<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 June 30, 1997
-----------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ____________________
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
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 17th Street, Suite 400
Denver, Colorado 80202
----------------------------------------
(Address of principal executive offices)
888-313-8051
-------------------------
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
--- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 15,792,121 shares of
common stock, $.0001 par value, as of August 6, 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 June 30, 1997
Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - June 30, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the
three months ended June 30, 1997 and 1996 5
Consolidated Statements of Operations for the six
months ended June 30, 1997 and 1996 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 55,335 $ 26,937
Accounts receivable, less allowance
for doubtful accounts of $239,774 2,281,197 -
Inventories, net 1,366,133 -
Prepaid expenses and other 122,110 -
Assets held for sale - 131,125
---------- ----------
Total current assets 3,824,775 158,062
Property and equipment, net of
accumulated depreciation of $92,472 2,119,095 -
Goodwill, net 2,250,913 -
Other assets 41,029 -
---------- ----------
Total assets $8,235,812 $ 158,062
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
JUNE 30, 1997 AND DECEMBER 31, 1996
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,269,822 $ 24,632
Accrued liabilities 68,383 36,000
Current portion of long-term debt 305,513 -
Note payable to affiliate 250,000 -
Other 147,361 20,000
----------- -----------
Total current liabilities 4,041,079 80,632
----------- -----------
Long-term debt - less current portion 4,000,041 -
----------- -----------
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, 15,772,121
and 1,570,546 shares outstanding, respectively 1,577 157
Additional paid-in capital 1,896,579 855,756
Accumulated deficit (1,703,464) (778,483)
----------- -----------
Total stockholders' equity 194,692 77,430
----------- -----------
Total liabilities and stockholders' equity $ 8,235,812 $ 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 JUNE 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Revenue:
Sale of real estate $ - $ 668,250
Net sales 5,124,435 -
------------ ------------
Total revenue 5,124,435 668,250
------------ ------------
Cost of goods sold:
Real estate - 345,016
Other 4,184,732 -
------------ ------------
Total cost of goods sold 4,184,732 345,016
------------ ------------
Gross profit 939,703 323,234
------------ ------------
Operating expenses:
Selling and shipping 601,934 -
General and administrative 515,352 23,562
Depreciation and amortization 112,926 4,813
------------ ------------
Total expenses 1,230,212 28,375
------------ ------------
Profit (loss) from operations (290,509) 294,859
------------ ------------
Other income (expense):
Interest expense (149,998) (2,877)
Other 39,716 (144,685)
------------ ------------
(110,282) (147,562)
------------ ------------
Net income (loss) $ (400,791) $ 147,297
============ ============
Net income (loss) per share $ (.03) $ .10
============ ============
Weighted average number of
common shares outstanding 15,752,713 1,529,546
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Revenue:
Sales of real estate $ - $ 668,250
Net sales 10,454,582 -
------------ ------------
Total revenue 10,454,582 668,250
------------ ------------
Cost of goods sold:
Real estate - 346,591
Other 8,569,254 -
------------ ------------
Total cost of goods sold 8,569,254 346,591
------------ ------------
Gross profit 1,885,328 321,659
------------ ------------
Operating expenses:
Selling and shipping 1,228,800 -
General and administrative 1,220,613 39,048
Depreciation and amortization 200,567 6,166
------------ ------------
Total expenses 2,649,980 45,214
------------ ------------
Profit (loss) from operations (764,652) 276,445
------------ ------------
Other income (expense):
Interest expense (227,996) (8,227)
Other 67,667 (133,427)
------------ ------------
(160,329) (141,654)
------------ ------------
Net income (loss) $ (924,981) $ 134,791
============ ============
Net income (loss) per share $ (.07) $ .09
============ ============
Weighted average number of
common shares outstanding 14,089,254 1,529,546
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(924,981) $ 134,791
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Amortization and depreciation 200,567 6,166
Gain (loss) on sale of assets (1,000) 1,750
Noncash interest expense 51,563 -
Minority interest gain - 147,050
Change in assets and liabilities:
Accounts receivable, net 236,884 (6,540)
Inventories, net 608,006 284,687
Prepaid expenses and other (89,754) -
Other assets 18,350 -
Accounts payable and accrued liabilities (295,162) 28,428
Other liabilities 127,361 -
--------- ---------
Net cash used in operating activities (68,166) 596,332
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash acquired (939,197) -
Purchase of property and equipment (60,015) -
Notes receivable from land sales - (605,750)
Proceeds from sale of assets held for sale 100,000 2,450
Collection of notes receivable - 190,000
Payment receives from related parties - 5,480
Advance to related parties - (6,187)
--------- ---------
Net cash used in investing activities (899,212) (414,007)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 931,731 -
Principal payments on long-term debt (617,856) (193,000)
Principal payments on note payable to former officer (285,000) -
Advances from related parties - 12,000
Proceeds from issuance of common stock, net of costs 966,901 -
--------- ---------
Net cash provided by (used in) financing activities 995,776 (181,000)
--------- ---------
NET INCREASE IN CASH 28,398 1,325
CASH AT BEGINNING OF PERIOD 26,937 6,494
--------- ---------
CASH AT END OF PERIOD $ 55,335 $ 7,819
========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 164,410 $ 8,227
========= =========
NONCASH FINANCING ACTIVITIES:
Issuance of common stock for loan fees $ 74,479 $ -
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 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, 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
$108,045 as of June 30, 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.
