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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Fiscal Year Ended December 31, 1997
Commission File No. 0-21821
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
COLORADO 93-0962072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 17TH STREET, SUITE 400, DENVER, COLORADO 80202
(888) 313-8051
(Address of principal executive offices; issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common
Shares
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[ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB: [ ]
Issuer's revenues for the most recent fiscal year: $16,989,478
The aggregate market value of the voting stock held by non-affiliates
of the issuer was approximately $14,045,805. The aggregate market value was
based upon the mean between the closing bid and asked price for the Common
Shares as reported on the NASD Electronic Bulletin Board as of March 25, 1998.
As of March 25, 1998, there were 17,975,756 of the Issuer's Common
Shares outstanding.
Documents Incorporated by Reference:
None
Transitional Small Business Disclosure Format (check one): Yes [ ]
No [X]
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT - FOR FISCAL YEAR ENDED
DECEMBER 31, 1997
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
<TABLE>
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PART I
<S> <C> <C> <C>
Item 1. Description of Business...................................2
Item 2. Description of Property..................................13
Item 3. Legal Proceedings........................................14
Item 4. Submission of Matters to a Vote
of Security Holders....................................15
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters....................................17
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operation...........19
Item 7. Financial Statements and Supplementary Data..............26
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................26
PART III
Item 9. Directors and Executive Officers.........................28
Item 10. Executive Compensation...................................32
Item 11. Security Ownership of Certain
Beneficial Owners and Management.......................36
Item 12. Certain Relationships and
Related Transactions...................................39
PART IV
Item 13. Exhibits and Reports on Form 8-K.........................44
SIGNATURE PAGE..............................................................51
FINANCIAL STATEMENTS........................................................F-1
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The Private Securities Litigation Reform Act of 1995 provides a "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 acquisitions, as well
as its current ongoing operations.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY OF THE COMPANY
Consolidated Capital of North America, Inc. (the "Company") was incorporated
under the laws of the State of Delaware on November 24, 1987. In March 1992, the
Company was reincorporated in the State of Colorado through the merger of the
Delaware corporation into a newly formed Colorado corporation.
The Company was originally organized to take advantage of potential business
opportunities made available to the Board of Directors. Commencing in 1989, the
Company investigated business opportunities in various industries and in 1991
the Company acquired an interest in a natural gas pipeline located in southeast
Kansas and northeast Oklahoma. The pipeline was operated by an independent third
party on behalf of the Company and its joint venture partner until May 1993,
when the pipeline was sold.
Commencing in 1994, the Company focused on real estate development and acquired
an interest in two entities participating in the real estate industry in
Colorado Springs, Colorado - the Northcrest Joint Venture and the Bear Star
Limited Liability Company ("Bear Star"). The Northcrest Joint Venture owns
undeveloped real estate east of Colorado Springs which has been zoned for single
family residential development. The Company owned a 53% interest in that entity
until such interest was sold in January 1997 prior to the Merger described
below. Bear Star was organized to develop and market partially developed real
estate west of Colorado Springs, which was zoned for single family homes. The
Company owned an 18.54% interest in that entity until such interest was sold in
April 1997. See "Narrative Description of Business - Former Real Estate
Development Business" for a description of the Northcrest Joint Venture, Bear
Star, and the other former real estate development interests of the Company.
On January 21, 1997, a subsidiary of the Company merged with Angeles Acquisition
Corp. ("Angeles Acquisition"), a privately held company, with Angeles
Acquisition surviving the merger as a wholly-owned subsidiary of the Company
(the "Merger"). Prior to the Merger, Angeles Acquisition had acquired Angeles
Metal Trim Co. ("Angeles"), which does business as Angeles Metal Systems. During
August 1997, the Company reorganized its subsidiaries and
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Angeles became a direct wholly-owned subsidiary of the Company. Angeles and its
wholly owned subsidiary, California Building Systems, Inc. ("CBS"), fabricate
and sell steel framing materials for commercial and residential structures. CBS
has also developed a low-cost complete steel frame housing structure. See
"Narrative Description of Business - Angeles Metal Trim Co. and Subsidiary" for
a description of the business of Angeles and CBS.
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 to be filed with the
Securities and Exchange Commission by April 10, 1998. Information on the
acquisition of the assets of Old Capitol, and the obligations incurred in
connection with such acquisition appears in note K to the Company's 1997
Financial Statements that are included in this report. See also "Item 6.
Management's Discussion and Analysis of Financial Condition and Results of
Operation".
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 Company's business strategy is to increase its profitability through
expansion of its existing operations and acquisitions of businesses that are
strategically located or positioned to diversify or enhance the Company's
customer base, product range and geographic coverage. The Company is in
preliminary negotiations with two potential acquisition candidates. In order to
facilitate the financing of these acquisitions, the Company has entered into an
engagement with an investment banking firm to act as its agent for the placement
of the Company's securities. There can be no assurance that either of these
acquisitions will be completed or that the Company will issue such securities.
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NARRATIVE DESCRIPTION OF BUSINESS
Angeles Metal Trim Co. and Subsidiary
Products and Markets
Angeles is in the business of fabricating and selling light gauge steel framing
materials for commercial and residential structures. Angeles' products include
galvanized steel components, framing materials, studs, tracks, trusses and
joists for domestic and international markets. Angeles also provides technical
support, engineering and estimating services for specialized projects, primarily
in the residential housing market. CBS has also developed a proprietary low-cost
steel frame housing structure.
Angeles has been supplying its steel framing products to the commercial
construction industry for over 40 years. The commercial construction market
segment represented approximately 95% of Angeles' sales during 1997.
Since 1992, Angeles has been developing the use of steel framing for residential
housing markets. The residential construction market segment represented
approximately 5% of Angeles' sales during 1997. While the use of steel framing
is not new in residential construction, the recent escalation and volatility in
lumber prices has caused widespread attention to be focused on the advantages of
building homes with steel. Management believes that the early entry by Angeles
into this growing market gives it a significant advantage over its competitors
in terms of designing and engineering products, training framers and
subcontractors, and developing relationships with builders.
Management believes that its sales to the residential construction market
segment will grow during the current fiscal year. Steel has a number of
attractive qualities over lumber and concrete block as a building material,
including (i) steel's comparatively lower cost compared to lumber, which is
becoming increasingly scarce and expensive due to environmental and other
factors; (ii) steel's long life compared to lumber, which rots and is
susceptible to termites and other pests; (iii) steel's greater structural
integrity, which allows for greater consistency of quality, straightness and
strength under adverse conditions such as earthquakes; (iv) steel's faster
construction time with an experienced crew; (v) steel's pre-cut convenience and
ease of assembly with conventional tools; and (vi) steel's ability to be
re-cycled. Where wood is desired as an exterior material or trim, it can easily
be mixed with steel. The Company believes that the use of steel frames in
residential construction will continue to grow given the high cost of
conventional framing and the numerous positive attributes of steel framing.
In addition to selling light gauge steel framing materials and components for
residential structure, CBS also sells a pre-engineered low-cost steel frame
housing structure which it developed, known as Model 640. This product is a
pre-engineered 640 square foot steel framed basic structure which can be easily
customized to meet the differing requirements of a variety of customers. It is a
complete, steel framed housing structure that provides punch-outs for
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subsequent plumbing and wiring. The materials can be delivered to a housing site
for a price of under $2,500.
The Model 640 was primarily designed for export. The Company has identified the
worldwide low-cost housing market as a significant market ready to experience
substantial growth. The need for small, but affordable housing, is mushrooming
in third-world countries, which are beginning to emerge economically, but still
have very under-developed housing infrastructures for their populations. The
Model 640 and customized versions of the Model 640 have been sold in the Pacific
Rim and there has been additional interest in Europe, South America and the Far
East.
Most of the steel utilized in the Model 640 is pre-cut and galvanized for
corrosion resistance for maximum durability, even in the most damp climates.
Models can be engineered to withstand winds up to 155 mph and each home can be
engineered to be earthquake resistant up to a seismic 4 rating. The Model 640 is
(i) designed to meet the requirements of most governmental agencies; (ii) wind,
earthquake, corrosion, termite and dry rot resistant; (iii) easy to build and
quickly assembled, even with semi-skilled labor; (iv) economic to ship; and (v)
available with flexible floor plans.
Manufacturing
Angeles' products are manufactured in accordance with customer specifications.
Most of Angeles' products comply with Angeles' certification by the
International Conference of Building Officials ("ICBO"). Angeles is the only
major steel roll forming company on the West Coast that has it's own ICBO
certification in addition to being ICBO certified through AMS' membership in the
Metal Stud Manufacturing Association.
All of Angeles' design, engineering, manufacturing and administration operations
are performed at the company's manufacturing facilities in Los Angeles,
California and Vancouver, Washington. The Company intends to relocate the Los
Angeles, California operations of Angeles to the Torrance, California facility
used by Capitol. Angeles manufactures approximately 85-90% of the goods it sells
and outsources the remaining 10-15%. Both manufacturing locations also conduct
sales, marketing and distribution. In addition, Angeles maintains marketing,
sales and distribution facilities in Tacoma, Washington and Sacramento,
California. All of Angeles' facilities are leased. See "Item 2. Description of
Property".
Angeles is currently operating with one full shift and is equipped (but not
staffed) to run two shifts. Angeles owns all of its manufacturing and
engineering equipment.
Angeles strives to provide its customers with fast, reliable delivery of its
products. Angeles keeps sufficient inventory to respond quickly to customer
needs. Angeles purchases raw materials, which consist of full and slit steel
coils, in advance. Angeles distributes its commercial products on a truckload
basis. Residential products are also delivered by the truckload, to framing
companies, value added centers and to specific job sites. In some cases, trusses
are assembled at the company and in other cases they are assembled on site.
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Marketing, Distribution and Customers
Unlike many of its competitors, Angeles primarily markets and sells its steel
products directly to building contractors rather than through wholesalers or
distributors. As a result of transportation costs, products are marketed and
sold primarily in 13 western states. Products are also sold in Hawaii, Canada,
Mexico and other foreign countries. During 1997, international sales were
approximately 1% of total sales, reflecting sales primarily to Japan. The top
ten customers of 1997 represented approximately 26% of sales by Angeles, with no
one customer representing more than 10% of sales.
Raw Materials and Supplies
Galvanized steel is the primary raw material utilized by Angeles and it
represents the majority of cost of goods sold. Sources for this steel are
numerous and the supply has been and is expected to remain sufficient to meet
Angeles' needs. USS Posco, a joint venture between U.S. Steel and the Pohang
Steel Company of Korea, has been the primary supplier of steel for Angeles. In
addition, Angeles has also maintained continuous and competitive purchasing
relationships with other companies in order to ensure an uninterrupted supply of
material. Recently, Angeles has focused attention on more aggressively sourcing
these steel supply contracts, including additional purchases on the secondary
and spot markets.
Research and Development
Angeles has not incurred significant research and development expenditures in
the last two years.
Patents
Angeles holds a number of patents and trademarks on its products, none of which
is essential to the business. Management believes that Angeles' reputation, know
how and experience in the steel framing business is more important than its
patents and trademarks. Accordingly, Angeles relies upon trade secrets and other
unpatented proprietary information in its business.
Capitol Metals Co.
Background
In January 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, which started operating in 1946, grew to become one of
the largest flat-rolled steel service facilities in Southern California. Old
Capitol experienced financial difficulty due in part to insufficient working
capital necessary to maintain adequate inventory levels. On October 7, 1997, Old
Capitol filed for protection under Chapter 11 of the Bankruptcy Code. On
November 26, 1997, the Bankruptcy Court entered an order establishing the
procedures for the sale of substantially all of the assets of Old
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Capitol pursuant to the Asset Purchase Agreement dated December 1, 1997 between
Old Capitol and the Company. After the January 1998 acquisition, Angeles
Acquisition changed its name to Capitol Metals Co. ("Capitol").
Management believes that the acquisition of Capitol will provide the Company
with several advantages toward the accomplishment of its business objectives 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.
Products and Services
Capitol sells and processes flat rolled carbon steel products, which include:
o Hot rolled steel
o Pickled and oiled steel
o Cold rolled steel
o Galvanized steel
o Aluminized steel
Capitol processes steel to the precise thickness, length, width, shape, temper
and surface quality specified by its customers. Value-added processes provided
by Capitol include:
o Cutting to length - the cutting of steel into pieces and
along the width of a coil to create sheets or plates.
o Blanking - the process in which flat-rolled steel is cut
into precise two dimensional shapes by passing it through
a slitter and leveler.
o Leveling - the flattening of steel to uniform tolerances
for proper machining. Slitting - the cutting of coiled
steel to specified widths along the length of the coil.
o Pickling - a chemical treatment to improve surface
quality by removing the surface oxidation and scale which
develops on the steel shortly after it is hot-rolled.
o Edge trimming - a process which removes a specified
portion of the outside edges of coiled steel to produce
uniform width and round or smooth edges.
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Capitol is one of the largest flat rolled service facilities in Southern
California. Capitol owns three slitting lines, four cut-to-length lines and one
banding line for slit coil packing. The only toll coil pickling line on the West
Coast capable of handling 40,000 pound coils is owned by Capitol. This line has
capacity to process over 14,000 tons per month. Approximately 90% of Capitol's
1997 revenues were derived from processed steel sales, and approximately 10% was
derived from steel processing services. Management believes that the steel
processing services, particularly the pickling operations, will increase as a
percentage of Capitol's revenues over the next 12 months. Capitol also
warehouses customer owned material.
Management believes that Capitol's toll pickling line provides a significant
competitive advantage to the Company. In addition to providing the only pickling
service on the West Coast for 40,000 pound coils, Capitol is able to offer to
its pickling customers customized processing services for steel owned by such
customers or purchased from Capitol as well as storage of such steel in
Capitol's warehouse facility.
Capitol intends to capitalize on the trend of both primary steel producers and
end-users of steel products to reduce in-house processing and to outsource
processing and inventory management requirements. Capitol purchases steel from
primary producers, who focus on large volume sales of unprocessed steel, and in
most cases Capitol performs customized processing services on this steel to meet
specifications provided by end-use customers. By providing these services, as
well as offering inventory management and just-in-time delivery services,
Capitol enables its customers to reduce material costs, enhance quality,
decrease capital required for raw materials inventory and processing equipment
and save time, labor and other expenses.
Manufacturing
Capitol's products and processing services are manufactured in accordance with
customer specifications. All engineering, manufacturing and administrative
operations are performed at Capitol's facility in Torrance, California.
Capitol is currently operating with one full shift and one second shift crew and
is equipped (but not staffed) to run three full shifts. Capitol owns all of its
manufacturing and engineering equipment.
Capitol strives to provide its customers with fast, reliable delivery of its
products. Capitol keeps sufficient inventory to respond quickly to customer
needs. Capitol purchases raw materials, which consist of full and slit steel
coils, in advance. Capitol distributes its products on a truckload basis.
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Marketing, Distribution and Customers
Capitol has over 200 active customers throughout the western states. No one
customer accounted for more than 10% of Capitol's business in 1997. By category
for 1997, the customers by industry were approximately as follows:
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Description of Customers Percent of Sales
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Building and construction related 26
Service centers and trading companies 17
Specialty manufacturers 12
Automotive components and parts 11
Metal stamping and rollformers 11
Tube manufacturers 10
Miscellaneous 13
</TABLE>
Raw Materials and Supplies
Hot rolled steel is the primary raw material used by Capitol. Capitol also
purchases galvanized and cold rolled steel as well as other types of steel.
Sources for steel to meet Capitol's requirements are numerous and the supply has
been and is expected to remain sufficient to meet the requirements of Capitol.
USS Posco, a joint venture between U.S. Steel and the Pohang Steel Company of
Korea, Duferco Steel, Ferrostal and Thyssen Steel Trading Co., a German trading
company are major current suppliers of steel to Capitol.
COMPETITION
Angeles
Competition in the steel frame industry is intense and Angeles competes with a
number of entities, some of which may have greater financial resources than
Angeles. Angeles competes against a number of other companies for sales in both
the commercial and residential steel framing markets. To the extent that steel
framing for residential housing becomes more widely accepted as an alternative
to conventional lumber and concrete construction, competition may increase.
Angeles competes for orders from its customers primarily on the basis of price,
quality, timely delivery, engineering capability and reliability. Most of
Angeles' orders are awarded by its customers on the basis of competitive
bidding. Angeles sells primarily on a direct basis to contractors and
sub-contractors, while it's competitors sell primarily through building material
dealers. Angeles believes that it can better service customers by selling
products directly, rather than through dealers. In addition to competitors who
sell directly to contractors and to sub-contractors, manufacturers also sell to
building materials houses, who, in turn, sell to contractors and
sub-contractors. Those building materials houses sell materials in addition to
the light gauge steel products, and may, from time to time, sell the steel
products delivered to the job sites.
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Capitol
The steel distribution and servicing industry is highly fragmented and
competitive. Competition is based on price, service, quality, availability of
products and geographic proximity. Capitol faces competition from national,
regional and local independent steel distributors and servicing centers, many of
which may have greater resources than Capitol. The Company believes that it will
be able to compete more effectively as a result of the combined purchasing
volume and operational economies of scale resulting from the acquisition of
Capitol and combining the operations of Angeles with Capitol over the next few
months. Management believes that Capitol's toll pickling line provides a
significant competitive advantage to the Company. In addition to providing the
only pickling service on the West Coast for 40,000 pound coils, Capitol is able
to offer to its pickling customers customized processing services for steel
owned by such customers or purchased from Capitol as well as storage of such
steel in Capitol's warehouse facility.
GOVERNMENT REGULATION
The operations of the Company are subject to extensive federal, state and local
laws and regulations, relating to the protection of human health and the
environment. Hazardous materials that the Company uses in its operations
primarily include lubricants, cleaning solvents and hydrochloric acid used in
its pickling operations. Management believes that the Company is in material
compliance with all applicable environmental concerns. The Company does not
anticipate any material expenditures to meet environmental requirements.
The Company's operations are also governed by laws and regulations relating to
workplace safety and worker health, principally the Occupational Health and
Safety Act and regulations thereunder, which among other requirements, establish
noise, dust and safety standards. Management believes that the Company is in
material compliance with applicable laws and regulations and does not anticipate
that future compliance with such laws and regulations will have a material
adverse effect on the results of operations or financial condition of the
Company.
The use of steel framing products in commercial and residential construction are
governed by local building codes. Over the past several years, local building
codes in a number of jurisdictions have been revised to provide for the use of
steel for residential construction in addition to the traditional wood framing.
Angeles anticipates no significant adverse effects of governmental regulations
related to the use of light gage steel in commercial and residential framing.
EMPLOYEES
At March 1, 1998, the Company had 81 full-time employees at Angeles and 50
full-time employees at Capitol. The Company believes that its employee relations
are good.
Capitol is currently negotiating with the International Longshoremen and
Warehousemen's Union Local No. 76 ("ILWU"), which has been certified as the
exclusive representative for 25
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employees working in the Torrance, California facility. Management believes that
negotiations are progressing toward an agreement within budgetary ranges. The
ILWU represented the same employee group when they were employed by Old Capitol.
Former Real Estate Development Business
From 1994 through the January 1997 Merger, the Company's operations were
exclusively in the real estate development business described below. Prior to
the Merger, the Company sold certain assets of the Company, including the
Company's interest in the Northcrest Joint Venture, to three executive officers
and directors (the "Former Directors") of the Company (the "Asset Sale"). As
part of the Asset Sale, the Former Directors assumed all obligations of the
Company existing prior to the Merger. See "Item 12. Certain Relationships and
Related Transactions" for a description of the Asset Sale. During April 1997,
the Company sold its interest in Bear Star.
The Northcrest Joint Venture
During July 1994, the Company acquired an interest in a 59 acre parcel of
property, commonly known as the "Northcrest Development," located east of
Colorado Springs, Colorado through the formation of the Northcrest Joint Venture
(the "Northcrest Joint Venture") with Glacier Valley Holding Corporation
("Glacier Valley") and certain other entities for purposes of developing the
property. In September 1994, the Northcrest Joint Venture executed an agreement
to sell 27 of the 189 lots comprising the development to JBS Corporation
("JBS"), an unaffiliated third party, and the Company granted an option to JBS
with regard to the remaining lots, which option was contingent upon completion
of the initial purchase. Through December 31, 1995, the Company sold 90 lots to
JBS.
During April 1996, the Company entered into a new option agreement with Elite
Properties of America ("Elite"), an unaffiliated third party, to sell the
remaining 99 lots of the development. In a transaction effective June 21, 1996,
the Northcrest Joint Venture sold the remaining 99 lots to Elite for a price of
$668,250, which was reduced by an improvement credit of $50,000 given to Elite,
prior deposits of $5,000 and miscellaneous closing costs paid by the Company of
$1,629. The remaining balance due was $611,620, of which $5,870 was paid at
closing and the balance of $605,750 represented by a non-recourse promissory
note in favor of the Northcrest Joint Venture (the "Elite Note").
Prior to the Merger, the Company sold its entire interest in the Northcrest
Joint Venture and its interest in the Elite Note to the Former Directors of the
Company as part of the Asset Sale. In such Asset Sale, the Former Directors of
the Company provided certain consideration and assumed all obligations of the
Company existing prior to the Merger including any obligation of the Company
relating to its interest in the Northcrest Joint Venture. See "Item 12. Certain
Relationships and Related Transactions".
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Golden Prairie Northcrest Joint Venture
During the first quarter of 1995, the Company organized another joint venture to
acquire additional real estate adjoining the Northcrest Development. The Golden
Prairie Northcrest Joint Venture was comprised of the Company and Glacier
Valley, as equal participants, and acquired approximately seven acres of
undeveloped land. During November 1995, the Company sold its 50% interest in
Golden Prairie to affiliates of Glacier Valley for a promissory note in the
amount of $18,000 (the "Golden Prairie Note") and an assumption of liabilities
on the Golden Prairie Joint Venture by the purchaser. As part of the Asset Sale,
the Company sold its interest in the Golden Prairie Note to the Former Directors
of the Company. See "Item 12. Certain Relationships and Related Transactions".
Columbine Homes Sales LLC
The Company owned approximately 19% of Columbine Homes Sales, LLC ("Columbine"),
which interest was acquired in 1994. Columbine operated a retail manufactured
housing dealership in Colorado Springs and owned 60% of a real estate
development known as "The Community at Bear Creek," a manufactured housing
community located west of Colorado Springs.
During 1995, the Company transferred its interest in Columbine. Concurrent with
the sale, the ownership of Columbine and Bear Star were reorganized such that
the Company's indirect interest in Bear Star was converted to a direct interest,
together with that of the remaining members of Columbine. The Company and the
other Columbine members also purchased the remaining interest in Bear Star such
that the Company and the other Columbine members owned 100% of that entity after
such reorganization. See "Bear Star Limited Liability Company."
The interests of the Company and other members of Columbine were sold for a
$125,000 promissory note (the "Columbine Promissory Note"). The Company, as a
former owner of Columbine, owned an 18.54% undivided interest in the Columbine
Promissory Note.
Bear Star Limited Liability Company
Bear Star was formed to acquire, develop and market developed and partially
developed land located west of Colorado Springs. Bear Star was owned 60% by
Columbine and 40% by unrelated parties, but reorganized so that the owners of
Columbine directly acquired an interest in Bear Star. Following the
reorganization and acquisition of the remaining minority interest, the Company
owned 18.54% of Bear Star.
During June 1994, Bear Star acquired approximately 16 acres of partially
developed property, zoned for double-wide manufactured homes and intended for
approximately 110 lots. In conjunction with this purchase, Bear Star also
acquired an option to acquire an additional 14 acres of undeveloped land, which
additional property is also zoned for manufactured homes. During fiscal 1996,
Bear Star sold approximately 5.6 acres of the 16 acres to a third party. As of
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December 31, 1996, Bear Star had also sold 33 lots of the developed portion of
the property, leaving 15 lots unsold.
The original 16 acres were acquired by Bear Star for an effective price of
approximately $2,065,000, consisting of two promissory notes in the aggregate
principle amount of $765,000 (the "Bear Star Property Notes") and approximately
$1,300,000 in cash and property. The Bear Star Property Notes were paid in full
in 1996.
The interest of the minority members was acquired by the Company and the other
former owners of Columbine for an $880,000 promissory note and secured by a then
second mortgage on the property. That note was subsequently canceled in exchange
for the issuance of two new notes, both equally secured by a new first mortgage
on the property. The balance of these two notes at December 31, 1996 was
$432,400 and $146,029, respectively. During April 1997, the Company sold its
interest in Bear Star for $30,000 cash.
ITEM 2. DESCRIPTION OF PROPERTY
Executive Offices
The Company currently occupies office space at 410 17th Street, Suite 400,
Denver, Colorado 80202. The Company shares its Denver office, consisting of an
aggregate of 7,585 square feet, including office space, conference facilities
and reception area, with The Stone Pine Companies and other affiliated entities.
Stone Pine Atlantic, LLC ("SP Atlantic") and its affiliates provide
administrative, accounting, investor relations and investment banking services
to the Company pursuant to a Services Agreement. See "Item 12. Certain
Relationships and Related Transactions". The Company also maintains executive
offices at Angeles, 4817 East Sheila Street, Los Angeles, California 90040,
consisting of an aggregate of 10,300 square feet, including office space,
conference facilities and reception area, and at Capitol, 20000 South Western
Avenue, Torrance, California 90501 consisting of 20,000 square feet. It is the
intent of the Company to move the executive offices at Angeles to Capitol.
Management is of the opinion that the executive office space in Denver and Los
Angeles is adequate for the needs of the Company for the foreseeable future.
Production Facilities
The principal production facility at Capitol, which is leased, consists of the
following:
<TABLE>
<CAPTION>
Approximate
Location Square Footage Lease Term
-------- -------------- ----------
<S> <C> <C>
Torrance, California Buildings 340,000 01-13-98 through
(Corporate Headquarters, Manufacturing Land (14 12-31-2006*
Plant, Warehouse, Land and Buildings) acres) 609,840
*Includes two three-year extension options.
</TABLE>
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<PAGE> 15
The principal production facilities of Angeles, all of which are leased, consist
of the following:
<TABLE>
<CAPTION>
Approximate
Location Square Footage Lease Term
-------- -------------- ----------
<S> <C> <C>
Los Angeles, California Buildings 60,000 01-15-97 through
(Corporate Headquarters, Manufacturing Land 125,000 01-14-2000
Plant, Warehouse,
Land and Buildings)
Vancouver, Washington Buildings 20,000 01-15-97 through
(Plant, Offices, Warehouse, Land and Buildings) Land 130,680 01-14-2000
Sacramento, California Buildings 11,500 Month to Month
(Warehouse and Office) Land 46,600
Tacoma, Washington Buildings 20,000 10-01-96 through
(Warehouse and Offices) Land 93,400 09-30-99
Vancouver, Washington Building 7,500 Month to Month
(Warehouse, Land and Building) Land 120,000
Los Angeles, California Land 33,000 Month to Month
(Land)
</TABLE>
All of the Company's facilities are in good or excellent condition and are
adequate for its existing operations. The Company intends to relocate the Los
Angeles, California operations of Angeles to the Torrance, California facility
currently used by Capitol.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company or any subsidiary of the
Company is a party or to which the property of the Company or any subsidiary of
the Company is subject, is pending or is known by the Company to be contemplated
other than ordinary routine litigation incidental to the business of the
Company.
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<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of the Company's security holders was held on October 8, 1997.
The meeting involved the election of the following directors:
Paul Bagley
L. Wayne Harber
Donald R. Jackson
John D. McKey, Jr.
Thompson H. Rogers
Christian W. Wolf
There were no other directors whose term of office continued after the meeting.
The following proposals were voted upon and approved at the meeting.
1. Proposal for election of the following directors:
Class I (terms expire in 1998)
-----------------------------
Paul Bagley
Thompson H. Rogers
Class II (terms expire in 1999)
-----------------------------
L. Wayne Harber
John D. McKey, Jr.
Class III (terms expire in 2000)
-----------------------------
Donald R. Jackson
Chrisitian W. Wolf
<TABLE>
<CAPTION>
Number Percentage of
of Shares Outstanding Shares
--------- ------------------
<S> <C> <C>
For 15,461,268 97.9%
Against 0 0.0%
Abstain 175 *
(The vote was the same for all six nominees for director.)
</TABLE>
2. Proposal to ratify the selection, by the Company's Board
of Directors, of Grant Thornton LLP as the Company's
certifying accountants.
<TABLE>
<CAPTION>
Number Percentage of
of Shares Outstanding Shares
--------- ------------------
<S> <C> <C>
For 15,460,768 97.9%
Against 500 *
Abstain 175 *
</TABLE>
-15-
<PAGE> 17
3. Proposal to approve the Company's 1997 Stock Incentive
Plan.
<TABLE>
<CAPTION>
Number Percentage of
of Shares Outstanding Shares
--------- ------------------
<S> <C> <C>
For 13,879,388 87.9%
Against 4,750 *
Abstain 1,200 *
* Less than 0.1%
</TABLE>
-16-
<PAGE> 18
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Shares are traded in the over-the-counter market and are
quoted in the OTC Bulletin Board maintained by the NASD under the symbol "CDNO".
The following table sets forth the range of high and low bid quotations as
reported by the NASD for the Common Shares of the Company for the periods
indicated. Quotations represent prices between dealers, do not include retail
markups, markdowns or commissions, and do not necessarily represent prices at
which actual transactions were effected.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1997 1996
--------------------- -----------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
1st Quarter............. $2.75 $1.50 $.30 $.30
2nd Quarter............. $3.00 $1.00 $.-(1) $.-(1)
3rd Quarter............. $3.50 $1.50 $.25(2) $.25(2)
4th Quarter............. $2.00 $1.00 $.01(2) $.01(2)
</TABLE>
------------------------------
(1) No quotations reported by the NASD.
(2) Sales price reported by the NASD.
The number of record holders of Common Shares of the Company as of March 25,
1998 was 115.
The Company has the following number of Convertible Preferred Shares issued and
outstanding: 744,000 Series A 12% Convertible Preferred Shares ("Series A
Preferred Shares"), 449,000 Series B 12% Convertible Preferred Shares ("Series B
Preferred Shares") and 200 Series C 6% Convertible Preferred Shares ("Series C
Preferred Shares"). Each Series A Preferred Share and each Series B Preferred
Share is convertible into one Common Share at the option of the holder of such
shares. The Series C Preferred Shares are convertible into Common Shares of the
Company commencing on April 20, 1998, at a 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.
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<PAGE> 19
The holders of the Series A Preferred Shares, Series B Preferred Shares and
Series C Preferred Shares are entitled to receive, prior and in preference to
any declaration or payment of any dividend on Common Shares of the Company,
dividends at the rate of, $0.12, $.012 and $600 per share, respectively, per
annum, payable quarterly in cash or at the option of the Company, in Common
Shares. The Company's Loan and Security Agreement with Congress Financial
Corporation (Western) ("Congress Financial") prohibits the payment of cash
dividends on the Common Shares.
No dividends on the Common Shares have been paid by the Company to date. The
Company currently intends to retain future earnings to fund the development and
growth of its business and, therefore, does not anticipate paying cash dividends
within the foreseeable future. Any future payment of dividends will be
determined by the Company's Board of Directors and will depend on the Company's
financial condition, results of operations and other factors deemed relevant by
its Board of Directors.
Recent Sales of Equity Securities
During the fiscal year ended December 31, 1997, the Company issued unregistered
Common Shares in connection with the following transactions.
In the January 21, 1997 Merger, the Company issued to Stone Pine Colorado, LLC
("SP Colorado"), 8,638,003 of the Company's Common Shares.
On June 25, 1997, the Company issued to Stone Pine Financial Group, LLC ("SP
Financial"), 16,666 of the Company's Common Shares in consideration of a loan
made by SP Financial to the Company in June 1997.
On August 21, 1997, the Company issued to SP Financial, 60,000 of the Company's
Common Shares in consideration of a loan made by SP Financial to the Company in
August 1997.
The Company issued to ERB Acquisition Group, LLC ("ERB") a total of 110,000 of
the Company's Common Shares in consideration of a loan made by ERB to the
Company in April 1997. 50,000 shares were issued on June 7, 1997 and 10,000 were
issued on the first of each month from July 1997 through December 1997.
On December 31, 1997, the Company issued to Stone Pine Capital, LLC ("SP
Capital"), Stone Pine Advisors, LLC ("SP Advisors") and Paul Bagley 33,333,
33,333 and 33,334 of the Company's Common Shares, respectively, in consideration
of loans made by SP Capital, SP Advisors and Mr. Bagley to the Company during
December 1997.
On December 31, 1997, the Board of Directors of the Company approved the
issuance of the following number of Convertible Preferred Shares of the Company
in exchange for the forgiveness of outstanding indebtedness and other
obligations of the Company to the following: SP Financial - 360,000 Series A
Preferred Shares; ERB - 384,000 Series A Preferred Shares; SP Atlantic - 131,500
Series B Preferred Shares; SP Colorado - 317,500 Series B Preferred Shares.
-18-
<PAGE> 20
There were no underwriters involved in any of the transactions described above.
The issuances of Common Shares above were deemed to be exempt from registration
under the Securities Act of 1933 by Section 4(2) thereof based on the investor's
suitability and/or representations furnished by the security holders.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report.
INTRODUCTION
During 1996, the Company's operations were exclusively in the real estate
business. During January 1997, a subsidiary of the Company, merged with Angeles
Acquisition, a privately held company, with Angeles Acquisition surviving the
Merger as a wholly owned subsidiary of the Company. Prior to the Merger, Angeles
Acquisition had acquired Angeles, for a total consideration including the
purchase price for the shares of Angeles, broker fees, acquisition expenses
including legal and other related costs, of approximately $4,300,000. Angeles
and its wholly-owned subsidiary, CBS, fabricate and sell steel framing materials
for commercial and residential structures.
Prior to the Merger, the Company sold certain assets of the Company, including
the Company's interest in the Northcrest Joint Venture described herein, to the
Former Directors of the Company. In the Asset Sale, the Former Directors of the
Company provided certain consideration and assumed all obligations of the
Company that existed prior to the Merger. See "Item 12. Certain Relationships
and Related Transactions" for a description of the Asset Sale.
In the Merger, the Company issued 8,638,003 new Common Shares to the sole
stockholder of Angeles Acquisition. Immediately following the Merger, the
Company sold 5,496,911 Common Shares, in a private transaction to seven
purchasers for an aggregate purchase price of $1,000,000 (the "January 1997
Share Issuance").
In April 1997, the Company sold its interest in Bear Star for $30,000.
On August 22, 1997, Angeles Acquisition transferred all of its assets consisting
mainly of the investment in Angeles and all of its obligations to the Company.
At the date of transfer, the investment in Angeles amounted to $4,309,443, and
liabilities assumed included a note payable to Angeles in the amount of
$3,268,801, including accrued interest. The remaining liabilities included
accounts payable of $31,824 and a note payable to the Company of $1,000,000,
plus accrued interest of $8,818.
-19-
<PAGE> 21
In January 1998, the Company, through its subsidiary, Angeles Acquisition,
acquired substantially all of Old Capitol's 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.
In January 1998, in connection with the Capitol Acquisition, the Company assumed
an outstanding note in the amount of $626,000. The Company then issued a new
replacement note, which bears interest at a rate of 10% per annum, is
collateralized by substantially all the assets of Capitol (subordinated to
Congress Financial) and is due in 1998. Also, in connection with the Capitol
Acquisition, Capitol issued to the unsecured creditors of Old Capitol $1,500,000
in promissory notes, bearing interest at 9% per annum, and payable in
installments through 1999.
In January 1998, in connection with the Capitol Acquisition, Capitol and Angeles
entered into a new $20 million borrowing facility with Congress Financial, which
consists of revolving credit facilities, term loans, letter of credit facilities
and equipment facilities.
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 in the amount of
$1,750,000, with a 12% annual interest rate, payable monthly in arrears.
PLAN OF OPERATION
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
-20-
<PAGE> 22
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 increase its profitability through
expansion of its existing operations and acquisitions of businesses that are
strategically located or positioned to diversify or enhance the Company's
customer base, product range and geographic coverage. The Company is in
preliminary negotiations with two potential acquisition candidates. In order to
facilitate the financing of these acquisitions, the Company has entered into an
engagement agreement with an investment banking firm to act as its agent for the
placement of the Company's securities. There can be no assurance that either of
these acquisitions will be completed or that the Company will issue such
securities.
The Company's Common Shares are currently traded on the NASD OTC Bulletin Board.
The Company intends to qualify for listing on the Nasdaq Stock Market or
American Stock Exchange as soon as possible. In April 1998, the Company retained
an investor relations company to increase the investment community awareness
regarding the Company's investment potential.
RESULTS OF OPERATIONS
Year Ended December 31, 1997
For the year ended December 31, 1997, the Company had a net loss of $2,478,577
on revenues of $16,989,478. This loss is mainly the result of insufficient
working capital at Angeles to purchase inventory to generate steel sales volume
necessary to cover overhead and administrative costs. The net loss per share
amounted to $.17 for 1997 as compared to a $.20 loss per share for 1996.
The Company reported net sales of $16,989,478 from its steel fabrication
activities during the year ended December 31, 1997. Cost of goods sold totaled
$14,021,110, resulting in a gross profit of $2,968,368, or 17% of net sales.
Operating expenses totaled $5,029,606 for the year ended December 31, 1997
including selling expenses of $1,012,504, general and administrative expenses of
$1,513,959, payroll and related benefit expenses of $2,061,144 and depreciation
and amortization of $441,999. The gross profit of approximately $2,968,000 was
not sufficient to cover these operating expenses. As a result, the Company
incurred a loss from operations of $2,061,238.
Interest expense for the period totaled $582,713 and the Company reported
$165,374 of other income from sales of scrap. The net loss for the year ended
December 31, 1997 was $2,478,577, or $.17 per share.
A comparison of operating results for the year ended December 31, 1997 to the
prior year has not been made because such a comparison would not be meaningful
given the change in the Company's business activities during 1997.
-21-
<PAGE> 23
Year Ended December 31, 1996
For the year ended December 31, 1996, the Company had a loss of $312,482 on
revenues of $17,269 from interest income. Since Angeles was acquired in January
1997, the 1996 operating results did not reflect Angeles' operations. The loss
in 1996 was primarily the result of a $213,672 loss incurred on the writedown of
the assets included in the Asset Sale to realizable value, based upon fair value
of such assets as determined by the Asset Sale. The Company also incurred an
$11,400 loss from the buyout of certain stock options, in which the Company
issued 28,500 Common Shares to cancel options covering 35,000 Common Shares.
Effect of Inflation
Inflation did not have a significant effect on the operations of the Company
during the fiscal year ended December 31, 1997. However, in the steel business,
acquisition of steel is a major cost factor in the production process. As steel
prices rise and decline, management believes that proper selection, competition
of steel supply companies, timing of purchases and future sales price
adjustments should preclude any significant adverse effect on the Company.
Seasonality
The Company distributes steel products to customers in a variety of industries,
including the construction, manufacturing and automotive industries. Because the
Company sells to a variety of customers in several industries, management does
not believe that the Company's operations are impacted by any material seasonal
trends. There can be no assurance however, that period-to-period fluctuations
will not occur in the future.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Financial Condition
As of December 31, 1997, the Company had negative working capital of $1,942,872
and stockholders' equity of $7,852. At December 31, 1997, the total assets of
the Company were $7,706,283, consisting of cash of $14,304, net accounts
receivable of $1,587,035, inventories of $1,193,208, prepaid expenses of
$32,879, property and equipment of $2,053,215 (after accumulated depreciation
and amortization) and other assets, including goodwill, of $2,825,642. The total
current liabilities of the Company at December 31, 1997 were $4,770,298,
consisting of $3,872,397 in accounts payable, accrued liabilities of $290,618,
current portion of long-term debt of $320,738, $225,000 notes to affiliates and
other current liabilities of $61,545. See the Company's Financial Statements,
included elsewhere in this report, for detailed financial information regarding
the Company. The bank debt was repaid in January 1998 with funds provided by the
new indebtedness as described below.
As of January 13, 1998, the date of the Capitol Acquisition, Capitol had working
capital of $1,573,285 and stockholders' equity of $2,050,000. At January 13,
1998, the total assets of Capitol were $8,364,162, consisting of accounts
receivable of $1,576,967, inventories of
-22-
<PAGE> 24
$2,200,947 prepaid and other assets of $160,102, property and equipment of
$3,713,814 and other assets of $712,332. The total current liabilities of
Capitol at January 13, 1998 were $2,364,731 consisting of loans from a financial
institution of $500,000, accrued liabilities of $514,731 and notes and loans
payable of $1,350,000.
Liquidity and Capital Resources
Since January 1997, the Company has primarily financed its operations with cash
available under its credit facilities and funds advanced under loan arrangements
with affiliated entities. The Company has also financed its operations through
the private placement of capital stock, including $1 million from sales of
Common Shares in January 1997 and most recently $2 million from the March 1998
sale of Series C Preferred Shares. The Company expects to consummate a $5
million convertible note placement with institutional investors in the near
future, the proceeds of which will be used for working capital. However, there
can be no assurance that this transaction will be consummated.
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. See Item
12. "Certain Relationships and Related Transactions." 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.
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
covenants, 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.
-23-
<PAGE> 25
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 CBS.
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, 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.
Subsequent to December 31, 1997, the Company has raised additional capital to
meet the Company's needs. During March 1998, the Company sold 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
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 the conversion price formula, the Series C Preferred Shares
will be convertible into no less than 1.14 million 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 foreign investors warrants to purchase
2,000,000 Common Shares (1 million exercisable at $1.00 per share and 1 million
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 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.
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<PAGE> 26
The Company is in preliminary negotiations with two potential acquisition
candidates. In order to facilitate the financing of these acquisitions, the
Company has entered unto an engagement agreement with an investment banking firm
to act as its agent for the placement of the Company's securities. There can be
no assurance that either of these acquisitions will be completed or that the
Company will issue such securities.
The Company believes that the funds raised from the sale of the Series C
Preferred Shares, 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.
Readiness for Year 2000
The Company is in the process of upgrading its information systems. The new
systems, which will be installed during 1998 and used by both Capitol and
Angeles, are designed to be compatible for the year 2000 and beyond. The new
systems will also provide management with better information, on a more timely
basis. The costs of the Company's year 2000 compliance effort are being funded
with cash flows from operations. These costs are not expected to have a material
adverse effect on the Company's results of operations or cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standard No. 128 "Earnings Per Share" ("SFAS No. 128"), effective for
years ending after December 15, 1997. Basic loss per share in the accompanying
financial statements is calculated in accordance with SFAS No. 128. Loss per
share for 1996, has been restated to reflect earnings per share calculated in
accordance with SFAS No. 128. SFAS No. 128 requires basic earnings per share to
be calculated based on the number of weighted average shares outstanding for the
period without giving effect to outstanding common stock equivalents, while
diluted earnings per share considers the effect of common stock equivalents on
weighted average shares outstanding. Diluted earnings per share of common stock
is the same as basic earnings per share as the Company reported a loss for 1997
and 1996.
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 will adopt the new
standards in 1998. The effects of these new standards have not yet been
determined.
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<PAGE> 27
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements beginning on page F-1 are filed as part of this Annual
Report on Form 10-KSB and are incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 12, 1996, Hein & Associates, LLP was dismissed as the principal
accountants for the Company. The decision was approved by the Board of Directors
of the Company. Hein & Associates, LLP's reports on financial statements of the
Company for the fiscal years ended December 31, 1994 and 1995 contained
unqualified opinions. There were no disagreements on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope or
procedure with Hein & Associates, LLP.
On March 12, 1996, the Company engaged Kish, Leake & Associates, P.C. as its
principal accountants. This decision was approved by the Board of Directors of
the Company. The Company had no discussions with Kish, Leake & Associates
concerning the application of an accounting principle or practice related to a
specific completed or contemplated transaction, or the type of audit opinion
which might be rendered.
Subsequent to the January 1997 Merger, Kish Leake & Associates, P.C., was
dismissed by vote of the Board of Directors, effective February 4, 1997. The
prior accountants' report on financial statements for the fiscal year ended
December 31, 1995 did not contain an adverse opinion or a disclaimer of opinion;
nor was it modified as to uncertainty, audit scope or accounting principles.
Prior to the dismissal of Kish Leake & Associates, P.C., there were no
disagreements between the Company and Kish Leake & Associates, P.C. on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of the former accountants would have caused it to make reference to
the subject matter of the disagreement in connection with its report.
Furthermore, there were no unresolved issues with the prior accountants.
The Board of Directors of the Company appointed Grant Thornton LLP as the
Company's new certifying accountants to audit the Company's financial
statements, effective February 4, 1997. Grant Thornton LLP was not consulted
concerning the application of accounting principles to any specific transaction,
either completed or proposed or the type of audit opinion that might be rendered
on the Company's financial statements, nor was a written report provided to the
Company nor oral advice given by the new accountants regarding important factors
considered by the Company in reaching its decision as to any accounting,
auditing or financial reporting issue.
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<PAGE> 28
Grant Thornton was dismissed by vote of the Board of Directors, effective
January 21, 1998. This decision to change accountants was approved by the
members of the audit committee of the Board of Directors. The prior accountants'
report on financial statements for the fiscal year ended December 31, 1996 did
not contain an adverse opinion or a disclaimer of opinion; nor was it modified
as to uncertainty, audit scope or accounting principles. Prior to the dismissal
of Grant Thornton LLP, there were no disagreements between the Company and Grant
Thornton LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of the former accountant would have caused it to
make reference to the subject matter of the disagreement in connection with its
report. Furthermore, there were no unresolved issues with the prior accountants.
On January 21, 1998, the Board of Directors of the Company appointed Arthur
Andersen LLP as the Company's new public accountants to audit the Company's
financial statements, effective for the year ended December 31, 1997. Arthur
Andersen LLP was not consulted concerning the application of accounting
principles to any specific transaction, either completed or proposed or the type
of audit opinion that might be rendered on the Company's financial statements,
nor was a written report provided to the Company nor oral advice given by the
new accountants regarding important factors considered by the Company in
reaching its decision as to any accounting, auditing or financial reporting
issue.
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<PAGE> 29
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
Information concerning the current members of the Company's Board of Directors
(the "Board") and its executive officers is as follows:
<TABLE>
<CAPTION>
Directors and Executive Officers Age Position
<S> <C> <C>
Paul Bagley 55 Chairman of the Board and
Chief Executive Officer
Richard D. Bailey 40 Director
Carl Casareto 39 Chief Financial Officer
L. Wayne Harber 44 Director
Donald R. Jackson 48 Director, Secretary and
Treasurer
Ronald F. Martin 62 President of Angeles Metal
Trim Co.
John D. McKey, Jr. 54 Director
Thompson H. Rogers 44 Director
Christian W. Wolf 42 Director
</TABLE>
Paul Bagley has served as a director of the Company since January 21, 1997, as
Chairman of the Board of Directors since November 17, 1997 and as Chief
Executive Officer since March 10, 1998. Mr. Bagley is a Managing Member of The
Stone Pine Companies (since 1994), a group of companies involved in investment
banking, asset management and merchant banking activities, and is Chairman and
Chief Executive Officer of FCM Fiduciary Capital Management Company (since
1989), an investment-related company. Mr. Bagley was Chief Executive Officer of
Laidlaw Holdings, Inc., an investment services company, from January 1995 until
November 1996. For more than twenty years prior to October 1988, Mr. Bagley was
engaged in investment banking activities with Shearson Lehman Hutton Inc. and
its predecessor, E.F. Hutton & Company Inc. Mr. Bagley served in various
capacities with Shearson and E.F. Hutton, including Executive Vice President and
Director, Managing Director, Head of Direct Investment Origination and Manager
of Corporate Finance. Mr. Bagley serves as Chairman of the Board of Directors of
Silver Screen Management, Inc. and International Film Investors, Inc., which
manage film portfolios. Mr. Bagley is also a director of Hollis-Eden
Pharmaceuticals, Inc. a publicly held company, LMC Operating Corp., a privately
held manufacturer of low ground pressure vehicles, and Hamilton Lane Private
Equity Fund, PLC, an Irish Stock Exchange listed investment partnership. Mr.
Bagley graduated from the University of California at Berkeley in 1965 with a BS
degree in Business and Economics and from Harvard Business School in 1968 with
an MBA in Finance.
Richard D. Bailey, a director of the Company since March 10, 1998, is the
President of RDB Capital Advisers, LLC, a privately held company involved in
investment banking activities.
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<PAGE> 30
During 1995, Mr. Bailey acquired, restructured and subsequently sold the Rigging
Company, a mail order manufacturer of custom yacht rigging. From 1991 to 1995,
he was a principal of the New England Wire Company, a manufacturer of specialty
shaped wire and cable with primary applications in the defense, electronics,
safety and consumer products industries. From 1986 to 1991, Mr. Bailey was the
Executive Vice President of Pennsylvania Rolling Mills, Inc., a manufacturer of
cold rolled carbon strip steel, supplying the automotive, defense and building
products industries. Mr. Bailey holds a BA degree in Political Science from
Providence College and a MA degree in International Relations from Fairfield
University.
Carl Casareto was elected Chief Financial Officer of the Company and each of its
subsidiaries on March 10, 1998. Mr. Casareto served as a financial consultant to
the Company from June 1997 until January 12, 1998. From October 1989 to April
1997, Mr. Casareto was the Chief Financial Officer and Senior Vice President of
Finance of TELACU and Subsidiaries. TELACU is a Community Development
Corporation managing for profit subsidiaries involved in, real estate
development, utility industry construction, asset and real property management,
retail and financing. From December 1995 to April 1997, Mr. Casareto also served
as President of Telalink Corporation, a Los Angeles based subsidiary of TELACU,
which was involved in the fiber optics industry. From 1981 to 1989, Mr. Casareto
was associated with the accounting firm of Grant Thornton, where he served as
the partner-in-charge of Grant Thornton's Southern California tax practice. Mr.
Casareto holds a BS degree in accounting from Loyola Marymount University and is
a certified public accountant.
L. Wayne Harber, a director of the Company since January 21, 1997, is a Managing
Director of The Stone Pine Companies (since 1994). From 1990 to 1993, Mr. Harber
was the Senior Vice President of Marketing for Aegis Holdings Corporation, an
asset management and investment banking concern specializing in asset
securitization and structured finance. From 1980 to 1990, Mr. Harber was a Vice
President and National Sales Manager for Franchise Finance Corporation of
America. Mr. Harber holds a BS degree in Economics and English from the
University of Tennessee.
Donald R. Jackson has served as the Secretary and Treasurer of the Company since
January 21, 1997 and a director of the Company since February 4, 1997. From
January 21, 1997 until March 10, 1998, Mr. Jackson also served as Chief
Financial Officer of the Company. Mr. Jackson is a Managing Director and Chief
Financial Officer of The Stone Pine Companies (since 1994) and is a Senior Vice
President, Treasurer and Chief Financial Officer of FCM Fiduciary Capital
Management Company. From January 1990 to June 1994, Mr. Jackson was a Corporate
Vice President with PaineWebber Incorporated, where he was involved in the
financial administration of various publicly and privately offered investment
programs. During 1989, Mr. Jackson was self-employed. Immediately prior to that
he was a First Vice President in the Direct Investments Group with Shearson
Lehman Hutton Inc. and its predecessor, E.F. Hutton & Company, Inc. From 1972 to
1986, Mr. Jackson was associated with the accounting firm of Arthur Andersen &
Co., serving as a partner from 1981 to 1986. Mr. Jackson is a director of LMC
Operating Corp., a privately held manufacturing company. Mr. Jackson holds a
BSBA degree in accounting from the University of Denver and is a certified
public accountant.
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<PAGE> 31
Ronald F. Martin was elected the President of Angeles Metal Trim Co. on April
10, 1997. Mr. Martin was the President and Chief Executive Officer of Noman
Technology, Inc. from 1994 until April 1997. He was the President and Chief
Executive Officer of Harris Tube from 1989 until 1993 and President of Harris
Tube from 1986 to 1989. For over 25 years prior to 1986, Mr. Martin held a
number of positions with Rheem Manufacturing Co. from entry level to senior
management positions. In June 1993, Harris Tube filed for bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Ronald Martin was serving as an
executive officer of Harris Tube at the time of such filing.
John D. McKey, Jr., a director of the Company since February 4, 1997, has been a
partner at the law firm of McCarthy, Summers, Bobko & McKey, P.A. since
September 1993, and from June 1986 to September 1993, was a partner at Kohl,
Bobko, McKey & Higgins, P.A. Mr. McKey is a director of Lithium Technology
Corporation.
Thompson H. Rogers has served as a director of the Company since January 21,
1997 and served as Chairman of the Board from January 21, 1997 until November
17, 1997. Mr. Rogers is a Managing Member of The Stone Pine Companies (since
1994) and is the Chairman of Affiliated Holdings, Inc., a private investment
management company (since 1985). Prior thereto, Mr. Rogers was with FIRSTIER,
now known as First Bank, a financial institution in Omaha, Nebraska. From 1995
to 1996, Mr. Rogers was the Chairman of New York based, Laidlaw Holdings Asset
Management, Inc. Mr. Rogers serves on the Board of Directors of Pinnacle Bank of
Omaha, located in Omaha, Nebraska; Havelock Bank, located in Lincoln, Nebraska;
Aspen Holdings Inc., an insurance holding company; and Worldwave Communications
Inc., a telecommunications company.
