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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended June 30, 1995
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22968
FOCAL CORPORATION
(Name of small business issuer in its charter)
UTAH 87-0363789
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
518 DWYER DRIVE
ANAHEIM, CALIFORNIA 92801
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (including area code): (714) 635-8821
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.10 par value per share
---------------------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
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No X
-------
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The registrant's revenues for its most recent fiscal year were -0-.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on June 30, 1996 was approximately $786,847.
The number of shares outstanding of the registrant's only class of
Common Stock, $0.10 par value per share, was 3,491,576 on June 30, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Focal Corporation ("Company") was incorporated in Utah on August 12, 1980 as
Petro Funding, Inc., for the purpose of acquiring, exploring and developing
natural resource properties. The Company changed its name to TVM Global
Entertainment, Inc. in November 1982, and to Cinema Features, Inc. in July 1983,
as part of the Company's plan to invest in movie production and distribution
rights. By January 1985, the Company had acquired the movie and video cassette
distribution rights for eight motion pictures. In 1989, the Company's movie
rights were independently appraised for audit purposes and the total cost base
of $2,100,000 was decreased by $770,000 to a revised value of $1,330,000.
In March 1993, after several years of unprofitable operations, the Company's
Board of Directors entered into negotiations to sell the Company's movie rights.
As a result of a shareholders meeting held on May 17, 1993, and with the
approval of the Company's shareholders, all of the Company's assets relating to
movie production and distribution were sold to an independent marketing firm in
exchange for $1,200,000 worth of restricted stock. See "Management's Discussion
and Analysis or Plan of Operations." Shortly thereafter, the shares of
restricted stock were distributed to the shareholders of the Company, on a pro
rata basis and without consideration, and the Company's Articles of
Incorporation were amended to change the name of the Company to Focal
Corporation. In addition to the name change, the amendment to the Company's
Articles of Incorporation effected a one-for-ten reverse stock split of the
Company's Common Stock, changed the par value of the Company's Common Stock to
$0.10 per share and established a new class of undesignated preferred stock.
During August 1993, the Company's Board of Directors approved a new business
plan to acquire and develop community shopping centers and other operating real
properties. In connection with the Company's new business plan, the Board of
Directors appointed Howard M. Palmer as President and Chairman of the Board. See
"Certain Relationships and Related Transactions." Through Mr. Palmer's
experience, coupled with a number of experienced consultants, including
independent architects, construction and civil engineers, developers, brokers
and attorneys, the Company initially intends to acquire existing shopping
centers anchored by national retail tenants with operations that generate
positive cash flows. As the Company's financial condition improves, and as
appropriate opportunities arise, the Company also intends to acquire
strategically-located vacant land suitable for the development of discount and
neighborhood shopping centers. The Company has never acquired a discount
shopping center, acquired vacant land suitable for development of a shopping
center or developed a shopping center. Accordingly, there is no assurance that
any shopping centers will be successfully acquired or developed in the future.
However, because the Company's President has over 25 years of experience in the
development, ownership and management of shopping centers, and because the
Company has engaged the services of independent consultants with many years of
experience in site analysis, property acquisition, land use regulations, anchor
tenant negotiations and the development of retail complexes with national
discount-oriented tenants, the Company believes it has in such individuals the
necessary expertise to accomplish the Company's business plan. It is
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intended that shopping centers which are either acquired or developed by the
Company will be operated, on a day-to-day basis, by professional managers
selected by the Company.
The Company presently has two properties under contract, one in Mesa, Arizona,
and the other in Barstow, California. The Mesa property consists of 11 acres
improved with a shopping center anchored by a 103,000 square foot HomeBase
store. The purchase price is $9,700,000, with $2,200,000 down, the assumption of
an existing $7,100,000 first trust deed, and the seller taking back a $400,000
second trust deed. The Barstow property consists of 26.8 undeveloped acres on
which the Company plans to develop a Bob's Big Boy restaurant and a 125-unit
Best Western motel. The purchase price is $2,800,000, with $800,000 down. Both
purchase contracts have expired, but the Company is negotiating for, and expects
to obtain, extensions.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company occupies a small office in Anaheim, California provided by Palmer
Development Company, an affiliate of the Company's President. The Company
presently pays no rent. Management of the Company considers the office space to
be adequate to meet the current demands of the Company's business; however, the
Company is currently looking at larger office space in Orange County,
California, which will accommodate a small property management and
administrative staff. The Company expects to begin paying rent of approximately
$1,800 per month in late 1996.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any litigation and is not aware of any pending
or threatened litigation against the Company. James Collins, a former financial
consultant of the Company, has a stipulated judgment against the Company for
$24,000 in unpaid consulting fees. Jackson, DeMarco & Peckenpaugh, the Company's
former counsel, has recorded a $71,000 judgment (and lien against the Company's
assets) for unpaid legal fees.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Although previously traded in Utah pursuant to a Secondary Trading
Transactional Exemption under old Rule 177-14-2m of the Utah Uniform Securities
Act, there has been no active trading market for the Common Stock of the Company
since 1984. The Company's Common Stock is not listed on any exchange and is not
quoted or traded on the over-the-counter market. No broker maintains a position
or deals in the Company's Common Stock. No bid or asked prices are quoted in the
pink sheets or any local newspaper. Although the Company uses a transfer agent
to maintain
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its stock transfer ledgers, the Company is typically aware of any transactions
involving changes in record ownership.