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 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.
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 has issued 50,000
of its common shares to the lender and will issue 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.
During June 1997, Angeles borrowed $107,000 from an affiliate of the Company's
major shareholder. Angeles agreed to pay a commitment fee of $3,120, which was
added to the principal balance of the note and the Company has issued 16,666 of
its common shares to the lender. The note bears interest at 12% per annum,
payable monthly in arrears, beginning July 1, 1997. The principal of the note
is due, in its entirety, during June 1999. Angeles has the option to prepay the
note, without penalty, at any time.
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 $2,782,513
1999 782,492
2000 399,902
2001 35,134
----------
$4,000,041
==========
</TABLE>
9
<PAGE> 10
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, 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".
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.
RESULTS OF OPERATIONS
The Company reported net sales of $5,124,435 from its steel fabrication
activities during the three months ended June 30, 1997. Cost of goods sold
totaled $4,184,732, resulting in a gross profit of $939,703, or 18.3% of net
sales. This gross profit was not sufficient to cover the selling and shipping,
general and administrative and depreciation and amortization expenses of
$1,230,212 that were incurred during the period. As a result, the Company
incurred a loss from operations of $290,509. Interest expense for the period
totaled $149,998 and the Company reported $39,716 of interest income and income
from sales of scrap. The net loss for the three months ended June 30, 1997 was
$400,791, or $.03 per share.
The Company reported net sales of $10,454,582 from its steel fabrication
activities during the six months ended June 30, 1997. Cost of goods sold
totaled $8,569,254, resulting in a gross profit of $1,885,328, or 18.0% of net
sales. This gross profit was not sufficient to cover the selling and shipping,
general and administrative and depreciation and amortization expenses of
$2,649,980 that were incurred during the period. As a result, the Company
incurred a loss from operations of $764,652. Interest expense for the period
totaled $227,996 and the Company reported $67,667 of interest income and income
from sales of scrap. The net loss for the six months ended June 30, 1997 was
$924,981, or $.07 per share.
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A comparison of operating results for the three and six month periods ended
June 30, 1997 to the corresponding periods 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 June 30, 1997, the Company had a deficit in working capital of $216,304
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 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.
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 41% of the
Company's outstanding common shares and all of the Company's directors have a
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financial interest in Stone Pine Colorado, LLC. Two of the Company's directors
also have a financial interest in ERB.
During June 1997, Stone Pine Financial Group, LLC, a Colorado limited liability
company ("SPFG") loaned $107,000 to Angeles (the "SPFG Loan"), which loan is
evidenced by a promissory note payable to SPFG (the "SPFG Note"). The SPFG Loan
proceeds were used to settle all obligations owed by Angeles to the former
majority shareholder/officer of Angeles other than rental payments due and
owing.
In consideration of the SPFG Loan, Angeles agreed to pay SPFG a commitment fee
of $3,210, which was added to the principal balance of the SPFG Note, and the
Company issued 16,666 of its common shares to SPFG upon such funding. The SPFG
Note bears interest at 12% per annum, payable monthly in arrears beginning July
1, 1997. The principal of the SPFG Note and any accrued and unpaid interest is
due and payable on June 18, 1999. Angeles has the option to prepay the SPFG
Note at any time. Two of the Company's directors also have a financial interest
in SPFG.
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 substantial additional capital through the sale of common and/or
preferred 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.
