<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 12, 1999
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Colorado 0-21821 93-0962072
- -------------------------------- ----------- ------------------
State or Other Jurisdiction Commission IRS Employer
of Incorporation or Organization File Number Identification No.
410 17th Street, Suite 400, Denver, Colorado 80202
---------------------------------------------------
Address of Principal Executive Offices and Zip Code
Registrant's telephone number, including area code (888) 313-8051
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Business Acquired.
<TABLE>
<CAPTION>
TOLEDO PICKLING & STEEL SALES, INC. Page
----
<S> <C>
Report of Independent Public Accountants 5
Balance Sheet at September 30, 1998 6
Statement of Operations for the Year Ended September 30, 1998 8
Statement of Shareholder's Deficit 9
Statement of Cash Flows for the Year Ended September 30, 1998 10
Notes to Financial Statements 11
Report of Independent Accountants 18
Balance Sheet at September 30, 1997 and September 30, 1996 19
Statement of Operations and Retained Earnings for the
Years Ended September 30, 1997 and September 30, 1996 20
Statement of Cash Flows for the Years Ended September 30, 1997
and September 30, 1996 21
Notes to Financial Statements 22
(b) Pro Forma Financial Information.
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
Description of Acquisition Transaction 28
Unaudited Pro Forma Combined Balance Sheet at September 30, 1998 29
Unaudited Pro Forma Combined Statement of Operations for the
Nine Months Ended September 30, 1998 and for the Year Ended
December 31, 1997 31
Notes to Unaudited Pro Forma Combined Financial Statements 33
</TABLE>
2
<PAGE> 3
Exhibits
- --------
10.77 (1) Asset Purchase Agreement dated as of December 31, 1998 by
and between Toledo Pickling and TPSS Acquisition [Schedules
and Exhibits omitted].
10.78 (1) Assignment and Bill of Sale dated as of January 12, 1999 from
Toledo Pickling to TPSS Acquisition.
10.79 (1) Assumption Agreement dated as of January 12, 1999 by and
between Toledo Pickling and TPSS Acquisition.
10.80 (1) Employment and Noncompetition Agreement dated as of January
12, 1999 between TPSS Acquisition and William Ciralsky.
10.81 (1) Equipment Purchase Agreement dated as of January 12, 1999 by
and among TPSS Acquisition and William Ciralsky and Nancy
Ciralsky. [Exhibit omitted]
10.82 (1) Unconditional and Continuing Guaranty of the Company dated as
of January 12, 1999 with respect to the Unconditional and
Continuing Guaranty July 6, 1998, issued by William Ciralsky
in favor of Toledo Blank, Inc. [Exhibit A omitted]
10.83 (1) Indemnification Agreement dated as of January 12, 1999 by TPSS
Acquisition to William Ciralsky.
10.84 (1) Lease dated as of January 12, 1999 by and between Campbell
Investors, as lessor, and TPSS Acquisition, as lessee [real
property located at 1149 Campbell Road, Toledo, Ohio].
10.85 (1) Consent to Assignment to Equipment Lease Agreement dated as of
January 12, 1999 of Equipment Lease Agreement between Toledo
Pickling and William Ciralsky and Nancy Ciralsky dated as of
June 1, 1998 [Herr-Voss .50 inch maximum level line].
10.86 (1) Consent to Assignment to Equipment Lease Agreement dated as of
January 12, 1999 of the Equipment Lease Agreement between
Toledo Pickling and William Ciralsky dated as of June 1, 1998
[Herr-Voss .25 inch maximum level line].
10.87 (1) Equipment Lease Agreement dated as of June 1, 1998 between
Toledo Pickling and William Ciralsky and Nancy Ciralsky
[Herr-Voss .50 inch maximum level line].
10.88 (1) Equipment Lease Agreement dated as of June 1, 1998 between
Toledo Pickling and William Ciralsky [Herr-Voss .25 inch
maximum level line].
10.89 Assumption and Consent Agreement dated as of January 12, 1999
among Toledo Pickling, TPSS Acquisition and Finova. [Exhibits
omitted]
10.90 Secured Promissory Note A dated as of January 12, 1999 between
TPSS Acquisition, Toledo Pickling and Finova in the principal
amount of $2,307,692.
10.91 Secured Promissory Note B dated as of January 12, 1999 between
TPSS Acquisition, Toledo Pickling and Finova in the principal
amount of $333,332.
10.93 Assumption and Consent Agreement dated as of January 12, 1999
among Toledo Pickling, TPSS Acquisition, NBC and Finova.
[Exhibits omitted]
10.94 Credit Note dated as of January 12, 1999 by and between TPSS
Acquisition, Toledo Pickling and NBC in the principal of
amount of $5,130,000.
10.95 Credit Note dated as of January 12, 1999 by and between TPSS
Acquisition, Toledo Pickling, NBC and Finova in the principal
of amount of $3,870,000.
10.96 Guaranty of the Company dated as of January 12, 1999 in favor
of NBC and Finova.
10.97 (1) Note Purchase Agreement dated January 11, 1999 by and between
the Company and Security Income Trust, LP.
3
<PAGE> 4
10.98 (1) 18% Note dated January 11, 1999 issued by the Company to
Security Income Trust, L. P. in the principal amount of
$1,250,000.
- ---------------------------
(1) Previously filed on January 27, 1999 on Form 8-K.
Safe Harbor Statement: The statements contained in this report that are not
historical facts may contain forward looking statement that involve a number of
known and unknown risks and uncertainties that could cause actual results to
differ materially from those discussed or anticipated by management. Potential
risks and uncertainties include, among other factors, general business
conditions, competitive market conditions, success of the Company's growth and
sales strategy, whether the Company will suffer customer attrition, whether the
transaction between the Company and TPSS will be successfully integrated,
whether the Company will have sufficient resources to realize its growth plans,
fluctuations in margins, and other risks and uncertainties currently unknown to
management.
4
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Consolidated Capital of North America, Inc.
and Toledo Pickling and Steel Sales, Inc.
We have audited the accompanying balance sheet of Toledo Pickling and Steel
Sales, Inc. (an Ohio corporation) as of September 30, 1998, and the related
statements of operations, shareholder's deficit 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 financial position of Toledo Pickling and Steel
Sales, Inc. as of September 30, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered significant recurring losses, has
negative working capital, a net capital deficiency and is in violation of
financial covenants under its debt obligations as of September 30, 1998 that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. As
discussed in Note 12 to the financial statements, substantially all of the
assets were sold subsequent to September 30, 1998, although no assurances can be
made that the new entity will be able to reach profitable levels. The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
/s/ Arthur Andersen LLP
Cleveland, Ohio,
January 21, 1999.
5
<PAGE> 6
TOLEDO PICKLING AND STEEL SALES, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS:
<S> <C>
Cash $ 65,985
Accounts receivable, net of allowances
for doubtful accounts of $110,000 7,083,218
Receivable from officers 212,410
Inventories, net 4,408,832
Other current assets 52,767
---------------
Total current assets 11,823,212
PROPERTY, PLANT AND EQUIPMENT, net 6,221,741
OTHER ASSETS:
Cash surrender value of life insurance
policies, net of loans 488,113
---------------
Total assets $ 18,533,066
===============
</TABLE>
The accompanying notes to financial statements
are an integral part of this financial
statement.
6
<PAGE> 7
TOLEDO PICKLING AND STEEL SALES, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 1998
LIABILITIES AND SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C>
Line of credit $ 8,066,399
Current portion of long-term debt and capital lease
obligations 2,791,126
Accounts payable 8,611,007
Accrued liabilities 752,149
---------------
Total current liabilities 20,220,681
---------------
CAPITAL LEASE OBLIGATIONS 233,405
---------------
DEFERRED COMPENSATION 311,434
---------------
COMMITMENTS AND CONTINGENCIES --
---------------
SHAREHOLDER'S DEFICIT:
Common stock without par value - 750 shares authorized; 295 shares issued
at stated value of $750
per share 221,250
Additional paid in capital 392,142
Retained deficit (2,845,846)
---------------
(2,232,454)
---------------
Total liabilities and shareholder's deficit $ 18,533,066
===============
</TABLE>
The accompanying notes to financial statements
are an integral part of this financial
statement.
7
<PAGE> 8
TOLEDO PICKLING AND STEEL SALES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
Net sales $ 85,283,375
---------------
Cost of sales (80,685,427)
Selling, general and administrative expenses (6,834,984)
---------------
Operating loss (2,237,036)
Interest expense (1,947,073)
---------------
Net loss $ (4,184,109)
===============
</TABLE>
The accompanying notes to financial statements
are an integral part of this financial
statement.
8
<PAGE> 9
TOLEDO PICKLING AND STEEL SALES, INC.
STATEMENT OF SHAREHOLDER'S DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Additional Retained
Common Paid-in Earnings/
Stock Capital (Deficit) Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 $ 221,250 $ 192,142 $ 1,338,263 $ 1,751,655
Capital contribution -- 200,000 -- 200,000
Net loss -- -- (4,184,109) (4,184,109)
------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1998 $ 221,250 $ 392,142 $ (2,845,846) $ (2,232,454)
============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of this financial
statement.
9
<PAGE> 10
TOLEDO PICKLING AND STEEL SALES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (4,184,109)
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 1,252,267
Changes in assets and liabilities-
Trade and officer receivables 4,804,361
Inventories 13,455,716
Other current assets 142,070
Cash surrender value of life insurance, net 82,292
Accounts payable (5,330,779)
Accrued liabilities 61,408
Deferred compensation (99,756)
---------------
Net cash provided by operating activities 10,183,470
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (1,511,417)
---------------
Net cash used for investing activities (1,511,417)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in line of credit borrowings (10,890,079)
Proceeds from issuance of long-term debt 3,000,000
Repayments of long-term debt (893,606)
Payments under capital lease obligations (28,033)
Capital contributions 200,000
---------------
Net cash provided by financing activities (8,611,718)
---------------
NET INCREASE IN CASH 60,335
CASH, AT BEGINNING OF THE YEAR 5,650
---------------
CASH, AT END OF YEAR $ 65,985
===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST $ 2,028,494
===============
ACQUISITION OF FIXED ASSETS UNDER CAPITAL LEASES $ 309,810
===============
</TABLE>
The accompanying notes to financial statements
are an integral part of this financial
statement.
10
<PAGE> 11
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
Toledo Pickling and Steel Sales, Inc. (the Company) processes, warehouses and
sells steel to customers located primarily in Ohio, Michigan, Indiana and
Illinois. The Company also engages in steel brokerage transactions. The Company
has three divisions: Toledo Pickling and Steel Sales (TPSS), Ciralsky Steel
Sales (CSS) and Temperance Steel Sales (TSS). During fiscal 1998, the Company
consolidated the CSS and TPSS operations into its existing TPSS facility and
closed the CSS and TSS locations.
Basis of Presentation
The accompanying financial statements present the assets and liabilities as of
September 30, 1998 of the entire Company. Subsequent to September 30, 1998,
Consolidated Capital of North America, Inc. (the Acquiror or Consolidated
Capital), through a wholly-owned subsidiary, TPSS Acquisition Corp., purchased
substantially all of the assets of the Company. See also Note 12. These
statements have been prepared as a result of the requirements of Section 3.05 of
Regulation S-X of the Securities and Exchange Commission (SEC), for filing by
the Company as part of the SEC Form 8-K reporting the acquisition.
The accompanying financial statements are prepared on the historical basis to
the Company and do not reflect any adjustments which may occur as a result of
the allocation of the purchase price by the Acquiror to the assets acquired and
liabilities assumed.
Going Concern
The Company has incurred significant losses for the year ended September 30,
1998 and has negative working capital at September 30, 1998. In addition, the
Company was not in compliance with certain terms of its line of credit agreement
and term note agreements during fiscal 1998 and at September 30, 1998 and
anticipates being in noncompliance with certain covenants of its line of credit
and term note agreements in fiscal 1999.
In response to recurring losses, management made the decision to combine the CSS
and TPSS operations into its existing TPSS facility and close the CSS and TSS
locations. In addition, management retained an outside consulting firm to
recommend areas to reduce costs and improve operational efficiency in the
combined CSS/TPSS operation. The Company anticipates continual operational
changes throughout fiscal 1999. Due to continuing competition within the steel
service industry, the Company does not anticipate returning to profitability
during 1999.
11
<PAGE> 12
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
As discussed in Note 12, subsequent to year end assets and liabilities of the
Company were acquired by a wholly owned subsidiary of Consolidated Capital.
Revenue Recognition
Revenue from the sale and processing of steel is recognized upon shipment of the
product to the customer.
Inventory
Inventories are valued at the lower of cost or market. Cost is determined on the
specific identification basis. Reserves are recorded based on specific
identification.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost. Depreciation is computed
principally using the straight-line method over the following estimated useful
lives of the assets:
<TABLE>
<S> <C>
Leasehold improvements 1 - 20 Years
Machinery and equipment 1 - 20 Years
Furniture and fixtures 5 - 15 Years
Equipment under capital leases Life of the lease
</TABLE>
Bank Overdraft
Included in accounts payable at September 30, 1998 are liabilities in the amount
of $5,483,659 representing checks outstanding which have not yet been presented
for collection.
Fair Value of Financial Instruments
The Company's financial instruments at September 30, 1998 consist of cash,
accounts receivable, accounts payable, debt and accrued expenses. The fair value
of these financial instruments approximates the carrying value at September 30,
1998.
Use of Estimates
The Company's financial statements are prepared in conformity with generally
accepted accounting principles which require management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses and disclosures embodied in these financial statements. Actual results
could differ from those estimates.
12
<PAGE> 13
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
2. SALES TO MAJOR CUSTOMERS:
One customer accounted for approximately 11.5% of the Company's sales in the
fiscal year ended September 30, 1998.
3. INVENTORIES:
Inventories at September 30, 1998 consist of the following:
<TABLE>
<S> <C>
Raw materials and freight $4,344,521
Spare parts and supplies 374,974
Inventory reserve (310,663)
----------
$4,408,832
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at September 30, 1998 consist of the following:
<TABLE>
<S> <C>
Leasehold improvements $ 2,106,847
Machinery and equipment (including $358,498 relating to
equipment under capital lease obligations at
September 30, 1998) 11,294,183
Furniture and fixtures 492,015
-----------
13,893,045
Less- Accumulated depreciation and amortization
(including $55,264 relating to equipment under
capital lease obligations at September 30, 1998) 7,731,061
-----------
6,161,984
Construction-in-progress 59,757
-----------
$ 6,221,741
===========
</TABLE>
13
<PAGE> 14
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
5. LONG-TERM DEBT:
Long-term debt at September 30, 1998 consists of the following:
<TABLE>
<S> <C>
Finova Note A $2,371,784
Finova Note B 291,637
Capital lease 361,110
----------
Long-term debt and capital lease 3,024,531
Less- current portion 2,791,126
----------
Long-term debt and capital lease $ 233,405
==========
</TABLE>
The Company entered into two new term loans with Finova Financial Innovators
(Finova) in December 1997 at which time the proceeds were used to retire a term
loan with National Canada Finance Corporation (NCFC), finance the consolidation
of CSS and TPSS and provide working capital for the operations of the Company.
The first Finova term loan (Note A) in the amount of $2,500,000 required
interest only payments for the first six months beginning on January 1, 1998.
Monthly principal payments of $32,051 plus interest began on July 1, 1998. A
balloon payment of $1,584,255 is due on December 1, 2000. Interest on this term
loan is calculated at 2% above Finova's prime lending rate, which was 8.5% at
September 30, 1998. The second Finova term loan (Note B) in the amount of
$500,000 requires monthly principal payments of $13,889 plus interest with a
final principal and interest payment due on December 1, 2000. Interest is
calculated at 2.5% above Finova's prime lending rate, which was 8.5% at
September 30, 1998. Each of the term loans contain restrictive covenants and
cross default provisions similar to those included in the Company's line of
credit agreement and are secured by the Company's machinery and equipment. All
amounts are classified as current at September 30, 1998 as the Company is not in
compliance with these covenants and has not obtained waivers for these covenant
violations at September 30, 1998.
As of September 30, 1998, long-term capital lease payments, including current
portions of long-term capital lease obligations, are as follows:
<TABLE>
<CAPTION>
For the Year
Ending
September 30,
- -----------------------
<S> <C>
1999 $ 84,098
2000 84,098
2001 84,098
2002 75,486
2003 33,330
Thereafter --
----------
$ 361,110
==========
</TABLE>
14
<PAGE> 15
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
6. LINE OF CREDIT:
Under the financing arrangements with NCFC, a line of credit is available to the
Company for borrowings up to $20 million as defined. The Company is entitled to
borrow up to 85% and 60% of its qualified accounts receivable and inventory,
respectively, or the available line, whichever is less. At September 30, 1998,
the Company had no borrowings available under its line of credit agreement. The
obligation, which is repayable on demand, is secured by the accounts receivable
and inventory of the Company and a limited guarantee executed by the President
and Shareholder of the Company in the amount of $2,500,000 plus all amounts
outstanding on the line of credit over $18 million. Interest on the line of
credit is calculated at 1.25% above NCFC's prime lending rate which was 8.50% at
September 30, 1998, and is payable monthly. The line of credit contains certain
financial and other covenants including a minimum net worth requirement and a
minimum ratio of liabilities to net worth, as well as certain restrictions on
capital expenditures, dividends and officers' compensation.
