<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, 1998
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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.
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(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: 18,845,756 shares of $.0001 per share
common stock as of April 28, 1998.
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, 1998
Table of Contents
<TABLE>
<CAPTION>
Page
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Part I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - March 31, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997 6
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1998 1997
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(unaudited)
<S> <C> <C>
Current assets
Cash $ 276,777 $ 14,304
Accounts receivable, less allowance
for doubtful accounts of $166,789 and
$138,003 in 1998 and 1997, respectively 2,752,129 1,587,035
Inventories 3,000,219 1,193,208
Deferred loan costs 810,561 --
Prepaid expenses and other 381,794 32,879
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Total current assets 7,221,480 2,827,426
Property and equipment, net of
accumulated depreciation of $384,960
and $216,004 in 1998 and 1997, respectively 5,450,002 2,053,215
Goodwill, net of accumulated amortization of
$284,945 and $225,995 in 1998 and 1997,
respectively 2,074,063 2,133,013
Other assets 1,151,235 692,629
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Total assets $15,896,780 $ 7,706,283
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE> 4
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' March 31, December 31,
(DEFICIT) EQUITY 1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities
Accounts payable $ 4,032,844 $ 3,872,397
Accrued liabilities 221,976 290,618
Current portion of long-term debt 308,608 320,738
Convertible notes payable to affiliates 2,000,000 --
Note payable to affiliates -- 225,000
Notes and loan payable 1,650,000 --
Other 51,327 61,545
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Total current liabilities 8,264,755 4,770,298
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Long-term liabilities
Long-term debt - less current portion 6,050,813 2,928,133
Payable to consultant 312,000 --
Dividends 35,790 --
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Total long-term liabilities 6,398,603 2,928,133
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Redeemable Series C preferred shares 1,674,797 --
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Stockholders' (deficit) equity
Series A preferred shares, par value of $.01
per share, liquidation value of $1.00 per share:
Authorized 1,000,000 shares, 744,000 shares
issued and outstanding 744,000 744,000
Series B preferred shares, par value of $.01
per share, liquidation value of $1.00 per share:
Authorized 1,000,000 shares, 449,000 shares
issued and outstanding 449,000 449,000
Common shares, par value $.0001 per share:
Authorized - 50,000,000 shares, 17,975,756
and 15,992,121 shares outstanding, respectively 1,798 1,599
Additional paid-in capital 4,040,596 2,070,313
Accumulated deficit (5,676,769) (3,257,060)
------------ ------------
Total stockholders' (deficit) equity (441,375) 7,852
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Total liabilities and stockholders' (deficit) equity $ 15,896,780 $ 7,706,283
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE> 5
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Net sales $ 5,539,506 $ 5,330,147
Cost of goods sold 4,905,079 4,384,522
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Gross profit 634,427 945,625
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Operating expenses
Selling and shipping 193,672 253,280
General and administrative 1,232,941 497,414
Payroll and related benefits 599,546 581,433
Depreciation and amortization 227,906 87,641
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Total expenses 2,254,065 1,419,768
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Loss from operations (1,619,638) (474,143)
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Other income (expense)
Interest expense (475,258) (77,998)
Other 111,900 27,951
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(363,358) (50,047)
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Net loss (1,982,996) (524,190)
Preferred share dividends (43,023) --
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(2,026,019) (524,190)
Discount attributable to conversion value of
preferred shares and warrants (436,713) --
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Loss applicable to common stockholders $ (2,462,732) $ (524,190)
============ ============
Basic and diluted loss per share $ (.14) $ (.04)
============ ============
Weighted average number of
common shares outstanding 17,661,271 12,407,313
============ ============
</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, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,982,996) $ (524,190)
Adjustments to reconcile net loss to net cash
used in operations:
Amortization and depreciation 227,906 87,641
Provision for doubtful accounts (17,213) --
Gain on sale of assets -- (1,000)
Common shares issued for loan fees 685,715 --
Value of options granted to non-employees 873 --
Change in assets and liabilities:
Accounts receivable 429,087 63,114
Inventories 349,501 241,499
Prepaid expenses and other (144,378) (47,592)
Deferred loan costs (524,847) --
Other assets 428,448 23,012
Accounts payable and accrued liabilities (119,195) (133,365)
Other liabilities (38,671) 63,430
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Net cash used in operating activities (705,770) (227,451)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses, net of cash acquired (1,750,000) (939,197)
Purchase of property and equipment (51,929) (17,755)
Notes receivable from land sales -- 70,000
Purchase of certificate of deposit restricted -
against long-term obligations (250,000) --
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Net cash used in investing activities (2,051,929) (886,952)
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</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 - CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 8,066,262 511,686
Principal payments on long-term debt (9,105,143) (46,557)
Principal payments on note payable to former officer -- (185,000)
Payable to consultant 312,000 --
Payment of notes payable to affiliates (225,000) --
Proceeds from issuance of common stock -- 966,901
Short-term borrowings 1,714,286 --
Proceeds from issuance of redeemable preferred shares, net 1,880,000 --
Proceeds from sale of common stock purchase warrants 385,000 --
Dividends (7,233) --
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Net cash provided by financing activities 3,020,172 1,247,030
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NET INCREASE IN CASH 262,473 132,627
CASH AT BEGINNING OF PERIOD 14,304 26,937
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CASH AT END OF PERIOD $ 276,777 $ 159,564
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SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 196,881 $ 63,396
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NONCASH FINANCING ACTIVITIES:
Issuance of common stock for business acquisitions $ 300,000 $ 864
=========== ===========
Cumulative dividends of preferred shares $ 35,790 $ --
=========== ===========
BUSINESS ACQUISITIONS:
Assets acquired $ 8,114,162 $ 9,039,474
Liabilities incurred or assumed (6,064,162) (8,099,413)
Common shares issued (300,000) (864)
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Cash used in business acquisitions $ 1,750,000 $ 939,197
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</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE> 8
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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 wholly-owned 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, 1998 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, 1997. Certain prior year amounts have been reclassified
to conform with the current period presentation.
2. BUSINESS ACTIVITIES
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. Prior to the merger Angeles Acquisition Corp.
had acquired Angeles Metal Trim Co. ("Angeles"). Angeles and its wholly-owned
subsidiary fabricate and sell steel framing materials for commercial and
residential structures.
On January 12, 1998, the Company through a wholly-owned subsidiary, purchased
substantially all of the assets of Capitol Metals Co., Inc. ("Old Capitol"), a
privately held steel processing and service center headquartered in Torrance,
California. Old Capitol filed for protection under Chapter 11 of the Bankruptcy
Code on October 7, 1997. The total consideration was approximately $8,100,000,
consisting of $336,000 in cash, $1,500,000 in promissory notes, $300,000 of
Common Shares of the Company (269,349 Common Shares), the assumption of an
outstanding note and interest of $626,000, the repayment of $4,764,000 of Old
Capitol's then existing senior debt and the assumption of approximately $574,000
of costs and expenses associated with the acquisition. The Company agreed to
include the Common Shares issued in connection with the acquisition of the
assets of Old Capitol in a registration statement which is to be filed with the
Securities and Exchange Commission during May 1998. During February 1998,
Angeles Acquisition Corp. changed its corporate name to Capitol Metals, Co.
("Capitol").
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
(unaudited)
With the recent acquisition of Angeles and Capitol, the Company intends to focus
on the steel frame building business, steel service center operations and
complementary businesses. Management believes that the acquisition of Capitol
will provide the Company with several advantages toward the accomplishment of
its business objective of increasing the Company's profitability. The Company
intends to relocate the Los Angeles, California operations of Angeles to the
Torrance, California facility currently used by Capitol. In addition to the long
term reduction in facilities cost, this relocation will allow management to
combine several previously duplicative functions, creating efficiencies and cost
savings. These functions will include: materials receiving, slitting operations,
purchasing, accounting and other administrative functions. Additionally, as the
companies currently use several common suppliers, the Company believes that the
purchasing volume created by the addition of Capitol may create reduced pricing
for materials and services utilized by Angeles and Capitol.
The pro forma effect on the statement of operations for the Company had the
acquisition taken place on January 1, 1997 would have been as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
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<S> <C> <C>
Revenues $ 5,800,400 $ 11,312,776
Loss from operations $ (1,718,260) $ (514,558)
Net loss $ (2,596,111) $ (896,684)
Basic and fully diluted loss per share $ (.15) $ (.06)
Weighted average number of Common
Shares outstanding 17,830,517 14,176,722
</TABLE>
3. LONG-TERM DEBT
During January 1998, the Company entered into a new financing arrangement with
Congress Financial Corporation (Western) ("Congress Financial"). The Company
incurred $8,100,000 of indebtedness from Congress Financial, of which $3,300,000
was utilized for the repayment of outstanding revolving and term indebtedness of
Angeles and $4,800,000 of which was utilized in connection with the acquisition
of Capitol. Congress Financial provided $1,400,000 and $3,300,000 in financing
under revolving lines of credit to Angeles and Capitol, respectively, and
provided $1,900,000 and $1,500,000 to Angeles and Capitol, respectively, in
financing under term loans. These loans are collectively referred to as the
"Congress Facility."
Under the Congress Facility, Angeles and Capitol can borrow up to a maximum of
$20 million. The revolving line of credit portion of the Congress Facility is
limited by the amount of eligible accounts receivable and inventory and requires
Angeles and Capitol to comply with certain financial and other non-financial
covenants, as defined in the agreement. The Congress Facility is available,
subject to
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
(unaudited)
support by the appropriate levels of assets and compliance with the applicable
financial and other non-financial covenants by both Angeles and Capitol, to
provide financing for general corporate purposes. The Company is in compliance
with these covenants. The revolving line of credit component of the Congress
Facility is due in January 2000. The term loans are to be repaid in 60 monthly
installments commencing February 1, 1998. Amounts drawn under the Congress
Facility bear interest at a rate which is .75% per annum over the prime rate
announced by Core States Bank, N. A. for the interest period.
There are no compensating balance requirements under either of these two
financing arrangements.
All of the accounts receivable, inventory, equipment and intangibles of Angeles
and Capitol have been pledged as security for the Congress Facility. The
Congress Facility has been guaranteed by the Company and California Building
Systems, Inc., a subsidiary of Angeles.
4. DIVIDENDS
As of March 31, 1998, the Company has a liability for the dividends accrued to
the preferred shareholders for the Series A, Series B and Series C Preferred
Shares which amount to $22,320, $13,470 and $7,233, respectively. The dividends
for the Series A and B Preferred Shares are considered as a noncurrent liability
in the amount of $35,790, as the Company will not pay dividends on these shares
in 1998. The dividends to the Series C Preferred shareholders was paid in April,
1998 in the amount of $7,233 in cash.
5. SALE OF SERIES C PREFERRED SHARES
During March 1998, the Company sold 200 shares of its Series C Preferred Shares
at $10,000 per share for a total consideration of $2,000,000. In connection with
the purchase of the Preferred Shares, the Company issued warrants to purchase up
to 250,000 Common Shares at $2.38 per share. The warrants can be exercised any
time until March 6, 2000. In addition, the Company paid $120,000 to a company
owned by a director of the Company, for services rendered in connection with
arranging for the Series C funding. The Series C Preferred Shares have a stated
value of $10,000 per share and a 6% annual dividend rate payable quarterly in
cash, or at the option of the Company in Common Shares. The Series C Preferred
Shares have a liquidation preference of $10,000 per share, plus any accumulated
but unpaid dividends. The Series A Preferred Shares and the Series C Preferred
Shares rank pari passu in liquidation and the Series B Preferred Shares rank
junior to the Series A Preferred Shares and the Series C Preferred Shares in
liquidation. The Series C Preferred Shares are convertible, at the option of the
holders of such shares, commencing April 20, 1998, at the conversion price per
Series C Preferred Share equal to $10,000 divided by the lesser of (x) $1.75 or
(y) 75% of the arithmetic average of the closing
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
(unaudited)
bid prices of the Common Shares for each of the five trading days prior to the
exercise date of any such conversion. Based on a conversion price of $1.75, the
Series C Preferred Shares are convertible into approximately 1,143,000 Common
Shares. The Series C Preferred Shares have a mandatory redemption feature on
March 10, 2001 at a redemption price of $10,000 per share, plus all accumulated
and unpaid dividends. The Series C Preferred Shares are nonvoting.