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 in addition to the
acquisition of CMC discussed above. As these investments are identified and
funds are needed to complete such acquisitions, additional funding will be
necessary.
During August 1997, the Company received a preliminary indication of interest
for the purchase of $7.5 million of newly issued convertible preferred stock of
the Company in a private transaction. It is anticipated that, if this
transaction is successfully consummated, it will be completed during August
1997. The Company is also in negotiations to enter into a similar transaction
with another entity for the purchase of $5 million of convertible preferred
stock during September 1997. Both transactions are subject to satisfactory due
diligence, negotiation and execution of definitive documentation by the parties
and satisfaction of all closing conditions applicable to such transactions.
Accordingly, there can be no assurance that either financing transaction will
be consummated. If the transactions are successfully consummated, the Company
plans to use a portion of the proceeds to complete the acquisition of CMC.
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
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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.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits to be filed:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.30 Loan Agreement, dated as of June 18, 1997,
between Angeles Metal Trim Co.,
Consolidated Capital of North America,
Inc., and Stone Pine Financial Group, LLC.
10.31 Promissory Note, dated June 18, 1997, of
Angeles Metal Trim Co. in the principal
amount of $110,210, payable to Stone Pine
Financial Group, LLC.
10.32 Employment Agreement, dated as of April 10,
1997, between Angeles Metal Trim Co. and
Ronald F. Martin.
27.1 Financial Data Schedule.
</TABLE>
(b) The Registrant did not file any reports on Form 8-K during
the second quarter of the fiscal year ending December 31,
1997.
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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: August 14, 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)
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
10.30 Loan Agreement, dated as of June 18, 1997, between
Angeles Metal Trim Co., Consolidated Capital of North
America, Inc., and Stone Pine Financial Group, LLC.
10.31 Promissory Note, dated June 18, 1997, of Angeles Metal
Trim Co. in the principal amount of $110,210, payable to
Stone Pine Financial Group, LLC.
10.32 Employment Agreement, dated as of April 10, 1997,
between Angeles Metal Trim Co. and Ronald F. Martin.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.30
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made as of the 18th day of June,
1997, between Angeles Metal Trim Co., a California corporation ("Borrower"),
Consolidated Capital of North America, a Colorado corporation ("Consolidated
Capital") and Stone Pine Financial 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 $107,000.00, 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 the date hereof, the
principal sum of $107,000.00 (the "Loan"). The Loan, together with Borrower's
obligation to pay a commitment fee of $3,210.00 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: 16,666 Common Shares upon
advancement of the Loan (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.
(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.
<PAGE> 2
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; and (c)
a stock certificate for 16,666 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 Acknowledgement 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
acknowledgement shall be in form and substance reasonably satisfactory to
Lender.
3. REPRESENTATIONS AND WARRANTIES.
3.1 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.
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3.2 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: (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 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 sets forth the legal, valid
and binding obligations of Consolidated Capital and is enforceable against
Consolidated Capital in accordance with their respective terms.
3.3 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 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
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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.
4. DEFAULT AND RIGHTS AND REMEDIES.
4.1 Default and Rights and Remedies. Upon the occurrence of
default, Lender shall have the rights and remedies set forth in the Note and
the rights and remedies available to Lender under applicable law.
5. MISCELLANEOUS.
5.1 Reliance by Lender. All covenants, agreements,
representations and warranties made by Borrower shall, notwithstanding any
investigation by Lender, be deemed to be material to and to have been relied
upon Lender.
5.2 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
and Lender.
5.3 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
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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.
5.4 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.
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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 FINANCIAL GROUP, LLC
a Nevada limited liability company
By: /s/ Paul Bagley
Name: Paul Bagley
Title: CEO
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<PAGE> 1
EXHIBIT 10.31
TERM NOTE
$110,210.00 June 18, 1997
FOR VALUE RECEIVED, the undersigned, Angeles Metal Trim Co., a
California corporation ("Borrower"), promises to pay to Stone Pine Financial
Group, LLC, a Nebraska limited liability company ("Lender"), at Suite 400, 410
17th Street, Denver, Colorado 80202, 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 $110,210.00 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 July, 1997. The principal of
this Note and accrued and unpaid interest hereon shall be due and payable in
full on June 18, 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.
The existence of any of the following conditions or the occurrence of
one or 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) 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
(c) Any violation in any material respect of any covenant
contained in the Loan Agreement; or
(d) Borrower or Consolidated Capital 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,
<PAGE> 2
or Borrower or Consolidated Capital 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
(e) 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
(f) 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
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
(g) 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 or
Consolidated Capital.