In conjunction with the new term loans with Finova, the Company amended its line
of credit agreement in fiscal 1998. The amendment increased the amount available
under the line of credit to $23 million and increased the percentage of
inventory, which the Company can include in its borrowing base to 65%. As part
of the amendment, NCFC participated in $10 million of the line of credit to
Finova. At September 30, 1998, the Company has outstanding borrowings of
$8,066,399.
As discussed in Note 1, during fiscal 1998 and at September 30, 1998, the
Company was not in compliance with certain provisions of the covenants and these
instances of noncompliance have not been waived by NCFC and Finova.
The line of credit was assumed as part of the acquisition. See Note 12.
7. INCOME TAXES:
Effective October 1, 1991, the Shareholder of the Company elected to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under these
provisions and similar provisions for the State of Ohio, the Company generally
does not pay federal or state income taxes on its taxable income. Instead, the
Shareholder is liable for individual federal and state income taxes on the
Company's taxable income.
8. DEFERRED COMPENSATION:
The Company has established deferred compensation arrangements with certain
officers. The Company recognizes the annual cost of these arrangements as
additional compensation expense, which approximated $60,000 for fiscal 1998.
Portions of the deferred compensation arrangements are funded through life
insurance policies. The Company expenses the insurance premiums paid on these
life insurance policies.
15
<PAGE> 16
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
Amounts expensed net of changes in the cash surrender values of the policies,
approximated $10,000 in 1998. The aggregate cash surrender values of the life
insurance policies relating to these deferred compensation arrangements
approximated $488,000 at September 30, 1998.
9. PENSION AND EMPLOYEE BENEFITS PLAN:
The Company is a participant in the Teamsters Central States Pension Fund, a
multi-employer defined benefit pension plan, for its union employees. Pension
plan expense approximated $143,000 for fiscal 1998.
The Company also has a qualified discretionary profit sharing plan for non-union
employees meeting certain service requirements. Contributions to the plan are
made at the discretion of the President and Shareholder of the Company. No
contributions were made to the plan for 1998.
10. RELATED PARTIES:
The Company has advanced funds to certain of its officers. The amounts of these
receivables aggregated approximately $212,000 at September 30, 1998. These
advances are unsecured, noninterest-bearing and payable on demand.
The Company leases the Toledo Pickling and Steel Sales facility from a real
estate partnership in which the President and Shareholder of the Company has a
50% interest. The agreement provides for monthly payments, which are negotiated
annually and ranged from $23,000 to $32,000 during fiscal 1998. The lease
expires in fiscal 1999 and provides the Company with options to renew the lease
for two additional terms of five years each.
During the first half of the fiscal year, the Company leased the Ciralsky Steel
Service facility and certain equipment from a real estate partnership in which
the President and Shareholder of the Company has a 50% ownership interest.
Monthly payments ranged from $12,200 to $20,900 during 1998 for the facility.
Monthly payments for the equipment leases were $2,900 during fiscal 1998.
The Company leased the Temperance Steel Service facility from a real estate
partnership in which the President and Shareholder of the Company had a 33.3%
interest. During fiscal 1998 this facility was closed and the President and
Shareholder's interest was sold. The agreement provided for monthly payments
ranging from $15,000 to $18,000 during fiscal 1998.
Other equipment is leased directly from the President and Shareholder of the
Company for monthly payments ranging from $41,000 to $51,000 during fiscal 1998.
Rental expense incurred with respect to arrangements with related parties
accounted for as operating leases approximated $1,015,000 in fiscal 1998. The
Company also leases automobiles from unrelated third parties. Rental expense
related to all operating leases aggregated approximately $1,100,000 in fiscal
1998.
16
<PAGE> 17
TOLEDO PICKLING AND STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
11. CONTINGENCIES:
The Company is a party to various pending or threatened legal proceedings,
including alleged violations of environmental regulations, arising in the
ordinary course of its business. Management believes, based upon the information
currently available, that any liabilities that may result from these legal
proceedings will not have a material effect on the Company's results of
operations and financial condition as presented in the accompanying financial
statements.
12. SUBSEQUENT EVENTS:
Subsequent to September 30, 1998, Consolidated Capital, through a wholly-owned
subsidiary, TPSS Acquisition Corp. (TPSS Acquisition), purchased substantially
all of the assets of the Company. The total consideration for the purchase of
the Company was approximately $15,815,000 and consisted primarily of the
assumption of certain liabilities of the Company including, 1) $5,647,000 of
obligations under the Company's line of credit, 2) $2,700,000 of obligations
under the Finova Notes A and B, 3) accounts payable of $7,232,000 and 4) certain
liabilities and obligations under certain leases and contracts that existed,
were assumed by TPSS Acquisition. In addition, TPSS Acquisition also assumed
future liabilities and obligations, as defined. The line of credit and Finova
term loan agreements were assumed by TPSS Acquisition and guaranteed by
Consolidated Capital and are required to be refinanced or repaid by April 12,
1999.
17
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Toledo Pickling & Steel Sales, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and retained earnings and of cash flows present fairly, in all
material respects, the financial position of Toledo Pickling & Steel Sales, Inc.
at September 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles. 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 audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of Toledo Pickling & Steel
Sales, Inc. for any period subsequent to September 30, 1997.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and is in violation of certain debt covenants that raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amounts and classification of liabilities that
might result should the Company be unable to continue as a going concern.
As discussed in Note 12 to the financial statements, the Company leases certain
real estate and equipment from its President and Stockholder and from
partnerships in which he has significant interests. Because of these
relationships, it is possible that the lease terms are not the same as those
that would result from transactions among wholly unrelated parties.
As described in Note 14, effective December 31, 1998, Consolidated Capital of
North America, Inc., through a wholly-owned subsidiary, TPSS Acquisition Corp.,
purchased substantially all of the assets of the Company and assumed
substantially all of its liabilities.
/s/ PricewaterhouseCoopers LLP
Toledo, Ohio
December 5, 1997, except as to Note 14,
which is as of February 10, 1999
18
<PAGE> 19
TOLEDO PICKLING & STEEL SALES, INC.
BALANCE SHEET
AT SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 5,650 $ 5,279
Accounts receivable, net of allowance for
doubtful accounts of $138,692 and $147,658
in 1997 and 1996, respectively 11,895,515 11,733,183
Inventories (Note 5) 17,864,548 18,848,927
Receivable from officers (Note 12) 204,473 185,810
Other current assets 194,837 165,171
------------ ------------
Total current assets 30,165,023 30,938,370
Property, plant and equipment, net (Note 6) 5,648,216 6,011,182
Other assets:
Cash surrender value of life insurance policies,
net of loans (Note 10) 570,405 677,202
------------ ------------
Total assets $ 36,383,644 $ 37,626,754
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Line of credit (Note 8) $ 18,956,474 $ 16,929,798
Current portion of long-term debt (Note 7) 631,798 1,102,903
Accounts payable 13,941,788 15,274,579
Accrued liabilities 690,742 775,496
------------ ------------
Total current liabilities 34,220,802 34,082,776
------------ ------------
Long-term debt (Note 7) -- 14,872
------------ ------------
Deferred compensation (Note 10) 411,190 450,894
------------ ------------
Commitments and contingencies (Note 13) -- --
Stockholder's equity:
Common stock without par value - 750 shares authorized; 295 shares in 1997
and 1996 issued at stated value of $750 per share 221,250 221,250
Additional paid in capital 192,142
Retained earnings 1,338,260 2,856,962
------------ ------------
1,751,652 3,078,212
------------ ------------
Total liabilities and stockholder's equity $ 36,383,644 $ 37,626,754
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 20
TOLEDO PICKLING & STEEL SALES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net sales $ 106,393,341 $ 99,155,941
------------- -------------
Cost of sales 100,971,489 93,717,225
Selling, general and administrative expenses 5,070,792 4,813,135
Interest expense 2,137,957 1,761,591
Gain on disposal of capital asset (268,195) --
------------- -------------
107,912,043 100,291,951
------------- -------------
Net loss (1,518,702) (1,136,010)
Dividends declared and paid (525,002)
Retained earnings at beginning of year 2,856,962 4,517,974
------------- -------------
Retained earnings at end of year $ 1,338,260 $ 2,856,962
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 21
TOLEDO PICKLING & STEEL SALES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows - operating activities
Net loss $ (1,518,702) $ (1,136,010)
Adjustments to reconcile net loss to net
cash (used for) provided by operating activities
Gain on disposal of a capital asset (268,195) --
Depreciation and amortization 1,076,836 922,204
Changes in assets and liabilities:
Trade and officer receivables (180,995) (2,124,395)
Inventories 984,379 (2,724,049)
Other current assets (29,666) (12,476)
Cash surrender value of life insurance, net 106,797 (86,167)
Accounts payable (1,332,791) 5,242,898
Accrued liabilities (84,754) (74,243)
Deferred compensation (39,704) 58,297
------------ ------------
Net cash (used for) provided by operating activities (1,286,795) 66,059
------------ ------------
Cash flows - investing activities
Capital expenditures (1,125,675) (1,251,424)
Proceeds from sale of fixed assets 680,000 --
------------ ------------
Net cash used for investing activities (445,675) (1,251,424)
------------ ------------
Cash flows - financing activities
Net increase in line of credit borrowings 2,026,676 2,151,112
Repayments of long-term debt (459,837) (445,693)
Payment of dividends -- (525,002)
Principal payments under capital lease obligations (26,140) (17,249)
Capital contributions 192,142 --
------------ ------------
Net cash provided by financing activities 1,732,841 1,163,168
------------ ------------
Net increase (decrease) in cash 371 (22,197)
Cash at beginning of year 5,279 27,476
------------ ------------
Cash at end of year $ 5,650 $ 5,279
============ ============
Supplemental disclosure of cash flow information
Cash paid for interest $ 2,122,763 $ 1,762,419
============ ============
Acquisition of capital asset $ 48,688
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 22
TOLEDO PICKLING & STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Toledo Pickling & Steel Sales, Inc. (the Company) has three divisions:
Toledo Pickling & Steel Sales, Ciralsky Steel Service and Temperance Steel
Service, which process, warehouse and sell steel to customers located
primarily in Ohio, Michigan, Indiana and Illinois. The Company also
engages in steel brokerage transactions.
2. OPERATING LOSSES AND RELATED MANAGEMENT ACTIONS
The Company incurred significant losses for the years ended September 30,
1997 and 1996, significantly decreasing retained earnings. The Company
also had negative working capital as of September 30, 1997 and 1996 and,
as discussed in Note 8, the Company was not in compliance with certain
terms of its line of credit and term note agreements at September 30,
1997. Due to increasing competition in the steel service industry, the
Company does not anticipate returning to profitability during 1998.
During October 1997, management made the decision to consolidate its
Ciralsky Steel Facility into its Toledo Pickling & Steel Sales (Campbell
Street) operations as part of actions intended to return the Company to
profitability.
During December 1997, management obtained two new term loans aggregating
$3 million with Finova Capital Corporation (Note 7). These loans were used
to pay off the outstanding principal of the term loan with National Canada
Finance Corporation, finance the consolidation of the Ciralsky Steel
Facility, and provide working capital for the operations of the Company.
As described in Note 14, effective December 31, 1998, substantially all of
the assets and liabilities of the Company were acquired by Consolidated
Capital of North America, Inc. through a wholly-owned subsidiary, TPSS
Acquisition Corp.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from the sale and processing of steel is recognized upon shipment
of the product to the customer.
CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid investment instruments purchased
with a maturity of three months or less to be cash equivalents.
INVENTORY
Inventories are valued at the lower of cost or market. Cost is determined
on the specific identification basis.
22
<PAGE> 23
TOLEDO PICKLING & STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are recorded at cost. Depreciation is
computed principally using the straight-line method over the following
estimated useful lives of the assets:
<TABLE>
<S> <C>
Leasehold improvements 1-20 Years
Machinery and equipment 1-20 Years
Furniture and fixtures 5-15 Years
Equipment under capital leases Life of the lease
</TABLE>
BANK OVERDRAFT
Included in accounts payable at September 30, 1997 and 1996 are
liabilities in the amount of $7,752,004 and $7,747,302, respectively,
representing checks issued which have not yet been presented for
collection.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments at September 30, 1997 and 1996 consist
of cash, accounts receivable, accounts payable, debt and accrued expenses.
The fair value of these financial instruments approximates the carrying
value at September 30, 1997 and 1996.
USE OF ESTIMATES
The Company's financial statements are prepared in conformity with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, expenses and disclosures embodied in these
financial statements. Actual results could differ from those estimates.
4. SALES TO MAJOR CUSTOMERS
One customer accounted for approximately 11% and 15% of the Company's
sales in the fiscal years ended September 30, 1997 and 1996, respectively.
5. INVENTORIES
Inventories at September 30, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
<S> <C> <C>
Raw materials and freight $ 17,450,192 $ 18,475,923
Spare parts and supplies 414,356 373,004
------------- -------------
$ 17,864,548 $ 18,848,927
============= =============
</TABLE>
23
<PAGE> 24
TOLEDO PICKLING & STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30, 1997 and 1996 consist of
the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
<S> <C> <C>
Leasehold improvements $ 2,280,846 $ 2,142,429
Machinery and equipment (including $48,688
relating to equipment under capital lease
obligations at September 30, 1997 and 1996) 9,265,795 9,484,723
Furniture and fixtures 491,781 490,688
------------ ------------
12,038,422 12,117,840
Less - accumulated depreciation and amortization (including $41,532
and $17,188 relating to equipment under capital lease obligations at
September 30, 1997 and 1996, respectively) 6,658,921 6,106,658
------------ ------------
5,379,501 6,011,182
Construction-in-progress 268,715
------------ ------------
$ 5,648,216 $ 6,011,182
============ ============
</TABLE>
7. LONG-TERM DEBT
Long-term debt at September 30, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
<S> <C> <C>
Term loan, original amount of $2,000,000 $ 626,500 $ 1,028,500
Term loan, original amount of $135,000 -- 57,836
Capital lease obligations 5,298 31,439
------------ ------------
Long term debt 631,798 1,117,775
Less: current portion 631,798 1,102,903
------------ ------------
Long-term debt $ -- $ 14,872
============ ============
</TABLE>
In December 1994, the Company obtained a $135,000 term loan from Capital
Bank. This loan was paid in full during 1997.
24
<PAGE> 25
TOLEDO PICKLING & STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
In April 1994, the Company obtained a $2 million term loan from National
Canada Finance Corporation ("NCFC"). As discussed in Note 2, the Company
entered into two new term loans with Finova Capital Corporation ("Finova")
in December 1997 at which time a portion of the proceeds was used to
retire the term loan with NCFC. The first term loan in the amount of
$2,500,000 requires interest only payments for the first six months
beginning on January 1, 1998. Monthly principal payments of $32,051 plus
interest are required beginning on July 1, 1998. A balloon payment of
$2,019,556 of principal and interest is due on December 1, 2000. Interest
on this term loan is calculated at 2% above Finova's prime lending rate.
The second term loan in the amount of $500,000 requires principal payments
of $13,889 plus interest with a final principal and interest payment due
on December 1, 2000. Interest is calculated at 2.5% above Finova's prime
lending rate.
8. LINE OF CREDIT
Under the Company's financing arrangements with NCFC, a $20 million line
of credit was available to the Company. In December 1996, the Company
amended its line of credit agreement with NCFC. Under the terms of the
amended agreement, the Company could borrow up to $23 million during
December 1996, $24 million in January and February 1997 and $23 million in
March 1997. Effective April 1, 1997, the line of credit returned to $20
million. The Company is entitled to borrow up to 85% and 60% of its
qualified accounts receivable and inventory, respectively, or the
available line, whichever is less. At September 30, 1997, the Company had
approximately $1 million available under its line of credit agreement. The
obligation, which is repayable on demand, is secured by all real and
personal property of the Company and a limited guarantee executed by the
President and Stockholder of the Company in the amount of $2,500,000 plus
all amounts outstanding on the line of credit over $18 million. Interest
on the line of credit is calculated at 1 1/4% above NCFC's prime lending
rate (which was 8.50% at September 30, 1997) and is payable monthly. Prior
to December 1996, interest on the line of credit was calculated as 1%
above NCFC's prime lending rate. The line of credit contains certain
financial covenants including a minimum net worth requirement and a
minimum ratio of liabilities to net worth, as well as certain restrictions
on capital expenditures, dividends and officers' compensation.