Christian W. Wolf has served as a director of the Company since October 8, 1997.
In addition, Mr. Wolf served as the Chief Executive Officer of the Company from
October 1997 to March 1998 and is engaged as an consultant to the Company. Mr.
Wolf is the founding partner of Phaedrus Ltd., an investment banking concern
founded in January 1996 to focus on advisory services for small to mid
capitalization companies. From 1994 to 1995, Mr. Wolf was Managing Director of
Private Placements for First Union Capital Markets, a new initiative for the
company. From 1989 to 1994, Mr. Wolf was a Senior Vice President and Director of
Corporate Finance for NationsBanc Capital Markets. From 1983 to 1989, Mr. Wolf
was a Vice President of JP Morgan's Private Placement Group. Prior to 1983, Mr.
Wolf spent four years with Wheeling Pittsburgh Steel. Mr. Wolf's operational
experience involved; annealing, roll forming, cold rolling, slitting and
pickling.
The members of the Board are divided into three classes, with staggered terms.
The terms of Messrs. Bagley and Rogers expire in 1998, the terms of Messrs.
Harber and McKey expire in 1999 and the terms of Messrs. Bailey, Jackson and
Wolf expire in 2000. Officers of the Company serve at the pleasure of the Board
of Directors.
No family relationships exist between any of the officers and directors of the
Company.
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<PAGE> 32
Innovest Holdings, Ltd., which purchased Common Shares of the Company in the
January 1997 Share Issuance, has the right to nominate two directors to the
Board of Directors of the Company or, in the alternative, has the right to be
present at all Board meetings. As of the date hereof no such directors have been
nominated to the Board.
Committees of the Board of Directors
The Board has three standing committees: an Executive Committee, an Audit
Committee and a Compensation Committee.
The Executive Committee of the Board was established during August 1997 and
currently consists of Messrs. Bagley and Jackson. The Executive Committee is
authorized to exercise all of the authority of the Board in the management of
the Company to the fullest extent permissible by the Colorado Business
Corporation Act.
The Audit Committee of the Board was established during February 1997 and
currently consists of Messrs. Bagley, Rogers and Jackson. The Audit Committee
provides general financial oversight in financial reporting and the adequacy of
the Company's internal controls through periodic meetings with the Company's
management and its external auditors.
The Compensation Committee of the Board was established during February 1997 and
currently consists of Messrs. Rogers, Harber and Jackson. The Compensation
Committee administers the Company's 1997 Stock Incentive Plan, subject to the
review and oversight of the entire Board. The Compensation Committee also
provides general oversight in all employee personnel matters through periodic
meetings with the management of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of the Forms 3 and 4 furnished to the Company during
1997 and 1998 and written representations furnished to the Company, the Company
has not identified any director, officer or beneficial owner of more than ten
percent of its common stock who failed to file on a timely basis the forms
required by Section 16(a) of the Securities Exchange Act of 1934 for fiscal year
1997, other than those discussed in the following paragraph.
All Forms 3 and 4 that were required to be filed pursuant to the provisions of
Section 16(a) of the Exchange Act have been filed. However, some of the Forms 3
and /or 4 that were required to be filed by Messrs. Bagley (2), DeGrassi (3),
Harber (1), Jackson (1), McKey (1), Rogers (2) and Wolf (1) and Stone Pine
Colorado, LLC (2), Stone Pine Capital, LLC (2) and Stone Pine Atlantic Equities,
LLC (2) were not filed on a timely basis. (The number in parenthesis after each
name represents the number of required forms that were not filed on a timely
basis.)
-31-
<PAGE> 33
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and
long-term compensation for services rendered to the Company and its subsidiaries
during 1997, 1996 and 1995 by each of the Named Executive Officers.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------
Annual Compensation
--------------------------------------------------------
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
- ------------------ ---- --------- -------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Raymond E. 1997 0 0 --(2) 0 0
McElhaney(1) 1996 12,000(2) 0 * 0 0
1995 12,000 0 * 0 0
Peter W. 1997 36,525 0 * 0 2,631(4)
Damisch(3)
Thompson H. 1997 0 0 0 0 0
Rogers(5)
Christian W. 1997 37,500 0 * 0 0
Wolf(6)
Ronald F. 1997 65,546 10,000 * 500,000 3,041(8)
Martin(7)
</TABLE>
- -------------------------
(1) Mr. McElhaney resigned his position as President and Chief Executive
Officer of the Company, effective January 21, 1997.
(2) No cash payments were made to Mr. McElhaney during 1996. The accrued amount
of $12,000 and future payments due under Mr. McElhaney's Employment
Agreement were partial consideration for the Asset Purchase in January
1997. See "Item 12. Certain Relationships and Related Transactions".
(3) Mr. Damisch served as President and Chief Executive Officer of the Company
and each of its active subsidiaries from January 21, 1997 until April 6,
1997.
(4) Includes $2,500 reimbursement of personal legal fees and $131 of disability
insurance premiums paid by Angeles on behalf of Mr. Damisch.
(5) Mr. Rogers, who was Chairman of the Board of Directors at the time, served
as Chief Executive Officer of the Company without compensation from April
6, 1997 until October 8, 1997.
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<PAGE> 34
(6) Mr. Wolf served as President and Chief Executive Officer of the Company
from October 8, 1997 until he resigned on March 10, 1998. Mr. Wolf
continues to serve as a director of, and a consultant to, the Company.
(7) Mr. Martin has served as President of Angeles Metal Trim Co., the major
operating subsidiary of the Company during 1997, since April 10, 1997.
(8) Includes $2,988 of disability and life insurance premiums paid by Angeles
on behalf of Mr. Martin and $53 of contributions by Angeles to Angeles' 401
plan on behalf of Mr. Martin.
* Did not receive perquisites or other personal benefits, securities, or
property having an aggregate value of greater than the lower of $50,000 or
10% of the total salary and bonus reported for such executive officer.
Option/SAR Grants in 1997
At the Annual Meeting of the Shareholders of the Company held on October 8,
1997, the Shareholders adopted the Company's 1997 Stock Incentive Plan (the
"Plan"). Under the terms of the Plan, the Company may grant employees of, or any
other individual providing services to, the Company and its subsidiaries stock
options, stock appreciation rights or stock awards. The Company has reserved 3
million Common Shares for issuance pursuant to the Plan. The exercise price of
all stock options granted pursuant to the Plan shall not be less than the fair
market value of the Common Shares on the date of grant. As of December 31, 1997,
options to acquire an aggregate of 500,000 Common Shares were outstanding under
the Plan, all of which were held by Ronald F. Martin, President of Angeles Metal
Trim Co., the major operating subsidiary of the Company during 1997. As of
December 31, 1997, no stock appreciation rights had been granted and there had
been no stock awards under the Plan.
The Company does not offer its employees any long-term incentive plans, other
than stock options, stock appreciation rights or stock awards issued pursuant to
the Plan, nor does it offer any defined benefit or actuarial plans. The Company
does offer a 401(k) plan to employees.
The following table sets forth information concerning individual grants of stock
options during 1997 to Named Executive Officers.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base Expiration
Name Granted (#) in 1997 Price ($/Sh) Date
---- ----------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Ronald F. Martin 250,000(1) 50.0% $2.00 04/10/02
Ronald F. Martin 250,000(1) 50.0% $2.00 04/10/07
- --------------------
</TABLE>
(1) The 250,000 options may be exercised cumulatively as set forth below:
<TABLE>
<CAPTION>
Date Number of Options
---- -----------------
<S> <C>
April 10, 1998 50,000
April 10, 1999 50,000
April 10, 2000 50,000
April 10, 2001 50,000
April 10, 2002 50,000
</TABLE>
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<PAGE> 35
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
As of December 31, 1997, the Company had not granted any SARs. In addition, no
stock options were exercised by employees during 1997. The following table sets
forth information concerning the value of unexercised stock options as of
December 31, 1997.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/97 (#) 12/31/97($)
Shares
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
---- -------------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Ronald F. Martin 0 0 0/500,000 0/0
</TABLE>
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for serving on the Company's Board of
Directors other than reimbursement for out-of-pocket expenses incurred in
attending meetings.
EMPLOYMENT AND CONSULTING AGREEMENTS
Raymond E. McElhaney, Bill M. Conrad and Ronald R. McGinnis each served as
officers of the Company pursuant to three-year Employment Agreements with the
Company that had termination dates of November 17, 1997. Messrs. McElhaney,
Conrad and McGinnis resigned from such positions as of January 21, 1997
immediately after the consummation of the Merger. Each Employment Agreement
provided for payment of salary in the amount of $1,000 per month, plus
reimbursement of reasonable and necessary expenses incurred on behalf of the
Company. The Agreements were terminable without liability to the Company
immediately for "cause" and upon 90 days advance written notice in other cases.
No payments were made to Messrs. McElhaney, Conrad or McGinnis under such
Agreements during 1996 or 1997 (the "Accrued Payments"). The Accrued Payments
and future payments due under such Agreements were partial consideration for the
Asset Purchase and such Employment Agreements were terminated in connection with
the Asset Purchase. See "Item 12. Certain Relationships and Related
Transactions".
Ronald F. Martin serves as the President of Angeles Metal Trim Co., the major
operating subsidiary of the Company during 1997, pursuant to a one-year
Employment Agreement entered into on April 10, 1997. The Employment Agreement is
subject to automatic renewals of one year unless either party provides written
notice of non-renewal to the other party at least 60 days prior to the
expiration of the initial or any renewal term of the Employment Agreement. No
such notice has been given under the Agreement. The Employment Agreement
provides for an annual salary of $84,000 and additional bonus payments. As part
of the consideration for services rendered under the Employment Agreement, Mr.
Martin was granted 500,000 options with an
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<PAGE> 36
exercise price of $2.00 per share to purchase Common Shares. These options vest
over a five year period so long as Mr. Martin remains in the employ of the
Company or one of its subsidiaries. The 500,000 options granted under the
Employment Agreement were canceled and reissued, with identical terms, under the
provisions of the 1997 Stock Incentive Plan following its approval by the
Company's stockholders during October 1997. In the event of termination without
cause, Mr. Martin would receive his annual salary for the remainder of the term
of the Employment Agreement, retain the right to exercise all stock options and
receive other specified benefits.
Christian W. Wolf served as the President and Chief Executive Officer of the
Company from October 8, 1997 until he resigned on March 10, 1998. On January 12,
1998, Mr. Wolf was granted 200,000 options, with an exercise price of $1.22 per
share, to purchase Common Shares. These options are currently vested and have a
ten year term. Mr. Wolf continues to serve as a director of the Company. On
March 10, 1998, the Company entered into a consulting arrangement with Mr. Wolf.
Under the arrangement, Mr. Wolf will provide consulting services in connection
with a potential acquisition by the Company. Mr. Wolf will receive approximately
$40,000, plus 150,000 Common Shares as compensation for these services. If the
target company signs a definitive letter of intent with the Company containing
terms that are acceptable to the Company's Board of Directors, Mr. Wolf will be
issued another 100,000 Common Shares. In addition, if the acquisition is
consummated, Mr. Wolf will receive an additional 100,000 shares of Common Stock
and a cash fee based upon a specified formula.
SERVICES AGREEMENT
The Company entered into a Services Agreement (the "Services Agreement") with SP
Atlantic, effective as of February 1, 1997, pursuant to which SP Atlantic and
its affiliates provide administrative, accounting and investor relations
services to the Company and its subsidiaries as well as investment banking
services and assistance in merger and acquisition transactions, financing
transactions and stock offerings by the Company. In consideration for such
services, the Company is obligated to pay SP Atlantic $10,000 per month, plus
reimbursement for the cost of providing the administrative, accounting and
investor relations services. Messrs. Bagley, Harber, Jackson and Rogers,
directors and officers of the Company, have a financial interest in SP Atlantic.
In addition, Messrs. Bagley and Rogers are beneficial owners of approximately
65% and 51%, respectively, of the outstanding Common Shares.
The Services Agreement has a term of five years, and is subject to automatic
renewals of one year unless either party provides written notice of non-renewal
to the other party at least 90 days prior to the expiration of the initial or
any renewal term of the Services Agreement. SP Atlantic has the option to
terminate the Agreement at any time for any reason upon written notice. The
Company may terminate the Services Agreement at any time upon written notice;
however, in the event this provision is exercised by the Company, SP Atlantic
shall not receive less compensation and benefits that would otherwise be due to
it for the remainder of the term of the Services Agreement. The Company may
terminate the Services Agreement for cause, effective upon written notice, and
upon such a termination the Company shall be obligated to pay SP Atlantic fees
and any expense reimbursements due through the date of termination. "Cause" is
defined to mean that SP Atlantic has: (i) knowingly acted fraudulently in SP
Atlantic's relations
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<PAGE> 37
with the Company, (ii) misappropriated or done material, intentional damage to
the property of the Company, (iii) willfully and materially failed to follow a
legal and reasonable order or directive by the Chairman of the Board of
Directors of the Company (which order or directive is consistent with the
provisions of the Services Agreement), or (iv) been grossly negligent in the
performance of its duties as provided for by the Services Agreement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At December 31, 1997, the Company had outstanding 15,992,121 Common Shares, the
only class of voting securities outstanding. At March 25, 1998, the Company had
17,975,756 Common Shares outstanding.
At December 31, 1997, the Company had outstanding 744,000 Series A Preferred
Shares and 449,000 Series B Preferred Shares. On March 31, 1998, the Company
issued 200 Series C Preferred Shares. All three classes of preferred stock are
non-voting securities.
The following table reflects information concerning the ownership, as of March
25, 1998, of Common Shares by (i) each person who is known by the Company to be
a beneficial owner of more than 5% of the Common Shares; (ii) by all directors;
(iii) by each of the Named Executive Officers, and (iv) by all directors and
Named Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
Percent of
Name Number of Shares Voting Securities
---- ---------------- -----------------
<S> <C> <C>
Stone Pine Colorado, LLC(1) 8,780,503(2) 47.99%
Stone Pine Capital, LLC(1) 9,409,622(4) 50.39%
Stone Pine Atlantic Equities, LLC(1) 9,376,289(5) 50.21%
Paul Bagley(1)(9)(10) 13,662,455(11) 64.54%
Richard D. Bailey(9)(12) -0- --
Thompson H. Rogers(1)(9) 9,741,169(13) 51.17%
W. Duke DeGrassi(1) 9,376,289(5) 50.21%
Carl Casareto(10)(14) 50,000(15) *
L. Wayne Harber(1)(9) -0- --
Donald R. Jackson(1)(9)(10) -0- --
Ronald F. Martin(10)(16) 100,000(17) *
John D. McKey, Jr.(9)(18) -0- --
Christian W. Wolf(9)(19) 201,000(20) 1.11%
Berkshire Capital Partners, Ltd.(21) 3,000,000(22) 16.69%
Atlantis Holding Corp.(23) 1,412,068(24) 7.86%
Investor Capital Enterprises, Inc.(23) 1,412,068(24) 7.86%
Gary Kucher(23) 1,412,068(24) 7.86%
All Directors and Executive Officers
as a group (9 persons) 14,043,455(25) 65.17%
- --------------------------------
</TABLE>
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<PAGE> 38
(1) The address for each person is 410 17th Street, Suite 400, Denver,
Colorado 80202.
(2) SP Colorado directly owns 6,481,867 of the Company's outstanding Common
Shares and 317,500 shares of the Company's Series B Preferred Shares,
which are convertible into 317,500 Common Shares. SP Colorado holds
proxies to vote 1,211,568 Common Shares (the "AHC Shares") which are
owned by Atlantis Holding Corp. and 769,568 Common Shares (the "Herstone
Shares") that are owned by Richard Herstone, until the earlier of a
transfer of the AHC Shares and the Herstone Shares and February 4, 2000.
(The 6,481,867 outstanding Common Shares directly owned by SP Colorado,
the 317,500 Common Shares that would be received by SP Colorado if the
Series B Preferred Shares were converted, the AHC Shares and the Herstone
Shares are collectively referred to as the "SP Colorado Shares"). The
following persons are members of SP Colorado and each own an equal voting
interest in SP Colorado: SP Capital, Stone Pine Atlantic Equities, LLC
("SP Equities") and Thompson H. Rogers. Paul Bagley and W. Duke DeGrassi
are the designated voting persons for SP Capital and SP Equities,
respectively. SP Colorado, SP Capital, SP Equities, Thompson H. Rogers,
Paul Bagley and W. Duke DeGrassi are referred to herein as the "Stone
Pine Reporting Persons". Each Stone Pine Reporting Person may be deemed a
member of a group that shares voting power over the AHC Shares and the
Herstone Shares and voting and dispositive power over the SP Colorado
Shares and accordingly may be deemed to beneficially own the SP Colorado
Shares, including the AHC Shares and the Herstone Shares.
(3) SP Atlantic directly owns 214,286 of the outstanding Common Shares,
131,500 of the Company's Series B Preferred Shares and a $250,000
Convertible Note issued by the Company. The Series B Preferred Shares and
the Note are collectively convertible into 381,500 Common Shares. (The
214,286 outstanding Common Shares and the 381,500 Common Shares that
would be received if the Series B Preferred Shares and the Note were
converted are collectively referred to as the "SP Atlantic Shares"). SP
Capital and SP Equities are members of SP Atlantic and Mr. Bagley is the
manager of SP Atlantic. As a result, SP Capital, SP Equities and Mr.
Bagley may be deemed to beneficially own the SP Atlantic Shares.
(4) This amount includes (i) 33,333 of the Company's outstanding Common
Shares directly owned by SP Capital (the "SP Capital Shares"), (ii) the
SP Colorado Shares (see (2)), and (iii) the SP Atlantic Shares (see (3)).
(5) This amount includes the SP Colorado Shares (see (2)) and the SP
Atlantic Shares (see (3)).
(6) SP Financial directly owns 76,666 of the Company's outstanding Common
Shares and 360,000 of the Company's Series A Preferred Shares, which are
convertible into 360,000 Common Shares. (The 76,666 outstanding Common
Shares and the 360,000 Common Shares that would be received if the Series
B Preferred Shares were converted are collectively referred to as the "SP
Financial Shares"). Messrs. Bagley and Rogers are members of SP Financial
and may be deemed to beneficially own the SP Financial Shares.
(7) ERB directly owns 110,000 of the Company's outstanding Common Shares and
384,000 of the Company's Series A Preferred Shares, which are convertible
into 384,000 of Common Shares. (The 110,000 outstanding Common Shares and
the 384,000 Common Shares that would be received if the Series A
Preferred Shares were converted are collectively referred to as the "ERB
Shares"). Messrs. Bagley and Rogers are members of ERB and may be deemed
to beneficially own the ERB Shares.
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<PAGE> 39
(8) Stone Pine Advisors, LLC ("SP Advisors") directly owns 33,333 of the
Company's outstanding Common Shares ("SP Advisors Shares"). Mr. Bagley is
the manager of SP Advisors and may be deemed to beneficially own the SP
Advisors Shares.
(9) Director.
(10) Executive Officer.
(11) Mr. Bagley directly owns 1,533,334 of the Company's outstanding Common
Shares and a $1,750,000 Convertible Note issued by the Company, which is
convertible into 1,750,000 Common Shares. In addition, 5,000 of the
Company's outstanding Common Shares are held by Mr. Bagley's spouse and
500 of the Company's outstanding Common Shares are held in Mr. Bagley's
individual retirement account. (The above discussed 1,538,834 outstanding
Common Shares and the 1,750,000 Common Shares that would be received if
the Note was converted are collectively referred to as the "Bagley
Shares").
This amount includes (i) the Bagley Shares, (ii) the SP Colorado Shares
(see (2)), (iii) the SP Atlantic Shares (see (3)), (iv) the SP Capital
Shares (see (4)), (v) the SP Financial Shares (see (6)), (vi) the ERB
Shares (see (7)), and (vii) the SP Advisors Shares (see (8)).
(12) The address for Mr. Bailey is 580 Thames Street, Suite 228, Newport,
Rhode Island 02840.
(13) This amount includes (i) 30,000 of the Company's outstanding Common
Shares directly owned by Mr. Rogers ("the Rogers Shares"), (ii) the SP
Colorado Shares (see (2)), (iii) the SP Financial Shares (see (6)), and
(iv) the ERB Shares (see (7)).
(14) The address for Mr. Casareto is 20000 South Western Avenue, Torrance,
California 90501.
(15) This amount represents 50,000 Common Shares that are represented by stock
options that are currently exercisable at a price of $1.22 per share (the
"Casareto Shares").
(16) The address for Mr. Martin is 20000 South Western Avenue, Torrance,
California 90501.
(17) This amount represents 100,000 Common Shares that are represented by
stock options that will be exercisable as of April 10, 1998 at a price of
$2.00 per share (the "Martin Shares").
(18) The address for Mr. McKey is 2081 East Ocean Boulevard, 2nd Floor,
Stuart, Florida 34996.
(19) The address for Mr. Wolf is 436 Seneca Lane, Boca Raton, Florida 33487.
(20) This amount includes 200,000 Common Shares that are represented by stock
options that are currently exercisable at a price of $1.22 per share and
1,000 of the Company's outstanding Common Shares that are held in Mr.
Wolf's individual retirement account (collectively referred to as the
"Wolf Shares").
(21) The address for Berkshire Capital Partners, Ltd. ("Berkshire Capital") is
1221 Post Road East, Westport, Connecticut 06880.
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<PAGE> 40
(22) As reported in a Schedule 13D filed by Berkshire Capital on March 9,
1997, Berkshire Capital directly owns 3,000,000 of the Company's
outstanding Common Shares.
(23) The address for Atlantis Holding Corp. ("AHC"), Investor Capital
Enterprises, Inc. ("ICE") and Mr. Kucher is 7986 E. Arapahoe Court, Suite
1800, Englewood, Colorado 80112.
(24) AHC directly owns 1,211,568 of the Company's outstanding Common Shares.
AHC has the sole dispositive power over the AHC Shares and SP Colorado
has the sole voting power over the AHC Shares pursuant to a voting proxy
until the earlier of the transfer of the AHC Shares by AHC to a
nonaffiliate and February 4, 2000. ICE directly owns 200,000 of the
Company's outstanding Common Shares. Mr. Kucher directly owns 500 of the
Company's outstanding Common Shares (the "Kucher Shares").
Mr. Kucher as the sole shareholder of AHC has dispositive power over the
AHC Shares and as the sole shareholder, director and executive officer of
ICE has voting and dispositive power over the ICE Shares and accordingly
may be deemed to beneficially own the AHC Shares and the ICE Shares. Mr.
Kucher, AHC and ICE may be deemed to be persons who comprise a group with
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, and therefore each may be deemed to beneficially own all of
the Kucher Shares, the AHC Shares and the ICE Shares.
(25) This amount includes (i) the SP Colorado Shares (see (2)), (ii) the SP
Atlantic Shares (see (3)), (iii) the SP Capital Shares (see (4)), (iv)
the SP Financial Shares (see (6)), (v) the ERB Shares (see (7)), (vi) the
SP Advisors Shares (see (8)), (vii) the Bagley Shares (see (11)), (viii)
the Rogers Shares (see (13)), (ix) the Casareto Shares (see (15)), (x)
the Martin Shares (see (17)), and (xi) the Wolf Shares (see (20)).
* Less than 1%.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the January 1997 Merger described herein, Raymond McElhaney, Bill
Conrad, and Ronald McGinnis, the sole executive officers and directors of the
Company (the "Former Directors"), purchased from the Company the following
assets of the Company (the "Asset Sale"): (i) the furniture and equipment of the
Company, (ii) 7,000 shares of common stock of American Educational Products,
Inc. including warrants to purchase additional shares of the common stock of
American Education Products, Inc., (iii) 37,500 shares of common stock of Gold
Capital Corporation, (iv) a Promissory Note receivable by and between the
Company and Glacier Valley Holding Corporation dated November 13, 1995 in the
principal amount of $18,000 (see "Item 1. Description of Business - Narrative
Description of Business - Former Real Estate Development Business - Glacier
Valley") and (v) the Company's interest in and to the Elite Note and the
Company's interest in the Northcrest Joint Venture (see "Item 1. Description of
Business - Narrative Description of Business - Former Real Estate Development
Business - The Northcrest Joint Venture").
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<PAGE> 41
The purchase price for the assets sold in the Asset Sale was $99,625 which
consideration consisted of (x) the cancellation of stock options held by the
Former Directors to acquire an aggregate of 455,454 shares of the common stock
of the Company at the exercise price of $.55 per share, (y) the relinquishment
of any interest in and to the salaries which were accrued for the accounts of
the Former Directors and any claim for future salaries pursuant to the
Employment Agreements between the Company and the Former Directors, in the
aggregate amount of $69,000, and the cancellation of such Employment Agreements
and (z) the assumption by the Former Directors of all debts, liabilities and
outstanding accounts of the Company which were outstanding prior to the Merger.
The following assets purchased by the Former Directors and included in the Asset
Sale were acquired during the last two years for the following purchase price:
(i) 7,000 shares of common stock of American Educational Products, Inc. and
warrants to purchase additional shares of common stock, $7,000, (ii) a
promissory note receivable from Glacier Valley Holding Corporation, $18,000, and
(iii) a 52% interest in the nonrecourse promissory note payable by Elite
Properties of America, $415,750, with a principal balance equal to $216,190 at
the time of sale.
The Company paid $80,000 in consideration of services provided by ICE in
connection with the Merger. ICE is the beneficial owner of approximately 8% of
the outstanding Common Shares.
The Company agreed to pay SP Colorado an acquisition structuring fee of $250,000
in connection with the Merger and the related transactions and delivered a
non-interest bearing promissory note for such amount ("the SP Colorado Note").
During December 1997, the Company issued 317,500 Series B Preferred Shares to SP
Colorado in exchange for the forgiveness of the SP Colorado Note and $67,500 of
other obligations of the Company to SP Colorado. SP Colorado is the owner of
approximately 48% of the outstanding Common Shares and Messrs. Bagley, Harber,
Jackson, McKey and Rogers, directors and officers of the Company, have a
financial interest in SP Colorado.
The Company entered into a Services Agreement with SP Atlantic effective as of
February 1997. See "Item 10. Executive Compensation - Services Agreement" for a
discussion of the terms of the Services Agreement. During December 1997, the
Company issued 131,500 Series B Preferred Shares to SP Atlantic in exchange for
the forgiveness of $100,000 of fees due under the terms of the Services
Agreement and $31,500 of other indebtedness owed to SP Atlantic by the Company.
Messrs. Bagley, Harber, Jackson and Rogers, directors and officers of the
Company, have a financial interest in SP Atlantic.
During April 1997, ERB loaned $300,000 to Angeles, which loan was evidenced by a
12% promissory note payable to ERB (the "ERB Note"). As additional consideration
for such loan, (i) Angeles agreed to pay ERB a facility fee of $9,000, which was
added to the principal balance of the ERB Note, (ii) the Company issued 50,000
Common Shares to ERB upon such funding, and (iii) the Company agreed to issue
10,000 Common Shares on the first day of each month commencing July 1, 1997
until the ERB Note was repaid in full. During December 1997, the Company issued
384,000 Series A Preferred Shares to ERB in exchange for forgiveness of this
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<PAGE> 42
$309,000 loan and $75,000 of other indebtedness owed to ERB by the Company. The
Company issued a total of 110,000 Common Shares to ERB as additional
consideration for the ERB Note during its term.
During June 1997, SP Financial loaned $107,000 to Angeles, which loan was
evidenced by a 12% promissory note payable to SP Financial (the "SP Financial
Note"). As additional consideration for such loan, Angeles agreed to pay SP
Financial a commitment fee of $3,210, which was added to the principal balance
of the SP Financial Note, and the Company issued 16,666 Common Shares to SP
Financial. During December 1997, the Company issued 110,000 Series A Preferred
Shares to SP Financial in exchange for the forgiveness of $110,000 of the
principal balance of the SP Financial Note, with the $210 balance of the Note
being paid in cash.
During August 1997, SP Financial loaned $250,000 to the Company, which loan was
evidenced by a 12% promissory note payable to SP Financial (the "Second SP
Financial Note"). As additional consideration for such loan, the Company issued
60,000 Common Shares to SP Financial. During December 1997, the Company issued
250,000 Series A Preferred Shares to SP Financial in exchange for the
forgiveness of the $250,000 principal balance of the Second SP Financial Note.
During December 1997, SP Advisors loaned $75,000 to the Company, which loan was
evidenced by a 12% promissory note payable to SP Advisors (the "SP Advisors
Note"). As additional consideration for such loan, the Company issued 33,333
Common Shares to SP Advisors. The Company repaid the SP Advisors Note during
January 1998. Messrs. Bagley, Harber, Jackson and Rogers, directors and officers
of the Company, have a financial interest in SP Advisors.
During December 1997, SP Capital loaned $75,000 to the Company, which loan was
evidenced by a 12% promissory note payable to SP Capital (the "SP Capital
Note"). As additional consideration for such loan, the Company issued 33,333
Common Shares to SP Capital. The Company repaid the SP Advisors Note during
March 1998.
During December 1997, Mr. Bagley loaned $75,000 to the Company, which loan was
evidenced by a 12% promissory note payable to Mr. Bagley (the "Bagley Note"). As
additional consideration for such loan, the Company issued 33,334 Common Shares
to Mr. Bagley. The Company repaid the Bagley Note during March 1998. Mr. Bagley
is a director and officer of the Company and the beneficial owner of
approximately 65% of the outstanding Common Shares.
During 1997, the Company issued to Ronald F. Martin, President of Angeles Metal
Trim Co., options to purchase 500,000 Common Shares at $2.00 per share. The
options vest over a five year period commencing on April 10, 1998.
In January 1998, the Company issued to Christian W. Wolf, who was serving as
President and Chief Executive Officer of the Company at such time, options to
purchase 200,000 Common Shares at $1.22 per share. The options are currently
vested and have a ten year term.
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<PAGE> 43
In January 1998, the Company issued to Carl Casareto, who was appointed the
Chief Financial Officer of the Company in March 1998, options to purchase
200,000 Common Shares at $1.22 per share. 50,000 of the options are currently
vested and 50,000 of the options vest on January 12, 1999, 2000 and 2001,
respectively.
During January 1998, in connection with the acquisition of Capitol and the
transactions with Congress Financial, Mr. Bagley loaned an additional $1,500,000
to the Company. The loan is evidenced by a convertible promissory note of the
Company (the "Second Bagley Note") in the amount of $1,750,000, with a 12%
annual interest rate payable monthly in arrears. The Second 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 Second 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, 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 or 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 entered into an agreement with RDB Capital
Advisors, LLC ("RDB") pursuant to which the Company paid RDB $120,000 as
compensation for services rendered by RDB in arranging for the $2 million
purchase of the Company's Series C Preferred Shares by a group of investors. RDB
is owned by Mr. Bailey, a director of the Company.
During March 1998, the Company entered into a consulting arrangement with
Christian W. Wolf, a director of the Company. Under the arrangement, Mr. Wolf
will provide consulting services in connection with a potential acquisition by
the Company. Mr. Wolf will receive approximately $40,000, plus 150,000 Common
Shares as compensation for these services. If the target company signs a
definitive letter of intent with the Company containing terms that are
acceptable to the Company's Board of Directors, Mr. Wolf will be issued another
100,000 Common Shares. In addition, if the acquisition is consummated, Mr. Wolf
will receive an additional 100,000 Common Shares and a cash fee based upon a
specified formula.
In March 1998, the Company issued to employees of the Company and employees of
related companies providing services to the Company, stock options to purchase a
total of 625,000 Common Shares at $2.08 per share. These 625,000 options
included 400,000 options granted to Carl Casareto, the Chief Financial Officer
of the Company and 100,000 options granted to
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<PAGE> 44
Donald R. Jackson, the Secretary and Treasurer of the Company. The options vest
over a four year period commencing on March 10, 1999.
Messrs. Bagley and Rogers, who are directors and officers of the Company and who
are beneficial owners of approximately 65% and 51%, respectively, of the
outstanding Common Shares, have a financial interest in SP Colorado, SP
Atlantic, ERB, SP Financial, SP Advisors and SP Capital.
The Company believes that the transactions described above were fair to the
Company and were as favorable to the Company as those which it might have
obtained from non-affiliated third parties, given the circumstances under which
such transactions were proposed and effectuated.
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<PAGE> 45
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following documents are filed herewith or incorporated herein
by reference as exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<S> <C>
2.1(1) Stock Purchase Agreement, dated as of January
15, 1997, between Angeles Acquisition Corp.,
Angeles Metal Trim Co., California Building
Systems, Inc., and the shareholders of Angeles
Metal Trim Co. and D. Kingston Cable (Exhibits
and Schedules omitted).
2.2(1) Agreement and Plan of Merger, dated January 16,
1997, between the Company, Consolidated Land &
Cattle Company, Raymond E. McElhaney, Bill M.
Conrad, Ronald R. McGinnis, Angeles Acquisition
Corp. and Stone Pine Colorado, LLC (Exhibits and
Schedules omitted).
3.1(2) Articles of Incorporation of the Company.
3.2 Articles of Amendment to Articles of
Incorporation, dated as of December 31, 1997
(Setting Forth Terms of Series A Preferred Stock
and Series B Preferred Stock).
3.3(3) Articles of Amendment to Articles of
Incorporation, dated as of March 9, 1998
(Setting Forth Terms of Series C Preferred
Stock).
3.4(4) By-Laws Revised and Amended, as of August 26,
1997.
4.1(3) Form of Warrant to Purchase 1,000,000 Common
Shares at $1.00.
4.2(3) Form of Warrants to Purchase 1,000,000 Common
Shares at $.75.
4.3(3) Form of Warrants to Purchase 250,000 Common
Shares at $2.38.
10.1(5) Purchase and Sale Agreement, dated January 16,
1997, between the Company, Raymond McElhaney,
Bill Conrad and Ronald McGinnis (Exhibits and
Schedules omitted).
10.2(1) Form of Stock Purchase Agreement, dated January
16, 1997, between the Company and the investors
(Exhibits and Schedules omitted).
</TABLE>
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<PAGE> 46
<TABLE>
<S> <C>
10.3(5) Lease Agreement, dated January 15, 1997, by
and between Angeles Metal Trim Co. and D.
Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995
Revocable Intervivos Trust (Re: property at
4817 and 4915 Sheila Street, Commerce,
California).
10.4(5) Lease Agreement, dated January 15, 1997, by and
between Angeles Metal Trim Co. and D. Kingston
Cable, Trustee of the Daniel Kingston Cable and
Barbara White Cable 1995 Revocable Intervivos
Trust (Re: property at 116 Y Street, Vancouver,
Washington).
10.5(5) Lease Agreement, dated November 13, 1989, by and
between Angeles Metal Trim Co. and 83rd Street
Investors (Re: property at 4841 83rd Street,
Sacramento, California).
10.6(5) Lease Agreement, dated October 1, 1996, by and
between Angeles Metal Trim Co. and Fred G. and
Patricia A. Duncolon (Re: property at 1851
Alexander Avenue, Tacoma, Washington).
10.7(5) Services Agreement, dated as of February 1,
1997, between the Company and Stone Pine
Atlantic, LLC.
10.8(5) Promissory Note, dated as of January 16, 1997,
between the Company and Stone Pine Colorado,
LLC.
10.9(6) Loan Agreement, dated as of April 9, 1997,
between Angeles Metal Trim Co., Consolidated
Capital of North America, Inc., Stone Pine
Colorado, LLC and ERB Acquisition Group, LLC.
10.10(6) Promissory Note, dated April 9, 1997, of Angeles
Metal Trim Co. in the principal amount of
$309,000, payable to ERB Acquisition Group, LLC.
10.11(6) Guaranty, dated April 9, 1997, and delivered by
Consolidated Capital of North America Inc. and
Stone Pine Colorado, LLC to and for the benefit
of ERB Acquisition Group, LLC.
10.12(6) Security Agreement, dated as of April 9, 1997,
made and delivered by Consolidated Capital of
North America, Inc. in favor of ERB Acquisition
Group, LLC.
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
10.13(7) Loan Agreement, dated as of June 18, 1997,
between Angeles Metal Trim Co., Consolidated
Capital of North America, Inc. and Stone Pine
Financial Group, LLC.
10.14(7) Promissory Note, dated June 18, 1997, of
Angeles Metal Trim Co., in the principal
amount of $110,210, payable to Stone Pine
Financial Group, LLC.
10.15(7) Employment Agreement, dated April 10, 1997,
between Angeles Metal Trim Co. and Ronald F.
Martin.
10.16(4) Loan Agreement and Term Note, dated as of August
21, 1997, between Consolidated Capital of North
America, Inc. and Stone Pine Financial Group,
LLC.
10.17(4) Amendment to Term Note, dated August 21, 1997.
10.18(4) Promissory Note, dated as of July 8, 1997,
between ERB Acquisition Group, LLC and
Consolidated Capital of North America, Inc.
10.19(4) Amendment to Promissory Note, dated July 8, 1997.
10.20(4) Consolidated Capital of North America, Inc. 1997
Stock Incentive Plan.
10.21(4) Form of Incentive Stock Option Agreement for
Grants to Employees.
10.22(4) Form of Non-Qualified Stock Option Agreement for
Grants to Employees.
10.23(4) Form of Non-Qualified Stock Option Agreement for
Grants to Non-Employees.
10.24(8) Asset Purchase Agreement, dated as of
December 1, 1997, between the Company and
Capitol Metals Co., Inc. (Exhibits and
Schedules omitted).
10.25(8) 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.
</TABLE>
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<PAGE> 48
<TABLE>
<S> <C>
10.26(8) 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(8) 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(8) 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(8) Security Agreement, dated January 8, 1998,
between Binhad, Inc. (formerly known as Capitol
Metals Co., Inc.) and Angeles Acquisition Corp.
10.30(8) Registration Agreement, dated as of January 6,
1998, between Binhad, Inc. (formerly known as
Capitol Metals Co., Inc.) and the Company.
10.31(8) 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(8) 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(8) 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 Loan Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Advisors,
LLC.
10.35 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 Loan Agreement, dated as of December 31, 1997,
between the Company and Stone Pine Capital, LLC.
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C>
10.37 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 Loan Agreement, dated as of December 31, 1997,
between the Company and Paul Bagley.
10.39 Promissory Note, dated as of December 31, 1997,
in the principal amount of $75,000 from the
Company to Paul Bagley.
10.40 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 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 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 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 Convertible Note, dated as of January 9, 1998,
in the principal amount of $1,750,000 from the
Company to Paul Bagley.
10.45 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 Loan Agreement, dated January 9, 1998, by and
between Congress Financial Corporation
(Western), Angeles Metal Trim Co. and Angeles
Acquisition Corp.
10.48 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).
</TABLE>
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<PAGE> 50
<TABLE>
<S> <C>
10.49 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 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 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 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 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 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 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 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.
16.1(9) Letter from Kish Leake & Associates, P.C., dated
February 5, 1997, regarding change of certifying
accountant.
16.2(10) Letter from Grant Thornton LLP, dated January
28, 1998, regarding change of certifying
accountant.
21. Subsidiaries of the Company.
</TABLE>
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<PAGE> 51
<TABLE>
<S> <C>
27.1 Financial Data Schedule.
</TABLE>
- -------------
(1) Incorporated by reference from the Company's Report on Form 8-K, dated
January 23, 1997.
(2) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991.
(3) Incorporated by reference from the Company's Report on Form 8-K, dated
March 18, 1998.
(4) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the period ended September 30, 1997.
(5) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.
(6) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the period ended March 31, 1997.
(7) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the period ended June 30, 1997.
(8) Incorporated by reference from the Company's Report on Form 8-KA, filed on
January 29, 1998.
(9) Incorporated by reference from the Company's Report on Form 8-K filed on
February 7, 1997.
(10) Incorporated by reference from the Company's Report on Form 8-KA, filed on
January 30, 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., a privately held
steel processing and service center located in Torrance, California.
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 3, 1998 to report a
change in executive officers and the sales of equity securities pursuant to
Regulation S.
-50-
<PAGE> 52
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigning, thereunto
duly authorized.
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
Date: March 31, 1998 By: /s/ Paul Bagley
-----------------------------
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Paul Bagley Chairman and Chief Executive Officer March 31, 1998
- ------------------------------ (Principal Executive Officer)
Paul Bagley
/s/ Carl Casareto Chief Financial Officer March 31, 1998
- ------------------------------ (Principal Financial and Accounting
Carl Casareto Officer)
/s/ Donald R. Jackson Director March 31, 1998
- ------------------------------
Donald R. Jackson
/s/ Richard D. Bailey Director March 31, 1998
- ------------------------------
Richard D. Bailey
/s/ L. Wayne Harber Director March 31, 1998
- ------------------------------
L. Wayne Harber
/s/ John D. McKey, Jr. Director March 31, 1998
- ------------------------------
John D. McKey Jr.
/s/ Thompson H. Rogers Director March 31, 1998
- ------------------------------
Thompson H. Rogers
/s/ Christian W. Wolf Director March 31, 1998
- ------------------------------
Christian W. Wolf
</TABLE>
-51-
<PAGE> 53
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE> 54
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants............................... F-2
Report of Independent Certified Public Accountants..................... F-3
Consolidated Balance Sheets at December 31, 1997 and 1996.............. F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1997 and 1996........................................... F-6
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1997 and 1996..................................... F-7
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996........................................... F-8
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1997 and 1996........................................... F-10
</TABLE>
F-1
<PAGE> 55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Consolidated Capital of North America, Inc.:
We have audited the accompanying consolidated balance sheet of Consolidated
Capital of North America, Inc. (a Colorado corporation) and subsidiaries as of
December 31, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consolidated
Capital of North America, Inc. and subsidiaries as of December 31, 1997 and the
results of their operations and their cash flows for year then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Los Angeles, California
March 27, 1998
F-2
<PAGE> 56
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Consolidated Capital of North America, Inc.
We have audited the accompanying balance sheet of Consolidated Capital of North
America, Inc. (the "Company") as of December 31, 1996, and the related
statements of operations, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consolidated Capital of North
America, Inc. as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Grant Thornton LLP
Los Angeles, California
March 21, 1997
F-3
<PAGE> 57
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
---- ----
<S> <C> <C>
Current assets
Cash $ 14,304 $ 26,937
Accounts receivable less allowance
for doubtful accounts of $138,003
at December 31, 1997 1,587,035 --
Inventories 1,193,208 --
Prepaid expenses and other 32,879 --
Notes receivable -- 32,125
Investment in joint venture held for sale -- 52,000
Equipment held for sale -- 2,500
Marketable securities held for sale -- 44,500
---------- --------
Total current assets 2,827,426 158,062
Property and equipment, net of
accumulated depreciation of
$216,004 at December 31, 1997 2,053,215 --
Goodwill, net of accumulated amortization
of $225,995 at December 31, 1997 2,133,013 --
Other assets 692,629 --
---------- --------
Total assets $7,706,283 $158,062
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 58
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS - Continued
December 31, 1997 and 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
---- ----
<S> <C> <C>
Current liabilities
Accounts payable $3,872,397 $ 24,632
Accrued liabilities 290,618 36,000
Current portion of long-term debt 320,738 --
Notes payable to affiliates 225,000 --
Other 61,545 20,000
---------- --------
Total current liabilities 4,770,298 80,632
---------- --------
Long-term debt, less current portion 2,928,133 --
---------- --------
Stockholders' 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 --
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 --
Common Shares, par value $.0001 per share:
Authorized 50,000,000 shares, 15,992,121 and
1,570,541 shares outstanding at December
31, 1997 and 1996, respectively 1,599 157
Additional paid-in-capital 2,070,313 855,756
Accumulated deficit (3,257,060) (778,483)
---------- --------
Total stockholders' equity 7,852 77,430
---------- --------
Total liabilities and stockholders' equity $7,706,283 $158,062
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 59
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $ 16,989,478 $ --
Cost of goods sold 14,021,110 --
------------ -----------
Gross profit 2,968,368 --
------------ -----------
Operating expenses
Selling expenses 1,012,504 --
General and administrative expenses 1,513,959 50,623
Payroll and related benefits 2,061,144 40,487
Depreciation and amortization 441,999 --
------------ -----------
Total expenses 5,029,606 91,110
------------ -----------
Loss from operations (2,061,238) (91,110)
------------ -----------
Other income and (expense)
Interest income -- 17,269
Other income 165,374 --
Interest expense (582,713) (3,671)
Income (loss) from operations of affiliates
held for sale -- (9,898)
Write-down of assets held for sale -- (213,672)
Settlement of stock options -- (11,400)
------------ -----------
(417,339) (221,372)
------------ -----------
Net loss $ (2,478,577) $ (312,482)
============ ===========
Basic loss per share $ (.17) $ (.20)
============ ===========
Weighted average number of basic
common shares outstanding 14,980,423 1,532,129
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 60
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Number of Shares
Common Preferred Common Preferred Stock
Shares Shares Shares Series A Series B
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 1,529,541 - $ 153 $ - $ -
Issuance of common shares:
Legal services 12,500 - 1 - -
Cancellation of stock options 28,500 - 3 - -
Net loss - - - - -
----------------------------------------------------------------------
Balance at December 31, 1996 1,570,541 - 157 - -
Sale of common shares through a
private placement, net of expenses 5,496,911 - 550 - -
Merger with Angeles Acquisition
Corp. 8,638,003 - 864 - -
Issuance of common shares
for loan fees 286,666 - 28 - -
Issuance of preferred shares in
exchange for debt and services:
Series A - 744,000 - 744,000 -
Series B - 449,000 - - 449,000
Net loss - - - - -
---------------------------------------------------------------------
Balance at December 31, 1997 15,992,121 1,193,000 $1,599 $744,000 $449,000
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Additional
Paid-in Accumulated
Capital Deficit Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1996 $ 832,075 $ (466,001) $ 366,227
Issuance of common shares:
Legal services 12,284 - 12,285
Cancellation of stock options 11,397 - 11,400
Net loss - (312,482) (312,482)
------------------------------------------
Balance at December 31, 1996 855,756 (778,483) 77,430
Sale of common shares through a
private placement, net of expenses 966,351 - 966,901
Merger with Angeles Acquisition
Corp. - - 864
Issuance of common shares
for loan fees 248,206 - 248,234
Issuance of preferred shares in
exchange for debt and services:
Series A - - 744,000
Series B - - 449,000
Net loss - (2,478,577) (2,478,577)
------------------------------------------
Balance at December 31, 1997 $2,070,313 $(3,257,060) $ 7,852
==========================================
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 61
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,478,577) $(312,482)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization and depreciation 441,999 --
Provision for doubtful accounts 45,017 --
Gain on sale of assets (1,000) --
Stock options settled for stock -- 11,400
Management fees paid in preferred stock 168,000 --
Write-down of assets held for sale -- 213,757
Common shares issued for loan fees and interest 223,234 --
Legal services paid in stock -- 12,285
Change in assets and liabilities net of effects
from the business acquisition:
Accounts receivable, net 853,904 --
Inventories 780,931 --
Prepaid expenses and other assets (599,564) --
Accounts payable and accrued liabilities 559,648 7,246
Other liabilities 41,545 --
---------- -------
Net cash provided by (used in) operating
activities 35,137 (67,794)
---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in business acquisition (966,901) --
Purchase of property and equipment (117,667) --
Proceeds from sale of assets held for sale 70,000 --
Purchase of marketable securities -- (7,000)
Deposit received in connection with acquisition -- 20,000
Proceeds from the sale of equipment -- 4,200
Distribution from investment in affiliates held for sale -- 84,588
---------- -------
Net cash (used in) provided by investing activities (1,014,568) 101,788
---------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in note payable -- (12,524)
Proceeds from long-term borrowings 720,000 --
Principal payments on long-term debt (1,462,807) --
Proceeds from notes payable to affiliates 1,000,000 --
Principal payment on note payable to former officer (285,000) --
Proceeds from issuance of common shares,
net of related costs 966,901 --
---------- -------
Net cash provided by (used in) financing activities 939,094 (12,524)
========== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE> 62
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FROM ACQUIRED ENTITY $ 27,704 $ --
--------------- -------------
NET (DECREASE) INCREASE IN CASH (12,633) 21,470
CASH AT BEGINNING OF YEAR 26,937 5,467
--------------- -------------
CASH AT END OF YEAR $ 14,304 $ 26,937
=============== =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 338,065 $ --
=============== =============
Cash paid for income taxes $ -- $ --
=============== =============
NONCASH FINANCING ACTIVITIES:
Preferred shares issued for retirement of debt $ 1,193,000 $ --
=============== =============
BUSINESS ACQUISITION:
Assets acquired, including cash of $27,704 $ 9,067,178 $ --
Liabilities assumed (8,099,413) --
Common shares issued (864) --
--------------- -------------
Cash used in business acquisition $ 966,901 $ --
=============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE> 63
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE A - BUSINESS AND INVESTMENT RISK
Consolidated Capital of North America, Inc., a Colorado corporation (the
"Company"), was organized in 1987. During 1997, the Company sold all of its real
estate investments. With the 1997 acquisition of Angeles Metal Trim Co.
("Angeles") and the 1998 acquisition of substantially all of the assets of
Capitol Metals Co., Inc. ("Old Capitol"), the Company intends to focus on the
steel frame building business, steel service center operations and complementary
businesses.
As of December 31, 1997, the Company had a working capital deficit of $1,942,872
and a net loss of $2,478,577 for the year ended December 31, 1997. In January
1998, the Company acquired substantially all of the assets of Old Capitol, which
had filed for protection under Chapter 11 of the Bankruptcy Code (see note K).
The ability of the Company to successfully carry out its business plan is
dependent upon its ability to obtain sufficient additional capital and to
generate significant revenues through its existing assets, including the Capitol
assets.
The Company plans to raise additional working capital through private offerings
of debt and equity (see note K). There is no assurance that the Company will
have sufficient funds to execute its business plan or generate positive
operating results. Management believes that funds on hand and raised in
placements subsequent to year end will be sufficient to fund its operating needs
through at least December 31, 1998.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying financial statements follows:
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Angeles Acquisition Corp. ("Angeles Acquisition")
and Angeles and its wholly-owned subsidiary, California Building Systems, Inc.
All significant intercompany accounts and transactions have been eliminated.
2. Inventories
Inventories are stated at the lower of standard cost (which approximates
first-in, first-out basis) or market.
F-10
<PAGE> 64
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
3. Depreciation and Amortization
Depreciation and amortization are provided using principally the straight-line
method over estimated useful lives of five to ten years. Leasehold improvements
are amortized over the lives of the respective leases or the service lives of
the improvements, whichever is shorter.
4. Goodwill
Goodwill represents the excess of the purchase price over the estimated fair
value of the net assets acquired, and is being amortized over ten years on a
straight line basis. The Company periodically evaluates the carrying value and
the remaining useful life of its goodwill, and will adjust the carrying value
and related amortization period, if appropriate.
5. Income Taxes
The Company accounts for income taxes using the asset and liability method in
accordance with Statement of Financial Accounting Standards No. 109 ("SFAS No.
109") "Accounting for Income Taxes".
6. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7. Concentrations of Risk
The Company purchases its raw materials from a few vendors which potentially
subjects the Company to a concentration of supplier risk. Although its purchases
of raw materials are currently concentrated with a few key suppliers, management
believes that other suppliers could provide similar services and comparable
terms. A change in suppliers, however, could cause delays in manufacturing and
shipping and a possible loss of sales, which could adversely affect operating
results.
The majority of the Company's sales are to customers in the commercial
construction market. An adverse change in the financial condition of the market
could cause a loss of sales, which could adversely affect operating results.
F-11
<PAGE> 65
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
8. Investments
The Company accounts for its interest in investments for which it has less than
a 50% interest and in majority owned subsidiaries where control is expected to
be temporary under the equity method. Under this method, the Company's
proportionate share of the equity investments' income or loss either increases
or decreases the Company's investment. At December 31, 1996, the Company reduced
its investment to net realizable value. In January 1997, the Company sold its
53% interest in the Northcrest Joint Venture. In April 1997, the Company sold
its majority interest in Bear Star.
9. Marketable Securities Held for Sale
Investments in equity securities are classified as trading. Trading securities
are measured at fair value, with net unrealized holding gains and losses
reported in operations.
10. Basic Loss Per Share
The Financial Accounting Standards Board recently issued SFAS No. 128 "Earnings
Per Share", effective for years ending after December 15, 1997. Basic loss per
share in the accompanying financial statements is calculated in accordance with
SFAS No. 128. Loss per share for 1996, calculated in accordance with SFAS No.
128, did not change from the amount previously reported. SFAS No. 128 requires
basic earnings per share be calculated based on weighted average shares
outstanding for the period without giving effect to outstanding common stock
equivalents, while diluted earnings per share considers the effect of common
stock equivalents on weighted average shares outstanding. Diluted earnings per
share of common stock is the same as basic earnings per share as the Company
reported a loss for 1997 and 1996.
