital owned by Stone Pine
Colorado; and (h) a stock certificate for 50,000 Common Shares of Consolidated
Capital issued in the name of Lender.
2.2 Representations and Warranties. All representations and warranties
contained in this Agreement shall be true in all material respects on and as of
the date of the making of the Loan as if such representations and warranties
had been made on and as of such date.
2.3 Acknowledgment of Union Bank. The making of the Loan is further
conditioned upon the receipt by Lender of the acknowledgement of Union Bank of
California, N.A. ("Union Bank") to the effect that the Loan is permitted under
that certain Business Loan Agreement dated as of January 15, 1997 between
Borrower and Union Bank (the "Union Bank Agreement"). Said acknowledgment shall
be in form and substance reasonably satisfactory to Lender.
3. SECURITY. The payment of the Note is secured by (a) the Guaranty of
even dated herewith pursuant to which Consolidated Capital and Stone Pine
Colorado guarantee the full payment and performance by Borrower of its
obligations under the Note, (b) a pledge by Stone Pine Colorado, pursuant to
the terms of the Pledge Agreement of even date herewith, of 6,556,867 Common
Shares of Consolidated Capital owned by Stone Pine Colorado, (c) the
Consolidated Capital Security Agreement of even date herewith pursuant to which
Consolidated Capital grants Borrower a security interest in all of its assets,
and (d) the Stone Pine Colorado Security Agreement of even date herewith
pursuant to which Stone Pine Colorado grants Borrower a security interest in
all of its assets.
2
<PAGE> 3
4. REPRESENTATIONS AND WARRANTIES.
4.1 Representations and Warranties of Borrower. Borrower represents
and warrants that as of the date of the execution of this Agreement:
(a) Existence. Borrower is a corporation duly organized and in good
standing under the laws of the State of California and is duly qualified to do
business and is in good standing in all states where such qualification is
necessary, except for those jurisdictions in which the failure to qualify would
not, in the aggregate, have a material adverse effect on Borrower's financial
condition, results of operations or business.
(b) Authority. The execution and delivery by Borrower of this
Agreement and the Note: (a) are within Borrower's corporate powers; (b) are
duly authorized by Borrower's board of directors; (c) are not in contravention
of the terms of Borrower's certificate of incorporation or bylaws; (d) are not
in contravention of any law or laws, or of the terms of any material indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
any of Borrower's property is bound, including without limitation, the Union
Bank Agreement; (e) do not require any governmental consent, registration or
approval; (f) do not contravene any contractual or governmental restriction
binding upon Borrower; and (g) will not result in the imposition of any lien,
charge, security interest or encumbrance upon any property of Borrower under
any existing indenture, mortgage, deed of trust, loan or credit agreement or
other material agreement or instrument to which Borrower is a party or by which
Borrower or any of Borrower's property may be bound or affected.
(c) Binding Effect. This Agreement and the Note set forth the legal,
valid and binding obligations of Borrower and are enforceable against Borrower
in accordance with their respective terms.
4.2 Representations and Warranties of Consolidated Capital.
Consolidated Capital represents and warrants that as of the date of the
execution of this Agreement:
(a) Existence. Consolidated Capital is a corporation duly organized
and in good standing under the laws of the State of Colorado.
(b) Authority. The execution and delivery by Consolidated Capital of
this Agreement, the Guaranty and the Consolidated Capital Security Agreement:
(a) are within Consolidated Capital's corporate powers; (b) are duly authorized
by Consolidated Capital's board of directors; (c) are not in contravention of
the terms of Consolidated Capital's certificate of incorporation or bylaws; (d)
are not in contravention of any law or laws, or of the terms of any material
indenture, agreement or undertaking to which Consolidated Capital is a party or
by which Consolidated Capital or any of Consolidated Capital's property is
bound; (e) do not require any governmental consent, registration or approval;
(f) do not contravene any
3
<PAGE> 4
contractual or governmental restriction binding upon Consolidated Capital; and
(g) will not, except as contemplated or permitted by this Agreement, result in
the imposition of any lien, charge, security interest or encumbrance upon any
property of Consolidated Capital under any existing indenture, mortgage, deed
of trust, loan or credit agreement or other material agreement or instrument to
which Consolidated Capital is a party or by which Consolidated Capital or any
of Consolidated Capital's property may be bound or affected.
(c) Binding Effect. This Agreement, the Guaranty and the Consolidated
Capital Security Agreement set forth the legal, valid and binding obligations
of Consolidated Capital and are enforceable against Consolidated Capital in
accordance with their respective terms.
4.3 Representations and Warranties of Stone Pine Colorado. Stone Pine
Colorado represents and warrants that as of the date of the execution of this
Agreement:
(a) Existence. Stone Pine Colorado is a limited liability company
organized and in good standing under the laws of the State of Colorado.
(b) Authority. The execution and delivery by Stone Pine Colorado of
this Agreement, the Pledge Agreement, the Guaranty and the Stone Pine Colorado
Security Agreement: (a) are within Stone Pine Colorado's powers; (b) are duly
authorized by Stone Pine Colorado; (c) are not in contravention of the terms of
Stone Pine Colorado's operating agreement or similar documents; (d) are not in
contravention of any law or laws, or of the terms of any material indenture,
agreement or undertaking to which Stone Pine Colorado is a party or by which
Stone Pine Colorado or any of Stone Pine Colorado's property is bound; (e) do
not require any governmental consent, registration or approval; (f) do not
contravene any contractual or governmental restriction binding upon Stone Pine
Colorado; and (g) will not, except as contemplated or permitted by this
Agreement, result in the imposition of any lien, charge, security interest or
encumbrance upon any property of Stone Pine Colorado under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other material
agreement or instrument to which Stone Pine Colorado is a party or by which
Stone Pine Colorado or any of Stone Pine Colorado's property may be bound or
affected.
(c) Binding Effect. This Agreement, the Pledge Agreement, the Guaranty
and the Stone Pine Colorado Security Agreement set forth the legal, valid and
binding obligations of Stone Pine Colorado and are enforceable against Stone
Pine Colorado in accordance with their respective terms.
4.4 Investment Representations of Lender. Lender represents and
warrants to Consolidated Capital as follows:
(a) Lender acknowledges that you have advised Lender that the Common
Shares have not been registered under the Securities Act or any other
securities regulation laws of any state and that your reliance on the
availability of certain exemptions from registration is based in
4
<PAGE> 5
part on the representations made by Lender in this Agreement.
(b) Lender hereby represents to you that Lender is acquiring the
Common Shares for the account of Lender for investment only and not with a view
to resell or otherwise distribute such Common Shares, and that Lender is not
acquiring the Common Shares on behalf of any other person or entity. Lender
further represents that Lender does not intend to resell, transfer or dispose
of all or any part of the Common Shares without registration under the
Securities Act or without an opinion from counsel acceptable to Consolidated
Capital, that registration is not required, and Lender represents that it is
able to bear the economic risk of this investment for an indefinite period of
time under these circumstances.
(c) Lender further acknowledges that the Common Shares are "restricted
securities" as that term is defined in Rule 144 of the General Rules and
Regulations under the Securities Act. Lender understands that stop transfer
instructions will be issued to the transfer agent for Consolidated Capital's
stock, and Lender consents to the placing of a legend in substantially the
following form on the back of the certificate issued to Lender:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY OTHER STATE LAWS REGULATING THE ISSUANCE
OF SECURITIES AND ARE PURCHASED PURSUANT TO AN INVESTMENT
REPRESENTATION BY THE PURCHASER THEREOF. THESE SHARES SHALL
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY
THE PURCHASER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES EXCEPT UPON THE ISSUANCE TO THE
COMPANY OF A FAVORABLE OPINION OF ITS COUNSEL TO THE EFFECT
THAT SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS.
(d) Lender agrees to hold harmless and indemnify Consolidated Capital
for any and all liabilities resulting to it through violation by Lender of the
above warranties and representations.
5. DEFAULT AND RIGHTS AND REMEDIES.
5.1 Default and Rights and Remedies. Upon the occurrence of default,
Lender shall have the rights and remedies set forth in the Note, the Pledge
Agreement, the Guaranty, the Consolidated Capital Security Agreement, the Stone
Pine Colorado Security Agreement and the rights and remedies available to
Lender under applicable law.
5
<PAGE> 6
6. MISCELLANEOUS.
6.1 Reliance by Lender. All covenants, agreements, representations and
warranties made by Borrower and Guarantors shall, notwithstanding any
investigation by Lender, be deemed to be material to and to have been relied
upon Lender.
6.2 Parties. Whenever in this Agreement there is reference made to any
of the parties, such reference shall be deemed to include, wherever applicable,
a reference to the respective successors and assigns of Borrower, Guarantors
and Lender.