6. CONSULTING AGREEMENT
In March 1998, the Company entered into a consulting arrangement with a director
of the Company. This individual will receive approximately $40,000 and 250,000
Common Shares as compensation for these services and may receive 100,000
additional Common Shares before December 31, 1998. Compensation for the services
are valued at the quoted market value of the Common Shares on the date earned.
7. RELATED PARTY TRANSACTIONS
During January 1998, in connection with the acquisition of Capitol and the
transaction with Congress Financial, a related party loaned $1,500,000 to the
Company. The loan is evidenced by a convertible promissory note to the Company
(the "Note") in the amount of $1,750,000, with a 12% annual interest rate
payable monthly in arrears. The Note is due in one year or sooner in the event
of a $25 million equity issuance by the Company and is secured by a subordinated
security interest in all of the assets of the Company and its subsidiaries,
effective upon the consent of Congress Financial to such security interest or
the refinancing or repayment of the loan from Congress Financial. The Note is
convertible into 1,750,000 Common Shares. As additional consideration for the
loan, the Company issued 1,500,000 Common Shares to the individual.
During March 1998, a company affiliated with certain directors loaned $214,286
to the Company. The loan is evidenced by a convertible promissory note of the
Company (the "Promissory Note") in aggregate amount of $250,000, with a 12%
annual interest rate payable monthly in arrears. The Promissory Note is due in
one year or sooner in the event of a $25 million equity issuance by the Company
and is secured by a subordinated security interest in all of the assets of the
Company and its subsidiaries, effective upon the consent of Congress Financial
to such security interest or the refinancing or repayment of the loan from
Congress Financial. The Promissory Note is convertible into 250,000 Common
Shares. As additional consideration for the loan, the Company issued 214,286
Common Shares to the lender.
8. LOSS PER SHARE
Common share equivalents were not considered as they would be anti-dilutive and
had no impact on the loss per share for the three month periods presented.
However, the impact under the treasury method of
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
(unaudited)
dilutive stock options and warrants would have been 927,632 Common Shares for
the three months ended March 31, 1998. There were no dilutive stock options or
warrants for the three months ended March 31, 1997.
9. SUBSEQUENT EVENTS
A. Sale of Convertible Notes
The Company has issued and sold, in a private placement, an aggregate of $3.5
million of its 10% Convertible Notes (collectively, the "Notes") pursuant to the
terms of a Note Purchase Agreement between the Company and the purchasers of the
Notes (the "Note Purchase Agreement"). The Company issued $2 million of the
Notes on April 9, 1998 and $1.5 million on April 16, 1998. The proceeds from the
issuance of the Notes will be used for working capital. Interest is payable on
the principal of the Notes from the date of issuance at the rate of 10% per
annum. The interest is payable semi-annually on October 1 and April 1 commencing
October 1, 1998, until the principal is paid in full. The maturity date of the
Notes is April 9, 1999 (the "Maturity Date"). The Company has the right, at its
sole option, to pay any interest due on the Notes in Common Shares of the
Company based on the arithmetic average of the closing bid and ask price of the
Company's Common Shares for the twenty trading days prior to the interest
payment due date (the "Interest Shares").
At any time after issuance and prior to the Maturity Date, the outstanding
principal amount of the Notes, any and all accrued and unpaid interest thereon,
in whole or in increments of at least $20,000 of principal, may be converted by
the holder thereof into Common Shares of the Company (the "Conversion Shares")
at the Conversion Price equal to the lesser of (i) $1.75 per share or (ii) the
following conversion prices: (x) on or after August 6, 1998 at a per share price
equal to eighty percent (80%) of the arithmetic average of the closing bid and
ask prices of the Company's Common Shares for the twenty trading days prior to
the exercise date of such conversion and (y) on or after October 5, 1998 at a
per share price equal to seventy-five percent (75%) of the arithmetic average of
the closing bid and ask prices of the Company's Common Shares for each of the
twenty trading days prior to the exercise date of the such conversion. Based on
a conversion price of $1.75, the Notes are convertible into approximately
2,000,000 Common Shares. The conversion price is subject to adjustment under
specified antidilution provisions. The Company has agreed to register the
Conversion Shares and Interest Shares in a registration statement to be filed
with the Securities and Exchange Commission and to have such registration
statement effective by July 8, 1998. Failure to have the registration statement
effective by such date subjects the Company to monetary penalties.
B. Proposed Acquisition
The Company has entered into a letter of intent to acquire Form Tech Steel, Inc.
("Form Tech") a privately held, Midwest-based steel service center, for a
purchase price of $22.5 million. The purchase
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
(unaudited)
will be financed through a combination of senior notes, the assumption of
existing indebtedness, cash and the issuance of a convertible note to the
sellers. Form Tech processes and sells slit coil steel, including hot rolled,
cold rolled, hot-dipped galvanized and galvanneal, electrolytic galvanized, and
aluminized steel coils. The consummation of the transaction, which the Company
expects to occur in July 1998, is contingent upon certain closing conditions
being met by the parties including the execution of definitive agreements,
completion of a review of the business of Form Tech and attainment of adequate
financing to consummate the transaction.
13
<PAGE> 14
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. ("Angeles
Acquisition"), a privately held company. Angeles Acquisition survived the Merger
and became a wholly owned subsidiary of the Company. Prior to the merger Angeles
Acquisition had acquired Angeles Metal Trim Co. ("Angeles"). Angeles and its
wholly-owned subsidiary fabricate and sell steel framing materials for
commercial and residential structures.
In January 1998, the Company, through Angeles Acquisition, acquired
substantially all of Capitol Metals Co., Inc.'s ("Old Capitol") assets in a sale
approved by the U.S. Bankruptcy Court (the "Capitol Acquisition"). The purchase
price of Old Capitol's assets was approximately $8,100,000 consisting of
$336,000 in cash, $1,500,000 in promissory notes, $300,000 of Common Shares of
the Company (269,349 Common Shares), the assumption of an outstanding note of
$626,000, the repayment of $4,764,000 of Capitol's previously existing senior
debt and the assumption of approximately $574,000 of costs and expenses
associated with the acquisition. Simultaneously, Angeles Acquisition entered
into a lease with Danat Investment Company for the real property formerly used
in the operations of Old Capitol. During February 1998, Angeles Acquisition
changed its corporate name to Capitol Metals Co. ("Capitol"). Capitol operates a
steel service center, selling steel and providing pickling, slitting, leveling,
storage and other processing services to its customers.
With the acquisition of Angeles and Capitol, the Company intends to focus on the
steel frame building business, steel service center operations and complementary
businesses. Acquisition plans, capital needs and plans to raise additional
capital by the Company are described below under "Liquidity, Capital Resources
and Financial Condition."
Management believes that the acquisition of Capitol will provide the Company
with several advantages toward the accomplishment of its business objective of
increasing the Company's profitability. The Company intends to relocate the Los
Angeles, California operations of Angeles to the Torrance, California facility
currently used by Capitol. In addition to the long term reduction in facilities
cost, this relocation will allow management to combine several previously
duplicative functions, creating efficiencies and cost savings. These functions
will include: materials receiving, slitting operations, purchasing, accounting
and other administrative functions. Additionally, as the companies currently use
several common suppliers, the Company believes that the purchasing volume
created by the addition of Capitol may create reduced pricing for materials and
services utilized by both Angeles and Capitol.
The Company's business strategy is to achieve profitability through expansion of
its existing operations and acquisitions of businesses that are strategically
located or positioned to diversify or enhance the Company's
14
<PAGE> 15
customer base, product range and geographic coverage. The Company has entered
into a letter of intent to acquire Form Tech Steel, Inc. ("Form Tech"), a
Midwest-based steel service center, for a purchase price of $22.5 million. The
purchase will be financed through a combination of senior notes, the assumption
of existing indebtedness, cash and the issuance of a convertible note to the
sellers. Form Tech processes and sells slit coil steel, including hot rolled,
cold rolled, hot-dipped galvanized and galvanneal, electrolytic galvanized, and
aluminized steel coils. The Company expects to utilize Form Tech as the core of
an aggressive acquisition effort in the Midwest, and also expects to grow the
business through expansion of Form Tech's existing facilities, currently
consisting of a 55,000 square foot facility on 10 acres of land in Temperance,
Michigan which is two miles north of Toledo, Ohio, and 45 miles south of
Detroit, Michigan. The consummation of the transaction, which the Company
expects to occur in July 1998, is contingent upon certain closing conditions
being met by the parties including the execution of definitive agreements,
completion of a review of the business of Form Tech and attainment of adequate
financing to consummate the transaction. The Company is also in negotiations
with another potential acquisition candidate. There can be no assurance that
either of these acquisitions will be completed.
RESULTS OF OPERATIONS
During the first quarter of 1998, the Company reported net sales of $5,539,506
as compared with net sales for the first quarter of 1997 of $5,330,147. Net
sales in the quarter included $2,707,203 of sales of Capitol which was acquired
on January 12, 1998. Sales in the first quarter of 1998 for Angeles operation
decreased from $5,330,147 in the first quarter of 1997 to $2,832,303 for 1998.
This decrease in net sales for Angeles was mainly a result of insufficient
working capital to purchase steel necessary to produce products. The Company
expects that revenues from Capitol and Angeles will increase during the
remainder of the fiscal year ending December 31, 1998.
Gross sales for the twelve month period ended March 31, 1998 amounted to
$18,144,752.
Cost of goods sold for both entities amounted to $4,905,079 for the first
quarter in 1998 resulting in a gross margin of 11% of net sales. The gross
profit for Angeles amounted to 15% for the first quarter in 1998 and Capitol
generated a gross profit of 8% for the same quarter. The gross profit for
Angeles for the first quarter ended March 31, 1997 amounted to 17.7% or a
reduction of 2.7% for the same period in 1998. This reduction in gross profit
percentage of Angeles resulted from the impact of decreased sales without a
related decrease in the fixed costs of sales.
Operating expenses increased by $834,297, or 59%, to $2,254,065 for the first
quarter of 1998 from $1,419,768 in the first quarter of 1997. The increase is
primarily attributable to general and administrative expenses from Capitol. The
Company anticipates that the operating expenses will decrease as a percentage of
sales as the Company combines the operations of Angeles and Capitol over the
next few months. In addition to the long term reduction in facilities cost, the
combination of the operations of Angeles and Capitol will allow management to
combine several previously duplicated functions, creating efficiencies and cost
savings. These functions will include: materials receiving, slitting operations,
purchasing, accounting and other administrative functions.
15
<PAGE> 16
Additionally, as the companies currently use several common suppliers, the
Company believes that the purchasing volume created by the addition of the
Capitol may create reduced pricing for materials and services utilized by both
Angeles and Capitol.
Interest expense increased by $397,260 to $475,258 in the first quarter of 1998
as compared to $77,998 in the first quarter of 1997. This increase is the result
of the interest expense related to the various financing arrangements entered
into by the Company to provide working capital and the financing related to the
acquisition of Capitol.
The Company reported a net loss for the three months ended March 31, 1998 of
$1,982,996 as compared to a net loss of $524,190 for the same period in 1997.
The net loss for the Capitol operations amounted to $687,765 for the first
quarter ended March 31, 1998. Including the discount attributable to the
conversion value of preferred shares and warrants of $463,713, the Company
reported a loss for the three months ended March 31, 1998 of $2,462,732 ($.14
per share).
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Cash flows used in operations were $705,770 for the three months ended March 31,
1998 as compared to $227,451 used in operations for the first quarter ended
March 31, 1997. The increase in cash used in operations for the first quarter
ended March 31, 1998 was a result of the larger loss in the first quarter of
1998 compared to the same quarter of 1997. The negative impact of the larger
loss was partially offset by a decrease in accounts receivable and inventory,
which provided additional cash for operations. The acquisition of Capitol in
January 1998 resulted in the use of cash of approximately $2 million compared to
approximately $.9 million in the same period for 1997. Cash flows from financing
activities for the first quarter of 1998 increased by $1.8 million compared to
the same period in 1997 because of cash needed for the acquisition. As of March
31, 1998, the Company had a working capital deficit of $1,043,275, a
stockholders' deficit of $441,375 and an accumulated deficit of $5,676,769. See
the Company's financial statements and notes hereto, included elsewhere in this
report, for detailed financial information regarding the Company.