11. Financial Instruments
The carrying amounts of the Company's accounts receivable, accounts payable and
short-term debt approximated fair value as of December 31, 1997 and 1996,
because of their relatively short maturity.
12. New Financial Accounting Pronouncements
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 will adopt the new
standards in 1998. The effects of these new standards have not yet been
determined.
F-12
<PAGE> 66
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
NOTE C - INVENTORIES
Inventories at December 31, 1997 consist of the following:
Raw materials $ 202,522
Work-in-process 185,225
Finished goods 805,461
-----------
$ 1,193,208
===========
NOTE D - RELATED PARTY TRANSACTIONS
In 1997, the Company borrowed approximately $1,000,000 from various affiliated
entities. Interest and loan fees to these entities for 1997 amounted to
$298,382, of which $248,234 was paid by issuing 286,666 shares of the Company's
Common Stock. The fair value of the stock was determined by the Board of
Directors of the Company. The balance of $50,148 was paid or accrued in 1997. 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
in management fees.
Notes payable to affiliates include three notes in the amount of $75,000 each,
which bear interest at the rate of 12% per annum and were due March 31, 1998.
These loans were repaid subsequent to year end.
During 1997, the Company entered into a five-year agreement with an affiliated
entity to provide administrative, accounting, investment banking and investor
relations services as defined in the agreement. Fees for these services were
$192,500 for the year ended December 31, 1997. The Company issued 168,000 shares
of preferred stock valued at $168,000 and the remaining portion was paid in
cash.
NOTE E - MARKETABLE SECURITIES
During December 1993, the Company acquired 12,500 units in Gold Capital
Corporation ("GCC") in a private offering of securities at a per unit cost of
$2.00 with each unit consisting of two common shares and one warrant to purchase
common shares at $1.00. In 1994, the Company exercised its warrants and held a
total of 37,500 shares. During January 1997, the Company exchanged all of its
GCC securities in exchange for the cancellation of the stock options (see note
F.3).
F-13
<PAGE> 67
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
NOTE F - STOCKHOLDERS' EQUITY
1. Preferred Stock
As of December 31, 1997, the Company had two classes of Preferred Shares: Series
A and Series B. Both the Series A and B Shares (i) have 1,000,000 authorized
shares, (ii) are entitled to a cumulative $0.12 per annum dividend, and (iii) a
liquidation preference of $1.00 per share, plus any accumulated but unpaid
dividends. The dividends are payable quarterly, in cash or at the option of the
Company, in Common Shares. The Series A Shares have a priority in liquidation
over the Series B Shares.
The Company has the right to redeem both the Series A and B Shares at any time
for an amount equal to their liquidation preference amount. In addition, both
the Series A and B Shares are convertible, at the option of the holders, into
Common Shares, on a share for share basis. Both the Series A and B Shares are
nonvoting.
2. Common Stock
On January 21, 1997, Consolidated Land & Cattle Company (an inactive subsidiary
of the Company) merged with Angeles Acquisition Corp. Angeles Acquisition Corp.
survived the merger and is a wholly owned subsidiary of the Company (see note
G). In January 1997, the Company issued 8,638,003 Common Shares to the sole
stockholder of Angeles Acquisition Corp. at the stockholder's basis in the
entity.
In January 1997, the Company sold 5,496,911 Common Shares in a private
transaction for an aggregate purchase price of $1,000,000.
3. Stock Options
The Company had an aggregate of 140,000 Common Shares reserved for issuance
under a Compensatory Benefit Plan. The purpose of this plan was to compensate
officers, directors, consultants and advisors for services rendered to the
Company through the issuance of Common Shares. No shares were issued under the
Compensatory Benefit Plan in 1997 and 1996.
The Company had 5,000,000 Common Shares reserved for future issuance under an
Incentive Stock Option Plan (the "Old Plan"). During 1994, the Company granted
520,000 options to employees and
F-14
<PAGE> 68
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
officers/directors at $.55 per share. In September 1994, 54,546 stock options
were exercised. In 1996, 10,000 options were settled through the issuance of
8,500 Common Shares with a fair value of $3,400. In January 1997, the remaining
455,454 options were canceled in exchange for approximately $45,000 of
marketable securities which were held by the Company.
In 1994, the Company reserved 750,000 Common Shares for future issuance under a
nonqualified stock option plan the (the "1994 Plan"). In 1995, options to
acquire a total of 25,000 Common Shares at an exercise price of $.50 were
issued. As of December 31, 1996, the stock options to exercise 25,000 shares
were settled through the issuance of 20,000 Common Shares with a fair value of
$8,000.
During 1997, the Compensatory Benefit Plan, the Old Plan and the 1994 Plan were
terminated and any future amounts will be granted under the 1997 Stock Incentive
Plan.
At the annual Meeting of the Shareholders of the Company, held on October 8,
1997, the Shareholders adopted the Company's 1997 Stock Incentive Plan (the
"1997 Plan"). Under the terms of the 1997 Plan, the Company may grant employees
or consultants and advisors for services rendered to the Company, stock options,
stock appreciation rights or stock awards. The Company has reserved 3,000,000
Common Shares for issuance pursuant to the 1997 Plan. The exercise price of all
options shall not be less than the fair market value of the Common Shares on the
date of grant. As of December 31, 1997, options to acquire an aggregate of
500,000 Common Shares were outstanding under the 1997 Plan during 1997. As of
December 31, 1997, no stock appreciation rights had been granted and there had
been no stock awards under the 1997 Plan. The 1997 Plan expires on August 22,
2007.
The following represents stock option activity for the 1997 Plan for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
Weighted Average
Number Exercise Exercise
of Shares Price per Share Price per Share
--------- --------------- ---------------
<S> <C> <C> <C>
Outstanding at December 31, 1996 -- $ -- $ --
Granted 500,000 2.00 2.00
Exercised -- -- --
Canceled -- -- --
------- ------- -------
Outstanding at December 31, 1997 500,000 $ 2.00 $ 2.00
======= ======= =======
</TABLE>
At December 31, 1997 none of the options granted have vested.
F-15
<PAGE> 69
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
In accordance with provisions of SFAS No. 123, the Company applies APB Opinion
25 and related interpretations in accounting for its employee stock option plan
and, accordingly, does not recognize compensation expense for options issued to
employees. If the Company had elected to recognize compensation expense based on
the fair value of the options granted at grant date as prescribed by SFAS No.
123, net loss and basic loss per share would have been reduced to the pro forma
amounts indicated in the table below:
1997
----
Net loss attributable to common
stockholders - as reported $(2,478,577)
Net loss attributed to common
stockholders - pro forma $(2,548,577)
Basic loss per share - as reported $ (.17)
Basic loss per share pro forma $ (.17)
Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to December 31, 1995, the resulting pro forma compensation expense
may not be representative of the cost to be expected in future years.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
Expected dividend 0%
Expected stock price volatility 142%
Risk free interest rate 6%
Expected life of option 5 years
NOTE G - ANGELES METAL TRIM CO.
On January 21, 1997, Consolidated Land & Cattle Company (an inactive subsidiary
of the Company) merged with Angeles Acquisition Corp. (a privately held
company). Angeles Acquisition Corp. survived the merger and is a wholly owned
subsidiary of the Company. As part of the merger, the Company issued 8,638,003
Common Shares to the sole shareholder of Angeles Acquisition Corp. The shares
were recorded at the stockholder's basis in the entity. Concurrent with the
merger, the Company sold 5,496,911 Common Shares in a private transaction, for
an aggregate purchase price of $1,000,000. Prior to the merger, Angeles
Acquisition Corp. acquired Angeles for approximately $4,300,000, including fees
and expenses. Angeles incurred indebtedness of approximately $4,300,000, which
was
F-16
<PAGE> 70
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
used in connection with this acquisition. A portion of the proceeds from the
indebtedness was used to repay the outstanding balance of $900,000 under
Angeles' line of credit. The transaction was accounted for using the purchase
method of accounting. The allocation of the purchase price resulted in an excess
purchase price over fair value of net assets acquired of $2,384,904. This amount
represents goodwill and is being amortized over 10 years. The results of
operations for Angeles are included in the statement of operations from the date
of acquisition.
The pro forma effect on the statement of operations for the years ended December
31, 1997 and 1996 assuming this acquisition had occurred on January 1, 1996,
would have been as follows:
1997 1996
---- ----
Revenues $ 17,935,393 $20,879,891
Net loss $ (2,478,577) $(2,351,665)
These pro forma results have been prepared for comparative purposes and are not
meant to be indicative of the results had the acquisition occurred on the date
indicated, or which may result in the future.
NOTE H - NOTES PAYABLE
On January 15, 1997, the Company entered into a credit facility with a lender
and borrowed approximately $2,800,000. This credit facility was due on December
15, 1998 and bore interest at a rate of 2% per annum over the lender's
LIBOR-Rate. The balance outstanding at December 31, 1997 was approximately
$2,116,000. Interest expense was approximately $203,000 in 1997.
On January 17, 1997, the Company also borrowed $1,400,000 from a financial
institution at an interest rate of 9.78%, payable in forty-eight installments,
with the final payment due on February 17, 2001. The balance outstanding at
December 31, 1997 was approximately $1,132,000. Interest expense was
approximately $115,000 in 1997.
On January 12, 1998, both of the above discussed loans were repaid in connection
with the establishment of a new financing facility with Congress Financial
Corporation (Western) ("Congress Financial"). The new facility consists of
$3,443,000 in term loans, payable $57,384 per month, through January 2003, and
revolving lines of credit as determined as a percentage of eligible accounts
receivable and eligible inventories expiring January 2000, less certain reserves
as defined in the new agreement. The maximum borrowings permitted under the new
credit facility is $20,000,000, as defined in the agreement. Interest is payable
monthly at the bank's prime rate plus 0.75% per annum (9.25% at December 31,
1997). All the advances under the new facility are collateralized by all of the
F-17
<PAGE> 71
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
assets of Angeles and Angeles Acquisition (Capitol) and are also guaranteed by
the Company and California Building Systems, Inc., a subsidiary of Angeles.
The new financing facility contains a number of financial and other
non-financial covenants for both Angeles and Capitol. Angeles and Capitol are in
compliance with these new covenants.
NOTE I - INCOME TAXES
Deferred taxes are determined based on the estimated future tax effects of
difference between the financial statements and the basis of assets and
liabilities under the provisions of the enacted tax laws.
The tax effects of temporary differences that give rise to net deferred taxes at
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Deferred tax assets: 1997 1996
---- ----
<S> <C> <C>
Allowance for bad debts $ 55,201 $ --
Reserve for inventory 40,000 --
Net operating loss carryfoward 1,664,954 240,000
Inventory capitalization 56,497 --
Depreciation and amortization 62,794 --
Provision for write-down of assets -- 85,000
Others 15,200 --
----------- -----------
Total deferred tax assets 1,894,646 325,000
Valuation allowance for deferred tax assets (1,894,646) (325,000)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
</TABLE>
A valuation allowance was established because of the uncertainty that the
deferred tax asset will be realized.
At December 31, 1997 the Company had net operating loss carryforwards of
approximately $4,400,000 and $2,200,000 for Federal and State income tax
purposes and expire through 2012. Due to the additional common stock issued in
1997 and a change in ownership, pursuant to Section 382 of the Internal Revenue
Code, the Company's utilization of its net operating loss carryforwards may be
subject to limitation.
F-18
<PAGE> 72
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
NOTE J - COMMITMENTS
1. Leases
The Company leases its plant facilities under various operating lease
agreements. A majority of the plant facilities were leased from a former owner
of Angeles under three year lease agreements.
Total rent expense under operating lease agreements for the years ended December
31, 1997 and 1996, (net of sublease rental income of $19,512 and $21,071,
respectively) was $328,932 and $289,774, respectively. In addition to the lease
payments, the Company is responsible for property taxes.
The following is a schedule of approximate future minimum lease payments under
operating leases for facilities and equipment that have initial or remaining
noncancelable lease terms in excess of one year:
Year Ending
December 31,
------------
1998 $ 281,000
1999 262,500
2000 8,500
---------
$ 552,000
=========
Subsequent to December 31, 1997 (see note K), in connection with the acquisition
of substantially all of Old Capitol's assets, the Company assumed additional
future minimum lease payments due under a facilities lease of $900,000 per year
through December 31, 2000.
2. Employment Contract
During 1997, the Company has a one-year employment contract with the President
of one of its subsidiaries. The contract provides for annual compensation of
$84,000 plus bonuses and the issuance of 500,000 stock options.
NOTE K - SUBSEQUENT EVENTS
1. Acquisition
On January 12, 1998, the Company through its wholly-owned subsidiary, Angeles
Acquisition purchased substantially all of the assets of Old Capitol, a steel
processing and service center.
F-19
<PAGE> 73
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
Old Capitol filed for protection under Chapter 11 of the Bankruptcy Code on
October 7, 1997. On November 26, 1997, the Bankruptcy Court entered an order
establishing the procedures for the sale of substantially all of Old Capitol's
assets pursuant to the Asset Purchase Agreement dated December 1, 1997 between
Old Capitol and the Company.
The transaction was accounted for using the purchase method of accounting and
the total consideration was approximately $8,100,000, consisting of $336,000 in
cash, $1,500,000 in promissory notes (bearing interest at 9% due in installments
through 1999), $300,000 of the Company's Common Shares (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 cost and expenses associated with the acquisition.
Following the January 1998 acquisition, Angeles Acquisition changed its name to
Capitol Metals Co. ("Capitol").
The following related unaudited pro forma statement of operations gives effect
to such transactions as if they had occurred on January 1, 1997:
Year Ended
December 31, 1997
-----------------
Revenues $ 37,475,321
Loss from operations $ (5,327,729)
Net Loss $ (6,435,407)
Basic loss per share $ (.38)
Weighted average number of
common shares outstanding 16,749,772
These pro forma results have been prepared for comparative purposes and are not
meant to be indicative of the results had the acquisition occurred on the date
indicated, or which may result in the future.
2. Sale of Series C Preferred Shares
During March 1998, the Company sold 200 shares of its newly authorized 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.
F-20
<PAGE> 74
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
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 bid prices of the Common Shares for each of the five
trading days prior to the exercise date of any such conversion. 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. In addition, the Series C Preferred Shares are nonvoting.
3. Consulting Arrangement
In March 1998, the Company entered into a consulting arrangement with a director
of the Company. This individual will receive approximately $40,000 and 150,000
Common Shares as compensation for these services and may receive up to 200,000
additional Common Shares.
4. Related Party Transactions
During January 1998, in connection with the acquisition of Capitol and the
transactions with Congress Financial, a related party loaned an additional
$1,500,000 to the Company. The loan is evidenced by a convertible promissory
note of 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
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 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, an affiliate loaned $214,286 to the Company. The loan is
evidenced by a convertible promissory note of the Company (the "Promissory
Note") in the 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
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 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
affiliate.
F-21
<PAGE> 75
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1997 and 1996
5. Issuance of Warrants
In March 1998, the Company issued warrants to purchase 2,000,000 Common Shares
(1,000,000 exercisable at $1.00 per share and the remaining 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 a related party.
6. Issuance of Stock Options
In January 1998, two officers of the Company were granted a total of 400,000
stock options to purchase Common Shares with an exercise price of $1.22 per
share. These stock options vest at various dates through 2001.
In March 1998, the Company issued to officers, employees and employees of
affiliated entities stock options to purchase 625,000 Common Shares at $2.08 per
share. These stock options vest over a four year period commencing on March 10,
1999.
F-22
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1(1) Stock Purchase Agreement, dated as of January 15, 1997, between
Angeles Acquisition Corp., Angeles Metal Trim Co., California
Building Systems, Inc., and the shareholders of Angeles Metal Trim
Co. and D. Kingston Cable (Exhibits and Schedules omitted).
2.2(1) Agreement and Plan of Merger, dated January 16, 1997, between the
Company, Consolidated Land & Cattle Company, Raymond E. McElhaney,
Bill M. Conrad, Ronald R. McGinnis, Angeles Acquisition Corp. and
Stone Pine Colorado, LLC (Exhibits and Schedules omitted).
3.1(2) Articles of Incorporation of the Company.
3.2 Articles of Amendment to Articles of Incorporation, dated as of
December 31, 1997 (Setting Forth Terms of Series A Preferred
Stock and Series B Preferred Stock).
3.3(3) Articles of Amendment to Articles of Incorporation, dated as of
March 9, 1998 (Setting Forth Terms of Series C Preferred Stock).
3.4(4) By-Laws Revised and Amended, as of August 26, 1997.
4.1(3) Form of Warrant to Purchase 1,000,000 Common Shares at $1.00.
4.2(3) Form of Warrants to Purchase 1,000,000 Common Shares at $.75.
4.3(3) Form of Warrants to Purchase 250,000 Common Shares at $2.38.
10.1(5) Purchase and Sale Agreement, dated January 16, 1997, between the
Company, Raymond McElhaney, Bill Conrad and Ronald McGinnis
(Exhibits and Schedules omitted).
10.2(1) Form of Stock Purchase Agreement, dated January 16, 1997, between
the Company and the investors (Exhibits and Schedules omitted).
</TABLE>
<PAGE> 77
<TABLE>
<S> <C>
10.3(5) Lease Agreement, dated January 15, 1997, by and between Angeles
Metal Trim Co. and D. Kingston Cable, Trustee of the Daniel Kingston
Cable and Barbara White Cable 1995 Revocable Intervivos Trust (Re:
property at 4817 and 4915 Sheila Street, Commerce, California).
10.4(5) Lease Agreement, dated January 15, 1997, by and between Angeles Metal
Trim Co. and D. Kingston Cable, Trustee of the Daniel Kingston Cable
and Barbara White Cable 1995 Revocable Intervivos Trust (Re: property
at 116 Y Street, Vancouver, Washington).
10.5(5) Lease Agreement, dated November 13, 1989, by and between Angeles Metal
Trim Co. and 83rd Street Investors (Re: property at 4841 83rd Street,
Sacramento, California).
10.6(5) Lease Agreement, dated October 1, 1996, by and between Angeles Metal
Trim Co. and Fred G. and Patricia A. Duncolon (Re: property at 1851
Alexander Avenue, Tacoma, Washington).
10.7(5) Services Agreement, dated as of February 1, 1997, between the Company
and Stone Pine Atlantic, LLC.
10.8(5) Promissory Note, dated as of January 16, 1997, between the Company and
Stone Pine Colorado, LLC.
10.9(6) Loan Agreement, dated as of April 9, 1997, between Angeles Metal Trim
Co., Consolidated Capital of North America, Inc., Stone Pine Colorado,
LLC and ERB Acquisition Group, LLC.
10.10(6) Promissory Note, dated April 9, 1997, of Angeles Metal Trim Co. in the
principal amount of $309,000, payable to ERB Acquisition Group, LLC.
10.11(6) Guaranty, dated April 9, 1997, and delivered by Consolidated Capital of
North America Inc. and Stone Pine Colorado, LLC to and for the benefit
of ERB Acquisition Group, LLC.
10.12(6) Security Agreement, dated as of April 9, 1997, made and delivered by
Consolidated Capital of North America, Inc. in favor of ERB Acquisition
Group, LLC.
</TABLE>
<PAGE> 78
<TABLE>
<S> <C>
10.13(7) Loan Agreement, dated as of June 18, 1997, between Angeles Metal Trim Co.,
Consolidated Capital of North America, Inc. and Stone Pine Financial Group,
LLC.
10.14(7) Promissory Note, dated June 18, 1997, of Angeles Metal Trim Co., in the
principal amount of $110,210, payable to Stone Pine Financial Group, LLC.
10.15(7) Employment Agreement, dated April 10, 1997, between Angeles Metal Trim Co.
and Ronald F. Martin.
10.16(4) Loan Agreement and Term Note, dated as of August 21, 1997, between
Consolidated Capital of North America, Inc. and Stone Pine Financial Group,
LLC.
10.17(4) Amendment to Term Note, dated August 21, 1997.
10.18(4) Promissory Note, dated as of July 8, 1997, between ERB Acquisition Group,
LLC and Consolidated Capital of North America, Inc.
10.19(4) Amendment to Promissory Note, dated July 8, 1997.
10.20(4) Consolidated Capital of North America, Inc. 1997 Stock Incentive Plan.
10.21(4) Form of Incentive Stock Option Agreement for Grants to Employees.
10.22(4) Form of Non-Qualified Stock Option Agreement for Grants to Employees.
10.23(4) Form of Non-Qualified Stock Option Agreement for Grants to Non-Employees.
10.24(8) Asset Purchase Agreement, dated as of December 1, 1997, between the
Company and Capitol Metals Co., Inc. (Exhibits and Schedules omitted).
10.25(8) 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.
</TABLE>
<PAGE> 79
<TABLE>
<S> <C>
10.26(8) 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(8) 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(8) 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(8) Security Agreement, dated January 8, 1998, between Binhad, Inc. (formerly
known as Capitol Metals Co., Inc.) and Angeles Acquisition Corp.
10.30(8) Registration Agreement, dated as of January 6, 1998, between Binhad, Inc.
(formerly known as Capitol Metals Co., Inc.) and the Company.
10.31(8) 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(8) 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(8) 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 Loan Agreement, dated as of December 31, 1997, between the Company and
Stone Pine Advisors, LLC.
10.35 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 Loan Agreement, dated as of December 31, 1997, between the Company and
Stone Pine Capital, LLC.
</TABLE>
<PAGE> 80
<TABLE>
<S> <C>
10.37 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 Loan Agreement, dated as of December 31, 1997, between the Company and
Paul Bagley.
10.39 Promissory Note, dated as of December 31, 1997, in the principal amount of
$75,000 from the Company to Paul Bagley.
10.40 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 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 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 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 Convertible Note, dated as of January 9, 1998, in the principal amount of
$1,750,000 from the Company to Paul Bagley.
10.45 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 Loan Agreement, dated January 9, 1998, by and between Congress Financial
Corporation (Western), Angeles Metal Trim Co. and Angeles Acquisition Corp.
10.48 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).
</TABLE>
<PAGE> 81
<TABLE>
<S> <C>
10.49 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 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 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 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 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 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 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 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.
16.1(9) Letter from Kish Leake & Associates, P.C., dated February 5, 1997, regarding
change of certifying accountant.
16.2(10) Letter from Grant Thornton LLP, dated January 28, 1998,regarding change of
certifying accountant.
21. Subsidiaries of the Company.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 82
- ----------------
(1) Incorporated by reference from the Company's Report on Form 8-K, dated
January 23, 1997.
(2) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991.
(3) Incorporated by reference from the Company's Report on Form 8-K, dated
March 18, 1998.
(4) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the period ended September 30, 1997.
(5) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.
(6) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the period ended March 31, 1997.
(7) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the period ended June 30, 1997.
(8) Incorporated by reference from the Company's Report on Form 8-KA, filed on
January 29, 1998.
(9) Incorporated by reference from the Company's Report on Form 8-K filed on
February 7, 1997.
(10) Incorporated by reference from the Company's Report on Form 8-KA, filed on
January 30, 1998.
<PAGE> 1
EXHIBIT
3.2
Articles of Amendment to Articles of Incorporation, dated as
of December 31, 1997 (Setting Forth Terms of Series A
Preferred Stock and Series B Preferred Stock)
<PAGE> 2
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Consolidated Capital of North America,
Inc. (the "Corporation").
SECOND: The following amendment to the Articles of Incorporation was adopted on
March 30, 1998, as prescribed by the Colorado Business Corporation Act, in the
manner marked with an X below:
No Common Shares have been issued or Directors Elected - Action by
- --- Incorporators
No Common Shares have been issued but Directors Elected - Action by
- ---- Directors
X Such amendment was adopted by the board of directors where Common
- ---- Shares have been issued.
Such amendment was adopted by a vote of the shareholders. The number of
- ---- Common Shares voted for the amendment was sufficient for approval.
If these amendments are to have a delayed effective date, please list that date:
________________
(not to exceed ninety (90) days from the date of filing)
THIRD: The Corporation's Articles of Incorporation are hereby amended to amend
and restate Section 4 of ARTICLE IV as follows:
Section 4. Series A and Series B Preferred Shares
A. Designation. Two series of Preferred Shares, designated Series A
Preferred Shares and Series B Preferred Shares are hereby provided for, which
shares shall have the rights, privileges and preferences set forth below.
Authorized Number. The number of shares constituting the Series A
Preferred Shares shall be 1,000,000. The number of shares constituting the
Series B Preferred Shares shall be 1,000,000. Except as set forth below, the
powers, preferences, rights, qualifications, limitations and restrictions of the
Series A Preferred Shares and Series B Preferred Shares (which are sometimes
together referred to as the "Initial Series Preferred Shares") shall be
identical.
<PAGE> 3
B. Dividends. (1) The holders of record of the Initial Series
Preferred Shares shall be entitled to receive, out of any assets legally
available for the purpose, prior and in preference to any declaration or payment
of any dividend on the Common Shares of the Corporation, dividends at the rate
of $0.12 per share per annum payable quarterly (when, as and if declared by the
Board of Directors out of its funds legally available for such purpose) on the
first day of January, April, July and October of each year to the holders of
record on such dates. Such dividends shall be cumulative. The dividends shall be
paid in cash or at the option of the Corporation, dividends shall be paid in
Common Shares of the Corporation based on the average of the closing bid price
of the Corporation's Common Shares for the five consecutive trading days
preceding the last five trading days of the period for which such dividends are
payable.
(2) Dividends shall accrue from the date of original issue of the
Initial Series Preferred Shares. Quarterly dividends which are not paid in full
on any dividend payment date will cumulate without interest until such
accumulated quarterly dividends shall have been declared and paid. Any
declaration of dividends may be for a portion, or all, of the then accumulated
dividends. Any accumulated dividends which are not paid will continue to
cumulate in the manner described above.
(3) No dividend or distribution in cash, shares of capital stock or
other property shall be paid or declared and set apart for payment on any date
on or in respect of the Common Shares or on any other series of stock issued by
the Corporation ranking junior to the Initial Series Preferred Shares in payment
of dividends or upon liquidation, dissolution or winding-up of the Corporation
(collectively, the "Junior Securities") (any such dividend or distribution
hereinafter referred to as a "Junior Securities Distribution"), unless,
contemporaneously therewith or with respect to the immediately preceding
dividend payment date for the Initial Series Preferred Shares, a dividend or
distribution is or was paid or declared and set apart for payment, as the case
may be, on or in respect of the Initial Series Preferred Shares payable at the
rate set forth herein and payable on a date no later than the payment date set
for such Junior Securities Distribution. In no event may the Corporation (i)
make a Junior Securities Distribution in cash, unless, contemporaneously
therewith or with respect to the immediately preceding dividend payment date for
the Initial Series Preferred Shares, a dividend or distribution in cash is or
was paid or declared and set apart for payment on or in respect of the Initial
Series Preferred Shares, payable at the rate set forth herein and on a date no
later than the payment date set for such Junior Securities Distribution, (ii)
make a Junior Securities Distribution while there are dividends in arrears on
the Initial Series Preferred Shares or (iii) redeem, purchase or otherwise
acquire for value any Junior Securities, unless, prior to or contemporaneously
with such redemption, purchase or acquisition the Initial Series Preferred
Shares is redeemed in full; provided, however, that the Corporation may redeem,
purchase or otherwise acquire Junior Securities if such redemption, purchase or
other acquisition is approved by the holders of at least 50% of the outstanding
Initial Series Preferred Shares. Notwithstanding the foregoing, this provision
shall not prohibit the payment or declaration and setting aside of a dividend
payable in shares of Junior Securities or a redemption, purchase or acquisition
of Junior Securities with shares of Junior Securities.
<PAGE> 4
(4) No dividend may be paid or declared and set apart for payment on
any Initial Series Preferred Shares, unless at the same time (i) a like dividend
is paid or set aside for payment on all Initial Series Preferred Shares then
outstanding and (ii) a like ratable dividend is paid or set aside for payment on
all shares of capital stock ranking on a parity with the Initial Series
Preferred Shares with respect to the payment of dividends. No dividend may be
paid or declared and set apart for payment on any share of capital stock ranking
on a parity with the Initial Series Preferred Shares with respect to payment of
dividends, unless there shall have been paid or set apart for payment a like
ratable dividend on all Initial Series Preferred Shares then outstanding.
C. Liquidation Preference.
(1) Series A Preferred Shares. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of Series A Preferred Shares shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of any Liquidation Junior Stock, an amount per share equal to (i) $1.00
for each outstanding Series A Preferred Share and (ii) all accumulated but
unpaid dividends, if any, on each such Series A Preferred Share. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Liquidation Parity Stock shall be insufficient to permit the
payment to such holders of the full preferential amounts set forth in Subsection
C(1) of Section 4 and Subsection D(1) of Section 5 of these Articles of
Incorporation, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Liquidation Parity Stock on a share by share basis in proportion to the
aggregate preferential amounts of each such series of Preferred Shares.
(2) Series B Preferred Shares. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of Series B Preferred Shares shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of shares of the Corporation other than Series B Preferred Shares by
reason of their ownership thereof, but after payment to the holders of Series A
Preferred Shares and Series C Preferred Shares, an amount per share equal to (i)
$1.00 for each outstanding Series B Preferred Share and (ii) all accumulated but
unpaid dividends, if any, on each such Series B Preferred Share. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Shares shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the Corporation legally available for distribution
after payment to the holders of Series A Preferred Shares and Series C Preferred
Shares, shall be distributed ratably among the holders of the Series B Preferred
Shares in proportion to the number of shares of such stock owned by each such
holder.
(3) Remaining Assets. After the distributions described in Sections
C(1) and (2) have been paid, the remaining assets of the Corporation available
for distribution to shareholders shall be distributed among the holders of the
Corporation other than Series A Preferred Shares, Series
<PAGE> 5
B Preferred Shares and Series C Preferred Shares pro rata based on the number of
shares of the Corporation other than Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares held by each such holder.
(4) Treatment of Mergers, etc. A consolidation, merger or share
exchange by the Corporation with or into any other corporation or corporations,
or a sale, conveyance or disposition of all or substantially all of the assets
of the Corporation or the effectuation by the Corporation of a transaction or
series of related transactions in which more than 50% of the voting power of the
Corporation is disposed of, shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section C, if the holders of at least 50%
of the outstanding Series A Preferred Shares and the holders of at least 50% of
the outstanding Series B Preferred Shares elect to have such transaction treated
as a liquidation.
(5) Defined Terms. The term "Liquidation Parity Stock" as used
herein shall be deemed to mean all shares of Series A Preferred Shares of the
Corporation and Series C Preferred Shares of the Corporation which shall rank
equally as to distribution of assets upon liquidation. The term "Liquidation
Junior Stock" as used herein shall be deemed to mean the Series B Preferred
Shares, the Common Shares and all other stock of the Corporation ranking junior
to the Series A Preferred Shares and the Series C Preferred Shares as to
distribution of assets upon liquidation.
D. Conversion. The holders of the Initial Series Preferred Shares
shall have conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rights.
(i) Each Initial Series Preferred Share shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Initial
Series Preferred Shares, into such number of fully paid and nonassessable Common
Shares as is determined by dividing $1.00 (the "Original Issue Price") by the
Conversion Price at the time in effect for such share. The initial Conversion
Price per share for the Initial Series Preferred Shares shall be $1.00;
provided, however, that the Conversion Price for the Initial Series Preferred
Shares (the "Conversion Price") shall be subject to adjustment as set forth
below.
(ii) In the event of a call for redemption of any Initial Series
Preferred Shares pursuant to Section E hereof, each holder of any Initial Series
Preferred Share shall have the right to exercise the conversion rights set forth
in this Section D and the right to convert each share shall cease as to the
shares designated for redemption as of the close of business on the business day
immediately prior to the redemption date, unless default is made in payment of
the redemption price.
<PAGE> 6
(2) Mechanics of Conversion. Before any holder of Initial Series
Preferred Shares shall be entitled to convert the same into Common Shares, the
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Initial Series
Preferred Shares, and shall give written notice by mail, postage prepaid, to the
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for Common Shares are to be issued. The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such holder of
Initial Series Preferred Shares, or to the nominee or nominees or such holder, a
certificate or certificates for the number of whole Common Shares to which such
holder shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Initial Series Preferred Shares to be converted, and the person
or persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares as of such date. If the conversion is in connection with an underwritten
offer of securities registered pursuant to the Securities Act of 1933, the
conversion may, at the option of any holder tendering Initial Series Preferred
Shares for conversion, be conditioned upon the closing with the underwriter of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Shares issuable upon such conversion of the
Initial Series Preferred Shares shall not be deemed to have converted such
Initial Series Preferred Shares unless and until the closing of such sale of
securities.
(3) Conversion Price Adjustments. The Conversion Price shall be
subject to adjustment from time to time as follows:
The Conversion Rate shall be appropriately adjusted for any
stock-split, stock-dividend, subdivision or combination of the Common Shares,
such that upon conversion of the Initial Series Preferred Shares the holders of
Initial Series Preferred Shares shall be entitled to receive such number of
Common Shares for each Initial Series Preferred Share to be converted as such
holders would have become entitled to had such holders converted the Initial
Series Preferred Share immediately prior to such event. In the event of any
consolidation, merger or share exchange by the Corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of the Corporation or the effectuation by the
Corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the Corporation is disposed of, then each holder
of Initial Series Preferred Shares shall be entitled to receive in respect of
all or any of the Initial Series Preferred Shares then held by such holder, the
shares, securities or property receivable upon such transaction by a holder of
the number of Common Shares issuable upon conversion of such Initial Series
Preferred Shares immediately prior to such transaction. No adjustments in
respect of dividends will be made upon any conversion.
(4) Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons or assets (excluding
cash dividends), then, in each such case for the purpose of this subsection
D(4), the holders of the Initial Series Preferred Shares shall be entitled to a
<PAGE> 7
proportionate share of any such distribution as though they were the holders of
the number of Common Shares of the Corporation into which their shares of
Initial Series Preferred Shares are convertible as of the record date fixed for
the determination of the holders of Common Shares of the Corporation entitled to
receive such distribution.
(5) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Shares (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section D) provision shall be made so that the holders of the Initial
Series Preferred Shares shall thereafter be entitled to receive upon conversion
of the Initial Series Preferred Shares the number of shares of stock of other
securities or property of the Corporation or otherwise, to which a holder of
Common Shares deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section D with respect to the rights of
the holders of the Initial Series Preferred Shares after the recapitalization to
the end that the provisions of this Section D (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Initial Series Preferred Shares) shall be applicable after
that event as nearly equivalent as may be practicable.
(6) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 of Article IV and in the taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the holders of the Initial Series Preferred Shares against impairment.
(7) No Fractional Shares; Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of
the Initial Series Preferred Shares, and the number of Common Shares to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of Initial Series Preferred Shares the holder is at the time
converting into Common Shares and the number of Common Shares issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Initial Series Preferred Shares pursuant to this Section
D, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Initial Series Preferred Shares a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Initial Series Preferred Shares, furnish or
cause to be furnished to such holder a like certificate
<PAGE> 8
setting forth (A) such adjustment and readjustment, (B) the Conversion Price at
the time in effect, and (C) the number of Common Shares and the amount, if any,
of other property which at the time would be received upon the conversion of a
share of Initial Series Preferred Shares.
(8) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock or any class of
any other securities or property, or to receive any other right, this
Corporation shall mail to each holder of an Initial Series Preferred Share, at
least 20 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(9) Reservation of Stock Issuable Upon Conversion. This Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Shares solely for the purpose of effecting the conversion of the Initial
Series Preferred Shares such number of its Common Shares as shall from time to
time be sufficient to effect the conversion of all outstanding Initial Series
Preferred Shares; and if at any time the number of authorized but unissued
Common Shares shall not be sufficient to effect the conversion of all then
outstanding Initial Series Preferred Shares, in addition to such other remedies
as shall be available to the holder of such Initial Series Preferred Shares, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued Common Shares to
such number of shares as shall be sufficient for such purposes.
(10) Notices. Any notice required by the provisions of this Section
4 or Article IV to be given to the holders of Initial Series Preferred Shares
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at its address appearing on the books of
the Corporation.
E. Redemption of Initial Series Preferred Shares.
(1) Optional Redemption. The Initial Series Preferred Shares may be
called for redemption and redeemed at the option of the Corporation by
resolution of the board of directors, in whole or in part at any time, upon the
notice hereinafter provided for in Section E(2) hereof, by the payment therefor
of the redemption price of $1.00 per share and any accumulated but unpaid
dividends on such Initial Series Preferred Shares.
(2) Manner of Redemption of Initial Series Preferred Shares. (i) If
less than all of the outstanding Initial Series Preferred Shares shall be called
for redemption, the particular shares of such series to be redeemed shall be
selected by lot or by such other equitable manner as may be prescribed by
resolution of the Board of Directors.
(ii) Notice of redemption of any Initial Series Preferred Shares
shall be given by the Corporation by first-class mail, not less than 20 nor more
than 60 days prior to the date
<PAGE> 9
fixed by the board of directors of the Corporation for redemption (herein called
the "redemption date"), to the holders of record of the shares to be redeemed at
their respective addresses then appearing on the records of the Corporation. The
notice of the redemption shall state:
(A) the redemption date,
(B) the redemption price,
(C) whether the redemption is an optional redemption or a
mandatory redemption,
(D) if less than all outstanding Initial Series Preferred
Shares are to be redeemed, the identification of the Initial Series Preferred
Shares to be redeemed,
(E) the conversion rate on the date of the notice,
(F) that on the redemption date the redemption price will
become due and payable upon each Initial Series Preferred Share to be redeemed
and the right to convert each share of Initial Series Preferred Share shall
cease as of the close of business on the business day prior to the redemption
date, unless default shall be made in the payment of the redemption price, and
(G) the place or places where such Initial Series Preferred
Shares to be redeemed are to be surrendered for payment of the redemption price.
F. Voting Rights. Holders of the Initial Series Preferred Shares
shall not be entitled to any voting rights and shall not be entitled to notice
of any meeting of shareholders of the Corporation.
G. Status of Converted or Redeemed Stock. In the event any Initial
Series Preferred Shares shall be converted pursuant to Section D hereof or shall
be redeemed pursuant to Section E hereof, the shares so converted or redeemed
shall be canceled and shall not be reissuable by the Corporation.
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by its authorized officer as of March 30, 1998.
[Corporate Seal] CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Donald R. Jackson
--------------------------
Donald R. Jackson
Secretary and Treasurer
<PAGE> 1
EXHIBIT
10.34
Loan Agreement dated as of December 31, 1997, between the Company and Stone
Pine Advisors, LLC
<PAGE> 2
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made as of the 31st day of
December, 1997, between Consolidated Capital of North America, Inc., a Colorado
corporation ("Borrower") and Stone Pine Advisors, LLC, a Colorado limited
liability company ("Lender").
RECITAL
Borrower has requested that Lender make a loan to or for the benefit of
Borrower in the amount of $75,000.00, and Lender is willing to do so on the
following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, Borrower and Lender agree as follows:
1. LOAN.
1.1 Loan. Subject to all of the terms and conditions contained in
this Agreement, Lender agrees to advance to Borrower, on the date hereof, the
principal sum of $75,000.00 (the "Loan"). The Loan shall be evidenced by and
repayable in accordance with the terms of Borrower's promissory note ("Note"),
the form of which is attached as Exhibit A.
1.2 Equity Shares. (a) As additional consideration for the
advancement of the Loan, Borrower shall issue to Lender Common Shares of
Borrower as follows: 33,333 Common Shares upon advancement of the Loan (the
"Common Shares").
(b) The Common Shares will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and accordingly, will constitute
"restricted securities" for purposes of the Securities Act and Lender will not
be able to transfer such Common Shares except upon compliance with the
registration requirements of the Securities Act and applicable state securities
laws or an exemption therefrom. The certificates evidencing the Common Shares
shall contain a legend to the foregoing effect.
(c) Borrower, shall upon the demand of any holder of the Common
Shares, file a registration statement with the SEC to permit the sale of the
Common Shares by the holders of such shares from time to time. The holders of
the Common Shares shall also have "piggyback" registration rights.
2. CONDITIONS TO THE LOAN.
2.1 Documents. The making of the Loan is conditioned upon the
execution and/or
<PAGE> 3
delivery to Lender of the following agreements, instruments and documents by
the parties thereto: (a) this Agreement; (b) the Note; and (c) a stock
certificate for 33,333 Common Shares of Borrower issued in the name of Lender.
2.2 Representations and Warranties. All representations and
warranties contained in this Agreement shall be true in all material respects
on and as of the date of the making of the Loan as if such representations and
warranties had been made on and as of such date.
3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of Borrower. Borrower
represents and warrants that as of the date of the execution of this Agreement:
(a) Existence. Borrower is a corporation duly organized and in
good standing under the laws of the State of 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 Borrower's financial
condition, results of operations or business.
(b) Authority. The execution and delivery by Borrower of this
Agreement and the Note: (a) are within Borrower's corporate powers; (b) are
duly authorized by Borrower's board of directors; (c) are not in contravention
of the terms of Borrower's certificate of incorporation or bylaws; (d) are not
in contravention of any law or laws, or of the terms of any material indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
any of Borrower's property is bound; (e) do not require any governmental
consent, registration or approval; (f) do not contravene any contractual or
governmental restriction binding upon Borrower; and (g) will not result in the
imposition of any lien, charge, security interest or encumbrance upon any
property of Borrower under any existing indenture, mortgage, deed of trust,
loan or credit agreement or other material agreement or instrument to which
Borrower is a party or by which Borrower or any of Borrower's property may be
bound or affected.
(c) Binding Effect. This Agreement and the Note set forth the
legal, valid and binding obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms.
3.2 Investment Representations of Lender. Lender represents and
warrants to Borrower as follows:
(a) Lender acknowledges that you have advised Lender that the Common
Shares have not been registered under the Securities Act or any other
securities regulation laws of any state and that your reliance on the
availability of certain exemptions from registration is based in part on the
representations made by Lender in this Agreement.
<PAGE> 4
(b) Lender hereby represents to you that Lender is acquiring the
Common Shares for the account of Lender for investment only and not with a view
to resell or otherwise distribute such Common Shares, and that Lender is not
acquiring the Common Shares on behalf of any other person or entity. Lender
further represents that Lender does not intend to resell, transfer or dispose
of all or any part of the Common Shares without registration under the
Securities Act or without an opinion from counsel acceptable to Borrower, that
registration is not required, and Lender represents that it is able to bear the
economic risk of this investment for an indefinite period of time under these
circumstances.
(c) Lender further acknowledges that the Common Shares are "restricted
securities" as that term is defined in Rule 144 of the General Rules and
Regulations under the Securities Act. Lender understands that stop transfer
instructions will be issued to the transfer agent for Borrower's stock, and
Lender consents to the placing of a legend in substantially the following form
on the back of the certificate issued to Lender:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER STATE LAWS REGULATING THE ISSUANCE OF
SECURITIES AND ARE PURCHASED PURSUANT TO AN INVESTMENT
REPRESENTATION BY THE PURCHASER THEREOF. THESE SHARES SHALL NOT
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE PURCHASER
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SHARES EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE
OPINION OF ITS COUNSEL TO THE EFFECT THAT SUCH TRANSFER SHALL NOT
BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS.
(d) Lender agrees to hold harmless and indemnify Borrower for any and
all liabilities resulting to it through violation by Lender of the above
warranties and representations.
4. DEFAULT AND RIGHTS AND REMEDIES.
4.1 Default and Rights and Remedies. Upon the occurrence of
default, Lender shall have the rights and remedies set forth in the Note and
the rights and remedies available to Lender under applicable law.
5. MISCELLANEOUS.
5.1 Reliance by Lender. All covenants, agreements, representations
and warranties
<PAGE> 5
made by Borrower shall, notwithstanding any investigation by Lender, be
deemed to be material to and to have been relied upon Lender.
5.2 Parties. Whenever in this Agreement there is reference made to
any of the parties, such reference shall be deemed to include, wherever
applicable, a reference to the respective successors and assigns of Borrower
and Lender.
5.3 Applicable Law; Severability. THIS AGREEMENT SHALL BE
CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND
DECISIONS OF THE STATE OF COLORADO. EACH PARTY TO THIS AGREEMENT HEREBY
CONSENTS TO JURISDICTION AND VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT
IN FEDERAL OR STATE COURT SITTING IN THE CITY OF DENVER, COLORADO. Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.
5.4 Maximum Interest. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the applicable
law governing the maximum rate of interest payable on or in connection with all
indebtedness and transactions hereunder (or applicable United States federal
law to the extent that it permits Lender to contract for, charge, take, reserve
or receive a greater amount of interest). If the applicable law is ever
judicially interpreted so as to render usurious any amount of money or other
consideration called for hereunder, or contracted for, charged, taken, reserved
or received with respect to any loan or advance hereunder, or if acceleration
of the maturity of the Loan or the indebtedness hereunder or if any prepayment
by Borrower results in Borrower's having paid any interest in excess of that
permitted by law, then it is Borrower's and Lender's express intent that all
excess cash amounts theretofore collected by Lender be credited on the
principal balance of the Loan (or if the Loan has been or would thereby be paid
in full, refunded to Borrower), and the provisions of this Agreement
immediately be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder. The right to accelerate maturity of the
Loan does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of acceleration.
<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
a Colorado corporation
By: /s/ Donald R. Jackson
---------------------------------
Donald R. Jackson
Treasurer
STONE PINE ADVISORS, LLC
a Colorado limited liability company
By: /s/ Paul Bagley
---------------------------------
Paul Bagley
Chief Executive Officer
<PAGE> 7
Exhibit A to
Loan Agreement
Note
(See Exhibit 10.35)
<PAGE> 1
EXHIBIT
10.35
Promissory Note, dated as of December 31, 1997, in the
principal amount of $75,000 from the Company to Stone
Pine Advisors, LLC.
<PAGE> 2
TERM NOTE
$75,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, Consolidated Capital of North
America, Inc., a Colorado corporation ("Borrower"), promises to pay to Stone
Pine Advisors, LLC, a Colorado limited liability company ("Lender"), at Suite
400, 410 17th Street, Denver, Colorado 80202, or at any other place designated
at any time by the holder hereof, in lawful money of the United States of
America, the principal amount of $75,000.00 as described herein. Borrower
further promises to pay interest (computed on the basis of a year consisting of
twelve equal months) on the principal balance of this Term Note (this "Note")
outstanding from time to time at the rate of 12.0% per annum.
The principal of this Note and accrued interest hereon shall be due
and payable in full on March 31, 1998.
Borrower shall have the option at any time to prepay, without penalty,
the whole or a part of the principal of this Note. All prepayments shall be
applied first to accrued and unpaid interest and then to principal.
The existence of any of the following conditions or the occurrence of
one or the following events, if not cured or waived within ten (10) days after
notice shall be an Event of Default of this Note:
(a) Borrower shall fail to make any payment of any
installment of interest or principal of this Note
when due and payable; or
(b) Any warranty or representation contained in the Loan
Agreement shall prove to have been false or incorrect
or breached in any material respect on the date as of
which made; or
(c) Any violation in any material respect of any covenant
contained in the Loan Agreement; or
(d) Borrower shall fail to pay any Credit Obligation
(defined to mean any obligation for the payment of
borrowed money or the installment purchase price of
property or an account of a lease of property, or any
obligation under a guaranty or suretyship agreement
covering obligations of such type) owing by it or
them, or any interest or premium thereon, when due,
whether owed to Lender or any other person and
whether such Credit Obligation shall become due by
scheduled maturity, by required prepayment, by
acceleration, by demand, or otherwise, or Borrower
shall fail to perform any term,
<PAGE> 3
covenant, or agreement on its or their part to be
performed under any agreement or instrument
evidencing or securing or relating to any such Credit
Obligation when required to be performed which
continues beyond any applicable grace period, if the
effect of such failure is to accelerate or to permit
the holder or holders of such Credit Obligations to
accelerate the maturity of such Credit Obligation,
whether or not such failure to perform shall be
waived by the holder or holders of such Credit
Obligation; or
(e) Borrower is dissolved or liquidated, or Borrower
makes an assignment for the benefit of creditors,
files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any
tribunal for any receiver or trustee of Borrower,
commences any proceeding relating to Borrower under
any bankruptcy, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or
there is commenced against Borrower any such
proceeding which remains undismissed for a period of
sixty days, or Borrower by any act indicates its
consent to, approval of or acquiescence in any such
proceeding or the appointment of any receiver of or
trustee for Borrower or any substantial part of its
property, or suffers any such receivership or
trusteeship to continue undischarged for a period of
thirty days; or
(f) Lender shall have determined that one or more
conditions exist or events have occurred which will
result in a material adverse change in the business,
properties or financial condition of Borrower.
Upon the happening of any one or more of the foregoing Events of
Default which shall be continuing (i) the unpaid balance of the principal
amount hereof shall become and be immediately due and payable without
presentation, demand, protest or other notice of any kind all of which are
expressly waived by Borrower and (ii) the Borrower shall pay all costs and
expenses of collection, including attorneys' fees.
If any required payment under this Note is not paid within ten (10)
days after the same becomes due and payable, the same shall bear interest at a
rate which is five percent (5.0%) per annum in excess of the otherwise
applicable rate of interest.
This Note is fully transferable by Lender, without the consent of or
notice to, Borrower.
It is expressly stipulated and agreed to be the intent of Borrower and
Lender at all times to comply with the applicable law governing the maximum
rate of interest payable on or in connection with all indebtedness and
transactions hereunder (or applicable United States
<PAGE> 4
federal law to the extent that it permits Lender to contract for, charge, take,
reserve or receive a greater amount of interest). If the applicable law is
ever judicially interpreted so as to render usurious any amount of money or
other consideration called for hereunder, or contracted for, charged, taken,
reserved or received with respect to any loan or advance hereunder, or if
acceleration of the maturity of this Note or the indebtedness hereunder or if
any prepayment by Borrower results in Borrower's having paid any interest in
excess of that permitted by law, then it is Borrower's and Lender's express
intent that all excess cash amounts theretofore collected by Lender be credited
on the principal balance of this Note (or if this Note has been or would
thereby be paid in full, refunded to Borrower), and the provisions of this Note
immediately be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder. The right to accelerate maturity of
this Note does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of acceleration.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF COLORADO.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
a Colorado corporation
By: /s/ Donald R. Jackson
--------------------------
Donald R. Jackson
Treasurer
<PAGE> 1
EXHIBIT
10.36
Loan Agreement, dated as of December 31, 1997, between
the Company and Stone Pine Capital, LLC.
<PAGE> 2
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made as of the 31st day of
December, 1997, between Consolidated Capital of North America, Inc., a Colorado
corporation ("Borrower") and Stone Pine Capital, LLC, a Colorado limited
liability company ("Lender").
RECITAL
Borrower has requested that Lender make a loan to or for the benefit
of Borrower in the amount of $75,000.00, and Lender is willing to do so on the
following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, Borrower and Lender agree as follows:
1. LOAN.
1.1 Loan. Subject to all of the terms and conditions contained in
this Agreement, Lender agrees to advance to Borrower, on the date hereof, the
principal sum of $75,000.00 (the "Loan"). The Loan shall be evidenced by and
repayable in accordance with the terms of Borrower's promissory note ("Note"),
the form of which is attached as Exhibit A.
1.2 Equity Shares. (a) As additional consideration for the
advancement of the Loan, Borrower shall issue to Lender Common Shares of
Borrower as follows: 33,333 Common Shares upon advancement of the Loan (the
"Common Shares").
(b) The Common Shares will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and accordingly, will constitute
"restricted securities" for purposes of the Securities Act and Lender will not
be able to transfer such Common Shares except upon compliance with the
registration requirements of the Securities Act and applicable state securities
laws or an exemption therefrom. The certificates evidencing the Common Shares
shall contain a legend to the foregoing effect.
(c) Borrower, shall upon the demand of any holder of the Common
Shares, file a registration statement with the SEC to permit the sale of the
Common Shares by the holders of such shares from time to time. The holders of
the Common Shares shall also have "piggyback" registration rights.
2. CONDITIONS TO THE LOAN.
2.1 Documents. The making of the Loan is conditioned upon the
execution and/or delivery to Lender of the following agreements, instruments
and documents by the parties
<PAGE> 3
thereto: (a) this Agreement; (b) the Note; and (c) a stock certificate for
33,333 Common Shares of Borrower issued in the name of Lender.
2.2 Representations and Warranties. All representations and
warranties contained in this Agreement shall be true in all material respects
on and as of the date of the making of the Loan as if such representations and
warranties had been made on and as of such date.
3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of Borrower. Borrower
represents and warrants that as of the date of the execution of this Agreement:
(a) Existence. Borrower is a corporation duly organized and in
good standing under the laws of the State of 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 Borrower's financial
condition, results of operations or business.
(b) Authority. The execution and delivery by Borrower of this
Agreement and the Note: (a) are within Borrower's corporate powers; (b) are
duly authorized by Borrower's board of directors; (c) are not in contravention
of the terms of Borrower's certificate of incorporation or bylaws; (d) are not
in contravention of any law or laws, or of the terms of any material indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
any of Borrower's property is bound; (e) do not require any governmental
consent, registration or approval; (f) do not contravene any contractual or
governmental restriction binding upon Borrower; and (g) will not result in the
imposition of any lien, charge, security interest or encumbrance upon any
property of Borrower under any existing indenture, mortgage, deed of trust,
loan or credit agreement or other material agreement or instrument to which
Borrower is a party or by which Borrower or any of Borrower's property may be
bound or affected.