6.3 Applicable Law; Severability. THIS AGREEMENT SHALL BE CONSTRUED IN
ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE OF NEBRASKA. EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO JURISDICTION
AND VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT IN FEDERAL OR STATE COURT
SITTING IN THE CITY OF OMAHA, NEBRASKA. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
6.4 Maximum Interest. It is expressly stipulated and agreed to be the
intent of Borrower and Lender at all times to comply with the applicable law
governing the maximum rate of interest payable on or in connection with all
indebtedness and transactions hereunder (or applicable United States federal
law to the extent that it permits Lender to contract for, charge, take, reserve
or receive a greater amount of interest). If the applicable law is ever
judicially interpreted so as to render usurious any amount of money or other
consideration called for hereunder, or contracted for, charged, taken, reserved
or received with respect to any loan or advance hereunder, or if acceleration
of the maturity of the Loan or the indebtedness hereunder or if any prepayment
by Borrower results in Borrower's having paid any interest in excess of that
permitted by law, then it is Borrower's and Lender's express intent that all
excess cash amounts theretofore collected by Lender be credited on the
principal balance of the Loan (or if the Loan has been or would thereby be paid
in full, refunded to Borrower), and the provisions of this Agreement
immediately be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder. The right to accelerate maturity of the
Loan does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of acceleration.
6
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
ANGELES METAL TRIM CO.
a California corporation
By: /s/ Donald R. Jackson
----------------------------------
Name: Donald R. Jackson
--------------------------------
Title: Treasurer
-------------------------------
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.,
a Colorado corporation
By: /s/ Thompson H. Rogers
----------------------------------
Name: Thompson H. Rogers
--------------------------------
Title: Chairman
-------------------------------
STONE PINE COLORADO, LLC
a Colorado limited liability company
By: /s/ W. Duke DeGrassi
----------------------------------
Name: W. Duke DeGrassi
--------------------------------
Title: Executive Vice President
-------------------------------
ERB ACQUISITION GROUP, LLC
a Nebraska limited liability company
By: /s/ Paul Bagley
----------------------------------
Name: Paul Bagley
--------------------------------
Title: Partner
-------------------------------
7
<PAGE> 8
Exhibit A to
Loan Agreement
Note
(See Exhibit No. 10.26)
<PAGE> 9
Exhibit B to
Loan Agreement
Guaranty
(See Exhibit No. 10.27)
<PAGE> 10
Exhibit C to
Loan Agreement
Pledge Agreement
<PAGE> 11
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of April 9, 1997, is made and delivered
by Stone Pine Colorado, LLC, a Colorado limited liability company ("Stone Pine
Colorado") in favor of ERB Acquisition Group, LLC, a Nebraska limited liability
company ("Lender").
A. Angeles Metal Trim Co. ("Borrower"), a wholly owned subsidiary of
Consolidated Capital of North America, Inc. ("Consolidated Capital"), has
entered into a Loan Agreement dated as of the date hereof (the "Loan
Agreement") by and among Borrower, Consolidated Capital, Stone Pine Colorado
and Lender, pursuant to which Lender has agreed to make a loan to or for the
benefit of Borrower which loan is evidenced by a Promissory Note of the
Borrower dated the date hereof in the aggregate principal amount of $309,000.00
(the "Note").
B. Stone Pine Colorado is the beneficial owner of approximately 42% of
the outstanding Common Shares of Consolidated Capital.
C. To induce the Lender to make the Loan, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Stone Pine Colorado is willing to grant to Lender a security
interest in the Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound hereby, the undersigned agrees as follows:
1. Pledge. Stone Pine Colorado hereby grants to Lender a security
interest in the following property (collectively, the "Collateral"):
(a) 6,556,867 Common Shares of Consolidated Capital and the
certificates or the instruments representing such property and all dividends,
interest, or other distributions paid or payable other than in cash in respect
of, and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for any or all of such property; and
(b) all proceeds of any of the foregoing.
2. Security for Obligations. The security interest granted by this
Agreement secures the payment and performance of Borrower's obligations under
the Loan Agreement and the Note and the payment of all liabilities of Borrower
to Lender, whether absolute or contingent, matured or unmatured, direct or
indirect, similar or dissimilar, due or to become due arising under the Loan
Agreement, the Note and the Guaranty of even date herewith of Consolidated
Capital and Stone Pine Colorado in favor of Lender (all such payment and
performance obligations are hereinafter referred to as the "Obligations").
<PAGE> 12
3. Delivery of Collateral.
(a) All certificates representing or evidencing the Collateral
have been or shall be delivered to and held by Lender pursuant hereto and shall
be duly endorsed to Lender or shall be otherwise in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer
or assignment in blank, in form and substance satisfactory to Lender.
(b) This Agreement shall terminate and all certificates or
instruments representing or evidencing the Collateral shall be delivered to
Stone Pine Colorado upon payment in full of all Obligations.
4. Further Assurances. Stone Pine Colorado agrees that at any time and
from time to time, Stone Pine Colorado will promptly execute and deliver all
further instruments and documents, and take all further action that Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Lender to exercise and
enforce the rights and remedies hereunder with respect to any of the
Collateral.
5. Representations and Warranties. Stone Pine Colorado hereby
represents and warrants that Stone Pine Colorado has all right, title and
interest in and to the property now constituting the Collateral, and will have
all right, title and interest in and to any property subsequently constituting
the Collateral pursuant to the terms hereof, in each case free and clear of any
liens, claims, security interests, and other encumbrances and free and clear of
any warrants, options, and other rights.
6. Voting Rights; Dividends, Etc.
(a) So long as no Event of Default (as herein defined) shall have
occurred and be continuing:
(i) Stone Pine Colorado shall be entitled to exercise any and
all of Stone Pine Colorado's voting and other consensual rights pertaining to
the Collateral or any part thereof for any purpose not inconsistent with the
terms of this Agreement or the Note; provided, however, that Stone Pine
Colorado shall give Lender at least thirty (30) days prior written notice of
the manner in which it intends to exercise, or the reasons for refraining from
exercising, any such right which would have a material adverse effect on the
value of the Collateral; and, provided further, that Stone Pine Colorado shall
not exercise or refrain from exercising any such right if Lender advises Stone
Pine Colorado that, in Lender's reasonable judgment, such action would have a
material adverse effect on the value of the Collateral or any part thereof.
(ii) Stone Pine Colorado shall be entitled to receive and
retain free and clear of the security interest of Lender hereunder, any and all
of such dividends, interest and other distributions to be paid to Stone Pine
Colorado in respect of the Collateral or any part thereof, except that (A) any
and all dividends, interest or other distributions paid or payable other
2
<PAGE> 13
than in cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for, any
Collateral shall also constitute Collateral and shall be promptly delivered to
Stone Pine Colorado in conformity with Section 3 hereof, and (B) any and all --
(1) dividends, interest, or other distributions paid or
payable in cash in respect of any Collateral in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(2) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Collateral --
received by Stone Pine Colorado shall be so received in trust for the benefit
of Lender, be segregated from the other property or funds of Stone Pine
Colorado, and be forthwith delivered to Lender in the same form as so received
(with any necessary endorsement) to be held as Collateral and applied as
provided in Section 11(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) all rights of Stone Pine Colorado to exercise the
voting and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) hereof and to receive the dividends,
interest and other payments which it would otherwise be authorized to receive
and retain pursuant to Section 6(a)(ii) hereof shall cease and all such rights
shall thereupon become vested in Lender which shall thereupon have the sole
right to exercise such consensual rights and to receive such dividends,
interest, and other payments to be held as cash Collateral and applied as
provided in Section 11(ii) hereof; and
(ii) all dividends, interest and other payments which are
received by Stone Pine Colorado contrary to the provisions of paragraph (i) of
this Section 6(b) shall be received in trust for the benefit of Lender, shall
be segregated from other funds of Stone Pine Colorado, and shall be forthwith
paid over to Lender in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided in Section
11(ii) hereof.
7. Transfers and Liens. Stone Pine Colorado will not, without the
written consent of Lender, (a) sell or otherwise dispose of, or grant any
option with respect to, any of the Collateral, or (b) create or permit to exist
any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Collateral.
8. Lender Appointed Attorney-in-Fact. Stone Pine Colorado hereby
appoints Lender as Stone Pine Colorado's attorney-in-fact, with full authority
in the place and stead of Stone Pine Colorado and in the name of Stone Pine
Colorado or otherwise, and from time to time in
3
<PAGE> 14
Lender's discretion to take any action and to execute any instrument which
Lender may deem necessary or advisable to accomplish the purposes of this
Agreement. In its capacity as such attorney-in-fact, Lender shall not be liable
for any acts or omissions, nor for any error of judgment or mistake of fact or
law, but only for bad faith, willful misconduct or gross negligence. This
power, being coupled with an interest, is irrevocable until all Obligations
have been fully satisfied.
9. Lender May Perform. If Stone Pine Colorado fails to perform any
agreement contained herein, Lender may itself perform, or cause performance of,
such agreement.
10. Lender's Duties. The powers conferred on Lender hereunder are
solely to protect its interests in the Collateral and shall not impose any duty
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
Lender shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. Without limiting the generality of the foregoing,
Lender shall not have any responsibility for ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Collateral, whether or not Lender has or is deemed to have
knowledge of such matters.