In conjunction with the new term loans with Finova (see Note 7), the line
of credit was modified during December 1997. The modification included
increasing the amount available under the line of credit to $23,000,000
and assigning $10,000,000 of the line of credit to Finova.
The Finova loans and line of credit have restrictive financial covenants
similar to the NCFC line of credit. During 1997, the Company did not meet
certain restrictive financial covenants.
9. INCOME TAXES
Effective October 1, 1991, the Stockholder of the Company elected to be
taxed under the provisions of Subchapter S of the Internal Revenue Code.
Under these provisions and similar provisions for the State of Ohio, the
Company generally does not pay federal or state income taxes
25
<PAGE> 26
TOLEDO PICKLING & STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
on its taxable income. Instead, the Stockholder is liable for individual
federal and state income taxes on the Company's taxable income.
10. DEFERRED COMPENSATION
The Company has established deferred compensation arrangements with
certain officers. The Company recognizes the annual cost of these
arrangements as additional compensation expense, which approximated
$56,000 and $58,000 for fiscal 1997 and 1996, respectively. Portions of
the deferred compensation arrangements are funded through life insurance
policies. The Company expenses the insurance premiums paid on these life
insurance policies. Amounts expensed, net of increases in the cash
surrender values of the policies, approximated $46,000 and $40,000 in 1997
and 1996, respectively. The aggregate cash surrender values of the life
insurance policies relating to these deferred compensation arrangements
approximated $338,000 and $299,000 at September 30, 1997 and 1996,
respectively.
11. PENSION AND EMPLOYEE BENEFITS PLANS
The Company is a participant in the Teamsters Central States Pension Fund,
a multi-employer defined benefit pension plan, for its union employees.
Pension plan expense approximated $113,000 and $117,000 for fiscal 1997
and 1996, respectively.
The Company also has a qualified discretionary profit sharing plan for
non-union employees meeting certain service requirements. Contributions to
the plan are made at the discretion of the President and Stockholder of
the Company. No contributions were made to the plan for 1997 or 1996.
12. RELATED PARTIES
The Company has advanced funds to certain of its officers; amounts
receivable aggregated $204,000 and $186,000 at September 30, 1997 and
1996, respectively. These advances are unsecured, noninterest-bearing and
payable on demand.
The Company leases the Toledo Pickling & Steel Sales facility from a real
estate partnership in which the President and Stockholder of the Company
has a 50 percent interest. The agreement provides for monthly payments
which are negotiated annually and ranged from $26,000 to $32,000 during
1997 and were $26,000 during 1996. The lease expires in 1999 and provides
the Company with options to renew the lease for two additional terms of
five years each.
The Company leases the Ciralsky Steel Service facility and certain
equipment from a real estate partnership in which the President and
Stockholder of the Company has a 50 percent interest. Monthly payments
ranged from $9,700 to $21,000 during 1997 and were $9,700 during 1996 for
the facility. Monthly payments for the equipment leases were $2,700 during
1997 and 1996.
26
<PAGE> 27
TOLEDO PICKLING & STEEL SALES, INC.
NOTES TO FINANCIAL STATEMENTS
The Company leased the Temperance Steel Service facility from a real
estate partnership in which the President and Stockholder of the Company
had a 33.3 percent interest. During December 1998, this facility was
closed and the President and Stockholder's interest in the partnership was
sold. The lease on the Temperance Steel Service facility provided for
monthly payments ranging from $15,500 to $18,000 during 1997 and were
$17,500 during 1996.
Other equipment is leased directly from the President and Stockholder of
the Company for monthly payments ranging from $44,000 to $65,000 during
1997 and were $65,000 during 1996.
Rental expense incurred in respect of arrangements with related parties
accounted for as operating leases approximated $1,466,000 in fiscal 1997
and $1,540,000 in fiscal 1996. The Company also leases automobiles from
unrelated third parties. Rental expense related to all operating leases
aggregated approximately $1,575,000 in fiscal 1997 and $1,673,000 in
fiscal 1996.
The future minimum lease payments required under all noncancelable
operating leases at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal year ending September 30:
<S> <C>
1998 $ 468,000
1999 391,000
------------
Total future minimum lease
payments $ 859,000
============
</TABLE>
13. CONTINGENCIES
The Company is a party to various pending or threatened legal proceedings,
including alleged violations of environmental regulations, arising in the
ordinary course of its business. Management believes, based upon the
information currently available, that any liabilities that may result from
these legal proceedings will not have a material effect on the Company's
results of operations and financial condition as presented in the
accompanying financial statements.
14. SUBSEQUENT EVENTS
Effective December 31, 1998, Consolidated Capital of North America, Inc.,
through a wholly-owned subsidiary, TPSS Acquisition Corp., purchased
substantially all of the Company's assets and assumed substantially all of
the Company's liabilities.
27
<PAGE> 28
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
DESCRIPTION OF ACQUISITION TRANSACTION
Effective December 31, 1998, Consolidated Capital of North America, Inc. (the
"Company"), through its wholly-owned subsidiary, TPSS Acquisition Corp. ("TPSS
Acquisition"), purchased substantially all of the assets and assumed certain
liabilities of Toledo Pickling and Steel Sales, Inc. ("Toledo Pickling"), a
privately held steel processing and service center, headquartered in Toledo,
Ohio.
The transaction was accounted for using the purchase method of accounting and
the total consideration was approximately $15,815,000, consisting primarily of
the assumption of certain liabilities of Toledo Pickling including; amount due
under the Restated Loan and Security Agreement by and among Toledo Pickling,
National Bank of Canada ("NBC") and Finova Capital Corporation ("Finova") as to
which the outstanding balance as of December 31, 1998 was approximately
$5,647,000 (the "Revolving Loan Agreement"); the liabilities and obligations
under the Loan and Security Agreement by and between Seller and Finova as to
which the outstanding principal loan balance due thereunder, as of December 31,
1998 was approximately $2,700,000 (the "Term Loan Agreement"); accounts payable
of approximately $7,232,000 and various other liabilities of approximately
$236,000 as of December 31, 1998. The Revolving Loan Agreement and the Term Loan
Agreement were assumed by TPSS Acquisition and guaranteed by the Company on
December 31,1998 and are required to be refinanced or repaid by April 12, 1999.
The purchase price was allocated on December 31, 1998 as follows:
<TABLE>
<S> <C>
Accounts receivable $ 4,750,185
Inventories 2,900,499
Other current assets 70,708
Property and equipment 6,816,148
Goodwill 998,143
Deposits and other assets 279,767
-----------
$15,815,450
===========
</TABLE>
The following unaudited pro forma balance sheet information gives effect of the
acquisition and related transactions as if they had occurred on September 30,
1998. The unaudited pro forma statements of operations gives effect to such
transactions as if they had occurred on January 1, 1997.
28
<PAGE> 29
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Consolidated Toledo Pickling Adjustments
Capital of and Steel Sales, Increase Pro Forma
North America, Inc. Inc. (Decrease) Consolidated
------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash $ 133,655 $ 65,985 (1) $ (65,985) $ 133,655
Accounts receivable, less
allowance for doubtful accounts 3,374,387 7,083,218 -- 10,457,605
Inventories 3,634,494 4,408,832 -- 8,043,326
Deferred loan costs 896,431 -- (5) 768,000 1,664,431
Prepaid expenses and other 493,092 265,177 (1) (212,410) 545,859
--------------- --------------- --------------- ---------------
Total current assets 8,532,059 11,823,212 489,605 20,844,876
--------------- --------------- --------------- ---------------
Property and Equipment 6,462,605 13,952,802 (2) (7,136,654) 13,278,753
Less accumulated depreciation and
amortization 759,817 7,731,061 (2) (7,731,061) 759,817
--------------- --------------- --------------- ---------------
Total property and equipment 5,702,788 6,221,741 594,407 12,518,936
--------------- --------------- --------------- ---------------
Other Assets
Goodwill, net of accumulated
amortization of $402,845 1,956,162 -- (4) 998,143 2,954,305
Other assets 1,517,806 488,113 (1) (31,950) 1,973,869
--------------- --------------- --------------- ---------------
Total other assets 3,473,968 488,113 966,193 4,928,274
--------------- --------------- --------------- ---------------
Total assets $ 17,708,815 $ 18,533,066 $ 2,050,205 $ 38,292,086
=============== =============== =============== ===============
</TABLE>
29
<PAGE> 30
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED BALANCE SHEET -CONTINUED
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Consolidated Toledo Pro Forma
Capital of Pickling and Adjustments
North America, Steel Sales, Increase Pro Forma
Inc. Inc. (Decrease) Consolidated
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current Liabilities
Accounts Payable $ 3,612,987 $ 8,611,004 (1) $ (225,205) $ 8,189,991
(3) (3,808,795)
Accrued liabilities 263,871 752,149 (1) (280,205) 735,815
Current portion of long-term debt 388,608 2,791,129 (3) 500,000 3,679,737
Convertible notes payable to affiliates 2,000,000 -- -- 2,000,000
Convertible notes - 10% 4,850,278 -- -- 4,850,278
Convertible notes - 15% 1,000,000 -- -- 1,000,000
Convertible note - 18% -- -- (5) 1,000,000 1,000,000
Notes and loan payable 1,650,000 8,066,399 (5) (1,000,000) 8,716,399
Other 28,770 -- -- 28,770
------------ ------------ ------------ ------------
Total current liabilities 13,794,514 20,220,681 (3,814,205) 30,200,990
------------ ------------ ------------ ------------
Long-Term Liabilities
Long-term debt - net of current portion 6,133,154 (3) 1,500,000 7,633,154
Accrued interest 214,439 -- -- 214,439
Accrued dividends 120,420 -- -- 120,420
Capital lease obligations -- 233,405 (1) (233,405) --
------------ ------------ ------------ ------------
Total long-term liabilities 6,468,013 233,405 1,266,595 7,968,013
------------ ------------ ------------ ------------
Redeemable Series C Preferred Shares 870,000 -- -- 870,000
------------ ------------ ------------ ------------
Deferred Compensation -- 311,434 (1) (211,434) 100,000
------------ ------------ ------------ ------------
Commitments and Contingencies -- -- -- --
Stockholders' (Deficit)
Series A preferred shares 744,000 -- -- 744,000
Series A preferred shares 449,000 -- (2) -- 449,000
Common shares 2,462 221,250 (3) 865 3,567
-- -- (3) (221,250) --
-- -- (5) 240 --
Additional paid in capital 8,933,175 392,142 (2) (392,142) 11,508,865
-- (3) 1,807,930 --
-- -- (5) 767,760 --
Accumulated deficit (13,552,349) (2,845,846) (1) 2,845,846 (13,552,349)
------------ ------------ ------------ ------------
Total stockholders' (deficit) (3,423,712) (2,232,454) 4,809,249 (846,917)
------------ ------------ ------------ ------------
Total liabilities and stockholders'
(deficit) $ 17,708,815 $ 18,533,066 $ 2,050,205 $ 38,292,086
============ ============ ============ ============
</TABLE>
30
<PAGE> 31
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Consolidated Pro Forma
Capital of Toledo Pickling Adjustments
North America, and Steel Sales, Increase Pro Forma
Inc. Inc. (Decrease) Consolidated
-------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 15,908,469 $ 62,978,896 $ -- $ 78,887,365
Cost of goods sold 13,360,890 58,788,865 -- 72,149,755
------------ ------------ ------------ ------------
Gross profit 2,547,579 4,190,031 -- 6,737,610
------------ ------------ ------------ ------------
Operating expenses
Selling and shipping 578,001 2,335,508 -- 2,913,509
General and administrative 4,076,550 1,488,995 -- 5,565,545
Payroll and related benefits 2,246,958 1,307,172 -- 3,554,130
Depreciation and amortization 737,609 856,665 (6) (856,665) 1,152,239
(6) 339,769
(7) 74,861
------------ ------------ ------------ ------------
Total expenses 7,639,118 5,988,340 (442,035) 13,185,423
------------ ------------ ------------ ------------
Loss from operations (5,091,539) (1,798,309) 442,035 (6,447,813)
------------ ------------ ------------ ------------
Other income (expense)
Interest expense (3,676,857) (1,426,004) (8) 69,503 (5,172,364)
Other 230,427 (620) -- 229,807
Termination of an acquisition (995,403) -- -- (995,403)
------------ ------------ ------------ ------------
Total other income (expense) (4,441,833) (1,426,624) 69,503 (5,937,960)
------------ ------------ ------------ ------------
Net loss (9,533,372) (3,224,933) 372,532 (12,385,773)
Preferred share dividends (157,653) -- -- (157,653)
------------ ------------ ------------ ------------
(9,691,025) (3,224,933) 372,532 (12,543,426)
Discount attributable to conversion value
of preferred shares and warrants (761,917) -- -- (761,917)
------------ ------------ ------------ ------------
Loss applicable to common shareholders $(10,452,942) $ (3,224,933) $ 372,532 $(13,305,343)
============ ============ ============ ============
Basic and diluted loss per share $ (.54) $ (10,931.98) $ .03 $ (.44)
============ ============ ============ ============
Weighted average number of
Common Shares outstanding 19,189,533 295 11,054,523 30,244,056
============ ============ ============ ============
</TABLE>
31
<PAGE> 32
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Consolidated Pro Forma
Capital of Toledo Pickling Adjustments
North America, and Steel Sales, Increase Pro Forma
Inc. Inc. (Decrease) Consolidated
-------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 16,989,478 $ 103,366,278 $ -- $ 120,355,756
Cost of goods sold 14,021,110 94,786,546 -- 108,807,656
------------- ------------- ------------- -------------
Gross profit 2,968,368 8,579,732 -- 11,548,100
------------- ------------- ------------- -------------
Operating expenses
Selling and shipping 1,012,504 3,523,273 -- 4,535,777
General and administrative 1,513,959 1,973,594 -- 3,487,553
Payroll and related benefits 2,061,144 2,351,635 -- 4,412,779
Depreciation and amortization 441,999 991,432 (6) (991,432) 994,838
(6) 453,025
(7) 99,814
------------- ------------- ------------- -------------
Total expenses 5,029,606 8,839,934 (438,593) 13,430,947
------------- ------------- ------------- -------------
Income (loss) from operations (2,061,238) (260,202) 438,593 (1,882,847)
------------- ------------- ------------- -------------
Other income (expense)
Other 165,374 272,315 -- 437,689
Interest expense (582,713) (2,166,874) (8) 1,074,623 (3,824,210)
------------- ------------- ------------- -------------
Total other income (expense) (417,339) (1,894,559) (1,074,623) (3,386,521)
------------- ------------- ------------- -------------
Net loss $ (2,478,577) $ (2,154,761) $ (636,030) $ (5,269,368)
============= ============= ============= =============
Basic and diluted loss per share $ (.17) $ (7,304.27) $ (.06) $ (.21)
============= ============= ============= =============
Weighted average number of
Common Shares outstanding 14,980,423 295 10,054,523 25,034,946
============= ============= ============= =============
</TABLE>
32
<PAGE> 33
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED STATEMENTS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
Below are explanations for the numerical notes in the Pro Forma Statements:
Balance Sheet - Pro Forma Adjustments
1. To adjust for assets not acquired, liabilities not assumed and to record
the elimination of the deficit of Toledo Pickling and Steel Sales, Inc.
("TPSS").
2. To record the purchase price of machinery, furniture and equipment acquired
based upon an appraisal by an unrelated third party and leasehold
improvements valued by management at net book at date acquisition.
3. To record 4,784,689 Common Shares issued to U.S. Steel Group of USX
Corporation ("USX") during January 1999, valued at $.209 per share in
satisfaction of debt of $1,000,000 and a promissory note issued to USX by
the Company in the amount of $2,000,000, with interest at 8% per annum,
payable quarterly in the amount of $166,666.67 including principal and
interest beginning on March 1, 1999. The note is due in full on December 1,
2001. The holder of this note may at any time prior to maturity convert the
principal amount thereof remaining outstanding into the Company's Common
Stock, at the conversion ratio of $.209 of principal for one share of
Common Stock, or an aggregate of 9,569,378 shares.
To record 3,869,834 of Common Shares to be issued to certain other vendors
with a value of $.209 per share for reduction in their liabilities of
$808,795.
4. To record the excess of the purchase price over net assets acquired as
goodwill.