(c) Binding Effect. This Agreement and the Note set forth the
legal, valid and binding obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms.
3.2 Investment Representations of Lender. Lender represents and
warrants to Borrower as follows:
(a) Lender acknowledges that you have advised Lender that the Common
Shares have not been registered under the Securities Act or any other
securities regulation laws of any state and that your reliance on the
availability of certain exemptions from registration is based in part on the
representations made by Lender in this Agreement.
<PAGE> 4
(b) Lender hereby represents to you that Lender is acquiring the
Common Shares for the account of Lender for investment only and not with a view
to resell or otherwise distribute such Common Shares, and that Lender is not
acquiring the Common Shares on behalf of any other person or entity. Lender
further represents that Lender does not intend to resell, transfer or dispose
of all or any part of the Common Shares without registration under the
Securities Act or without an opinion from counsel acceptable to Borrower, that
registration is not required, and Lender represents that it is able to bear the
economic risk of this investment for an indefinite period of time under these
circumstances.
(c) Lender further acknowledges that the Common Shares are
"restricted securities" as that term is defined in Rule 144 of the General
Rules and Regulations under the Securities Act. Lender understands that stop
transfer instructions will be issued to the transfer agent for Borrower's
stock, and Lender consents to the placing of a legend in substantially the
following form on the back of the certificate issued to Lender:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY OTHER STATE LAWS REGULATING THE ISSUANCE OF
SECURITIES AND ARE PURCHASED PURSUANT TO AN INVESTMENT
REPRESENTATION BY THE PURCHASER THEREOF. THESE SHARES SHALL
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY
THE PURCHASER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES EXCEPT UPON THE ISSUANCE TO THE
COMPANY OF A FAVORABLE OPINION OF ITS COUNSEL TO THE EFFECT
THAT SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
(d) Lender agrees to hold harmless and indemnify Borrower for any and
all liabilities resulting to it through violation by Lender of the above
warranties and representations.
4. DEFAULT AND RIGHTS AND REMEDIES.
4.1 Default and Rights and Remedies. Upon the occurrence of
default, Lender shall have the rights and remedies set forth in the Note and
the rights and remedies available to Lender under applicable law.
5. MISCELLANEOUS.
5.1 Reliance by Lender. All covenants, agreements,
representations and warranties made by Borrower shall, notwithstanding any
investigation by Lender, be deemed to be material to and to have been relied
upon Lender.
<PAGE> 5
5.2 Parties. Whenever in this Agreement there is reference made
to any of the parties, such reference shall be deemed to include, wherever
applicable, a reference to the respective successors and assigns of Borrower
and Lender.
5.3 Applicable Law; Severability. THIS AGREEMENT SHALL BE
CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND
DECISIONS OF THE STATE OF COLORADO. EACH PARTY TO THIS AGREEMENT HEREBY
CONSENTS TO JURISDICTION AND VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT
IN FEDERAL OR STATE COURT SITTING IN THE CITY OF DENVER, COLORADO. Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.
5.4 Maximum Interest. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the applicable
law governing the maximum rate of interest payable on or in connection with all
indebtedness and transactions hereunder (or applicable United States federal
law to the extent that it permits Lender to contract for, charge, take, reserve
or receive a greater amount of interest). If the applicable law is ever
judicially interpreted so as to render usurious any amount of money or other
consideration called for hereunder, or contracted for, charged, taken, reserved
or received with respect to any loan or advance hereunder, or if acceleration
of the maturity of the Loan or the indebtedness hereunder or if any prepayment
by Borrower results in Borrower's having paid any interest in excess of that
permitted by law, then it is Borrower's and Lender's express intent that all
excess cash amounts theretofore collected by Lender be credited on the
principal balance of the Loan (or if the Loan has been or would thereby be paid
in full, refunded to Borrower), and the provisions of this Agreement
immediately be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder. The right to accelerate maturity of the
Loan does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of acceleration.
<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
a Colorado corporation
By: /s/ Donald R. Jackson
--------------------------
Donald R. Jackson
Treasurer
STONE PINE CAPITAL, LLC
a Colorado limited
liability company
By: /s/ Paul Bagley
--------------------------
Paul Bagley
Chief Executive Officer
<PAGE> 1
Exhibit A to
Loan Agreement
Note
(See Exhibit 10.37)
<PAGE> 2
EXHIBIT
10.37
Promissory Note, dated as of December 31, 1997, in the
principal amount of $75,000 from the Company to Stone Pine
Capital, LLC.
<PAGE> 3
TERM NOTE
$75,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, Consolidated Capital of North
America, Inc., a Colorado corporation ("Borrower"), promises to pay to Stone
Pine Capital, LLC, a Colorado limited liability company ("Lender"), at Suite
400, 410 17th Street, Denver, Colorado 80202, or at any other place designated
at any time by the holder hereof, in lawful money of the United States of
America, the principal amount of $75,000.00 as described herein. Borrower
further promises to pay interest (computed on the basis of a year consisting of
twelve equal months) on the principal balance of this Term Note (this "Note")
outstanding from time to time at the rate of 12.0% per annum.
The principal of this Note and accrued interest hereon shall be due and
payable in full on March 31, 1998.
Borrower shall have the option at any time to prepay, without penalty,
the whole or a part of the principal of this Note. All prepayments shall be
applied first to accrued and unpaid interest and then to principal.
The existence of any of the following conditions or the occurrence of
one or the following events, if not cured or waived within ten (10) days after
notice shall be an Event of Default of this Note:
(a) Borrower shall fail to make any payment of any installment of
interest or principal of this Note when due and payable; or
(b) Any warranty or representation contained in the Loan Agreement
shall prove to have been false or incorrect or breached in any
material respect on the date as of which made; or
(c) Any violation in any material respect of any covenant contained
in the Loan Agreement; or
(d) Borrower shall fail to pay any Credit Obligation (defined to mean
any obligation for the payment of borrowed money or the
installment purchase price of property or an account of a lease
of property, or any obligation under a guaranty or suretyship
agreement covering obligations of such type) owing by it or them,
or any interest or premium thereon, when due, whether owed to
Lender or any other person and whether such Credit Obligation
shall become due by
<PAGE> 4
scheduled maturity, by required prepayment, by acceleration, by
demand, or otherwise, or Borrower shall fail to perform any term,
covenant, or agreement on its or their part to be performed under
any agreement or instrument evidencing or securing or relating to
any such Credit Obligation when required to be performed which
continues beyond any applicable grace period, if the effect of
such failure is to accelerate or to permit the holder or holders
of such Credit Obligations to accelerate the maturity of such
Credit Obligation, whether or not such failure to perform shall
be waived by the holder or holders of such Credit Obligation; or
(e) Borrower is dissolved or liquidated, or Borrower makes an
assignment for the benefit of creditors, files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver or trustee of Borrower,
commences any proceeding relating to Borrower under any
bankruptcy, reorganization, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or there is commenced against Borrower any
such proceeding which remains undismissed for a period of sixty
days, or Borrower by any act indicates its consent to, approval
of or acquiescence in any such proceeding or the appointment of
any receiver of or trustee for Borrower or any substantial part
of its property, or suffers any such receivership or trusteeship
to continue undischarged for a period of thirty days; or
(f) Lender shall have determined that one or more conditions exist or
events have occurred which will result in a material adverse
change in the business, properties or financial condition of
Borrower.
Upon the happening of any one or more of the foregoing Events of
Default which shall be continuing (i) the unpaid balance of the principal amount
hereof shall become and be immediately due and payable without presentation,
demand, protest or other notice of any kind all of which are expressly waived by
Borrower and (ii) the Borrower shall pay all costs and expenses of collection,
including attorneys' fees.
If any required payment under this Note is not paid within ten (10)
days after the same becomes due and payable, the same shall bear interest at a
rate which is five percent (5.0%) per annum in excess of the otherwise
applicable rate of interest.
This Note is fully transferable by Lender, without the consent of or
notice to, Borrower.
<PAGE> 5
It is expressly stipulated and agreed to be the intent of Borrower and
Lender at all times to comply with the applicable law governing the maximum rate
of interest payable on or in connection with all indebtedness and transactions
hereunder (or applicable United States federal law to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of
interest). If the applicable law is ever judicially interpreted so as to render
usurious any amount of money or other consideration called for hereunder, or
contracted for, charged, taken, reserved or received with respect to any loan or
advance hereunder, or if acceleration of the maturity of this Note or the
indebtedness hereunder or if any prepayment by Borrower results in Borrower's
having paid any interest in excess of that permitted by law, then it is
Borrower's and Lender's express intent that all excess cash amounts theretofore
collected by Lender be credited on the principal balance of this Note (or if
this Note has been or would thereby be paid in full, refunded to Borrower), and
the provisions of this Note immediately be deemed reformed and the amounts
thereafter collectible hereunder reduced, without the necessity of the execution
of any new document, so as to comply with the applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder. The
right to accelerate maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF COLORADO.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
a Colorado corporation
By: /s/ Donald R. Jackson
-------------------------------
Donald R. Jackson
Treasurer
<PAGE> 1
EXHIBIT
10.38
Loan Agreement, dated as of December 31, 1997, between
the Company and Paul Bagley.
<PAGE> 2
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made as of the 31st day of
December, 1997, between Consolidated Capital of North America, Inc., a Colorado
corporation ("Borrower") and Paul Bagley ("Lender").
RECITAL
Borrower has requested that Lender make a loan to or for the benefit of
Borrower in the amount of $75,000.00, and Lender is willing to do so on the
following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, Borrower and Lender agree as follows:
1. LOAN.
1.1 Loan. Subject to all of the terms and conditions contained in this
Agreement, Lender agrees to advance to Borrower, on the date hereof, the
principal sum of $75,000.00 (the "Loan"). The Loan shall be evidenced by and
repayable in accordance with the terms of Borrower's promissory note ("Note"),
the form of which is attached as Exhibit A.
1.2 Equity Shares. (a) As additional consideration for the
advancement of the Loan, Borrower shall issue to Lender Common Shares of
Borrower as follows: 33,334 Common Shares upon advancement of the Loan
(the "Common Shares").
(b) The Common Shares will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and accordingly, will constitute
"restricted securities" for purposes of the Securities Act and Lender will not
be able to transfer such Common Shares except upon compliance with the
registration requirements of the Securities Act and applicable state securities
laws or an exemption therefrom. The certificates evidencing the Common Shares
shall contain a legend to the foregoing effect.
(c) Borrower, shall upon the demand of any holder of the Common Shares,
file a registration statement with the SEC to permit the sale of the Common
Shares by the holders of such shares from time to time. The holders of the
Common Shares shall also have "piggyback" registration rights.
2. CONDITIONS TO THE LOAN.
2.1 Documents. The making of the Loan is conditioned upon the execution
and/or delivery to Lender of the following agreements, instruments and documents
by the parties thereto: (a) this Agreement; (b) the Note; and (c) a stock
certificate for 33,333 Common Shares of Borrower issued in the name of Lender.
<PAGE> 3
2.2 Representations and Warranties. All representations and warranties
contained in this Agreement shall be true in all material respects on and as of
the date of the making of the Loan as if such representations and warranties had
been made on and as of such date.
3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of Borrower. Borrower represents and
warrants that as of the date of the execution of this Agreement:
(a) Existence. Borrower is a corporation duly organized and in good
standing under the laws of the State of 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 Borrower's financial
condition, results of operations or business.
(b) Authority. The execution and delivery by Borrower of this Agreement
and the Note: (a) are within Borrower's corporate powers; (b) are duly
authorized by Borrower's board of directors; (c) are not in contravention of the
terms of Borrower's certificate of incorporation or bylaws; (d) are not in
contravention of any law or laws, or of the terms of any material indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
any of Borrower's property is bound; (e) do not require any governmental
consent, registration or approval; (f) do not contravene any contractual or
governmental restriction binding upon Borrower; and (g) will not result in the
imposition of any lien, charge, security interest or encumbrance upon any
property of Borrower under any existing indenture, mortgage, deed of trust, loan
or credit agreement or other material agreement or instrument to which Borrower
is a party or by which Borrower or any of Borrower's property may be bound or
affected.
(c) Binding Effect. This Agreement and the Note set forth the legal,
valid and binding obligations of Borrower and are enforceable against Borrower
in accordance with their respective terms.
3.2 Investment Representations of Lender. Lender represents and
warrants to Borrower as follows:
(a) Lender acknowledges that you have advised Lender that the Common
Shares have not been registered under the Securities Act or any other securities
regulation laws of any state and that your reliance on the availability of
certain exemptions from registration is based in part on the representations
made by Lender in this Agreement.
(b) Lender hereby represents to you that Lender is acquiring the Common
Shares for the account of Lender for investment only and not with a view to
resell or otherwise distribute such Common Shares, and that Lender is not
acquiring the Common Shares on behalf of any other person or entity. Lender
further represents that Lender does not intend to resell, transfer or dispose of
all or any part of the Common Shares without registration under the Securities
<PAGE> 4
Act or without an opinion from counsel acceptable to Borrower, that registration
is not required, and Lender represents that it is able to bear the economic risk
of this investment for an indefinite period of time under these circumstances.
(c) Lender further acknowledges that the Common Shares are "restricted
securities" as that term is defined in Rule 144 of the General Rules and
Regulations under the Securities Act. Lender understands that stop transfer
instructions will be issued to the transfer agent for Borrower's stock, and
Lender consents to the placing of a legend in substantially the following form
on the back of the certificate issued to Lender:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY OTHER STATE LAWS REGULATING THE ISSUANCE OF
SECURITIES AND ARE PURCHASED PURSUANT TO AN INVESTMENT
REPRESENTATION BY THE PURCHASER THEREOF. THESE SHARES SHALL
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY
THE PURCHASER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES EXCEPT UPON THE ISSUANCE TO THE
COMPANY OF A FAVORABLE OPINION OF ITS COUNSEL TO THE EFFECT
THAT SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
(d) Lender agrees to hold harmless and indemnify Borrower for any and
all liabilities resulting to it through violation by Lender of the above
warranties and representations.
4. DEFAULT AND RIGHTS AND REMEDIES.
4.1 Default and Rights and Remedies. Upon the occurrence of default,
Lender shall have the rights and remedies set forth in the Note and the rights
and remedies available to Lender under applicable law.
5. MISCELLANEOUS.
5.1 Reliance by Lender. All covenants, agreements, representations and
warranties made by Borrower shall, notwithstanding any investigation by Lender,
be deemed to be material to and to have been relied upon Lender.
5.2 Parties. Whenever in this Agreement there is reference made to any
of the parties, such reference shall be deemed to include, wherever applicable,
a reference to the
<PAGE> 5
respective successors and assigns of Borrower and Lender.
5.3 Applicable Law; Severability. THIS AGREEMENT SHALL BE CONSTRUED IN
ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE OF COLORADO. EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO JURISDICTION
AND VENUE IN ANY CONTROVERSY INVOLVING THIS AGREEMENT IN FEDERAL OR STATE COURT
SITTING IN THE CITY OF DENVER, COLORADO. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
5.4 Maximum Interest. It is expressly stipulated and agreed to be the
intent of Borrower and Lender at all times to comply with the applicable law
governing the maximum rate of interest payable on or in connection with all
indebtedness and transactions hereunder (or applicable United States federal law
to the extent that it permits Lender to contract for, charge, take, reserve or
receive a greater amount of interest). If the applicable law is ever judicially
interpreted so as to render usurious any amount of money or other consideration
called for hereunder, or contracted for, charged, taken, reserved or received
with respect to any loan or advance hereunder, or if acceleration of the
maturity of the Loan or the indebtedness hereunder or if any prepayment by
Borrower results in Borrower's having paid any interest in excess of that
permitted by law, then it is Borrower's and Lender's express intent that all
excess cash amounts theretofore collected by Lender be credited on the principal
balance of the Loan (or if the Loan has been or would thereby be paid in full,
refunded to Borrower), and the provisions of this Agreement immediately be
deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder. The right to accelerate maturity of the Loan
does not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and Lender does not intend to collect
any unearned interest in the event of acceleration.
<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
a Colorado corporation
By: /s/ Donald R. Jackson
------------------------
Donald R. Jackson
Treasurer
By: /s/ Paul Bagley
------------------------
Paul Bagley
<PAGE> 1
Exhibit A
Loan Agreement
Note
(See Exhibit 10.39)
<PAGE> 2
EXHIBIT
10.39
Promissory Note, dated as of December 31, 1997, in
the principal amount of $75,000 from the Company to
Paul Bagley.
<PAGE> 3
TERM NOTE
$75,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, Consolidated Capital of North
America, Inc., a Colorado corporation ("Borrower"), promises to pay to Paul
Bagley ("Lender"), at Suite 400, 410 17th Street, Denver, Colorado 80202, or at
any other place designated at any time by the holder hereof, in lawful money of
the United States of America, the principal amount of $75,000.00 as described
herein. Borrower further promises to pay interest (computed on the basis of a
year consisting of twelve equal months) on the principal balance of this Term
Note (this "Note") outstanding from time to time at the rate of 12.0% per
annum.
The principal of this Note and accrued interest hereon shall be due
and payable in full on March 31, 1998.
Borrower shall have the option at any time to prepay, without penalty,
the whole or a part of the principal of this Note. All prepayments shall be
applied first to accrued and unpaid interest and then to principal.
The existence of any of the following conditions or the occurrence of
one or the following events, if not cured or waived within ten (10) days after
notice shall be an Event of Default of this Note:
(a) Borrower shall fail to make any payment of any
installment of interest or principal of this Note
when due and payable; or
(b) Any warranty or representation contained in the Loan
Agreement shall prove to have been false or incorrect
or breached in any material respect on the date as of
which made; or
(c) Any violation in any material respect of any covenant
contained in the Loan Agreement; or
(d) Borrower shall fail to pay any Credit Obligation
(defined to mean any obligation for the payment of
borrowed money or the installment purchase price of
property or an account of a lease of property, or any
obligation under a guaranty or suretyship agreement
covering obligations of such type) owing by it or
them, or any interest or premium thereon, when due,
whether owed to Lender or any other person and
whether such Credit Obligation shall become due by
scheduled maturity, by required prepayment, by
acceleration, by demand, or otherwise, or Borrower
shall fail to perform any term, covenant, or
agreement on its or their part to be
<PAGE> 4
performed under any agreement or instrument
evidencing or securing or relating to any such Credit
Obligation when required to be performed which
continues beyond any applicable grace period, if the
effect of such failure is to accelerate or to permit
the holder or holders of such Credit Obligations to
accelerate the maturity of such Credit Obligation,
whether or not such failure to perform shall be
waived by the holder or holders of such Credit
Obligation; or
(e) Borrower is dissolved or liquidated, or Borrower
makes an assignment for the benefit of creditors,
files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any
tribunal for any receiver or trustee of Borrower,
commences any proceeding relating to Borrower under
any bankruptcy, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or
there is commenced against Borrower any such
proceeding which remains undismissed for a period of
sixty days, or Borrower by any act indicates its
consent to, approval of or acquiescence in any such
proceeding or the appointment of any receiver of or
trustee for Borrower or any substantial part of its
property, or suffers any such receivership or
trusteeship to continue undischarged for a period of
thirty days; or
(f) Lender shall have determined that one or more
conditions exist or events have occurred which will
result in a material adverse change in the business,
properties or financial condition of Borrower.
Upon the happening of any one or more of the foregoing Events of
Default which shall be continuing (i) the unpaid balance of the principal
amount hereof shall become and be immediately due and payable without
presentation, demand, protest or other notice of any kind all of which are
expressly waived by Borrower and (ii) the Borrower shall pay all costs and
expenses of collection, including attorneys' fees.
If any required payment under this Note is not paid within ten (10)
days after the same becomes due and payable, the same shall bear interest at a
rate which is five percent (5.0%) per annum in excess of the otherwise
applicable rate of interest.
This Note is fully transferable by Lender, without the consent of or notice to,
Borrower.
It is expressly stipulated and agreed to be the intent of Borrower and
Lender at all times to comply with the applicable law governing the maximum
rate of interest payable on or in connection with all indebtedness and
transactions hereunder (or applicable United States federal law to the extent
that it permits Lender to contract for, charge, take, reserve or receive a
greater amount of interest). If the applicable law is ever judicially
<PAGE> 5
interpreted so as to render usurious any amount of money or other consideration
called for hereunder, or contracted for, charged, taken, reserved or received
with respect to any loan or advance hereunder, or if acceleration of the
maturity of this Note or the indebtedness hereunder or if any prepayment by
Borrower results in Borrower's having paid any interest in excess of that
permitted by law, then it is Borrower's and Lender's express intent that all
excess cash amounts theretofore collected by Lender be credited on the
principal balance of this Note (or if this Note has been or would thereby be
paid in full, refunded to Borrower), and the provisions of this Note
immediately be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder. The right to accelerate maturity of
this Note does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of acceleration.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF COLORADO.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
a Colorado corporation
By: /s/ Donald R. Jackson
--------------------------
Donald R. Jackson
Treasurer
<PAGE> 1
EXHIBIT
10.40
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.
<PAGE> 2
AGREEMENT
This Agreement is made as of December 31, 1997, between Consolidated
Capital of North America, Inc. (the "Company") and Stone Pine Financial Group,
LLC ("SPFG").
WITNESSETH
WHEREAS, the Company is indebted to SPFG for $360,000 (the
"Indebtedness"); and
WHEREAS, the Company desires to issue Preferred Shares in exchange for
the cancellation of such Indebtedness;
WHEREAS, SPFG is willing to accept Preferred Shares of the Company in
exchange for cancellation of such Indebtedness;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants made herein, and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Issuance of the Shares. Simultaneously with the execution of
this Agreement, the Company agrees to issue to SPFG 360,000 Series A Preferred
Shares of the Company having the terms set forth in Annex A hereto (the
"Shares") in consideration of the cancellation of the Indebtedness owed by the
Company to SPFG.
2. Investment Intent. SPFG acknowledges that it is acquiring the
Shares for investment purposes only, and acknowledges that (A) the Shares and
the Common Shares of the Company into which the Shares are convertible (the
"Conversion Shares") have not been registered under federal securities laws or
state securities laws, and accordingly, constitute "restricted securities" for
purposes of federal and state securities laws, (B) SPFG will not be able to
transfer the Shares or Conversion Shares except upon compliance with the
registration
<PAGE> 3
requirements of federal and state securities laws or exemptions therefrom, and
(C) the certificate evidencing the Shares and the Conversion Shares will
contain a legend to the foregoing effect.
3. Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement as of the date first above written.
CONSOLIDATED CAPITAL
OF NORTH AMERICA, INC
By: /s/ Donald R. Jackson
----------------------------
Donald R. Jackson
Secretary, Treasurer and
Chief Financial Officer
STONE PINE FINANCIAL GROUP, LLC
By: /s/ Paul Bagley
---------------------------
Paul Bagley
Member
<PAGE> 1
EXHIBIT
10.41
Agreement, dated as of December 31, 1997, between the
Company and ERB Acquisition Group, LLC relating to the
issuance of Series A Preferred Shares.
<PAGE> 2
AGREEMENT
This Agreement is made as of December 31, 1997, between Consolidated
Capital of North America, Inc. (the "Company") and ERB Acquisition Group,
LLC("ERB").
WITNESSETH
WHEREAS, the Company is indebted to ERB for $384,000 (the
"Indebtedness"); and
WHEREAS, the Company desires to issue Preferred Shares in exchange for
the cancellation of such Indebtedness;
WHEREAS, ERB is willing to accept Preferred Shares of the Company in
exchange for cancellation of such Indebtedness;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants made herein, and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Issuance of the Shares. Simultaneously with the execution of
this Agreement, the Company agrees to issue to ERB 384,000 Series A Preferred
Shares of the Company having the terms set forth in Annex A hereto (the
"Shares") in consideration of the cancellation of the Indebtedness owed by the
Company to ERB.
2. Investment Intent. ERB acknowledges that it is acquiring the
Shares for investment purposes only, and acknowledges that (A) the Shares and
the Common Shares of the Company into which the Shares are convertible (the
"Conversion Shares") have not been registered under federal securities laws or
state securities laws, and accordingly, constitute "restricted securities" for
purposes of federal and state securities laws, (B) ERB will not be able to
transfer the Shares or Conversion Shares except upon compliance with the
registration
<PAGE> 3
requirements of federal and state securities laws or exemptions therefrom, and
(C) the certificate evidencing the Shares and the Conversion Shares will
contain a legend to the foregoing effect.
3. Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement as of the date first above written.
CONSOLIDATED CAPITAL
OF NORTH AMERICA, INC
By:/s/ Donald R. Jackson
------------------------------
Donald R. Jackson
Secretary, Treasurer and
Chief Financial Officer
ERB ACQUISITION GROUP, LLC
By: /s/ Paul Bagley
-----------------------------
Paul Bagley
Manager
<PAGE> 1
EXHIBIT
10.42
Agreement, dated as of December 31, 1997, between the
Company and Stone Pine Colorado, LLC relating to the
issuance of Series B Preferred Shares.
<PAGE> 2
AGREEMENT
This Agreement is made as of December 31, 1997, between Consolidated
Capital of North America, Inc. (the "Company") and Stone Pine Colorado, LLC
("SPC") .
WITNESSETH
WHEREAS, the Company is indebted to SPC for $317,500 (the
"Indebtedness"); and
WHEREAS, the Company desires to issue Preferred Shares in exchange for
the cancellation of such Indebtedness;
WHEREAS, SPC is willing to accept Preferred Shares of the Company in
exchange for cancellation of such Indebtedness;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants made herein, and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Issuance of the Shares. Simultaneously with the execution of
this Agreement, the Company agrees to issue to SPC 317,500 Series B Preferred
Shares of the Company having the terms set forth in Annex A hereto (the
"Shares") in consideration of the cancellation of the Indebtedness owed by the
Company to SPC.
2. Investment Intent. SPC acknowledges that it is acquiring the
Shares for investment purposes only, and acknowledges that (A) the Shares and
the Common Shares of the Company into which the Shares are convertible (the
"Conversion Shares") have not been registered under federal securities laws or
state securities laws, and accordingly, constitute "restricted securities" for
purposes of federal and state securities laws, (B) SPC will not be able to
transfer the Shares or Conversion Shares except upon compliance with the
registration requirements of
<PAGE> 3
federal and state securities laws or exemptions therefrom, and (C) the
certificate evidencing the Shares and the Conversion Shares will contain a
legend to the foregoing effect.
3. Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement as of the date first above written.
CONSOLIDATED CAPITAL
OF NORTH AMERICA, INC
By:/s/ Donald R. Jackson
-----------------------------
Donald R. Jackson
Secretary, Treasurer and
Chief Financial Officer
STONE PINE COLORADO, LLC
By: /s/ Paul Bagley
--------------------------
Paul Bagley
Manager
<PAGE> 1
EXHIBIT
10.43
Agreement, dated as of December 31, 1997, between the
Company and Stone Pine Atlantic, LLC relating to the
issuance of Series B Preferred Shares.
<PAGE> 2
AGREEMENT
This Agreement is made as of December 31, 1997, between Consolidated
Capital of North America, Inc. (the "Company") and Stone Pine Atlantic, LLC
("SPA") .
WITNESSETH
WHEREAS, the Company is indebted to SPA for $131,500 (the "Indebtedness");
and
WHEREAS, the Company desires to issue Preferred Shares in exchange for the
cancellation of such Indebtedness;
WHEREAS, SPA is willing to accept Preferred Shares of the Company in
exchange for cancellation of such Indebtedness;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants made herein, and other good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. Issuance of the Shares. Simultaneously with the execution of this
Agreement, the Company agrees to issue to SPA 131,500 Series B Preferred Shares
of the Company having the terms set forth in Annex A hereto (the "Shares") in
consideration of the cancellation of the Indebtedness owed by the Company to
SPA.
2. Investment Intent. SPA acknowledges that it is acquiring the Shares
for investment purposes only, and acknowledges that (A) the Shares and the
Common Shares of the Company into which the Shares are convertible (the
"Conversion Shares") have not been registered under federal securities laws or
state securities laws, and accordingly, constitute "restricted securities" for
purposes of federal and state securities laws, (B) SPA will not be able to
transfer the Shares or Conversion Shares except upon compliance with the
registration
<PAGE> 3
requirements of federal and state securities laws or exemptions therefrom, and
(C) the certificate evidencing the Shares and the Conversion Shares will contain
a legend to the foregoing effect.
3. Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement as of the date first above written.
CONSOLIDATED CAPITAL
OF NORTH AMERICA, INC
By:/s/ Donald R. Jackson
--------------------------------
Donald R. Jackson
Secretary, Treasurer and
Chief Financial Officer
STONE PINE ATLANTIC, LLC
By: /s/ Paul Bagley
--------------------------------
Paul Bagley
Manager
<PAGE> 1
EXHIBIT
10.44
Convertible Note, dated as of January 9, 1998, in the principal amount of
$1,750,000 from the Company to Paul Bagley.
<PAGE> 2
CONVERTIBLE NOTE
FOR VALUE RECEIVED, the undersigned ("Consolidated Capital") promises
to pay to Paul Bagley (the "Noteholder") One Million Seven Hundred Fifty
Thousand and 00/100 Dollars ($1,750,000), together with interest, as follows:
1. PAYMENT; INTEREST RATE. Except as earlier converted in whole or in
part, the principal amount of this Note shall be repaid on the 8th day of
January 1999. Interest on this Note shall accrue at the rate of 12% per annum
based on a 365-day year, which interest shall be due and payable monthly in
arrears on the 7th day of each month beginning with the 9th day of February
1998. Interest shall be paid in cash.
2. TERM. The Loan shall be due and payable on (the "Repayment Date")
the earlier of (a) January 9, 1999 and (b) sixty (60) days after the
consummation of an equity issuance by Consolidated Capital resulting in net
proceeds of at least $25 million (the "Equity Issuance Repayment Date") provided
that the Noteholder or any Holder of the Note shall have received a written
notice of the at least forty-five (45) days prior to such Equity Issuance
Repayment Date.
3. PREPAYMENTS. This Note and any and all interest thereon may be
prepaid, in whole or in part, by Consolidated Capital at any time, and from time
to time, provided that no prepayment may be made by Consolidated Capital until
the Noteholder or any Holder of the Note shall have received a written notice of
the date of prepayment not less than forty-five (45) days prior to such
prepayment (the "Prepayment Date"). This Note may be converted on the terms set
forth in Section 5 until 5:00 p.m. on the day immediately preceding to the
Prepayment Date.
4. SECURITY, EQUITY SHARES. The payment of this Note shall be secured
by a security interest in all of the assets of Consolidated Capital and each of
its subsidiaries which security interest shall automatically become effective
upon the consent of Congress Financial Corporation ("Congress") to such security
interest or the refinancing or repayment of any loan arrangement with Congress.
As consideration for the advancement of this loan, Consolidated Capital
shall issue to the Noteholder Common Shares of Borrower as follows: 1,500,000
Common Shares upon advancement of the Loan (the "Common Shares"). The Common
Shares will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and accordingly, will constitute "restricted securities" for
purposes of the Securities Act and the Noteholder will not be able to transfer
such Common Shares except upon compliance with the registration requirements of
the Securities Act and applicable state securities laws or an exemption
therefrom. The certificates evidencing the Common Shares shall contain a legend
to the foregoing effect.
5. CONVERSION OF NOTE. (a) At any time and prior to the repayment in
full of
<PAGE> 3
the Loan, the outstanding principal amount of this Note, and all accrued
interest thereon, in whole or in increments of at least $20,000 of principal,
may be converted by the Noteholder into shares of Common Stock (the "Conversion
Shares") at $1.00 per share (the "Conversion Price").
(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 as Schedule 2 (the "Notice of Conversion")
and surrender the Note for conversion. Each conversion of all or any
portion of the Note will be effected as of the close of business on the
date on which the Note is surrendered at the principal office of
Consolidated Capital. At such time as such conversion is 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 become the holder of record of the shares
of Conversion Shares represented thereby. Consolidated Capital shall
convert that portion of the Note specified in the Notice of Conversion
to Conversion Shares and, for the balance of the Loan remaining
subsequent to the conversion, reissue to the Noteholder a replacement
note in the same form as the Note.
(c) Within five business days after a conversion has been
effected, Consolidated Capital will deliver to the Noteholder:
(i) a certificate or certificates representing the
number of shares 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.
(d) 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 --vents as follows after the date hereof and through and
including the repayment in full of the Loan:
(i) In case Consolidated Capital shall (1) declare a
dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (2) subdivide or
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 by multiplying it 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.
<PAGE> 4
(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 5(d) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(iv) Whenever securities are issued causing the
Conversion Price to be adjusted, as herein provided,
Consolidated Capital 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
Consolidated Capital's register. Consolidated Capital may
retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular
accountants employed by Consolidated Capital) to make any
computation required by this Section 5(d), and a certificate
signed by such firm shall be evidence of the correctness of
such adjustment.
6. DEFAULT. Consolidated Capital shall be in default under this Note
upon the occurrence of- (i) any of the events specified in Section 6(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 6(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 6(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 this Note; 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 Consolidated Capital, or
commenced against Consolidated Capital which is not discharged within
sixty (60) days.
The liability of Consolidated Capital hereunder is
unconditional and no indulgences granted from time to time shall be
construed as a novation of this Note or as
<PAGE> 5
a reinstatement of indebtedness evidenced hereby or as a waiver of the
right of Noteholder or subsequent holders thereafter to insist upon
strict compliance with the terms of this Note.
7. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default:
(a) specified in clause (c) of Section 6, then the entire
amount of the Loan shall be automatically accelerated and immediately
due and payable;
(b) specified in clauses (a) or (b) of Section 6, then the
Noteholder may declare the entire amount of the Loan immediately
accelerated, due and payable; and
(c) the Noteholder shall have all of the rights and remedies
provided to the Noteholder by the Loan Documents, 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.
(d) the Noteholder or any subsequent holder hereof shall be
entitled to reimbursement for all reasonable costs and expenses
(including attorneys' fees and expenses) incurred in attempting to
enforce payment of any amounts due and owing hereunder.
8. REPRESENTATIONS AND WARRANTIES OF CONSOLIDATED CAPITAL.
(a) Existence. Consolidated Capital 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 Consolidated Capital's
financial condition, results of operations or business.
(b) Authority. The execution and delivery by Consolidated
Capital of this Agreement and the Note: (a) are within Consolidated
Capital's corporate powers; (b) are duly authorized by Consolidated
Capital's board of directors; (c) are not in contravention of the terms
of Consolidated Capital's certificate of incorporation or bylaws; (d)
are not in contravention of any law or laws, or of the terms of any
material indenture, agreement or undertaking to which Consolidated
Capital is a party or by which Consolidated Capital or any of
Consolidated Capital's property is bound; (e) do not require any
governmental consent, registration or approval; (f) do not contravene
any contractual or governmental restriction binding upon Consolidated
Capital; and (g) will not result in the imposition of
<PAGE> 6
any lien, charge, security interest or encumbrance upon any property of
Consolidated Capital under any existing indenture, mortgage, deed of
trust, loan or credit agreement or other material agreement or
instrument to which Consolidated Capital is a party or by which
Consolidated Capital or any of Consolidated Capital's property may be
bound or affected.
(c) Binding Effect. This Agreement sets forth the legal, valid
and binding obligations of Consolidated Capital and are enforceable
against Consolidated Capital in accordance with their respective terms.
9. INVESTMENT REPRESENTATIONS THE NOTEHOLDER. The Noteholder represents
and warrants to Consolidated Capital as follows:
(a) The Noteholder acknowledges that you have advised the
Noteholder that the Common Shares and Conversion Shares (together, the
"Securities") have not been registered under the Securities Act or any
other securities regulation laws of any state and that your reliance on
the availability of certain exemptions from registration is based in
part on the representations made by the Noteholder in this Agreement.
(b) The Noteholder hereby represents to you that the
Noteholder is acquiring the Securities for the account of the
Noteholder for investment only and not with a view to resell or
otherwise distribute such Securities, and that the Noteholder is not
acquiring the Securities on behalf of any other person or entity. The
Noteholder further represents that the Noteholder does not intend to
resell, transfer or dispose of all or any part of the Securities
without registration under the Securities Act or without an opinion
from counsel acceptable to Consolidated Capital, that registration is
not required, and the Noteholder represents that he is able to bear the
economic risk of this investment for an indefinite period of time under
these circumstances.
(c) The Noteholder further acknowledges that the Securities
are "restricted securities" as that term is defined in Rule 144 of the
General Rules and Regulations under the Securities Act. The Noteholder
understands that stop transfer instructions will be issued to the
transfer agent for Consolidated Capital's stock, and the Noteholder
consents to the placing of a legend in substantially the following form
on the back of the certificate issued to the Noteholder:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY OTHER STATE LAWS REGULATING THE ISSUANCE OF SECURITIES AND ARE
PURCHASED PURSUANT TO AN INVESTMENT REPRESENTATION BY THE PURCHASER
THEREOF. THESE SHARES SHALL NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, BY
<PAGE> 7
THE PURCHASER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SHARES EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE
OPINION OF ITS COUNSEL TO THE EFFECT THAT SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS.
10. COVENANTS OF CONSOLIDATED CAPITAL. Consolidated Capital covenants
that:
(a) Reservation of Common Stock. As of the date hereof,
Consolidated Capital has reserved and Consolidated Capital shall
continue to reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling Consolidated
Capital to satisfy any obligation to issue shares of its Common Stock
incident to the conversion of the Note and otherwise in accordance with
the terms of this Note; such amount of shares of Common Stock to be
reserved to be calculated based upon the minimum purchase price
therefor under the terns of this Note, and assuming the full conversion
of this Note. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided may be reduced
by the number of shares actually delivered hereunder and the number of
shares so reserved shall be increased to reflect (i) potential
increases in the Common Stock which Consolidated Capital may thereafter
be so obligated to issue by reason of adjustments to the purchase price
therefor and the issuance of the Note and (ii) stock splits and stock
dividends and distributions.
(b) Exchange Act Registration. Consolidated Capital will
comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Act. Consolidated Capital
will take all action to continue the listing and trading of its Common
Stock and will comply in all respects with Consolidated Capital's
reporting, filing and other obligations under the bylaws or rules of
the NASD and its trading market.
(c) Corporate Existence. Consolidated Capital will take all
steps necessary to preserve and continue the corporate existence of
Consolidated Capital.
(d) Additional SEC Documents. Consolidated Capital will
furnish to the Noteholder upon request copies of all SEC Documents
furnished or submitted to the SEC.
(e) Blackout Period. (i) Consolidated Capital will immediately
notify the Noteholder upon the occurrence of any of the following
events in respect of a registration statement or related prospectus in
respect of an equity offering; (A) receipt of any request
<PAGE> 8
for additional information by the SEC or any other federal or state
governmental authority during the. period of effectiveness of the
registration statement for amendments or supplements to the
registration statement or related prospectus; (B) the issuance by the
SEC or any other federal or state governmental authority of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose; (C) receipt of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Common Stock for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; (D) the happening of any event which makes any statement
made in the registration statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any
changes in the registration statement, related prospectus or documents
so that, in the case of the registration statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and (E) Consolidated Capital's
reasonable determination that a post-effective amendment to the
registration statement would be appropriate; and Consolidated Capital
will promptly make available to the Noteholder any such supplement or
amendment to the related prospectus.
11. REGISTRATION RIGHTS.
11.1 Registration of Securities. (a) At the written request of the
Noteholder Consolidated Capital shall file with the SEC a registration statement
on Form S-1 or otherwise appropriate form (the "Registration Statement') for the
registration of the resale by the Noteholder of the Securities under the
Securities Act.
(b) Consolidated Capital shall prepare and file with the SEC
such amendments and supplements to such registration statements and the
prospectus used in connection therewith as may be necessary to keep the
Registration Statements referred to in subsection (a) above effective
for a maximum of two years from the date of issuance of the Securities.
(c) Consolidated Capital will, prior to filing a registration
statement or prospectus or any amendment or supplement thereto
(excluding amendments deemed to result from the filing of documents
incorporated by reference therein) to register the Securities, furnish
to the Noteholder and one firm of counsel representing the Noteholder,
copies of such registration statement as proposed to be filed, together
with the exhibits thereto, which documents will be subject to review by
such parties, and thereafter furnish to the Noteholder and its counsel
for their review such number of copies of such registration statement,
each amendment and supplement thereto (in each case including
<PAGE> 9
all exhibits thereto), the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents or information as the Noteholder or counsel may reasonably
request in order to facilitate the disposition of the Securities.
11.2 Indemnification of the Holder. Subject to the conditions set forth
below, in connection with any registration of the Securities pursuant to this
Section 11, Consolidated Capital agrees to indemnify and hold harmless the
Noteholder, any underwriter for Consolidated Capital or acting on behalf of the
Noteholder and each person, if any, who controls the Noteholder, within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each an "Indemnified Person"), 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),
registration statement or prospectus (as from time to time
amended and supplemented), or in any application or other
document executed by Consolidated Capital or based upon
written information furnished by Consolidated Capital filed in
any jurisdiction in order to qualify Consolidated Capital'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 Consolidated Capital in the
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 Consolidated Capital by or on behalf of the
Noteholder expressly for use in connection therewith or
arising out of any action or inaction of the Noteholder;
(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
Consolidated Capital; and
(iii) Consolidated Capital shall be notified, by
letter or by facsimile confirmed by letter, of any action
commenced against Indemnified Persons,
<PAGE> 10
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
Consolidated Capital, if prejudicial in any material respect
to Consolidated Capital's ability to defend such claim, shall
relieve Consolidated Capital from its liability to the
indemnified person under this Section 6, but only to the
extent that Consolidated Capital was prejudiced. The failure
to so notify Consolidated Capital shall not relieve
Consolidated Capital from any liability which it may have
otherwise than on account of this indemnity agreement.
Consolidated Capital shall be entitled to participate at its
own expense in the defense of any suit brought to enforce any
such claim, but if Consolidated Capital elects to assume the
defense, such defense shall be conducted by counsel chosen by
it, provided such counsel is reasonably satisfactory to the
Indemnified Persons in any suit so brought.
11.3 Indemnification of Consolidated Capital. The Noteholder agrees to
indemnify and hold harmless Consolidated Capital, and its officers and directors
who signed the registration statement and each other person, if any, who
controls Consolidated Capital and underwriter within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act against any and all
such losses, liabilities, claims, damages and expenses as are indemnified
against by Consolidated Capital under Section 11.2 above; provided, however,
that such indemnification by the Noteholder 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 to Consolidated Capital by the Noteholder
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. In case any action shall be brought against Consolidated
Capital, or any other person so indemnified, in respect of which indemnity may
be sought against Noteholder, Noteholder shall have the rights and duties given
to Consolidated Capital, and each other person so indemnified shall have the
rights and duties given to the Noteholder, by the provisions of Section 11.2.
The person indemnified agrees to notify Noteholder promptly after the assertion
of any claim against the person indemnified in connection with the sale of
securities.
11.4 Contribution. If the indemnification provided for in Sections 11.2
and 11.3 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
<PAGE> 11
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.
11.5 Maximum Interest. It is expressly stipulated and agreed to be the
intent of Consolidated Capital and the 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 Note or advance
hereunder, or if acceleration of the maturity of the Note or the indebtedness
hereunder or if any prepayment by Consolidated Capital results in Consolidated
Capital's having paid any interest in excess of that permitted by law, then it
is Consolidated Capital's and the Noteholder's express intent that all excess
cash amounts theretofore collected by Noteholder be credited on the principal
balance of the Note (or if the Note has been or would thereby be paid in full,
refunded to Consolidated Capital), 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 the Note
does not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the Noteholder does not intend to
collect any unearned interest in the event of acceleration.
12. WAIVER OF PRESENTMENT. Except as set forth in this Note,
Consolidated Capital and every endorser or guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of time of payment or any other indulgence, to any substitution,
exchange or release of Collateral and to the addition or release of any other
party primarily or secondarily liable.
13. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF COLORADO AND CONSOLIDATED CAPITAL AND
<PAGE> 12
THE NOTEHOLDER BY ACCEPTANCE HEREOF CONSENT TO THE JURISDICTION OF THE FEDERAL
AND STATE COURTS OF THE STATE OF COLORADO TO DETERMINE ANY QUESTIONS OF FACT OR
LAW ARISING UNDER THIS NOTE.
14. TRANSFERABILITY. This Note is assignable and transferable by the
Noteholder without the consent of Consolidated Capital.
IN WITNESS WHEREOF, Consolidated Capital has executed this Note as of
the day and year set forth below.
Dated: January 9, 1998 CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Donald R. Jackson
----------------------------
Donald R. Jackson
Treasurer
<PAGE> 1
EXHIBIT
10.45
Convertible Note, dated as of March 3, 1998, in the principal
amount of $250,000 from the Company to Stone Pine Atlantic,
LLC.
<PAGE> 2
CONVERTIBLE NOTE
FOR VALUE RECEIVED, the undersigned ("Consolidated Capital") promises to
pay to Stone Pine Atlantic, LLC (the "Noteholder") Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000), together with interest, as follows:
1. PAYMENT; INTEREST RATE. Except as earlier converted in whole or in
part, the principal amount of this Note shall be repaid on the 2nd day of March
1999. Interest on this Note shall accrue at the rate of 12% per annum based on a
365-day year, which interest shall be due and payable monthly in arrears on the
2nd day of each month beginning with the 2nd day of April 1998. Interest shall
be paid in cash.
2. TERM. The Loan shall be due and payable on (the "Repayment Date") the
earlier of (a) March 2, 1999 and (b) sixty (60) days after the consummation of
an equity issuance by Consolidated Capital resulting in net proceeds of at least
$25 million (the "Equity Issuance Repayment Date") provided that the Noteholder
or any Holder of the Note shall have received a written notice of the at least
forty-five (45) days prior to such Equity Issuance Repayment Date.
3. PREPAYMENTS. This Note and any and all interest thereon may be
prepaid, in whole or in part, by Consolidated Capital at any time, and from time
to time, provided that no prepayment may be made by Consolidated Capital until
the Noteholder or any Holder of the Note shall have received a written notice of
the date of prepayment not less than forty-five (45) days prior to such
prepayment (the "Prepayment Date"). This Note may be converted on the terms set
forth in Section 5 until 5:00 p.m. on the day immediately preceding to the
Prepayment Date.
4. SECURITY; EQUITY SHARES. The payment of this Note shall be secured by
a security interest in all of the assets of Consolidated Capital and each of its
subsidiaries which security interest shall automatically become effective upon
the consent of Congress Financial Corporation ("Congress") to such security
interest or the refinancing or repayment of any loan arrangement with Congress.
As consideration for the advancement of this loan, Consolidated
Capital shall issue to the Noteholder Common Shares of Borrower as follows:
214,286 Common Shares upon advancement of the Loan (the "Common Shares"). The
Common Shares will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), and accordingly, will constitute "restricted
securities" for purposes of the Securities Act and the Noteholder will not be
able to transfer such Common Shares except upon compliance with the registration
requirements of the Securities Act and applicable state securities laws or an
exemption therefrom. The certificates evidencing the Common Shares shall contain
a legend to the foregoing effect.
5. CONVERSION OF NOTE. (a) At any time and prior to the repayment in
full of
<PAGE> 3
the Loan, the outstanding principal amount of this Note, and all accrued
interest thereon, in whole or in increments of at least $20,000 of principal,
may be converted by the Noteholder into shares of Common Stock (the "Conversion
Shares") at $1.00 per share (the "Conversion Price").
(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 as Schedule 2 (the "Notice of Conversion") and
surrender the Note for conversion. Each conversion of all or any portion
of the Note will be effected as of the close of business on the date on
which the Note is surrendered at the principal office of Consolidated
Capital. At such time as such conversion is 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 become the holder of record of the shares of Conversion
Shares represented thereby. Consolidated Capital shall convert that
portion of the Note specified in the Notice of Conversion to Conversion
Shares and, for the balance of the Loan remaining subsequent to the
conversion, reissue to the Noteholder a replacement note in the same
form as the Note.
(c) Within five business days after a conversion has been
effected, Consolidated Capital will deliver to the Noteholder:
(i) a certificate or certificates representing the number
of shares 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.
(d) 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
repayment in full of the Loan:
(i) In case Consolidated Capital shall (1) declare a
dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (2) subdivide or
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 by
multiplying it 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.
<PAGE> 4
(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 5(d) shall be
made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(iv) Whenever securities are issued causing the
Conversion Price to be adjusted, as herein provided, Consolidated
Capital 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 Consolidated
Capital's register. Consolidated Capital may retain a firm of
independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by
Consolidated Capital) to make any computation required by this
Section 5(d), and a certificate signed by such firm shall be
evidence of the correctness of such adjustment.
6. DEFAULT. Consolidated Capital shall be in default under this Note
upon the occurrence of: (i) any of the events specified in Section 6(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 6(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 6(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 this Note; 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 Consolidated Capital, or
commenced against Consolidated Capital which is not discharged within
sixty (60) days.
The liability of Consolidated Capital hereunder is unconditional
and no indulgences granted from time to time shall be construed as a
novation of this Note or as a reinstatement of indebtedness evidenced
hereby or as a waiver of the right of Noteholder or subsequent holders
thereafter to insist upon strict compliance with the
<PAGE> 5
terms of this Note.
7. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event
of Default:
(a) specified in clause (c) of Section 6, then the entire amount
of the Loan shall be automatically accelerated and immediately due and
payable;
(b) specified in clauses (a) or (b) of Section 6, then the
Noteholder may declare the entire amount of the Loan immediately
accelerated, due and payable; and
(c) the Noteholder shall have all of the rights and remedies
provided to the Noteholder by the Loan Documents, 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.
(d) the Noteholder or any subsequent holder hereof shall be
entitled to reimbursement for all reasonable costs and expenses
(including attorneys' fees and expenses) incurred in attempting to
enforce payment of any amounts due and owing hereunder.
8. REPRESENTATIONS AND WARRANTIES OF CONSOLIDATED CAPITAL.
(a) Existence. Consolidated Capital 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 Consolidated Capital's
financial condition, results of operations or business.
(b) Authority. The execution and delivery by Consolidated Capital
of this Agreement and the Note: (a) are within Consolidated Capital's
corporate powers; (b) are duly authorized by Consolidated Capital's
board of directors; (c) are not in contravention of the terms of
Consolidated Capital's certificate of incorporation or bylaws; (d) are
not in contravention of any law or laws, or of the terms of any material
indenture, agreement or undertaking to which Consolidated Capital is a
party or by which Consolidated Capital or any of Consolidated Capital's
property is bound; (e) do not require any governmental consent,
registration or approval; (f) do not contravene any contractual or
governmental restriction binding upon Consolidated Capital; and (g) will
not result in the imposition of any lien, charge, security interest or
encumbrance upon any property of Consolidated Capital under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which Consolidated Capital is a
party or by
<PAGE> 6
which Consolidated Capital or any of Consolidated Capital's property may
be bound or affected.
(c) Binding Effect. This Agreement sets forth the legal, valid
and binding obligations of Consolidated Capital and are enforceable
against Consolidated Capital in accordance with their respective terms.
9. INVESTMENT REPRESENTATIONS THE NOTEHOLDER. The Noteholder
represents and warrants to Consolidated Capital as follows:
(a) The Noteholder acknowledges that you have advised the
Noteholder that the Common Shares and Conversion Shares (together, the
"Securities") have not been registered under the Securities Act or any
other securities regulation laws of any state and that your reliance on
the availability of certain exemptions from registration is based in
part on the representations made by the Noteholder in this Agreement.
(b) The Noteholder hereby represents to you that the Noteholder
is acquiring the Securities for the account of the Noteholder for
investment only and not with a view to resell or otherwise distribute
such Securities, and that the Noteholder is not acquiring the Securities
on behalf of any other person or entity. The Noteholder further
represents that the Noteholder does not intend to resell, transfer or
dispose of all or any part of the Securities without registration under
the Securities Act or without an opinion from counsel acceptable to
Consolidated Capital, that registration is not required, and the
Noteholder represents that it is able to bear the economic risk of this
investment for an indefinite period of time under these circumstances.
(c) The Noteholder further acknowledges that the Securities are
"restricted securities" as that term is defined in Rule 144 of the
General Rules and Regulations under the Securities Act. The Noteholder
understands that stop transfer instructions will be issued to the
transfer agent for Consolidated Capital's stock, and the Noteholder
consents to the placing of a legend in substantially the following form
on the back of the certificate issued to the Noteholder:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER STATE LAWS REGULATING THE ISSUANCE OF
SECURITIES AND ARE PURCHASED PURSUANT TO AN INVESTMENT
REPRESENTATION BY THE PURCHASER THEREOF. THESE SHARES SHALL NOT
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE PURCHASER
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SHARES EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE
OPINION OF ITS COUNSEL TO THE EFFECT THAT SUCH
<PAGE> 7
TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
10. Covenants of Consolidated Capital. Consolidated Capital covenants
that:
(a) Reservation of Common Stock. As of the date hereof,
Consolidated Capital has reserved and Consolidated Capital shall
continue to reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling Consolidated
Capital to satisfy any obligation to issue shares of its Common Stock
incident to the conversion of the Note and otherwise in accordance with
the terms of this Note; such amount of shares of Common Stock to be
reserved to be calculated based upon the minimum purchase price therefor
under the terns of this Note, and assuming the full conversion of this
Note. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered hereunder and the number of shares
so reserved shall be increased to reflect (i) potential increases in the
Common Stock which Consolidated Capital may thereafter be so obligated
to issue by reason of adjustments to the purchase price therefor and the
issuance of the Note and (ii) stock splits and stock dividends and
distributions.