11. Events of Default; Remedies. The term "Event of Default," as used
herein, shall mean: (a) any "event of default" under and as defined in the
Note; (b) any warranty or representation contained in this Agreement or the
Loan Agreement shall prove to have been false or incorrect or breached in any
material respect on the date as of which made; and (c) any violation by the
Stone Pine Colorado in any material respect of any covenant contained in this
Agreement or the Loan Agreement provided however that, no Event of Default
shall have occurred under Subsection (b) or (c) of this Section 11 if: (i) such
violation is capable of being cured, and (ii) such violation is cured within
ten (10) days. If an Event of Default has occurred, then:
(i) Lender may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in the State of Nebraska (the "Code") and other
applicable laws and agreements and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale for cash, on credit, or for future delivery, and upon such
other terms as Lender may deem commercially reasonable. Stone Pine Colorado
agrees that at least fifteen days notice to Stone Pine Colorado of the time and
place of any public sale or the time after which any private sale is to be made
shall be given and shall constitute reasonable notification. Lender shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
4
<PAGE> 15
(ii) Any cash held by Lender as Collateral and all cash proceeds
received by Lender in respect of any collection from, or other realization upon
all or any part of the Collateral in the discretion of Lender, may be held by
Lender as collateral for, and/or then or at any time thereafter applied in
whole or in part by Lender against, all or any part of the Obligations in such
order as Lender shall elect. Any surplus of such cash or cash proceeds held by
Lender and remaining after payment in full the Obligations shall be paid over
to Stone Pine Colorado or to whomsoever may be lawfully entitled to receive
such surplus.
12. Private Sale. Lender acknowledges and recognizes that Lender may
be unable to effect a public sale of all or a part of the Collateral and may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Lender acknowledges that any such private sales
may be at prices and on terms less favorable to Lender than those of public
sales, and agrees that such private sales shall be deemed to have been made in
a commercially reasonable manner and that Lender has no obligation to delay
sale of any Collateral to permit the issuer thereof to register it for public
sale under the Securities Act of 1933, as from time to time amended, even if
the issuer is willing to do so.
13. Amendments, Indulgences, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by Lender 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. No failure or
delay on the part of Lender in the exercise of any right, power, or remedy
under this Agreement shall constitute a waiver thereof, or prevent the exercise
thereof in that or any other instance.
14. Continuing Security Interest. This Agreement creates a continuing
security interest in the Collateral and shall (b) be binding upon Stone Pine
Colorado, and its successors and assigns and (b) inure to the benefit of Lender
and its successors, transferees and assigns. The execution and delivery of this
Agreement shall in no manner impair or affect any other security (by
endorsement or otherwise) for the payment or performance of the Obligations and
no security taken hereafter as security for payment or performance of the
Obligations shall impair in any manner or affect this Agreement or the security
interest granted hereby, all such present and future additional security to be
considered as cumulative security. Any of the Collateral may be released from
this Agreement without altering, varying, or diminishing in any way this
Agreement or the security interest granted hereby as to the Collateral not
expressly released, and this Agreement and such security interest shall
continue in full force and effect as to all of the Collateral not expressly
released.
15. Nebraska Law to Govern. THIS AGREEMENT SHALL BE CONSTRUED IN ALL
RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND
5
<PAGE> 16
DECISIONS OF THE STATE OF NEBRASKA. STONE PINE COLORADO HEREBY CONSENTS TO
JURISDICTION AND VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT IN FEDERAL
OR STATE COURT SITTING IN THE CITY OF OMAHA, NEBRASKA. Unless otherwise defined
herein, terms defined in the Code as in effect on the date hereof are used
herein as therein defined as of such date.
16. Severability. The provisions of this Agreement are independent of
and separable from each other, and no such provision, shall be altered or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other such provision may be invalid or unenforceable in whole or in part.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
STONE PINE COLORADO, LLC
a Colorado limited liability company
By: /s/ W. Duke DeGrassi
----------------------------------
Name: W. Duke DeGrassi
--------------------------------
Title: Executive Vice President
-------------------------------
STATE OF Colorado:
SS:
COUNTY OF Denver:
Subscribed to and sworn
before me this 23rd day
of April, 1997
/s/ Jeanette L. Avery
- ---------------------
(notary public)
My Commission Expires 7/17/00
6
<PAGE> 17
Exhibit D to
Loan Agreement
Security Agreement of Consolidated Capital
(See Exhibit No. 10.28)
<PAGE> 18
Exhibit E to
Loan Agreement
Security Agreement of Stone Pine Colorado
<PAGE> 19
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of April 9, 1997, is made and
delivered by Stone Pine Colorado, LLC, a Colorado limited liability company
("Stone Pine Colorado") in favor of ERB Acquisition Group, LLC, a Nebraska
limited liability company ("Lender").
A. Angeles Metal Trim Co. ("Borrower"), a wholly owned subsidiary of
Consolidated Capital of North America, Inc. ("Consolidated Capital"), has
entered into a Loan Agreement dated as of the date hereof (the "Loan
Agreement") by and among Borrower, Consolidated Capital, Stone Pine Colorado
and Lender, pursuant to which Lender has agreed to make a loan to or for the
benefit of Borrower which loan is evidenced by a Promissory Note of the
Borrower dated the date hereof in the aggregate principal amount of $309,000.00
(the "Note").
B. To induce the Lender to make the Loan, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Stone Pine Colorado is willing to grant to Lender a security
interest in the Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound hereby, the undersigned agrees as follows:
1. As security for the payment and performance of Borrower's
obligations under the Loan Agreement, the Note and the Guaranty of even date
herewith of Consolidated Capital and Stone Pine Colorado in favor of Lender
(the "Guaranty"), and the payment of all liabilities of Borrower to Lender,
whether absolute or contingent, matured or unmatured, direct or indirect,
similar or dissimilar, due or to become due arising under the Loan Agreement
and the Note (all such payment and performance obligations are hereinafter
referred to as the "Obligations") Stone Pine Colorado does hereby grant a
continuing security interest to Lender in all tangible and intangible property
of Stone Pine Colorado, whether now or hereafter owned or in existence and
wherever located (herein called "Collateral"), including without limitation,
the following:
A. All equipment, fixtures and furniture of Stone Pine Colorado;
B. All accounts, deposit accounts, cash, securities, instruments,
chattel paper, documents, general intangibles, and inventory, now or hereafter
owned or acquired by Stone Pine Colorado, all proceeds and insurance proceeds
of the foregoing, all guarantees and other security therefore, and all of Stone
Pine Colorado's books and records relating thereto (including computer-stored
information and all software relating thereto) and all contract rights with
third parties relating to the maintenance of any such books, records and
information. The Collateral described above will be maintained at 410 17th
Street, Suite 400, Denver, CO 80202 and any other locations;
C. All personal property of Stone Pine Colorado of any kind whether or
not in the possession or control of Lender or its agents; and
<PAGE> 20
D. Proceeds of any of the above-described property.
The grant of a security interest in proceeds does not imply the right
of Stone Pine Colorado to sell or dispose of any Collateral described herein
without the express consent in writing by Lender.
2. Stone Pine Colorado will: (a) execute such Financing Statements and
other documents and do such other acts and things, all as Lender may from time
to time require, to establish and maintain a valid security interest in
Collateral, including payment of all costs and fees in connection with any of
the foregoing when deemed necessary by Lender; (b) pay and perform promptly
when due all Obligations; (c) furnish Lender such information concerning Stone
Pine Colorado and Collateral as Lender may from time to time request, including
but not limited to current financial statements; (d) keep Collateral separate
and identifiable and at the location described herein and permit Lender and its
representatives to inspect Collateral and/or records pertaining thereto from
time to time during normal business hours; (e) not sell, assign or create or
permit to exist any lien on or security interest in Collateral in favor of
anyone other than the Lender unless Lender consents thereto in writing and at
Stone Pine Colorado's expense upon Lender's request remove any unauthorized
lien or security interest and defend any claim affecting the Collateral; (f)
pay all charges against Collateral prior to delinquency including but not
limited to taxes, assessments, encumbrances, insurance and diverse claims, and
upon Stone Pine Colorado's failure to do so Lender may pay any such charge as
it deems necessary and add the amount paid to the Obligations; (g) reimburse
Lender for any expenses including but not limited to reasonable attorney's fees
and legal expenses incurred by Lender in seeking to protect, collect or enforce
any rights in Collateral; (h) when required provide insurance in form and
amounts and with companies acceptable to Lender and when required assign the
policies or the rights thereunder to Lender; (i) maintain Collateral in good
condition and not use Collateral for any unlawful purpose; (j) at its own
expense, upon request of Lender, notify any parties obligated to Stone Pine
Colorado on any Collateral to make payment to Lender and Stone Pine Colorado
hereby irrevocably grants Lender power of attorney to make said notifications
and collections; (k) and does hereby authorize Lender to perform any and all
acts which Lender in good faith deems necessary for the protection and
preservation of Collateral or its value or Lender's security interest therein,
including transferring any Collateral into its own name and receiving the
income thereon as additional security hereunder.
3. The term default shall mean the occurrence of any of the following
events: (a) any "event of default" under and as defined in the Note, the
Guaranty or the Pledge Agreement dated as of the date hereof by Stone Pine
Colorado in favor of Lender (the "Pledge Agreement"); (b) any warranty or
representation contained in this Agreement or the Loan Agreement shall prove to
have been false or incorrect or breached in any material respect on the date as
of which made; (c) deterioration or impairment of the value of Collateral; and
(d) any violation in any material respect of any covenant contained in this
Agreement or the Loan Agreement, provided however that, no Event of Default
shall have occurred under Subsection (b), (c) or (d) of this Section 3 if:
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<PAGE> 21
(i) such violation is capable of being cured, and (ii) such violation is cured
within ten (10) days.