5. To record $1,000,000 of proceeds from a loan to the Company made by
Security Income Trust, L. P. ("SIT"), a privately held company controlled
by a director and officer of the Company. The loan is evidence by a
promissory note of the Company dated January 11, 1999, with an 18% annual
rate of interest payable in arrears together with the principal on July 10,
1999. The Company may, at its option, extend the maturity date of the note
for two successive ninety-day periods. In connection with and at the time
of each such extension, the Company shall issue to SIT related to funds
used in this acquisition 800,000 shares of the Common Stock of the Company.
In connection with this acquisition as additional consideration for the
loan, the Company issued 800,000 shares of Common Stock of the Company to
SIT. Proceeds were used to reduce bank debt.
33
<PAGE> 34
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED STATEMENTS - CONTINUED
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
Income Statements - Pro Forma Adjustments
TPSS has a fiscal year end of September 30. The pro forma financial statements
of operations reflect the period from January 1, 1998 to September 30, 1998 and
for the twelve month period ended December 31, 1997. The Company has a fiscal
year end of December 31. The statement of operations for TPSS properly reflect
comparable periods to that of the Company.
6. To adjust for depreciation resulting from the revaluation of assets as
determined mainly by an unrelated third party appraisal. Assets are
depreciated, after provision for salvage value, over their useful lives
using the straight-line method, with lives ranging from three to fifteen
years.
7. To adjust for amortization of the excess of purchase price over net assets
acquired. The amortization is based on a ten-year life using the
straight-line method.
8. To adjust for additional interest and amortization of loan costs of the USX
note in the amount of $2,000,000 and the $1,000,000 of a related party loan
proceeds used in connection with this acquisition assuming both two
successive ninety-day extensions are exercised at $.32 per share.
34
<PAGE> 35
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
By: /s/ Richard D. Bailey
--------------------------------------
Richard D. Bailey
President and Chief Operating Officer
By: /s/ Carl Casareto
--------------------------------------
Carl Casareto
Chief Financial Officer
Date: February 12, 1999
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------- --------------------
<S> <C>
10.77 (1) Asset Purchase Agreement dated as of December 31, 1998 by
and between Toledo Pickling and TPSS Acquisition [Schedules
and Exhibits omitted].
10.78 (1) Assignment and Bill of Sale dated as of January 12, 1999 from
Toledo Pickling to TPSS Acquisition.
10.79 (1) Assumption Agreement dated as of January 12, 1999 by and
between Toledo Pickling and TPSS Acquisition.
10.80 (1) Employment and Noncompetition Agreement dated as of January
12, 1999 between TPSS Acquisition and William Ciralsky.
10.81 (1) Equipment Purchase Agreement dated as of January 12, 1999 by
and among TPSS Acquisition and William Ciralsky and Nancy
Ciralsky. [Exhibit omitted]
10.82 (1) Unconditional and Continuing Guaranty of the Company dated as
of January 12, 1999 with respect to the Unconditional and
Continuing Guaranty July 6, 1998, issued by William Ciralsky
in favor of Toledo Blank, Inc. [Exhibit A omitted]
10.83 (1) Indemnification Agreement dated as of January 12, 1999 by TPSS
Acquisition to William Ciralsky.
10.84 (1) Lease dated as of January 12, 1999 by and between Campbell
Investors, as lessor, and TPSS Acquisition, as lessee [real
property located at 1149 Campbell Road, Toledo, Ohio].
10.85 (1) Consent to Assignment to Equipment Lease Agreement dated as of
January 12, 1999 of Equipment Lease Agreement between Toledo
Pickling and William Ciralsky and Nancy Ciralsky dated as of
June 1, 1998 [Herr-Voss .50 inch maximum level line].
10.86 (1) Consent to Assignment to Equipment Lease Agreement dated as of
January 12, 1999 of the Equipment Lease Agreement between
Toledo Pickling and William Ciralsky dated as of June 1, 1998
[Herr-Voss .25 inch maximum level line].
10.87 (1) Equipment Lease Agreement dated as of June 1, 1998 between
Toledo Pickling and William Ciralsky and Nancy Ciralsky
[Herr-Voss .50 inch maximum level line].
10.88 (1) Equipment Lease Agreement dated as of June 1, 1998 between
Toledo Pickling and William Ciralsky [Herr-Voss .25 inch
maximum level line].
10.89 Assumption and Consent Agreement dated as of January 12, 1999
among Toledo Pickling, TPSS Acquisition and Finova. [Exhibits
omitted]
10.90 Secured Promissory Note A dated as of January 12, 1999 between
TPSS Acquisition, Toledo Pickling and Finova in the principal
amount of $2,307,692.
10.91 Secured Promissory Note B dated as of January 12, 1999 between
TPSS Acquisition, Toledo Pickling and Finova in the principal
amount of $333,332.
10.93 Assumption and Consent Agreement dated as of January 12, 1999
among Toledo Pickling, TPSS Acquisition, NBC and Finova.
[Exhibits omitted]
10.94 Credit Note dated as of January 12, 1999 by and between TPSS
Acquisition, Toledo Pickling and NBC in the principal of
amount of $5,130,000.
10.95 Credit Note dated as of January 12, 1999 by and between TPSS
Acquisition, Toledo Pickling, NBC and Finova in the principal
of amount of $3,870,000.
10.96 Guaranty of the Company dated as of January 12, 1999 in favor
of NBC and Finova.
10.97 (1) Note Purchase Agreement dated January 11, 1999 by and between
the Company and Security Income Trust, LP.
10.98 (1) 18% Note dated January 11, 1999 issued by the Company to
Security Income Trust, L. P. in the principal amount of
$1,250,000.
</TABLE>
- ---------------------------
(1) Previously filed on January 27, 1999 on Form 8-K.
<PAGE> 1
EXHIBIT 10.89
ASSUMPTION AND CONSENT AGREEMENT
THIS ASSUMPTION AND CONSENT AGREEMENT (hereinafter the "Agreement") is
entered into as of this 12th day of January, 1999, by and among TOLEDO PICKLING
& STEEL SALES, INC., an Ohio corporation ("Current Debtor"), TPSS ACQUISITION
CORPORATION, an Ohio corporation ("Assumptor"), and FINOVA CAPITAL CORPORATION
("FINOVA").
RECITALS
A. Current Debtor and FINOVA are parties to a certain Loan and Security
Agreement dated as of December 1, 1997 (which, as heretofore amended, modified
or supplemented from time to time, is referred to herein as the "Term Loan
Agreement" and, together with the other "Loan Documents" as therein defined, as
heretofore amended, modified or supplemented from time to time, as the "Term
Loan Documents"), under the terms of which FINOVA agreed to make two term loans
to Current Debtor (copies of the Term Loan Documents are attached hereto as
collective Exhibit A and incorporated herein by reference);
B. The Obligations (as defined in the Term Loan Agreement) of Current
Debtor to FINOVA (the "Obligations") are evidenced by certain demand notes
executed by Current Debtor and payable to FINOVA (as heretofore amended,
modified or supplemented from time to time, the "Notes");
C. Current Debtor, FINOVA and National Bank of Canada ("NBC") are parties
to a certain Restated Loan and Security Agreement dated December 1, 1997 (which,
as heretofore amended, modified or supplemented from time to time, is referred
to herein as the "Credit Agreement" and, together with the other "Credit
Documents" as therein defined, as heretofore amended, modified or supplemented
from time to time, as the "Credit Documents"), under the terms of which NBC
together with FINOVA (collectively the "Credit Lenders") agreed to make loans to
Current Debtor on a revolving loan basis;
D. The Obligations (as defined in the Credit Agreement) of Current Debtor
to the Credit Lenders (the "Credit Obligations") are evidenced by certain demand
notes executed by Current Debtor and payable to the Credit Lenders (as
heretofore amended, modified or supplemented from time to time, the "Credit
Notes");
E. Pursuant to an Asset Purchase Agreement dated as of December 31, 1998,
Assumptor is purchasing (subject to the liens and security interests securing
the Obligations and the Credit Obligations) substantially all of the Current
Debtor's assets for valuable consideration, part of said consideration being the
assumption and agreement by Assumptor to pay the unpaid balance owing on the
Notes and to assume all of Current Debtor's Obligations, covenants and
agreements under the Term Loan Documents by and subject to the terms of this
Agreement;
<PAGE> 2
F. Under the terms of the above-described Term Loan Documents, the
Obligations of Current Debtor may be accelerated if Current Debtor sells or
otherwise conveys its Property without the prior written consent of FINOVA; and
G. Subject to the terms and conditions of this Agreement, FINOVA is
willing to consent to the transfer (subject to the liens and security interests
securing the Obligations and the Credit Obligations) of Current Debtor's
Property to Assumptor and the assumption of the Obligations by Assumptor.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing and the provisions set
forth in this Agreement, and the further consideration of the advantages to
accrue to all parties hereto, Current Debtor, Assumptor, and FINOVA hereby agree
as follows:
1. Definitions. Capitalized terms not otherwise defined in this Agreement
shall have the same meanings as used in the Term Loan Agreement.
2. Amount of Term Loans. Current Debtor, FINOVA and Assumptor agree that as
of the date hereof, (i) the unpaid amount owing to FINOVA under the Term Loan
Documents is $2,641,024.32 of principal, plus accrued but unpaid interest
thereon, fees, costs, expenses and other amounts chargeable under the Term Loan
Documents and (ii) the Obligations are duly and validly existing and enforceable
obligations of Current Debtor which are due and payable in accordance with the
terms of the Term Loan Documents, and upon assumption by Assumptor pursuant
hereto, are also duly and validly existing and enforceable obligations of
Assumptor payable in accordance with the terms of the Term Loan Documents (as
modified hereby) and are not subject to any defense, setoff, offset, recoupment,
reduction or counterclaim of any kind or nature by or on behalf of Current
Debtor or Assumptor.
3. Assumption. Assumptor hereby (i) assumes and agrees to pay, as a primary
obligor, on or before April 12, 1999 the principal balance due and becoming due
under the Notes, all interest and other Obligations due and becoming due
thereunder; (ii) assumes and covenants to perform, as a primary obligor, all the
terms and conditions of the Notes and all other Term Loan Documents required to
be performed by Current Debtor, as modified by this Agreement; and (iii) agrees
to be legally bound for such performance, as a primary obligor, to the same
extent as if Assumptor were the "Borrower" originally named in the Notes and
other Term Loan Documents and notwithstanding any failure of Current Debtor to
perform any warranties, covenants or other obligations running from Current
Debtor to Assumptor; provided, however, that Current Debtor shall remain fully
liable for the Obligations and for the performance of the terms and conditions
of the Notes and the other Term Loan Documents, as modified by this Agreement,
as a primary obligor, jointly and severally with Assumptor.
4. Modifications of Terms of Term Loan Documents. Assumptor specifically
acknowledges receipt of the Term Loan Documents and hereby assumes and covenants
to comply with and perform all of the terms, provisions, covenants and
requirements set forth in such Term Loan Documents (except those waived in
2
<PAGE> 3
writing by FINOVA, if any), to the same extent as if Assumptor were originally
named as "Borrower" in those Term Loan Documents, subject to the following:
(a) Notwithstanding anything to the contrary in the Term Loan Documents,
Assumptor and Current Debtor jointly and severally agree that the
Obligations owed to FINOVA under the Notes shall be paid in full on or
before April 12, 1999 (the "Termination Date") and that FINOVA shall
not have any obligation to extend any credit or make any advances to
Assumptor after the Termination Date;
(b) Assumptorand Current Debtor jointly and severally acknowledge and
agree that Current Debtor is currently in default under the Term Loan
Documents, that the Default Interest Rate set forth in Section 2.4 of
the Term Loan Agreement is currently being charged on the outstanding
balance under the Notes and that such Default Interest Rate will
continue to be charged by FINOVA on all Obligations owed under the
Term Loan Documents from the date hereof until all Obligations under
such Notes are paid in full on or before April 12, 1999.
5. Agreements of FINOVA. Subject to the terms and conditions of this
Agreement, FINOVA agrees as follows:
(a) FINOVA consents to the transfer (subject to the liens and security
interests securing the Obligations and the Credit Obligations) of
Current Debtor's Property to Assumptor and the assumption of the
Obligations by Assumptor.
(b) FINOVA agrees not to accelerate the Obligations or exercise available
default-related remedies under the Term Loan Documents including,
without limitation, the Notes delivered pursuant to Section 8(b)(i) of
this Agreement, arising out of Current Debtor's Existing Defaults (as
defined below) from the date hereof until the earlier of (i) the
occurrence of an Event of Default other than the Existing Defaults or
(ii) the Termination Date (the "Forbearance Period"); provided,
however, that (i) such forbearance shall in no way be considered a
waiver of any current or future Event of Default by Current Debtor or
Assumptor under the Term Loan Agreement and (ii) such forbearance
shall not affect, impair or diminish any rights FINOVA may have under
the Term Loan Documents as a result of any failure or breach by
Current Debtor or Assumptor under the Term Loan Documents after the
date hereof.
(c) FINOVA expressly waives the Termination Fee and the other requirements
of Section 9.2(b) of the Term Loan Agreement; provided, however, that
such waiver shall in no way be considered to extend beyond the
Forbearance Period or in any way be deemed a waiver of any other
provision, covenant or obligation under the Term Loan Documents as
assumed by Assumptor under this Agreement.
(d) FINOVA expressly waives any Event of Default (i) under Section 7.1(b)
of the Term Loan Agreement as a result of noncompliance by the
Assumptor during the Forbearance Period with the requirement in
Section 9.1(b) of the Term Loan Agreement that Borrower provide FINOVA
3
<PAGE> 4
with the financial and collateral reports required under Section
7.1(I) of the Credit Agreement; (ii) under Section 7.1(b) of the Term
Loan Agreement as a result of noncompliance by the Assumptor during
the Forbearance Period with Section 9.1(c) of the Term Loan Agreement;
and (iii) under Section 7.1(d) of the Term Loan Agreement with respect
to William Ciralsky; provided, however, that such waiver shall in no
way be considered to extend beyond the Forbearance Period or in any
way be deemed a waiver of any other provision, covenant or obligation
under the Term Loan Documents as assumed by Assumptor under this
Agreement.
6. Security Interests. Assumptor acknowledges and reaffirms the liens and
security interests granted pursuant to the Term Loan Agreement and agrees that
(i) it is purchasing the assets of Current Debtor subject to the liens and
security interests securing the Obligations and the Credit Obligations and (ii)
neither the execution of this Agreement nor any documents or instruments
required to be delivered under this Agreement nor the transfer of the assets
from Current Debtor to Assumptor shall be deemed to terminate or otherwise
affect the liens and security interests granted pursuant to the Term Loan
Agreement, the existing priority thereof or the rights of FINOVA with respect
thereto. In addition, to secure the prompt payment and performance of the
Obligations, and in addition to any other Collateral securing the Obligations,
Assumptor hereby grants to FINOVA a security interest in and to all of
Assumptor's now owned or hereafter acquired or arising Inventory, Equipment,
Receivables, life insurance policies and the proceeds thereof, Trademarks,
Copyrights, Licenses and Patents, Investment Property (as defined in Section
9-115 of the Uniform Commercial Code) and General Intangibles, including without
limitation, all of Borrower's Deposit Accounts, money, any and all property now
or at any time hereafter in FINOVA's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records and computer data related to any of the foregoing.
In furtherance thereof, Assumptor shall execute such financing statements and
otherwise take such other action and execute such other documents or instruments
as FINOVA may from time to time request to evidence FINOVA's continued security
interest in the Collateral. Assumptor hereby authorizes FINOVA to execute and
file any such instrument on Assumptor's behalf.
7. Representations and Warranties. Assumptor and Current Debtor each
represent, warrant and covenant that: (i) it (and its undersigned
representative, if any) has full power, authority and legal right to execute
this Agreement and to keep and observe all of the terms of this Agreement on its
part to be observed or performed; and (ii) the Notes, the other Term Loan
Documents and this Agreement constitute valid and binding obligations of
Assumptor and Current Debtor. Current Debtor represents and warrants that, other
than the Events of Default described on Schedule I hereto (the "Existing
Defaults"), no Event of Default or event which, with the passage of time, could
become an Event of Default, has occurred and is continuing. Assumptor and FINOVA
represent and warrant that, to their knowledge, no Events of Default other than
the Existing Defaults have occurred and are continuing; provided, however, that
nothing set forth herein shall be deemed a waiver or forbearance by FINOVA from
exercising its rights and remedies with respect to any Event of Default other
than the Existing Defaults. All of the covenants, representations and warranties
set forth in the Term Loan Documents are hereby restated, ratified and confirmed
4
<PAGE> 5
in all respects by Assumptor and Current Debtor as of the date hereof and are
and shall remain in full force and effect without modification or amendment,
except as otherwise provided in this Agreement.