Since January 1997, the Company has primarily financed its operations with cash
available under its credit facilities and funds advanced under loan
arrangements, including certain loans from affiliated entities. The Company has
also financed its operations through the private placement of capital stock and
convertible securities, including $1,000,000 from sales of Common Shares in
January 1997, $2,000,000 from the March 1998 sale of Series C Preferred Shares
and $3,500,000 from the issuance of convertible notes in April 1998.
During 1997, the Company borrowed approximately $1,000,000 from various
affiliated entities. Interest and loan fees to these entities amounted to
$298,382, of which $248,234 was paid by issuing 286,666 Common Shares. On
December 31, 1997, the Company issued to these entities 744,000 shares of its
Series A Preferred Shares and 449,000 shares of its Series B Preferred Shares in
exchange for the retirement of $1,025,000 of these loans and payment of $168,000
of management fees. In March 1998, the Company repaid the remaining amounts
outstanding on these loans.
16
<PAGE> 17
During January 1998, the Company entered into a new financing arrangement with
Congress Financial. The Company incurred $8,100,000 of indebtedness from
Congress Financial, of which $3,300,000 was utilized for the repayment of
outstanding revolving and term indebtedness of Angeles and $4,800,000 of which
was utilized in connection with the acquisition of Capitol. Congress Financial
provided $1,400,000 and $3,300,000 in financing under revolving lines of credit
to Angeles and Capitol, respectively, and provided $1,900,000 and $1,500,000 to
Angeles and Capitol, respectively, in financing under term loans. These loans
are collectively referred to as the "Congress Facility".
Under the Congress Facility, Angeles and Capitol can borrow up to a maximum of
$20 million. The revolving line of credit portion of the Congress Facility is
limited by the amount of eligible accounts receivable and inventory and requires
Angeles and Capitol to comply with certain financial and other non-financial
convenants, as defined in the agreement. The Congress Facility is available,
subject to support by the appropriate levels of assets and compliance with the
applicable financial and other non-financial covenants by both Angeles and
Capitol, to provide financing for general corporate purposes. The Company is in
compliance with these covenants. The revolving line of credit component of the
Congress Facility is due in January 2000. The term loans are to be repaid in 60
monthly installments commencing February 1, 1998. Amounts drawn under the
Congress Facility bear interest at a rate which is .75% per annum over the prime
rate announced by Core States Bank, N. A. for the interest period. All of the
accounts receivable, inventory, equipment and intangibles of Angeles and Capitol
have been pledged as security for the Congress Facility. The Congress Facility
has been guaranteed by the Company and California Building Systems, Inc., a
subsidiary of Angeles.
During January 1998, in connection with the Capitol Acquisition and the
transactions with Congress Financial, Paul Bagley, the Chairman and Chief
Executive Officer of the Company, loaned $1,500,000 to the Company. The loan is
evidenced by a convertible promissory note of the Company (the "1998 Bagley
Note") in the amount of $1,750,000, with a 12% annual interest rate, payable
monthly in arrears. The 1998 Bagley Note is due in one year or sooner in the
event of a $25 million equity issuance by the Company and is secured by a
subordinate security interest in all of the assets of the Company and its
subsidiaries, effective upon the consent of Congress Financial to such security
interest or the refinancing or repayment of the Congress Facility. The 1998
Bagley Note is convertible into 1,750,000 Common Shares. As additional
consideration for the loan, the Company issued 1,500,000 Common Shares to Mr.
Bagley.
During March 1998, Stone Pine Atlantic, LLC ("SP Atlantic") loaned $214,286 to
the Company. The loan is evidenced by a convertible promissory note of the
Company (the "SP Atlantic Note") in the aggregate amount of $250,000, with a 12%
annual interest rate, payable monthly in arrears. The SP Atlantic Note is due in
one year or sooner in the event of a $25 million equity issuance by the Company
and is secured by a subordinate security interest in all of the assets of the
Company and its subsidiaries, effective upon the consent of Congress Financial
to such security interest or the refinancing and repayment of the Congress
Facility. The SP Atlantic Note is convertible into 250,000 Common Shares. As
additional consideration for the loan, the Company issued 214,286 Common Shares
to SP Atlantic.
During March 1998, the Company sold to offshore accredited investors 200 shares
of Series C Convertible Preferred Shares at $10,000 per share for a total
consideration of $2,000,000. The Series C Convertible Preferred Shares are
convertible into Common Shares of the Company commencing April 20, 1998, at a
17
<PAGE> 18
conversion price per Series C Preferred Share equal to $10,000 divided by the
lesser of (x) $1.75 or (y) 75% of the arithmetic average of the closing bid
prices for each of the five trading days prior to the exercise date of any such
conversion. Based on a conversion price of $1.75, the Series C Preferred Shares
are convertible into approximately 1,143,000 Common Shares. As part of this
transaction, the Company issued Common Stock Purchase Warrants to purchase
250,000 of the Company's Common Shares at a price of $2.38 per share. The
Warrants can be exercised any time until March 6, 2000.
In March 1998, the Company issued to offshore investors warrants to purchase
2,000,000 Common Shares (1,000,000 exercisable at $1.00 per share and 1,000,000
at $.75 per share), expiring March 2001 and March 2000, respectively. The
warrants were issued in exchange for $385,000 of cash paid by SP Atlantic and
are currently exercisable.
The Company has issued and sold, in a private placement, an aggregate of $3.5
million of its 10% Convertible Notes (collectively, the "Notes") pursuant to the
terms of a Note Purchase Agreement between the Company and the purchasers of the
Notes (the "Note Purchase Agreement"). The Company issued $2 million of the
Notes on April 9, 1998 and $1.5 million on April 16, 1998. The proceeds from the
issuance of the Notes will be used for working capital. Interest is payable on
the principal of the Notes from the date of issuance at the rate of 10% per
annum. The interest is payable semi-annually on October 1 and April 1 commencing
October 1, 1998, until the principal is paid in full. The maturity date of the
Notes is April 9, 1999 (the "Maturity Date"). Principal and interest on the
Notes is payable in cash, however, the Company has the right, at its sole
option, to pay any interest due on the Notes in Common Shares of the Company
based on the arithmetic average of the closing bid and ask price of the
Company's Common Shares for the twenty trading days prior to the interest
payment due date (the "Interest Shares").
At any time after issuance and prior to the Maturity Date, the outstanding
principal amount of the Notes, and all accrued and unpaid interest thereon, in
whole or in increments of at least $20,000 of principal, may be converted by the
holder thereof into Common Shares of the Company (the "Conversion Shares") at
the Conversion Price equal to the lesser of (i) $1.75 per share or (ii) the
following conversion prices: (x) on or after August 6, 1998 at a per share price
equal to eighty percent (80%) of the arithmetic average of the closing bid and
ask prices of the Company's Common Shares for the twenty trading days prior to
the exercise date of such conversion and (y) on or after October 5, 1998 a per
share price equal to seventy-five percent (75%) of the arithmetic average of the
closing bid and ask prices of the Company's Common Shares for each of the twenty
trading days prior to the exercise date of the such conversion. Based upon a
conversion price of $1.75, the Notes are convertible into approximately
2,000,000 Common Shares. The conversion price is subject to adjustment under
specified antidilution provisions. The Company has agreed to register the
Conversion Shares and Interest Shares on a registration statement to be filed
with the Securities and Exchange Commission and to have such registration
statement effective by July 8, 1998. Failure to have the registration statement
effective by such date subjects the Company to monetary penalties.
The Company plans to engage in strategic acquisitions. As these investments are
identified and funds are needed to complete such acquisitions, funding for such
acquisitions will be necessary. The Company has entered into a letter of intent
to acquire Form Tech, as described above (See "Introduction and Plan of
Operations"). The purchase will be financed through a combination of senior
notes, the assumption of existing
18
<PAGE> 19
indebtedness, cash and the issuance of a convertible note to the sellers. The
consummation of the transaction, which the Company expects to occur in July
1998, is contingent upon certain closing conditions being met by the parties
including the execution of definitive agreements, completion of a review of the
business of Form Tech and attainment of adequate financing to consummate the
transaction. The Company is also in negotiations with another potential
acquisition candidate. There can be no assurance that either of these
acquisitions will be completed.
The Company believes that the funds raised from the sale of the Series C
Preferred Shares, the sale of the convertible notes, operating cash flows of the
Company and funds available under the Congress Facility will provide adequate
resources to fund ongoing operating requirements and future capital expenditures
related to the development of its business for the next twelve months. The
Company may be required to obtain additional lines of credit for working capital
purposes and make periodic public offerings or private placements in order to
meet the liquidity needs of its business 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.
SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosure About
Segments of an Enterprise and Related Information" are effective for fiscal
years beginning after December 15, 1997. The Company has complied with these
pronouncements and has determined there is no material impact for the first
quarter of 1998.
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.
19
<PAGE> 20
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits to be filed:
Exhibit No. Description
10.25(1) First Amendment to Asset Purchase Agreement,
dated as of January 8, 1998, among Binhad, Inc.
(formerly known as Capitol Metals Co., Inc.),
the Company and Angeles Acquisition Corp.
10.26(1) Assignment and Bill of Sale, dated January 9,
1998, from Binhad, Inc. (formerly known as
Capitol Metals Co., Inc.) to Angeles
Acquisition Corp.
10.27(1) Secured Promissory Note, dated January 12,
1998, in the principal amount of $1,200,000,
from the Company and Angeles Acquisition Corp.,
to Binhad, Inc. (formerly known as Capitol
Metals, Inc.).
10.28(1) Secured Promissory Note, dated January 12,
1998, in the principal amount of $300,000, from
the Company and Angeles Acquisition Corp., to
Binhad, Inc. (formerly known as Capitol Metals
Co., Inc.).
10.29(1) Security Agreement, dated January 8, 1998,
between Binhad, Inc. (formerly known as Capitol
Metals Co., Inc.) and Angeles Acquisition Corp.
10.30(1) Registration Agreement, dated as of January 6,
1998, between Binhad, Inc. (formerly known as
Capitol Metals Co., Inc.) and the Company.
10.31(1) Assignment and Assumption Agreement, dated as
of January 8, 1998, among the Company, Binhad,
Inc. (formerly known as Capitol Metals Co.,
Inc.) and Angeles Acquisition Corp.
10.32(1) Note Secured by Collateral Security Agreement,
dated January 12, 1998, by and between the
Company and Angeles Acquisition Corp., and Nat
and Evelyn Handel, Trustees of the Nat and
Evelyn Handel Family Trust.
10.33(1) Collateral Security Agreement, dated January
12, 1998, by and between Angeles Acquisition
Corp. and Nat and Evelyn Handel, Trustees of
the Nat and Evelyn Handel Family Trust.
20
<PAGE> 21
Exhibit No. Description
10.34(2) Loan Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Advisors,
LLC.
10.35(2) Promissory Note, dated as of December 31, 1997,
in the principal amount of $75,000 from the
Company to Stone Pine Advisors, LLC.
10.36(2) Loan Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Capital,
LLC.
10.37(2) Promissory Note, dated as of December 31, 1997,
in the principal amount of $75,000 from the
Company to Stone Pine Capital, LLC.
10.38(2) Loan Agreement, dated as of December 31, 1997,
between the Company and Paul Bagley.
10.39(2) Promissory Note, dated as of December 31, 1997,
in the principal amount of $75,000 from the
Company to Paul Bagley.
10.40(2) Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Financial
Group, LLC relating to the issuance of Series A
Preferred Shares.
10.41(2) Agreement, dated as of December 31, 1997,
between the Company and ERB Acquisition Group,
LLC relating to the issuance of Series A
Preferred Shares.
10.42(2) Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Colorado,
LLC relating to the issuance of Series B
Preferred Shares.
10.43(2) Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Atlantic,
LLC relating to the issuance of Series B
Preferred Shares.
10.44(2) Convertible Note, dated as of January 9, 1998,
in the principal amount of $1,750,000 from the
Company to Paul Bagley.
10.45(2) Convertible Note, dated as of March 3, 1998, in
the principal amount of $250,000 from the
Company to Stone Pine Atlantic, LLC.