(b) Exchange Act Registration. Consolidated Capital will comply
in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether
or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and
filing obligations under said Act. Consolidated Capital will take all
action to continue the listing and trading of its Common Stock and will
comply in all respects with Consolidated Capital's reporting, filing and
other obligations under the bylaws or rules of the NASD and its trading
market.
(c) Corporate Existence. Consolidated Capital will take all steps
necessary to preserve and continue the corporate existence of
Consolidated Capital.
(d) Additional SEC Documents. Consolidated Capital will furnish
to the Noteholder upon request copies of all SEC Documents furnished or
submitted to the SEC.
(e) Blackout Period. (i) Consolidated Capital will immediately
notify the Noteholder upon the occurrence of any of the following events
in respect of a registration statement or related prospectus in respect
of an equity offering; (A) receipt of any request for additional
information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the registration
statement for amendments or supplements to the registration statement or
related prospectus; (B) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any
proceedings for that
<PAGE> 8
purpose; (C) receipt of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the
Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (D) the happening of any
event which makes any statement made in the registration statement or
related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
which requires the making of any changes in the registration statement,
related prospectus or documents so that, in the case of the registration
statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the
case of the related prospectus, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (E)
Consolidated Capital's reasonable determination that a post-effective
amendment to the registration statement would be appropriate; and
Consolidated Capital will promptly make available to the Noteholder any
such supplement or amendment to the related prospectus.
11. REGISTRATION RIGHTS.
11.1 Registration of Securities. (a) At the written request of the
Noteholder Consolidated Capital shall file with the SEC a registration statement
on Form S-1 or otherwise appropriate form (the "Registration Statement') for the
registration of the resale by the Noteholder of the Securities under the
Securities Act.
(b) Consolidated Capital shall prepare and file with the SEC such
amendments and supplements to such registration statements and the
prospectus used in connection therewith as may be necessary to keep the
Registration Statements referred to in subsection (a) above effective
for a maximum of two years from the date of issuance of the Securities.
(c) Consolidated Capital will, prior to filing a registration
statement or prospectus or any amendment or supplement thereto
(excluding amendments deemed to result from the filing of documents
incorporated by reference therein) to register the Securities, furnish
to the Noteholder and one firm of counsel representing the Noteholder,
copies of such registration statement as proposed to be filed, together
with the exhibits thereto, which documents will be subject to review by
such parties, and thereafter furnish to the Noteholder and its counsel
for their review such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents or information as the Noteholder or counsel may reasonably
request in order to facilitate the disposition of the Securities.
11.2 Indemnification of the Holder. Subject to the conditions set forth
below, in connection with any registration of the Securities pursuant to this
Section 11, Consolidated
<PAGE> 9
Capital agrees to indemnify and hold harmless the Noteholder, any underwriter
for Consolidated Capital or acting on behalf of the Noteholder and each person,
if any, who controls the Noteholder, within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each an "Indemnified Person"),
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), registration statement or prospectus
(as from time to time amended and supplemented), or in any
application or other document executed by Consolidated Capital or
based upon written information furnished by Consolidated Capital
filed in any jurisdiction in order to qualify Consolidated
Capital'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 Consolidated
Capital in the 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 Consolidated Capital by or on behalf of the Noteholder
expressly for use in connection therewith or arising out of any
action or inaction of the Noteholder;
(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 Consolidated Capital; and
(iii) Consolidated Capital shall be notified, by letter
or by facsimile confirmed by letter, of any action commenced
against Indemnified 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 Consolidated Capital, if prejudicial in any material
respect to Consolidated Capital's ability to defend such claim,
shall relieve Consolidated Capital from its liability to the
indemnified person under this Section 6, but only to the extent
that Consolidated Capital was prejudiced. The failure to so
notify
<PAGE> 10
Consolidated Capital shall not relieve Consolidated Capital from
any liability which it may have otherwise than on account of this
indemnity agreement. Consolidated Capital shall be entitled to
participate at its own expense in the defense of any suit brought
to enforce any such claim, but if Consolidated Capital elects to
assume the defense, such defense shall be conducted by counsel
chosen by it, provided such counsel is reasonably satisfactory to
the Indemnified Persons in any suit so brought.
11.3 Indemnification of Consolidated Capital. The Noteholder agrees to
indemnify and hold harmless Consolidated Capital, and its officers and directors
who signed the registration statement and each other person, if any, who
controls Consolidated Capital and underwriter within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act against any and all
such losses, liabilities, claims, damages and expenses as are indemnified
against by Consolidated Capital under Section 11.2 above; provided, however,
that such indemnification by the Noteholder 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 to Consolidated Capital by the Noteholder
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. In case any action shall be brought against Consolidated
Capital, or any other person so indemnified, in respect of which indemnity may
be sought against Noteholder, Noteholder shall have the rights and duties given
to Consolidated Capital, and each other person so indemnified shall have the
rights and duties given to the Noteholder, by the provisions of Section 11.2.
The person indemnified agrees to notify Noteholder promptly after the assertion
of any claim against the person indemnified in connection with the sale of
securities.
11.4 Contribution. If the indemnification provided for in Sections
11.2 and 11.3 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
<PAGE> 11
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.
11.5 Maximum Interest. It is expressly stipulated and agreed to be the
intent of Consolidated Capital and the 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 Note or advance
hereunder, or if acceleration of the maturity of the Note or the indebtedness
hereunder or if any prepayment by Consolidated Capital results in Consolidated
Capital's having paid any interest in excess of that permitted by law, then it
is Consolidated Capital's and the Noteholder's express intent that all excess
cash amounts theretofore collected by Noteholder be credited on the principal
balance of the Note (or if the Note has been or would thereby be paid in full,
refunded to Consolidated Capital), 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 the Note
does not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the Noteholder does not intend to
collect any unearned interest in the event of acceleration.
12. WAIVER OF PRESENTMENT. Except as set forth in this Note,
Consolidated Capital and every endorser or guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of time of payment or any other indulgence, to any substitution,
exchange or release of Collateral and to the addition or release of any other
party primarily or secondarily liable.
13. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED ACCORDING TO THE LAWS OF
THE STATE OF COLORADO AND CONSOLIDATED CAPITAL AND THE NOTEHOLDER BY ACCEPTANCE
HEREOF CONSENT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE
OF COLORADO TO DETERMINE ANY QUESTIONS OF FACT OR LAW ARISING UNDER THIS NOTE.
14. TRANSFERABILITY. This Note is assignable and transferable by the
Noteholder without the consent of Consolidated Capital.
<PAGE> 12
IN WITNESS WHEREOF, Consolidated Capital has executed this Note as of
the day and year set forth below.
Dated: March 3, 1998 CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Donald R. Jackson
---------------------------------
Donald R. Jackson
Treasurer
<PAGE> 1
EXHIBIT
10.47
Loan Agreement, dated January 9, 1998, by and between
Congress Financial Corporation (Western), Angeles
Metal Trim Co. and Angeles Acquisition Corp.
<PAGE> 2
================================================================================
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (WESTERN)
As Lender
And
ANGELES METAL TRIM CO.
AND
ANGELES ACQUISITION CORP.
As Borrower
Dated: January 9, 1998
================================================================================
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . 11
2.2 Letter of Credit Accommodations . . . . . . . . . . . . . 13
2.3 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Cap Ex Loans . . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Separate Loans to Each Borrower . . . . . . . . . . . . . 16
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Servicing Fee . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Compensation Adjustment . . . . . . . . . . . . . . . . . 18
3.5 Changes in Laws and Increased Costs of Loans . . . . . . . 19
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations . . . . . . . . . . . . . . . . . 20
4.2 Conditions Precedent to All Loans and Letter
of Credit Accommodations . . . . . . . . . . . . . . . . . 24
SECTION 5. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . 24
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . . . . 25
6.1 Borrower's Loan Account . . . . . . . . . . . . . . . . . 25
6.2 Statements . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Collection of Accounts . . . . . . . . . . . . . . . . . . 26
6.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Authorization to Make Loans . . . . . . . . . . . . . . . 27
6.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7. COLLATERAL REPORTING AND COVENANTS . . . . . . . . . . . . . . . 28
7.1 Collateral Reporting . . . . . . . . . . . . . . . . . . . 28
7.2 Accounts Covenants . . . . . . . . . . . . . . . . . . . . 28
7.3 Inventory Covenants . . . . . . . . . . . . . . . . . . . 30
7.4 Equipment Covenants . . . . . . . . . . . . . . . . . . . 30
7.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . 31
7.6 Right to Cure . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Access to Premises . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
-i-
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C> <C>
SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 32
8.1 Corporate Existence, Power and Authority . . . . . . . . 32
8.2 Financial Statements; No Material Adverse Change . . . . 33
8.3 Chief Executive Office; Collateral Locations . . . . . . 33
8.4 Priority of Liens; Title to Properties . . . . . . . . . 33
8.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 Compliance with Other Agreements and
Applicable Laws . . . . . . . . . . . . . . . . . . . . 34
8.8 Environmental Compliance . . . . . . . . . . . . . . . . 34
8.9 Employee Benefits . . . . . . . . . . . . . . . . . . . 35
8.10 Acquisition of Purchased Assets . . . . . . . . . . . . 35
8.11 Capitalization . . . . . . . . . . . . . . . . . . . . . 36
8.12 Accuracy and Completeness of Information . . . . . . . . 37
8.13 Survival of Warranties; Cumulative . . . . . . . . . . . 37
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . 37
9.1 Maintenance of Existence . . . . . . . . . . . . . . . . 37
9.2 New Collateral Locations . . . . . . . . . . . . . . . . 37
9.3 Compliance with Laws, Regulations . . . . . . . . . . . 38
9.4 Payment of Taxes and Claims . . . . . . . . . . . . . . 39
9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . 39
9.6 Financial Statements and Other Information . . . . . . . 40
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc. . . . . . . . . . . . . . . . . . . . 41
9.8 Encumbrances . . . . . . . . . . . . . . . . . . . . . . 41
9.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 42
9.10 Loans, Investments, Guarantees, Etc. . . . . . . . . . . 42
9.11 Dividends and Redemptions . . . . . . . . . . . . . . . 43
9.12 Transactions with Affiliates . . . . . . . . . . . . . . 43
9.13 Adjusted Net Worth . . . . . . . . . . . . . . . . . . . 43
9.14 Compliance with ERISA . . . . . . . . . . . . . . . . . 43
9.15 Costs and Expenses . . . . . . . . . . . . . . . . . . . 44
9.16 Further Assurances . . . . . . . . . . . . . . . . . . . 45
SECTION 10. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . 45
10.1 Events of Default . . . . . . . . . . . . . . . . . . . 45
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 48
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver . . . . . . . . . . . . . . . 48
11.2 Waiver of Notices . . . . . . . . . . . . . . . . . . . 49
11.3 Amendments and Waivers . . . . . . . . . . . . . . . . . 49
11.4 Waiver of Counterclaims . . . . . . . . . . . . . . . . 50
11.5 Indemnification . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
-ii-
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS . . . . . . . . . . . . . . . 50
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 51
12.3 Partial Invalidity . . . . . . . . . . . . . . . . . . . 52
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . 52
12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
-iii-
<PAGE> 6
Exhibit A Information Certificate
iv
<PAGE> 7
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated January 9, 1998 is entered into by and
between CONGRESS FINANCIAL CORPORATION (WESTERN), a California corporation
("Lender") and ANGELES METAL TRIM CO. ("Angeles"), a California corporation,
and ANGELES ACQUISITION CORP. ("Acquisition Corp."), a Delaware corporation.
(Angeles and Acquisition Corp. are referred to herein jointly and severally as
"Borrower".)
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
All terms used herein which are defined in Article 1 or Article 9 of the
California Uniform Commercial Code shall have the respective meanings given
therein unless otherwise defined in this Agreement. All references to the
plural herein shall also mean the singular and to the singular shall also mean
the plural. All references to Borrower and Lender pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns. The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
An Event of Default shall exist or continue or be continuing until such Event
of Default is waived in accordance with Section 11.3. Any accounting term used
herein unless otherwise defined in this Agreement shall have the meaning
customarily given to such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.A. "$3,500,000 Equity Condition" has the meaning set forth in
Section 1.28 below.
1.B. "Angeles Equity Contribution" has the meaning set forth in
Section 4.1(q) below.
-1-
<PAGE> 8
1.C. "Acquisition Equity Contribution" has the meaning set forth in
Section 4.1(q) below.
1.1 "Accounts" shall mean all present and future rights of Borrower
to payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b)
a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a (x) first-in-first-out basis with respect to
Angeles and (y) an average cost basis with respect to Acquisition Corp. until
March 31, 1998 and on a first-in-first-out basis commencing April 1, 1998,
after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the
indebtedness and other liabilities of such Person and its subsidiaries
(including tax and other proper accruals) plus (b) indebtedness of such Person
and its subsidiaries which is subordinated in right of payment to the full and
final payment of all of the Obligations on terms and conditions acceptable to
Lender.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and
revise in good faith reducing the amount of Revolving Loans and Letter of
Credit Accommodations which would otherwise be available to Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Lender in good faith, do or may
affect either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) the assets, business or prospects of
Borrower or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect
-2-
<PAGE> 9
Lender's good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Obligor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect or (c) to
reflect any state of facts which Lender determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default. Without limiting the generality of the foregoing, Lender (i)
shall establish on the date hereof and maintain throughout the term of this
Agreement and throughout any renewal term an Availability Reserve for an amount
equal to three (3) months of Borrower's gross rent and other obligations as
lessee for each leased premises of Borrower which is located in a state where a
landlord may be entitled to a priority lien on Collateral to secure unpaid rent
and with respect to each such property the landlord has not executed a form of
waiver and consent acceptable to Lender, (ii) may establish an additional
Availability Reserve on the date hereof, and from time to time hereafter, and
maintain such reserve throughout the term of this Agreement and throughout any
renewal term in an amount determined by Lender in its discretion to be
sufficient to cover the anticipated moving expenses and other costs associated
with the transfer of Inventory from each of Borrower's locations to another
location acceptable to Lender, and (iii) may establish and maintain an
additional Availability Reserve from time to time to compensate for any
increase in the percentage of Inventory represented by slow moving Inventory.
1.5 "Blocked Account" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close
under the laws of the State of New York or the Commonwealth of Pennsylvania,
and a day on which the Reference Bank and Lender are open for the transaction
of business, except that if a determination of a Business Day shall relate to
any Eurodollar Rate Loans, the term Business Day shall also exclude any day on
which banks are closed for dealings in dollar deposits in the London interbank
market or other applicable Eurodollar Rate market.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.9 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
-3-
<PAGE> 10
(b) such Accounts are not unpaid more than ninety (90) days
after the date of the original invoice for them or more than sixty (60) days
after the original due date thereof;
(c) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or Canada,
or, at Lender's option, if either: (i) the account debtor has delivered to
Borrower an irrevocable letter of credit issued or confirmed by a bank in the
United States satisfactory to Lender, sufficient to cover such Account, payable
in the United States of America and in U.S. Dollars, in form and substance
satisfactory to Lender and, if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender including, but not
limited to, the creditworthiness of the account debtor and the political risk
associated therewith, and the ability of the Lender to collect the foreign
Account, subject to such lending formulas with respect to each foreign Account
as Lender may determine, and each such foreign Account is payable to Borrower
at a location in the United States of America and in U.S. Dollars;
(f) such Accounts do not consist of progress billings, bill
and hold invoices or retainage invoices, except as to bill and hold invoices,
if Lender shall have received an agreement in writing from the account debtor,
in form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts;
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such Accounts or
reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any liens except
those permitted in this Agreement;
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(j) neither the account debtor nor any officer, director or
10% or more shareholder of the account debtor with respect to such Accounts is
an officer, employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control, management or
otherwise;
(k) the account debtors with respect to such Accounts are not
any foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened
or pending against the account debtors with respect to such Accounts which
might result in any material adverse change in any such account debtor's
financial condition;
(m) such Accounts of a single account debtor or its affiliates
do not constitute more than twenty (20%) percent of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage may
be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than ninety (90) days after the date of the original
invoice for them or more than sixty (60) days after the original due date
thereof, which constitute more than fifty percent (50%) of the total Accounts
of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may still be deemed Eligible
Accounts); and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and
revised from time to time by Lender in good faith. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
1.10 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and
raw materials for such finished goods which are acceptable to Lender based on
the criteria set forth below. In general, Eligible Inventory shall not include
(a) work-in-process (except that Unprocessed WIP Raw Materials (as defined in
Section 2.1(a)) may be included in Eligible Inventory, but Revolving Loans with
respect to the same shall be limited as set forth in Section 2.1(a)); (b)
components which are not part of finished goods; (c) spare
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parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory in-transit (other than Inventory located in the United States to
which Borrower has title); (h) Inventory subject to a security interest or lien
in favor of any person other than Lender except those permitted in this
Agreement; (i) bill and hold goods; (j) unserviceable, obsolete or slow moving
Inventory; (k) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (l) damaged and/or defective Inventory;
(m) Inventory purchased or sold on consignment; or (n) remnants or scrap metal
or customized inventory. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
1.11 "Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to Borrower's
business and facilities (whether or not owned by it), including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes.
1.12 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used
in connection therewith, and substitutions and replacements thereof, wherever
located.
1.13 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.14 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its affiliates under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
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1.15 "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.16 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.17 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.18 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lender formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, as determined by Lender, and subject to
the sublimits and Availability Reserves from time to time established by Lender
hereunder, and (ii) the Maximum Credit (less the then outstanding principal
amount of the Term Loans), minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations (but not including for this purpose the then
outstanding principal amount of the Term Loans), (ii) the aggregate amount of
all then outstanding and unpaid trade payables of Borrower which are more than
sixty (60) days past due as of such time, (iii) the aggregate amount of
Borrower's book overdrafts, and (iv) the aggregate amount of payments 30 days
or more past due on Borrower's lease and notes payable.
1.19 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.20 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for purposes of Section 9.13 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof
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and consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.21 "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous
or toxic under any Environmental Law).
1.22 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.23 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.24 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
three quarters of one percent (0.75%) per annum in excess of the Prime Rate
and, as to Eurodollar Rate Loans, a rate of two and three quarters percent
(2.75%) per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by Borrower as in
effect three (3) Business Days after the date of receipt by Lender of the
request of Borrower for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to
Borrower); provided, that, the Interest Rate shall mean the rate of 2.75% per
annum in excess of the Prime Rate as to all Loans (whether a Prime Rate Loan or
a Eurodollar Rate Loan), at Lender's option, without notice, (a) for the period
(i) from and after the date of termination or non-renewal hereof until Lender
has received full and final payment of all obligations (notwithstanding entry
of a judgment against Borrower) and (ii) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, and (b) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrower under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
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1.25 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.26 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued, opened or provided by Lender for the account of Borrower or
any Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower of its
obligations to such issuer.
1.27 "Loans" shall mean the Revolving Loans, the Cap Ex Loans and the
Term Loans.
1.28 "Maximum Credit" shall mean the amount of $15,000,000; provided
that at such time as Borrower receives net cash proceeds of the issuance of
equity securities by Borrower after the date hereof in an amount not less than
$3,500,000 (in addition to the sums referred to in Section 4.1(q) below) and
provides Lender with evidence of the same satisfactory to Lender in its
discretion (the "$3,500,000 Equity Condition"), the "Maximum Credit" shall be
increased to $20,000,000. Borrower shall cause the $3,500,000 Equity Condition
to be satisfied within 12 months after the date hereof.
1.29 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
1.30 "Obligations" shall mean any and all Revolving Loans, the Cap Ex
Loans, the Term Loans, Letter of Credit Accommodations and all other
obligations, liabilities and indebtedness of every kind, nature and description
owing by Borrower to Lender and/or its affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to Borrower under
the United States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the commencement of such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lender.
1.31 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
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1.32 "Participant" shall mean any person which at any time
participates with Lender in respect of the Loans, the Letter of Credit
Accommodations or other Obligations or any portion thereof.
1.33 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.34 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.35 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.36 "Prime Rate Loans" any Loans or portion thereof on which interest
is payable based on the Prime Rate in accordance with the terms hereof. All
Loans shall be Prime Rate Loans until changed to Eurodollar Loans in accordance
with the terms hereof.
1.37 "Purchase Agreements" shall mean, individually and collectively,
the Asset Purchase Agreement, dated as of January 9, 1998, among Acquisition
Corp., Seller, and certain other parties, together with bills of sale,
quitclaim deeds, assignment and assumption agreements and such other
instruments of transfer as are referred to therein and all side letters with
respect thereto, and all agreements, documents and instruments executed and/or
delivered in connection therewith, as all of the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced; provided, that, the term "Purchase Agreements" as used herein shall
not include any of the "Financing Agreements" as such term is defined herein.
1.38 "Purchased Assets" shall mean all of the assets and properties
acquired by Acquisition Corp. from Seller pursuant to the Purchase Agreements.
1.39 "Records" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.39 "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
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1.40 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.41 "Seller" shall mean Capitol Metals Co., Inc., a California
corporation, and its successors and assigns.
1.42 "Tangible Net Worth" shall mean Adjusted Net Worth, excluding
however all assets which would be classified as intangible assets under GAAP,
including without limitation goodwill, licenses, patents, trademarks, trade
names, copyrights, capitalized software and organizational costs, licences and
franchises.
1.43 "Term Loans" shall mean the term loans made by Lender to Borrower
as provided for in Section 2.3 hereof, and the $150,000 term loan referred to
in Section 2.0(c) below.
1.44 "Unprocessed WIP Raw Materials" has the meaning set forth in
Section 2.1(a) below.
1.45 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a (x) first-in-first-
out basis with respect to Angeles and (y) an average cost basis with respect
to Acquisition Corp. until December 31, 1997 and on a first-in-first-out basis
commencing January 1, 1998, in accordance with GAAP or (b) market value.
SECTION 2. CREDIT FACILITIES.
2.0 Assumption.
(a) Concurrently, Acquisition Corp. is purchasing all of the
assets of the Seller as set forth in the Purchase Agreements. Acquisition
Corp. hereby assumes and agrees to pay and perform when due for the benefit of
Lender the entire unpaid principal balance of all indebtedness, liabilities and
obligations of the Seller to Lender, including without limitation all accrued
and unpaid interest thereon and all costs and expenses incurred in connection
therewith. Acquisition Corp. acknowledges that the present unpaid principal
balance of the said indebtedness, including interest accrued through January
12, 1998, is $4,700,043.61 (which figure is subject to change), plus fees,
costs and expenses including without limitation attorneys' fees in accordance
with the Loan Agreement and other documents between Seller and Lender
(collectively, the "Assumed Indebtedness").
(b) As used herein, "Overadvance" means the amount of the
Assumed Indebtedness in excess of the total of (i) the Loans available to
Acquisition Corp. under Section 2.1 below plus (ii) the Term Loan to
Acquisition Corp. under Section 2.3 below (less the "Omitted Equipment Reserve"
as defined therein), plus (iii) the attorneys fees
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incurred by Lender for the months of December, 1997 and January, 1998 and
included in the Assumed Indebtedness (the "Deferred Costs").
(c) Concurrently, Acquisition Corp. shall (i) pay Lender an
amount sufficient to reduce the Overadvance to $200,000 and (ii) execute and
deliver to Lender a promissory note in the amount of said $200,000, payable
$20,000 per month principal plus interest, in such form as Lender shall
specify.
(d) Acquisition Corp. shall pay the Deferred Costs to Lender
(plus accrued interest thereon from the date incurred) on November 9, 1998.
(e) The balance of the Assumed Indebtedness shall constitute
the opening balance of the Loans to Acquisition Corp. under Section 2.1 below
and the Term Loan to Acquisition Corp. under Section 2.3 below.
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) 85% percent of the Net Amount of Eligible Accounts,
plus
(ii) the lesser of:
(A) the following percentages (the "Inventory
Advance Rates"): sum of 67% of the Value of Eligible Inventory in the case of
Acquisition Corp., or 57% of the Value of Eligible Inventory in the case of
Angeles; provided that in all cases the Inventory Advance Rate with respect to
unprocessed raw materials included in work in process ("Unprocessed WIP Raw
Materials") shall be 30%; or
(B) 85% of the orderly liquidation value of
Eligible Inventory as determined by an independent appraisal firm acceptable to
Lender, net of expenses which would be incurred in such a liquidation as
determined by Lender; or
(C) the amount equal to: (1) $10,000,000 minus (2)
the applicable Inventory Advance Rate multiplied by the then undrawn amounts of
the outstanding Letter of Credit Accommodations for the purpose of purchasing
goods, less
(iii) any Availability Reserves, and less
(iv) the $750,000 Reserve under Section 4.1(s) (if
applicable).
Notwithstanding the foregoing, Revolving Loans with respect to Unprocessed WIP
Raw Materials shall not exceed $100,000 at any time outstanding. Borrower
shall separately report to Lender Unprocessed WIP Raw Materials on all
Inventory reports to Lender in a manner acceptable to Lender in its discretion.
Notwithstanding anything
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herein to the contrary, Unprocessed WIP Raw Materials shall not be considered
Eligible Inventory, and Loans will not be made with respect thereto, until
Borrower as put in place a perpetual inventory system acceptable to Lender in
its discretion.
The Inventory Advance Rate with respect to Acquisition Corp. shall be reduced
by one percentage point per month, commencing one month after the date hereof,
until it is reduced to 61%.
Borrower may request an appraisal of the orderly liquidation value of Eligible
Inventory, as provided above in Section 2.1(a)(ii)(B) no more frequently than
semi-annually.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines
in good faith that: (A) the dilution with respect to the Accounts for any
period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover, or the mix, of the
Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated in
any material respect. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans, the Letter of Credit Accommodations and other Obligations outstanding at
any time shall not exceed the Maximum Credit. In the event that the
outstanding amount of any component of the Loans, or the aggregate amount of
the outstanding Loans, Letter of Credit Accommodations and other Obligations
exceed the amounts available under the lending formulas set forth in Section
2.1(a) hereof, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2(c) or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or
on any future occasions and Borrower shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms
and conditions
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acceptable to Lender and the issuer thereof. Any payments made by Lender to
any issuer thereof and/or related parties in connection with the Letter of
Credit Accommodations shall constitute additional Revolving Loans to Borrower
pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to one
percent (1%) per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable
in arrears as of the first day of each succeeding month; provided, however,
that such letter of credit fee shall be increased, at Lender's option, without
notice, to three percent (3%) per annum for the period on or after the date of
termination or non-renewal of this Agreement, or the date of the occurrence of
an Event of Default. Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or non-
renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrower (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than: (i)
if the proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) the product of the Value of such Eligible
Inventory multiplied by an amount equal to one minus the then applicable
Inventory Advance Rate under Section 2.1(a)(ii)(A), plus (B) freight, taxes,
duty and other amounts which Lender estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of Borrower's locations for
Eligible Inventory within the United States of America and (ii) if the proposed
Letter of Credit Accommodation is for standby letters of credit guaranteeing
the purchase of Eligible Inventory or for any other purpose, an amount equal to
one hundred (100%) percent of the face amount thereof and all other commitments
and obligations made or incurred by Lender with respect thereto. Effective on
the issuance of each Letter of Credit Accommodation, the amount of Revolving
Loans which might otherwise be available to Borrower shall be reduced by the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at
any time exceed $2,000,000 and (ii) the amount of all outstanding Letter of
Credit Accommodations for the purpose of purchasing Eligible Inventory and all
other commitments and obligations made or incurred by Lender in connection
therewith shall not at any time exceed: (A) $10,000,000 minus (B) the amount of
the then outstanding Revolving Loans based on Eligible Inventory pursuant to
Section 2.1(a)(ii) hereof. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower will either furnish
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cash collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Lender for the Letter of Credit Accommodations, and in either case, the
Revolving Loans otherwise available to Borrower shall not be reduced as
provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with
respect to any Letter of Credit Accommodation. Borrower assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed Borrower's agent. Borrower assumes all risks for, and agrees
to pay, all foreign, Federal, State and local taxes, duties and levies relating
to any goods subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder. Borrower hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower, by any issuer or correspondent or otherwise, unless
caused by the gross negligence or wilful misconduct of Lender, with respect to
or relating to any Letter of Credit Accommodation. The provisions of this
Section 2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter
of Credit Accommodation provided by an issuer other than Lender unless Lender
has duly executed and delivered to such issuer the application or a guarantee
or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made in good
faith by Lender, or any other issuer or correspondent under or in connection
with any Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of Borrower. Lender shall have the sole and exclusive right
and authority to, and Borrower shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents, and (B) agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take such
actions either in its own name or in Borrower's name.
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(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall
be deemed to have been granted or undertaken by Borrower to Lender. Any duties
or obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrower to Lender
and to apply in all respects to Borrower.
2.3 Term Loans.
(a) Lender is making a Term Loan to Acquisition Corp. in the
original principal amount of $1,500,000 and a Term Loan to Angeles in the
original principal amount of $1,943,000.
(b) The Term Loan to Acquisition Corp. is being made
concurrently herewith, provided that Lender shall have the right to withhold
from the proceeds thereof the sum of $137,000 (the "Omitted Equipment
Reserve"). The Omitted Equipment Reserve takes into account that certain
cranes and other equipment were excluded from the assets being purchased by
Acquisition from the Seller (the "Omitted Equipment"). In the event title to
the Omitted Equipment, free and clear of all liens and security interests and
adverse claims, is later transferred to Acquisition pursuant to documentation
acceptable to Lender in its sole discretion and the Omitted Equipment is
acceptable to Lender in its sole discretion, then Lender may, in its sole
discretion, release the Omitted Equipment Reserve (provided no Event of Default
and no event which, with notice or passage of time or both, would constitute an
Event of Default, has occurred and is continuing).
(c) The Term Loan to Angeles shall be made when the Angeles
Equity Contribution (as defined in Section 4.1(q)) has been made, provided
that, at the date the Term Loan is to be made, all other conditions precedent
have been satisfied and no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default, has occurred and
is continuing. The Term Loans are (a) evidenced by Term Promissory Notes in
such original principal amounts duly executed and delivered by Acquisition
Corp. and Angeles to Lender concurrently herewith; (b) to be repaid, together
with interest and other amounts, in accordance with this Agreement, the Term
Promissory Notes, and the other Financing Agreements and (c) secured by all of
the Collateral.
2.4 Cap Ex Loans.
Subject to, and upon the terms and conditions contained herein, Lender
agrees to make loans (the "Cap Ex Loans") to Borrower from time to time in
amounts requested by Borrower up to 75% of the net purchase price of new
Equipment purchased and installed after the date hereof and acceptable to
Lender in its discretion (provided that
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not more than $1,000,000 in Cap Ex Loans shall be made hereunder). Cap Ex
Loans may not be re-borrowed after being repaid. The net purchase price of
Equipment means the purchase price thereof, as shown on the applicable invoice,
net of all charges for taxes, freight, delivery, insurance, installation, set-
up, training, manuals, fees, service charges and other similar items. Cap Ex
Loans shall be made in disbursements of not less than $200,000 each and the
proceeds of Cap Ex Loans shall be used exclusively to purchase the applicable
Equipment. Each Cap Ex Loan shall be repaid by the Borrower to Lender in 60
equal monthly payments of principal, commencing on the first day of the first
month after such Cap Ex Loan was disbursed and continuing until the earlier of
the date such Cap Ex Loan has been paid in full or the date this Agreement
terminates by its terms or is terminated, at which date the entire unpaid
principal balance of the Cap Ex Loans, plus all accrued and unpaid interest
thereon, shall be due and payable.
2.5 Separate Loans to Each Borrower.
Loans will be disbursed separately to each Borrower, based on the
Collateral of each Borrower, but nothing herein limits the fact that the
Borrowers are jointly and severally liable for all Loans and all other
Obligations and that all Collateral of each Borrower secures all Loans and all
other Obligations of both Borrowers.
SECTION 3. INTEREST AND FEES.
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate.
Obligations to reimburse Lender for the amount of undrawn Letters of Credit are
contingent, until they become payable to Lender. All interest accruing
hereunder on and after the date of any Event of Default or termination or non-
renewal hereof shall be payable on demand.
(b) From and after the date the $3,500,000 Equity Condition
has been satisfied, the following provisions of this Section 3.1(b) shall
apply: Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrower shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar
Rate Loans (subject to the limits set forth below) and the Interest Period to
be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of
such a request from Borrower, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrower shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrower from time to time for requests by Borrower
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for Eurodollar Rate Loans, (iv) no more than three (3) Interest Periods may be
in effect at any one time, (v) the aggregate amount of the Eurodollar Rate
Loans must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrower shall not exceed the amount equal to
eighty (80%) percent of the daily average of the principal amount of the
Revolving Loans which it is anticipated will be outstanding during the
applicable Interest Period (but with no obligation of Lender to make such
Revolving Loans), and (vii) Lender shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Lender through the Reference
Bank and can be readily determined as of the date of the request for such
Eurodollar Rate Loan by Borrower. Any request by Borrower to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans shall be irrevocable. Notwithstanding anything to the contrary contained
herein, Lender and Reference Bank shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference Bank had purchased
such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate
Loan at least three (3) Business Days prior to such last day in accordance with
the terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon
notice by Lender to Borrower, convert to Prime Rate Loans in the event that (i)
an Event of Default or event which with notice or passage of time or both would
constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then outstanding,
or (B) the then outstanding principal amount of the Revolving Loans then
available to Borrower under Section 2 hereof. Borrower shall pay to Lender,
upon demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (not including loss of anticipated
profits), cost or expense incurred by such person, as a result of the
conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the
foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no
event
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<PAGE> 25
shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation,
and if any such part or provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be deemed amended to
conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $100,000, which shall be fully earned as of and payable on the date
hereof.
3.3 Servicing Fee. Borrower shall pay to Lender annually a servicing
fee in an amount equal to $42,000 in respect of Lender's services for each year
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned in advance as of the date hereof and on each annual anniversary
hereafter, such annual servicing fee to be payable on a monthly basis, in
advance, with the first such monthly payment payable on the date hereof
(without proration) and on the first day of each month hereafter.
3.4 Compensation Adjustment.
(a) If after the date of this Agreement the introduction of,
or any change in, any law or any governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or compliance by Lender or any Participant therewith:
(i) subjects Lender to any tax, duty, charge or
withholding on or from payments due from Borrower (excluding franchise taxes
imposed upon, and taxation of the overall net income of, Lender or any
Participant), or changes the basis of taxation of payments, in either case in
respect of amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve
requirement or other reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Lender or any Participant, or
(iii) imposes any other condition the result of which
is to increase the cost to Lender or any Participant of making, funding or
maintaining the Revolving Loans or Letter of Credit Accommodations or reduces
any amount receivable by Lender or any Participant in connection with the Loans
or Letter of Credit Accommodations, or requires Lender or any Participant to
make payment calculated by references to the amount of loans held or interest
received by it, by an amount deemed material by Lender or any Participant, or
(iv) imposes or increases any capital requirement or
affects the amount of capital required or expected to be maintained by Lender
or any Participant or any corporation controlling Lender or any Participant,
and Lender or any Participant determines that such imposition or increase in
capital requirements or increase in the amount of capital expected to be
maintained is based upon the existence of this
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<PAGE> 26
Agreement or the Loans or Letter of Credit Accommodations hereunder, all of
which may be determined by Lender's reasonable allocation of the aggregate of
its impositions or increases in capital required or expected to be maintained,
and the result of any of the foregoing is to increase the cost to Lender or any
Participant of making, renewing or maintaining the Loans or Letter of Credit
Accommodations, or to reduce the rate of return to Lender or any Participant on
the Loans or Letter of Credit Accommodations, then upon demand by Lender,
Borrower shall pay to Lender, and continue to make periodic payments to Lender
or any Participant, such additional amounts as may be necessary to compensate
Lender or any Participant for any such additional cost incurred or reduced rate
of return realized.
(b) A certificate of Lender claiming entitlement to
compensation as set forth above will be conclusive in the absence of manifest
error. Such certificate will set forth the nature of the occurrence giving
rise to such compensation, the additional amount or amounts to be paid and the
compensation and the method by which such amounts were determined. In
determining any additional amounts due from Borrower under this Section, Lender
shall act reasonably and in good faith and will, to the extent that the
increased costs, reductions, or amounts received or receivable relate to the
Lender's or a Participant's loans or commitments generally and are not
specifically attributable to the Loans and commitments hereunder, use averaging
and attribution methods which are reasonable and equitable and which cover all
loans and commitments under this Agreement by the Lender or such Participant,
as the case may be, whether or not the loan documentation for such other loans
and commitments permits the Lender or such Participant to receive compensation
costs of the type described in this Section.
3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the material increase in
the costs to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans or (C) reduce the amounts received or receivable by
Lender in respect thereof, by an amount deemed by Lender to be material or (ii)
the cost to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans shall otherwise increase by an amount deemed by
Lender to be material. Borrower shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of Borrower) any amounts
required to compensate Lender, the Reference Bank or any participant with
Lender for any loss (not including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds
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acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (not including loss of anticipated profits), cost or expense incurred by
such person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such person to make or
maintain such Eurodollar Rate Loans or any portion thereof.
SECTION 4. CONDITIONS PRECEDENT.
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder. If any of the following conditions are not satisfied
by January 9, 1998, Lender shall have no further obligation hereunder. Any of
the following conditions may be waived by Lender, but only in a written waiver
signed by a duly-authorized officer of Lender.
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination of any interest
in and to any assets and properties of Borrower, duly authorized, executed and
delivered by it or each of them, including, but not limited to, UCC termination
statements for all UCC financing statements and Lender shall have satisfied
itself that it has valid, perfected and first priority security interests in
and liens upon the Collateral and any other property which is intended as
security for the Obligations, or the liability of any Obligor in respect
thereto, subject only to the security interests and liens permitted herein or
in the other Financing Agreements;
(b) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including, without limitation,
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or governmental
authorities;
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(c) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records
and of such other financial information, projections, budgets, business plans
and cash flows as Lender shall reasonably request from time to time, including,
but not limited to, current agings of receivables, current perpetual inventory
records and/or rollforwards of Accounts and Inventory through the date of
closing (including a physical count of the Inventory by a third party
acceptable to Lender), together with supporting documentation, including
documentation with respect to Inventory in-transit, goods in bonded warehouses
or at other third-party locations, that will enable Lender to accurately
identify and verify the eligible Collateral at or before closing in a manner
satisfactory to Lender, the results of which shall be satisfactory to Lender;
(e) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including, without limitation,
acknowledgments by lessors, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any security interests,
liens or other claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the premises to
exercise its rights and remedies and otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with
respect to the Financing Agreements and such other matters as Lender may
request;
(h) the Excess Availability as determined by Lender as of the
date hereof, and as of the date the initial Loans and the initial Letter of
Credit Accommodations are to be provided hereunder, shall be not less than
$500,000 for Acquisition Corp. and $250,000 for Angeles, respectively, in each
case after giving effect to the initial Loans made or to be made hereunder and
the payment of all fees and expenses payable upon the consummation of the
initial transactions contemplated by this Agreement;
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(i) Lender shall have received, in form and substance
satisfactory to Lender and its counsel, the assignment of all of Borrower's
rights in registered patents, trademarks, service marks and copyrights, as
Collateral hereunder, on Lender's standard forms of Collateral Assignments;
(j) Lender shall have received, in form and substance
satisfactory to Lender, an executed copy of a Blocked Account Agreement,
pursuant to Section 6.3(a) hereof, among Lender, Borrower and Union Bank
(except that Angeles may defer providing said Blocked Account Agreement until
two Business Days prior to the date the first Loan or Letter of Credit
Accommodation is to be made to Angeles); and
(k) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender; and
(l) Any holders of a security interest in Borrower's assets
including, without limitation, vendors of Inventory to Borrower, the Seller,
and the Estate of Nat Handel, shall have executed such intercreditor and
security interest and debt subordination agreements in form and substance
satisfactory to Lender.
(m) Consolidated Capital of North America, Inc. (the "Parent")
and California Building Systems, Inc. ("CBS") shall have executed and delivered
a Continuing Guaranty in favor of Lender with respect to the Obligations, on
Lender's standard form, and the Parent and CBS shall have executed and
delivered to Lender a security agreement with respect to all of their assets,
on Lender's standard form, granting Lender a first-priority security interest
therein, together with all appropriate UCC-1 Financing Statements and other
documentation satisfactory to Lender in its discretion.
(n) Lender shall have received, in form and substance
satisfactory to Lender, evidence that the Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto, and the same
shall be satisfactory to Lender in its sole discretion, and the transactions
contemplated by the Purchase Agreements shall have been consummated prior to or
contemporaneously with the execution of this Agreement, in a manner
satisfactory to Lender in its sole discretion and in compliance with all
applicable laws, rules and regulations and all agreements binding on Borrower,
Seller or their assets, and with all necessary consents, and Lender shall have
received evidence of the same, including an opinion of counsel, in form and
substance satisfactory to Lender in its sole discretion. Without limiting the
generality of the foregoing, the sale of the Seller's assets pursuant to the
Purchase Agreements shall be approved by a final order of the United States
Bankruptcy Court, such order shall not have been stayed, and no appeal shall
have been taken therefrom.
(o) Lender shall have received, in form and substance
satisfactory to Lender, the opinion letter of counsel(s) to Borrower with
respect to the Purchase
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Agreements, the Financing Agreements and the security interests and liens of
Lender with respect to the Collateral and such other matters as Lender may
request;
(p) Lender shall have received, in form and substance
satisfactory to Lender, a pro-forma balance sheet of Borrower reflecting the
initial transactions contemplated hereunder, including, but not limited to, (i)
the consummation of the acquisition of the Purchased Assets by Borrower from
Seller and the other transactions contemplated by the Purchase Agreements and
(ii) the Loans and Letter of Credit Accommodations provided by Lender to
Borrower on the date hereof and the use of the proceeds of the initial Loans as
provided herein, accompanied by a certificate, dated of even date herewith, of
the chief financial officer of Borrower stating that such pro-forma balance
sheet represents the reasonable, good faith opinion of such officer as to the
subject matter thereof as of the date of such certificate;
(q) Equity Contributions.
(1) Lender shall have received, in form and substance
satisfactory to Lender, evidence that Acquisition has received net cash
proceeds from a cash equity capital contribution to Acquisition after the date
hereof of not less than $1,000,000 (the "Acquisition Equity Contribution") and
Angeles has received net cash proceeds from a cash equity capital contribution
to Angeles after the date hereof of not less than $1,500,000 minus the amount
of the Acquisition Equity Contribution (the "Angeles Equity Contribution").
(2) Angeles may defer making the Angeles Equity
Contribution for not more than 10 days after the date hereof. Notwithstanding
anything in this Agreement to the contrary, no Loans or Letter of Credit
Accommodations will be made to Angeles until the Angeles Equity Contribution
has been made. At the date the Angeles Equity Contribution has been made and
Loans and Letter of Credit Accommodations are to be made to Angeles, all
conditions precedent set forth in this Section 4.1 must be met again before
Loans and Letter of Credit Accommodations will be made to Angeles. Angeles
shall give Lender at least five Business Days advance written notice prior to
the date Angeles wishes to obtain the first Loan or Letter of Credit
Accommodation hereunder. If Angeles fails to make the Angeles Equity
Contribution within 10 days after the date hereof, such failure shall
constitute an Event of Default under this Agreement.
(3) Prior to the date the first Loan or Letter of
Credit Accommodation is made to Angeles, Angeles shall not be required to meet
the requirements of Sections 6.3 (relating to collection of Accounts), 7.1
(relating to collateral reporting, except that Borrower shall comply with the
requirement of Section 7.1 relating to a fully integrated perpetual inventory
system acceptable to Lender), 7.2 (a)-(e) (relating to Accounts covenants).
After the date the first Loan or Letter of Credit Accommodation is made to
Angeles, Angeles shall meet all such requirements.
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(4) Prior to the date the first Loan or Letter of
Credit Accommodation is made to Angeles, Lender acknowledges that security
interests in Angeles' assets will be held by General Electric Credit
Corporation and Union Bank. Any event of default under the obligations secured
by said security interests shall constitute an Event of Default hereunder
(unless cured within any cure period provided in the agreements between Angeles
and said lenders or waived in writing by said lenders). Prior to the date the
first Loan or Letter of Credit Accommodation is made to Angeles, said other
security interests shall be terminated.
(r) [omitted];
(s) A certificate of deposit in the amount of $250,000 issued
by a bank and payable on terms satisfactory to Lender in its sole discretion,
shall have been pledged to the Lender to secure all of the Obligations,
pursuant to a pledge agreement in such form as Lender shall specify (the
"Collateral CD"). $1,000,000 of the Acquisition Equity Contribution provided
for in Section 4.1 (q)(1) may not be utilized, directly or indirectly for the
Collateral CD. Lender shall release the Collateral CD at such time as all of
the following conditions have satisfied: (i) the $3,500,000 Equity Condition
has been satisfied, (ii) no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default, has occurred and
is continuing, (iii) Borrower has Excess Availability of at least $750,000.
From and after the date the Collateral CD is so released, Lender shall have the
right to withhold and maintain a reserve against Loans which would otherwise be
available to the Borrower in the amount of $750,000 (the "$750,000 Reserve").
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after
giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST.
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against,
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and hereby assigns to Lender as security, the following property and interests
in property, whether now owned or hereafter acquired or existing, and wherever
located (collectively, the "Collateral"):
5.1 Accounts;
5.2 All present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses
in action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
investment property, letters of credit, bankers' acceptances and guaranties;
5.3 All present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter held
or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of Borrower, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and
all present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 All products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, all Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and
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interest. All entries in the loan account(s) shall be made in accordance with
Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a
statement setting forth the balance in the Borrower's loan account(s)
maintained by Lender for Borrower pursuant to the provisions of this Agreement,
including principal, interest, fees, costs and expenses. Each such statement
shall be subject to subsequent adjustment by Lender but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower of any specific exceptions
of Borrower thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to
Borrower a written statement as provided above, the balance in Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable
to Lender into which Borrower shall promptly deposit and direct its account
debtors to directly remit all payments on Accounts and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. The
banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Lender, providing that all
items received or deposited in the Blocked Accounts are the property of Lender,
that the depository bank has no lien upon, or right to setoff against, the
Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of Lender
as Lender may from time to time designate for such purpose ("Payment Account").
Borrower agrees that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or as proceeds of
Inventory or other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Lender in the Payment Account, or two
(2) Business Days following the date of receipt of funds that are not
immediately available to Lender in the Payment Account, as applicable. For
purposes of calculating the amount of the Revolving Loans available to Borrower
such payments will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt by Lender in the Payment Account, if
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such payments are received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to credit
Borrower's loan account on such day, and if not, then on the next Business Day.
In the event that there are no outstanding monetary Obligations at the time
such payments or other funds are received, Borrower shall pay a Lender a charge
(the "Float Charge") in an amount equal to interest at the Prime Rate on the
amount of such payment or other funds, for one (1) Business Day following the
date of receipt of immediately available funds by Lender in the Payment
Account, or two (2) Business Days following the date of receipt of funds that
are not immediately available to Lender in the Payment Account, as applicable.
(c) Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person, unless such payment or indemnification obligation of Lender was
a result of Lender's gross negligence or wilful misconduct. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender may apply payments received or collected from
Borrower or for the account of Borrower (including, without limitation, the
monetary proceeds of collections or of realization upon any Collateral) to such
of the Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
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notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of Borrower
or other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests
received after 10:30 a.m. (Los Angeles time) on any day shall be deemed to have
been made as of the opening of business on the immediately following Business
Day. All Loans and Letter of Credit Accommodations under this Agreement shall
be conclusively presumed to have been made to, and at the request of and for
the benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrower to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter
of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating, working
capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or
for the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS.
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts; (b) on a weekly basis or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category and (iii) agings of accounts payable, (c) upon
Lender's request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank
statements, (ii) copies of shipping and delivery documents, and (iii) copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by
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Borrower; (d) agings of accounts receivable on a monthly basis or more
frequently as Lender may request; and (e) such other reports as to the
Collateral as Lender shall reasonably request from time to time. Within 120
days after the date hereof, Borrower shall establish and maintain a fully
integrated perpetual inventory system acceptable to Lender. If any of
Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information
relating to the financial condition of any account debtor and (iii) any event
or circumstance which, to Borrower's knowledge would cause Lender to consider
any then existing Accounts as no longer constituting Eligible Accounts. No
credit, discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices and
policies previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Borrower shall promptly report to Lender any return of
Inventory by an account debtor having a sales price in excess of $20,000. At
any time that Inventory is returned, reclaimed or repossessed, the related
Account shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrower shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender, (ii) segregate all returned Inventory from all
of its other property, (iii) dispose of the returned Inventory solely according
to Lender's instructions, and (iv) not issue any credits, discounts or
allowances with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any
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account debtor except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions made or given in
the ordinary course of Borrower's business in accordance with practices and
policies previously disclosed to Lender, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the terms
of this Agreement, (v) none of the transactions giving rise thereto will
violate any applicable State or Federal laws or regulations, all documentation
relating thereto will be legally sufficient under such laws and regulations and
all such documentation will be legally enforceable in accordance with its
terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by
mail, telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower,
all chattel paper and instruments which Borrower now owns or may at any time
acquire immediately upon Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary
or desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions
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thereto; (b) Borrower shall conduct a physical count of the Inventory at least
once each year, but at any time or times as Lender may request on or after an
Event of Default which is continuing, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such
physical count; (c) Borrower shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Lender,
except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location; (d) upon Lender's request, Borrower shall, at
its expense, no more than once in any twelve (12) month period, but at any time
or times as Lender may request on or after an Event of Default which is
continuing, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrower shall produce, use,
store and maintain the Inventory, with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including, but not limited to, the requirements of the Federal
Fair Labor Standards Act of 1938, as amended and all rules, regulations and
orders related thereto); (f) Borrower assumes all responsibility and liability
arising from or relating to the production, use, sale or other disposition of
the Inventory; (g) Borrower shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate Borrower to repurchase such Inventory; (h) Borrower shall keep the
Inventory in good and marketable condition; and (i) Borrower shall not, without
prior written notice to Lender, acquire or accept any Inventory on consignment
or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) Borrower shall keep the Equipment in good order, repair, running
and marketable condition (ordinary wear and tear excepted); (c) Borrower shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrower's business and not for
personal, family, household or farming use; (e) Borrower shall not remove any
Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property, unless a landlord and mortgagee waiver in
such form as Lender shall specify has been executed
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and delivered to Lender with respect to such real property; and (g) Borrower
assumes all responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and, without
assuming any liability whatsoever to Borrower, make available to Borrower, to
the extent not necessary to be utilized by Lender in the exercise of any of its
rights under this Agreement, all mail addressed to Borrower, and (ix) do all
acts and things which are necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof, (ii) have access to any lockbox or postal box into which
Borrower's mail is deposited, (iii) endorse Borrower's name upon any items of
payment or proceeds thereof and deposit the same in the Lender's account for
application to the Obligations, (iv) endorse Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral, (v)
sign Borrower's name on any verification of Accounts and notices thereof to
account debtors and (vi) execute in Borrower's name and file any UCC financing
statements or amendments thereto. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default
by Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on
demand. Lender shall be under no obligation to effect such cure, payment
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or bonding and shall not, by doing so, be deemed to have assumed any obligation
or liability of Borrower. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event
of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender by
one day's notice to Borrower, at the cost and expense of Borrower, (a) Lender
or its designee shall have complete access to all of Borrower's premises during
normal business hours and after notice to Borrower, or at any time and without
notice to Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrower's books and records, including, without
limitation, the Records, and (b) Borrower shall promptly furnish to Lender such
copies of such books and records or extracts therefrom as Lender may request,
and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and the
providing of Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
is a corporation duly organized and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on Borrower's financial
condition, results of operation or business or the rights of Lender in or to
any of the Collateral. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder are all within Borrower's corporate powers, have been
duly authorized and are not in contravention of law or the terms of Borrower's
certificate of incorporation, by-laws, or other organizational documentation,
or any indenture, agreement or undertaking to which Borrower is a party or by
which Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms. Borrower does
not have any subsidiaries except that Angeles has one wholly-owned subsidiary,
California Building Systems, Inc., which is an inactive corporation and has no
assets or liabilities. Borrower shall cause California Building Systems, Inc.
to continue to be an inactive corporation with no assets or liabilities, unless
Lender shall give its prior written consent to a change thereto.