As of June 30, 1996, there were 3,491,576 shares of the Company's Common Stock
issued and outstanding, held of record by 441 shareholders.
The Company has paid no dividends on its Common Stock and does not expect to
pay dividends in the foreseeable future.
Oxford Transfer & Registrar Agency, Inc. in Portland, Oregon serves as
transfer agent for the Common Stock of the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
Plan of Operations
In May 1993, the Company discontinued its operations relating to movie
distribution and sold substantially all of its assets to Maverick Marketing
Management, Inc., a Nevada corporation ("Maverick"), in exchange for shares of
common stock of Maverick and shares of common stock of Interdec Corporation, a
Colorado corporation ("Interdec"), which were held by Maverick. All of the
shares of common stock of Maverick and Interdec were subsequently distributed to
the Company's shareholders on a pro rata basis and for no consideration. The
Company realized a $271,000 net gain on the sale of the assets to Maverick.
The Company's current plan of operations is to acquire commercial shopping
centers in the Western United States. The Company expects to target centers
anchored by long-term leases with national, credit-rated retail tenants and
which generate positive cash flows. The Company intends to acquire existing
shopping centers of approximately eight to 20 acres, which are expected to
include a major discount department store, a major supermarket and several
credit-rated retailers strategically spaced between the larger anchors. Some
complexes also will include separate out-lots suitable for family type
restaurants. In addition, as the Company's financial condition improves and as
appropriate opportunities arise, the Company plans to option or contract for
strategically-located vacant land suitable for the development of shopping
centers, such options or contracts to be subject to negotiating pre-building
leases with major retail tenants.
The Company's investment objective in considering each potential acquisition
is to achieve long-term capital appreciation through increased cash flow and
increased value of the acquired property. The Company will seek to accomplish
this investment objective through (i) selective acquisitions of shopping centers
which are strategically located and which generally provide positive cash flows,
(ii) improved operations of the shopping centers and lease-up of unleased space,
and (iii) where deemed appropriate, expansions, renovations and redevelopments
of these properties. A key criterion for property investments will be that they
offer the opportunity for growth in revenues from operations. The Company may
purchase or lease properties for long-term investment or sell such properties,
in whole or in part, when circumstances warrant. The Company may also
participate with other entities in property ownership, through joint ventures or
other types of co-ownership. Equity
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investments may be subject to existing mortgage financing and other indebtedness
which have priority over the equity interest of the Company.
Currently, the Company does not own or manage any shopping centers or other
real properties. In addition, the Company does not have funds necessary for the
acquisition or development of shopping centers. However, the Company intends to
rely on its new management to successfully negotiate the acquisition of existing
shopping centers and vacant land in exchange for shares of the Company's Common
Stock or Convertible Preferred Stock. It is anticipated that each such
acquisition will be separately negotiated based on the owner's equity or tax
base in the subject property. The Company presently has one improved and one
unimproved property under contract. See "Description of Business."
The Company currently intends to adhere to a policy of limiting the incurrence
of debt so that the Company's ratio of total debt to total equity on its
portfolio of shopping center properties does not exceed 70%. The Company may
from time to time modify its debt policy in light of then current economic
conditions, relative costs of debt and equity capital, the market value of
acquired properties, general conditions in the market for debt and equity
securities, fluctuations in the fair market value of the Company's Common Stock
and Convertible Preferred Stock, growth and acquisition opportunities and other
factors. Accordingly, the Company may increase or decrease the total debt to
total equity ratio beyond the limits described above.
Although the Company currently intends to acquire shopping centers in exchange
for shares of the Company's Common Stock or Convertible Preferred Stock, if the
Board of Directors determines that additional or other funding is required to
acquire the shopping centers, the Company may raise such funds through equity
offerings, debt financing or retention of cash flow, or a combination of these
methods. If the Board of Directors determines to raise equity capital, it has
the authority, without shareholder approval, to issue shares of Common Stock or
Convertible Preferred Stock in any manner (and on such terms and for such
consideration) it deems appropriate, including in exchange for property.