4. Whenever a default exists, Lender, at its option may: (a) without
notice accelerate the maturity of any part or all of the Obligations; (b) sell,
lease or otherwise dispose of Collateral at public or private sale, unless
Collateral is perishable and threatens to decline speedily in value or is a
type customarily sold on a recognized market, Lender will give Stone Pine
Colorado at least five (5) days prior written notice of the time and place of
any public sale or of the time after which any private sale or any other
intended disposition may be made; (c) transfer any Collateral into its own name
or that of its nominee; (d) retain Collateral in satisfaction of Obligations
secured hereby, with notice of such retention sent to Stone Pine Colorado as
required by law; (e) notify any parties obligated on any Collateral consisting
of accounts, instruments, chattel paper, choses in action or the like to make
payment to Lender and enforce collection of any Collateral herein; (f) require
Stone Pine Colorado to assemble and deliver any Collateral to Lender at a
reasonable convenient place designated by Lender; (g) apply all sums received
or collected from or on account of Collateral including the proceeds of any
sales thereof to the payment of the costs and expenses incurred in preserving
and enforcing rights of Lender including but not limited to reasonable
attorney's fees, and Obligations secured hereby in such order and manner as
Lender in its sole discretion determines; Lender shall account to Stone Pine
Colorado for any surplus remaining thereafter, and shall pay such surplus to
the party entitled thereto, including any second secured party who has made a
proper demand upon Lender and has furnished proof to Lender as requested in the
manner provided by law; and (h) exercise its lien or right of setoff in the
same manner as though the credit were unsecured. Lender shall have all the
rights and remedies of a secured party under the Uniform Commercial Code of
Nebraska in any jurisdiction where enforcement is sought, whether in Nebraska
or elsewhere. All rights, power and remedies of Lender hereunder shall be
cumulative and not alternative. No delay on the part of Lender in the exercise
of any right or remedy shall constitute a waiver thereof and no exercise by
Lender of any right or remedy shall preclude the exercise of any other right or
remedy or further exercise of the same remedy.
5. Stone Pine Colorado waives: (a) all right to require Lender to
proceed against any other person including any person granting a security
interest to Lender or to apply any Collateral Lender may hold at any time or to
pursue any other remedy; Collateral, endorsers or guarantors may be released,
substituted or added without affecting the liability of Stone Pine Colorado
hereunder; (b) the defense of the Statute of Limitations in any action upon any
Obligations secured hereby; (c) any right of subrogation and any right to
participate in Collateral until all Obligations hereby secured have been paid
in full.
6. Stone Pine Colorado warrants: (a) that it is or will be the lawful
owner of all Collateral free of all claims, liens or encumbrances whatsoever,
other than the security interest granted pursuant hereto; (b) all information,
including but not limited to financial statements furnished by Stone Pine
Colorado to Lender heretofore or hereafter, whether oral or written, is and
will be correct and true as of the date given; and (c) the execution, delivery
and performance hereof are within the powers of Stone Pine Colorado and have
been duly authorized.
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<PAGE> 22
7. The right of Lender to have recourse against Collateral shall not
be affected in any way by the fact that the credit is secured by a mortgage,
deed of trust or other lien upon real property.
8. Stone Pine Colorado may terminate this Agreement at any time upon
written notice to Lender of such termination; provided however, that such
termination shall not affect Obligations then outstanding, any extensions or
renewals thereof, nor the security interest granted herein which shall continue
until such outstanding Obligations are satisfied in full.
9. This Agreement shall inure to the benefit of and bind Lender, its
successors and assigns and the undersigned, their respective heirs, executors,
administrators and successors in interest. Upon transfer by Lender of any part
of the Obligations secured hereby, Lender shall be fully discharged from all
liability with respect to Collateral transferred therewith.
10. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this agreement shall be prohibited or invalid under
applicable law, such provisions shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such or the
remaining provisions of this Agreement.
11. Governing Law. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ALL
RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE OF NEBRASKA. STONE PINE COLORADO HEREBY CONSENTS TO JURISDICTION AND
VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT IN FEDERAL OR STATE COURT
SITTING IN THE CITY OF OMAHA, NEBRASKA.
STONE PINE COLORADO, LLC
a Colorado limited liability company
By: /s/ W. Duke DeGrassi
----------------------------------
Name: W. Duke DeGrassi
--------------------------------
Title: Executive Vice President
------------------------------
STATE OF Colorado:
SS:
COUNTY OF Denver:
Subscribed to and sworn
before me this 23rd day
of April, 1997
/s/ Jeanette L. Avery
- -----------------------
(notary public)
4
<PAGE> 1
TERM NOTE
$309,000.00 April 9, 1997
FOR VALUE RECEIVED, the undersigned, Angeles Metal Trim Co., a
California corporation ("Borrower"), promises to pay to ERB Acquisition Group,
LLC, a Nebraska limited liability company ("Lender"), at Suite 900W, 1650
Farnam Street, Omaha, Nebraska 68102, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America, the
principal amount of THREE HUNDRED NINE THOUSAND AND NO/100 DOLLARS
($309,000.00) as described herein. Borrower further promises to pay interest
(computed on the basis of a year consisting of twelve equal months) on the
principal balance of this Term Note (this "Note") outstanding from time to time
at the rate of 12.0% per annum.
Interest on this Note shall be payable monthly in arrears on the 1st
day of each month beginning with the 1st day of May, 1997. The principal of
this Note and accrued and unpaid interest hereon shall be due and payable in
full on April 9, 1999.
Borrower shall have the option at any time to prepay, without penalty,
the whole or a part of the principal of this Note. All prepayments shall be
applied first to accrued and unpaid interest and then to principal.
This Note is secured by a Pledge Agreement of even date herewith by
Stone Pine Colorado, LLC, a Guaranty of even date herewith of Stone Pine
Colorado, LLC and Consolidated Capital of North America, Inc. ("Consolidated
Capital" and together with Stone Pine Colorado, LLC, the "Guarantors") a
Security Agreement of even date herewith of Consolidated Capital and a Security
Agreement of even date herewith of Stone Pine Colorado.
The existence of any of the following conditions or the occurrence of
one of the following events, if not cured or waived within ten (10) days after
notice shall be an Event of Default of this Note:
(a) Borrower shall fail to make any payment of any installment
of interest or principal of this Note when due and payable;
or
(b) There occurs any "event of default" under and as defined in
the Pledge Agreement, the Guaranty or either Security
Agreement; or
(c) Any warranty or representation contained in the Loan
Agreement shall prove to have been false or incorrect or
breached in any material respect on the date as of which
made; or
(d) Any violation in any material respect of any covenant
contained in the Loan Agreement; or
<PAGE> 2
(e) Borrower, Consolidated Capital or Stone Pine Colorado shall
fail to pay any Credit Obligation (defined to mean any
obligation for the payment of borrowed money or the
installment purchase price of property or an account of a
lease of property, or any obligation under a guaranty or
suretyship agreement covering obligations of such type)
owing by it or them, or any interest or premium thereon,
when due, whether owed to Lender or any other person and
whether such Credit Obligation shall become due by
scheduled maturity, by required prepayment, by
acceleration, by demand, or otherwise, or Borrower,
Consolidated Capital or Stone Pine Colorado shall fail to
perform any term, covenant, or agreement on its or their
part to be performed under any agreement or instrument
evidencing or securing or relating to any such Credit
Obligation when required to be performed which continues
beyond any applicable grace period, if the effect of such
failure is to accelerate or to permit the holder or holders
of such Credit Obligations to accelerate the maturity of
such Credit Obligation, whether or not such failure to
perform shall be waived by the holder or holders of such
Credit Obligation; or
(f) Borrower is dissolved or liquidated, or Borrower makes an
assignment for the benefit of creditors, files a petition
in bankruptcy, is adjudicated insolvent or bankrupt,
petitions or applies to any tribunal for any receiver or
trustee of Borrower, commences any proceeding relating to
Borrower under any bankruptcy, reorganization, readjustment
of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there
is commenced against Borrower any such proceeding which
remains undismissed for a period of sixty days, or Borrower
by any act indicates its consent to, approval of or
acquiescence in any such proceeding or the appointment of
any receiver of or trustee for Borrower or any substantial
part of its property, or suffers any such receivership or
trusteeship to continue undischarged for a period of thirty
days; or
(g) Consolidated Capital is dissolved or liquidated, or
Consolidated Capital makes an assignment for the benefit of
creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal
for any receiver or trustee of Consolidated Capital,
commences any proceeding relating to Consolidated Capital
under any bankruptcy, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there
is commenced against Consolidated Capital any such
proceeding which remains undismissed for a period of sixty
days, or Consolidated Capital by any act indicates its
consent to, approval of or
2
<PAGE> 3
acquiescence in any such proceeding or the appointment of
any receiver of or trustee for Consolidated Capital or any
substantial part of its property, or suffers any such
receivership or trusteeship to continue undischarged for a
period of thirty days; or
(h) Stone Pine Colorado is dissolved or liquidated, or Stone
Pine Colorado makes an assignment for the benefit of
creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal
for any receiver or trustee of Stone Pine Colorado,
commences any proceeding relating to Stone Pine Colorado
under any bankruptcy, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there
is commenced against Stone Pine Colorado any such
proceeding which remains undismissed for a period of sixty
days, or Stone Pine Colorado by any act indicates its
consent to, approval of or acquiescence in any such
proceeding or the appointment of any receiver of or trustee
for Stone Pine Colorado or any substantial part of its
property, or suffers any such receivership or trusteeship
to continue undischarged for a period of thirty days; or
(i) Lender shall have determined that one or more conditions
exist or events have occurred which will result in a
material adverse change in the business, properties or
financial condition of the Borrower, Consolidated Capital
or Stone Pine Colorado.