10.46(3) Offshore Securities Subscription Agreement for
6% Convertible Preferred Shares - Series C,
dated March 6, 1998 (Exhibits and Schedules
omitted).
21
<PAGE> 22
Exhibit No. Description
10.47(2) Loan Agreement, dated January 9, 1998, by and
between Congress Financial Corporation
(Western), Angeles Metal Trim Co. and Angeles
Acquisition Corp.
10.48(2) Secured Promissory Note, dated January 9, 1998,
in the original principal amount of $1,943,000,
from Angeles Metal Trim Co. to Congress
Financial Corporation (Western).
10.49(2) Secured Promissory Note, dated January 9, 1998,
in the original principal amount of $200,000
from Angeles Acquisition Corp. to Congress
Financial Corporation (Western).
10.50(2) Secured Promissory Note, dated January 9, 1998,
in the original principal amount of $1,500,000
from Angeles Acquisition Corp. to Congress
Financial Corporation (Western).
10.51(2) Guarantee, dated January 9, 1998 executed by
the Company Angeles Metal Trim Co. and
California Building Systems, Inc. in favor of
Congress Financial Corporation (Western) with
respect to Angeles Acquisition Corp. notes.
10.52(2) Guarantee, dated January 9, 1998 executed by
the Company Angeles Acquisition Corp. and
California Building Systems, Inc. in favor of
Congress Financial Corporation (Western) with
respect to Angeles Metal Trim Co. notes.
10.53(2) Lease Agreement, dated January 12, 1998, by and
between Danat Investment Company and the
Company (Re: property at 20000 South Western
Avenue, Torrance , California).
10.54(2) Subordination, Nondisturbance and Attornment
Agreement, dated January 12, 1998, by and among
the Company, Angeles Acquisition Corp., Danat
Investment Company and Aid Association for
Lutherans.
10.55(2) Mortgage Agreement, dated January 12, 1998,
executed by Aid Association for Lutherans in
favor of Congress Financial Corporation
(Western) with respect to premises at 20000 S.
Western Avenue, Torrance, California (Exhibits
omitted).
10.56(2) Agreement, dated as of March 3, 1998, by and
between RDB Capital Advisors, LLC, Richard D.
Bailey, Stone Pine Investment Banking, LLC and
the Company.
22
<PAGE> 23
Exhibit No. Description
10.57 Agreement between Company and Christian W. Wolf
effective March 10, 1998.
10.58 Form of Note Purchase Agreement between the
Company and the Purchasers of 10% Convertible
Notes (Exhibits and Schedules Omitted).
10.59 Form of 10% Convertible Note due April 9, 1999.
10.60 Agreement between the Company and Jeffrey R.
Leach effective April 29, 1998.
27.1 Financial Data Schedule.
- ----------------------------------------------------------
(1) Incorporated by reference from the Company's Report on Form
8-KA, filed on January 29, 1998.
(2) Incorporated by reference from the Company's report on Form
10-KSB, dated December 31, 1997.
(3) Incorporated by reference from the Company's Report on Form
8-KA, filed on March 18, 1998.
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on January 27,
1998, as amended on January 29, 1998 and March 27, 1998, to
report the acquisition of substantially all of the assets of
Capitol Metals, Co., Inc.
The Company filed a Current Report on Form 8-K on January 28,
1998, as amended on January 29, 1998, to report a change in
certifying accountants.
The Company filed a Current Report on Form 8-K on March 18,
1998, to report a change in executive officers and the sales
of equity securities pursuant to Regulation S.
23
<PAGE> 24
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 14, 1998 By: /s/ Paul Bagley
-----------------
Paul Bagley
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Carl Casareto
-------------------
Carl Casareto
Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE> 25
EXHIBIT INDEX
Exhibit No. Description
10.25(1) First Amendment to Asset Purchase Agreement,
dated as of January 8, 1998, among Binhad, Inc.
(formerly known as Capitol Metals Co., Inc.),
the Company and Angeles Acquisition Corp.
10.26(1) Assignment and Bill of Sale, dated January 9,
1998, from Binhad, Inc. (formerly known as
Capitol Metals Co., Inc.) to Angeles
Acquisition Corp.
10.27(1) Secured Promissory Note, dated January 12,
1998, in the principal amount of $1,200,000,
from the Company and Angeles Acquisition Corp.,
to Binhad, Inc. (formerly known as Capitol
Metals, Inc.).
10.28(1) Secured Promissory Note, dated January 12,
1998, in the principal amount of $300,000, from
the Company and Angeles Acquisition Corp., to
Binhad, Inc. (formerly known as Capitol Metals
Co., Inc.).
10.29(1) Security Agreement, dated January 8, 1998,
between Binhad, Inc. (formerly known as Capitol
Metals Co., Inc.) and Angeles Acquisition Corp.
10.30(1) Registration Agreement, dated as of January 6,
1998, between Binhad, Inc. (formerly known as
Capitol Metals Co., Inc.) and the Company.
10.31(1) Assignment and Assumption Agreement, dated as
of January 8, 1998, among the Company, Binhad,
Inc. (formerly known as Capitol Metals Co.,
Inc.) and Angeles Acquisition Corp.
10.32(1) Note Secured by Collateral Security Agreement,
dated January 12, 1998, by and between the
Company and Angeles Acquisition Corp., and Nat
and Evelyn Handel, Trustees of the Nat and
Evelyn Handel Family Trust.
10.33(1) Collateral Security Agreement, dated January
12, 1998, by and between Angeles Acquisition
Corp. and Nat and Evelyn Handel, Trustees of
the Nat and Evelyn Handel Family Trust.
10.34(2) Loan Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Advisors,
LLC.
10.35(2) Note, dated as of December 31, 1997, in the
Promissory principal amount of $75,000 from the
Company to Stone Pine Advisors, LLC.
E-1
<PAGE> 26
Exhibit No. Description
10.36(2) Loan Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Capital,
LLC.
10.37(2) Promissory Note, dated as of December 31, 1997,
in the principal amount of $75,000 from the
Company to Stone Pine Capital, LLC.
10.38(2) Loan Agreement, dated as of December 31, 1997,
between the Company and Paul Bagley.
10.39(2) Promissory Note, dated as of December 31, 1997,
in the principal amount of $75,000 from the
Company to Paul Bagley.
10.40(2) Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Financial
Group, LLC relating to the issuance of Series A
Preferred Shares.
10.41(2) Agreement, dated as of December 31, 1997,
between the Company and ERB Acquisition Group,
LLC relating to the issuance of Series A
Preferred Shares.
10.42(2) Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Colorado,
LLC relating to the issuance of Series B
Preferred Shares.
10.43(2) Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Atlantic,
LLC relating to the issuance of Series B
Preferred Shares.
10.44(2) Convertible Note, dated as of January 9, 1998,
in the principal amount of $1,750,000 from the
Company to Paul Bagley.
10.45(2) Convertible Note, dated as of March 3, 1998, in
the principal amount of $250,000 from the
Company to Stone Pine Atlantic, LLC.
10.46(3) Offshore Securities Subscription Agreement for
6% Convertible Preferred Shares - Series C,
dated March 6, 1998 (Exhibits and Schedules
omitted).
10.47(2) Loan Agreement, dated January 9, 1998, by and
between Congress Financial Corporation
(Western), Angeles Metal Trim Co. and Angeles
Acquisition Corp.
E-2
<PAGE> 27
Exhibit No. Description
10.48(2) Secured Promissory Note, dated January 9, 1998,
in the original principal amount of $1,943,000,
from Angeles Metal Trim Co. to Congress
Financial Corporation (Western).
10.49(2) Secured Promissory Note, dated January 9, 1998,
in the original principal amount of $200,000
from Angeles Acquisition Corp. to Congress
Financial Corporation (Western).
10.50(2) Secured Promissory Note, dated January 9, 1998,
in the original principal amount of $1,500,000
from Angeles Acquisition Corp. to Congress
Financial Corporation (Western).
10.51(2) Guarantee, dated January 9, 1998 executed by
the Company Angeles Metal Trim Co. and
California Building Systems, Inc. in favor of
Congress Financial Corporation (Western) with
respect to Angeles Acquisition Corp. notes.
10.52(2) Guarantee, dated January 9, 1998 executed by
the Company Angeles Acquisition Corp. and
California Building Systems, Inc. in favor of
Congress Financial Corporation (Western) with
respect to Angeles Metal Trim Co. notes.
10.53(2) Lease Agreement, dated January 12, 1998, by and
between Danat Investment Company and the
Company (Re: property at 20000 South Western
Avenue, Torrance , California).
10.54(2) Subordination, Nondisturbance and Attornment
Agreement, dated January 12, 1998, by and among
the Company, Angeles Acquisition Corp., Danat
Investment Company and Aid Association for
Lutherans.
10.55(2) Mortgage Agreement, dated January 12, 1998,
executed by Aid Association for Lutherans in
favor of Congress Financial Corporation
(Western) with respect to premises at 20000 S.
Western Avenue, Torrance, California (Exhibits
omitted).
10.56(2) Agreement, dated as of March 3, 1998, by and
between RDB Capital Advisors, LLC, Richard D.
Bailey, Stone Pine Investment Banking, LLC and
the Company.
10.57 Agreement between Company and Christian W. Wolf
effective March 10, 1998.
E-3
<PAGE> 28
Exhibit No. Description
10.58 Form of Note Purchase Agreement between the
Company and the Purchasers of 10% Convertible
Notes (Exhibits and Schedules Omitted).
10.59 Form of 10% Convertible Note due April 9, 1999.
10.60 Agreement between the Company and Jeffrey R.
Leach effective April 29, 1998.
27.1 Financial Data Schedule.
- -----------------------------------------------------------
(1) Incorporated by reference from the Company's Report on Form
8-KA, filed on January 29, 1998.
(2) Incorporated by reference from the Company's report on Form
10-KSB, dated December 31, 1997.
(3) Incorporated by reference from the Company's Report on Form
8-KA, filed on March 18, 1998.
E-4
<PAGE> 1
Exhibit No. 10.57
Agreement between Company and Christian W.
effective March 10, 1998
<PAGE> 2
AGREEMENT
BETWEEN
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
AND CHRISTIAN W. WOLF
THIS AGREEMENT is effective as of March 10, 1998 between Consolidated
Capital of North America, Inc. (the "Corporation") and Christian W. Wolf (the
"Consultant").
WHEREAS, the Corporation wishes to utilize the services of the
Consultant in connection with the acquisition of Form Tech Steel, Inc. (the
"Form Tech Acquisition"); and
WHEREAS, the parties desire to enter into this Agreement for their
mutual benefit.
1. RESPONSIBILITIES OF CONSULTANT. In consideration of the benefits
provided in paragraph 3 of this Agreement:
(a) Consultant will provide services to the Corporation in
connection with the Form Tech Acquisition as set forth in Section 2 of
this Agreement;
(b) Consultant will perform such duties for the Corporation as
are herein identified at such time and place as the Corporation and
Consultant mutually agree; and
(c) Consultant will report to the Chief Executive Officer and
the Board of Directors of the Corporation as requested from time to
time.
2. DUTIES OF CONSULTANT. Consultant will provide to the Corporation
and its subsidiaries the following:
(a) Assistance in analyzing, structuring, negotiating and
effecting the acquisition of Form Tech Steel, Inc. ("Form Tech") by the
Corporation;
(b) Assistance in analyzing, structuring, negotiating and
effecting the financing of the Form Tech Acquisition by the Corporation
and its subsidiaries; and
(c) Such other services as are requested of Consultant by the
Corporation and its subsidiaries and which are reasonably related to
the scope of Consultant's engagement.
<PAGE> 3
3. PAYMENTS FOR SERVICES. In consideration for the services
provided by Consultant as specified in Section 1 and Section 2 above, and other
good and valuable consideration, the Corporation agrees that:
(a) The Corporation shall pay Consultant ninety days of fees to
be paid monthly as a retainer in the amount of twelve thousand five
hundred ($12,500) per month plus the cost of COBRA health and dental
insurance.
(b) The Corporation shall issue to Consultant within ten
business days of the filing of a Form S-8 Registration Statement by the
Corporation covering the Corporation's 1997 Stock Incentive Plan,
150,000 Common Shares (the "Shares") of the Corporation, which Shares
shall be subject to the following resale restrictions: The Shares will
be placed in a brokerage account at Ladenburg Thalmann with Ezra
Grayman as Broker and Consultant as the owner and beneficiary. From
time to time Consultant will advise Mr. Grayman of his desire to sell a
specified number of Shares at a specified minimum net price per Share.