8. Conditions to Consent of FINOVA. The consent of FINOVA to the transfer
(subject to the liens and security interests securing the Obligations and the
Credit Obligations) of Current Debtor's assets to Assumptor and the assumption
of the Obligations by Assumptor, and the other agreements of FINOVA under this
Agreement are conditioned upon satisfaction by Assumptor on the date this
Agreement is executed, of each of the following conditions, all in form and
substance satisfactory to FINOVA and its counsel:
(a) No legal action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, or
prohibit, or to obtain damages in respect of, or which is related to
or arises out of this Agreement or any of the other Term Loan
Documents or the consummation of the transactions contemplated hereby
or thereby, or which, in the reasonable opinion of FINOVA would make
it inadvisable to consummate the transactions contemplated by this
Agreement.
(b) FINOVA shall have received the following documents, each in form and
substance satisfactory to FINOVA and its counsel:
(i) Notes duly executed by Assumptor;
(ii) The Unlimited Guaranty "CCC Guaranty" of Consolidated Capital of
North America, Inc. ("Guarantor") duly executed by an authorized
officer of Guarantor;
(iii) An Amended and Restated Limited Guaranty executed by Mr. William
Ciralsky;
(iv) The written opinion of counsel to Assumptor and Guarantor as to
the transactions contemplated by the Asset Purchase Agreement,
this Agreement and the CCC Guaranty;
(v) Certifiedcopies of Assumptor's casualty insurance policies
evidencing the existence of the insurance coverage required
pursuant to Section 3.4 of the Term Loan Agreement, together with
loss payable endorsements thereto naming FINOVA as the loss payee
or additional insured;
(vi) A Certificate of the Secretary of Assumptor, dated as of a date
satisfactory to FINOVA certifying (a) that attached thereto is a
true and complete copy of the Articles of Incorporation and Code
of Regulations of Assumptor, as in effect on the date of such
certification, (b) that attached thereto is a true and complete
copy of resolutions, in form satisfactory to FINOVA, adopted by
the Board of Directors of Assumptor, authorizing the execution,
5
<PAGE> 6
delivery and performance of the Asset Purchase Agreement and this
Agreement and the consummation of the transactions contemplated
hereby, and (c) as to the incumbency and genuineness of the
signature of each officer of Assumptor executing the Asset
Purchase Agreement and this Agreement;
(vii) Good standing certificates of Assumptor and Guarantor issued by
the Secretary of State of Assumptor's and Guarantor's respective
states of incorporation;
(viii) A Certificate of the Secretary of Guarantor, dated as of a date
satisfactory to FINOVA certifying (a) that attached thereto is a
true and complete copy of the Certificate of Incorporation and
Bylaws of Guarantor, as in effect on the date of such
certification, (b) that attached thereto is a true and complete
copy of resolutions, in form satisfactory to FINOVA, adopted by
the Board of Directors of Guarantor, authorizing the execution,
delivery and performance of the CCC Guaranty and the consummation
of the transactions contemplated hereby, and (c) as to the
incumbency and genuineness of the signature of each officer of
Guarantor executing the CCC Guaranty;
(ix) UCC financing statements evidencing transfer of the Collateral
from Current Debtor to Assumptor and the lien and security
interest granted hereby, duly executed by Assumptor;
(x) An Assumption and Consent Agreement duly executed by Current
Debtor, Assumptor, FINOVA, and NBC pursuant to which Assumptor
shall have assumed the Credit Obligations and the terms and
conditions of the Credit Documents; and
(xi) Such other agreements, instruments and documents which FINOVA may
require to be executed in connection therewith.
(c) Guarantorshall have made a One Million Dollar ($1,000,000) equity
contribution to Assumptor, which will be paid directly to NBC to be
applied to the outstanding balance of the Credit Obligations.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona.
(b) Counterparts. This Agreement may be executed and acknowledged in
multiple counterparts for the convenience of the parties, which
together shall constitute one agreement, and the counterpart signature
pages may be detached from the various counterparts and attached to
6
<PAGE> 7
one copy of this Agreement to simplify the recordation of this
Agreement.
(c) Notices. Any notices which may be required under the Term Loan
Documents to be sent to Current Debtor shall be sent to Assumptor at
the following address:
Mr. Richard Bailey
TPSS Acquisition Corporation
20000 So. Western Avenue
Torrance, CA 90501
with a copy to:
Timothy J. Kincaid
Purcell & Scott
6035 Memorial Drive
Dublin, OH 43017
(d) References. Any reference to the Term Loan Agreement contained in any
notice, request, certificate, or other document executed concurrently
with or after the execution and delivery of this Agreement shall be
deemed to refer to the Term Loan Agreement as modified by this
Agreement unless the context shall otherwise require.
(e) ContinuedEffectiveness. Notwithstanding anything contained herein, the
terms of this Agreement are not intended to and do not serve to effect
a novation as to the Term Loan Agreement; instead, it is the express
intention of the parties hereto to reaffirm the Obligations created
under the Term Loan Agreement which are evidenced by the Notes and
secured by the Collateral. The Term Loan Agreement, as amended hereby,
and each of the other Term Loan Documents shall remain in full force
and effect.
(f) Costs and Expenses. Assumptor and Current Debtor affirm and
acknowledge that Section 8.1 of the Term Loan Agreement applies to
this Agreement and the transactions and agreements and documents
contemplated hereunder.
(g) Severability. 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 to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
[Signature page follows]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement, intending to be legally
bound as of the date above set forth.
FINOVA CAPITAL CORPORATION CURRENT DEBTOR:
TOLEDO PICKLING & STEEL SALES, INC.
By: /s/ Bruce Mettel By: /s/ William Ciralsky
----------------------------- -----------------------------
Its: Bruce Mettel Its: William Ciralsky
----------------------------- -----------------------------
ASSUMPTOR:
TPSS ACQUISITION CORPORATION
By: /s/ Richard D. Bailey
-----------------------------
Its: Richard D. Bailey
S-1
<PAGE> 1
EXHIBIT 10.90
SECURED PROMISSORY NOTE A
$2,307,692.32 Phoenix, Arizona
January 12, 1999
FOR VALUE RECEIVED, TPSS ACQUISITION CORPORATION, an Ohio
corporation ("TPSS"), and TOLEDO PICKLING AND STEEL SALES, INC., an Ohio
corporation ("Toledo" and, together with TPSS, the "Borrowers"), jointly and
severally promise to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of $2,307,692.32, plus
interest in the manner and upon the terms and conditions set forth below. This
Secured Promissory Note A ("Note") is made pursuant to that certain Loan and
Security Agreement dated December 1, 1997 between FINOVA and Toledo, as modified
by that certain Assumption and Consent Agreement among FINOVA and Borrowers
dated January 12, 1999 (the "Assumption Agreement") and as otherwise amended
from time to time (the "Loan Agreement"), the provisions of which are
incorporated herein by this reference. Capitalized terms herein, unless
otherwise defined herein, shall have the meaning set forth in the Loan
Agreement.
1. SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT.
1.1. This Note shall be payable as follows:
(a) Equal successive monthly installments of principal of
$32,051 each on the first day of each month beginning
February 1, 1999, and continuing through and
including April 1, 1999; and
(b) A final installment of the unpaid principal amount
hereof on the twelfth (12th) day of April, 1999,
together with accrued interest on the principal balance from time to time
remaining unpaid, payable monthly on the first day of each and every month, in
arrears, beginning February 1, 1999.
1.2. Prepayment may be made under this Note in whole but not
in part, subject to the terms set forth in the Loan Agreement, provided that
such prepayment is preceded by not less than five (5) business days prior
written notice to FINOVA and accompanied by all accrued but unpaid interest and,
except as otherwise set forth in the Assumption Agreement, the full amount of
the applicable Termination Fee. Notwithstanding anything herein to the contrary,
in the event the Loan Agreement is terminated by the Borrowers, by FINOVA or by
any other person at any time or the Revolving Loan Agreement is terminated, then
the entire unpaid principal balance of this Note, together with all accrued and
unpaid interest hereon and, except as otherwise set forth in the Assumption
Agreement, the full amount of the applicable Termination Fee, shall become
<PAGE> 2
immediately due and payable in full on the effective date of such termination,
without presentment, notice or demand of any kind.
1.3. Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, and shall be at the rate of two (2)
percentage points above the Prime Rate (as hereinafter defined), computed on the
basis of a 360-day year; provided, however, upon the occurrence and during the
continuance of an Event of Default (as hereinafter defined), interest shall
accrue on the outstanding principal balance of this Note at a default rate (the
"Default Rate") of four (4) percentage points above the Prime Rate, and shall be
payable on demand. "Prime Rate" means, for any day, the rate of interest per
annum (over a year of three hundred sixty (360) days) announced by Citibank,
N.A. (or any successor thereto) (the "Bank"), from time to time, as its `base
rate" in effect on such day. The Prime Rate is not necessarily the lowest rate
charged by the Bank. The applicable rate of interest assessed hereunder will be
increased or decreased from time to time hereafter in an amount equal to any
increase or decrease hereafter made by the Bank in the Prime Rate. A change in
the Prime Rate shall be effective on the first day following such change.
2. EVENTS OF DEFAULTS; REMEDIES.
2.1. The occurrence of any one of the following events shall
constitute a default by Borrowers under this Note (hereinafter an "Event of
Default"): (a) if Borrowers fail to pay to FINOVA an installment of principal or
interest hereunder when due; (b) if Borrowers fail to pay any of the Obligations
(as defined in the Loan Agreement) to FINOVA when due and payable; (c) if
Borrowers fail or neglect to perform, keep or observe any term, provision,
covenant, warranty or representation contained in this Note or the Loan
Agreement (other than as referred to in (a) or (b) of this Section) which is
required to be performed, kept or observed by Borrowers or if a default occurs
under the Loan Agreement; or (d) the occurrence of an Event of Default under the
Loan Agreement or the occurrence of a default or an event of default under any
agreement, instrument or document heretofore, now or at any time or times
hereafter delivered to FINOVA by Borrowers or by any guarantor of part or all of
Borrowers' Obligations to FINOVA.
2.2. Upon the occurrence of any Event of Default hereunder, in
addition to FINOVA's right to charge interest on the Obligations at the Default
Rate: (a) at the option of FINOVA, the entire unpaid amount of all of the
Obligations, including without limitation, except as otherwise set forth in the
Assumption Agreement, the Termination Fee, shall become immediately due and
payable without demand, notice or legal process of any kind; (b) FINOVA may, at
its option, without demand, notice or legal process of any kind, exercise any
and all rights and remedies granted to it by the Loan Agreement or by any other
agreement now or hereafter existing between FINOVA and Borrowers or between
FINOVA and any guarantor of part or all of Borrowers' liabilities to FINOVA; and
(c) FINOVA may at its option exercise from time to time any other rights and
remedies available to it under the Uniform Commercial Code or other laws of the
State of Arizona.
2.3. The remedies of FINOVA as provided herein and in the Loan
Agreement shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of FINOVA. No act of omission
2
<PAGE> 3
or commission of FINOVA, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by FINOVA and then only to the extent specifically recited therein. A
waiver or release with reference to any one event shall not be construed as
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event.
3. GENERAL PROVISIONS.
3.1. Obligations of the Borrowers described herein or in the
Loan Agreement are the joint and several primary obligation of both Borrowers.
3.2. Notwithstanding anything contained herein, the terms of
this Note are not intended to and do not serve to effect a novation as to the
Demand Secured Promissory Note A dated December 1, 1997 (the "Prior Note") made
by Toledo in favor of FINOVA; instead, it is the express intention of the
parties hereto to reaffirm the Obligations created under the Loan Agreement
which are evidenced by the Prior Note and secured by the Collateral.
3.3. Borrowers warrant and represent to FINOVA that Borrowers
have used and will continue to use the loans and advances represented by this
Note solely for proper business purposes, and consistent with all applicable
laws and statutes.
3.4. This Note is secured by the Collateral described in the
Loan Agreement.
3.5. Borrowers waive presentment, demand and protest, notice
of protest, notice of presentment and all other notices and demands in
connection with the enforcement of FINOVA's rights hereunder, except as
specifically provided and called for by this Note, and hereby consent to, and
waive notice of, the release, addition, or substitution, with or without
consideration, of any collateral or of any person liable for payment of this
Note. Any failure of FINOVA to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
3.6. If this Note is not paid when due or upon the occurrence
of an Event of Default, Borrowers further promise to pay all costs of
collection, foreclosure fees, attorneys fees and expert witness fees incurred by
FINOVA, whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Loan Agreement.
3.7. The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule to the Loan Agreement, calculated and
applied to the principal balance of this Note in accordance with the provisions
of this Note; (ii) all Additional Sums (as herein defined), if any. Borrowers
agree to pay an effective contracted for rate of interest which is the sum of
the above-referenced elements. All examination fees, attorneys fees, expert
witness fees, closing fees, Termination Fees, other charges, goods, things in
action or any other sums or things of value paid or payable by Borrowers
(collectively, the "Additional Sums"), whether pursuant to this Note, the Loan
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
3
<PAGE> 4
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrowers as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
3.8. It is the intent of the parties to comply with the usury
laws of the State of Arizona (the "Applicable Usury Law"). Accordingly, it is
agreed that notwithstanding any provisions to the contrary in this Note, or in
any of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrowers or otherwise in connection with the loan evidenced hereby, or (b) the
maturity of the loan evidenced hereby is accelerated in whole or in part, or (c)
all or part of the loan evidenced hereby shall be prepaid, so that under any of
such circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this Section shall govern and
control, (2) neither Borrowers nor any other person or entity now or hereafter
liable for the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount hereof or refunded to Borrowers,
at FINOVA's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made for
the purpose of determining whether such rate would exceed the Maximum Interest
Rate shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest at any
time contracted for, charged or received from Borrowers or otherwise in
connection with such loan; and (y) in the event that the effective rate of
interest on the loan should at any time exceed the Maximum Interest Rate, such
excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective interest rate on the loan otherwise falls below
the Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrowers further
agree that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
4
<PAGE> 5
3.9. FINOVA may at any time transfer this Note and FINOVA's
rights in any or all collateral securing this Note, and FINOVA thereafter shall
be relieved from all liability with respect to such collateral arising after the
date of such transfer.
3.10. This Note shall be binding upon Borrowers and their
legal representatives, successors and assigns. Whenever possible, each provision
of this Note shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN
PHOENIX, ARIZONA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ARIZONA, AS THE SAME MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT
LIMITATION, THE UNIFORM COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWERS HEREBY
(i) IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN MARICOPA COUNTY, ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS NOTE; (ii) WAIVE PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON BORROWERS, AND CONSENT THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWERS AT
THE ADDRESSES SET FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO BORROWERS' ADDRESSES; (iii) IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT BORROWERS MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREE THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; (v) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST FINOVA OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
NOTE IN ANY COURT OTHER THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi)
IRREVOCABLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN
CONNECTION WITH THIS NOTE. NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR
FINOVA'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWERS OR BORROWERS' PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
SIGNATURE PAGE FOLLOWS
5
<PAGE> 6
TPSS ACQUISITION CORPORATION, an
Ohio corporation
By: /s/ Richard D. Bailey
------------------------------
Name: Richard D. Bailey
-----------------------------
Title: President
----------------------------
Federal Taxpayer Identification
Number: 33-0833208
Address: 20000 So. Western Avenue
Torrance, California 90501
TOLEDO PICKLING & STEEL SALES, INC.,
an Ohio corporation
By: /s/ William Ciralsky
------------------------------
Name: William Ciralsky
-----------------------------
Title: President
----------------------------
Federal Taxpayer Identification
Number: 34-1440413
Address: 1149 Campbell Street
Toledo, Ohio 43607
6
<PAGE> 1
EXHIBIT 10.91
SECURED PROMISSORY NOTE B
$333,332 Phoenix, Arizona
January 12, 1999
FOR VALUE RECEIVED, TPSS ACQUISITION CORPORATION, an Ohio
corporation ("TPSS"), and TOLEDO PICKLING AND STEEL SALES, INC., an Ohio
corporation ("Toledo" and, together with TPSS, the "Borrowers"), jointly and
severally promise to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of $333,332, plus
interest in the manner and upon the terms and conditions set forth below. This
Secured Promissory Note B ("Note") is made pursuant to that certain Loan and
Security Agreement dated December 1, 1997 between FINOVA and Toledo, as modified
by that certain Assumption and Consent Agreement among FINOVA and Borrowers
dated January 12, 1999 (the "Assumption Agreement") and as otherwise amended
from time to time (the "Loan Agreement"), the provisions of which are
incorporated herein by this reference. Capitalized terms herein, unless
otherwise defined herein, shall have the meaning set forth in the Loan
Agreement.
1. SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT.
1.1. This Note shall be payable as follows:
(a) Equal successive monthly installments of principal of
$13,889 each on the first day of each month beginning
February 1, 1999, and continuing through and
including April 1, 1999; and
(b) A final installment of the unpaid principal amount
hereof on the twelfth (12th) day of April, 1999,
together with accrued interest on the principal balance from time to time
remaining unpaid, payable monthly on the first day of each and every month, in
arrears, beginning February 1, 1999.
1.2. Prepayment may be made under this Note in whole but not
in part, subject to the terms set forth in the Loan Agreement, provided that
such prepayment is preceded by not less than five (5) business days prior
written notice to FINOVA and accompanied by all accrued but unpaid interest and,
except as otherwise set forth in the Assumption Agreement, the full amount of
the applicable Termination Fee. Notwithstanding anything herein to the contrary,
in the event the Loan Agreement is terminated by the Borrowers, by FINOVA or by
any other person at any time or the Revolving Loan Agreement is terminated, then
the entire unpaid principal balance of this Note, together with all accrued and
unpaid interest hereon and, except as otherwise set forth in the Assumption
Agreement, the full amount of the applicable Termination Fee, shall become
immediately due and payable in full on the effective date of such termination,
without presentment, notice or demand of any kind.
<PAGE> 2
1.3. Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, and shall be at the rate of two and
one-half (2.5) percentage points above the Prime Rate (as hereinafter defined),
computed on the basis of a 360-day year; provided, however, upon the occurrence
and during the continuance of an Event of Default (as hereinafter defined),
interest shall accrue on the outstanding principal balance of this Note at a
default rate (the "Default Rate") of four and one-half (4.5) percentage points
above the Prime Rate, and shall be payable on demand. "Prime Rate" means, for
any day, the rate of interest per annum (over a year of three hundred sixty
(360) days) announced by Citibank, N.A. (or any successor thereto) (the "Bank"),
from time to time, as its `base rate" in effect on such day. The Prime Rate is
not necessarily the lowest rate charged by the Bank. The applicable rate of
interest assessed hereunder will be increased or decreased from time to time
hereafter in an amount equal to any increase or decrease hereafter made by the
Bank in the Prime Rate. A change in the Prime Rate shall be effective on the
first day following such change.
2. EVENTS OF DEFAULTS; REMEDIES.
2.1. The occurrence of any one of the following events shall
constitute a default by Borrowers under this Note (hereinafter an "Event of
Default"): (a) if Borrowers fail to pay to FINOVA an installment of principal or
interest hereunder when due; (b) if Borrowers fail to pay any of the Obligations
(as defined in the Loan Agreement) to FINOVA when due and payable; (c) if
Borrowers fail or neglect to perform, keep or observe any term, provision,
covenant, warranty or representation contained in this Note or the Loan
Agreement (other than as referred to in (a) or (b) of this Section) which is
required to be performed, kept or observed by Borrowers or if a default occurs
under the Loan Agreement; or (d) the occurrence of an Event of Default under the
Loan Agreement or the occurrence of a default or an event of default under any
agreement, instrument or document heretofore, now or at any time or times
hereafter delivered to FINOVA by Borrowers or by any guarantor of part or all of
Borrowers' Obligations to FINOVA.
2.2. Upon the occurrence of any Event of Default hereunder, in
addition to FINOVA's right to charge interest on the Obligations at the Default
Rate: (a) at the option of FINOVA, the entire unpaid amount of all of the
Obligations, including without limitation, except as otherwise set forth in the
Assumption Agreement, the Termination Fee, shall become immediately due and
payable without demand, notice or legal process of any kind; (b) FINOVA may, at
its option, without demand, notice or legal process of any kind, exercise any
and all rights and remedies granted to it by the Loan Agreement or by any other
agreement now or hereafter existing between FINOVA and Borrowers or between
FINOVA and any guarantor of part or all of Borrowers' liabilities to FINOVA; and
(c) FINOVA may at its option exercise from time to time any other rights and
remedies available to it under the Uniform Commercial Code or other laws of the
State of Arizona.
2.3. The remedies of FINOVA as provided herein and in the Loan
Agreement shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of FINOVA. No act of omission
or commission of FINOVA, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by FINOVA and then only to the extent specifically recited therein. A
waiver or release with reference to any one event shall not be construed as
2
<PAGE> 3
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event.
3. GENERAL PROVISIONS.
3.1. Obligations of the Borrowers described herein or in the
Loan Agreement are the joint and several primary obligation of both Borrowers.
3.2. Notwithstanding anything contained herein, the terms of
this Note are not intended to and do not serve to effect a novation as to the
Demand Secured Promissory Note B dated December 1, 1997 (the "Prior Note") made
by Toledo in favor of FINOVA; instead, it is the express intention of the
parties hereto to reaffirm the Obligations created under the Loan Agreement
which are evidenced by the Prior Note and secured by the Collateral.
3.3. Borrowers warrant and represent to FINOVA that Borrowers
have used and will continue to use the loans and advances represented by this
Note solely for proper business purposes, and consistent with all applicable
laws and statutes.
3.4. This Note is secured by the Collateral described in the
Loan Agreement.
3.5. Borrowers waive presentment, demand and protest, notice
of protest, notice of presentment and all other notices and demands in
connection with the enforcement of FINOVA's rights hereunder, except as
specifically provided and called for by this Note, and hereby consent to, and
waive notice of, the release, addition, or substitution, with or without
consideration, of any collateral or of any person liable for payment of this
Note. Any failure of FINOVA to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
3.6. If this Note is not paid when due or upon the occurrence
of an Event of Default, Borrowers further promise to pay all costs of
collection, foreclosure fees, attorneys fees and expert witness fees incurred by
FINOVA, whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Loan Agreement.
3.7. The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule to the Loan Agreement, calculated and
applied to the principal balance of this Note in accordance with the provisions
of this Note; (ii) all Additional Sums (as herein defined), if any. Borrowers
agree to pay an effective contracted for rate of interest which is the sum of
the above-referenced elements. All examination fees, attorneys fees, expert
witness fees, closing fees, Termination Fees, other charges, goods, things in
action or any other sums or things of value paid or payable by Borrowers
(collectively, the "Additional Sums"), whether pursuant to this Note, the Loan
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrowers as, and shall be deemed to be,
3
<PAGE> 4
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
3.8. It is the intent of the parties to comply with the usury
laws of the State of Arizona (the "Applicable Usury Law"). Accordingly, it is
agreed that notwithstanding any provisions to the contrary in this Note, or in
any of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrowers or otherwise in connection with the loan evidenced hereby, or (b) the
maturity of the loan evidenced hereby is accelerated in whole or in part, or (c)
all or part of the loan evidenced hereby shall be prepaid, so that under any of
such circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this Section shall govern and
control, (2) neither Borrowers nor any other person or entity now or hereafter
liable for the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount hereof or refunded to Borrowers,
at FINOVA's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made for
the purpose of determining whether such rate would exceed the Maximum Interest
Rate shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest at any
time contracted for, charged or received from Borrowers or otherwise in
connection with such loan; and (y) in the event that the effective rate of
interest on the loan should at any time exceed the Maximum Interest Rate, such
excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective interest rate on the loan otherwise falls below
the Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrowers further
agree that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.9. FINOVA may at any time transfer this Note and FINOVA's
rights in any or all collateral securing this Note, and FINOVA thereafter shall
be relieved from all liability with respect to such collateral arising after the
date of such transfer.
4
<PAGE> 5
3.10. This Note shall be binding upon Borrowers and their
legal representatives, successors and assigns. Whenever possible, each provision
of this Note shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN
PHOENIX, ARIZONA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ARIZONA, AS THE SAME MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT
LIMITATION, THE UNIFORM COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWERS HEREBY
(i) IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN MARICOPA COUNTY, ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS NOTE; (ii) WAIVE PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON BORROWERS, AND CONSENT THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWERS AT
THE ADDRESSES SET FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO BORROWERS' ADDRESSES; (iii) IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT BORROWERS MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREE THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; (v) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST FINOVA OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
NOTE IN ANY COURT OTHER THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi)
IRREVOCABLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN
CONNECTION WITH THIS NOTE. NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR
FINOVA'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWERS OR BORROWERS' PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
SIGNATURE PAGE FOLLOWS
5
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TPSS ACQUISITION CORPORATION, an
Ohio corporation
By: /s/ Richard D. Bailey
------------------------------
Name: Richard D. Bailey
-----------------------------
Title: President
----------------------------
Federal Taxpayer Identification
Number: 33-0833208
Address: 20000 So. Western Avenue
Torrance, California 90501
TOLEDO PICKLING & STEEL SALES, INC.,
an Ohio corporation
By: /s/ William Ciralsky
------------------------------
Name: William Ciralsky
-----------------------------
Title: President
----------------------------
Federal Taxpayer Identification
Number: 34-1440413
Address: 1149 Campbell Street
Toledo, Ohio 43607
6
<PAGE> 1
EXHIBIT 10.93
ASSUMPTION AND CONSENT AGREEMENT
THIS ASSUMPTION AND CONSENT AGREEMENT (hereinafter the "Agreement") is
entered into as of this 12th day of January, 1999, by and among TOLEDO PICKLING
& STEEL SALES, INC., an Ohio corporation ("Current Debtor"), TPSS ACQUISITION
CORPORATION, an Ohio corporation ("Assumptor"), NATIONAL BANK OF CANADA ("NBC"),
FINOVA CAPITAL CORPORATION ("FINOVA"; and together with NBC the "Lenders"), and
NATIONAL BANK OF CANADA, in its capacity as agent for the Lenders (in such
capacity, the "Agent").
RECITALS
A. Current Debtor, Lenders and Agent are parties to a certain Restated Loan
and Security Agreement dated as of December 1, 1997 (which, as heretofore
amended, modified or supplemented from time to time, is referred to herein as
the "Credit Agreement" and, together with the other "Credit Documents" as
therein defined, as heretofore amended, modified or supplemented from time to
time, as the "Credit Documents"), under the terms of which Lenders agreed to
make loans to Current Debtor on a revolving loan basis (copies of the Credit
Documents are attached hereto as collective Exhibit A and incorporated herein by
reference);
B. The Obligations (as defined in the Credit Agreement) of Current Debtor
to Lenders are evidenced by certain demand notes executed by Current Debtor and
payable to each Lender (as heretofore amended, modified or supplemented from
time to time, the "Credit Notes");
C. Current Debtor and FINOVA are also parties to a certain Loan and
Security Agreement dated as of December 1, 1997 (which, as heretofore amended,
modified or supplemented from time to time, is referred to herein as the "Term
Loan Agreement" and, together with the other "Loan Documents" as therein
defined, as heretofore amended, modified or supplemented from time to time, as
the "Term Loan Documents"), under the terms of which FINOVA agreed to make two
term loans to Current Debtor;
D. The Obligations (as defined in the Term Loan Agreement) of Current
Debtor to FINOVA (the "Term Loan Obligations") are evidenced by certain demand
notes executed by Current Debtor and payable to FINOVA;
E. Pursuant to an Asset Purchase Agreement dated as of December 31, 1998,
Assumptor is purchasing (subject to the liens and security interests securing
the Obligations and the Term Loan Obligations) substantially all of the Current
Debtor's assets for valuable consideration, part of said consideration being the
assumption and agreement by Assumptor to pay the unpaid balance owing on the
Credit Notes and to assume all of Current Debtor's Obligations, covenants and
agreements under the Credit Documents by and subject to the terms of this
Agreement;
<PAGE> 2
F. Under the terms of the above-described Credit Documents and Term Loan
Documents, the Obligations of Current Debtor may be accelerated if Current
Debtor sells or otherwise conveys its Property without the prior written consent
of Lenders; and
G. Subject to the terms and conditions of this Agreement, Lenders are
willing to consent to the transfer (subject to the liens and security interests
securing the Obligations and the Term Loan Obligations) of Current Debtor's
Property to Assumptor and the assumption of the Obligations by Assumptor.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth in this Agreement, and the further consideration of the advantages to
accrue to all parties hereto, Current Debtor, Assumptor, NBC, FINOVA and Agent
hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this Agreement
shall have the same meanings as used in the Credit Documents.
2. Amount of Revolving Loans. Current Debtor, Lenders and Assumptor agree
that as of the date hereof, (i) the Revolving Loan Commitment is $9,000,000,
(ii) the unpaid amount owing to Lenders under the Credit Documents is
$5,417,725.88 of principal, plus accrued but unpaid interest thereon, fees,
costs, expenses and other amounts chargeable under the Credit Documents and
(iii) the Obligations are duly and validly existing and enforceable obligations
of Current Debtor which are due and payable in accordance with the terms of the
Credit Documents, and upon assumption by Assumptor pursuant hereto, are also
duly and validly existing and enforceable obligations of Assumptor payable in
accordance with the terms of the Credit Documents (as modified hereby) and are
not subject to any defense, setoff, offset, recoupment, reduction or
counterclaim of any kind or nature by or on behalf of Current Debtor or
Assumptor.
3. Assumption. Assumptor hereby (i) assumes and agrees to pay, as a primary
obligor, on or before April 12, 1999 the principal balance due and becoming due
under the Credit Notes, all interest and other Obligations due and becoming due
thereunder; (ii) assumes and covenants to perform, as a primary obligor, all the
terms and conditions of the Credit Notes and all other Credit Documents required
to be performed by Current Debtor, as modified by this Agreement; and (iii)
agrees to be legally bound for such performance, as a primary obligor, to the
same extent as if Assumptor were the "Borrower" originally named in the Credit
Notes and other Credit Documents and notwithstanding any failure of Current
Debtor to perform any warranties, covenants or other obligations running from
Current Debtor to Assumptor; provided, however, that Current Debtor shall remain
fully liable for the Obligations and for the performance of the terms and
conditions of the Credit Notes and the other Credit Documents, as modified by
this Agreement, as a primary obligor, jointly and severally with Assumptor
(provided, that solely Assumptor shall be entitled to borrow under the Credit
Documents from and after the date hereof).
4. Modifications of Terms of Credit Documents. Assumptor specifically
acknowledges receipt of the Credit Documents and hereby assumes and covenants to
comply with and perform all of the terms, provisions, covenants and requirements
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<PAGE> 3
set forth in such Credit Documents (except those waived in writing by Lenders,
if any), to the same extent as if Assumptor were originally named as "Borrower"
in those Credit Documents, subject to the following:
(a) Notwithstanding anything to the contrary in the Credit Documents,
Assumptor and Current Debtor jointly and severally agree that the
Obligations owed to Lenders under the Credit Notes shall be paid in
full on or before April 12, 1999 (the "Termination Date") and that
neither Lender shall have any obligation to extend any credit or make
any advances to Assumptor under the Revolving Loan after the
Termination Date.
(b) Notwithstanding anything to the contrary in the Credit Documents or
this Agreement, Assumptor and Current Debtor jointly and severally
agree that in the event all of the Obligations owed to Lenders under
the Credit Notes are not paid in full on or before the Termination
Date, Assumptor and Current Debtor will be jointly and severally
obligated to pay to Agent, for the benefit of the Lenders, a fee of
$2,000 for each day after the Termination Date that any Obligations
remain unpaid (the "Loan Continuation Fee") and, until paid, the
entire amount of the Loan Continuation Fee shall be an additional
Obligation under the Credit Agreement secured by the Collateral.
(c) Notwithstanding anything to the contrary in the Credit Documents or
this Agreement, Section 2.1(A) of the Credit Agreement is hereby
deleted and replaced with the following:
(A) Establishment of Revolving Loan. Subject to the provisions of
this Agreement, and subject at all times to the right of the
Required Lenders to demand repayment thereof and to the creation
of reserves for accrued interest and otherwise as Agent deems
necessary or appropriate from time to time after five (5) days
notice to Borrower, each Lender severally agrees to make such
loans to Borrower as the Required Lenders, from time to time, in
their discretion, elect to make (collectively, the "Revolving
Loans") consisting of advances made by such Lender against the
value of Eligible Inventory and Eligible Accounts, provided,
however, that (i) the aggregate unpaid principal of the Revolving
Loans outstanding at any one time shall not at any time exceed
the Revolving Loan Borrowing Base and (ii) the aggregate amount
of a Lender's Revolving Loans outstanding at any one time shall
not exceed such Lender's Revolving Loan Commitment.
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<PAGE> 4
(d) Notwithstanding anything to the contrary in the Credit Documents or
this Agreement, Section 2.1(B) of the Credit Agreement is hereby
deleted and replaced with the following:
(B) Changes in Revolving Loan Borrowing Base. As long as no Event of
Default has occurred or is continuing and as long as there is no
substantial decrease in the value of the Collateral (as
reasonably determined by Agent), Agent may not decrease the
Revolving Loan Borrowing Base. Notwithstanding the foregoing
provision, Agent may decrease the Revolving Loan Borrowing Base
immediately upon providing five days prior notice thereof to
Borrower for the purpose of calculating the amounts which the
Lenders may be willing to advance or to allow to remain
outstanding as revolving credit advances if an Event of Default
has occurred or is continuing or a substantial decrease in the
value of the Collateral has occurred (as reasonably determined by
the Agent).