Upon the happening of any one or more of the foregoing Events of
Default which shall be continuing (i) the unpaid balance of the principal
amount hereof shall become and be immediately due and payable without
presentation, demand, protest or other notice of any kind all of which are
expressly waived by Borrower and (ii) the Borrower shall pay all costs and
expenses of collection, including attorneys' fees.
If any required payment under this Note is not paid within ten (10)
days after the same becomes due and payable, the same shall bear interest at a
rate which is five percent (5.0%) per annum in excess of the otherwise
applicable rate of interest.
This Note is fully transferable by Lender, without the consent of or
notice to, Borrower.
It is expressly stipulated and agreed to be the intent of Borrower and
Lender at all times to comply with the applicable law governing the maximum
rate of interest payable on or in connection with all indebtedness and
transactions hereunder (or applicable United States federal law to the extent
that it permits Lender to contract for, charge, take, reserve or receive a
greater amount of interest). If the applicable law is ever judicially
interpreted so as to render
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<PAGE> 4
usurious any amount of money or other consideration called for hereunder, or
contracted for, charged, taken, reserved or received with respect to any loan
or advance hereunder, or if acceleration of the maturity of this Note or the
indebtedness hereunder or if any prepayment by Borrower results in Borrower's
having paid any interest in excess of that permitted by law, then it is
Borrower's and Lender's express intent that all excess cash amounts theretofore
collected by Lender be credited on the principal balance of this Note (or if
this Note has been or would thereby be paid in full, refunded to Borrower), and
the provisions of this Note immediately be deemed reformed and the amounts
thereafter collectible hereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder.
The right to accelerate maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in
the event of acceleration.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEBRASKA.
ANGELES METAL TRIM CO.
a California corporation
By: /s/ Donald R. Jackson
---------------------------------
Name: Donald R. Jackson
-------------------------------
Title: Treasurer
------------------------------
4
<PAGE> 1
GUARANTY
THIS GUARANTY dated as of April 9, 1997 is made and delivered by
Consolidated Capital of North America, Inc., a Colorado corporation
("Consolidated Capital") and Stone Pine Colorado, LLC, a Colorado limited
liability company ("Stone Pine Colorado"), to and for the benefit of ERB
Acquisition Group, LLC, a Nebraska limited liability company ("Lender").
A. Angeles Metal Trim Co. ("Borrower"), a wholly owned subsidiary of
Consolidated Capital, has entered into a Loan Agreement dated as of the date
hereof (the "Loan Agreement") by and among Borrower, Consolidated Capital,
Stone Pine Colorado and Lender, pursuant to which Lender has agreed to make a
loan to or for the benefit of Borrower which loan is evidenced by a Promissory
Note of the Borrower dated the date hereof in the aggregate principal amount of
$309,000.00 (the "Note").
B. Stone Pine Colorado is the beneficial owner of approximately 42% of the
outstanding Common Shares of Consolidated Capital.
C. To induce Lender to make the Loan, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Consolidated Capital and Stone Pine Colorado are willing to guarantee the
performance of certain obligations of Borrower as set forth herein.
D. As used in Guaranty, the word "Guarantor" shall mean either
Consolidated Capital or Stone Pine Colorado and any one or more of them, and
their respective successors and assigns and words used herein in the singular
shall be considered to have been used in the plural where the context and
construction so requires in order to refer to more than one Guarantor.
NOW, THEREFORE, in consideration of the foregoing premises and intending
to be legally bound hereby, the undersigned agree as follows:
1. Obligations Guarantied. For consideration, the adequacy and sufficiency of
which is acknowledged, the Guarantors jointly and severally unconditionally
guarantee the payment and performance of Borrower's obligations under the Loan
Agreement and Note and the payment of all liabilities of Borrower to Lender,
whether absolute or contingent, matured or unmatured, direct or indirect,
similar or dissimilar, due or to become due arising under the Loan Agreement
and the Note (all such payment, and performance obligations are hereinafter
referred to as the "Obligations"). Guarantor's liability under this Guaranty
for Borrower's Obligations shall not exceed at any one time the sum of the
following (the "Guarantied Liability Amount"): (a) Three Hundred and Nine
Thousand and no/100 Dollars ($309,000.00) for Obligations representing
principal ("Principal Amount"), (b) all interest, fees and like charges owing
and allocable to the Principal Amount under the Note, (c) the value of the
Common Shares (as such term is defined in the Loan Agreement) to be issued to
Lender by Consolidated Capital and (d) all costs, attorneys' fees, and expenses
of Lender relating to or arising out of the enforcement of the Obligations and
this Guaranty.
<PAGE> 2
The foregoing limitation applies only to Guarantor's liability under
this particular Guaranty. Unless Lender otherwise agrees in writing, every
other guaranty of any obligations previously, concurrently, or hereafter given
to Lender by Guarantor is independent of this Guaranty and of every other such
guaranty. Without notice to Guarantor, Lender may permit the Obligations to
exceed the Principal Amount and may apply or reapply any amounts received in
respect of the Obligations from any source other than from Guarantor to that
portion of the Obligations not included within the Guarantied Liability Amount.
2. Continuing Nature/Revocation/Reinstatement. This Guaranty is in addition to
any other guaranties of the Obligations, is continuing and covers all
Obligations. Revocation by one or more signers of this Guaranty or any other
guarantors of the Obligations shall not (a) affect the obligations under this
Guaranty of a non-revoking Guarantor, (b) apply to Obligations outstanding when
Lender receives written notice of revocation, or to any extensions, renewals,
readvances, modifications, amendments or replacements of such Obligations, or
(c) apply to Obligations, arising after Lender receives such notice of
revocation, which are created pursuant to a commitment existing at the time of
the revocation, whether or not there exists an unsatisfied condition to such
commitment or Lender has another defense to its performance. All of Lender's
rights pursuant to this Guaranty continue with respect to amounts previously
paid to Lender on account of any Obligations which are thereafter restored or
returned by Lender, whether in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding ("Insolvency Proceeding") of Borrower or for
any other reason, all as though such amounts had not been paid to Lender; and
Guarantor's liability under this Guaranty (and all its terms and provisions)
shall be reinstated and revived, notwithstanding any surrender or cancellation
of this Guaranty. Lender, at its sole discretion, may determine whether any
amount paid to it must be restored or returned; provided, however, that if
Lender elects to contest any claim for return or restoration, Guarantor agrees
to indemnify and hold Lender harmless from and against all cost and expenses,
including reasonable attorneys' fees, expended or incurred by Lender in
connection with such contest. No payment by Guarantor shall reduce the
Guarantied Liability Amount hereunder unless, at or prior to the time of such
payment, Lender receives Guarantor's written notice to that effect. If any
Insolvency Proceeding is commenced by or against Borrower or Guarantor, at
Lender's election, Guarantor's obligations under this Guaranty shall
immediately and without notice or demand become due and payable, whether or not
then otherwise due and payable.
3. Authorization. Guarantor authorizes Lender, without notice and without
affecting Guarantor's liability under this Guaranty, from time to time, whether
before or after any revocation of this Guaranty, to (a) renew, compromise,
extend, accelerate, release, subordinate, waive, amend and restate, or
otherwise amend or change, the interest rate, time or place for payment or any
other terms of all or any part of the Obligations; (b) accept delinquent or
partial payments on the Obligations; (c) take or not take security or other
credit support for this Guaranty or for all or any part of the Obligations, and
exchange, enforce, waive, release, subordinate, fail to enforce or perfect,
sell, or otherwise dispose of any such security or credit support; (d) apply
proceeds of any such security or credit support and direct the order or manner
of its sale or enforcement as Lender, at its sole discretion, may
2
<PAGE> 3
determine; and (e) release or substitute Borrower or any guarantor or other
person or entity liable on the Obligations.
4. Waivers. To the maximum extent permitted by law, Guarantor waives (a) all
rights to require Lender to proceed against Borrower, or any other guarantor,
or proceed against, enforce or exhaust any security for the Obligations or to
marshal assets or to pursue any other remedy in Lender's power whatsoever; (b)
all defenses arising by reasons for any disability or other defense of
Borrower, the cessation for any reason of the liability of Borrower, any
defense that any other indemnity, guaranty or security was to be obtained, any
claim that Lender has made Guarantor's obligations more burdensome or more
burdensome than Borrower's obligations, and the use of any proceeds of the
Obligations other than as intended or understood by Lender or Guarantor; (c)
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty
and of the existence or creation of new or additional Obligations, and all
other notices or demands to which Guarantor might otherwise be entitled; (d)
all conditions precedent to the effectiveness of this Guaranty; (e) all rights
to file a claim in connection with the Obligations in an Insolvency Proceeding
filed by or against Borrower; (f) all rights to require Lender to enforce any
of its remedies; and (g) until the Obligations are satisfied or fully paid with
such payment not subject to return: (i) all rights of subrogation,
contribution, indemnification or reimbursement, (ii) all rights of recourse to
any assets or property of Borrower, or to any collateral or credit support for
the Obligations, (iii) all rights to participate in or benefit from any
security or credit support Lender may have or acquire, (iv) all rights,
remedies and defenses Guarantor may have or acquire against Borrower and (v)
any rights or defenses Guarantor may have by reason of protection afforded to
Borrower with respect to the Obligations pursuant to the laws of Nebraska or
otherwise limiting or discharging Borrower's indebtedness. Guarantor
understands that if Lender forecloses by trustee's sale on a deed of trust
securing any of the Obligations, Guarantor would then have a defense preventing
Lender from thereafter enforcing Guarantor's liability for the unpaid balance
of the secured Obligations. This defense arises because the trustee's sale
would eliminate Guarantor's right of subrogation, and therefore Guarantor would
be unable to obtain reimbursement from Borrower. Guarantor specifically waives
this defense and all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against Borrower by the
operation of Nebraska law or otherwise.