Thereafter, the execution of specific trades that meet such minimum
criteria must receive the prior approval of the Chairman of the
Corporation. Failure of Consultant to comply with this provision will
result in the forfeiture to the Corporation of the remaining Shares in
the account. All moneys realized from the sale of Shares in compliance
with this provision shall be immediately paid to Consultant. The
foregoing resale restrictions shall terminate on September 15, 1998 and
thereafter Consultant shall be free to sell the balance of the Shares
without any restriction.
(c) Consultant shall be entitled to reimbursement for all
reasonable business expenses related to the Form Tech Acquisition to
the extent that such expenses are incurred on behalf of the Corporation
and with the prior approval of the Corporation. Consultant is
responsible for the timely submission of appropriate written receipts
therefor.
4. CONTINGENT COMMON STOCK AWARDS. As an additional incentive to
Consultant
<PAGE> 4
to diligently pursue and assist in facilitating the Form Tech Acquisition, the
Corporation agrees to issue to the Consultant additional Common Shares of the
Corporation upon the following events:
(a) upon the execution of a definitive letter of intent by Form
Tech with the Corporation no later than June 1, 1998 containing terms
that are acceptable to the Corporation's Board of Directors, the
Corporation shall issue to the Consultant 100,000 Common Shares of the
Corporation; and
(b) upon the consummation of the Form Tech Acquisition by the
Corporation no later than December 31, 1998, the Corporation shall
issue to the Consultant an additional 100,000 Common Shares of the
Corporation, and pay Consultant a cash fee (the "Transaction Fee")
equal to the following percentages of the Transaction Value, as defined
below:
o 5% on the first $1,000,000
o 4% on the second $1,000,000
o 3% on the third $1,000,000
o 2% on the fourth $1,000,000
o 1% on the amounts over $4,000,000
The Transaction Fee shall be payable in cash upon the closing of the
Form Tech Acquisition. For purposes of this Agreement, the term "Transaction
Value" means an amount equal to the sum of the aggregate fair market value of
any securities issued, and any cash consideration paid, to Form Tech or its
stockholders in connection with a acquisition, plus the value ascribed to any
non-compete contracts (but not employment contracts). The fair market value of
any securities issued as consideration for the acquisition will be the value
ascribed to the securities by the Company and Form Tech.
5. DURATION. This Agreement will be in effect until December 31,
1998. These terms may be modified by written instrument mutually agreed upon by
the parties at any time.
6. VOLUNTARY TERMINATION BY CONSULTANT. Consultant has the option
to terminate this Agreement at any time for any reason upon ten (10) days
written notice. Such termination would immediately terminate the obligations of
the Company under Section 4 hereof.
<PAGE> 5
7. TERMINATION OF AGREEMENT BY THE COMPANY.
(a) WITHOUT CAUSE. The Corporation may terminate this Agreement
at any time upon written notice; however, in the event this provision
is exercised by the Corporation, Consultant shall not receive less
compensation than would otherwise be due to Consultant under Sections 3
and 4 of this Agreement.
(b) WITH CAUSE. The Corporation may terminate this Agreement for
cause, effective upon written notice, and upon such a termination the
Corporation shall be obligated to pay Consultant any reasonable fees
and expenses earned pursuant to Sections 3 and 4 only through the date
of termination. For purposes of this paragraph, "cause" shall mean that
Consultant has: (i) knowingly acted fraudulently in Consultant's
relations with the Corporation, (ii) misappropriated information or
done intentional damage to the negotiations of this transaction, (iii)
willfully and materially failed to follow a legal and reasonable order
or directive by the Chairman of the Board of Directors of the
Corporation, or (iv) failed to reasonably perform the duties as
described herein.
8. CONFIDENTIALITY AND NON-COMPETITION.
(a) Consultant hereby agrees that during the term of this
Agreement and at all times thereafter, Consultant shall: (i) keep
secret and confidential and not make any written or oral announcement
or disclosure of (other than as permitted herein) Consultant's
discussions with the Corporation or any information about, or directly
or indirectly pertaining to, the business, strategy, properties, or
prospects of the Corporation or any of its subsidiaries or affiliates
("Confidential Information") except to those agents of Consultant who
have a direct need to know such information; (ii) not use any
Confidential Information to obtain a commercial, trading or other
advantage; (iii) at any time on request from the Corporation return any
written record of any Confidential Information or other record in any
form in Consultant's possession; and (iv)
<PAGE> 6
promptly notify the Corporation if any Confidential Information is
required to be disclosed by reason of law or governmental or other
regulation and cooperate with the Corporation regarding the manner of
such disclosure or any action which the Corporation, at its sole cost
and expense, may elect to take to challenge legally the validity of
such requirement.
(b) The above undertakings shall not apply to information
which: (i) becomes generally available to the public other than as a
result of disclosure by Consultant or any party to whom Consultant has
disclosed it or other than by way of any breach of any obligation of
confidentiality; (ii) Consultant can demonstrate was in Consultant's
possession at the time of disclosure to Consultant and which Consultant
lawfully acquired other than from Form Tech or the Corporation or any
of its subsidiaries; (iii) was otherwise available in the public
domain; or (iv) was disclosed with the Corporation's consent.
9. SEVERABILITY. Each paragraph and subparagraphs of this Agreement
shall be construed and considered separate and separable from the validity and
enforceability of any other provision contained in this Agreement.
10. TITLES AND HEADINGS. Titles and headings to paragraphs hereof
are for purposes of reference only and shall in no way limit, define or
otherwise affect the provisions hereof.
11. COLORADO LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado without giving effect to
any conflicts of law doctrines.
12. COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
counterpart.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties hereto and may be modified or amended only by a written
instrument executed by both parties hereto.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
which is effective as of the date first set forth above.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Paul Bagley
------------------------------
Paul Bagley
Chief Executive Officer
By: /s/ Christian W. Wolf
------------------------------
Christian W. Wolf
<PAGE> 1
Exhibit No. 10.58
Form of Note Purchase Agreement between the
Company and the Purchasers of 10% Convertible
Notes (Exhibits and Schedules Omitted).
<PAGE> 2
NOTE PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made this ___ day of April 1998,
between Consolidated Capital of North America, Inc., a Colorado corporation (the
"Company") and the entities set forth on Schedule I hereto (hereinafter referred
to collectively as the "Purchasers" and individually a "Purchaser").
RECITAL
WHEREAS, the Company has authorized the issuance and sale of the
Company's 10% Convertible Notes up to an aggregate principal amount of
$5,000,000 having the terms set forth in Exhibit A attached hereto (the
"Notes"); and
WHEREAS, each Purchaser desires to purchase the Notes set forth on
Schedule I hereto.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, the Company and each Purchaser agree as
follows:
1. PURCHASE AND SALE OF NOTES. Subject to the terms and conditions
contained in this Agreement, at the Closing (as hereinafter defined) each
Purchaser shall purchase from the Company and the Company shall sell to each
Purchaser the Notes set forth on Schedule I hereto.
2. CLOSING.
2.1 Date of Closing. The closing of the purchase and sale of the
Notes (the "Closing") shall take place on April __, 1998 or such other day as
agreed to by the parties (the "Closing Date").
2.2 Items to be Delivered to Purchaser. The following shall be
delivered by the Company to each Purchaser on the Closing Date:
(a) the Notes purchased by such Purchaser;
(b) a legal opinion of counsel to the Company covering the due
execution, delivery and binding effect of this Agreement and the Notes;
and
(c) a certificate of the secretary or an assistant secretary of
the Company certifying (i) an attached complete and correct copy of its
articles of incorporation, (ii) an attached complete and correct copy
of its bylaws, and (iii) an attached complete and correct copy of
resolutions duly adopted by its board of directors authorizing the
execution, delivery and performance of this Agreement and the Notes.
2.3 Items to be Delivered to the Company. The following shall be
delivered by each Purchaser to the Company on the Closing Date:
(a) The purchase price set forth on Schedule I by wire transfer
to the account designated by the Company.
<PAGE> 3
3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of the Company. The Company
represents and warrants that as of the date of this Agreement:
(a) Existence. The Company is a corporation duly organized and
in good standing under the laws of the State of Colorado 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 the Company's financial condition, results
of operations or business.
(b) Authority. The execution and delivery by the Company of
this Agreement and the Notes (i) are within the Company's corporate
powers; (ii) are duly authorized by the Company's board of directors;
(iii) are not in contravention of the terms of the Company's
certificate of incorporation or bylaws; (iv) are not in contravention
of any law or laws; (v) except for the filing of a Form D Notice with
the Securities and Exchange Commission and any exemption filing related
thereto which may be required pursuant to applicable state securities
or "blue sky" laws, do not require any governmental consent,
registration or approval; (vi) do not contravene any contractual or
governmental restriction binding upon the Company; and (vii) will not
result in the imposition of any lien, charge, security interest or
encumbrance upon any property of the Company under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which the Company is a party or by
which the Company or any of the Company's property may be bound or
affected.
(c) Binding Effect. This Agreement and the Notes have been
duly authorized, executed and delivered by the Company and constitute
the valid and legally binding obligation of the Company, enforceable in
accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(d) Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, par value $.0001
per share, 17,975,756 shares of which are issued and outstanding and
10,000,000 shares of Preferred Stock, par value $.01 per share, of
which the following Preferred Shares are authorized, issued and
outstanding: Series A Preferred Shares, par value $1.00 per share,
authorized 1,000,000 shares, 744,000 shares issued and outstanding;
Series B Preferred Shares, par value $1.00 per share, authorized
1,000,000 shares, 449,000 shares issued and outstanding; Series C
Preferred Shares, stated value $10,000 per share, authorized 200
shares, 200 shares issued and outstanding. The shares of common stock
issuable upon conversion of the Notes (the "Conversion Shares") and the
shares of common stock issuable in lieu of cash interest payments on
the Notes (the "Interest Shares" and together with the Conversion
Shares, the "Shares") have been duly and validly authorized and
reserved for issuance and, when issued and delivered in accordance with
the terms of this Agreement, will be duly and validly issued, fully
paid and non-assessable. All outstanding securities of the Company that
are convertible into Common Shares of the Company, and all securities
of the Company that have registration rights, are set forth on Schedule
3.1(d) attached hereto.
(e) SEC Documents. The Company has furnished each Purchaser
with a true and complete copy of the Company's Report on Form 8-K filed
on January 27, 1998, as amended on
<PAGE> 4
January 29, 1998 and March 27, 1998, Report on Form 8-K filed on
January 28, 1998 as amended on January 29, 1998, Report on Form 8-K
filed on March 3, 1998 and the Company's Form 10-KSB for the fiscal
year ended December 31, 1997 (the "Disclosure Documents"). Except as
disclosed in the Disclosure Documents, since December 31, 1997 the
Company has not incurred any material liability except in the ordinary
course of its business consistent with past practice and there has not
been any change in the business, financial condition or results of
operations of the Company which has had a material adverse effect on
the Company. Since January 1, 1997, the Company has filed with the
Securities and Exchange Commission (the "SEC") all documents required
to be filed pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated
thereunder. As of its dates, the Disclosure Documents complied in all
material respects with the requirements of the Exchange Act, and the
rules and regulations of the SEC thereunder applicable to such
Disclosure Documents, and the Disclosure Documents did not contain any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
Disclosure Documents (the "Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto.
The Financial Statements are accurate, complete and have been prepared
in accordance with the books and records of the Company and in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto and fairly present (subject, in the case
of the unaudited statements, to normal, recurring audit adjustments
that are not material) the consolidated financial position of the
Company as at the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended.
(f) Litigation. There is neither pending nor, to the Company's
knowledge and belief, threatened any action, suit, proceeding or claim,
or any basis therefor, to which the Company is or may be named as a
party or its property is or may be subject or which calls into question
any of the transactions contemplated by this Agreement.