(e) Assumptor and Current Debtor jointly and severally acknowledge and
agree that Current Debtor is currently in default under the Credit
Documents, that the Default Rate (as defined in the Credit Agreement)
is currently being charged on the outstanding balance under the Credit
Notes and that such Default Rate will continue to be charged by
Lenders on all Obligations owed under the Credit Documents from the
date hereof until all Obligations under such Credit Notes are paid in
full on April 12, 1999.
(f) Notwithstanding anything to the contrary in the Credit Documents or
this Agreement, it shall constitute an "Event of Default" under the
Credit Agreement if Assumptor fails, within 30 days after the date of
this Agreement, to have restructured Current Debtor's accounts payable
in accordance with Exhibit C attached hereto and incorporated herein
by reference.
(g) Notwithstanding anything to the contrary in the Credit Documents or
this Agreement, if Guarantor fails to contribute a second One Million
Dollar equity contribution to Assumptor within 30 days after the date
of this Agreement, Assumptor shall immediately pay to Agent for the
benefit of Lenders an additional fee of $20,000.
5. Agreements of Lenders. Subject to the terms and conditions of this
Agreement, NBC and FINOVA each agree as follows:
(a) Each Lender consents to the transfer (subject to the liens and
security interests securing the Obligations and the Term Loan
Obligations) of Current Debtor's Property to Assumptor and the
assumption of the Obligations by Assumptor.
4
<PAGE> 5
(b) Each of the Lenders and Agent agree not to accelerate the Obligations
or exercise available default-related remedies under the Credit
Documents arising out of Current Debtor's Existing Defaults (as
defined below) from the date hereof until the earlier of (i) the
occurrence of an Event of Default other than the Existing Defaults or
(ii) the Termination Date (the "Forbearance Period"); provided,
however, that (i) such forbearance shall in no way be considered a
waiver of any current or future Event of Default by Current Debtor or
Assumptor under the Credit Agreement and (ii) such forbearance shall
not affect, impair or diminish any rights Lenders or Agent may have
under the Credit Documents as a result of any failure or breach by
Current Debtor or Assumptor under the Credit Documents after the date
hereof;
(c) Each Lender expressly waives any Event of Default under Section
10.1(c) of the Credit Agreement as a result of noncompliance by
Assumptor during the Forbearance Period with the financial covenants
set forth in Sections 7.1(C), 7.1(I), 7.1(N) and 7.1(P) of the Credit
Agreement; provided, however, that such waiver shall in no way be
considered to extend beyond the Forbearance Period or in any way be
deemed a waiver of any other provision, covenant or obligation under
the Credit Documents as assumed by Assumptor under this Agreement.
6. Security Interests. Assumptor acknowledges and reaffirms the Existing
Security Interests (as defined in the Credit Agreement) and the liens and
security interests granted pursuant to the Credit Agreement and agrees that (i)
it is purchasing the Property of Current Debtor subject to the liens and
security interests securing the Obligations and the Term Loan Obligations and
(ii) neither the execution of this Agreement nor any documents or instruments
required to be delivered under this Agreement nor the transfer of the Property
from Current Debtor to Assumptor shall be deemed to terminate or otherwise
affect the Existing Security Interests, the liens and security interests granted
pursuant to the Credit Agreement, the existing priority thereof or the rights of
Lenders or Agent with respect thereto. In addition, to secure the prompt payment
and performance of the Obligations, and in addition to any other Collateral
securing the Obligations, Assumptor hereby grants to the Agent, in its capacity
as agent for the benefit and account of each Lender, a security interest in and
to all of the following Property of Assumptor, whether now owned or existing or
hereafter acquired or arising and wheresoever located:
(a) Revolving Collateral. All Revolving Collateral.
(b) Deposits; Accounts. Any and all deposits or other sums at any time
credited by or due from the Agent or any Lender to Assumptor, whether
in a Depository Account or other account, together with any and all
instruments, documents, policies and certificates of insurance,
securities, goods, Accounts, choses in action, general intangibles,
chattel paper, cash or other Property, and the proceeds of each of the
foregoing, to the extent owned by Assumptor or in which Assumptor has
an interest and which now or hereafter are at any time in the
possession or control of the Agent or any Lender or in transit by mail
or carrier to or from the Agent or any Lender or in the possession of
any Person acting on behalf of the Agent or any Lender, without regard
to whether such party received the same in pledge, for safekeeping, as
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<PAGE> 6
agent for collection or transmission or otherwise or whether such
party had conditionally released the same, and any and all balances,
sums, proceeds and credits of Assumptor with, and any claims of
Assumptor against, such party.
(c) Fixed Collateral. All Fixed Collateral except for the "Equipment" (as
defined in that certain Equipment Purchase Agreement between Assumptor
and William Ciralsky and Nancy Ciralsky dated as of the date of this
Agreement, a copy of which is attached hereto as Exhibit B and
incorporated herein by reference).
(d) Accessions, Products and Proceeds. All accessions to, substitutions
for, and all replacements, products, and proceeds of the Property
described in Subsections (a), (b) and (c) above including, without
limitation, proceeds of insurance policies insuring such Property.
(e) Books and Records. All books, records, and other property (including,
without limitation, credit files, programs, printouts, and other
materials and records) of Assumptor pertaining to any of the Property
described in Subsections (a), (b), (c) or (d) above.
In furtherance thereof, Assumptor shall execute such financing statements and
otherwise take such other action and execute such other documents or instruments
as Agent may from time to time request to evidence Agent's continued security
interest in the Collateral. Assumptor hereby authorizes Agent to execute and
file any such instrument on Assumptor's behalf.
7. Representations and Warranties. Assumptor and Current Debtor each
represent, warrant and covenant that: (i) it (and its undersigned
representative, if any) has full power, authority and legal right to execute
this Agreement and to keep and observe all of the terms of this Agreement on its
part to be observed or performed; and (ii) the Credit Notes, the other Credit
Documents and this Agreement constitute valid and binding obligations of
Assumptor and Current Debtor. Current Debtor represents and warrants that, other
than the Events of Default described on Schedule I hereto (the "Existing
Defaults"), no Event of Default or event which, with the passage of time, could
become an Event of Default, has occurred and is continuing. Assumptor, NBC and
FINOVA represent and warrant that, to their knowledge, no Events of Default
other than the Existing Defaults have occurred and are continuing; provided,
however, that nothing set forth herein shall be deemed a waiver or forbearance
by Agent from exercising its rights and remedies with respect to any Event of
Default other than the Existing Defaults. All of the covenants, representations
and warranties set forth in the Credit Documents are hereby restated, ratified
and confirmed in all respects by Assumptor and Current Debtor as of the date
hereof and are and shall remain in full force and effect without modification or
amendment, except as otherwise provided in this Agreement.
8. Conditions to Consent of Lenders and Agent. The consent of Lenders to
the transfer (subject to the liens and security interests securing the
Obligations and the Term Loan Obligations) of Current Debtor's Property to
Assumptor and the assumption of the Obligations by Assumptor, and the other
agreements of Lenders and Agent under this Agreement are conditioned upon
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satisfaction by Assumptor on the date this Agreement is executed, of each of the
following conditions, all in form and substance satisfactory to Lenders and
their counsel:
(a) No legal action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, or
prohibit, or to obtain damages in respect of, or which is related to
or arises out of this Agreement or any of the other Credit Documents
or the consummation of the transactions contemplated hereby or
thereby, or which, in the reasonable opinion of the Lenders would make
it inadvisable to consummate the transactions contemplated by this
Agreement.
(b) Agent shall have received the following documents, each in form and
substance satisfactory to Lenders and their counsel:
(i) Credit Notes duly executed by Assumptor;
(ii) The Unlimited Guaranty "CCC Guaranty" of Consolidated Capital of
North America, Inc. ("Guarantor") duly executed by an authorized
officer of Guarantor;
(iii) An Amended and Restated Limited Guaranty executed by Mr. William
Ciralsky;
(iv) The written opinion of counsel to Assumptor and Guarantor as to
the transactions contemplated by the Asset Purchase Agreement,
this Agreement and the CCC Guaranty;
(v) Certified copies of Assumptor's casualty insurance policies
evidencing the existence of the insurance coverage required
pursuant to the Credit Agreement, together with loss payable
endorsements thereto naming the Agent, in such capacity, as the
loss payee or additional insured;
(vi) A Certificate of the Secretary of Assumptor, dated as of a date
satisfactory to the Agent, certifying (a) that attached thereto
is a true and complete copy of the Articles of Incorporation and
Code of Regulations of Assumptor, as in effect on the date of
such certification, (b) that attached thereto is a true and
complete copy of resolutions, in form satisfactory to the
Lenders, adopted by the Board of Directors of Assumptor,
authorizing the execution, delivery and performance of the Asset
Purchase Agreement and this Agreement and the consummation of the
transactions contemplated hereby, and (c) as to the incumbency
and genuineness of the signature of each officer of Assumptor
executing the Asset Purchase Agreement and this Agreement;
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(vii) Good standing certificates of Assumptor and Guarantor issued by
the Secretary of State of Assumptor's and Guarantor's respective
state of incorporation;
(viii) A Certificate of the Secretary of Guarantor, dated as of a date
satisfactory to the Agent, certifying (a) that attached thereto
is a true and complete copy of the Certificate of Incorporation
and Bylaws of Guarantor, as in effect on the date of such
certification, (b) that attached thereto is a true and complete
copy of resolutions, in form satisfactory to the Lenders, adopted
by the Board of Directors of Guarantor, authorizing the
execution, delivery and performance of the CCC Guaranty and the
consummation of the transactions contemplated hereby, and (c) as
to the incumbency and genuineness of the signature of each
officer of Guarantor executing the CCC Guaranty;
(ix) UCC financing statements evidencing transfer of the Collateral
from Current Debtor to Assumptor and the lien and security
interest granted hereby, duly executed by Assumptor;
(x) An Assumption and Consent Agreement duly executed by Current
Debtor, Assumptor and FINOVA, pursuant to which Assumptor shall
have assumed the Term Loan Obligations and the terms and
conditions of the Term Loan Documents; and
(xi) Such other agreements, instruments and documents which the Agent
or Lenders may require to be executed in connection therewith.
(c) Guarantor shall have made a One Million Dollar ($1,000,000) equity
contribution to Assumptor, which will be paid directly to Agent to be
applied to the outstanding balance of the Revolving Loan.
(d) Assumptor shall have paid to Agent for the benefit of Lenders a fee in
the amount of $10,000.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
(b) Counterparts. This Agreement may be executed and acknowledged in
multiple counterparts for the convenience of the parties, which
together shall constitute one agreement, and the counterpart signature
pages may be detached from the various counterparts and attached to
one copy of this Agreement to simplify the recordation of this
Agreement.
(c) Notices. Any notices which may be required under the Credit Documents
to be sent to Current Debtor shall be sent to Assumptor at the
following address:
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Mr. Richard Bailey
TPSS Acquisition Corporation
20000 S. Western Avenue
Torrance, California 90501
with a copy to:
Timothy J. Kincaid
Purcell & Scott
6035 Memorial Drive
Dublin, Ohio 43017
(d) References. Any reference to the Credit Agreement contained in any
notice, request, certificate, or other document executed concurrently
with or after the execution and delivery of this Agreement shall be
deemed to refer to the Credit Agreement as modified by this Agreement
unless the context shall otherwise require.
(e) Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this Agreement are not intended to and do not serve to
effect a novation as to the Credit Agreement; instead, it is the
express intention of the parties hereto to reaffirm the Obligations
created under the Credit Agreement which are evidenced by the Credit
Notes and secured by the Collateral. The Credit Agreement, as amended
hereby, and each of the other Credit Documents shall remain in full
force and effect.
(f) Costs, Expenses and Indemnity. Assumptor and Current Debtor affirm and
acknowledge that Sections 13.2 and 13.12 of the Credit Agreement apply
to this Agreement and the transactions and agreements and documents
contemplated hereunder.
(g) Severability. 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 to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement, intending to be legally
bound as of the date above set forth.
NATIONAL BANK OF CANADA, CURRENT DEBTOR:
in its capacities as both the Agent
and as a Lender TOLEDO PICKLING & STEEL SALES, INC.
By: /s/ Jack Jankovic By: /s/ William Ciralsky
------------------------------- ------------------------------
Its: Vice President Its: President
------------------------------- ------------------------------
FINOVA CAPITAL CORPORATION ASSUMPTOR:
TPSS ACQUISITION CORPORATION
By: /s/ Bruce Mettel By: /s/ Richard D. Bailey
------------------------------- ------------------------------
Its: Authorized Signer Its: President
------------------------------- ------------------------------
S-1
<PAGE> 1
EXHIBIT 10.94
CREDIT NOTE
$5,130,000 Cleveland, Ohio
January 12, 1999
FOR VALUE RECEIVED, the undersigned jointly and severally promise to
pay to the order of NATIONAL BANK OF CANADA ("Lender") on April 12, 1999 (the
"Maturity Date") the principal amount of FIVE MILLION ONE HUNDRED THIRTY
THOUSAND DOLLARS ($5,130,000) or such lesser amount as shall have been borrowed
by the undersigned from Lender from time to time pursuant to the provisions of a
certain Restated Loan And Security Agreement dated December 1, 1997 entered into
by and between Toledo Pickling & Steel Sales, Inc., Lender, National Bank of
Canada, in its capacity as agent thereunder (together with its successors and
assigns, the "Agent") and each of the other Lenders (as therein defined) a party
thereto (the "Loan Agreement"), as determined by the ledgers and records of
Lender, as accurately maintained to reflect the borrowings and payments under
the Loan Agreement, with interest on the unpaid principal balance from time to
time outstanding at a rate per annum equal to three and one-quarter (3-1/4)
percentage points above the "Base Rate" (as defined below) for commercial loans
in effect from time to time. Prior to the Maturity Date, Interest shall be
payable monthly commencing January 31, 1999, and continuing on the last day of
each month thereafter until the entire principal amount has been repaid in full.
Any increase or decrease in the interest rate resulting from a change in the
Base Rate shall become effective on the date of such change. Interest shall be
computed on a 360-day year basis based on the actual number of days elapsed.
The term "Base Rate" as used herein shall mean the rate of interest
announced publicly by the Agent from time to time as its prime rate or its
corporate base rate for loans in the United States or such other designation
which may replace such prime rate or corporate base rate, which rate may not be
the lowest or best rate offered by such bank.
Payment of the principal of, and interest on, this Credit Note (the
"Note") shall be made in lawful money of the United States of America to Lender
at 125 West 55th Street, New York, New York 10019 or at such other place as the
holder has designated to the undersigned in writing.
This Note is one of the "Credit Notes" referred to in the Loan
Agreement and evidences the assumption by TPSS Acquisition Corporation of joint
and several liability with Toledo Pickling & Steel Sales, Inc. ("Current
Debtor") for the obligations of Current Debtor to Lender pursuant to an
Assumption and Consent Agreement dated of even date herewith (the "Assumption
Agreement"). This Note is secured by, among other things, the security interests
and liens described in the Loan Agreement. Reference is hereby made to the Loan
Agreement and the Assumption Agreement for a statement of the rights and
obligations of Lender and the duties and obligations of the undersigned in
relation thereto, but neither this reference to the Loan Agreement and the
Assumption Agreement nor any provision thereof shall affect or impair the
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absolute and the unconditional joint and several obligation of the undersigned
to pay the principal of, and interest on, this Note on the Maturity Date or
otherwise when due and payable.
This Note has been issued pursuant to the Loan Agreement, together with
the other Credit Notes as evidence of the undersigned's joint and several
liability for the obligations under that certain Demand Note dated May 4, 1989
in the original principal amount of Sixteen Million Dollars ($16,000,000) issued
to Bank of New England, N.A., the predecessor-in-interest to the Agent, by
Toledo Pickling & Steel Sales, Inc. (as amended to date, including amendments
set forth in the Assumption Agreement, the "Original Note"). It is understood
and acknowledged by the undersigned that this Note is not intended as a novation
of the obligations under the Original Note but is merely evidence of the
assumption by TPSS Acquisition Corporation of such obligations pursuant to the
Assumption Agreement.