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
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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 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
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EXHIBIT 10.32
EMPLOYMENT AGREEMENT
AGREEMENT made as of April 10, 1997, by and between ANGELES METAL TRIM
CO., a California corporation (the "Corporation"), having an address at 4817
East Sheila Street, Los Angeles, California 90040 and RONALD F. MARTIN
("Executive"), residing at 830 Madera Place, Fullerton, California 92635.
W I T N E S S E T H:
WHEREAS, the Corporation wishes to employ Executive, and Executive is
willing to accept such employment, on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
1. Employment and Term. Subject to the terms and conditions of
this Agreement, the Corporation agrees to employ Executive, and Executive
hereby accepts employment by the Corporation, for a period of one year (the
"Term") commencing on the date first written above; provided, however, that
this Agreement and the Term of Executive's employment with the Corporation
hereunder shall automatically be extended for one year commencing on the first
anniversary of this Agreement and on each successive one year anniversary after
the first anniversary unless Executive or the Corporation shall have given
written notice to the other at least sixty (60) days prior to such anniversary
that the Term shall expire at the end of the current Term or extended one year
Term, as applicable. For purposes of this Agreement, the "Term" of this
Agreement shall mean the initial one-year term of this Agreement and
(cumulatively) any and all one-year extension(s) of the initial one-year term
of this Agreement. In the event of the exercise of any of the one-year
extensions of this Agreement, Executive's salary and other compensation for the
extension year shall be negotiated in good faith; and in the event that
agreement is not reached by the beginning of the one-year extension period,
then all of the terms of this Agreement in effect immediately prior to the
commencement of the one-year extension shall be continued for the
then-commencing year.
2. Duties. During the Term, Executive shall serve as the
President of the Corporation or in such other capacity or capacities as may be
determined by the Board of Directors of the Corporation. If requested by the
Board of Directors of the Corporation, Executive shall also serve, without
<PAGE> 2
additional compensation, as an officer or director of any subsidiary, affiliate
or joint venture of the Corporation. Executive shall perform such duties and
services as are incidental to the positions he holds or as he may, from time to
time, be requested to hold by the Board of Directors of the Corporation. The
Executive will devote his time, attention, skill, and energy to the business of
the Corporation, will use his best efforts to promote the success of the
Corporation's business, and will cooperate fully with the Board of Directors in
the advancement of the best interests of the Corporation. Nothing in this
Section 2, however, will prevent the Executive from engaging in additional
activities in connection with personal investments and community affairs that
are not inconsistent with the Executive's duties under this Agreement.
3. Base Salary. During the Term, the Corporation shall pay to
Executive, in equal installments no less frequently than twice per month (or at
such other intervals as are in effect from time to time for other executive
officers of the Corporation), a base salary at the rate of $84,000 per year.
4. Bonus.
(a) Within 60 days of the date hereof, in consideration of
Executive's execution of this Agreement and the commencement of his employment
hereunder, the Corporation shall pay Executive a one-time bonus equal to
$10,000.
(b) During each fiscal quarter commencing with April 1,
1997, Executive shall be eligible to receive a quarterly bonus (the "Quarterly
Bonus") which shall be equal to 5% of the Pre-Tax Profit (as herein defined) of
the Corporation for the year to date calculated as of the end of each fiscal
quarter and reduced by the amount of any Quarterly Bonus paid in the prior
fiscal quarters of such year. The calculation of the Quarterly Bonus shall be
based on the financial statements of the Corporation prepared in the ordinary
course of business. If any Quarterly Bonus is due Executive, the Quarterly
Bonus shall be paid by the Corporation within 30 days of the end of the first,
second and third fiscal quarters and within 120 days of the end of the fiscal
year, accompanied by a calculation of the amount of the Quarterly Bonus.
For purposes of this Agreement, the term "Pre-Tax Profit" shall mean the
reported net earnings of the Corporation and all other businesses under its
management control, before deduction for federal, state and local income taxes,
as reflected in the financial statements of the Corporation used to prepare the
quarterly and annual reports of Consolidated Capital of North America, Inc.,
the parent company of the Corporation ("Consolidated Capital"), filed with the
Securities and Exchange Commission. Pre-Tax Profit shall be determined on the
basis of generally accepted accounting principles applicable to United States
companies.