(g) Securities Matters. Subject to the accuracy of the
representations of the Purchaser set forth in Section 3.2 hereof, the
offer, sale and issuance of the Notes and the Shares as contemplated by
this Agreement are exempt from the registration requirements of the
Securities Act of 1933 as amended (the "Securities Act"). The Company
has complied and will comply with all applicable state "blue sky" or
securities laws in connection with the offer, sale and issuance of the
Notes and the Shares as contemplated by this Agreement.
3.2 Representations and Warranties of the Purchasers. Each
Purchaser represents and warrants that as of the date of the execution of this
Agreement:
(a) Authorization. This Agreement constitutes a valid and
legally binding obligation of such Purchaser.
(b) Investment Representations (i) The Purchaser has received
and reviewed the Company's Disclosure Documents and the Purchaser or
the Purchaser's designated representatives have concluded a
satisfactory due diligence investigation of the Company and have had an
opportunity to have all their questions regarding the Company
satisfactorily answered.
<PAGE> 5
(ii) The Purchaser acknowledges that the Notes and
the Shares are speculative and involve a high degree of risk
and the Purchaser represents that it is able to sustain the
loss of the entire amount of its investment.
(iii) The Purchaser (or its members and/or officers)
has previously invested in unregistered securities and has
sufficient financial and investing expertise to evaluate and
understand the risks of the Notes and the Shares.
(iv) The Purchaser has received from the Company,
and is relying on, no representations (except as set forth in
this Agreement) or projections with respect to the Company's
business and prospects.
(v) The Purchaser is an "accredited investor"
within the meaning of Regulation D under the Securities Act.
(vi) The Purchaser is acquiring the Notes and the
Shares for investment purposes only without intent to
distribute the same, and acknowledges that the Notes and the
Shares have not been registered under the Securities Act and
applicable state securities laws, and accordingly, constitute
"restricted securities" for purposes of the Securities Act and
such state securities laws.
(vii) The Purchaser acknowledges that it will not be
able to transfer the Notes and the Shares except upon
compliance with the registration requirements of the
Securities Act and applicable state securities laws or
exemptions therefrom.
(viii) The certificates and/or instruments evidencing
the Notes and the Shares will contain a legend to the
foregoing effect.
<PAGE> 6
4. REGISTRATION RIGHTS.
4.1 Registration of Shares. (a) The Company shall prepare and file
with the SEC a registration statement as soon as practical, which registration
statement shall include the Shares, and shall thereafter use its best efforts to
have such registration statement declared effective within 90 days after the
Closing Date (the "Target Date") and remain effective until the earlier of the
date on which all the Shares are sold or two years after the Closing Date (the
"Effective Period"). The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective throughout the Effective Period and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of the Shares covered by such registration statement whenever the Purchaser
shall desire to sell or otherwise dispose of the same.
(b) If a registration statement covering all Shares is not
effective by the Target Date, the Company shall pay to the Purchasers
as liquidated damages an aggregate amount equal to one and one half
percent (1 1/2%) of the total purchase price of the Notes for each
thirty (30) day period following the Target Date until such time as the
registration statement is declared effective. The payment set forth
above shall be pro-rated daily as to any period of less than thirty
(30) days. Such payment shall be made to each Purchaser by cashier's
check or wire transfer in immediately available funds to such account
as shall be designated in writing by the Purchaser and shall be paid
irrespective of the amount of Shares held by Purchaser on the Target
Date and thereafter.
(c) If the effectiveness of the Registration Statement is
suspended or a current prospectus meeting the requirements of Section
10 of the Act is not available for delivery by the Purchaser for a
period of more than thirty (30) days (either referred to herein as a
"suspension"), the Company shall pay to the Purchasers as liquidated
damages an aggregate amount equal to one and one half percent (1 1/2%)
of the total purchase price of the Notes for each thirty (30) day
period following the initial thirty (30) days of the suspension. Such
amounts shall be pro-rated daily and paid to each Purchaser by
cashier's check or wire transfer in immediately available funds to such
account as shall be designated in writing by the Purchaser.
(d) Any amount payable pursuant to the foregoing provisions
shall be delivered on or before the fifth (5th) day following the end
of the calendar month in which such payment or delivery obligation
arose.
(e) The Company shall file a request for acceleration of
effectiveness of the registration statement within five days after it
has received a no review/no further comment determination from the SEC.
4.2 Participation in Registered Offerings ("Piggyback Rights" for
Shares). If the Company at any time after the date of this Agreement and prior
to the second anniversary of this Agreement proposes or is required to register
any of its shares or other equity securities for public sale for cash under the
Securities Act (other than on Forms S-4 or S-8 or similar registration forms),
it will at each such time or times give written notice to the Purchaser of its
intention to do so. Upon the written request of the Purchaser given within
twenty (20) days after receipt of any such notice, the Company shall use its
best efforts to cause to be included in such registration any Shares held by the
Purchaser or Shares obtainable upon conversion of the Note and requested to be
registered under the Securities Act and any applicable
<PAGE> 7
state securities laws; provided, that if the managing underwriter advises that
less than all of the shares to be registered should be offered for sale so as
not materially and adversely to affect the price or salability of the offering
being registered by the Company, the Purchaser (but not the Company to the
extent it desires to include shares for its own account) shall reduce the number
of its shares to be included in the registration statement as required by the
underwriter to the extent requisite to permit the sale or other disposition (in
accordance with the intended method of disposition thereof as aforesaid) by the
prospective seller or sellers of the securities so registered. The registration
requested pursuant to this Section 4.2 is referred to herein as the "Piggyback
Registration".
4.3 Obligations of the Purchaser. It shall be a condition
precedent to the obligation of the Company to register any Shares pursuant to
this Section 4 that Purchaser shall furnish to the Company such information
regarding the Shares held and the intended method of disposition thereof and
other information concerning the Purchaser as the Company shall reasonably
request and as shall be required in connection with the registration statement
to be filed by the Company. If after a registration statement becomes effective
the Company advises the Purchaser that the Company considers it appropriate to
amend or supplement the applicable registration statement, the Purchaser shall
suspend further sales of the Shares until the Company advises the Purchaser that
such registration statement has been amended or supplemented.
4.4 Registration Proceedings. Whenever the Company is required by
the provisions of this Section 4 to effect the registration of the Shares under
the Securities Act, the Company shall:
(i) Prepare and file with the SEC a registration
statement with respect to such securities and use its
best efforts to cause such registration statement to
become and remain effective;
(ii) Prepare and file with the SEC such amendments to such
registration statement and supplements to the
prospectus contained therein as may be necessary to
keep such registration statement effective;
(iii) Furnish to the Purchaser and to the underwriters of
the securities being registered such reasonable
number of copies of the registration statement,
preliminary prospectus, final prospectus and such
other documents as such underwriters may reasonably
request in order to facilitate the public offering of
such securities;
(iv) Use its best efforts to register or qualify the
securities covered by such registration statement
under such state securities or Blue Sky Laws of such
jurisdictions as the Purchaser may reasonably request
within twenty (20) days following the original filing
of such registration statement, except that the
Company shall not for any purpose be required to
execute a general consent to service of process or to
qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(v) Notify the Purchaser, promptly after it shall receive
notice thereof, of the time when such registration
statement has become effective or a supplement to any
prospectus forming a part of such registration
statement has been filed;
(vi) Notify the Purchaser promptly of any request by the
SEC for the amending or
<PAGE> 8
supplementing of such registration statement or
prospectus or for additional information; and
(vii) Prepare and promptly file with the SEC and promptly
notify the Purchaser of the filing of such amendment
or supplement to such registration statement or
prospectus as may be necessary to correct any
statements or omissions if, at the time when a
prospectus relating to such securities is required to
be delivered under the Securities Act, any event
shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact
or omit to state any material fact necessary to make
the statements therein, in light of the circumstances
in which they were made, not misleading.
Notwithstanding any provision herein to the contrary,
the Company shall not be required to amend,
supplement, or update a prospectus contained in any
registration statement if to do so would result in an
unduly burdensome expense to the Company.
4.5 Expenses. With respect to the inclusion of the Shares in a
registration statement pursuant to this Section 4, all registration expenses,
fees, costs and expenses of and incidental to such registration, inclusion and
public offering in connection therewith shall be borne by the Company; provided,
however, that the Purchaser shall bear its own professional fees and pro rata
share of the underwriting discount and commissions. The fees, costs and expenses
of registration to be borne by the Company shall include, without limitation,
all registration, filing, printing expenses, fees and disbursements of counsel
and accountants for the Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if the Company and/or selling
security holders are required to bear such fees and disbursements), and all
legal fees and disbursements and other expenses of complying with state
securities or Blue Sky Laws of any jurisdiction in which the securities to be
offered are to be registered or qualified.
4.6 Indemnification of the Holder. Subject to the conditions set
forth below, in connection with any registration of the Shares pursuant to this
Section 4, the Company agrees to indemnify and hold harmless the Purchaser, any
underwriter for the Company or acting on behalf of the Purchaser and each
person, if any, who controls the Purchaser, within the meaning of Section 15 of
the Securities Act, as follows:
(i) Against any and all loss, claim, damage and expense
whatsoever arising out of or based upon (including,
but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing or
defending any litigation, commenced or threatened, or
any claim whatsoever based upon) any untrue or
alleged untrue statement of a material fact contained
in any preliminary prospectus (if used prior to the
effective date of the registration statement), the
registration statement or the prospectus (as from
time to time amended and supplemented), or in any
application or other document executed by the Company
or based upon written information furnished by the
Company filed in any jurisdiction in order to qualify
the Company's securities under the securities laws
thereof, or the omission or alleged omission
therefrom of a material fact required to be stated
therein or necessary to make the statements therein
not misleading, or any other violation of applicable
federal or state statutory or regulatory requirements
or limitations relating to action or inaction by the
Company in the
<PAGE> 9
course of preparing, filing, or implementing such
registered offering; provided, however, that the
indemnity agreement contained in this section shall
not apply to any loss, claim, damage, liability or
action arising out of or based upon any untrue or
alleged untrue statement or omission made in reliance
upon and in conformity with any information furnished
in writing to the Company by or on behalf of the
Purchaser expressly for use in connection therewith
or arising out of any action or inaction of the
Purchaser;
(ii) Subject to the proviso contained in Subsection (i)
above, against any and all loss, liability, claim,
damage and expense whatsoever to the extent of the
aggregate amount paid in settlement of any
litigation, commenced or threatened, or of any claim
whatsoever based upon any untrue statement or
omission (including, but not limited to, any and all
expense whatsoever reasonably incurred in
investigating, preparing or defending against any
such litigation or claim) if such settlement is
effected with the written consent of the Company; and
(iii) In no case shall the Company be liable under this
indemnity agreement with respect to any claim made
against such seller, underwriter or any such
controlling person unless the Company shall be
notified, by letter or by facsimile confirmed by
letter, of any action commenced against such persons,
promptly after such person shall have been served
with the summons or other legal process giving
information as to the nature and basis of the claim.
The failure to so notify the Company, if prejudicial
in any material respect to the Company's ability to
defend such claim, shall relieve the Company from its
liability to the indemnified person under this
Section 4, but only to the extent that the Company
was prejudiced. The failure to so notify the Company
shall not relieve the Company from any liability
which it may have otherwise than on account of this
indemnity agreement. The Company shall be entitled to
participate at its own expense in the defense of any
suit brought to enforce any such claim, but if the
Company elects to assume the defense, such defense
shall be conducted by counsel chosen by it, provided
such counsel is reasonably satisfactory to the
sellers or controlling persons, defendants in any
suit so brought. In the event the Company elects to
assume the defense of any such suit and retain such
counsel, the sellers, underwriter or controlling
persons, defendants in the suit, shall, after the
date they are notified of such election, bear the
fees and expenses of any counsel thereafter retained
by them, as well as any other expenses thereafter
incurred by them in connection with the defense
thereof; provided, however, that if the sellers,
underwriter or controlling persons reasonably believe
that there may be available to them any defense or
counterclaim different than those available to the
Company or that representation of such sellers,
underwriters or controlling persons by counsel for
the Company presents a conflict of interest for such
counsel, then such sellers, underwriter and
controlling person shall be entitled to defend such
suit with counsel of their own choosing and the
Company shall bear the fees, expenses and other costs
of such separate counsel.