Notwithstanding anything to the contrary in the Credit Documents (as
defined in the Assumption Agreement) or the Assumption Agreement, the
undersigned agree that in the event all of the Obligations owed to Lenders under
the Credit Notes are not paid in full on or before the Maturity Date, the
undersigned will be jointly and severally obligated to pay to Agent, for the
benefit of the Lenders, a fee of $2,000 for each calendar day after the Maturity
Date that any Obligations remain unpaid (the "Loan Continuation Fee") and, until
paid, the entire amount of the Loan Continuation Fee shall be an additional
Obligation under the Credit Documents secured by the Collateral.
Upon the nonpayment or partial payment of any payment of principal
and/or accrued interest due and owing under this Note, or any other obligation
due and owing to Lender, all or any portion of the principal and interest due or
to become due under this Note shall become at once due and payable at the option
of the holder without notice, demand, presentment, or dishonor, which the
undersigned hereby waive.
The undersigned hereby irrevocably waive all right to trial by jury in
any action, proceeding, or counterclaim arising out of or relating to this Note
and agree to pay upon default the costs of collection including, without
limitation, reasonable attorneys' fees.
No delay or omission on the part of the holder in exercising any rights
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission, or waiver on any one occasion be deemed a
bar to, or waiver of, the same or any other right on any future occasion. The
undersigned and every endorser of this Note, regardless of the time, order, or
place of signing, waive presentment, protest, and notice of every kind and
assent to any one or more extensions or postponements of the time of payment or
any other indulgences, to any substitutions, exchanges, or releases of
collateral for this Note, and to additions or releases of any other parties or
persons primarily or secondarily liable hereunder.
Each of the undersigned authorizes any attorney-at-law to (a) appear
before any court of record, state or Federal, in the county of the State of Ohio
in which this Note was executed or in any other State of the United States of
America after the unpaid principal of this Note becomes due, (b) waive the
issuance and service of process, (c) admit the maturity of the Note, (d) enter
an appearance and confess judgment against either or both of the undersigned in
favor of Lender for the amount then appearing due, together with interest
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<PAGE> 3
thereon and costs of suit (including reasonable attorney fees), and (e)
thereupon to release all errors and waive all rights of appeal and stay of
execution. No such judgment against the undersigned based upon one or more
matured obligations shall be a bar to a subsequent judgment or judgments
pursuant to this warrant of attorney against the undersigned based upon
subsequently matured obligations of the undersigned. The foregoing warrant of
attorney shall survive any judgment, it being understood that should any
judgment be vacated for any reason, the foregoing warrant of attorney
nevertheless may thereafter be used for obtaining an additional judgment or
judgments.
This Note is being executed and delivered in Cleveland, Ohio.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
TPSS ACQUISITION CORPORATION
By: /s/ Richard D. Bailey
---------------------------------
Title: President
------------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
TOLEDO PICKING & STEEL SALES, INC.
By: /s/ William Ciralsky
--------------------------------
Title: President
-----------------------------
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<PAGE> 1
EXHIBIT 10.95
CREDIT NOTE
$3,870,000 Cleveland, Ohio
January 12, 1999
FOR VALUE RECEIVED, the undersigned jointly and severally promise to
pay to the order of FINOVA CAPITAL CORPORATION ("Lender") on April 12, 1999 (the
"Maturity Date") the principal amount of THREE MILLION EIGHT HUNDRED SEVENTY
THOUSAND DOLLARS ($3,870,000) or such lesser amount as shall have been borrowed
by the undersigned from Lender from time to time pursuant to the provisions of a
certain Restated Loan And Security Agreement dated December 1, 1997 entered into
by and between Toledo Pickling & Steel Sales, Inc., Lender, National Bank of
Canada, in its capacity as agent thereunder (together with its successors and
assigns, the "Agent") and each of the other Lenders (as therein defined) a party
thereto (the "Loan Agreement"), as determined by the ledgers and records of
Lender, as accurately maintained to reflect the borrowings and payments under
the Loan Agreement, with interest on the unpaid principal balance from time to
time outstanding at a rate per annum equal to three and one-quarter (3-1/4)
percentage points above the "Base Rate" (as defined below) for commercial loans
in effect from time to time. Prior to the Maturity Date, Interest shall be
payable monthly commencing January 31, 1999, and continuing on the last day of
each month thereafter until the entire principal amount has been repaid in full.
Any increase or decrease in the interest rate resulting from a change in the
Base Rate shall become effective on the date of such change. Interest shall be
computed on a 360-day year basis based on the actual number of days elapsed.
The term "Base Rate" as used herein shall mean the rate of interest
announced publicly by the Agent from time to time as its prime rate or its
corporate base rate for loans in the United States or such other designation
which may replace such prime rate or corporate base rate, which rate may not be
the lowest or best rate offered by such bank.
Payment of the principal of, and interest on, this Credit Note (the
"Note") shall be made in lawful money of the United States of America to Lender
at 355 South Grand Avenue, Suite 2400, Los Angeles, California 90071 or at such
other place as the holder has designated to the undersigned in writing.
This Note is one of the "Credit Notes" referred to in the Loan
Agreement and evidences the assumption by TPSS Acquisition Corporation of joint
and several liability with Toledo Pickling & Steel Sales, Inc. ("Current
Debtor") for the obligations of Current Debtor to Lender pursuant to an
Assumption and Consent Agreement dated of even date herewith (the "Assumption
Agreement"). This Note is secured by, among other things, the security interests
and liens described in the Loan Agreement. Reference is hereby made to the Loan
Agreement and the Assumption Agreement for a statement of the rights and
obligations of Lender and the duties and obligations of the undersigned in
relation thereto, but neither this reference to the Loan Agreement and the
Assumption Agreement nor any provision thereof shall affect or impair the
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<PAGE> 2
absolute and the unconditional joint and several obligation of the undersigned
to pay the principal of, and interest on, this Note on the Maturity Date or
otherwise when due and payable.
This Note has been issued pursuant to the Loan Agreement, together with
the other Credit Notes as evidence of the undersigned's joint and several
liability for the obligations under that certain Demand Note dated May 4, 1989
in the original principal amount of Sixteen Million Dollars ($16,000,000) issued
to Bank of New England, N.A., the predecessor-in-interest to the Agent, by
Toledo Pickling & Steel Sales, Inc. (as amended to date, including amendments
set forth in the Assumption Agreement, the "Original Note"). It is understood
and acknowledged by the undersigned that this Note is not intended as a novation
of the obligations under the Original Note but is merely evidence of the
assumption by TPSS Acquisition Corporation of such obligations pursuant to the
Assumption Agreement.
Notwithstanding anything to the contrary in the Credit Documents (as
defined in the Assumption Agreement) or the Assumption Agreement, the
undersigned agree that in the event all of the Obligations owed to Lenders under
the Credit Notes are not paid in full on or before the Maturity Date, the
undersigned will be jointly and severally obligated to pay to Agent, for the
benefit of the Lenders, a fee of $2,000 for each calendar day after the Maturity
Date that any Obligations remain unpaid (the "Loan Continuation Fee") and, until
paid, the entire amount of the Loan Continuation Fee shall be an additional
Obligation under the Credit Documents secured by the Collateral.
Upon the nonpayment or partial payment of any payment of principal
and/or accrued interest due and owing under this Note, or any other obligation
due and owing to Lender, all or any portion of the principal and interest due or
to become due under this Note shall become at once due and payable at the option
of the holder without notice, demand, presentment, or dishonor, which the
undersigned hereby waive.
The undersigned hereby irrevocably waive all right to trial by jury in
any action, proceeding, or counterclaim arising out of or relating to this Note
and agree to pay upon default the costs of collection including, without
limitation, reasonable attorneys' fees.
No delay or omission on the part of the holder in exercising any rights
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission, or waiver on any one occasion be deemed a
bar to, or waiver of, the same or any other right on any future occasion. The
undersigned and every endorser of this Note, regardless of the time, order, or
place of signing, waive presentment, protest, and notice of every kind and
assent to any one or more extensions or postponements of the time of payment or
any other indulgences, to any substitutions, exchanges, or releases of
collateral for this Note, and to additions or releases of any other parties or
persons primarily or secondarily liable hereunder.
Each of the undersigned authorizes any attorney-at-law to (a) appear
before any court of record, state or Federal, in the county of the State of Ohio
in which this Note was executed or in any other State of the United States of
America after the unpaid principal of this Note becomes due, (b) waive the
issuance and service of process, (c) admit the maturity of the Note, (d) enter
an appearance and confess judgment against either or both of the undersigned in
favor of Lender for the amount then appearing due, together with interest
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<PAGE> 3
thereon and costs of suit (including reasonable attorney fees), and (e)
thereupon to release all errors and waive all rights of appeal and stay of
execution. No such judgment against the undersigned based upon one or more
matured obligations shall be a bar to a subsequent judgment or judgments
pursuant to this warrant of attorney against the undersigned based upon
subsequently matured obligations of the undersigned. The foregoing warrant of
attorney shall survive any judgment, it being understood that should any
judgment be vacated for any reason, the foregoing warrant of attorney
nevertheless may thereafter be used for obtaining an additional judgment or
judgments.
This Note is being executed and delivered in Cleveland, Ohio.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
TPSS ACQUISITION CORPORATION
By: /s/ Richard D. Bailey
----------------------------------
Title: President
-------------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
TOLEDO PICKING & STEEL SALES, INC.
By: /s/ William Ciralsky
----------------------------------
Title: President
-------------------------------
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<PAGE> 1
EXHIBIT 10.96
GUARANTY
This Guaranty ("Guaranty") is executed by the undersigned guarantor
(the "Guarantor") for the joint benefit of (a) NATIONAL BANK OF CANADA, in its
capacity as Agent (referred to herein as the "Agent") under the terms of that
certain Restated Loan and Security Agreement dated December 1, 1997, as amended
(which, as it may hereafter from time to time be restated, amended, modified or
supplemented is referred to herein as the "Revolving Credit Agreement" and,
together with the other "Credit Documents" as therein defined, sometimes
collectively referred herein to as the "Revolving Credit Documents") by and
among Toledo Pickling & Steel Sales, Inc., an Ohio corporation (the "Original
Borrower"), the Agent and the Lenders (as therein defined) a party thereto (the
"Lenders") and (b) FINOVA CAPITAL CORPORATION ("FINOVA"), in its capacity as
lender under the terms of that certain Loan and Security Agreement dated
December 1, 1997 between the Original Borrower and FINOVA (which, as it may
hereafter from time to time be restated, amended, modified or supplemented is
referred to herein as the "Term Loan Agreement" and, together with each of the
other agreements, instruments and other documents executed in connection
therewith or pursuant thereto, sometimes collectively referred herein to as the
"Term Loan Documents") to induce the Lenders to (a) consent to the transfer and
sale of Original Borrower's Property and the assumption of the Obligations of
Original Borrower under the Revolving Credit Documents and the Term Loan
Documents by TPSS Acquisition Corporation ("Assumptor") pursuant to the terms of
an Assumption and Consent Agreement among the Lenders, Agent, Original Borrower
and Assumptor of even date herewith and an Assumption and Consent Agreement
among FINOVA, Original Borrower and Assumptor of even date herewith. The
Revolving Credit Documents and Term Loan Documents are sometimes collectively
referred to herein as the "Credit Documents".
In consideration thereof, the Guarantor hereby absolutely and
unconditionally guarantees (a) the payment to Lenders and FINOVA of all sums
which may be presently due and owing to Lenders and FINOVA, or which may become
due and owing to Lenders and FINOVA from Assumptor, under the Credit Documents,
and (b) the due performance by Assumptor of all of Assumptor's obligations under
the Credit Documents.
The Guarantor also agrees: that this Guaranty shall not be impaired by
any modification, supplement, extension or amendment of any contract or
agreement to which the parties to the Credit Documents may hereafter agree, nor
by any modification, release or other alteration of any of the obligations
hereby guaranteed or of any security or other guaranty or guaranties therefor,
nor by any agreements or arrangements of any kind with Assumptor, or any other
persons nor by Bank's election in any proceeding instituted under Chapter 11 of
Title 11 of the United States Code (11 U.S.C. ss.101 et seq.) (the "Bankruptcy
Code") of the application of Section 1111(b)(2) of the Bankruptcy Code, any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code, the disallowance under Section 502 of the Bankruptcy Code of all or any
portion of any claims of Lenders or FINOVA for repayment of all or any part of
the obligations hereby guaranteed or any expenses related thereto, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense (other than payment) of a guarantor; that the liability of the Guarantor
hereunder is direct and unconditional and may be enforced without requiring
<PAGE> 2
Lenders or FINOVA to first resort to any other right, remedy or security; that
the Guarantor shall not have any right of subrogation, reimbursement or
indemnity whatsoever, nor any right of recourse to security for the debts and
obligations of Assumptor to Lenders and FINOVA, unless and until all of such
debts and obligations have been paid in full; that if Assumptor or any guarantor
of Assumptor's indebtedness [other than William Ciralsky] to the Lenders and
FINOVA should at any time become insolvent or make a general assignment for the
benefit of creditors, or if a petition for bankruptcy or any insolvency or
reorganization proceeding shall be filed or commenced by, against or with
respect to Assumptor or any guarantor of any of Assumptor's indebtedness to the
Lenders, at the option of the Lenders and FINOVA as otherwise provided in the
Credit Documents, all obligations of Assumptor and the Guarantor immediately
shall become due and payable without notice; that this Guaranty is a continuing
Guaranty which shall remain effective so long as any indebtedness is owed by
Assumptor to Lenders or FINOVA; provided, however, that nothing shall discharge
or satisfy the liability of the Guarantor hereunder except the full payment and
performance of all of Assumptor's debts and obligations to Lenders and FINOVA
with interest; that any and all present and future debts and obligations of
Assumptor to the Guarantor are hereby waived and postponed in favor of and
subordinated to the full payment and performance of all present and future debts
and obligations of Assumptor to Lenders and FINOVA; and that all sums at any
time to the credit of the Guarantor and any of the property of the Guarantor in
the possession of the Agent, the Lenders or FINOVA at any time may be so held as
security for any and all obligations of the Guarantor hereunder, no matter how
or when arising, whether absolute or contingent, whether due or to become due
and whether under this Guaranty or otherwise.
The Guarantor waives diligence, presentment, demand for payment, filing
of claims with a court in the event of receivership or bankruptcy of Assumptor,
protest or notice with respect to the obligations guaranteed hereby and all
demands whatever, notice of acceptance hereof, presentment and protest of any
instrument, and notice thereof; notice of default; and all other notices to
which the Guarantor might otherwise be entitled.
The Guarantor hereby assumes responsibility for keeping himself
informed of the financial condition of Assumptor and of all other circumstances
bearing upon the risk of nonpayment of the obligations guaranteed hereby or any
part thereof that diligent inquiry would reveal and Guarantor hereby agrees that
neither the Agent, the Lenders or FINOVA shall have any duty to advise the
Guarantor of information known to such party regarding such condition or any
such circumstances. In the event any of the Agent, any Lender or FINOVA, in its
sole discretion, undertakes at any time or from time to time to provide any such
information to Guarantor, such party shall not be under any obligations (i) to
undertake any investigation not a part of its regular business routine; (ii) to
disclose any information which pursuant to accepted or reasonable commercial
finance practices, such party is to maintain confidential; or (iii) to make any
other or future disclosures of such information or any other information to the
Guarantor.
This Guaranty, all acts and transactions hereunder, and the rights and
obligations of the parties hereto shall be governed, construed, and interpreted
according to the laws of the State of Ohio, shall be binding upon the heirs,
executors, administrators, successors, and assigns of the Guarantor and shall
inure to the benefit of the respective successors and assigns of each of the
Agent, the Lenders and FINOVA.
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<PAGE> 3
The Guarantor authorizes any attorney-at-law to (a) appear before any
Court of Record in the County and the State of Ohio in which this Guaranty was
executed or in any other county in Ohio or State of the United States of America
after any one or more of the obligations of the Guarantor becomes due under this
Guaranty, (b) waive the issuance and service of process, (c) admit the maturity
of the obligation, (d) enter an appearance and confess a judgment against the
Guarantor in favor of the Lenders and/or FINOVA for the amount then appearing
due, together with interest thereon and cost of suit, and (e) release all errors
and waive all rights of appeal and stay of execution. No such judgment against
the Guarantor based upon one or more matured obligations shall be a bar to a
subsequent judgment or judgments pursuant to this warrant of attorney against
the Guarantor based upon subsequently matured obligations of the Guarantor. The
foregoing warrant of attorney shall survive any judgment, it being understood
that should any judgment be vacated for any reason, the foregoing warrant of
attorney may be used thereafter for obtaining an additional judgment or
judgments.
This Guaranty is being executed and delivered in Cleveland, Ohio.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
12 day of January, 1999.
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS. FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE."
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
By: /s/ Richard D. Bailey
------------------------------------------
Its: President
-----------------------------------------