5. Assignments. Without notice to Guarantor, Lender may assign the
Obligations and this Guaranty, in whole or in part.
6. Integration/Severability/Amendments. This Guaranty is intended by
Guarantor and Lender as the complete, final expression of their agreement
concerning its subject matter. It supersedes all prior understandings or
agreements with respect thereto and may be changed only by a writing signed by
Guarantor and Lender. No course of dealing, or parole or extrinsic evidence
shall be used to modify or supplement the express terms of this Guaranty. If
any provision of this Guaranty is found to be illegal, invalid or
unenforceable, such provision shall be
3
<PAGE> 4
enforced to the maximum extent permitted, but if fully unenforceable, such
provision shall be severable, and this Guaranty shall be construed as if such
provision had never been a part of this Guaranty, and the remaining provisions
shall continue in full force and effect.
7. Joint and Several. The obligations of each Guarantor under this Guaranty
are joint and several, and independent of the Obligations and of the
obligations of any other person or entity. A separate action or actions may be
brought and prosecuted against any one or more Guarantors, whether action is
brought against Borrower or other guarantors of the Obligations, and whether
Borrower or others are joined in any such action.
8. Governing Law. THIS GUARANTY SHALL BE CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND DECISIONS OF THE STATE OF
NEBRASKA. EACH GUARANTOR HEREBY CONSENTS TO JURISDICTION AND VENUE IN ANY
CONTROVERSY INVOLVING THIS AGREEMENT IN FEDERAL OR STATE COURT SITTING IN THE
CITY OF OMAHA, NEBRASKA.
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.,
a Colorado corporation
By: /s/ Thompson H. Rogers
---------------------------------
Name: Thompson H. Rogers
-------------------------------
Title: Chairman
------------------------------
STONE PINE COLORADO, LLC
a Colorado limited liability company
By: /s/ W. Duke DeGrassi
---------------------------------
Name: W. Duke DeGrassi
-------------------------------
Title: Executive Vice President
------------------------------
4
<PAGE> 1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of April 9, 1997, is made and
delivered by Consolidated Capital of North America, Inc., a Colorado
corporation ("Consolidated Capital") in favor of ERB Acquisition Group, LLC, a
Nebraska limited liability company ("Lender").
A. Angeles Metal Trim Co. ("Borrower"), a wholly owned subsidiary of
Consolidated Capital, has entered into a Loan Agreement dated as of the date
hereof (the "Loan Agreement") by and among Borrower, Consolidated Capital,
Stone Pine Colorado, LLC and Lender, pursuant to which Lender has agreed to
make a loan to or for the benefit of Borrower which loan is evidenced by a
Promissory Note of the Borrower dated the date hereof in the aggregate
principal amount of $309,000.00 (the "Note").
B. To induce the Lender to make the Loan, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Consolidated Capital is willing to grant to Lender a security
interest in the Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound hereby, the undersigned agrees as follows:
1. As security for the payment and performance of Borrower's
obligations under the Loan Agreement, the Note and the Guaranty of even date
herewith of Consolidated Capital and Stone Pine Colorado in favor of Lender
(the "Guaranty"), and the payment of all liabilities of Borrower to Lender,
whether absolute or contingent, matured or unmatured, direct or indirect,
similar or dissimilar, due or to become due arising under the Loan Agreement
and the Note (all such payment and performance obligations are hereinafter
referred to as the "Obligations") Consolidated Capital does hereby grant a
continuing security interest to Lender in all tangible and intangible property
of Consolidated Capital, whether now or hereafter owned or in existence and
wherever located (herein called "Collateral"), including without limitation,
the following:
A. All equipment, fixtures and furniture of Consolidated Capital;
B. All accounts, deposit accounts, cash, securities, instruments,
chattel paper, documents, general intangibles, and inventory, now or hereafter
owned or acquired by Consolidated Capital, all proceeds and insurance proceeds
of the foregoing, all guarantees and other security therefore, and all of
Consolidated Capital's books and records relating thereto (including
computer-stored information and all software relating thereto) and all contract
rights with third parties relating to the maintenance of any such books,
records and information. The Collateral described above will be maintained at
410 17th Street, Suite 400, Denver, CO 80202 and any other locations;
C. All personal property of Consolidated Capital of any kind whether
or not in the possession or control of Lender or its agents; and
D. Proceeds of any of the above-described property.
<PAGE> 2
The grant of a security interest in proceeds does not imply the right of
Consolidated Capital to sell or dispose of any Collateral described herein
without the express consent in writing by Lender.
2. Consolidated Capital will: (a) execute such Financing Statements
and other documents and do such other acts and things, all as Lender may from
time to time require, to establish and maintain a valid security interest in
Collateral, including payment of all costs and fees in connection with any of
the foregoing when deemed necessary by Lender; (b) pay and perform promptly
when due all Obligations; (c) furnish Lender such information concerning
Consolidated Capital and Collateral as Lender may from time to time request,
including but not limited to current financial statements; (d) keep Collateral
separate and identifiable and at the location described herein and permit
Lender and its representatives to inspect Collateral and/or records pertaining
thereto from time to time during normal business hours; (e) not sell, assign or
create or permit to exist any lien on or security interest in Collateral in
favor of anyone other than the Lender unless Lender consents thereto in writing
and at Consolidated Capital's expense upon Lender's request remove any
unauthorized lien or security interest and defend any claim affecting the
Collateral; (f) pay all charges against Collateral prior to delinquency
including but not limited to taxes, assessments, encumbrances, insurance and
diverse claims, and upon Consolidated Capital's failure to do so Lender may pay
any such charge as it deems necessary and add the amount paid to the
Obligations; (g) reimburse Lender for any expenses including but not limited to
reasonable attorney's fees and legal expenses incurred by Lender in seeking to
protect, collect or enforce any rights in Collateral; (h) when required provide
insurance in form and amounts and with companies acceptable to Lender and when
required assign the policies or the rights thereunder to Lender; (i) maintain
Collateral in good condition and not use Collateral for any unlawful purpose;
(j) at its own expense, upon request of Lender, notify any parties obligated to
Consolidated Capital on any Collateral to make payment to Lender and
Consolidated Capital hereby irrevocably grants Lender power of attorney to make
said notifications and collections; (k) and does hereby authorize Lender to
perform any and all acts which Lender in good faith deems necessary for the
protection and preservation of Collateral or its value or Lender's security
interest therein, including transferring any Collateral into its own name and
receiving the income thereon as additional security hereunder.
3. The term default shall mean the occurrence of any of the following
events: (a) any "event of default" under and as defined in the Note, the
Guaranty or the Pledge Agreement dated as of the date hereof by Stone Pine
Colorado in favor of Lender (the "Pledge Agreement"); (b) any warranty or
representation contained in this Agreement or the Loan Agreement shall prove to
have been false or incorrect or breached in any material respect on the date as
of which made; (c) deterioration or impairment of the value of Collateral; and
(d) any violation in any material respect of any covenant contained in this
Agreement or the Loan Agreement, provided however that, no Event of Default
shall have occurred under Subsection (b), (c) or (d) of this Section 3 if: (i)
such violation is capable of being cured, and (ii) such violation is cured
within ten (10) days.
2
<PAGE> 3
4. Whenever a default exists, Lender, at its option may: (a) without
notice accelerate the maturity of any part or all of the Obligations; (b) sell,
lease or otherwise dispose of Collateral at public or private sale, unless
Collateral is perishable and threatens to decline speedily in value or is a
type customarily sold on a recognized market, Lender will give Consolidated
Capital at least five (5) days prior written notice of the time and place of
any public sale or of the time after which any private sale or any other
intended disposition may be made; (c) transfer any Collateral into its own name
or that of its nominee; (d) retain Collateral in satisfaction of Obligations
secured hereby, with notice of such retention sent to Consolidated Capital as
required by law; (e) notify any parties obligated on any Collateral consisting
of accounts, instruments, chattel paper, choses in action or the like to make
payment to Lender and enforce collection of any Collateral herein; (f) require
Consolidated Capital to assemble and deliver any Collateral to Lender at a
reasonable convenient place designated by Lender; (g) apply all sums received
or collected from or on account of Collateral including the proceeds of any
sales thereof to the payment of the costs and expenses incurred in preserving
and enforcing rights of Lender including but not limited to reasonable
attorney's fees, and Obligations secured hereby in such order and manner as
Lender in its sole discretion determines; Lender shall account to Consolidated
Capital for any surplus remaining thereafter, and shall pay such surplus to the
party entitled thereto, including any second secured party who has made a
proper demand upon Lender and has furnished proof to Lender as requested in the
manner provided by law; and (h) exercise its lien or right of setoff in the
same manner as though the credit were unsecured. Lender shall have all the
rights and remedies of a secured party under the Uniform Commercial Code of
Nebraska in any jurisdiction where enforcement is sought, whether in Nebraska
or elsewhere. All rights, power and remedies of Lender hereunder shall be
cumulative and not alternative. No delay on the part of Lender in the exercise
of any right or remedy shall constitute a waiver thereof and no exercise by
Lender of any right or remedy shall preclude the exercise of any other right or
remedy or further exercise of the same remedy.