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5. Issuance of Stock Options. As part of the consideration for
services hereunder Executive shall be granted 500,000 options (the "Options")
with an exercise price of $2.00 per share to purchase common shares (the
"Shares") of Consolidated Capital. The Options shall vest in five equal
installments on each anniversary of the date of this Agreement during the Term
of this Agreement so long as Executive remains in the employ of the Corporation
on each such anniversary date. Vested options may be exercisable by Executive
for a period of five years from the date of grant for such portion of Options
designated as incentive stock options and ten years from the date of grant for
such portion of Options designated as non-qualified stock options, subject to
the provisions of Section 8 of this Agreement. The terms of the Options shall
be set forth in an Option Agreement between Consolidated Capital and Executive
(the "Option Agreement").
6. Additional Benefits.
(a) In the event that during the Term Consolidated Capital
causes to be filed with the Securities and Exchange Commission a registration
statement on Form S-8 (or equivalent form as may be in effect at such time) the
Executive may include in such registration statement all Shares underlying the
Options. In the event that during the Term Consolidated Capital causes to be
filed with the Securities and Exchange Commission a registration statement on a
form other than Form S-8, Executive shall have "piggyback" registration rights
to include in such registration statement all the Shares underlying the
Options, subject to a reasonable cutback in the inclusion of such Shares if the
Board or Consolidated Capital's underwriter determines that such cutback is
necessary to prevent an adverse effect on Consolidated Capital's offering.
(b) The Executive will be permitted to participate in
such pension, profit sharing, stock bonus, stock option, deferred compensation,
life insurance, hospitalization, major medical and other benefit plans of the
Corporation that may be in effect from the time, to the extent the Executive is
eligible under the terms of those plans.
(c) During the Term, Executive shall be entitled to three
weeks of vacation, and in addition thereto such personal days, sick leave and
other similar benefits in accordance with the policies of the Corporation from
time to time in effect for executives of comparable expertise and authority.
(d) During the Term, the Corporation shall pay the
premium on the existing $250,000 term life insurance policy now maintained by
Executive on Executive's life. It is understood that the Corporation shall
report the amount of such premium payments to the Internal Revenue Service in
accordance with the Internal Revenue Code and the Regulations issued thereunder
as income payable to Executive.
(e) Executive agrees that the Corporation may obtain key
man life insurance with respect to Executive, and in connection therewith,
agrees to submit to all reasonable and customary examinations by the provider
of such life insurance.
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(f) Executive shall be entitled to reimbursement for all
normal and reasonable travel, entertainment and other expenses necessarily
incurred by him in the performance of his duties hereunder, including but not
limited to expenses incurred in connection with the use of a cellular telephone
and a home business telephone. Executive shall have the use of a corporate
American Express Card for payment of necessary business expenses. Executive
shall submit on a timely basis such itemized accounts of all business expenses,
together with such vouchers or receipts for individual expense items, as the
Corporation may from time to time require under its established policies and
procedures.
(g) During the Term, the Corporation shall provide
Executive, for Executive's use, a late model automobile suitable to the status
of an executive of the Corporation and shall pay the attendant costs related
thereto, including, but not limited to, insurance, repairs, lease payments and
other related expenses, including gasoline.
7. Rights of Termination.
(a) For Cause. The Corporation shall have the right, at
any time effective upon notice to Executive, to terminate this Agreement and
Executive's employment hereunder for "cause" (as hereinafter defined). For
purposes of this Agreement, "cause" means: (1) Executive acting fraudulently in
his relations with the Corporation or on behalf of the Corporation, (2)
Executive misappropriating or doing material, intentional damage to the
property of the Corporation, (3) Executive being convicted of a felony, (4)
Executive's acts or omissions amounting to willful misconduct or recklessness
by Executive in the performance of his duties under this Agreement or the
habitual neglect of such duties or (5) any other material breach by Executive
of any of the terms of this Agreement.
(b) Disability; Death. In the event of Executive's
permanent and total disability as determined under the corporation's long-term
disability program or, if no such program has been adopted, the continuous
absence of Executive for 120 consecutive days or 150 days or more during any
twelve month period due to physical or mental illness or incapacity, the
Corporation shall have the right to terminate this Agreement and Executive's
employment hereunder upon 30 days' prior written notice. In the event that
Executive is able to and recommences rendering services and performing his
duties hereunder within such 30-day notice period, Executive shall be
reinstated and such notice shall be without further force or effect. If
Executive dies during the Term, this Agreement shall terminate immediately upon
his death.