4.7 Indemnification of the Company. Each Purchaser agrees to
indemnify and hold harmless the Company, each underwriter for the offering, and
each of their officers and directors and agents and each other person, if any,
who controls the Company and underwriter within the meaning of Section 15
<PAGE> 10
of the Securities Act against any and all such losses, liabilities, claims,
damages and expenses as are indemnified against by the Company under Section 4.6
above; provided, however, that such indemnification by Purchaser hereunder shall
be limited to any losses, liabilities, claims, damages, or expenses to the
extent caused by any untrue statement of a material fact or omission of a
material fact (required to be stated therein or necessary to make statements
therein not misleading), if any made (or in settlement of any litigation
effected with the written consent of such sellers, alleged to have been made) in
any preliminary prospectus, the registration statement or prospectus or any
amendment or supplement thereof or in any application or other document in
reliance upon, and in conformity with, written information furnished in respect
of such seller by or on behalf of such seller expressly for use in any
preliminary prospectus, the registration statement or prospectus or any
amendment or supplement thereof or in any such application or other document or
arising out of any action or inaction of such seller in implementing such
registered offering. Notwithstanding the foregoing, the indemnification
obligation of each Purchaser shall not exceed the purchase price of the Notes
paid by such Purchaser. In case any action shall be brought against the Company,
or any other person so indemnified, in respect of which indemnity may be sought
against any seller, such seller shall have the rights and duties given to the
Company, and each other person so indemnified shall have the rights and duties
given to the Purchaser, by the provisions of Section 4.6. The person indemnified
agrees to notify the sellers promptly after the assertion of any claim against
the person indemnified in connection with the sale of securities.
4.8 Contribution. If the indemnification provided for in Sections
4.6 and 4.7 above are unavailable or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the indemnified party, on one hand, and such indemnifying party, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, or liabilities (or actions in respect thereof). The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnified party, on one hand, or such indemnifying party, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person who has
committed fraudulent misrepresentation (within the meaning of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof referred to above in this Section shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
5. MISCELLANEOUS.
5.1 Confidentiality. (a) The Purchaser agrees to keep confidential
any and all non-public information delivered or made available to the Purchaser
by the Company except for disclosures, as necessary, made by the Purchaser to
the Purchaser's officers, directors, employees, agents, counsel and accountants
each of whom shall be notified by the Purchaser of this confidentiality covenant
and for whom the Purchaser shall be liable in the event of any breach of this
covenant by any such individual or individuals; provided, however, that nothing
herein shall prevent the Purchaser from disclosing such information (a) upon the
order of any court or administrative agency, (b) upon the request or demand of
<PAGE> 11
any regulatory agency or authority having jurisdiction over the Purchaser, (c)
which has been publicly disclosed or (d) to any of its members provided that any
such members agree in writing (with a copy provided to the Company) to be bound
by confidentiality provisions in form and substance substantially as are
contained herein. In the event of a mandatory disclosure as described in clause
(a) and/or (b) of the preceding sentence, the Purchaser shall promptly notify
the Company in writing of any applicable order, request or demand for such
information, cooperate with the Company if and to the extent that the Company
elects to seek an appropriate protective order or other relief from such order,
request, or demand, and disclose only the minimal amount of information
ultimately required to be disclosed. The Purchaser shall not use for its own
benefit, nor permit any other person to use for such person's benefit, any of
the Company's non-public information including, without limitation, in
connection with the purchase and/or sale of the Company's securities.
(b) The Company shall in no event disclose non-public
information to the Purchaser, advisors to or representatives of the
Purchaser unless prior to disclosure of such information the Company
marks such information as "Non-Public Information - Confidential" and
provides the Purchaser, such advisors and representatives with the
opportunity to accept or refuse to accept such non-public information
for review. The Company may, as a condition to disclosing any
non-public information hereunder, require the Purchaser's advisors and
representatives to enter into a confidentiality agreement in form
reasonably satisfactory to the Company and the Purchaser.
(c) Nothing herein shall require the Company to disclose
non-public information to the Purchaser or its advisors or
representatives, and the Company represents that it does not
disseminate non-public information to any Purchasers who purchase stock
in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately
notify the advisors and representatives of the Purchaser and, if any,
underwriters, of any event or the existence of any circumstance
(without any obligation to disclose the specific event or circumstance)
of which it becomes aware, constituting non-public information (whether
or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were
made, not misleading. Nothing herein shall be construed to mean that
such persons or entities other than the Purchaser (without the written
consent of the Purchaser prior to disclosure of such information) may
not obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing
herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such
persons or entities, that a Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which
they were made, nor misleading.
5.2 Legends. To the extent applicable, each note, certificate or
other document evidencing the Notes to be purchased and sold pursuant to this
Agreement and any Shares issued shall be endorsed with the legends set forth
below, and the Purchaser on behalf of itself and each holder of the Notes
covenants that, except to the extent such restrictions are waived by the
Company, it shall not transfer the Notes or Shares without complying with the
restrictions on transfer described in the legends endorsed on such note or
certificate:
<PAGE> 12
(a) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY
AND ITS COUNSEL AND FROM ATTORNEYS REASONABLY ACCEPTABLE TO
THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Note or the Shares, the legend
required by such state authority.
5.3 Costs and Expenses. The Company and each Purchaser shall bear
their own costs and expenses in connection with the preparation, execution and
delivery of this Agreement and the Notes.
5.4 Assignability; Successors. The provisions of this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of the parties hereto.
5.5 Survival. All agreements, covenants, representations and
warranties made by the Company or by the Purchaser herein shall survive the
execution and delivery of this Agreement.
5.6 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF COLORADO WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAWS.
5.7 Counterparts: Headings. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute but one and the same agreement. The
descriptive headings in this Agreement are inserted for convenience of reference
only and shall not affect the construction of this Agreement.
5.8 Entire Agreement, Amendments. This Agreement and the Exhibits
contain the entire understanding of the parties with respect to the subject
matter hereof, and supersede all other representations and understandings, oral
or written, with respect to the subject matter hereof. No amendment,
modification, alteration, or waiver of the terms of this Agreement or consent
required under the terms of this Agreement shall be effective unless made in a
writing, which makes specific reference to this Agreement and which has been
signed by the Company and each Purchaser. Any such amendment, modification,
alteration, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
5.9 Notices. All communications or notices required or permitted
by this Agreement shall be in writing and shall be deemed to have been given or
made when delivered in hand, deposited in the mail, or sent by facsimile, with
confirmation (if sent by facsimile on a non-business day, receipt shall be
deemed to have occurred on the next succeeding business day). Communications or
notices shall be
<PAGE> 13
delivered personally or by certified or registered mail, postage, or by
facsimile and addressed as follows, unless and until either of such parties
notifies the other in accordance with this Section of a change of address:
if to the Company Consolidated Capital of North America, Inc.
410 17th Street, Suite 400
Denver, Colorado 80202
Att: Secretary
Tel: (303) 446-2188
Fax: (303) 446-5972
with copies to: Gallagher, Briody & Butler
212 Carnegie Center, Suite 402
Princeton, New Jersey 08540
Att: Thomas P. Gallagher
Tel: (609) 452-6000
Fax: (609) 452-0090
if to the Purchasers: To the address set forth on Schedule I hereto
5.10 Severability. 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 by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
5.11 Maximum Interest. It is expressly stipulated and agreed to be
the intent of the Company and the Purchaser 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 Purchaser 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 Note results in the
Company's having paid any interest in excess of that permitted by law, then it
is the Company's and the Purchaser's express intent that all excess cash amounts
theretofore collected by Purchaser be credited on the principal balance of the
Note (or if the Note has been or would thereby be paid in full, refunded to the
Company), 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 Note does not include the
right to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and the Purchaser does not intend to collect any unearned
interest in the event of acceleration.
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
CONSOLIDATED CAPITAL
OF NORTH AMERICA, INC,
By: /s/ Donald R. Jackson
---------------------------
Donald R. Jackson
Secretary and Treasurer
[PURCHASERS]
By:
<PAGE> 1
Exhibit No. 10.59
Form of 10% Convertible Note due April 9, 1999.
<PAGE> 2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL AND FROM ATTORNEYS REASONABLY
ACCEPTABLE TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
No. _____ April __, 1998
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
10% CONVERTIBLE NOTE
FOR VALUE RECEIVED, Consolidated Capital of North America, Inc., a
Colorado corporation (the "Company") hereby promises to pay to
_____________________________ having an address at _____________________________
(the "Noteholder"), or registered assigns, on or before April 8, 1999 (the
"Maturity Date"), the principal sum of __________________________ Dollars
($___________), and to pay interest from the date hereof on the principal sum
remaining unpaid at the rate of 10% per annum based on a 365-day year, such
interest to accrue from the date hereof and to be payable semi-annually on
October 1 and April 1 commencing October 1, 1998, until the whole amount of the
principal hereof shall be paid. Principal and interest shall be payable in
lawful money of the United States of America at the principal office of the
Noteholder or at such other place as the registered holder may designate from
time to time in writing to the Company. Notwithstanding the foregoing, the
Company shall have the right, at its sole option, to pay any interest due in
Common Shares of the Company based on the arithmetic average of the closing bid
and ask price of the Company's Common Shares for the twenty trading days prior
to the interest payment due date (the "Interest Shares").
This Note is one of an issue of 10% Convertible Notes of the Company in
an aggregate principal amount of $5,000,000 (collectively, the "Notes") issued
pursuant to a Note Purchase Agreement dated as April __, 1998 between the
Company and the purchasers named therein (the "Note Purchase Agreement"). The
holder of this Note is entitled to the benefits of the Note Purchase Agreement
and to enforce the agreements of the Company contained therein. Capitalized
terms used herein and not otherwise defined shall have the meaning ascribed
thereto in the Note Purchase Agreement.
1. CONVERSION. (a) At any time after the date hereof and prior to the
Maturity Date, the outstanding principal amount of this Note, and all accrued
and unpaid interest thereon, in whole or in increments of at least $20,000 of
principal, may be converted by the Noteholder into Common Shares of the Company
(the "Conversion Shares") at the Conversion Price equal to the lesser of (i)
$1.75 per share or (ii) the following conversion prices: (x) on or after August
6, 1998 at a per share price equal to eighty percent (80%) of the arithmetic
average of the closing bid and ask prices of the Company's Common Shares for the
twenty trading days prior to the exercise date of such conversion and (y) on or
after October 5, 1998 a per share price equal to seventy-five (75%) of the
arithmetic average of the closing
<PAGE> 3
bid and ask prices of the Company's Common Shares for each of the twenty trading
days prior to the exercise date of such conversion.
(b) In order to effect the conversion of all or part of
the Note, the Noteholder shall issue a notice of conversion
substantially in the form attached hereto (the "Notice of Conversion")
which may be by facsimile and surrender the Note for conversion if the
Note is not already in possession of the Company. Each conversion of
all or any portion of the Note will be deemed to have been effected as
of the close of business on the date on which the Note has been
surrendered at the principal office of the Company. At such time as
such conversion has been effected, to the extent that any portion of
the Note is converted, the rights of the Noteholder with respect to
such portion of the Note shall cease and the Noteholder shall be deemed
to have become the holder of record of the shares of Conversion Shares
represented thereby.
(c) No fractional Common Shares shall be issued upon
conversion of the Note. In lieu of any fractional share to which the
holder would otherwise be entitled, the Company shall round up to the
nearest whole Common Share. In the case of a dispute as to the
calculation of the Conversion Price, the Company's calculation shall be
deemed conclusive absent manifest error.
(d) Within ten days after a conversion has been effected,
the Company will deliver to the Noteholder:
(i) a certificate or certificates representing the
number of Conversion Shares issuable by reason of conversion
in the name of the Noteholder and in such denomination or
denominations as the Noteholder has specified; and
(ii) a new Note representing any principal balance
which was not converted into Conversion Shares in connection
with such conversion.
(e) The issuance of certificates for Conversion Shares
upon conversion of the Note and/or interest will be delivered by the
Company within ten days of the date of conversion or the interest
payment due date and will be made without charge to the Noteholder for
any issuance tax in respect thereof or other cost incurred by the
Company in connection with such conversion and the related issuance of
Conversion Shares. In the event the certificates are not delivered
within such ten day period, the Company shall pay to the Noteholder a
penalty of $250 per day in cash for each day thereafter until the date
such certificates are delivered to the Noteholder.