5. Consolidated Capital waives: (a) all right to require Lender to
proceed against any other person including any other person granting a security
interest to Lender or to apply any Collateral Lender may hold at any time or to
pursue any other remedy; Collateral, endorsers or guarantors may be released,
substituted or added without affecting the liability of Consolidated Capital
hereunder; (b) the defense of the Statute of Limitations in any action upon any
Obligations secured hereby; and (c) any right of subrogation and any right to
participate in Collateral until all Obligations hereby secured have been paid
in full.
6. Consolidated Capital warrants: (a) that it is or will be the lawful
owner of all Collateral free of all claims, liens or encumbrances whatsoever,
other than the security interest granted pursuant hereto; (b) all information,
including but not limited to financial statements furnished by Consolidated
Capital to Lender heretofore or hereafter, whether oral or written, is and will
be correct and true as of the date given; and (c) the execution, delivery and
performance hereof are within the powers of Consolidated Capital and have been
duly authorized.
7. The right of Lender to have recourse against Collateral shall not
be affected in any
3
<PAGE> 4
way by the fact that the credit is secured by a mortgage, deed of trust or
other lien upon real property.
8. Consolidated Capital may terminate this Agreement at any time upon
written notice to Lender of such termination; provided however, that such
termination shall not affect the Obligations then outstanding, any extensions
or renewals thereof, nor the security interest granted herein which shall
continue until such outstanding Obligations are satisfied in full.
9. This Agreement shall inure to the benefit of and bind Lender, its
successors and assigns and the undersigned, their respective heirs, executors,
administrators and successors in interest. Upon transfer by Lender of any part
of the Obligations secured hereby, Lender shall be fully discharged from all
liability with respect to Collateral transferred therewith.
10. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this agreement shall be prohibited or invalid under
applicable law, such provisions shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such or the
remaining provisions of this Agreement.
11. Governing Law. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ALL
RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE OF NEBRASKA. CONSOLIDATED CAPITAL HEREBY CONSENTS TO JURISDICTION AND
VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT IN FEDERAL OR STATE COURT
SITTING IN THE CITY OF OMAHA, NEBRASKA.
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
a Colorado corporation
By: /s/ Thompson H. Rogers
-----------------------------------
Name: Thompson H. Rogers
--------------------------------
Title: Chairman
--------------------------------
STATE OF Nebraska:
SS:
COUNTY OF Douglas:
Subscribed to and sworn
before me this 21st day
of April, 1997
/s/ Lisa L. Dillon
- -----------------------
(notary public)
4
<PAGE> 1
FIRST AMENDMENT AND WAIVER
TO BUSINESS LOAN AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO BUSINESS LOAN AGREEMENT (this "First
Amendment") dated as of April 11, 1997, is made and entered into by and between
ANGELES METAL TRIM CO., a California corporation ("Borrower"), and UNION BANK
OF CALIFORNIA, N.A., a national banking association ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Business Loan Agreement
dated as of January 15, 1997 (the "Agreement"), pursuant to which Bank agreed
to extend credit to Borrower in the aggregate principal amount at any one time
outstanding not to exceed the lesser of (i) Four Million Dollars ($4,000,000)
and (ii) the sum of (a) eighty percent (80%) of Borrower's Eligible Accounts
and (b) fifty percent (50%) of Borrower's Eligible Inventory; provided,
however, that the aggregate advance against Borrower's Eligible Inventory shall
not exceed One Million Four Hundred Thousand Dollars ($ 1,400,000).
B. Pursuant to Subsection 4.1 (b) of the Agreement, Borrower agreed to
maintain at all times from and after the date of the Agreement a ratio of total
liabilities (as determined in accordance with generally accepted accounting
principles) to Tangible Net Worth (as such term is defined in the Agreement) of
not greater than 3.75 to 1.00. Borrower did not maintain a ratio of total
liabilities to Tangible Net Worth of not greater than 3.75 to 1.00 for the two
(2) month period ended February 28, 1997, which failure constitutes an Event of
Default under Subsection 5.3 of the Agreement. In addition, Borrower has
informed Bank that Borrower will fail to maintain a ratio of total liabilities
to Tangible Net Worth of not greater than 3.75 to 1.00 for the fiscal year of
Borrower ending on December 31, 1997, which failure constitutes a prospective
Event of Default under Subsection 5.3 of the Agreement. Borrower has requested
that Bank agree to waive such Events of Default and prospective Event of
Default. Bank is willing to so waive such Events of Default and prospective
Event of Default, but subject to the terms and conditions of this First
Amendment.
C. Pursuant to Subsection 4.3(d), Borrower agreed to have a perpetual
inventory system operating and in place prior to March 31, 1997. Borrower has
installed such perpetual inventory system; however, such perpetual inventory
system was not operating prior to March 31, 1997. Borrower has requested that
Bank agree to amend Subsection 4.3(d) to extend the deadline for such perpetual
inventory system to be operating to June 30,1997.
D. As of February 28,1997, an overadvance in the principal amount of Two
Hundred Ninety-Five Thousand Dollars ($295,000) was outstanding under the
Borrowing Base Loan (as such term is defined in the Agreement) and Bank has
requested that Borrower repay the amount of such overadvance.
1
<PAGE> 2
E. Borrower and Bank also desire to amend the Agreement in certain other
respects, but subject to the terms and conditions of this First Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. DEFINED TERMS. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. WAIVERS. Subject to the terms and conditions set forth in Sections 3, 5 and
6 of this First Amendment, Bank hereby waives (a) the Events of Default that
occurred under Subsection 5.3 of the Agreement as a result of Borrower's
failure, pursuant to Subsection 4.1(b) of the Agreement, to maintain a ratio of
total liabilities to Tangible Net Worth for the two (2) month period ended
February 28, 1997 of not greater than 3.75 to 1.00 and (b) the prospective
Event of Default that will occur under Subsection 5.3 of the Agreement as a
result of Borrower's prospective failure, pursuant to Subsection 4.1(b) of the
Agreement, to maintain a ratio of total liabilities to Tangible Net Worth for
the fiscal year ending December 31,1997 of not greater than 3.75 to 1.00.
3. WAIVERS LIMITED. The waivers provided for in Section 2 of this First
Amendment are limited precisely as written and shall not be deemed to excuse
Borrower's performance of Subsection 4.1(b) of the Agreement subsequent to
December 31, 1997 or any other condition, covenant or term contained in the
Agreement or any other Loan Document. Any failure or delay on the part of Bank
in the exercise of any right, power or privilege under the Agreement or any
other Loan Document shall not operate as a waiver thereof.
4. AMENDMENTS TO AGREEMENT.
(a) Subsection 1.2 of the Agreement is hereby amended by adding the
following parenthetical phrase after the percentage "50%" appearing in the
fourth line thereof:
"(or, as provided for and subject to the conditions set forth in
Subsection 4.3(d) hereof, 40%)"
(b) Subsection 4.1(a) of the Agreement is hereby amended to read in full
as follows:
"(a) Commencing January 31, 1997, Working Capital of not less than
Three Hundred Thousand Dollars ($300,000). As used herein, 'Working Capital'
shall mean the excess of Borrower's current assets over Borrower's current
liabilities."
2
<PAGE> 3
(c) Subsection 4.3(d) of the Agreement is hereby amended to read full as
follows:
"(d) On or before June 30, 1997, a perpetual inventory system for
Borrower shall be in place and operating and Borrower's auditors shall have
submitted to Bank a letter certifying that such system is in place and
operating. Within thirty (30) days after Bank's receipt of such letter, Bank
shall independently audit and verify the adequacy of such system. In the event
that either of the aforementioned requirements is not satisfied on or before
June 30, 1997, the advance rate against Borrower's Eligible Inventory provided
for in Subsection 1.2 of this Agreement shall be forty percent (40%) rather
than fifty percent (50%), effective on August 1, 1997 and continuing until such
time, if at all, as such system is in place and operating and so audited and
verified, at which time the advance rate against Borrower's Eligible Inventory
under Subsection 1.2 of this Agreement shall again be fifty percent (50%)."
(d) Subsection 4.11 of the Agreement is hereby amended by adding the
following sentence at the end thereof:
"Notwithstanding the foregoing, Borrower may borrow an amount not
exceeding Three Hundred Thousand Dollars ($300,000) (the 'Subordinated Loan')
from Stone Pine Colorado, LLC, Consolidated Capital of North America, Inc. and
ERB Acquisition Group, LLC (collectively, 'Subordinating Creditors') so long as
(a) the proceeds of the Subordinated Loan are promptly paid by Borrower to Bank
to repay in full the overadvance under the Borrowing Base Loan outstanding
immediately prior to the date of the First Amendment to this Agreement and (b)
the Subordinated Loan is subordinated to the Obligations owing by Borrower to
Bank hereunder and under the other Loan Documents pursuant to a Subordination
Agreement executed by Subordinating Creditors in a form reasonably acceptable
to Bank."