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8. Effects of Termination.
(a) In the event that Executive's employment is
terminated pursuant to Section 7(a) hereof, (i) Executive's employment
hereunder shall immediately cease, (ii) the Corporation shall pay to Executive
his accrued and unpaid salary, accrued vacation time and expense reimbursement
through the date of termination in accordance with the Corporation's usual
procedures, (iii) all then non-exercisable options held by Executive shall
immediately and automatically terminate and (iv) Executive shall not be
entitled to any Quarterly Bonus for the fiscal quarter during which such
termination occurs or any subsequent fiscal quarter.
(b) In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof, (i) Executive's employment
hereunder shall cease in accordance with Section 7(b), (ii) the Corporation
shall pay to Executive his accrued and unpaid salary, accrued vacation time and
expense reimbursement through the date of termination in accordance with the
Corporation's usual procedures, (iii) all then exercisable and non-exercisable
options shall become exercisable as set forth in the Option Agreement, (iv) the
Corporation shall pay to Executive that portion of the Quarterly Bonus, if any,
for the fiscal quarter during which the termination is effective, prorated
through the date of termination, and (v) in the event of the death of
Executive, any and all options (whether vested or unvested) shall be
transferred in accordance with Executive's will.
(c) In the event that Executive's employment hereunder is
terminated by the Corporation other than pursuant to Section 7(a) or (b), then:
(i) Executive shall be entitled to receive, and the Corporation shall continue
to pay to Executive, the annual salary specified in Section 3 for the remainder
of the Term, (ii) Executive shall be entitled, during the period during which
such severance payment is being paid, to receive all benefits under the
Corporation's medical insurance, disability insurance, life insurance and other
benefit plans as are then in effect for executives of the Corporation, (iii)
all then exercisable and non-exercisable options shall become exercisable as
set forth in the Option Agreement, and (iv) the Corporation shall pay to
Executive that portion of the Quarterly Bonus, if any, for the fiscal quarter
during which the termination is effective, prorated through the date of
termination.
(d) In the event that Executive's employment hereunder is
terminated by Executive, then: (i) the Corporation shall pay to Executive his
accrued and unpaid salary, accrued vacation time and expense reimbursement
through the date of termination in accordance with the Corporation's usual
procedures, (ii) all then non-exercisable options shall immediately and
automatically terminate upon such termination of employment and (iii) Executive
shall not be entitled to any Quarterly Bonus for the fiscal quarter during
which such termination occurs or any subsequent fiscal quarter.
(e) Executive's obligations pursuant to Sections 9 and 10
hereof shall survive any termination of this Agreement for any reason
whatsoever.
5
<PAGE> 6
9. Confidentiality.
(a) Executive understands and acknowledges that as a
result of Executive's employment with the Corporation, and involvement with the
business of the Corporation, he is or shall necessarily become informed of, and
have access to, confidential information of the Corporation including, without
limitation, inventions, patents, patent applications, trade secrets, technical
information, know-how, plans, specifications, marketing plans and information,
pricing information, identity of customers and prospective customers and
identity of suppliers, and that such information, even though it may have been
or may be developed or otherwise acquired by Executive, is the exclusive
property of the Corporation to be held by Executive in trust and solely for the
Corporation's benefit. Executive shall not at any time, either during or
subsequent to his employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or use, any of
the Corporation's confidential information, without the written consent of the
Corporation's Board of Directors, except for use on behalf of the Corporation
in connection with the Corporation's business, and except for such information
which legally and legitimately is or becomes of general public knowledge from
authorized sources other than Executive.
(b) Upon the termination of his employment with the
Corporation for any reason, Executive shall promptly deliver to the Corporation
all drawings, manuals, letters, notes, notebooks, reports and copies thereof
and all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Corporation's business which are in
Executive's possession or control. The Corporation shall reimburse Executive
for any packing or moving costs reasonably incurred by Executive in connection
with the foregoing delivery.
For purposes of this Section 9 and Section 10, the term "Corporation" includes
the Corporation and any other predecessor corporation, and affiliates
(including, without limitation, distributors, licensees, franchisees,
subsidiaries and joint ventures), and shall include Consolidated Capital.