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All financial statements relating to Borrower which have been or may
hereafter be delivered by Borrower to Lender have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operations of Borrower as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrower
to Lender prior to the date of this Agreement, there has been no material
adverse change in the assets, liabilities, properties and condition, financial
or otherwise, of Borrower, since the date of the most recent audited financial
statements furnished by Borrower to Lender prior to the date of this Agreement.
The chief executive office of Borrower and Borrower's Records
concerning Accounts are located only at the address set forth below and its
only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate, subject to the
right of Borrower to establish new locations in accordance with Section 9.2
below. The Information Certificate correctly identifies any of such locations
which are not owned by Borrower and sets forth the owners and/or operators
thereof and to the best of Borrower's knowledge, the holders of any mortgages
on such locations.
The security interests and liens granted to Lender under this Agreement
and the other Financing Agreements constitute valid and perfected first
priority liens and security interests in and upon the Collateral subject only
to liens permitted under Section 9.8 hereof. Borrower has good and marketable
title to all of its properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Lender and such others as are permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to
be filed by it (without requests for extension except as previously disclosed
in writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets,
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business or prospects of Borrower or would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce any Obligations or
realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower
is not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with
all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority.
8.8 Environmental Compliance.
(a) Borrower has not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operations of Borrower complies in all material respects with all Environmental
Laws and all licenses, permits, certificates, approvals and similar
authorizations thereunder.
(b) There has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental authority or
any other person nor is any pending or to the best of Borrower's knowledge
threatened, with respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrower or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or
safety matter, which affects Borrower or its business, operations or assets or
any properties at which Borrower has transported, stored or disposed of any
Hazardous Materials.
(c) Borrower has no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations
are valid and in full force and effect.
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8.9 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection
with which Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency
described in Section 8.9(c) hereof and any deficiency with respect to vested
accrued benefits described in Section 8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower to be incurred with respect to any employee
pension benefit plan of Borrower or any of its ERISA Affiliates. There has
been no reportable event (within the meaning of Section 4043(b) of ERISA) or
any other event or condition with respect to any employee pension benefit plan
of Borrower or any of its ERISA Affiliates which presents a risk of termination
of any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower
or any of its ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee pension
benefit plan as contributions to such plan as of the last day of the most
recent fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, exists with respect to any employee
pension benefit plan, including any penalty or tax described in Section 8.9(a)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrower that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Lender and
consented to in writing by Lender) of all conditions precedent set forth
therein and giving effect to the terms of the Purchase Agreements and the
assignments to be executed and delivered by Seller (or
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any of its affiliates or subsidiaries) thereunder, Borrower acquired and has
good and marketable title to the Purchased Assets, free and clear of all
claims, liens, pledges and encumbrances of any kind, except as permitted
hereunder. Borrower acknowledges that the Purchased Assets are being purchased
subject to the security interest in them granted to Lender by the Seller. The
outstanding balance of the Obligations of the Seller to Lender are being
assumed by Borrower and shall be included in the opening balance of the Loans
made pursuant hereto and shall be subject to all of the terms and provisions
hereof.
(b) All actions and proceedings, required by the Purchase
Agreements, applicable law or regulation (including, but not limited to,
compliance with the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as
amended) have been taken and the transactions required thereunder have been
duly and validly taken and consummated.
(c) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of
the transactions described in the Purchase Agreements and no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the transactions described in the Purchase Agreements.
(d) Borrower has delivered, or caused to be delivered, to
Lender, true, correct and complete copies of the Purchase Agreements.
8.11 Capitalization.
(a) All of the issued and outstanding shares of capital stock
of Borrower are directly and beneficially owned and held by the Parent and all
of such shares have been duly authorized and are fully paid and non-assessable,
free and clear of all claims, liens, pledges and encumbrances of any kind,
except as disclosed in writing to Lender.
(b) Borrower is solvent and will continue to be solvent after
the creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business and all
businesses in which it is about to engage. The assets and properties of
Borrower at a fair valuation and at their present fair salable value are, and
will be, greater than the Indebtedness of Borrower, and including subordinated
and contingent liabilities computed at the amount which, to the best of
Borrower's knowledge, represents an amount which can reasonably be expected to
become an actual or matured liability.
(c) The Parent has, on or before the date hereof, made the
cash equity capital contributions called for by Section 4.1(q) above, except
that Angeles may defer
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meeting the Angeles Equity Contribution for not more than 10 days after the
date hereof, as provided above in Section 4.1(q).
8.12 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business, assets or prospects
of Borrower, which has not been fully and accurately disclosed to Lender in
writing.
All representations and warranties contained in this Agreement or any
of the other Financing Agreements shall survive the execution and delivery of
this Agreement and shall be deemed to have been made again to Lender on the
date of each additional borrowing or other credit accommodation hereunder and
shall be conclusively presumed to have been relied on by Lender regardless of
any investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrower shall now or hereafter give,
or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, trade names, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Within thirty days of the date hereof, Acquisition Corp. shall
change its corporate name to "Capital Metals Co." and deliver to Lender (i) a
copy of the amendment to the Certificate of Incorporation of Acquisition Corp.
providing for such name change certified by the Secretary of State of
California as soon as it is available and any other jurisdiction where
Acquisition Corp is registered as a foreign corporation to do business.
Borrower shall give Lender thirty (30) days prior written notice of any
proposed additional change in its corporate name, which notice shall set forth
the new name and Borrower shall deliver to Lender a copy of the amendment to
the Certificate of Incorporation of Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
within the continental United States provided Borrower (a) gives Lender thirty
(30) days prior written notice of the intended opening of any such new location
and (b) executes and delivers, or causes to be executed and delivered, to
Lender such agreements, documents, and instruments as Lender may deem
reasonably necessary or desirable to
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protect its interests in the Collateral at such location, including, without
limitation, UCC financing statements and, if Borrower leases such new location,
provides a favorable landlord waiver or subordination, or, in the alternative,
Lender may apply an Availability Reserve in an amount equal to three (3) months
gross rent in a manner consistent with the Availability Reserve established to
cover rent as defined in Section 1.4 hereof.
9.3 Compliance with Laws, Regulations.
(a) Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal, State
or local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.
(b) Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual reviews of
such compliance by employees or agents of Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrower to Lender.
Borrower shall take prompt and appropriate action to respond to any non-
compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects Borrower or its business, operations or assets or
any properties at which Borrower transported, stored or disposed of any
Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall, at
Lender's request and Borrower's expense: (i) cause an independent environmental
engineer acceptable to Lender to conduct such tests of the site where
Borrower's non-compliance or alleged
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non-compliance with such Environmental Laws has occurred as to such non-
compliance and prepare and deliver to Lender a report as to such non-compliance
setting forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof
and (ii) provide to Lender a supplemental report of such engineer whenever the
scope of such non-compliance, or Borrower's response thereto or the estimated
costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs
of any required or necessary repair, cleanup or other remedial work with
respect to any property of Borrower and the preparation and implementation of
any closure, remedial or other required plans. All representations,
warranties, covenants and indemnifications in this Section 9.3 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon
or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books. Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements provided
for herein and Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by Borrower such amount shall be added and deemed part of the
Loans, provided, that, nothing contained herein shall be construed to require
Borrower to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event of Default
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exists or has occurred and is continuing, adjusting, settling, amending and
canceling such insurance. Borrower shall cause Lender to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrower shall obtain non-contributory
lender's loss payable endorsements to all insurance policies in form and
substance satisfactory to Lender. Such lender's loss payable endorsements
shall specify that the proceeds of such insurance shall be payable to Lender as
its interests may appear and further specify that Lender shall be paid
regardless of any act or omission by Borrower or any of its affiliates. At its
option, Lender may apply any insurance proceeds received by Lender at any time
to the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Lender
may determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries
(if any) in accordance with GAAP and Borrower shall furnish or cause to be
furnished to Lender: (i) within forty (40) days after the end of each fiscal
month, monthly unaudited consolidated financial statements, and, if Borrower
has any subsidiaries, unaudited consolidating financial statements (including
in each case balance sheets, statements of income and loss and statements of
shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month and (ii) within one
hundred twenty (120) days after the end of each fiscal year, audited
consolidated financial statements and, if Borrower has any subsidiaries,
audited consolidating financial statements of Borrower and its subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable
to Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for
the Obligations or which would result in any material adverse change in
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
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(c) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all financial
reports which Borrower sends to its stockholders generally and copies of all
reports and registration statements which Borrower files with the Securities
and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information in respect of the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on
behalf of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. Any documents, schedules, invoices or
other papers delivered to Lender may be destroyed or otherwise disposed of by
Lender one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(e) Borrower shall deliver, or cause to be delivered, to
Lender, within ninety (90) days from the date hereof, opening balance sheets
prepared by independent certified public accountants, which accountants shall
be a nationally recognized independent accounting firm selected by Borrower and
reasonably acceptable to Lender, and certified by such accountants to the
effect that such opening balance sheets have been prepared in accordance with
GAAP and present fairly the financial condition of Borrower as of such date.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrower shall not, directly or indirectly, (a) merge into or with or
consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it, or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any stock or indebtedness to any other Person or any of
its assets to any other Person (except for (i) sales of Inventory in the
ordinary course of business and (ii) the disposition of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower so long as
(A) if an Event of Default exists or has occurred and is continuing, any
proceeds are paid to Lender and (B) such sales do not involve Equipment having
an aggregate fair market value in excess of $25,000 for all such Equipment
disposed of in any fiscal year of Borrower), or (c) form or acquire any
subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the
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payment of taxes, either not yet overdue or the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower, in each case prior to
the commencement of foreclosure or other similar proceedings and with respect
to which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with
the use of such real property or ordinary conduct of the business of Borrower
as presently conducted thereon or materially impair the value of the real
property which may be subject thereto; (e) purchase money security interests in
Equipment (including capital leases) and purchase money mortgages on real
estate not to exceed $50,000 in the aggregate at any time outstanding so long
as such security interests and mortgages do not apply to any property of
Borrower other than the Equipment or real estate so acquired, and the
indebtedness secured thereby does not exceed the cost of the Equipment or real
estate so acquired, as the case may be and (f) security interests in favor of
the Seller, and the Estate of Nat Handel, which shall be subordinated in all
respects to the security interest in favor of Lender.
9.9 Indebtedness. Borrower shall not incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrower is contesting in good faith the amount or
validity thereof by appropriate proceedings diligently pursued and available to
Borrower, and with respect to which adequate reserves have been set aside on
its books; (c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement; and (d) obligations or indebtedness
set forth on the Information Certificate; provided, that, (i) Borrower may only
make regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) except as otherwise
permitted under this Agreement, redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
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9.10 Loans, Investments, Guarantees, Etc. Borrower shall not,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part
of the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender
to perfect the security interest of Lender in such investments and (c) the
guarantees set forth in the Information Certificate.
9.11 Dividends and Redemptions. Borrower shall not do any of the
following, and Borrower shall not permit Parent to any of the following:
directly or indirectly, declare or pay any dividends on account of any shares
of any class of capital stock of Borrower or Parent now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares
of any class of capital stock (or set aside or otherwise deposit or invest any
sums for such purpose) for any consideration other than common stock or apply
or set apart any sum, or make any other distribution (by reduction of capital
or otherwise) in respect of any such shares or agree to do any of the
foregoing; provided that (i) Borrower may pay dividends to Parent if no Event
of Default and no event which, with notice or passage of time or both, would
constitute an Event of Default, has occurred and is continuing or would occur
after giving effect to any such dividend, and if, after giving effect to such
dividend Borrower would have Excess Availability of not less than $750,000, and
(ii) Parent may declare and pay dividends on any class of preferred shares of
Parent, provided such dividends are in an amount not to exceed 10% per annum on
a non-cumulative basis, and provided no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default,
has occurred and is continuing or would occur after giving effect to any such
dividend, and provided that, after giving effect to such dividend Borrower
would have Excess Availability of not less than $750,000.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair
and reasonable terms no less favorable to the Borrower than Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person.
9.13 Net Worth. Acquisition Corp. shall, at all times, maintain a
net worth of not less than $810,000 (determined in accordance with GAAP), and
Angeles shall at all
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times maintain a net worth of not less than a negative $1,270,000 (determined
in accordance with GAAP, provided that in determining the net worth of
Angeles, the notes and obligations owing to Angeles from Parent and accrued
interest thereon shall not be counted as assets). The foregoing amounts may be
revised by Lender, in consultation with the Borrower, following Lender's
receipt of audited financial statements of Acquisition Corp. prepared as of the
date of the closing of the acquisition of the Purchased Assets, which Borrower
shall provide to Lender within 120 days after the date hereof.
9.14 Compliance with ERISA. Borrower shall not with respect to any
"employee pension benefit plan" maintained by Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any prohibited
transaction involving any of such employee pension benefit plans or any trust
created thereunder which would subject Borrower or such ERISA Affiliate to a
tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA, (iii) fail to pay to any such employee
pension benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee pension benefit plan, (v) allow or
suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee pension benefit plan that is a single
employer plan, which termination could result in any liability to the Pension
Benefit Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.14, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in
ERISA, and the term "prohibited transaction" shall have the meaning assigned to
it in Section 4975 of the Code and ERISA.
9.15 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including, but not
limited to: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for title insurance and other insurance
premiums, environmental
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<PAGE> 53
audits, surveys, assessments, engineering reports and inspections, appraisal
fees and search fees; (c) costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including, without limitation, preparations for and consultations concerning
any such matters); (g) all out-of-pocket expenses and costs heretofore and from
time to time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a per diem
charge at the rate of $650 per person per day for Lender's examiners in the
field and office; and (h) the reasonable fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.16 Further Assurances. At the request of Lender at any time and
from time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event
of Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations
which failure is not cured within two Business Days after the same became due
and payable, or Borrower fails to perform any of the other terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements, which failure is not cured within five calendar days
after the performance was due, provided that such
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five-day cure period shall not apply to (i) a failure to perform which cannot
be cured within such five-day period, or (ii) a failure which has been the
subject of a prior failure within the prior six months, or (iii) a failure
which is an intentional breach by the Borrower, or (iv) a breach of any of
Sections 6.1, 6.3, 6.4, 6.6, 7.2, 7.3, 7.4, 7.7, 9.4, 9.5, 9.7-9.13, or any
covenants or agreements covering substantially the same matters;
(b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) Any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) Any judgment for the payment of money which is not fully
covered by insurance (as demonstrated to Congress' reasonable satisfaction) is
rendered against Borrower or any Obligor in excess of $50,000 in any one case
or in excess of $100,000 in the aggregate and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
Borrower or any Obligor or any of their assets;
(e) Any Obligor (being a natural person or a general partner
of an Obligor which is a partnership) dies or Borrower or any Obligor, which is
a partnership, limited liability company or corporation, dissolves or suspends
or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) A case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed against Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within forty-
five (45) days after the date of its filing or Borrower or any Obligor shall
file any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) A case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any
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<PAGE> 55
jurisdiction now or hereafter in effect (whether at a law or equity) is filed
by Borrower or any Obligor or for all or any part of its property; or
(i) Any default by Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter
of credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of $50,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any material contract,
lease, license or other obligation to any person other than Lender, which
default continues for more than the applicable cure period, if any, with
respect thereto;
(j) any transfer or sale of any of the equity securities of
Borrower;
(k) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) at any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
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<PAGE> 56
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the occurrence
of any Event of Default described in Sections 10.1(g) and 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral, (iii) require Borrower, at Borrower's
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v)
remove any or all of the Collateral from any premises on or in which the same
may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (vi) sell, lease, transfer,
assign, deliver or otherwise dispose of any and all Collateral (including,
without limitation, entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower and/or (vii) terminate this Agreement. If any of the Collateral is
sold or leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to
be reasonable notice thereof and Borrower waives any other notice. In the
event Lender institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment remedy, Borrower waives the posting of
any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to
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Borrower and/or (ii) terminate any provision of this Agreement providing for
any future Loans or Letter of Credit Accommodations to be made by Lender to
Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of Los Angeles,
State of California and of the United States District Court for the Central
District of California and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails,
or, at Lender's option, by service upon Borrower in any other manner provided
under the rules of any such courts.
(D) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (II) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
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DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery,
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enforcement, performance or administration of this Agreement, any other
Financing Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act (other than Lender's own gross
negligence or willful misconduct), omission, event or transaction related or
attendant thereto, including, without limitation, amounts paid in settlement,
court costs, and the reasonable fees and expenses of counsel. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date two (2) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrower
(subject to Lender's right to extend the Renewal Date as provided above) may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice. Borrower may
terminate this Agreement prior to the end of the then current term, including
any renewal term, for any reason upon sixty (60) days prior written notice to
Lender, and in such case Borrower agrees to pay to Lender the applicable early
termination fee provided for in Section 12.1(c) hereof. Regardless of the
timing of termination, this Agreement and all other Financing Agreements must
be terminated simultaneously. Upon the effective date of termination or non-
renewal of the Financing Agreements, Borrower shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Lender
in such amounts as Lender determines are reasonably necessary to secure Lender
from loss, cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such cash collateral shall be
remitted by wire transfer in Federal funds to such bank account of Lender, as
Lender may, in its discretion, designate in writing to Borrower for such
purpose. Interest shall be due until and including the next Business Day, if
the amounts so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 10:30 a.m., Los Angeles time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and
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covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law,
shall remain in effect until all such Obligations have been fully and finally
discharged and paid.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, Borrower
agrees to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C> <C>
(i) 1% of the Maximum Credit From the date of this Agreement to and
including the day preceding the first
anniversary of this Agreement
(ii) 0.50% of the Maximum Credit from the first anniversary of this
Agreement to and including the day
preceding the second anniversary of this
Agreement
</TABLE>
The early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations. Lender agrees to waive the early termination fee
if Borrower requests financing for a business acquisition in the United States,
Lender declines to provide such financing on the terms requested by Borrower,
and Borrower consummates the acquisition with financing from another
institutional lender on such terms within 60 days after Lender has declined to
provide the financing. Any request for such financing shall be in writing.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver
the next Business Day, one (1) Business Day after sending; and if by certified
mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and
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obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and
inure to the benefit of and be enforceable by Lender, Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrower, assign its rights and delegate
its obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein to another
financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.
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<PAGE> 62
12.5 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
BORROWER: BORROWER:
ANGELES METAL TRIM CO. ANGELES ACQUISITION CORP.
By: /s/ Ronald F. Martin By: /s/ Christian W. Wolf
----------------------------- ----------------------------
Title: President Title: Chief Executive Officer
----------------------- ------------------------
Chief Executive Office: Chief Executive Office:
4817 East Sheila St. 20000 South Western Ave.
Los Angeles, California 90040 Torrance, CA 90501
LENDER:
CONGRESS FINANCIAL CORPORATION (WESTERN)
By: /s/ Matthew Grimes
---------------------------
Title: Vice President
--------------------------
Address:
225 South Lake Avenue
Suite 1000
Pasadena, California 91101
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<PAGE> 1
EXHIBIT
10.48
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).
<PAGE> 2
TERM PROMISSORY NOTE
$1,943,000 LOS ANGELES, CALIFORNIA
JANUARY 9, 1998
FOR VALUE RECEIVED, ANGELES METAL TRIM CO., a California corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION (WESTERN), a California corporation (the "Payee"), at the
offices of Payee at 225 South Lake Avenue, Suite 1000, Pasadena, California
91101, or at such other place as the Payee or any holder hereof may from time
to time designate, the principal sum of ONE MILLION NINE HUNDRED FORTY-THREE
THOUSAND DOLLARS ($1,943,000) in lawful money of the United States of America
and in immediately available funds, in sixty (60) consecutive monthly
installments (or earlier as hereinafter provided) on the first day of each
month commencing on the first day of the first month after the date the loan
evidenced by this Note is disbursed to the Debtor, of which the first
fifty-nine (59) installments shall each be in the amount of THIRTY-TWO THOUSAND
THREE HUNDRED EIGHTY-FOUR DOLLARS ($32,384), and the last installment shall be
in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing on the first day of the first month after the date the loan
evidenced by this Note is disbursed to the Debtor and on the first day of each
month thereafter until the indebtedness evidenced by this Note is paid in full.
Interest payable upon and after an Event of Default which is continuing or
termination or non-renewal of the Loan Agreement shall be payable upon demand.
(a) the term "Interest Rate" shall mean, as to Prime Rate Loans, a
rate of 0.75% per annum in excess of the Prime Rate, and as to Eurodollar Rate
Loans, a rate of 2.75% per annum in excess of the Adjusted Eurodollar Rate;
provided, that, at Payee's option, the Interest Rate shall mean a rate of 2.75%
per annum in excess of the Prime Rate as to Prime Rate Loans and a rate of
4.75% percent per annum in excess of the Adjusted Eurodollar Rate as to
Eurodollar Rate Loans upon and after an Event of Default or termination or
non-renewal of the Loan Agreement, (b) the term "Prime Rate" shall mean the
rate from time to time publicly announced by CoreStates Bank, N.A., or its
successors, at its office in Philadelphia, Pennsylvania, as its prime rate,
whether or not such announced rate is the best rate available at such bank, (c)
the term "Event of Default" shall mean an Event of Default as such term is
defined in the Loan Agreement, and (d) the term "Loan Agreement" shall mean
the Loan and Security Agreement, dated JANUARY 9, 1998, between Debtor and
Payee, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. Unless otherwise
defined herein, all capitalized terms used herein shall have the meaning
assigned thereto in the Loan Agreement. The right of the Borrower to request
that Prime Rate Loans be converted to Eurodollar Rate Loans is subject to the
restrictions set forth in the Loan Agreement.
<PAGE> 3
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate is announced. The increase or decrease shall be
based on the Prime Rate in effect on the last day of the month in which any
such change occurs. Interest shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed. In no event shall the
interest charged hereunder exceed the maximum permitted under the laws of the
State of California or other applicable law.
This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence the Term Loan by Payee to Debtor. This Note is secured
by the Collateral described in the Loan Agreement and all notes, guarantees,
security agreements and other agreements, documents and instrument now or at
any time hereafter executed and/or delivered by Debtor or any other party in
connection therewith (all of the foregoing, together with the Loan Agreement,
as the same now exist or may hereafter be amended, modified, supplemented,
renewed, extended, restated or replaced, being collectively referred to herein
as the "Financing Agreements"), and is entitled to all of the benefits and
rights thereof and of the other Financing Agreements. At the time any payment
is due hereunder, at its option, Payee may charge the amount thereof to any
account of Debtor maintained by Payee.
If any payment of principal or interest is not made when due
hereunder, or if any other Event of Default shall occur for any reason, or if
the Loan Agreement shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Loan Agreement and the other Financing Agreements (the
"Obligations"), including, without limitation, all amounts owing under this
Note, to be due and payable, whereupon the then unpaid balance hereof, together
with all interest accrued thereon, shall forthwith become due and payable,
together with interest accruing thereafter at the then applicable Interest Rate
stated above until the indebtedness evidenced by this Note is paid in full,
plus the costs and expenses of collection hereof, including, but not limited
to, reasonable attorneys' fees and legal expenses.
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for Payee to first
institute suit in order to enforce payment of this Note and (iii) consents to
any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. The pleading of any statute of
limitations as a defense to any demand against Debtor is expressly hereby
waived by Debtor. Upon any Event of Default or termination or non-renewal of
the Loan Agreement, Payee shall have the right, but not the obligation to
setoff against this Note all money owed by Payee to Debtor.
<PAGE> 4
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the
other Financing Agreements and any dispute arising in connection herewith or
therewith shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
Debtor irrevocably consents and submits to the non-exclusive
jurisdiction of the Los Angeles County Superior Court and the United States
District Court for the Central District of California and waives any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Note or any of the other Financing Agreements or in
any way connection with or related or incidental to the dealings of Debtor and
Payee in respect of this Note or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute arising out of the relationship between Debtor and
Payee or the conduct of such persons in connection with this Note or otherwise
shall be heard only in the courts described above (except that Payee shall have
the right to bring any action or proceeding against Debtor or its property in
the courts of any other jurisdiction which Payee deems necessary or appropriate
in order to realize on the Collateral or to otherwise enforce its rights
against Debtor or its property).
Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to it and service so made shall be deemed
to be completed five (5) days after the same shall have been so deposited in
the U.S. mails, or, at Payee's option, by service upon Debtor in any other
manner provided under the rules of any such courts. Within thirty (30) days
after such service, Debtor shall appear in answer to such process, failing
which Debtor shall be deemed in default and judgment may be entered by Payee
against Debtor for the amount of the claim and other relief requested.
DEBTOR WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (I) ARISING UNDER THIS NOTE OR (II) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN
RESPECT OF THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY.
<PAGE> 5
The execution and delivery of this Note has been authorized by the
Board of Directors and by any necessary vote or consent of the stockholders of
Debtor. Debtor hereby authorizes Payee to complete this Note in any
particulars according to the terms of the loan evidenced hereby.
This Note shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
ANGELES METAL TRIM CO.
ATTEST:
- --------------------------- By /s/ Ronald F. Martin
Secretary ------------------------------
Title President
---------------------------
<PAGE> 1
EXHIBIT
10.49
Secured Promissory Note, dated January 9, 1998, in the original principal
amount of $200,000 from Angeles Acquisition Corp. to Congress Financial
Corporation (Western).
<PAGE> 2
TERM PROMISSORY NOTE
$200,000 LOS ANGELES, CALIFORNIA
JANUARY 9, 1998
FOR VALUE RECEIVED, ANGELES ACQUISITION CORP., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION (Western), a California corporation (the "Payee"), at the
offices of Payee at 225 South Lake Avenue, Suite 1000, Pasadena, California
91101, or at such other place as the Payee or any holder hereof may from time to
time designate, the principal sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in
lawful money of the United States of America and in immediately available funds,
in TEN (10) consecutive monthly installments (or earlier as hereinafter
provided) on the first day of each month commencing FEBRUARY 1, 1998 of which
the first NINE (9) installments shall each be in the amount of TWENTY THOUSAND
DOLLARS ($20,000), and the last installment shall be in the amount of the entire
unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing
FEBRUARY 1, 1998 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
after an Event of Default which is continuing or termination or non-renewal of
the Loan Agreement shall be payable upon demand.
(a) the term "Interest Rate" shall mean, as to Prime Rate Loans, a rate
of 0.75% per annum in excess of the Prime Rate, and as to Eurodollar Rate Loans,
a rate of 2.75% per annum in excess of the Adjusted Eurodollar Rate; provided,
that, at Payee's option, the Interest Rate shall mean a rate of 2.75% per annum
in excess of the Prime Rate as to Prime Rate Loans and a rate of 4.75% percent
per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans
upon and after an Event of Default or termination or non-renewal of the Loan
Agreement, (b) the term "Prime Rate" shall mean the rate from time to time
publicly announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank, (c) the term "Event of Default"
shall mean an Event of Default as such term is defined in the Loan Agreement,
and (d) the term "Loan Agreement" shall mean the Loan and Security Agreement,
dated JANUARY 9, 1998, between Debtor and Payee, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. Unless otherwise defined herein, all capitalized terms used herein
shall have the meaning assigned thereto in the Loan Agreement. The right of the
Borrower to request that Prime Rate Loans be converted to Eurodollar Rate Loans
is subject to the restrictions set forth in the Loan Agreement.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate is announced. The increase or decrease shall be
based on the Prime Rate in effect on the last day of the month in which any such
change occurs.Interest shall be calculated on the basis of a three hundred sixty
<PAGE> 3
(360) day year and actual days elapsed. In no event shall the interest charged
hereunder exceed the maximum permitted under the laws of the State of California
or other applicable law.
This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence the Term Loan by Payee to Debtor. This Note is secured by
the Collateral described in the Loan Agreement and all notes, guarantees,
security agreements and other agreements, documents and instrument now or at any
time hereafter executed and/or delivered by Debtor or any other party in
connection therewith (all of the foregoing, together with the Loan Agreement, as
the same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, being collectively referred to herein as the
"Financing Agreements"), and is entitled to all of the benefits and rights
thereof and of the other Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
If any payment of principal or interest is not made when due hereunder,
or if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, in addition to all rights and remedies of Payee under the
Financing Agreements, applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently, Payee may, at its option, declare any or all of Debtor's
obligations, liabilities and indebtedness owing to Payee under the Loan
Agreement and the other Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable Interest Rate stated above until the
indebtedness evidenced by this Note is paid in full, plus the costs and expenses
of collection hereof, including, but not limited to, reasonable attorneys' fees
and legal expenses.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for Payee to first institute
suit in order to enforce payment of this Note and (iii) consents to any one or
more extensions or postponements of time of payment, release, surrender or
substitution of collateral security, or forbearance or other indulgence, without
notice or consent. The pleading of any statute of limitations as a defense to
any demand against Debtor is expressly hereby waived by Debtor. Upon any Event
of Default or termination or non-renewal of the Loan Agreement, Payee shall have
the right, but not the obligation to setoff against this Note all money owed by
Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the other
Financing Agreements and any dispute arising in connection herewith or therewith
shall be governed by the internal laws of the State of California (without
giving effect to principles of conflicts of law).
<PAGE> 4
Debtor irrevocably consents and submits to the non-exclusive
jurisdiction of the Los Angeles County Superior Court and the United States
District Court for the Central District of California and waives any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Note or any of the other Financing Agreements or in
any way connection with or related or incidental to the dealings of Debtor and
Payee in respect of this Note or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute arising out of the relationship between Debtor and Payee
or the conduct of such persons in connection with this Note or otherwise shall
be heard only in the courts described above (except that Payee shall have the
right to bring any action or proceeding against Debtor or its property in the
courts of any other jurisdiction which Payee deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Debtor or its property).
Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to it and service so made shall be deemed to
be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Payee's option, by service upon Debtor in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Debtor shall appear in answer to such process, failing which Debtor
shall be deemed in default and judgment may be entered by Payee against Debtor
for the amount of the claim and other relief requested.
DEBTOR WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE OR (ii) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN RESPECT OF
THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY.
The execution and delivery of this Note has been authorized by the
Board of Directors and by any necessary vote or consent of the stockholders of
Debtor. Debtor hereby authorizes Payee to complete this Note in any particulars
according to the terms of the loan evidenced hereby.
This Note shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
<PAGE> 5
ANGELES ACQUISITION CORP.
ATTEST:
- -------------------------------- By /s/ Christian W. Wolf
Secretary ---------------------------------
Title CEO
---------------------------------
<PAGE> 1
EXHIBIT
10.50
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).
<PAGE> 2
TERM PROMISSORY NOTE
$1,500,000 LOS ANGELES, CALIFORNIA
JANUARY 9, 1998
FOR VALUE RECEIVED, ANGELES ACQUISITION CORP., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION (WESTERN), a California corporation (the "Payee"), at the
offices of Payee at 225 South Lake Avenue, Suite 1000, Pasadena, California
91101, or at such other place as the Payee or any holder hereof may from time to
time designate, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000) in lawful money of the United States of America and in immediately
available funds, in sixty (60) consecutive monthly installments (or earlier as
hereinafter provided) on the first day of each month commencing FEBRUARY 1, 1998
of which the first fifty-nine (59) installments shall each be in the amount of
TWENTY-FIVE THOUSAND DOLLARS ($25,000), and the last installment shall be in the
amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing
FEBRUARY 1, 1998 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
after an Event of Default which is continuing or termination or non-renewal of
the Loan Agreement shall be payable upon demand.
(a) the term "Interest Rate" shall mean, as to Prime Rate Loans, a rate
of 0.75% per annum in excess of the Prime Rate, and as to Eurodollar Rate Loans,
a rate of 2.75% per annum in excess of the Adjusted Eurodollar Rate; provided,
that, at Payee's option, the Interest Rate shall mean a rate of 2.75% per annum
in excess of the Prime Rate as to Prime Rate Loans and a rate of 4.75% percent
per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans
upon and after an Event of Default or termination or non-renewal of the Loan
Agreement, (b) the term "Prime Rate" shall mean the rate from time to time
publicly announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank, (c) the term "Event of Default"
shall mean an Event of Default as such term is defined in the Loan Agreement,
and (d) the term "Loan Agreement" shall mean the Loan and Security Agreement,
dated JANUARY 9, 1998, between Debtor and Payee, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. Unless otherwise defined herein, all capitalized terms used herein
shall have the meaning assigned thereto in the Loan Agreement. The right of the
Borrower to request that Prime Rate Loans be converted to Eurodollar Rate Loans
is subject to the restrictions set forth in the Loan Agreement.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate is announced. The increase or decrease shall be
based on the Prime Rate in effect on the last day of the month in which any such
change occurs.
<PAGE> 3
Interest shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. In no event shall the interest charged
hereunder exceed the maximum permitted under the laws of the State of California
or other applicable law.
This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence the Term Loan by Payee to Debtor. This Note is secured by
the Collateral described in the Loan Agreement and all notes, guarantees,
security agreements and other agreements, documents and instrument now or at any
time hereafter executed and/or delivered by Debtor or any other party in
connection therewith (all of the foregoing, together with the Loan Agreement, as
the same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, being collectively referred to herein as the
"Financing Agreements"), and is entitled to all of the benefits and rights
thereof and of the other Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
If any payment of principal or interest is not made when due hereunder,
or if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, in addition to all rights and remedies of Payee under the
Financing Agreements, applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently, Payee may, at its option, declare any or all of Debtor's
obligations, liabilities and indebtedness owing to Payee under the Loan
Agreement and the other Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable Interest Rate stated above until the
indebtedness evidenced by this Note is paid in full, plus the costs and expenses
of collection hereof, including, but not limited to, reasonable attorneys' fees
and legal expenses.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for Payee to first institute
suit in order to enforce payment of this Note and (iii) consents to any one or
more extensions or postponements of time of payment, release, surrender or
substitution of collateral security, or forbearance or other indulgence, without
notice or consent. The pleading of any statute of limitations as a defense to
any demand against Debtor is expressly hereby waived by Debtor. Upon any Event
of Default or termination or non-renewal of the Loan Agreement, Payee shall have
the right, but not the obligation to setoff against this Note all money owed by
Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the other
Financing Agreements and any dispute arising in connection herewith or therewith
shall be governed by the internal laws of the State of California (without
giving effect to principles of conflicts of law).
<PAGE> 4
Debtor irrevocably consents and submits to the non-exclusive
jurisdiction of the Los Angeles County Superior Court and the United States
District Court for the Central District of California and waives any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Note or any of the other Financing Agreements or in
any way connection with or related or incidental to the dealings of Debtor and
Payee in respect of this Note or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute arising out of the relationship between Debtor and Payee
or the conduct of such persons in connection with this Note or otherwise shall
be heard only in the courts described above (except that Payee shall have the
right to bring any action or proceeding against Debtor or its property in the
courts of any other jurisdiction which Payee deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Debtor or its property).
Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to it and service so made shall be deemed to
be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Payee's option, by service upon Debtor in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Debtor shall appear in answer to such process, failing which Debtor
shall be deemed in default and judgment may be entered by Payee against Debtor
for the amount of the claim and other relief requested.
DEBTOR WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE OR (ii) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN RESPECT OF
THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY.
The execution and delivery of this Note has been authorized by the
Board of Directors and by any necessary vote or consent of the stockholders of
Debtor. Debtor hereby authorizes Payee to complete this Note in any particulars
according to the terms of the loan evidenced hereby.
This Note shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
<PAGE> 5
ANGELES ACQUISITION CORP.
ATTEST:
By /s/ Christian W. Wolf
- -------------------------------- ------------------------------
Secretary Title CEO
------------------------------
<PAGE> 1
EXHIBIT
10.51
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.
<PAGE> 2
[Multiple Corporate Guarantors]
GUARANTEE
January 9, 1998
Congress Financial Corporation (Western)
225 S. Lake Ave., Suite 1000
Pasadena, California 91101
Re: ANGELES ACQUISITION CORP. ("Borrower")
Gentlemen:
Congress Financial Corporation (Western) ("Lender") and Borrower have
entered into certain financing arrangements pursuant to which Lender may make
loans and advances and provide other financial accommodations to Borrower as set
forth in the Loan and Security Agreement, dated January 9, 1998, by and between
Borrower and Lender (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the "Loan
Agreement"), and other agreements, documents and instruments referred to therein
or at any time executed and/or delivered in connection therewith or related
thereto, including, but not limited to, this Guarantee (all of the foregoing,
together with the Loan Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between Borrower
and each and all of the undersigned (individually and collectively,
"Guarantors"), in consideration of the benefits which will accrue to Guarantors
and as an inducement for an in consideration of Lender making loans and advances
and providing other financial accommodations to Borrower pursuant to the Loan
Agreement and the other Financing Agreements, each of Guarantors hereby jointly
and severally agrees in favor of Lender as follows:
1. Guarantee.
(a) Each of Guarantors absolutely and unconditionally, jointly and
severally, guarantees and agrees to be liable for the full and indefeasible
payment and performance when due of the following (all of which are collectively
referred to herein as the "Guaranteed Obligations"): (i) all obligations,
liabilities and indebtedness of any kind, nature and description of Borrower to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under the Loan Agreement, the other
Financing Agreements or otherwise, whether now existing or hereafter arising,
whether arising before, during, or after the initial or any renewal term of the
Loan Agreement or after the commencement of any case with respect to Borrower
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest or other amounts, which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in any such case and
including loans, interest, fees, charges and expenses related thereto and all
other obligations of Borrower or its successors to Lender arising after the
commencement of such case), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by Lender and (ii) all
expenses
<PAGE> 3
(including, without limitation, attorney's fee and legal expenses) incurred by
Lender in connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of Borrower's
obligations, liabilities and indebtedness as aforesaid to Lender, the rights of
Lender in any collateral or under this Guarantee and all other Financing
Agreements or in any way involving claims by or against Lender directly or
indirectly arising out of or related to the relationships between Borrower, any
of Guarantors or any other Obligor (as hereinafter defined) and Lender, whether
such expenses are incurred before, during or after the initial or any renewal
term of the Loan Agreement and the other Financing Agreements or after the
commencement of any case with respect to Borrower or any of Guarantors under the
United States Bankruptcy Code or any similar statute.
(b) This Guarantee is a guaranty of payment and not of collection. Each
of the Guarantors agrees that Lender need not attempt to collect any Guaranteed
Obligations form Borrower, any one of Guarantors or any other Obligor or to
realize upon any collateral, but may require any one of Guarantors to make
immediate payment of all of the Guaranteed Obligations to Lender when due,
whether by maturity, acceleration or otherwise, or at any time thereafter.
Lender may apply any amounts received in respect of the Guaranteed Obligations
to any of the Guaranteed Obligations, in whole or in part (including reasonable
attorney's fees and legal expenses incurred by Lender with respect thereto or
otherwise chargeable to Borrower or Guarantors) and in such order as Lender may
elect.
(c) Payment by Guarantors shall be made to Lender at the office of
Lender from time to time on demand as Guaranteed Obligations become due.
Guarantors shall make payments to Lender on the Guaranteed Obligations free and
clear of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. One or more successive or
concurrent actions may be brought hereon against any of Guarantors either in the
same action in which Borrower or any of the other Guarantors or any other
Obligor is sued or in separate actions. In the event any claim or action, or
action on any judgment, based on this Guarantee is brought against any of
Guarantors, each of Guarantors agrees not to deduct, setoff, or seek any
counterclaim for or recoup any amounts which are or may be owed by Lender to any
of Guarantors.
2. Waivers and Consents.
(a) Notice of acceptance of this Guarantee, the making of loans and
advances and providing other financial accommodations to Borrower and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which Borrower or any of Guarantors are entitled are
hereby waived by each of Guarantors. Each of Guarantors also waives notice of
and hereby consents to (i) any amendment, modification, supplement, extension,
renewal, or restatement of the Loan Agreement and any other Financing
Agreements, including, without limitation, extensions of time on payment of or
increase or decrease in the amount of any of the Guaranteed Obligations, the
interest rates, fees, other charges, or any collateral, and the guarantee made
herein shall apply to the Loan Agreement and the other Financing Agreements and
the Guaranteed Obligations as so amended, modified, supplemented, renewed,
restated or extended, increased or decreased, (ii) the taking, exchange,
surrender, and releasing of collateral or guarantees now or at any time held by
or available to Lender for the obligations of Borrower or any other party at any
time liable on or in respect of the Guaranteed Obligations or who is the owner
of any property which is security for the Guaranteed Obligations (individually,
an "Obligor" and collectively, the "Obligors"), including, without limitation,
the surrender or release by Lender of any one of Guarantors hereunder, (iii) the
exercise of, or refraining from the exercise of any rights against Borrower, any
of Guarantors or any other Obligor or any collateral, (iv) the settlement,
compromise or release of, or the waiver of any default with respect to, any of
the
<PAGE> 4
Guaranteed Obligations, and (v) any financing by Lender of Borrower under
Section 364 of the United States Bankruptcy Code or consent to the use of cash
collateral by Lender under Section 363 of the United States Bankruptcy Code.
Each of Guarantors agrees that the amount of the Guaranteed Obligations shall
not be diminished and the liability of Guarantors hereunder shall not be
otherwise impaired or affected by any of the foregoing.
(b) No invalidity, irregularity or unenforceability of all or any part
of the Guaranteed Obligations shall affect, impair or be a defense to this
Guarantee, nor shall any other circumstance which might otherwise constitute a
defense be available to or legal or equitable discharge of Borrower in respect
of any of the Guaranteed Obligations, or any one of Guarantors in respect of
this Guarantee, affect, impair or be a defense to this Guarantee. Without
limitation of the foregoing, the liability of Guarantors hereunder shall not be
discharged or impaired in any respect by reason of any failure by Lender to
perfect or continue perfection of any lien or security interest in any
collateral or any delay by Lender in perfecting any such lien or security
interest. As to interest, fees and expenses, whether arising before or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, Guarantors shall be liable therefore,
even if Borrower's liability for such amounts does not, or ceases to, exist by
operation of law. Each of Guarantors acknowledges that Lender has not made any
representations to any of Guarantors with respect to Borrower, any other Obligor
or otherwise in connection with the execution and delivery by Guarantors of this
Guarantee and Guarantors are not in any respect relying upon Lender or any
statements by Lender in connection with this Guarantee.
(c) Each of Guarantors hereby irrevocably and unconditionally waives
and relinquishes all statutory, contractual, common law, equitable and all other
claims against Borrower, any collateral for the Guaranteed Obligations or other
assets of Borrower or any other Obligor, for subrogation, reimbursement,
exoneration, contribution, indemnification, setoff or other recourse in respect
to sums paid or payable to Lender by each of Guarantors hereunder and each of
Guarantors hereby further irrevocably and unconditionally waives and
relinquishes any and all other benefits which Guarantors might otherwise
directly or indirectly receive or be entitled to receive by reason of any
amounts paid by or collected or due from Guarantors, Borrower or any other
Obligor upon the Guaranteed Obligations or realized from their property.
3. Right to Dispose of Security; Impairment of Rights. Each of
Guarantors hereby authorizes and empowers Lender, in its direction, without any
notice or demand to any of Guarantors and without affecting the liability of any
of Guarantors hereunder, to exercise any right or remedy which Lender may have
available to it, including, but not limited to, judicial foreclosure, exercise
of rights of power of sale without judicial action, or taking a deed or an
assignment in lieu of foreclosure as to any collateral security for the
Guaranteed Obligations, whether real, personal or intangible property, and each
of Guarantors hereby waives any defense to the recovery by Lender against each
of Guarantors or any of its assets or properties or any deficiency after such
action notwithstanding any impairment or loss of any right of reimbursement or
subrogation or other right or remedy against Borrower or any other Obligor or
against any assets or properties of Borrower or any other Obligor. Each
Guarantor hereby waives all rights of subrogation, reimbursement,
indemnification, and contribution and any other rights and defenses that are or
may become available to the Guarantor or other surety by reason of California
Civil Code Sections 2787 to 2855, inclusive. Each Guarantor waives all rights
and defenses that the Guarantor may have because the Guaranteed Obligations are
secured by real property. This means, among other things: (1) Lender may collect
from the Guarantor without first foreclosing on any real or personal property
collateral pledged by the Borrower. (2) If Lender forecloses on any real
property collateral pledged by the Borrower, (A) The amount of the indebtedness
may be reduced only by the price for
<PAGE> 5
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price. (B) Lender may collect from the Guarantor even
if Lender, by foreclosing on real property collateral, has destroyed any right
the Guarantor may have to collect from the Borrower. This is an unconditional
and irrevocable waiver of any rights and defenses the Guarantor may have because
the Guaranteed Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure. Each Guarantor
waives all rights and defenses arising out or an election of remedies by Lender,
even thought that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed the Guarantor's
rights of subrogation and reimbursement against the principal by the operation
of Section 580d of the Code of Civil Procedure or otherwise. Without limiting
the foregoing and without waiving the benefits of California Commercial Code
Section 9501, each of Guarantors specifically agrees that any action maintained
by Lender for the appointment of a receiver, trustee or custodian to collect
rents, issuers of profits or to obtain possession of any property shall not
constitute an "action" within the meaning of Section 726 of the California Code
of Civil Procedure.
4. Additional Indebtedness; Duty of Guarantors. Each of Guarantors
acknowledges that Guaranteed Obligations may arise from time to time at the
request of the Borrower or otherwise as provided in the Loan Agreement without
further authorization from, the consent of or notice to, any of Guarantors,
notwithstanding any adverse change in the condition of the business, assets or
prospects of Borrower or any of the other Guarantors or any other Obligor after
the date hereof. In giving Lender this Guarantee, Guarantors are not concerned
with the condition of the business, assets or prospects of Borrower or any other
Obligor and each of them waives the right, if any, to require Lender to disclose
to any of Guarantors any information Lender may now have or hereafter acquire
concerning the business, assets or prospects of Borrower or any of the other
Guarantors or any other Obligor. Each of Guarantors has established adequate
means to obtain from Borrower on a continuing basis financial and other
information pertaining to Borrower's business, assets or prospects, and assumes
the responsibility for being and keeping informed of the financial and other
conditions of Borrower and of all circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations which diligent inquiry would reveal.
Lender need not inquire into the powers of Borrower or the authority of its
officers, directors, partners or agents acting or purporting to act on its
behalf, and any Guaranteed Obligations created in reliance upon the purported
exercise of such power or authority are and shall be included with the
Guaranteed Obligations and Guarantor shall be liable therefor. All Guaranteed
Obligations to Lender heretofore, now or hereafter created shall be deemed to
have been granted at the specific authorization and request of each of
Guarantors and in consideration of and in reliance upon this Guarantee.
5. Subordination. Payment of all amounts now or hereafter owed to
Guarantors by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full to Lender of the Guaranteed
Obligations and all such amounts and any security and guarantees therefor are
hereby assigned to Lender as security for the Guaranteed Obligations
6. Acceleration. Notwithstanding anything to the contrary contained
herein or any of the terms of any of the other Financing Agreements, the
liability of Guarantors for the entire Guaranteed Obligations shall mature and
become immediately due and payable, even if the liability of Borrower or any
other Obligor therefor does not, upon the occurrence of any act, condition or
event which constitutes an Event of Default as such terms is defined in the Loan
Agreement.
7. Account Stated. The books and records of the Lender showing the
account between Lender and Borrower shall be admissible in evidence in any
action or proceeding against or involving
<PAGE> 6
Guarantors as prima facie proof of the items therein set forth, and the monthly
statements of Lender rendered to Borrower, to the extent to which no written
object is made within thirty (30) days from the date of sending thereof to
Borrower, shall be deemed conclusively correct and constitute an account stated
between Lender and Borrower and be binding on Guarantors.
8. Termination. This Guarantee is continuing, unlimited, absolute and
unconditional. All Guaranteed Obligations shall be conclusively presumed to have
been created in reliance on this Guarantee. Each of Guarantor shall continue to
be liable hereunder until one of Lender's officers actually receives a written
termination notice from a Guarantor sent to Lender at its address set forth
above by certified mail, return receipt requested and thereafter set forth
below. Such notice received by Lender from any one of Guarantors shall not
constitute a revocation or termination of this Guarantee as to any of the other
Guarantors. Revocation or termination hereof by any of Guarantors shall not
effect, in any manner, the rights of Lender or any obligations or duties of any
of Guarantors (including the Guarantor which may have sent such notice) under
this Guarantee with respect to (a) Guaranteed Obligations which have been
created, contracted, assumed or incurred prior to the receipt by Lender of such
written notice of revocation or termination as provided herein, including,
without limitation, (i) all amendments, extensions, renewals and modifications
of such Guaranteed Obligations (whether or not evidenced by new or additional
agreements, documents or instruments executed on or after such notice of
revocation or termination), (ii) all interest, fees and similar charges accruing
or due on and after revocation or termination, and (iii) all reasonable
attorney's fees and legal expenses, costs and other expenses paid or incurred on
or after such notice of revocation or termination in attempting to collect or
enforce any of the Guaranteed Obligations against Borrower, Guarantors or any
other Obligor (whether or not suit be brought), or (b) Guaranteed Obligations
which have been created, contracted, assumed or incurred after the receipt by
Lender of such written notice of revocation or termination as provided herein
pursuant to any contract entered into by Lender prior to receipt of such notice.
The sole effect of such revocation or termination by any of Guarantors shall be
excluded from this Guarantee the liability of such Guarantor for those
Guaranteed Obligations arising after the date of receipt by Lender of such
written notice which are unrelated to Guaranteed Obligations arising or
transactions entered into prior to such date. Without limiting the foregoing,
this Guarantee may not be terminated and shall continue so long as the Loan
Agreement shall be in effect (whether during its original term or any renewal,
substitution or extension thereof).
9. Reinstatement. If after receipt of any payment of, or proceeds of
collateral applied to the payment of, any of the Guaranteed Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guarantee shall
continue in full force and effect as if such payment or proceeds had not been
received by Lender. Each of Guarantors shall be liable to pay Lender, and does
indemnify and hold Lender harmless for the amount of any payments or proceeds
surrendered or returned. This Section 9 shall remain effective notwithstanding
any contrary action which may be taken by Lender in reliance upon such payment
or proceeds. This Section 9 shall survive the termination or revocation of this
Guarantee.
10. Amendments and Waivers. Neither this Guarantee nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by and authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right,
<PAGE> 7
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11. Corporate Existence, Power and Authority. Each of Guarantors is a
corporation duly organized and in good standing under the laws of its state or
other jurisdiction on incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it of the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or businesses of any of Guarantors or the rights
of Lender hereunder or under any of the other Financing Agreements. The
execution, delivery and performance of this Guarantee is within the corporate
powers of each of Guarantors, have been duly authorized and are not in
contravention of law or the terms of the certificates of incorporation, by-laws,
or other organizational documentation of each of Guarantors, or any indenture,
agreement or undertaking to which any of Guarantors is a party or by which any
of Guarantors or its property are bound. This Guarantee constitutes the legal,
valid and binding obligation of each of Guarantors enforceable in accordance
with its terms. Any one of Guarantors signing this Guarantee shall be bound
hereby whether or not any of the other Guarantors or any other person signs this
Guarantee at any time.
12. Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Guarantee and
any dispute arising out of the relationship between any of Guarantors and
Lender, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of California (without giving effect to principles of
conflicts of law).
(b) Each of Guarantors hereby irrevocably consents and submits to the
non-exclusive jurisdiction of the Los Angeles County Superior Court and the
United States District Court for the Central District of California and waives
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Guarantee or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of any of Guarantors and Lender in respect of this Guarantee or any of the other
Financing Agreements or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising and whether in contract, tort, equity
or otherwise, and agrees that any dispute arising out of the relationship
between any of Guarantors or Borrower and Lender or the conduct of any such
persons in connection with this Guarantee, the other Financing Agreements or
otherwise shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against any of Guarantors
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on collateral at any time granted
by Borrower or any of Guarantors to Lender or to otherwise enforce its rights
against any of Guarantors or its property).
(c) Each of Guarantors hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon any of Guarantors in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, any of Guarantors so served shall appear in answer to such process,
failing which such Guarantors shall be deemed in default and judgment may be
entered by Lender against Guarantors for the amount of the claim and other
relief requested.
<PAGE> 8
(d) EACH OF GUARANTORS HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS GUARANTEE OR ANY
OF THE FINANCING AGREEMENTS OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF ANY OF GUARANTORS AND LENDER IN RESPECT OF THIS
GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TOR, EQUITY OR OTHERWISE. EACH OR GUARANTORS HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED COURT TRIAL WITHOUT A JURY AND THAT ANY OF GUARANTORS OR LENDER MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF GUARANTORS AND LENDER TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Guarantors (whether in tort,
contract, equity or otherwise) for losses suffered by Guarantors in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Guarantee, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of the Loan Agreement and the other
Financing Agreements.
13. Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth above and to each of
Guarantors at its chief executive office set forth below, or to such other
addresses as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
14. Partial Invalidity. If any provision of this Guarantee is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Guarantee as a whole, but this Guarantee shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
15. Entire Agreement. This Guarantee represents the entire agreement
and understanding of this parties concerning the subject matter hereof, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.