(e) Subsection 4.12 of the Agreement is hereby amended to read in full as
follows:
"4.12 Not, and will not permit any guarantor to, without Bank's prior
written consent, liquidate, dissolve, enter into any consolidation, merger,
partnership or other combination, or convey, sell or lease all or the greater
part of its assets or business, or purchase or lease all or the greater part of
the assets or business of any other person or entity; provided, however, that
Borrower may permit Angeles Acquisition Corp. to merge into Borrower so long as
(i) no Event of Default or event which, with notice or the lapse of time, or
both, would constitute an Event of Default, has occurred and is continuing or
would result from such merger, (ii) Borrower is the surviving corporation of
such merger, (iii) Bank shall have received a proforma balance sheet and income
statement for the surviving corporation of such merger on or before April
30,1997 prepared by a CPA firm satisfactory to Bank, (iv) that the financial
effects of the merger as set forth in the proforma balance sheet and income
statement shall be satisfactory to Bank and (v) as a result of such merger,
Borrower shall be the wholly-owned subsidiary of Consolidated Capital of North
America, Inc."
3
<PAGE> 4
(f) Section 4 of the Agreement is hereby further amended by renumbering
Subsection 4.16 as Subsection 4.17 and by adding a new Subsection 4.16 thereto,
which shall read in full as follows:
"4.16 Not make any payment or prepayment of principal or interest on any
of the obligations owing by Borrower to Daniel Kingston Cable, except that
rental payments by Borrower to Daniel Kingston Cable shall be permitted.
Amounts owed to Daniel Kingston Cable may be satisfied through the issuance of
Consolidated's equity securities."
5. EFFECTIVENESS OF THIS FIRST AMENDMENT. This First Amendment shall become
effective as of the date hereof when, and only when, Bank shall have received
all of the following, in form and substance satisfactory to Bank:
(a) A counterpart of this First Amendment, duly executed by Borrower and
acknowledged by Angeles Acquisition Corp., as guarantor, where indicated
hereinbelow;
(b) A principal payment in an amount not less than the amount sufficient
to repay in full the overadvance under the Borrowing Base Loan outstanding
immediately prior to the date of this Agreement, which payment shall be
promptly applied by Bank to repay in full such overadvance;
(c) A new Continuing Guaranty, on Bank's standard form therefor, duly
executed by Consolidated Capital of North America, Inc. ("Consolidated"),
whereby Consolidated shall unconditionally guarantee the Obligations of
Borrower under and as defined therein; provided, however, that Consolidated's
liability thereunder for principal (excluding accrued interest and Bank's
expenses) shall not exceed Four Million Dollars ($4,000,000);
(d) An Alternative Dispute Resolution Agreement, on Bank's standard form
therefor, relating to the determination of claims and controversies under the
new Continuing Guaranty, duly executed by Consolidated;
(e) An Authorization to Obtain Credit, Grant Security, Guarantee or
Subordinate, on Bank's standard form therefor, attesting to the resolution of
the board of directors of Consolidated authorizing the execution and delivery
of the new Continuing Guaranty described in subparagraph (c) hereinabove;
(f) Borrower's accounts receivable balance for the week ending on such
date, and Borrower agrees to furnish same on a weekly basis until June 30,
1997, and on a daily basis thereafter;
(g) A Subordination Agreement on Bank's standard form therefor (the
"Subordination Agreement"), duly executed by Stone Pine Colorado, LLC,
Consolidated Capital of North America, Inc. and ERB Acquisition Group, LLC
(collectively, "Subordinating Creditors"), as subordinating creditors, in favor
of Bank, pursuant to which Subordinating Creditors shall unconditionally
subordinate the obligations owing by
4
<PAGE> 5
Borrower to them pursuant to that certain promissory note dated April 9, 1997
in the principal amount of Three Hundred Thousand Dollars ($300,000) (the
"Subordinated Note") to the Obligations owing by Borrower to Bank under the
Agreement and under the other Loan Documents. The Subordination Agreement shall
provide, among other things, that so long as no Event of Default or event
which, with the giving of notice or the lapse of time, or both, would become an
Event of Default, has occurred and is continuing at the time of such payment,
Subordinating Creditors shall be entitled to receive regularly scheduled
payments of principal and interest (i.e., not prepayments or payments made as a
result of acceleration) on the Subordinated Note;
(h) Alternative Dispute Resolution Agreements, each on Bank's standard
form therefor, relating to the determination of claims and controversies under
the Subordination Agreement described in subparagraph (g) herein above, duly
executed by Subordinating Creditors;
(i) Authorizations to Obtain Credit, Grant Security, Guarantee or
Subordinate, each on Bank's standard form therefor, attesting to the
resolutions of the board of directors, managers or members, as the case may be,
of Subordinating Creditors authorizing the execution and delivery of the
Subordination Agreement described in subparagraph (g) hereinabove;
(j) Copies of the articles of incorporation, articles of organization,
operating agreements and other similar organizational documents of
Subordinating Creditors, as required by Bank;
(k) A fee in connection with the waiver and amendments provided for in
this First Amendment in the sum of Five Thousand Dollars ($5 000); and
(l) Such other documents, instruments or agreements as Bank may reasonably
deem necessary.
6. CONDITION SUBSEQUENT. Borrower agrees to furnish to Bank, on or before May
10, 1997, (a) bi-weekly cash flow projections of Borrower for the months of
May, 1997 and June, 1997, in form and substance satisfactory to Bank, and (b) a
revised projected income statement of Borrower for the fiscal year of Borrower
ending December 31, 1997, in form and substance satisfactory to Bank. Upon
Bank's receipt and review of the Items described in subparagraphs (a) and (b)
of this Section 6, Bank reserves the right, in its sole discretion, to require
a further amendment or amendments to the Agreement. Borrower's failure to
furnish Bank with any of the items described in subparagraphs (a) and (b) of
this Section 6 or to execute and deliver such further amendment or amendments
to Bank shall constitute an Event of Default under the Agreement, and entitle
Bank to exercise any of its rights and remedies thereunder.
5
<PAGE> 6
7. RATIFICATION.
(a) Except as specifically amended herein above, the Agreement shall
remain in full force and effect and is hereby ratified and confirmed; and
(b) Upon the effectiveness of this First Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Agreement shall mean and be a reference to the
Agreement as amended by this First Amendment.
8. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in Section 3 of
the Agreement, as amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
(b) The execution, delivery and performance of this First Amendment are
within Borrower's corporate powers, have been duly authorized by all necessary
corporate action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restriction binding on Borrower;
(c) This First Amendment is the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms; and
(d) Except as provided herein above, no event has occurred and is
continuing or would result from this First Amendment which constitutes an Event
of Default under the Agreement, or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
9. GOVERNING LAW. This First Amendment shall be deemed a contract under 'and
subject to, and shall be construed for all purposes and in accordance with, the
laws of the State of California.
10. COUNTERPARTS. This First Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
6
<PAGE> 7
WITNESS the due execution hereof as of the date first above written
ANGELES METAL TRIM CO.
By: /s/ Ronald F. Martin
------------------------------------------
Title: President
---------------------------------------
By: /s/ Donald R. Jackson
------------------------------------------
Title: Vice President, Secretary and Treasurer
---------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Jon E. Strayer
------------------------------------------
Title: Vice President
---------------------------------------
Acknowledgment of Existing Guarantor
The undersigned, as the existing Guarantor pursuant to that certain Continuing
Guaranty dated as of January 15, 1997 (the "Guaranty"), hereby consents to the
foregoing First Amendment and acknowledges and agrees, without in any manner
limiting or qualifying its obligations under the Guaranty, that payment of the
Obligations (as such term is defined in the Guaranty) and the punctual and
faithful performance, keeping, observance and fulfillment by Borrower of all of
the agreements, conditions, covenants and obligations of Borrower contained in
the Agreement are and continue to be unconditionally guaranteed by the
undersigned pursuant to the Guaranty.
ANGELES ACQUISITION CORP.
By: /s/ Jeffrey R. Leach
------------------------------------------
Title: President
---------------------------------------
By: /s/ Donald R. Jackson
------------------------------------------
Title: Secretary and Treasurer
---------------------------------------
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 159,564
<SECURITIES> 0
<RECEIVABLES> 2,682,539
<ALLOWANCES> 227,572
<INVENTORY> 1,732,640
<CURRENT-ASSETS> 4,457,119
<PP&E> 2,169,307
<DEPRECIATION> 38,496
<TOTAL-ASSETS> 8,911,244
<CURRENT-LIABILITIES> 4,179,873
<BONDS> 4,210,366
0
0
<COMMON> 1,571
<OTHER-SE> 519,434
<TOTAL-LIABILITY-AND-EQUITY> 8,911,244
<SALES> 5,330,147
<TOTAL-REVENUES> 5,330,147
<CGS> 4,384,522
<TOTAL-COSTS> 4,384,522
<OTHER-EXPENSES> 1,389,751
<LOSS-PROVISION> 30,017
<INTEREST-EXPENSE> 77,998
<INCOME-PRETAX> (524,190)
<INCOME-TAX> 0
<INCOME-CONTINUING> (524,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (524,190)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