10. Non-Competition. Executive agrees that, for a period
commencing on the date hereof and ending one year after the termination of his
employment with the Corporation for any reason, he shall not, anywhere in North
America, directly or indirectly:
(a) engage, directly or indirectly, as an independent
contractor or otherwise, in any activity for or on behalf of any person or
entity in a competitive line of business to that carried on by the Corporation
during the term of his employment therewith;
(b) solicit or attempt to solicit business of any
customers of the Corporation (including prospective customers solicited by the
Corporation) for products or services the same or similar to those offered,
sold, produced or under development by the Corporation during the term of his
employment therewith or dealt in by Executive during his employment with the
Corporation;
6
<PAGE> 7
(c) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(d) solicit or attempt to solicit for any business
endeavor any employee of the Corporation;
(e) interfere with any employment relationship or other
business relationship between the Corporation and any other individual, person,
or other entity;
(f) use the name of the Corporation or a name similar the
reto; or
(g) render any services as an officer, director,
employee, partner, consultant or otherwise to, or have any interest as a
stockholder, partner, lender or otherwise in, any person which is engaged in
activities which, if performed by Executive would violate this Section 10.
The foregoing shall not prevent Executive from purchasing or owning up
to five percent (5%) of the voting securities of any corporation, the
securities of which are publicly-traded.
11. Remedies and Survival. Because the Corporation does not have
an adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach or a threatened breach of the provisions
of Sections 9 or 10, be available to the Corporation. The Corporation shall
not be required to plead or prove the inadequacy of damages. The provisions of
Sections 9 and 10 and this Section 11 shall survive any termination of
Executive's employment with the Corporation for any reason whatsoever.
12. Bar Coding Equipment. The Corporation agrees that if the
Corporation converts its inventory control process to a bar coding process, the
Corporation shall purchase from Executive the new bar coding equipment owned by
Executive at a 50% discount, for a purchase price of $10,000.
13. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter, and shall not be modified or terminated except
by another agreement in writing executed by the Corporation and Executive.
Failure of a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations hereof shall
not be construed to be a waiver of such provisions by such party nor to in any
affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from taking
any other action at any time which it would legally be entitled to take.
7
<PAGE> 8
14. Severability. If any provision of this Agreement is held to
be invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgment, and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
15. Successors and Assigns. Neither party shall have the right to
assign this personal Agreement, or any rights or obligations hereunder, without
the consent of the other party; provided, however, that upon the sale or
transfer of all or substantially all of the assets and business of the
Corporation to another party, or upon the merger or consolidation of the
Corporation with, or acquisition of the Corporation by, another corporation or
entity, this Agreement shall inure to the benefit of, and be binding upon, both
Executive and the party purchasing such assets, business and goodwill, or
surviving such merger or consolidation or acquiring the Corporation, as the
case may be, in the same manner and to the same extent as though such other
party were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
16. Communications. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at the
beginning of this Agreement, or to such other address as any party may specify
by notice to the other parties, or delivered by Federal Express or a similar
overnight courier to such address; provided, however, that any notice of change
of address shall be effective only upon receipt.
17. Construction; Counterparts. The headings contained in this
Agreement are for convenience only and shall in no way restrict or otherwise
affect this construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
18. Governing Law. This Agreement shall be governed by the laws
of the State of California.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
ANGELES METAL TRIM CO.
By: /s/ Thompson H. Rogers
Thompson H. Rogers
Chairman of the Board
EXECUTIVE:
By: /s/ Ronald F. Martin
Ronald F. Martin
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 55,335
<SECURITIES> 0
<RECEIVABLES> 2,520,971
<ALLOWANCES> 239,774
<INVENTORY> 1,366,133
<CURRENT-ASSETS> 3,824,775
<PP&E> 2,211,567
<DEPRECIATION> 92,472
<TOTAL-ASSETS> 8,235,812
<CURRENT-LIABILITIES> 3,909,361
<BONDS> 4,131,759
0
0
<COMMON> 1,577
<OTHER-SE> 193,115
<TOTAL-LIABILITY-AND-EQUITY> 8,235,812
<SALES> 10,454,582
<TOTAL-REVENUES> 10,454,582
<CGS> 8,569,254
<TOTAL-COSTS> 8,569,254
<OTHER-EXPENSES> 2,637,778
<LOSS-PROVISION> 12,202
<INTEREST-EXPENSE> 227,986
<INCOME-PRETAX> (924,981)
<INCOME-TAX> 0
<INCOME-CONTINUING> (924,981)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (924,981)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