16. Successors and Assigns. This Guarantee shall be binding upon
Guarantors and their respective successors and assigns and shall inure to the
benefit of Lender and its successors, endorsees, transferees and assigns. The
liquidation, dissolution or termination of any of Guarantors shall not terminate
this Guarantee as to such entity or as to any of the other Guarantors.
<PAGE> 9
17. Construction. All references to the term "Guarantors" wherever used
herein shall mean each and all of Guarantors and their respective successors and
assigns, individually and collectively, jointly and severally (including,
without limitation, any receiver, trustee or custodian for any of Guarantors or
any of their respective assets or any of Guarantors in its capacity as debtor or
debtor-in-possession under the United States Bankruptcy Code). All references
tot the term "Lender" wherever used herein shall mean Lender and its successors
and assigns and all references to the term "Borrower" wherever used herein shall
mean Borrower and its successors and assign (including, without limitation, any
receiver, trustee or custodian for Borrower or any of its assets or Borrower in
its capacity as debtor or debtor-in-possession under the United States
Bankruptcy Code). All references to the term "Person" or "person" wherever used
herein shall mean any individual, sole proprietorship, partnership, corporation
(including, without limitation, any corporation which elects subchapter S status
under the Internal Revenue Code of 1986, as amended), limited liability company,
limited liability partnership, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality of political subdivision thereof. All references to
the plural shall also mean the singular and to the singular shall also mean the
plural.
IN WITNESS WHEREOF, each of Guarantors has executed and delivered this
Guarantee as of the day and year first above written.
ANGELES METAL TRIM CO. CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
By /s/ Ronald F. Martin By /s/ Christian W. Wolf
---------------------------- ---------------------------
Title President Title CEO
------------------------ ------------------------
Chief Executive Office: Chief Executive Office:
4817 East Sheila Street 410 17th Street, Suite 400
Los Angeles, CA 90040 Denver, CO 80202
CALIFORNIA BUILDING SYSTEMS, INC.
By /s/ Ronald F. Martin
--------------------------------
Title President
-----------------------------
Chief Executive Office:
4817 East Sheila Street
Los Angeles, CA 90040
<PAGE> 10
STATE OF CALIFORNIA )
) SS.
COUNTY OF Los Angeles )
On January 10, 1998, before me, Katherine B. Rogers a Notary Public in and for
said county and state, personally appeared Ronald F. Martin and Christian Wolf,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) are subscribed to the within instrument and
acknowledge to me that they executed the same the same in their authorized
capacity(ies), and that by their signature(s) on the instrument the person(s),
or entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
/s/ Katherine B. Rogers Katherine B. Rogers
Commission #1164025
Notary Public - California
Los Angels County
My Comm. Expires Dec. 23, 2001
<PAGE> 1
EXHIBIT
10.52
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.
<PAGE> 2
[Multiple Corporate Guarantors]
GUARANTEE
January 9, 1998
Congress Financial Corporation (Western)
225 S. Lake Avenue, Suite 1000
Pasadena, California 91101
Re: ANGELES METAL TRIM CO.("Borrower")
Gentlemen:
Congress Financial Corporation (Western) ("Lender") and Borrower have
entered into certain financing arrangements pursuant to which Lender may make
loans and advances and provide other financial accommodations to Borrower as set
forth in the Loan and Security Agreement, dated January 9, 1998, by and between
Borrower and Lender (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the "Loan
Agreement"), and other agreements, documents and instruments referred to therein
or at any time executed and/or delivered in connection therewith or related
thereto, including, but not limited to, this Guarantee (all of the foregoing,
together with the Loan Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between Borrower
and each and all of the undersigned (individually and collectively,
"Guarantors"), in consideration of the benefits which will accrue to Guarantors
and as an inducement for and in consideration of Lender making loans and
advances and providing other financial accommodations to Borrower pursuant to
the Loan Agreement and the other Financing Agreements, each of Guarantors hereby
jointly and severally agrees in favor of Lender as follows:
1. Guarantee.
(a) Each of Guarantors absolutely and unconditionally, jointly and
severally, guarantees and agrees to be liable for the full and indefeasible
payment and performance when due of the following (all of which are collectively
referred to herein as the "Guaranteed Obligations"): (i) all obligations,
liabilities and indebtedness of any kind, nature and description of Borrower to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under the Loan Agreement, the other
Financing Agreements or otherwise, whether now existing or hereafter arising,
whether arising before, during, or after the initial or any renewal term of the
Loan Agreement or after the commencement of any case with respect to Borrower
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts, which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in any such case and
including loans, interest, fees, charges and expenses related thereto and all
other obligations of Borrower or its successors to Lender arising after the
commencement of such case), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by Lender and (ii) all
expenses
<PAGE> 3
(including, without limitation, attorneys' fee and legal expenses) incurred by
Lender in connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of Borrower's
obligations, liabilities and indebtedness as aforesaid to Lender, the rights of
Lender in any collateral or under this Guarantee and all other Financing
Agreements or in any way involving claims by or against Lender directly or
indirectly arising out of or related to the relationships between Borrower, any
of Guarantors or any other Obligor (as hereinafter defined) and Lender, whether
such expenses are incurred before, during or after the initial or any renewal
term of the Loan Agreement and the other Financing Agreements or after the
commencement of any case with respect to Borrower or any of Guarantors under the
United States Bankruptcy Code or any similar statute.
(b) This Guarantee is a guaranty of payment and not of collection. Each
of the Guarantors agrees that Lender need not attempt to collect any Guaranteed
Obligations from Borrower, any one of Guarantors or any other Obligor or to
realize upon any collateral, but may require any one of Guarantors to make
immediate payment of all of the Guaranteed Obligations to Lender when due,
whether by maturity, acceleration or otherwise, or at any time thereafter.
Lender may apply any amounts received in respect of the Guaranteed Obligations
to any of the Guaranteed Obligations, in whole or in part (including reasonable
attorneys' fees and legal expenses incurred by Lender with respect thereto or
otherwise chargeable to Borrower or Guarantors) and in such order as Lender may
elect.
(c) Payment by Guarantors shall be made to Lender at the office of
Lender from time to time on demand as Guaranteed Obligations become due.
Guarantors shall make payments to Lender on the Guaranteed Obligations free and
clear of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. One or more successive or
concurrent actions may be brought hereon against any of Guarantors either in the
same action in which Borrower or any of the other Guarantors or any other
Obligor is sued or in separate actions. In the event any claim or action, or
action on any judgment, based on this Guarantee is brought against any of
Guarantors, each of Guarantors agrees not to deduct, set-off, or seek any
counterclaim for or recoup any amounts which are or may be owed by Lender to any
of Guarantors.
2. Waivers and Consents.
(a) Notice of acceptance of this Guarantee, the making of loans and
advances and providing other financial accommodations to Borrower and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which Borrower or any of Guarantors are entitled are
hereby waived by each of Guarantors. Each of Guarantors also waives notice of
and hereby consents to, (i) any amendment, modification, supplement, extension,
renewal, or restatement of the Loan Agreement and any of the other Financing
Agreements, including, without limitation, extensions of time on payment of or
increase or decrease in the amount of any of the Guaranteed Obligations, the
interest rates, fees, other charges, or any collateral, and the guarantee made
herein shall apply to the Loan Agreement and the other Financing Agreements and
the Guaranteed Obligations as so amended, modified, supplemented, renewed,
restated or extended, increased or decreased, (ii) the taking, exchange,
surrender, and releasing of collateral or guarantees now or at any time held by
or available to Lender for the obligations of Borrower or any other party at any
time liable on or in respect of the Guaranteed Obligations or who is the owner
of any property which is security for the Guaranteed Obligations (individually,
an "Obligor" and collectively, the "Obligors"), including, without limitation,
the surrender or release by Lender of any one of Guarantors hereunder, (iii) the
exercise of, or refraining from the exercise of any rights against Borrower, any
of Guarantors or any other Obligor or any collateral, (iv) the settlement,
compromise or release of, or the waiver of any default with respect to, any
<PAGE> 4
of the Guaranteed Obligations, and (v) any financing by Lender of Borrower under
Section 364 of the United States Bankruptcy Code or consent to the use of cash
collateral by Lender under Section 363 of the United States Bankruptcy Code.
Each of Guarantors agrees that the amount of the Guaranteed Obligations shall
not be diminished and the liability of Guarantors hereunder shall not be
otherwise impaired or affected by any of the foregoing.
(b) No invalidity, irregularity or unenforceability of all or any part
of the Guaranteed Obligations shall affect, impair or be a defense to this
Guarantee, nor shall any other circumstance which might otherwise constitute a
defense available to or legal or equitable discharge of Borrower in respect of
any of the Guaranteed Obligations, or any one of Guarantors in respect of this
Guarantee, affect, impair or be a defense to this Guarantee. Without limitation
of the foregoing, the liability of Guarantors hereunder shall not be discharged
or impaired in any respect by reason of any failure by Lender to perfect or
continue perfection of any lien or security interest in any collateral or any
delay by Lender in perfecting any such lien or security interest. As to
interest, fees and expenses, whether arising before or after the commencement of
any case with respect to Borrower under the United States Bankruptcy Code or any
similar statute, Guarantors shall be liable therefor, even if Borrower's
liability for such amounts does not, or ceases to, exist by operation of law.
Each of Guarantors acknowledges that Lender has not made any representations to
any of Guarantors with respect to Borrower, any other Obligor or otherwise in
connection with the execution and delivery by Guarantors of this Guarantee and
Guarantors are not in any respect relying upon Lender or any statements by
Lender in connection with this Guarantee.
(c) Each of Guarantors hereby irrevocably and unconditionally waives
and relinquishes all statutory, contractual, common law, equitable and all other
claims against Borrower, any collateral for the Guaranteed Obligations or other
assets of Borrower or any other Obligor, for subrogation, reimbursement,
exoneration, contribution, indemnification, setoff or other recourse in respect
to sums paid or payable to Lender by each of Guarantors hereunder and each of
Guarantors hereby further irrevocably and unconditionally waives and
relinquishes any and all other benefits which Guarantors might otherwise
directly or indirectly receive or be entitled to receive by reason of any
amounts paid by or collected or due from Guarantors, Borrower or any other
Obligor upon the Guaranteed Obligations or realized from their property.
3. Right to Dispose of Security; Impairment of Rights. Each of
Guarantors hereby authorizes and empowers Lender, in its direction, without any
notice or demand to any of Guarantors and without affecting the liability of any
of Guarantors hereunder, to exercise any right or remedy which Lender may have
available to it, including, but not limited to, judicial foreclosure, exercise
of rights of power of sale without judicial action, or taking a deed or an
assignment in lieu of foreclosure as to any collateral security for the
Guaranteed Obligations, whether real, personal or intangible property, and each
of Guarantors hereby waives any defense to the recovery by Lender against each
of Guarantors or any of its assets or properties or any deficiency after such
action notwithstanding any impairment or loss of any right of reimbursement or
subrogation or other right or remedy against Borrower or any other Obligor or
against any assets or properties of Borrower or any other Obligor. Each
Guarantor hereby waives all rights of subrogation, reimbursement,
indemnification, and contribution and any other rights and defenses that are or
may become available to the Guarantor or other surety by reason of California
Civil Code Sections 2787 to 2855, inclusive. Each Guarantor waives all rights
and defenses that the Guarantor may have because the Guaranteed Obligations are
secured by real property. This means, among other things: (1) Lender may collect
from the Guarantor without first foreclosing on any real or personal property
collateral pledged by the Borrower. (2) If Lender forecloses on any real
property collateral pledged by the Borrower; (A) The amount of the Indebtedness
may be reduced only by the price for
<PAGE> 5
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price. (B) Lender may collect from the Guarantor even
if Lender, by foreclosing on real property collateral, has destroyed any right
the Guarantor may have to collect from the Borrower. This is an unconditional
and irrevocable waiver of any rights and defenses the Guarantor may have because
the Guaranteed Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure. Each Guarantor
waives all rights and defenses arising out of an election of remedies by Lender,
even thought that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed the Guarantor's
rights of subrogation and reimbursement against the principal by the operation
of Section 580d of the Code of Civil Procedure or otherwise. Without limiting
the foregoing and without waiving the benefits of California Commercial Code
Section 9501, each of Guarantors specifically agrees that any action maintained
by Lender for the appointment of a receiver, trustee or custodian to collect
rents, issuers or profits or to obtain possession of any property shall not
constitute an "action" within the meaning of Section 726 of the California code
of Civil Procedure.
4. Additional Indebtedness; Duty of Guarantors. Each of Guarantors
acknowledges that Guaranteed Obligations may arise from time to time at the
request of the Borrower or otherwise as provided in the Loan Agreement without
further authorization from, the consent of or notice to, any of Guarantors,
notwithstanding any adverse change in the condition of the business, assets or
prospects of Borrower or any of the other Guarantors or any other Obligor after
the date hereof. In giving Lender this Guarantee, Guarantors are not concerned
with the condition of the business, assets or prospects of Borrower or any other
Obligor and each of them waives the right, if any, to require Lender to disclose
to any of Guarantors any information Lender may now have or hereafter acquire
concerning the business, assets or prospects of Borrower or any of the other
Guarantors or any other Obligor. Each of Guarantors has established adequate
means to obtain from Borrower on a continuing basis financial and other
information pertaining to Borrower's business, assets or prospects, and assumes
the responsibility for being and keeping informed of the financial and other
conditions of Borrower and of all circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations which diligent inquiry would reveal.
Lender need not inquire into the powers of Borrower or the authority of its
officers, directors, partners or agents acting or purporting to act on its
behalf, and any Guaranteed Obligations created in reliance upon the purported
exercise of such power or authority are and shall be included with the
Guaranteed Obligations and Guarantor shall be liable therefor. All Guaranteed
Obligations to Lender heretofore, now or hereafter created shall be deemed to
have been granted at the specific authorization and request of each of
Guarantors and in consideration of and in reliance upon this Guarantee.
5. Subordination. Payment of all amounts now or hereafter owed to
Guarantors by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full to Lender of the Guaranteed
Obligations and all such amounts and any security and guarantees therefor are
hereby assigned to Lender as security for the Guaranteed Obligations
6. Acceleration. Notwithstanding anything to the contrary contained
herein or any of the terms of any of the other Financing Agreements, the
liability of Guarantors for the entire Guaranteed Obligations shall mature and
become immediately due and payable, even if the liability of Borrower or any
other Obligor therefor does not, upon the occurrence of any act, condition or
event which constitutes an Event of Default as such term is defined in the Loan
Agreement.
7. Account Stated. The books and records of Lender showing the account
between Lender and Borrower shall be admissible in evidence in any action or
proceeding against or involving
<PAGE> 6
Guarantors as prima facie proof of the items therein set forth, and the monthly
statements of Lender rendered to Borrower, to the extent to which no written
objection is made within thirty (30) days from the date of sending thereof to
Borrower, shall be deemed conclusively correct and constitute an account stated
between Lender and Borrower and be binding on Guarantors.
8. Termination. This Guarantee is continuing, unlimited, absolute and
unconditional. All Guaranteed Obligations shall be conclusively presumed to have
been created in reliance on this Guarantee. Each of Guarantors shall continue to
be liable hereunder until one of Lender's officers actually receives a written
termination notice from a Guarantor sent to Lender at its address set forth
above by certified mail, return receipt requested and thereafter set forth
below. Such notice received by Lender from any one of Guarantors shall not
constitute a revocation or termination of this Guarantee as to any of the other
Guarantors. Revocation or termination hereof by any of Guarantors shall not
effect, in any manner, the rights of Lender or any obligations or duties of any
of Guarantors (including the Guarantor which may have sent such notice) under
this Guarantee with respect to (a) Guaranteed Obligations which have been
created, contracted, assumed or incurred prior to the receipt by Lender of such
written notice of revocation or termination as provided herein, including,
without limitation, (i) all amendments, extensions, renewals and modifications
of such Guaranteed Obligations (whether or not evidenced by new or additional
agreements, documents or instruments executed on or after such notice of
revocation or termination), (ii) all interest, fees and similar charges accruing
or due on and after revocation or termination, and (iii) all reasonable
attorneys' fees and legal expenses, costs and other expenses paid or incurred on
or after such notice of revocation or termination in attempting to collect or
enforce any of the Guaranteed Obligations against Borrower, Guarantors or any
other Obligor (whether or not suit be brought), or (b) Guaranteed Obligations
which have been created, contracted, assumed or incurred after the receipt by
Lender of such written notice of revocation or termination as provided herein
pursuant to any contract entered into by Lender prior to receipt of such notice.
The sole effect of such revocation or termination by any of Guarantors shall be
to excluded from this Guarantee the liability of such Guarantor for those
Guaranteed Obligations arising after the date of receipt by Lender of such
written notice which are unrelated to Guaranteed Obligations arising or
transactions entered into prior to such date. Without limiting the foregoing,
this Guarantee may not be terminated and shall continue so long as the Loan
Agreement shall be in effect (whether during its original term or any renewal,
substitution or extension thereof).
9. Reinstatement. If after receipt of any payment of, or proceeds of
collateral applied to the payment of, any of the Guaranteed Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guarantee shall
continue in full force and effect as if such payment or proceeds had not been
received by Lender. Each of Guarantors shall be liable to pay to Lender, and
does indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 9 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 9 shall survive the termination or
revocation of this Guarantee.
10. Amendments and Waivers. Neither this Guarantee nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right,
<PAGE> 7
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11. Corporate Existence, Power and Authority. Each of Guarantors is a
corporation duly organized and in good standing under the laws of its state or
other jurisdiction of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or businesses of any of Guarantors or the rights
of Lender hereunder or under any of the other Financing Agreements. The
execution, delivery and performance of this Guarantee is within the corporate
powers of each of Guarantors, have been duly authorized and are not in
contravention of law or the terms of the certificates of incorporation, by-laws,
or other organizational documentation of each of Guarantors, or any indenture,
agreement or undertaking to which any of Guarantors is a party or by which any
of Guarantors or its property are bound. This Guarantee constitutes the legal,
valid and binding obligation of each of Guarantors enforceable in accordance
with its terms. Any one of Guarantors signing this Guarantee shall be bound
hereby whether or not any of the other Guarantors or any other person signs this
Guarantee at any time.
12. Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Guarantee and
any dispute arising out of the relationship between any of Guarantors and
Lender, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of California (without giving effect to principles of
conflicts of law).
(b) Each of Guarantors hereby irrevocably consents and submits to the
non-exclusive jurisdiction of the Los Angeles County Superior Court and the
United States District Court for the Central District of California and waives
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Guarantee or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of any of Guarantors and Lender in respect of this Guarantee or any of the other
Financing Agreements or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising and whether in contract, tort, equity
or otherwise, and agrees that any dispute arising out of the relationship
between any of Guarantors or Borrower and Lender or the conduct of any such
persons in connection with this Guarantee, the other Financing Agreements or
otherwise shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against any of Guarantors
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on collateral at any time granted
by Borrower or any of Guarantors to Lender or to otherwise enforce its rights
against any of Guarantors or its property).
(c) Each of Guarantors hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon any of Guarantors in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, any of Guarantors so served shall appear in answer to such process,
failing which such Guarantors shall be deemed in default and judgment may be
entered by Lender against Guarantors for the amount of the claim and other
relief requested.
<PAGE> 8
(D) EACH OF GUARANTORS HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS GUARANTEE OR ANY
OF THE OTHER FINANCING AGREEMENTS OR (II) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF ANY OF GUARANTORS AND LENDER IN RESPECT OF THIS
GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF GUARANTORS HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED COURT TRIAL WITHOUT A JURY AND THAT ANY OF GUARANTORS OR LENDER MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF GUARANTORS AND LENDER TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Guarantors (whether in tort,
contract, equity or otherwise) for losses suffered by Guarantors in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Guarantee, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of the Loan Agreement and the other
Financing Agreements.
(f) Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth above and to each of
Guarantors at its chief executive office set forth below, or to such other
addresses as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
14. Partial Invalidity. If any provision of this Guarantee is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Guarantee as a whole, but this Guarantee shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
15. Entire Agreement. This Guarantee represents the entire agreement
and understanding of this parties concerning the subject matter hereof, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.
16. Successors and Assigns. This Guarantee shall be binding upon
Guarantors and their respective successors and assigns and shall inure to the
benefit of Lender and its successors, endorsees, transferees and assigns. The
liquidation, dissolution or termination of any of Guarantors shall not terminate
this Guarantee as to such entity or as to any of the other Guarantors.
<PAGE> 9
17. Construction. All references to the term "Guarantors" wherever used
herein shall mean each and all of Guarantors and their respective successors and
assigns, individually and collectively, jointly and severally (including,
without limitation, any receiver, trustee or custodian for any of Guarantors or
any of their respective assets or any of Guarantors in its capacity as debtor or
debtor-in-possession under the United States Bankruptcy Code). All references to
the term "Lender" wherever used herein shall mean Lender and its successors and
assigns and all references to the term "Borrower" wherever used herein shall
mean Borrower and its successors and assigns (including, without limitation, any
receiver, trustee or custodian for Borrower or any of its assets or Borrower in
its capacity as debtor or debtor-in-possession under the United States
Bankruptcy Code). All references to the term "Person" or "person" wherever used
herein shall mean any individual, sole proprietorship, partnership, corporation
(including, without limitation, any corporation which elects subchapter S status
under the Internal Revenue Code of 1986, as amended), limited liability company,
limited liability partnership, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality of political subdivision thereof. All references to
the plural shall also mean the singular and to the singular shall also mean the
plural.
IN WITNESS WHEREOF, each of Guarantors has executed and delivered this
Guarantee as of the day and year first above written.
s
ANGELES ACQUISITION CORP. CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
By /s/Ronald F. Martin By /s/ Christian W. Wolf
------------------------------- --------------------------
Title President Title CEO
---------------------------- -----------------------
Chief Executive Office: Chief Executive Office:
20000 South Western Avenue 410 17th Street, Suite 400
Torrance, CA 90501 Denver, CO 80202
CALIFORNIA BUILDING SYSTEMS, INC.
By /s/ Ronald F. Martin
-------------------------------
Title President
----------------------------
Chief Executive Office:
4817 East Sheila Street
Los Angeles, CA 90040
<PAGE> 10
STATE OF CALIFORNIA )
) SS.
COUNTY OF Los Angeles )
On January 10, 1998, before me, Katherine B. Rogers a Notary Public in and for
said county and state, personally appeared Ronald F. Martin and Christian Wolf,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) are subscribed to the within instrument and
acknowledge to me that they executed the same the same in their authorized
capacity(ies), and that by their signature(s) on the instrument the person(s),
or entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
/s/ Katherine B. Rogers Katherine B. Rogers
Commission #1164025
Notary Public - California
Los Angels County
My Comm. Expires Dec. 23, 2001
<PAGE> 1
EXHIBIT
10.53
Lease Agreement, dated January 12, 1998, by and between Danat Investment
Company and the Company (Re: property at 20000 South Western Avenue,
Torrance , California).
<PAGE> 2
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1.1 BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only,
is made by and between DANAT INVESTMENT COMPANY, a California general
partnership ("Danat") ("LESSOR") and CONSOLIDATED CAPITAL OF NORTH AMERICA,
INC., a Colorado corporation ("LESSEE"), (collectively the "PARTIES," or
individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 20000 South Western Avenue, Torrance, California 90501, located in the
County of Los Angeles, State of California, and generally described as (describe
briefly the nature of the property and, if applicable, the "PROJECT", if the
property is located within a Project) a two-story office building containing
approximately 19,140 square feet and a steel frame industrial building
containing approximately 310,000 square feet (collectively, the "Building") and
situated on approximately 609,840 square feet of land. Rail spur abandoned and
not part of premises. EXHIBIT "B" ("PREMISES"). (See also Paragraph 2)
1.3 TERM: 3 (three) years and months ("ORIGINAL TERM") commencing
("COMMENCEMENT DATE") and ending December 31, 2000 ("EXPIRATION DATE"). (See
also Paragraph 3)
1.4 EARLY POSSESSION: N/A ("EARLY POSSESSION DATE"). (See also
Paragraphs 3.2 and 3.3)
1.5 BASE RENT: $ 75,000.00 per month ("BASE RENT"), payable on the
first day of each month commencing January 1, 1998 (See also Paragraph 4)
[ ] If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted. SEE ADDENDUM
1.6 BASE RENT PAID UPON EXECUTION: $ 75,000.00 as Base Rent for the
period January 1998 .
1.7 SECURITY DEPOSIT: $ 75,000.00 within 60 days of closing of Sale
("SECURITY DEPOSIT"). (See also Paragraph 5)
1.8 AGREED USE: manufacturing, processing and distribution of steel
products . (See also Paragraph 6)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See also Paragraph 8)
1.10 REAL ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction (check applicable boxes):
[ ] N/A represents Lessor exclusively ("LESSOR'S BROKER");
[ ] N/A represents Lessee exclusively ("LESSEE'S BROKER"); or
[ ] N/A represents both Lessor and Lessee ("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease
by both Parties, Lessor shall pay to the Broker the fee agreed to in their
separate written agreement (or if there is no such agreement, the sum of% of the
total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by ("GUARANTOR"). (See also Paragraph 37)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 11 and Option to Extend, Addendum to Standard
Lease and Option to Purchase Lease Rider and agreement regarding equipment
purchase and offset rights, all of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less. SEE ADDENDUM
2.3 COMPLIANCE. Lessor warrants that the improvements on the Premises
and the use made of the Premises as of the Start Date comply with all applicable
laws, covenants or restrictions of record, building codes, regulations and
ordinances ("APPLICABLE REQUIREMENTS") in effect on the Start Date. SEE ADDENDUM
Said warranty does not apply to the use to which Lessee will put the Premises or
the any Alterations or Utility Installations (as defined in Paragraph 7.3(a))
made or to be made by Lessee. If the Applicable Requirements are here after
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall allocate the
cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital
Expenditures are required as a result of the specific and unique use of the
Premises by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent. If Lessee elects termination, Lessee shall immediately cease
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as , governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for such cost pursuant to the provisions of Paragraph 7.1(c) which
paragraph, for purposes of this Paragraph 2.3(b), shall be deemed to have not
been stricken from this Lease, provided, however, that if such Capital
Expenditure is required during the last two years of this Lease or if Lessor
reasonably determines that it is not economically feasible to pay its share
thereof, Lessor shall have the option to terminate this Lease upon ninety (90)
days prior written notice to Lessee unless Lessee notifies Lessor, in writing,
within in ten (10) days after receipt of Lessor's termination notice that Lessee
will pay for such Capital Expenditure. If Lessor does not elect to terminate,
and fails to tender its share of any such Capital Expenditure, Lessee may
advance such funds and deduct same, with Interest, from Rent until Lessor's
share of such cost have been fully paid. If Lessee is unable to finance Lessor's
share, or if the balance of the Rent due and payable for the remainder of this
Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee
shall have the right to terminate this Lease upon thirty (30) days written
notice to Lessor.
<PAGE> 3
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
2.4 ACKNOWLEDGMENTS. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee's intended use, (b)
Lessee has made such investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate to its
occupancy of the Premises, and (c) neither Lessor, Lessor's agents, nor any
Broker has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Lease. SEE ADDENDUM If addition,
Lessor acknowledges that: (a) Broker has made no representations, promises or
warranties concerning Lessee's ability to honor the Lease or suitability to
occupy the Premises, and (b) it is Lessor's sole responsibility to investigate
the financial capability and/or suitability of all proposed tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. TERM
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall, however, be in effect
during such period. Any such early possession shall not affect the Expiration
Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered within
four (4) months after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.
4. RENT.
4.1. RENT DEFINED. All monetary obligation of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease, including Paragraph 6.2 (e)), on or
before the day on which it is due. Rent for any period during the term hereof
which is for less than one (1) full calendar month shall be prorated based upon
the actual number of days of said month. Payment of Rent shall be made to Lessor
at its address stated herein on Page 12 or to such other persons or place as
Lessor may from time to time designate in writing. Acceptance of a payment which
is less than the amount then due shall not be a waver of Lessor's rights to the
balance of such Rent, regardless of Lessor's endorsement of any check so
stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional moneys with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublease or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within fourteen (14) days after the expiration or termination
of this Lease, if Lessor elects to apply the Security Deposit only to unpaid
Rent, and otherwise within thirty (30) days after the Premises have been vacated
pursuant to Paragraph 7.4( c ) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.
<PAGE> 4
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the Agreed
Use, or any other legal use which is reasonably comparable thereto, and for no
other purpose. Lessee shall not use or permit the use of the Premises in a
manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release, either
by itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premise, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to ,
hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products
or fractions thereof. Lessee shall not engage in any activity in or on the
Premises which constitutes a Reportable Use of Hazardous Substances without the
express prior written consent of Lessor and timely compliance (at Lessee's
expense) with all Applicable Requirements. "REPORTABLE USE" shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use , transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which an Applicable Requirements requires that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the
Agreed Use, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or
the environment against damage, contamination, injury and/or liability,
including, but not limited to, the installation (and removal on or before Lease
expiration or termination) of protective modifications (such as concrete
encasements) and/or increasing the Security Deposit. SEE ADDENDUM
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Lessor,
Lessee shall immediately give written notice of such fact to Lessor, and provide
Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance. Lessor acknowledges
receipt and review of the ESA.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend,
reimburse and hold Lessor, its agents, employees, lenders and ground lessor, if
any, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, claims, expenses, penalties, and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee, or any third party (provided, however, that
Lessee shall have no liability under this Lease with respect to migration of any
Hazardous Substance under the Premises from adjacent properties). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY
LESSOR AND LESSEE SHALL RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE
WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS SPECIFICALLY SO AGREED BY LESSOR IN
WRITING AT THE TIME OF SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. SEE ADDENDUM
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances in, on or about the Premises prior to the Start Date,
unless such remediation measure is required as a result of Lessee's use
(including "Alterations", as defined in paragraph 7.3(a) below) of the Premises,
in which event Lessee shall be responsible for such payment. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's investigative and remedial
responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination
notice, Lessee may, within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000 , which ever is
greater. Lessee shall provide Lessor with said funds or satisfactory assurance
thereof within thirty (30) days following such commitment. In such event, this
Lease shall continue in full force and effect, and Lessor shall proceed to make
such remediation as soon as reasonably possible after the required fund are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
<PAGE> 5
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined
in Paragraph 30 below) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease. The cost of any such inspections
shall be paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination.
7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations, and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises), including, but
not limited to, all equipment or facilities, such as plumbing, heating,
ventilation, air-conditioning, electrical, lighting facilities, boilers,
pressure vessels, fire protection system, fixtures, walls (interior and
exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include restorations, replacements or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition and state of repair. Lessee shall, during the term of this
Lease, keep the exterior appearance of the Building in a first-class condition
consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements ("Basic Elements"), if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and
pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, (vi) driveways and parking lots, (vii) clarifiers (viii) basic utility
feed to the perimeter of the Building, and (ix) any other equipment, if
reasonably required by Lessor.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation),
it is intended by the Parties hereto that Lessor have no obligation, in any
manner whatsoever, to repair and maintain the Premises, or the equipment
therein, all of which obligations are intended to be that of the Lessee. It is
the intention of the Parties that the terms of this Lease govern the respective
obligations of the Parties as to maintenance and repair of the Premises, and
they expressly waive the benefit of any statute now or hereafter in effect to
the extent it is inconsistent with the terms of this Lease.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems,
communications systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The Term "TRADE FIXTURES" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "ALTERATIONS" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed $50,000 in
the aggregate or $10,000 in any one year.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which cost an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the
<PAGE> 6
amount of such contested lien, claim or demand, indemnifying Lessor against
liability for the same. If Lessor elects to participate in any such action,
Lessee shall pay Lessor's attorneys' fees and costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or
elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but considered a
part of the Premises. Lessor may, at any time, elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor
not earlier than ninety (90) and not later than thirty (30) days prior to the
end of the term of this Lease, Lessor may require that any or all Lessee Owned
Alterations or Utility Installations be removed by the expiration or termination
of this Lease. Lessor may require the removal at anytime of all or any part of
any Lessee Owned Alterations or Utility Installations made without the required
consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof in substantially the same condition and
state of repair as received, ordinary wear and tear excepted. "Ordinary wear and
tear" shall not include any damage or deterioration that would have been
prevented by good maintenance practice. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
Owned Alterations and/or Utility Installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee, and the
removal, replacement, or remediation of any soil, material or groundwater
contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and
shall be removed by Lessee. The failure by Lessee to timely vacate the Premises
pursuant to this Paragraph 7.4( c ) without the express written consent of
Lessor shall constitute a holdover under the provisions of Paragraph 26 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Lessee shall pay for all insurance
required under Paragraph 8 except to the extent of the cost attributable to
liability insurance carried by Lessor under Paragraph 8.2(b) in excess of
$2,000,000 per occurrence. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term. Payment shall be made by Lessee to Lessor within ten (10) days following
receipt of an invoice. SEE ADDENDUM
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, person injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an "ADDITIONAL INSURED-MANAGERS OR LESSORS OF PREMISES
ENDORSEMENT" and contain the "AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance
as described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force a policy or policies in the name of Lessor, with loss payable
to Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lenders, but in no event more than the commercially reasonable
and available insurable value thereof. If Lessor is the Insuring Party, however,
Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's
personal property shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy
or policies shall insure against all risk of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U. S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss.
(b) RENTAL VALUE. The insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor with loss payable to Lessor and
any Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent to the
Premises, the Lessee shall pay for any increase in the premiums for the property
insurance of such building or buildings if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
<PAGE> 7
(b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss
of income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current issue
of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies of such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the
amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages ,
liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or
liabilities arising out of, involving, or in connection with , the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably by repaired in six (6) months or
less from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which cannot reasonably be repaired in six (6) months or
less from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixture, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of Applicable Requirements, and
without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon a reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Not withstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance hereof within said ten (10) day
period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If
such funds or assurance are not received, Lessor may nevertheless elect by
written notice to Lessee within ten (10) days thereafter to: (i) make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case the Lease shall remain in full force and
effect; or (ii) have this Lease terminate thirty (30) days thereafter. Lessee
shall not be entitled to reimbursement of any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
<PAGE> 8
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
a Premises Total Destruction occurs, this Lease shall terminate sixty (60) days
following such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore
the Premises and does not commence, in a substantial and meaningful way, such
repair or restoration with ninety (90) days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or restoration,
give written notice to Lessor and to any Lenders of which Lessee has actual
notice, of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such notice
and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within said thirty (30) days, this
Lease shall continue in full force and effect. "COMMENCE" shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. The
term "REAL PROPERTY TAXES" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including but not limited to, a change in the ownership
of the Premises.
10.2
(a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. Subject to Paragraph
10.2(b), all such payments shall be made at least ten (10) days prior to any
delinquency date. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes shall cover any
period of time prior to or after the expiration or termination of this Lease,
Lessee's share of such taxes shall be prorated to cover only that portion of the
tax bill applicable to the period that this Lease is in effect, and Lessor shall
reimburse Lessee for any overpayment. If Lessee shall fail to pay any required
Real Property Taxes, Lessor shall have the right to pay the same, and Lessee
shall reimburse Lessor therefor upon demand.
(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on
any Rent payment, Lessor may, at Lessor's option, estimate the current Real
Property Taxes, and require that such taxes be paid in advance to Lessor by
Lessee, either: (i) in a lump sum amount equal to the installment due, at least
twenty (20) days prior to the applicable delinquency date, or (ii) monthly in
advance with the payment of the Base Rent. If Lessor elects to require payment
monthly in advance, the monthly payment shall be an amount equal to the amount
of the estimated installment of taxes divided by the number of months remaining
before the month in
<PAGE> 9
which said installment becomes delinquent. When the actual amount of the
applicable tax bill is known, the amount of such equal monthly advance payments
shall be adjusted as required to provide the funds needed to pay the applicable
taxes. If the amount collected by Lessor is insufficient to pay such Real
Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional
sums as are necessary to pay such obligations. All moneys paid to Lessor under
this Paragraph may be intermingled with other moneys of Lessor and shall not
bear interest. In the event of a Breach by Lessee in the performance of its
obligations under this Lease, than any balance of funds paid to Lessor under the
provisions of this Paragraph may at the option of Lessor, be treated as an
additional Security Deposit.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose. SEE ADDENDUM
(c) The involvement of Lessee or its assets in any transaction,
or series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at
Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice, increase the monthly Base Rent to one hundred ten percent
(110%) of the Base Rent then in effect. Further, in the event of such Breach and
rental adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief. SEE ADDENDUM
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assigee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a fee of
$1000 or ten percent (10%) of the current monthly Base Rent applicable to the
portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as consideration for Lessor's considering and
processing said request. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed to
have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach
<PAGE> 10
shall occur in the performance of Lessee's obligations, Lessee may collect said
Rent. Lessor shall not, by reason of the foregoing or any assignment of such
sublease, nor by reason of the collection of Rent, be deemed liable to the
sublessee for any failure of Lessee to perform and comply with any of Lessee's
obligations to such sublease. Lessee hereby irrevocably authorizes and directs
any such sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee's obligations under this Lease, to
pay to Lessor all Rent due and to become due under the sublease. Sublessee shall
rely upon any such notice from Lessor and shall pay all Rents to Lessor without
any obligation or right to inquire as to whether such Breach exists,
notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may , at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A "BREACH" is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the
Premises without providing a commercially reasonable level of security, or where
the coverage of the property insurance described in Paragraph 8.3 is jeopardized
as a result thereof, or without providing reasonable assurances to minimize
potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) a
Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning
any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, where any such
failure continues for a period of ten (10) days following written notice to
Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, than it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making
of any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "DEBTOR" as defined in 11 U.S.C. 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is dismissed
within sixty (60) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
subparagraph (e) is contrary to any applicable law, such provision shall be of
no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee or of
any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guarantee, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory basis, and Lessee's failure, within sixty (60) days following
written notice of any such event, to provide written alternative assurance or
security, which, when coupled with the then existing resources of Lessee, equals
or exceeds the combined financial resources of lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative
duties or obligations, within ten (10) days after written notice (or in case of
an emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payment to be made by Lessee to be
by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the
<PAGE> 11
immediately preceding sentence shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of the District within which the
Premises are located at the time of award plus one percent (1%). Efforts by
Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not
waive Lessor's right to recover damages under Paragraph 12. If termination of
this Lease is obtained though the provisional remedy of unlawful detainer,
Lessor shall have the right to recover in such proceeding any unpaid Rent and
damages as are recoverable therein, or Lessor may reserve the right to recover
all or any part thereof in a separate suit. If a notice and grace period
required under Paragraph 13.1 was not previously given, a notice to pay rent or
quit, or to perform or quit given to Lessee under the unlawful detainer statue
shall also constitute the notice required by Paragraph 13.1. In such case, the
applicable grace period required by Paragraph 13.1 and the unlawful detainer
statute shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession and
recover the Rent as it becomes due, in which event Lessee may sublet or assign,
subject only to reasonable limitations. Acts of maintenance, efforts to relet,
and/or the appointment of a receiver to protect the Lessor's interest, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as "INDUCEMENT
PROVISIONS," shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur cost not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to ten percent (10%) of each such over due
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, than notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such as
Base Rent) or within thirty (30) days following the date on which it was due for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payment, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest ("INTEREST") charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus four percent (4%), but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, than Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (collectively "CONDEMNATION"), this Lease shall terminate as to the part
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any building portion
of the premises, or more than twenty-five percent (25%) of the land area portion
of the premises not occupied by any building, is taken by Condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
proportion to the reduction in utility of the Premises caused by such
Condemnation. Condemnation awards and/or payments shall be the property of
Lessor, whether such award shall be made as compensation for diminution in value
of the leasehold, the value of the part taken, or for severance damages;
provided, however, that Lessee shall be entitled to any compensation for
Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures,
without regard to whether or not this Lease is terminated pursuant to the
provisions of this Paragraph. All Alterations and Utility Installations made to
the Premises by Lessee, for purposes of Condemnation only, shall be considered
the property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor. In the event that this Lease is not
terminated by reason of the Condemnation, Lessor shall repair any damage to the
Premises caused by such Condemnation.
<PAGE> 12
15. BROKERS FEE.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.
16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "ESTOPPEL CERTIFICATE" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party, (ii) there are no uncured defaults in the Requesting Party's performance,
and (iii) if Lessor is the Requesting Party, not more than one month's rent has
been paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee and all Guarantors shall deliver to any
potential lender or purchaser designated by Lessor such financial statements as
may be reasonably required by such lender or purchaser, including but not
limited to Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, Danat and all subsequent holders of Danat's interest in this Lease
shall remain liable and responsible with regard to the potential duties and
liabilities of Lessor pertaining to Hazardous Substances as outlined in
Paragraph 6 above.
18. SEVERABLILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the
word "days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease
contains all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding shall
be effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court cost and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the forgoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by courier)
or may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if serve in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail the notice shall be deemed given forty-eight
(48) hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or overnight
courier that guarantee next day delivery shall be deemed given twenty-four (24)
hours after delivery of the same to the Postal Service or courier. Notices
transmitted by facsimile transmission or similar means shall be deemed delivered
upon telephone confirmation of receipt, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday, Sunday or legal holiday,
it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any
payment by Lessee may be accepted by Lessor on account of moneys or damages
<PAGE> 13
due Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall be
of no force or effect whatsoever unless specifically agreed to in writing by
Lessor at or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording proposes in form and content acceptable to both parties. The
Party requesting recordation shall be responsible for payment of any fees
applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
parties, but rather according to its fair meaning as a whole, as if both parties
had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership; (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term,
"PREVAILING PARTY" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be, whether
by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be computed
in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in the preparation and
service of notices of Default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such Default
or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvement or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "FOR SALE" signs and
Lessor may during the last six (6) months of the term hereof place on the
Premises any ordinary "FOR LEASE" signs. Lessee may at any time place on or
about the Premises any ordinary "FOR SUBLEASE" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not
place any sign upon the Premises without Lessor's prior written consent. All
signs must comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by witten notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.
<PAGE> 14
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following such
request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty
in the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any
Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) a
Estoppel Certificate, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.
39. OPTIONS.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the term
of or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter
assigning or subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during
the period commencing with the giving of any notice of Default and continuing
until said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given three (3) or more notices of separate Default, whether or not the
Defaults are cured, during the twelve (12) month period immediately preceding
the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or
effect, notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (i)
Lessee fails to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee three (3) or more notices of separate Default during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) If
Lessee commits a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including the care and cleanliness of the
grounds and including the parking, loading and unloading of vehicles, and that
Lessee will pay its fair share of common expenses incurred in connection
herewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to paid to be paid by one Party to the other under
the provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each party
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
<PAGE> 15
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out this Lease IS X IS NOT attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
- --------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKERS AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMIT TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
- --------------------------------------------------------------------------------
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<CAPTION>
<S> <C>
Executed at: Executed at:
--------------------------- ----------------------------------------
on: on:
----------------------------------- -------------------------------------------------
By LESSOR: By LESSEE:
DANAT INVESTMENT COMPANY, CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
- --------------------------------------- ----------------------------------------------------
a California general partnership
- --------------------------------------- ----------------------------------------------------
By: /s/ Daniel J. Eget By:/s/ Christian W. Wolf
------------------------------------ -------------------------------------------------
Name Printed: Daniel J. Eget Name Printed:
------------------------- --------------------------------------
Title: General Partner Title:
-------------------------------- ---------------------------------------------
By: /s/ Nathan J. Reese By: /s/ Donald R. Jackson
------------------------------------ -------------------------------------------------
Name Printed: Nathan J. Reese Name Printed: Donald R. Jackson
------------------------- ---------------------------------------
Title: General Partner Title: Secretary/Treasurer/Chief Financial Officer
--------------------------------- ----------------------------------------------
Address: Address:
------------------------------- -------------------------------------------
- --------------------------------------- ----------------------------------------------------
Telephone: ( ) Telephone: ( )
----------------------- ------------------------------------
Facsimile : ( ) Facsimile : ( )
----------------------- ------------------------------------
Federal ID No. Federal ID No.
------------------------- ------------------------------------
</TABLE>
<PAGE> 16
ADDITIONAL SIGNATURE PAGE FOR ANGELES ACQUISITION CORPORATION ON LEASE
Agreement
Executed at:
--------------------------------------
on:
--------------------------------------
By: LESSEE:
ANGELES ACQUISITION CORP.,
a Delaware Corporation
By:
--------------------------------------
Printed Name: Christian Wolf
Title: Chief Executive Officer
By:
--------------------------------------
Printed Name: Donald R. Jackson
Title: Secretary/Treasurer/Chief Financial Officer
Address:
------------------------------------------
------------------------------------------
Telephone:
---------------------------------------
Facsimile:
---------------------------------------
Federal ID No.
------------------------------------
<PAGE> 17
ADDENDUM AGREEMENT REGARDING EQUIPMENT PURCHASE
AND OFFSET RIGHTS
Consolidated Capital of North America, Inc.
Gentlemen:
This letter will confirm our understanding concerning the terms and
conditions which will prevail in the event that the Federal Bankruptcy Court in
Case #LA 97-48259 KM, determines that you, or either of you, are obligated to
purchase the cranes, craneways and/or electrical systems, located and installed
at 20000 South Western Avenue, Torrance, California 90501 (the PREMISES), form
Capitol Metals Company, Inc., and the value placed upon said items (the PRICE),
Danat (DANAT) agrees to do the following:
1. DANAT will purchase those same items from you for the PRICE as set
by the court.
2. The PRICE, plus interest at prime rate (as published by the Wall
Street Journal) plus two percent (2%), shall be paid monthly over
the remaining original term of the LEASE for the PREMISES.
3. The monthly payment amount shall be adjusted every six months to
reflect changes in the prime rate, if any.
4. When the LEASE terminates, title to said equipment shall vest in
DANAT and you shall execute a Bill of Sale for said equipment.
5. Said terms shall be free and clear of any liens or encumbrances.
6. During the period of the LEASE, you shall be totally responsible for
the maintenance and repair of said equipment.
7. At all times said equipment shall remain at and not be removed from
the PREMISES.
8. Each said monthly payment may be deducted by you from the payment
to be made by you to DANAT under the terms of the LEASE.
By signing this letter agreement at the place provided below, you will
be indicating your agreement and acceptance of the terms of the transaction set
forth.
DANAT INVESTMENT COMPANY
By: \s\ Daniel J. Eget \s\ Nathan J. Reese
-----------------------------------------------------
Daniel J. Eget
Its: General Partner
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
By:
--------------------------------------
Its:
<PAGE> 18
ADDITIONAL SIGNATURE PAGE FOR ANGELES ACQUISITION CORPORATION ON
ADDENDUM AGREEMENT REGARDING EQUIPMENT PURCHASE AND OFFSET RIGHTS
Executed at:
--------------------------------------
on:
--------------------------------------
By: LESSEE:
ANGELES ACQUISITION CORP.,
a Delaware Corporation
By:
--------------------------------------
Printed Name: Christian Wolf
Title: Chief Executive Officer
By:
--------------------------------------
Printed Name: Donald R. Jackson
Title: Secretary/Treasurer/Chief Financial Officer
Address:
------------------------------------------
------------------------------------------
Telephone:
---------------------------------------
Facsimile:
---------------------------------------
Federal ID No.
------------------------------------
<PAGE> 19
OPTION(S) TO EXTEND
ADDENDUM TO
STANDARD LEASE
DATED January 1, 1998
BY AND BETWEEN (LESSOR) DANAT INVESTMENT COMPANY, a California general
partnership
(LESSEE) Consolidated Capital of North America, Inc., a
Colorado corporation
PROPERTY ADDRESS: 20000 South Western Avenue, Torrance, California 90501
Paragraph 50
A. OPTION(S) TO EXTEND:
Lessor hereby grants to Lessee the option to extend the term of this
Lease for 2 additional 36 month period(s) commencing when the prior term expires
upon each and all of the following terms and conditions:
(i) Lessee gives to Lessor, and Lessor actually receives on a date which is
prior to the date that the option period would commence (if exercised) by at
least 120 and not more than 150 days, a written notice of the exercise of the
option(s) to extend this Lease for said additional term(s), time being of
essence. If said notification of the exercise of said option(s) is (are) not so
given and received, the option(s) shall automatically expire; said option(s) may
(if more than one) only be exercised consecutively;
(ii) The provisions of paragraph 39, including the provisions relating to
default of Lessee set forth in paragraph 39.4 of this Lease are conditions of
this Option;
(iii) All of the terms and conditions of this Lease except where
specifically modified by this option shall apply;
(iv) The monthly rent for each month of the option period shall be
calculated as follows, using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
X III. Fixed Rental Adjustments(s) (FRA)
----
The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amount on the dates set forth below:
<TABLE>
<S> <C>
On (Fill in FRA Adjustment Date(s)): The New Base Rental shall be:
January 1, 2001 $ 90,000.00 per month
----------------------------------- --------------------
January 1, 2004 $110,000.00 per month
----------------------------------- --------------------
----------------------------------- --------------------
----------------------------------- --------------------
</TABLE>
B. NOTICE: Unless specified otherwise herein, notice of any escalations other
than Fixed Rental Adjustments shall be made as specified in paragraph 23 of the
attached Lease.
OPTION(S) TO EXTEND
PAGE 1 of 1
<PAGE> 20
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-NET
This Addendum ("Addendum") is attached to and made a part of
that certain Standard Industrial/Commercial Single-Tenant Lease-Net ("Lease")
dated September 2, 1997, and made by and between Danat Investment Company, a
California general partnership as Lessor, and Angeles Acquisition Corporation,
a Delaware corporation and Consolidated Capital of North America, Inc., a
Colorado corporation, collectively, as Lessee, covering the Premises commonly
known as 20000 South Western Avenue, Torrance, California 90501, as more
particularly described in the Lease. Capitalized terms used herein and not
otherwise defined shall have the same meaning as set forth in the Lease. In
the event of any conflict or inconsistency between the terms and provisions of
this Addendum and the terms and provisions of the Lease, the terms and
provisions of this Addendum shall prevail. This Addendum and the Lease may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which, when taken together, shall constitute one and the
same instrument. The terms and provisions of the Lease are hereby modified or
supplemented as follows:
Paragraph 51. The following paragraph is hereby added after
Paragraph 50 of the Lease as a new Paragraph 51:
"51. Lessee's Right of First Refusal to Purchase.
51.1. If during the term of this Lease, Lessor intends to accept an
offer from any bona fide third party ("Proposed Purchaser") to purchase the
Premises, then, before accepting such offer, Lessor shall give Lessee the right
to purchase the Premises in accordance with this Paragraph 51.1 by notifying
Lessee in writing of the sale price and other material terms upon which Lessor
is willing to sell the Premises to the Proposed Purchaser and including
therewith a full and correct photocopy of the purchase offer which Lessor
intends to accept, but deleting therefrom any information as to the identity of
the Proposed Purchaser, if so requested by said Proposed Purchaser (the "Offer
Notice"). The Offer Notice shall constitute an offer to sell the Premises to
Lessee upon the terms and conditions set forth therein, as modified by this
Paragraph 51.1. Lessee shall have the right for a period of ten (10) business
days after delivery of the Offer Notice (the "Exercise Period") to deliver by
certified mail, return receipt requested, written notice to Lessor of Lessee's
election to purchase the Premises on the exact terms of the Offer Notice, as
hereafter modified ("Notice of Acceptance"), together with a deposit in the
amount equal to the deposit amount stated in the Offer Notice ("Deposit").
Notwithstanding the terms of the Offer Notice, the following shall apply to
Lessee's purchase: (a) there shall be no contingencies for the benefit of
Lessee to the closing relating to feasibility, physical or environmental
inspection, termite inspection, suitability for a particular use, legality of a
particular use, or the obtaining of governmental approvals; and (b) the
contingency, examination or other periods for the exercise of any right or the
performance of any obligation specified in the Purchase Agreement (defined
below) shall commence on the date of delivery of Lessee's Notice of Acceptance.
Lessee's timely delivery to Lessor of the Notice of Acceptance and the
Deposit shall constitute a binding acceptance on the part of Lessee to enter
into a purchase agreement with Lessor on Lessor's form of purchase agreement
("Purchase Agreement") which Purchase Agreement shall contain all of the terms
which are set forth in the Offer Notice, as modified by this Paragraph 51.1,
and such other terms and conditions not materially inconsistent with those set
forth above, as determined by Lessor in its reasonable discretion. If (i)
Lessee does not timely deliver to Lessor the Notice of Acceptance or make the
required Deposit, (ii) Lessee fails to execute and deliver the Purchase
Agreement for the purchase of the Premises within twenty (20) calendar days
following Lessor's delivery of same to Lessee or (iii) escrow does not close
within the time period set forth for closing under the Purchase Agreement for
any reason other than a material default of Lessor thereunder, then Lessor may
sell the Premises to the Proposed Purchaser on such terms and conditions as
Lessor and such Proposed Purchaser shall agree, and without the necessity of
offering the Premises for sale to Lessee, provided, however, that if pursuant
to negotiations with the Proposed Purchaser, Lessor agrees to sell the Premises
to such Proposed Purchaser for a purchase price which is less than ninety-five
percent (95%) of the purchase price set forth in the Offer Notice, then Lessor
shall be required to re-offer the Premises to Lessee in accordance with the
procedures set forth in this Paragraph 51. Any successor owner of the Premises
shall not be required to first offer the Premises to Lessee in the case of
future sales or transfers and, once the Premises is sold pursuant to the
provisions of this Paragraph 51.1, Lessee's right of first refusal hereunder
shall terminate and be null and void.