(f) The Company shall at all times have authorized,
reserved and set aside a sufficient number of Common Shares for the
conversion of all shares with respect to the Note and interest then
outstanding.
(g) The Conversion Price in effect at any time and the
number and kind of securities purchasable upon the exercise of the Note
shall be subject to adjustment from time to time upon the happening of
certain events as follows after the date hereof and through and
including the Maturity Date:
(i) In case the Company shall (1) declare a dividend
or make a distribution on its outstanding shares of Common
Stock in shares of Common Stock, (2) subdivide or
<PAGE> 4
reclassify its outstanding shares of Common Stock into a
greater number of shares, or (3) combine or reclassify its
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect at the time of the
record date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Conversion Price by a
fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such
action, and the numerator of which shall be the number of
shares of Common Stock immediately prior to such action. Such
adjustment shall be made each time any event listed above
shall occur.
(ii) Whenever the Conversion Price is adjusted
pursuant to Subsection (i) above, the number of Conversion
Shares purchasable upon conversion of the Note shall
simultaneously be adjusted by multiplying the number of
Conversion Shares initially issuable upon conversion of the
Note by the Conversion Price in effect on the date hereof and
dividing the product so obtained by the Conversion Price, as
adjusted.
(iii) All calculations under this Section 1.3(g)
shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(iv) Whenever the Conversion Price is adjusted, as
herein provided, the Company shall promptly cause a notice
setting forth the adjusted Conversion Price and adjusted
number of Conversion Shares issuable upon exercise of the Note
to be mailed to the Noteholder, at its last address appearing
in the Company's register. The Company may retain a firm of
independent certified public accountants selected by the Board
of Directors (who may be the regular accountants employed by
the Company) to make any computation required by this Section
1.3(g), and a certificate signed by such firm or the Company's
Chief Financial Officer shall be conclusive evidence of the
correctness of such adjustment.
(h) In the event of a merger, reorganization,
recapitalization or similar event of or with respect to the Company (a
"Corporate Change") (other than a Corporate Change in which all or
substantially all of the consideration received by the holders of the
Company's equity securities upon such Corporate Change consists of cash
or assets other than securities issued by the acquiring entity or any
affiliate thereof), this Note shall be convertible into such class and
type or securities as the holder would have received had the holder
converted the Note immediately prior to such Corporate Change, as
appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common
Stock after such corporate event.
2. REGISTRATION. The Company shall maintain at its principal
office a register of the Notes and shall record therein the names and addresses
of the registered holders of the Notes, the address to which notices are to be
sent and the address to which payments are to be made as designated by the
registered holder if other than the address of the holder, and the particulars
of all transfers, exchanges and replacements of Notes. No transfer of a Note
shall be valid unless the registered holder or his or its duly appointed
attorney request such transfer to be made on such register, upon surrender
thereof for exchange as hereinafter provided, accompanied by an instrument in
writing, in form and execution reasonably satisfactory to the Company. Each Note
issued hereunder, whether originally or upon transfer, exchange or replacement
of a Note, shall be registered on the date of execution thereof by
<PAGE> 5
the Company. The registered holder of a Note shall be that person or entity in
whose name the Note has been so registered by the Company. A registered holder
shall be deemed the owner of a Note for all purposes, and the Company shall not
be affected by any notice to the contrary.
3. TRANSFER AND EXCHANGE. Subject to compliance with the
restrictions on transfer set forth in the Note Purchase Agreement, the
registered holder of any Note or Notes may, prior to maturity, surrender such
Note or Notes at the principal office of the Company for transfer or exchange.
Within a reasonable time after notice to the Company from a registered holder of
its intention to make such exchange and without expense (other than applicable
transfer taxes, if any) to such registered holder, the Company shall issue in
exchange therefor another Note or Notes dated the date to which interest has
been paid on, and for the unpaid principal amount of, the Note or Notes so
surrendered, containing the same provisions and subject to the same terms and
conditions as the Note or Notes so surrendered. Subject to the restrictions on
transfer set forth in the Note Purchase Agreement, each new Note shall be made
payable to such person or entity, as the registered holder of such surrendered
Note or Notes may designate. Notes issued upon any transfer or exchange shall be
only in authorized denominations, which shall be $100,000.
4. REPLACEMENT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, if
requested by the Company in the case of any such loss, theft or destruction,
upon delivery of an indemnity bond or other agreement or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of such Note, the Company will issue a new Note, of
like tenor, in the amount of the unpaid principal of such Note, and dated the
date to which interest has been paid, in lieu of such lost, stolen, destroyed or
mutilated Note.
5. DEFAULT. The Company shall be in default under this Note upon
the occurrence of: (i) any of the events specified in Section 5(a) hereof and
the failure to cure such default within ten (10) days after receipt of written
notice thereof from the Noteholder; (ii) any of the events specified in Section
5(b) hereof and the failure to cure such default within twenty (20) days after
receipt of written notice thereof from the Noteholder; or (iii) any of the
events specified in Section 5(c) hereof (any of the foregoing being an "Event of
Default"):
(a) Failure to make any principal or interest payment required
under this Note on the due date of such payment;
(b) Any material default, breach or misrepresentation shall
occur under the terms and provisions of the Note Purchase Agreement; or
(c) Insolvency of, business failure of, or an assignment for
the benefit of creditors by or the filing of a petition under
bankruptcy, insolvency or debtor's relief law, or for any readjustment
of indebtedness, composition or extension by the Company, or commenced
against the Company which is not discharged within sixty (60) days.
6. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an
Event of Default:
(a) specified in clause (c) of Section 5, then the Note shall
be automatically accelerated and immediately due and payable;
<PAGE> 6
(b) specified in clauses (a) or (b) of Section 5, then the
Noteholder may declare the Note immediately accelerated, due and
payable; and
(c) the Noteholder shall have all of the rights and remedies,
at law and in equity, by statute or otherwise, and no remedy herein
conferred upon the Noteholder is intended to be exclusive of any other
remedy and each remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law,
in, equity, by statute or otherwise.
7. CHANGES; PARTIES. This Note can only be changed by an
agreement in writing signed by the Company and the Noteholder. This Note shall
inure to the benefit of and be binding upon the Company and the Noteholder and
their respective successors and assigns.
8. WAIVER OF PRESENTMENT. The Company hereby waives presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
9. MAXIMUM RATE OF INTEREST. It is expressly stipulated and
agreed to be the intent of the Company and Noteholder 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 Noteholder 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 the Company results in the Company's having
paid any interest in excess of that permitted by law, then it is the Company's
and Noteholder's express intent that all excess cash amounts theretofore
collected by Noteholder be credited on the principal balance of this Note (or if
this Note has been or would thereby be paid in full, refunded to the Company),
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 Noteholder does not intend to collect any unearned interest in
the event of acceleration.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF COLORADO WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAWS.
<PAGE> 7
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year set forth above.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Donald R. Jackson
------------------------------
Donald R. Jackson
Secretary and Treasurer
<PAGE> 8
NOTICE OF CONVERSION
TO: CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
The undersigned, the holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Common Shares of Consolidated Capital of
North America, Inc. to the extent of $_______ unpaid principal amount of such
Note, and requests that the certificates for such shares be issued in the name
of, and delivered to, _______________, whose address is
_________________________________.
Dated:
-------------------
-------------------------------
(Signature must conform in all
respects to name of holder as specified
on the face of the Note)
-------------------------------
(Address)
<PAGE> 1
Exhibit No. 10.60
Agreement between the Company and
Jeffrey R. Leach effective April 29, 1998
<PAGE> 2
AGREEMENT
BETWEEN
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
AND JEFFREY R. LEACH
THIS AGREEMENT is effective as of April 29, 1998 between Consolidated
Capital of North America, Inc. (the "Corporation") and Jeffrey R. Leach (the
"Consultant").
WHEREAS, the parties desire to enter into this Agreement for their
mutual benefit.
1. RESPONSIBILITIES OF CONSULTANT. In consideration of the
benefits provided in paragraph 2 of this Agreement:
(a) Consultant will provide services to the Corporation in
connection with strategic acquisitions by the Corporation from time to
time (the "Acquisitions");
(b) Consultant will perform such duties for the Corporation as
are herein identified at such time and place as the Corporation and
Consultant mutually agree; and
(c) Consultant will report to the Chief Executive Officer and
the Board of Directors of the Corporation as requested from time to
time.
2. PAYMENTS FOR SERVICES. In consideration for the services
provided by Consultant as specified in Section 1 above, and other good and
valuable consideration, the Corporation agrees that:
(a) The Corporation shall issue to Consultant 400,000 Common
Shares (the "Shares") of the Corporation pursuant to the Corporation's
1997 Stock Incentive Plan.
(b) Consultant shall be entitled to reimbursement for all
reasonable business expenses related to the Acquisitions to the extent
that such expenses are incurred on behalf of the Corporation and with
the prior approval of the Corporation. Consultant is responsible for
the timely submission of appropriate written receipts therefor.
3. DURATION. This Agreement will be in effect until April 30,
2000. These terms may be modified by written instrument mutually agreed upon by
the parties at any time.
<PAGE> 3
4. CONFIDENTIALITY.
(a) Consultant hereby agrees that during the term of this
Agreement and at all times thereafter, Consultant shall: (i) keep
secret and confidential and not make any written or oral announcement
or disclosure of (other than as permitted herein) Consultant's
discussions with the Corporation or any information about, or directly
or indirectly pertaining to, the business, strategy, properties, or
prospects of the Corporation or any of its subsidiaries or affiliates
("Confidential Information") except to those agents of Consultant who
have a direct need to know such information; (ii) not use any
Confidential Information to obtain a commercial, trading or other
advantage; (iii) at any time on request from the Corporation return any
written record of any Confidential Information or other record in any
form in Consultant's possession; and (iv) promptly notify the
Corporation if any Confidential Information is required to be disclosed
by reason of law or governmental or other regulation and cooperate with
the Corporation regarding the manner of such disclosure or any action
which the Corporation, at its sole cost and expense, may elect to take
to challenge legally the validity of such requirement.
(b) The above undertakings shall not apply to information
which: (i) becomes generally available to the public other than as a
result of disclosure by Consultant or any party to whom Consultant has
disclosed it or other than by way of any breach of any obligation of
confidentiality; (ii) Consultant can demonstrate was in Consultant's
possession at the time of disclosure to Consultant and which Consultant
lawfully acquired other than from an Acquisition candidate or the
Corporation or any of its subsidiaries; (iii) was otherwise available
in the public domain; or (iv) was disclosed with the Corporation's
consent.
5. SEVERABILITY. Each paragraph and subparagraphs of this
Agreement shall be construed and considered separate and separable from the
validity and enforceability of any other provision contained in this Agreement.
<PAGE> 4
6. TITLES AND HEADINGS. Titles and headings to paragraphs hereof
are for purposes of reference only and shall in no way limit, define or
otherwise affect the provisions hereof.
7. COLORADO LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado without giving
effect to any conflicts of law doctrines.
8. COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
counterpart.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties hereto and may be modified or amended only by a written
instrument executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
which is effective as of the date first set forth above.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Donald R. Jackson
---------------------------------
Donald R. Jackson
Secretary and Treasurer
By: /s/ Jeffrey R. Leach
---------------------------------
Jeffrey R. Leach
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 276,777
<SECURITIES> 0
<RECEIVABLES> 2,918,918
<ALLOWANCES> 166,789
<INVENTORY> 3,000,219
<CURRENT-ASSETS> 7,221,480
<PP&E> 5,834,962
<DEPRECIATION> 384,960
<TOTAL-ASSETS> 15,896,780
<CURRENT-LIABILITIES> 8,264,755
<BONDS> 6,050,813
1,674,797
1,193,000
<COMMON> 1,798
<OTHER-SE> (441,375)
<TOTAL-LIABILITY-AND-EQUITY> 15,896,780
<SALES> 5,539,506
<TOTAL-REVENUES> 5,539,506
<CGS> 4,905,079
<TOTAL-COSTS> 4,905,079
<OTHER-EXPENSES> 2,236,851
<LOSS-PROVISION> 17,214
<INTEREST-EXPENSE> 475,258
<INCOME-PRETAX> (1,982,996)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,982,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,982,996)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