The occurrence of a default by Lessee or Lessor under the terms of
this paragraph 51.1, including but not limited to any default in connection
with the purchase and sale of the Premises, shall not entitle either party to
terminate this Lease.
51.2. The right of first refusal contained in Paragraph 51.1 shall
not apply to the following sales or transfers of any of the Premises , and any
offers to purchase the Premises made in connection with the following sales or
transfers shall not constitute "bona fide" offers hereunder: (a) the sale or
transfer of the Premises or any portion thereof or interest therein to any of
Lessor's currently existing constituent partners; (b) the sale or transfer of
the Premises or any portion thereof or interest therein to a trust (including a
living trust), the beneficiaries of which consist solely of either Lessor, or
the beneficiaries of either Lessor, one or more of Lessor's currently existing
constituent partners or such partners' children or grandchildren; (c) the sale
or transfer of the Premises or any portion thereof or interest therein to any
one or more of the children, grandchildren, parents, brothers or sisters of
either of Lessor's currently existing constituent partners or beneficiaries;
(d) any other sale or transfer, which is a change in the form of ownership but
does not involve a change in the beneficial ownership of the Premises, unless
such change in beneficial ownership is covered by any of the foregoing
exceptions (by way of example, the right of first refusal shall not apply to a
sale or transfer to a partnership or corporation, the sole partners or
shareholders of which are the currently existing partners of either party
comprising Lessor or any of such partners' children or grandchildren); and (e)
the sale by foreclosure of any deed of trust or other lien on the Premises or
by deed in lieu of foreclosure to the beneficiary of any such deed of trust or
other lien or its designee. The purchaser or transferee set forth in
subsections (a) through (d) of this Paragraph 51.2 above shall be bound by the
terms of Paragraph 51.1 in the case of subsequent sales or transfers not
exempted by this Paragraph 51.2. Lessee's right of first refusal hereunder
shall terminate and be of no further force or effect in the event that the
Premises are sold as set forth in subsection (e) above. In addition, Lessee
agrees, within five (5) business
<PAGE> 21
days after Lessors written request therefor, to execute a subordination
agreement in favor of any lender or mortgagee of Lessor in order to subordinate
its rights under this Paragraph 51 to such lender or mortgagee.
51.3 Neither Lessee's rent payments nor any other payments made to
Lessor pursuant to the Lease shall be applied against the purchase price
payable under the Purchase Agreement. If Lessor defaults under this Paragraph
51 after notice to Lessor as provided in the Lease, Lessee shall not have the
right to terminate the Lease or offset against rent, however, Lessee may bring
an action for actual damages or for specific performance provided that Lessee
shall have fully performed all of its obligations hereunder and under the
Purchase Agreement (including, without limitation, deposit of the purchase
price in good funds to escrow), Lessee shall have given notice to Lessor
("Notice") of Lessor's default or alleged default within thirty (30) days after
Lessee has first obtained knowledge of Lessor's default or alleged default and
the action shall have been commenced, and service of process upon Lessor made,
not later than thirty (30) days after Lessee's delivery to Lessor of the
Notice."
Paragraph 2.2: CONDITION. Paragraph 2.2 of the Lease is
hereby deleted in its entirety and is replaced with the following:
"2.2 CONDITION. Subject to the disclosures and other items
set forth on the Disclosure Schedule attached to that certain
Asset Purchase Agreement dated September 5, 1997 by and
between Lessee, as "Purchaser" and Capitol Metals Co., Inc., a
California corporation as "Seller," and subject to matters to
which Lessee or its agents, representatives, employees or
brokers are aware pursuant to an inspection of the Premises or
otherwise, Danat Investment Company warrants that, as of the
earlier of the Commencement Date or the Early Possession Date
("Start Date") the improvement on the Premises necessary to
operate the business existing at the Premises as of the Start
Date (the "Pre-Existing Business") are in good condition and
are structurally sound, and all mechanical and other systems
necessary to operate the Pre-Existing Business and which are
located on the Premises are in good operating condition,
subject to normal wear and tear, and no condition exists
requiring material repairs, alterations or corrections to such
improvements or mechanical or other systems necessary to run
the Pre-Existing Business."
Paragraph 2.3: COMPLIANCE. The following sentence is inserted
at the end of the first sentence of Paragraph 2.3 of the Lease, before the
period:
"and except as provided in that certain Phase 1 Environmental
Site Assessment for the Premises dated August 20, 1997 by
Levine-Pricke and Recon ("ESA"), Lessor has received no
notices, oral or written, from any governmental body, and has
no reason to believe, that the Premises, and improvements
erected or situated thereon, or the uses of the Pre-Existing
Business conducted thereon or therein, violate any Applicable
Requirements in effect on the Start Date."
Paragraph 2.4: ACKNOWLEDGMENTS. The following is hereby
added after subsection (c) of Paragraph 2.4 of the Lease before the period:
", (d) it has received and reviewed the ESA and is familiar
with its contents and the environmental condition of the
Premises and surrounding areas as reported in the ESA, and,
notwithstanding anything to the contrary set forth in this
Lease, Lessee is leasing the Premises subject to such
conditions disclosed in the ESA and (e) no further action is
required by Lessor at this time with respect to the
recommendations set forth in Section 6.0 of the ESA."
Paragraph 6.2(a): REPORTABLE USES REQUIRE CONSENT. The
following sentence is hereby added at the end of Paragraph 6.2(a) of the Lease:
"Notwithstanding anything to the contrary set forth above,
Lessor hereby consents to Lessee's use of the materials and
substances listed on Exhibit A attached hereto on the
condition that said materials and substances shall at all
times be used in compliance with all Applicable Requirements."
Paragraph 6.2(e): LESSOR INDEMNIFICATION. Paragraph 6.2(e) of
the Lease is hereby deleted in its entirety and is replaced with the
following:
"Lessor shall indemnify, defend, reimburse and hold Lessee,
its agents, employees and lenders ("Lessee's Parties")
harmless from and against any and all damages, liabilities,
judgments, claims, expenses, penalties and attorneys' and
consultants' fees arising out of or involving any Hazardous
Substance in, on, or about, the Premises prior to the Start
Date, the presence of which was caused by Lessor or Lessor's
prior tenants, provided, however, that Lessor shall have no
liability under this Lease with respect to the migration of
any Hazardous Substance in, on, under or about the Premises
from adjacent properties. Lessor's obligations shall include,
but not be limited to, the effects of any contamination or
injury to person, property or the environment created or
suffered by Lessor, and the cost of investigation, removal,
remediation, restoration and/or abatement and, except as
otherwise provided in this Lease or the Addenda and Exhibits
attached hereto, shall survive the expiration or termination
of this Lease. Except as set forth herein, no termination,
cancellation or release agreement entered into by Lessee and
Lessor shall release Lessor from its obligations under this
Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessee in writing at the time of
such agreement. Lessor's indemnification provided herein and
all representations and warranties set forth in this Lease
shall expire and terminate upon Lessee's purchase of the
Premises pursuant to the provisions of Paragraph 51 hereof, in
the event that the purchase of the Premises is on an as-is
basis. Upon the issuance by a court of competent jurisdiction
of a final, nonappealable order ('Order') for damages against
Lessor which gives rise to Lessor's indemnity obligations
under this Paragraph 6.2(e) Lessor shall have until the time
period specified in such Order to make payment to Lessee as
required by such Order. If Lessee does not receive payment by
the date specified in any such Order, then Lessee shall have
the right to offset its payments of Rent due
<PAGE> 22
under the Lease until the amount of Rent withheld equals the
amount stated in the Order, at which time Lessee shall then
again be obligated to pay all Rent due under the Lease without
offset, in accordance with the terms of this Lease. Lessee
agrees that Lessor's indemnity obligations set forth in this
Paragraph 6.2(e) are subject to the provisions of Paragraphs
17 and 20 hereof regarding the definition of 'Lessor' and the
limitation of Lessor's liability, respectively."
Paragraph 6.2(h): APPLICABLE REQUIREMENTS. The following
paragraph is hereby added as a new Paragraph 6.2(h) to the Lease:
"As used in Paragraph 6 hereof, the term "Applicable
Requirements" shall also include any federal, state and local
environmental or health and safety laws, ordinances, rules,
regulations, codes, and any judicial and administrative
orders, directives, decrees, judgments, guidelines, permits or
permit conditions currently existing and as amended, enacted,
issued or adopted in the future which are applicable to or
otherwise related to the Premises."
Paragraph 8.1: PAYMENT FOR INSURANCE. The following is hereby
added at the end of Paragraph 8.1 of the Lease:
"Notwithstanding the foregoing, Lessee shall have the right,
for a period of thirty (30) days after the Commencement Date
of the Lease, and for a period of thirty (30) days following
each successive anniversary of the Commencement Date of this
Lease, to review the premiums charged for the insurance
required under Paragraph 8 to be obtained by Lessor as the
Insuring Party. If Lessee determines, in its reasonable
discretion, that the cost of the insurance premiums for the
insurance maintained by Lessor are materially greater than the
premiums being charged for such insurance by like insurance
companies, then, Lessee may elect, upon written notice to
Lessor given within ten (10) days following the expiration of
said thirty (30) day period, to be the "Insuring Party"
hereunder and procure and maintain the insurance required
under Paragraph 8 subject to all the terms and conditions set
forth herein. The foregoing shall not affect any obligation
of Lessee to pay for insurance premiums hereunder which accrue
during the time that Lessor is the Insuring Party."
Paragraph 12.1(b) and (c). All references to "Lessee" in
Paragraphs 12.1(b) and (c) are hereby changed to "Angeles".
Paragraph 12.1(f). The following paragraph is hereby added as
a new Paragraph 12.1(f):
"(f) Notwithstanding anything to contrary set forth in this
Paragraph 12.1, any change in control in Angeles which shall
be deemed to have occurred solely as a result of a change in
control of Consolidated Capital of North America, Inc., the
parent company of Angeles Acquisition Corporation, shall not
be deemed a change in control of Lessee for purposes of this
paragraph 12.1."
IN WITNESS WHEREOF, Lessee and Lessor have executed this Addendum
concurrently with their execution of the Lease.
LESSOR: LESSEE:
DANAT INVESTMENT COMPANY, CONSOLIDATED CAPITAL OF
a California general partnership NORTH AMERICA, INC.
By: \s\ Daniel J. Eget By: \s\ Christian W. Wolf
-------------------------------- ----------------------------
Name: Daniel J. Eget
Its: General Partner Its:
---------------------------
By: \s\ Nathan J. Reese By: /s/ Donald R. Jackson
-------------------------------- ----------------------------
Name: Nathan J. Reese Name: Donald R. Jackson
Its: General Partner Its: Secretary/Treasurer/
Chief Financial Officer
-------------------------
<PAGE> 23
EXHIBIT "A"
LIST OF HAZARDOUS MATERIALS AND SUBSTANCES
1. Waste oil - DOT combustible liquid, N.O.S., (Waste Petroleum Oil), NA 1993,
PGIII
2. Pickle liquor - DOT Ferrous chloride, Corrosive material, NA 1760
<PAGE> 24
OPTION TO PURCHASE PREMISES LEASE RIDER
This Option to Purchase Premises Lease Rider (this "Rider") is
attached to and forms a part of the Standard Industrial Commercial
Single-Tenant Lease-Net ("Lease") dated September 2, 1997 between Danat
Investment Company, a California general partnership and Howard and Sandra
Gosch, Co-trustees of the Sammy Narens Family Trust, U/T/D of September 7,
1988, collectively as Lessor, and Consolidated Capital of North America, Inc.,
a Colorado corporation, collectively as Lessee, covering the real property
commonly known as 20000 South Western Avenue, Torrance, California 90501, as
more particularly described in the Lease ("Premises"). Capitalized terms used
herein and not otherwise defined shall have the same meaning as set forth in
the Lease. In the event of any conflict or any inconsistency between the terms
and provisions of this Rider and the terms and provisions of the Lease, the
terms and provisions of this Rider shall prevail. This Rider may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which, when taken together, shall constitute one and the same
instrument.
Option to Purchase Premises.
A. Grant and Exercise of Option. Lessor hereby grants to Lessee
three (3) separate options to purchase the Premises (each, an "Option" and
collectively, the "Options"), at a price and upon the terms and conditions set
forth below. Subject to the conditions set forth in Paragraph C below, Lessee
shall exercise an Option, if at all, by delivering written notice thereof by
certified mail, return receipt requested (the "Notice of Exercise") to Lessor
on or between the dates set forth below with respect to each Option. If Lessor
has not received the applicable Notice of Exercise on or between such dates,
than such Option shall lapse and Lessee shall have no further right to exercise
such Option. The dates between which Lessee may exercise its Options are as
follows (the "Option Periods"):
<TABLE>
<CAPTION>
Option Number Dates of Exercise
- -------------- -----------------
<S> <C>
Option No. 1: Between October 1, 2000 and December 31, 2000
Option No. 2: Between October 1, 2003 and December 31, 2003
Option No. 3: Between October 1, 2006 and December 31, 2006
</TABLE>
B. Summary of Basic Terms of Option to Purchase Premises. This
paragraph B contains the basic terms concerning the Option. These basic terms
are to be read together with the remainder of this Rider.
1. Purchase Price Amount. The purchase price ("Purchase
Price") for the Premises shall be the Fair Market Value (defined below) of the
Premises as of the date of the Lessee's delivery of the Notice of Exercise and
Deposit (defined below) to Lessor.
2. Deposit Amount. The amount of the deposit which
Lessee shall deliver to Escrow Agent when the Purchase Price is determined
shall be an amount equal to five percent (5%) of the Purchase Price
("Deposit"). The Deposit shall be credited against the Purchase Price payable
pursuant to paragraph B(3).
3. Purchase Price Terms: Contingencies. The Purchase
Price shall be payable, all cash, at lease two (2) business days prior to the
Closing. Once the Purchase Price has been ascertained as provided herein,
there shall be no contingencies or conditions precedent to the Close of Escrow
(defined below) except for the title contingency set forth in paragraph B(5).
4. Escrow Company. The name and address of the escrow
company ("Escrow Agent") through which the purchase and sale of the Premises is
to be consummated is:
Commerce Escrow Company
1545 Wilshire Boulevard, Suite 600
Los Angeles, CA 90017
Attn: Mark Minsky
If Commerce Escrow Company is not in business at the time of the exercise of
the applicable Option, then the parties shall select an Escrow Agent by mutual
agreement.
5. Title Review. Lessee shall cause a title insurance
company of its choice ("Title Company") to furnish it with a preliminary title
report for the Premises ("Preliminary Report"), together with copies of all
underlying documents referred to as exceptions in the Preliminary Report.
Lessee shall pay for all costs and expenses associated with the preparation
and furnishing of the Preliminary Report. As a condition precedent to Lessee's
obligation to purchase the Premises hereunder, Lessee shall have until the
expiration of ten (10) days from its delivery of the applicable Notice of
Exercise to Lessor ("Title Review Expiration Date") to deliver to Lessor and
Escrow Agent a "Notice of Disapproval" disapproving of any exceptions shown in
the Preliminary Report of which Lessee disapproves, except for the standard
printed exceptions reflected in the Preliminary Report or on the title policy
to be issued to Lessee by the Title Company at the Close of Escrow. If Lessee
fails to deliver such Notice of Disapproval on or before the Title Review
Expiration Date, Lessee shall be deemed to have approved of all exceptions set
forth in the Preliminary Report. Upon Lessor's timely receipt of a Notice of
Disapproval, Lessor shall have the right, to be exercised within five (5)
business days after receipt of Lessee's notice to notify Lessee in writing that
it intends to cure any such disapproved matter prior to or concurrently with
the Close of Escrow. Failure of Lessor to deliver a written notice to Lessee
that it intends to cure any disapproved matter shall constitute Lessor's
refusal to cure said matter. Lessee shall thereupon have three (3) business
days in which to notify Escrow Agent and Lessor in writing that Lessee waives
its previous disapproval. Lessee's failure to timely provide such notice shall
constitute Lessee's unwillingness to waive said disapproved matter, whereupon
the escrow and Lessee's right to purchase the Premises as provided herein
(including, but not limited to, any remaining Options) shall immediately
terminate and be of no further force and
<PAGE> 25
effect, Lessee shall be entitled to the return of its Deposit from Escrow Agent
(to the extent that the Deposit has been received by Escrow Agent) and the
parties shall have no further rights or obligations to each other under this
Rider.
6. Date of Closing. The date of Closing (defined below)
will be sixty (60) calendar days (unless such day is a Saturday, Sunday or
legal holiday, in which case the Closing shall be on the next succeeding
business day) after Lessee delivers to Lessor the Notice of Exercise and the
Deposit.
C. Conditions to the Exercise of the Options; Termination of Options.
1. Lessee hereby agrees that a condition precedent to
the effectiveness of the Notice of Exercise is that the Lease shall be in full
force and effect on the date that Lessee delivers to Lessor the Notice of
Exercise.
2. Lessee hereby agrees that Option Number 2 and Option
Number 3, and Lessee's rights thereunder, respectively, shall automatically
terminate and expire if Lessee does not timely exercise either or both of its
options to extend the Lease term as set forth in Option to Extend Addendum to
Standard Lease attached to the Lease.
3. Lessee hereby agrees that the Options granted herein
shall terminate and be of no further force or effect in the event that the
Lease is terminated or otherwise expires pursuant to its terms or Lessor sells
the Premises to Lessee or to a third party (other than a third party described
in Paragraph 51.2 of the Lease) pursuant to or after Lessor complies with the
provisions of Paragraph 51 of the Lease.
4. If, during any Option Period, Lessor delivers an
Offer Notice to Lessee pursuant to Paragraph 51 of the Lease, then Lessee shall
not have the right to exercise the applicable Option unless and until Lessee
fails to timely (a) exercise its right of first refusal, (b) execute the
Purchase Agreement, or (c) close escrow, all as provided under Paragraph 51 of
the Lease, and Lessor notifies Lessee that the sale of the Offered Property to
the Proposed Purchaser under the applicable Offer Notice will not be
consummated. Thereafter, Lessee's right to exercise such Option shall only be
permitted during the applicable Option Period as provided herein, which Option
Period shall be extended by the lesser of (y) the number of days that Lessee is
prohibited from exercising its Option as provided above or (z) the number of
days between the date of Lessee's receipt of the Offer Notice and the scheduled
expiration date of the then applicable Option Period. For example, if Lessor
delivers an Offer Notice to Lessee on December 1, 2000, Lessee elects or has
deemed to have elected not to exercise its right of first refusal under
Paragraph 51, and Lessor notifies Lessee on March 1, 2001 that the sale of the
Offer Property will not be consummated, than the Option Period for Option No. 1
shall be extended by thirty-one (31) days and Lessee shall have the right to
exercise Option No. 1 by delivering a Notice of Exercise between March 1, 2001
and March 31, 2001.
D. Computation of Purchase Price.
1. Promptly after Lessor's receipt of the applicable
Notice of Exercise and the Deposit, Lessor and Lessee shall meet in an effort
to negotiate, in good faith, the Fair Market Value (defined below) of the
Premises as of the date of Lessee's delivery of the Notice of Exercise and
Deposit. If Lessor and Lessee have not agreed upon such Fair Market Value
within fifteen (15) days after Lessor's receipt of the Notice of Exercise and
the Deposit, then Lessor and Lessee shall each appoint one appraiser not later
than ten (10) days after the expiration of said fifteen (15) day period.
Within five (5) days after the appointment of such appraisers, the two
appointed appraisers shall appoint a third appraiser. If they are unable to
agree on a third appraiser within the five (5) day period set forth above, then
Lessor or Lessee may, by giving five (5) days notice to the other party, apply
to the presiding judge of the Superior Court of the County in which the
premises are located, for the selection of a third appraiser who meets the
qualifications stated in this paragraph. The third appraiser, however
selected, shall be a person who has not previously acted in any capacity for
either party. Lessor and Lessee shall instruct the appraisers to complete the
determination of Fair Market Value within thirty (30) days after appointment of
such appraisers. If either Lessor or Lessee fails to appoint its appraiser
within the prescribed time period, the single appraiser appointed shall
determine the Fair Market Value of the Premises. Each party shall bear the
cost of its own appraiser, and the parties shall bear equally the cost of the
third or single appraiser. All appraisers shall be independent, shall have
at least five (5) years' experience in the appraisal of commercial/industrial
real property substantially similar to the Premises, and shall be members of
professional organizations such as MAI or equivalent.
2. For the purpose of such appraisal, the term "Fair
Market Value" shall mean the price that a ready and willing buyer would pay to
a ready and willing seller for the Premises, as of the date of the appraisal,
if the Premises were exposed for sale on the open market for a reasonable
period of time, taking into account the highest and best use of the Premises
(whether or not such use is the use to which the Premises are then put). If
three appraisals are submitted, the Fair Market Value of the Premises shall be
the arithmetic average of the two appraisals closest in value to each other and
the third appraisal shall be disregarded. Otherwise, the appraisal of the
single appraiser so appointed shall be conclusive and binding on both Lessor
and Lessee. When the Fair Market Value of the Premises has been determined,
Lessor shall deliver notice thereof to Lessee and Lessee shall, within one (1)
business day thereafter, deliver the Deposit to Escrow Agent. If the Fair
Market Value of the Premises is not determined in accordance with the time
schedule set forth above, the date of Closing shall be postponed to the date
which is ten (10) days after the final determination of Fair Market Value.
Notwithstanding anything to the contrary set forth herein, if Lessor reasonably
believes that the Fair Market Value of the Premises, as determined by the
appraiser(s), was adversely affected as a result of any Hazardous Substance
brought on to the Premises and to which Lessor is entitled to indemnification
from Lessee as set forth in Paragraph 6.2(d) of the Lease, then Lessor shall
have no obligation to sell the Premises to Lessee and close escrow hereunder
until such time as Lessee's indemnification obligations have been satisfied in
full by (a) agreement between the parties, (b) pursuant to a final and
non-appealable decision of a court of competent jurisdiction or (c) pursuant to
a final and binding determination of an arbitrator in the event that the
parties elect to arbitrate such dispute.
<PAGE> 26
E. Escrow.
1. Within three (3) business days after Lessor's receipt
of the Notice of Exercise, Lessor and Lessee shall deliver to the Escrow Agent
executed counterparts of this option, and such other supplemental escrow
instructions as are customarily and reasonably required by the Escrow Agent,
which shall be the escrow instruction for the closing of the purchase and sale
contemplated hereunder. The Deposit shall be credited against the Purchase
Price at Closing.
2. The escrow instructions to be prepared by Escrow
Holder shall include the following provisions:
LESSEE ACKNOWLEDGES AND AGREES THAT THE PREMISES IS
BEING PURCHASED BY LESSEE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS" BASIS
AT THE CLOSING (AS DEFINED BELOW). LESSEE HEREBY WAIVES AND RELINQUISHES ALL
RIGHTS AND PRIVILEGES ARISING OUT OF, OR WITH RESPECT OR IN RELATION TO, ANY
REPRESENTATIONS, WARRANTIES OR COVENANTS, INDEMNITIES WHETHER EXPRESS OR
IMPLIED, WHICH MAY HAVE BEEN MADE OR GIVEN UNDER THE LEASE, INCLUDING WITHOUT
LIMITATION PARAGRAPH 6.2 OF THE LEASE, OR WHICH MAY BE DEEMED TO HAVE BEEN MADE
OR GIVEN, BY LESSOR. LESSEE HEREBY FURTHER ACKNOWLEDGES AND AGREES THAT
WARRANTIES OF MERCHANTABLILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE
EXCLUDED FROM THE TRANSACTION CONTEMPLATED HEREBY, AS ARE ANY WARRANTIES
ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE, AND THAT THE LESSOR HAS NOT
WARRANTED, AND DOES NOT HEREBY WARRANT, THAT THE PREMISES NOW OR IN THE FUTURE
WILL MEET OR COMPLY WITH THE REQUIREMENTS OF ANY APPLICABLE REQUIREMENTS OR
OTHER LAW, CODE, REGULATION OR ORDINANCE OF ANY APPLICABLE GOVERNMENTAL
AUTHORITY OR JURISDICTION. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
LESSEE HEREBY ASSUMES ALL RISK AND LIABILITY (AND AGREES THAT LESSOR SHALL NOT
BE LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL, OR OTHER DAMAGES)
RESULTING OR ARISING FROM OR RELATING TO THE OWNERSHIP, USE, CONDITION
(INCLUDING ENVIRONMENTAL CONDITION), LOCATION, MAINTENANCE, REPAIR, OR
OPERATION OF THE PREMISES. LESSEE ACKNOWLEDGES AND AGREES THAT THE SALE
PROVIDED FOR HEREIN IS MADE WITHOUT ANY WARRANTY BY LESSOR AS TO THE NATURE OR
QUALITY OF THE PREMISES; THE DEVELOPMENT POTENTIAL OF THE PREMISES; THE PRIOR
HISTORY OF OR ACTIVITIES ON THE PREMISES; THE QUALITY OF LABOR AND/OR MATERIALS
INCLUDED IN ANY OF THE IMPROVEMENTS; THE FITNESS OF THE PREMISES FOR AND/OR THE
SOIL OR ENVIRONMENTAL CONDITIONS EXISTING AT THE PREMISES FOR ANY PARTICULAR
PURPOSE OR DEVELOPMENT POTENTIAL; THE PRESENCE OR SUSPECTED PRESENCE OF
HAZARDOUS WASTE OR HAZARDOUS SUBSTANCES IN, ON, ABOUT, OR UNDER THE PREMISES OR
THE IMPROVEMENTS; OR THE ZONING OR OTHER LEGAL STATUS OF THE PREMISES. LESSEE
HEREBY ACKNOWLEDGES THAT NEITHER LESSOR, NOR ITS PARTNERS, EMPLOYEES, AGENTS,
ATTORNEYS, CONSULTANTS OR ANY OTHER PERSON HAS MADE, ANY REPRESENTATION,
AGREEMENT, STATEMENT, WARRANTY, GUARANTY OR PROMISE REGARDING THE PREMISES, OR
THE TRANSACTION CONTEMPLATED HEREIN, OR REGARDING THE ZONING, CONSTRUCTION,
PHYSICAL CONDITION OR OTHER STATUS OF THE PREMISES, AND NO REPRESENTATION,
WARRANTY, AGREEMENT, STATEMENT, GUARANTY OR PROMISE, IF ANY, MADE BY ANY PERSON
ACTING ON BEHALF OF LESSOR SHALL BE VALID OR BINDING UPON LESSOR. ALL OF THE
FORGOING SHALL SURVIVE THE CONVEYANCE OF THE PREMISES TO LESSEE.
LESSEE EXPRESSLY WAIVES THE BENEFITS OF SECTION 1542 OF THE CALIFORNIA CIVIL
CODE, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOW TO HIM MUST HAVE MATERIALLY AFFECTED THE SETTLEMENT WITH THE DEBTOR."
F. Closing. The close of escrow (the "Closing") shall take place
on or before the date specified in Paragraph B(6). Title to the Premises shall
be conveyed to Lessee by grant deed at the Closing. The "Close of Escrow"
shall be the date upon which the grant deed conveying the Premises to the
Lessee is recorded in the official records of the county of which the Premises
are located. The Closing shall be accomplished as follows:
1. The Purchase Price shall be paid by Lessee through
Escrow. All funds required to be paid by Lessee at the Closing shall be
deposited with Escrow Agent by Lessee not later then two (2) business days
prior to the day set for the Closing and such funds shall be immediately
available or good funds.
2. Base Rent shall be prorated as of Closing. Lessor
shall pay all documentary transfer taxes required as a result of the sale.
Lessee shall pay for any title insurance policy obtained by Lessee in
connection with its acquisition of the Premises. Lessor and Lessee shall pay
equally the escrow fee. All other costs shall be borne by Lessor and Lessee in
accordance with the standard practices of the county in which the Premises is
located, except as otherwise stated herein.
3. The parties shall execute such other documents as are
reasonably requested by Escrow in order to complete the purchase of the
Premises as provided by this Rider.
G. Rent Payments: Lessor Default. Neither Lessee's rent payments
nor any other payments made to Lessor pursuant to the Lease shall be applied
against the Purchase Price. If Lessor defaults under this Rider after notice
to Lessor as provided in the Lease, Lessee's sole remedy shall be an action
against Lessor for actual damages caused by Lessor's default, and Lessee shall
not have the right to terminate the Lease, offset against rent or injunctive
relief.
<PAGE> 27
H. Attorneys' Fees and Legal Expenses. Should either party
hereto institute any action or proceeding to enforce any provision hereof or
for damages by reason of any alleged breach of any provision of this Rider or
for any other remedy, the prevailing party shall be entitled to receive from
the losing party all reasonable attorneys' fees, costs and all court costs in
connection with said proceeding.
IN WITNESS WHEREOF, Lessee and Lessor have executed this Rider
concurrently with their execution of the Lease.
LESSOR: LESSEE:
DANAT INVESTMENT COMPANY, CONSOLIDATED CAPITAL OF
a California general partnership NORTH AMERICA, INC.
By: \s\ Daniel J. Eger By: \s\ Christian W. Wolf
---------------------------- -------------------------------
Name: Daniel J. Eger
Its: General Partner Its:
------------------------------
By: \s\ Nathan J. Reese By: /s/ Donald R. Jackson
---------------------------- ------------------------------
Name: Nathan J. Reese Name: Donald R. Jackson
Its: General Partner Its: Secretary/Treasure/
Chief Financial Officer
--------------------------
<PAGE> 28
ADDITIONAL SIGNATURE PAGE FOR ANGELES ACQUISITION CORPORATION ON
OPTION TO PURCHASE PREMISES LEASE RIDER
Executed at:
----------------------------------
on:
----------------------------------
By: LESSEE:
ANGELES ACQUISITION CORP.,
a Delaware Corporation
By:
----------------------------------
Printed Name: Christian Wolf
Title: Chief Executive Officer
By:
----------------------------------
Printed Name: Donald R. Jackson
Title: Secretary/Treasurer/
Chief Financial Officer
Address:
--------------------------------------
--------------------------------------
Telephone:
------------------------------------
Facsimile:
------------------------------------
Federal ID No.
--------------------------------
<PAGE> 29
ADDITIONAL SIGNATURE PAGE FOR ANGELES ACQUISITION CORPORATION ON
OPTION TO PURCHASE LEASED PREMISES
Executed at:
----------------------------------
on:
----------------------------------
By: LESSEE:
ANGELES ACQUISITION CORP.,
a Delaware Corporation
By:
----------------------------------
Printed Name: Christian Wolf
Title: Chief Executive Officer
By:
----------------------------------
Printed Name: Donald R. Jackson
Title: Secretary/Treasurer/
Chief Financial Officer
Address:
--------------------------------------
--------------------------------------
Telephone:
------------------------------------
Facsimile:
------------------------------------
Federal ID No.
--------------------------------
<PAGE> 1
EXHIBIT
10.54
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.
<PAGE> 2
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Aid Association for Lutherans
4321 North Ballard Road
Appleton, WI 54919
SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT ("Agreement") is
entered into as of the 12th day of January, 1998, by and among CONSOLIDATED
CAPITAL OF NORTH AMERICA, INC., a Colorado corporation, ANGELES ACQUISITION
CORP., a Colorado corporation ("Lessee"), DANAT INVESTMENT COMPANY, a California
general partnership (hereinafter "Borrower" and "Lessor") and AID ASSOCIATION
FOR LUTHERANS, a Wisconsin corporation ("Lender").
RECITALS
A. Lessee is the lessee and Borrower is one of the lessors under that
Certain Lease Agreement dated January __, 1998 (the "Lease").
B. Lender has made a loan to Borrower which is secured by a Deed of
Trust, Financing Statement, Security Agreement and Fixture Filing (With
Assignment of Rents) from Borrower to Lender dated July 16, 1990 (the "Deed of
Trust") and an Assignment of Rents and Leases from Borrower to Lender dated July
16, 1990 (the "Assignment"), covering the property described in Exhibit A
attached hereto wherein the premises (the "Premises") covered by the Lease are
located (the "Property").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and to induce Lender to make the
requested loan, Lessee, Borrower, Lessor, and Lender hereby agree and covenant
as follows:
1. Subordination. Borrower, Lessor, Lessee and Lender hereby agree that the
Lease and all of its terms and provisions (including, without limitation,
any option or options to purchase or rights of first refusal, including
the right of first refusal as set forth in paragraph 51 of the addendum
attached to the Lease and the option to purchase premises as set forth in
the Option to Purchase Premises Lease Rider attached to the Lease,
affecting the Property, or any portion thereof, contained therein) is and
shall at all times be subject and subordinate in all respects to the Deed
of Trust and to all supplements, amendments and modifications thereto,
and to all extensions, substitutions, rearrangements and/or replacements
thereof and
<PAGE> 3
such Lessee's right of first refusal and option to purchase
premises shall be unenforceable against Lender, its successors and
assigns. If the lien of the Deed of Trust is foreclosed, the options to
purchase the underlying real property the right of first refusal and the
option to renew the lease shall be extinguished.
2. Nondisturbance and Attornment. If Lessee is nor in default under any of
the terms, covenants or conditions contained in the Lease or this
Agreement, Lender agrees that in the event of foreclosure of the
Mortgage, trustee's sale, deed in lieu of foreclosure, or other
enforcement of the terms and conditions of the Mortgage, or the exercise
by Lender of its rights under the Assignment, or in the event Lender
comes into possession or acquires title to the Property as a result of
foreclosure or the threat thereof, or as a result of other means, such
action shall not result in either a termination of the Lease, or a
diminution or impairment of any of the rights granted to Lessee in the
Lease, except for the right of first refusal as set forth in paragraph 51
of the addendum attached to the Lease and the option to purchase premises
as set forth in the Option to Purchase Premises Lease Rider attached to
the Lease, as indicated in paragraph 1 above, and except as hereinafter
provided.
If the interests of Borrower and/or the Lessor in the Property shall be
transferred to Lender or any transferee of Lender (such transferee, its
successors and assigns, including, but not limited to, Lender, shall
hereinafter be referred to as "Purchaser") by reason of foreclosure,
trustee's sale, deed in lieu of foreclosure or other proceeding for the
enforcement of the Mortgage or rights of Lender under the Assignment, and
Lessee is not in default of its obligations under the Lease, Purchaser
shall not name or join Lessee in any foreclosure, trustee's sale or other
proceeding to enforce the Mortgage or Assignment, and Purchaser shall be
bound to Lessee, except as provided in Section 3, below, and except
Lessee's right of first refusal as set forth in paragraph 51 of the
addendum attached to the Lease and the option to purchase premises as set
forth in the Option to Purchase Premises Lease Rider attached to the
Lease, as indicated in paragraph 1 above, and Lessee shall be bound to
any Purchaser, under all of the terms, covenants and conditions of the
Lease for the balance of the term thereof, and any extensions thereof
with the same force and effect as if such Purchaser were the original
landlord under the Lease. Lessee does hereby attorn to such Purchaser,
including Lender if Lender is such Purchaser, as the landlord under the
Lease, said attornment to be effective and self-operative without the
execution of any further instruments upon Purchaser's succeeding to the
interest of the Borrower under the Lease.
3. Limitation on Purchaser Obligations. Notwithstanding anything to the
contrary contained in Section 2 hereof, a Purchaser shall not be:
3.1 liable for any damages or other relief attributable to any act or
omission of any prior lessor under the Lease (including without
limitation, Borrower);
3.2 subject to any offsets or defenses that Lessee may have against a
prior lessor under the lease (including, without limitation,
Borrower);
<PAGE> 4
3.3 liable for any damages or other relief attributable to any latent
or patent defects in construction with respect to the Property;
3.4 liable for the return of any security deposit under the Lease
unless such security deposit shall have been actually deposited
with Purchaser;
3.5 bound by any rent or additional rent that Lessee might have paid
in advance to any prior lessor under the Lease (including,
without limitation, Borrower), for any period beyond the month in
which Purchaser succeeds to the interest of Borrower under the
Lease;
3.6 bound by any waiver or forbearance by any prior lessor under the
Lease (including, without limitation, Borrower) or bound by any
agreement or modification of the Lease made without prior written
consent of Lender; or
3.7 bound by any covenant made by any prior lessor under the Lease
(including, without limitation, Borrower) to complete any
construction on the Property covered by the lease or to pay any
sums to Lessee in connection therewith, unless Purchaser shall
have expressly consented thereto in writing.
4. Further Actions. Lessee covenants and agrees from time to time to do all
acts and execute such instruments as it shall be requested by Lender to
do or execute for the purposes of carrying out and effectuating this
Agreement and the intent hereof, and evidencing this Agreement, whether
by filing with any public office, or agency or otherwise.
5. Covenants of Lessee. Lessee agrees that during the term of the Lease,
Lessee will not:
5.1 pay any rent or additional rent more than one (1) month in
advance to any lessor (including, but not limited to, Borrower);
or
5.2 cancel, surrender, amend or modify the Lease without Lender's
prior written consent nor terminate the Lease because of a
default thereunder by Borrower unless Lessee shall have first
given Lender written notice thereof and a reasonable opportunity
to cure such default. In the event the Lease is rejected or
deemed rejected in any bankruptcy proceeding with respect to
landlord, Lessee shall not exercise any right it may have to
treat the Lease as terminated under 11 U.S.C. Sec. 365(h), as
amended.
6. Merger. Borrower, Lessor, Lessee and Lender agree that unless Lender
shall otherwise consent in writing, the fee title to the Property and the
leasehold estate created by the Lease shall not merge but shall remain
separate and distinct, notwithstanding the union of said estates either
in Borrower or Lessor or Lessee or any third-party by purchase,
assignment or otherwise.
7. Limitation on Liability. Notwithstanding anything to the contrary
contained herein or in the Lease, in the event that any Lender shall
acquire title to the Property, such Lender shall
<PAGE> 5
have no obligation, nor incur any liability, beyond the then interest if
any, of such Lender in the Property, and Lessee shall look exclusively to
such interest of such Lender if any, in the Property for the payment and
discharge of any obligations imposed upon such Lender hereunder or under
the Lease, and such Lender is hereby released and relieved of any other
liability hereunder and under the Lease. As regards to such Lender,
Lessee shall look solely to the estate or interest owned by such Lender
in the Property and Lessee will not collect or attempt to collect any
such ligation or liabilities or any judgment therefor, out of any other
assets of Lender. By executing this Agreement, Borrower specifically
acknowledges and agrees that nothing contained in this paragraph shall
impair, limit, offset, lessen, abrogate or otherwise modify the
obligations of Lessor to lessee under the Lease.
8. Modification of Agreement. This agreement may not be modified orally or
in any other manner except by an agreement in writing signed by the
parties hereto or their respective successors in interest.
9. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, successors
and assigns.
10. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California.
11. Certification Relating to Lease. Lessee, Lessor and Borrower hereby
certify that, as of the date hereof, there are no defaults (or events
that with the giving of notice and/or the passage of time could become a
default) on the part of the other party under the Lease, that the Lease
is a complete statement of the agreement of the parties under the Lease
with respect to the leasing of the Premises, that the Lease is in full
force and effect, and that all conditions to the effectiveness or
continuing effectiveness thereof required to be satisfied as of the date
hereof have been satisfied. Lessee, Lessor and Borrower further certify:
11.1 All conditions under the Lease have been satisfied, the term of
the Lease commenced on September 8, 1997, expires on December 31,
2000, and Lessee is now in possession of the Premises (19.140
square foot two story office building and 310,000 square foot
industrial building) in accordance with the terms of the Lease.
11.2 The Lease provides for the following:
Lessee has two (2) additional thirty-six (36) month periods to
extend the Lease in accordance with the terms as set forth in
paragraph 50 of the Option to Extend Addendum attached to the
Lease.
11.3 Lessee has neither assigned, transferred, nor encumbered the
Lease, or any interest therein, nor sublet the Premises, or any
portion thereof.
<PAGE> 6
11.4 All required common areas have been competed and all required
parking spaces have been furnished.
11.5 The total annual minimum rent under the Lease is $780,000, no
rent or other sum payable by Lessee under the Lease has been
prepaid, and Lessee shall not prepay any such rent or other sum
more than one (1) month in advance, except with your prior
written consent.
12. Integration. This Agreement shall be the whole and only agreement with
regard to the subjection and subordination of the Lease and the leasehold
estate created thereby, together with all rights and privileges of Lessee
thereunder, to the lien or charge of the Deed of Trust and shall
supersede and cancel, but only insofar as would affect the priority
between the Lease and the Deed of Trust any prior agreements as to such
subjection or subordination, including, but not limited to, those
provisions contained in the Lease that provide for the subjection or
subordination of the Lease and the leasehold estate created thereby to a
deed or deeds of trust or to a mortgage or mortgages.
13. Notices. All notices and demands that may or are required to be given by
any party to any other party hereunder shall be given in writing and
shall be deemed to have been fully given within three (3) business days
after being deposited in the United States mail, certified or registered,
postage prepaid, and addressed to such party at the address set forth
below beside its signature. The parties may change their addresses by
giving notice to the other parties in the same manner as above provided.
Lessee agrees that it shall send a copy of any notice of default or
similar statement under the Lease to Lender at the same time such notice
or statement is sent to the lessor under the Lease.
14. Captions. The captions and headings of the paragraphs of this Agreement
are for convenience only and are not to be used in construing this
Agreement.
15. Counterparts. This Agreement may be executed in counterparts, and all
counterparts together shall be construed as one document.
<PAGE> 7
In WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
Address: LESSEE:
410 17th Street, Suite 400 CONSOLIDATED CAPITAL OF NORTH
Denver, CO 80202 AMERICA, INC.
By:
-------------------------------------
Name:
Title:
ANGELES ACQUISITION CORP.
a Colorado corporation
By:
-------------------------------------
Name:
Title:
(SIGNATURE OF LENDER, BORROWER AND LESSOR ON NEXT PAGE)
<PAGE> 8
LENDER:
Address:
4321 North Ballard Road AID ASSOCIATION FOR LUTHERANS,
Appleton, Wisconsin 54919 a Wisconsin corporation
Attn: Investment Department
Loan No. 65360
By: /s/ Wayne C. Streck
----------------------------------
Wayne C. Streck
Vice President-
Mortgages and Real Estate
By: /s/ Charles G. Egli
----------------------------------
Charles G. Egli
Assistant Secretary
BORROWER AND LESSOR:
Address:
2850 Benedict Canyon DANAT INVESTMENT COMPANY
Beverly Hills, California 90210 a California general partnership
By:
------------------------------
Daniel J. Eget
General Partner
<PAGE> 9
STATE OF Wisconsin )
) ss.
COUNTY OF Outagamie )
On January 12, 1998, before me, Linda K. Sklenar , personally appeared
Charles G. Egli and Wayne C. Streck , personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by his/her
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Linda K. Sklenar
------------------------------------------------
Notary Public in and for the State of California
My commission expires 09/13/98.
<PAGE> 1
EXHIBIT
10.55
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).
<PAGE> 2
MORTGAGE AGREEMENT
CONGRESS FINANCIAL CORPORATION (WESTERN) ("Congress") has entered or is
about to enter into financing arrangements with ANGELES ACQUISITION CORP.
("Debtor") pursuant to which Congress has been or may be granted a security
interest in any or all of Debtor's or its affiliates' personal property,
including, but not limited to, inventory and equipment (hereinafter "Personal
Property"). For purposes of this Agreement, the term "Personal Property" does
not include plumbing and electrical fixtures, heating, ventilation and air
conditioning, wall and floor coverings, walls or ceilings and other fixtures not
constituting trade fixtures. Some of the Personal Property has or may from time
to time become affixed to or be located on, wholly or in part, the real property
leased by Debtor or its affiliates located at 20000 S. Western Ave., Torrance,
CA 90501, the legal description of which is attached as Exhibit A (the
"Premises"). The undersigned is the mortgagee under a mortgage or beneficiary of
a deed of trust encumbering the Premises.
In order for Congress to consider making loans or providing other financial
accommodations to Debtor or its affiliates in reliance upon the Personal
Property as collateral, the undersigned agrees as follows:
1. The Personal Property may be installed in or located on the Premises and
is not and shall not be deemed a fixture or part of the real property but shall
at all times be considered personal property.
2. Congress, as its option, may enter and use the Premises for the purpose
of repossessing, removing, selling or otherwise dealing with any of the Personal
Property, and such right shall continue from the date Congress enters the
Premises for a period of up to ninety (90) days after the receipt by Congress of
written notice from the undersigned directing removal of the Personal Property;
provided, that, (a) for each day that Congress uses the Premises pursuant to the
rights granted to it hereunder, unless the person entitled thereto has otherwise
been paid rent in respect of any of such period. Congress shall pay the
regularly scheduled rent provided under the lease relating to the Premises
between the owner of the Premises and Debtor (the "Lease"), prorated on a per
diem basis to be determined on a thirty (30) day month, without thereby assuming
the Lease or incurring any other obligations of Debtor and (b) any damage to the
Premises caused by Congress or its representatives will be repaired by Congress
at its sole expense.
3. The undersigned agrees to send notice in writing of any default under
the mortgage or deed of trust encumbering the Premises, and (if the undersigned
succeeds to the interest of the owner of the Premises in the Premises) notice in
writing of any default under the Lease to:
Congress Financial Corporation (Western)
225 South Lake Avenue, Suite 1000
Pasadena, California 91101
<PAGE> 3
Upon receipt of such notice, Congress shall have the right, but not the
obligation, to cure such default within ten (10) days thereafter. Any payment
made or act done by Congress to cure any such default shall not constitute an
assumption of the Lease or said mortgage or deed of trust, or any obligations of
Debtor or the owner of the Premises.
4. This waiver may not be changed or terminated orally or by course of
conduct and is binding upon the undersigned and the heirs, personal
representatives, successors and assigns of the undersigned and inures to the
benefit of Congress and the successors and assigns of Congress.
5. The "Personal Property" includes the items on the attached Exhibit B,
but does not include the items shown on Exhibit B which are crossed off.
Dated this 12th day of January, 1998.
Aid Association for Lutherans, a Wisconsin
corporation
By /s/ Wayne C. Streck
-----------------------------------------
Title Vice President-Mortgages & Real Estate
---------------------------------------
By /s/ Charles G. Egli
------------------------------------------
Title Assistant Secretary
---------------------------------------
<PAGE> 4
MORTGAGEE ACKNOWLEDGEMENT
(CORPORATION)
STATE OF Wisconsin
ss:
COUNTY OF Outagamie
I, Linda K. Sklenar , a Notary Public within and for said County, in the
State aforesaid, duly commissioned and acting, do hereby certify that on this
12th day of January , 199 8 , personally appeared before me Wayne C. Streck and
Charles G. Egli (Name of Signer for MORTGAGEE) to me personally known to be the
person who signed the foregoing MORTGAGEE Waiver, and who, being by me duly
sworn and being informed of the contents of said MORTGAGEE Waiver, stated and
acknowledged to me under oath that they are Vice President - Mortgages & Real
Estate and Assistant Secretary of Aid Association for Lutherans the Corporation
named in and which executed the said MORTGAGEE Waiver, and that they know the
corporate seal of said Corporation, and that the seal affixed to said MORTGAGEE
Waiver, as the corporate seal of said Corporation, that they are duly authorized
to execute said MORTGAGEE Waiver, for, in the name of and on behalf of said
Corporation, and that same was signed, sealed, executed and delivered by them in
the name of and on behalf of said Corporation by authority of its Board of
Directors and that the execution of said MORTGAGEE Waiver was their free and
voluntary act and deed in their said capacity and acknowledged to me that said
Corporation executed the same as its voluntary and was by them voluntarily
executed, on behalf of said Corporation for the uses, purposes and consideration
therein mentioned and set forth.
WITNESS my hand and seal as such Notary Public the day and year in this
certificate above written.
/s/ Linda K. Sklenar
-----------------------------------
Notary Public
Commission expires: 09/13/98
<PAGE> 1
EXHIBIT
10.56
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.
<PAGE> 2
AGREEMENT
BY AND BETWEEN
RDB CAPITAL ADVISORS, LLC,
STONE PINE INVESTMENT BANKING, LLC AND
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
THIS AGREEMENT ("Agreement") is entered into as of March ___, 1998 by
RDB Capital Advisors, LLC on behalf of any persons or entities affiliated with
RDB Capital Advisors, LLC (collectively, the "RDB Entities"), Stone Pine
Investment Banking, LLC and its affiliates (collectively, "Stone Pine") and
Consolidated Capital of North America, Inc. ("Consolidated") (Stone Pine and
Consolidated collectively, the "Companies"), on the following terms and
conditions:
WHEREAS, RDB arranged for the purchase by certain entities (the
"Buyers") of $2 million shares of Series C Preferred Shares of Consolidated (the
"Stock Purchase"); and
WHEREAS, the Stock Purchase was consummated on March 10, 1998; and
WHEREAS, the Companies, as compensation for the services of RDB, have
agreed to pay to RDB the sum of $120,000.00 (the "Finder's Fee");
WHEREAS, RDB desires to enter into this Agreement in order to induce
and facilitate the payment of the Finder's Fee.
NOW THEREFORE, for full and adequate consideration, the sufficiency of
which is hereby acknowledged by the RDB Entities and the Companies, the parties
hereby agree as follows:
1. As full and final payment for all outstanding sums owed to the RDB
Entities, Consolidated shall pay $120,000.00 to the RDB Entities
immediately upon execution of this Agreement.
2. The RDB Entities shall be solely responsible to pay the Buyer's
representatives any fee payable to the Buyer's representatives and the
Companies shall have no obligation to pay any fee to the Buyer or the
Buyer's representatives.
3. By the execution of this Agreement, and subject to the receipt of the
payment set forth in paragraph 1:
The RDB Entities hereby release, remise and forever discharge the
Companies, and the Companies' current and former shareholders,
directors, officers, agents, members, managers, affiliates, attorneys
and employees (all such persons and entities collectively, the
"Recipients"), of and from any and all actions, suits, proceedings,
controversies, claims and/or demands ("Claims") whatsoever, so that the
RDB Entities shall not have any claim on or against the Companies or
the Recipients, directly or indirectly, arising from or relating to the
Stock Purchase or the Finder's Fee.
<PAGE> 3
4. This Agreement shall be binding upon the parties hereto and their
respective heirs, successors and assigns, and shall enure to the
benefit of the parties hereto and their respective heirs, successors
and assigns.
5. This Agreement constitutes the entire agreement and understanding
between the parties hereto and supersedes and replaces all negotiations
and all proposed agreements whether oral or written, between the
parties relating to the subject matter of this Agreement.
6. THIS AGREEMENT AND ANY CONTROVERSY WHICH MIGHT ARISE HEREFROM WILL IN
ALL RESPECTS BE INTERPRETED, ENFORCED AND GOVERNED BY THE LAWS OF THE
STATE OF COLORADO.
IN WITNESS WHEREOF, this Agreement is executed as of the date first set
forth above.
RDB CAPITAL ADVISORS, LLC
By: /s/ Richard D. Bailey
-------------------------------
Richard D. Bailey
Manager
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Donald R. Jackson
-------------------------------
Donald R. Jackson
Treasurer
STONE PINE INVESTMENT BANKING, LLC
By: /s/ Paul Bagley
---------------------------------
Paul Bagley:
Manager
<PAGE> 1
EXHIBIT
21
Subsidiaries of the Company
<PAGE> 2
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
LISTING OF SUBSIDIARIES
Angeles Metal Trim Co. - 100% direct subsidiary
Capitol Metals Co. (formerly, Angeles Acquisition Corp.) - 100% direct
subsidiary
California Building Systems, Inc. - 100% subsidiary of Angeles Metal Trim Co.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 1997 - BALANCE SHEETS, STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT -
BALANCE SHEET AND STATEMENT OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,304
<SECURITIES> 0
<RECEIVABLES> 1,725,038
<ALLOWANCES> 138,003
<INVENTORY> 1,193,208
<CURRENT-ASSETS> 2,827,426
<PP&E> 2,269,219
<DEPRECIATION> 216,004
<TOTAL-ASSETS> 7,706,283
<CURRENT-LIABILITIES> 4,770,298
<BONDS> 2,928,133
0
1,193,000
<COMMON> 1,599
<OTHER-SE> (1,186,747)
<TOTAL-LIABILITY-AND-EQUITY> 7,706,283
<SALES> 16,989,478
<TOTAL-REVENUES> 16,989,478
<CGS> 14,021,110
<TOTAL-COSTS> 14,021,110
<OTHER-EXPENSES> 4,984,579
<LOSS-PROVISION> 45,027
<INTEREST-EXPENSE> 582,713
<INCOME-PRETAX> (2,478,577)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,478,577)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,478,577)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