Existing shareholders have no preemptive right to purchase shares issued in any
offering, and any such offering might cause a dilution of a shareholder's
investment in the Company. Indebtedness incurred by the Company may be in the
form of bank borrowings, purchase money obligations to the sellers of
properties, secured and unsecured, and publicly and privately placed debt
investments. Such indebtedness may be recourse to all of the properties of the
Company or may be limited to the particular property to which the indebtedness
relates. The proceeds from any borrowings by the Company may be used for working
capital, to refinance existing indebtedness or to finance acquisitions,
expansions or development of new properties.
Results of Operations
The Company had no revenue from operations during the fiscal years ended June
30, 1995 and 1994.
The Company's expenses during the fiscal years ended June 30, 1995 and 1994
amounted to $511,625 and $472,322, respectively. Expenses increased by $39,303
(8.3%) primarily as a result of costs associated with due diligence
investigations of various real properties in California, Arizona,
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Nevada and other areas. Fees and advances to professional advisors and real
estate and financial consultants accounted for a substantial portion of these
increased expenses.
The Company had a net loss of $512,625 for the fiscal year ended June 30,
1995, and a net loss of $473,122 for the fiscal year ended June 30, 1994.
Because there was no revenue generated during those periods, these losses
represent the Company's operating expenses plus income tax.
Liquidity and Capital Resources
The Company's liquidity over the past two years has been materially and
adversely affected by continuing operating losses. The Company has experienced
total net losses of $985,757 for the two years ended June 30, 1995. As described
in Note 11 to the Company's financial statements, the Company currently has no
operations and is dependent on private debt and equity financing to fund its day
to day cash requirements. Accordingly, the independent auditors' report covering
the Company's financial statements is qualified as to the Company's ability to
continue as a going concern.
The Company is in the process of attempting to raise approximately $500,000
("Offering") for working capital. The offering is expected to consist of Common
Stock and Warrants to purchase Common Stock, and will be made to "accredited
investors" only pursuant to Regulation D under the Securities Act of 1933.
At June 30, 1995, the Company had total liabilities of $656,933, of which (i)
$80,412 represented expense reimbursements and loans payable to officers and
directors and their families (all of whom have agreed to defer payment until
such time as the Company is financially able to pay such payments), (ii)
$347,730 represented accounts payable to others (principally professional
advisors and real estate and financial consultants) and (iii) $35,074
represented accrued taxes. On that same date, the Company had assets totaling
$123,702, of which $3,702 represented cash and $120,000 represented prepaid
fees.
Management believes that proceeds from the Offering will generate sufficient
working capital to conduct the business of the Company during the period that
the Company negotiates for and closes the acquisition of its first shopping
center. Once the Company has acquired a shopping center that meets the Company's
investment criteria, which include among other things, the ability to generate
positive cash flows, management believes that such cash flows will provide the
liquidity and capital resources necessary to conduct the business of the
Company. Management of the Company believes that between the funds generated by
the Offering and any cash flows resulting from the acquisition of a shopping
center, the Company will generate enough cash to support its operations over the
next twelve months.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company are submitted as a separate section of
this Form 10-KSB on pages F-1 through F-14.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Kelly & Company ("Kelly") resigned as the Company's Certifying Accountant
effective September 9, 1995.
The reports of Kelly on the Company's financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion.
However, the financial statements were prepared to reflect the uncertainty as to
the Company's ability to continue as a going concern.
In connection with the audit of the Company's financial statements for the
year ended June 30, 1994 and the interim period through the date of dismissal,
there was no disagreement between the Company and Kelly on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, and there was no reportable event required to be disclosed.
The Company requested that Kelly furnish it a letter addressed to the
Commission stating whether it agrees with the above statements. A copy of that
letter, dated September 8, 1995, was filed as Exhibit 16 to the Company's Form
8-K dated September 25, 1995.
On September 25, 1995, the Company appointed Caldwell, Becker, Dervin, Petrick
& Company ("CBDP") as its new Certifying Accountant. The Company did not consult
with CBDP or any other accounting firm regarding the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of opinion that might be rendered regarding the Company's financial statements,
nor did the Company consult with CBDP with respect to any accounting
disagreement or any reportable event at any time prior to the appointment of
such firm.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors*, executive officers and significant personnel of the Company
and their ages are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------- --- ---------------------------
<S> <C> <C>
Howard M. Palmer 63 Chairman of the Board,
President and Director
Leroy Hardy 59 Vice President and Director
Gerald W. May 57 Director
A. G. Kading 47 Treasurer
Rosemary Palmer 58 Secretary
</TABLE>
_______________
* The Company's Board of Directors have been operating with two vacancies
and will continue to do so until suitable candidates can be identified
and agree to join the Board.
HOWARD M. PALMER has been Chairman of the Board, President and a director of
the Company since 1993. In addition to his positions with the Company, Mr.
Palmer has been the owner of Palmer Development Company, a real estate
development and investment firm in Anaheim, California, for the last five years.
Mr. Palmer has over 25 years of experience developing neighborhood and discount
shopping centers throughout the Western United States. Mr. Palmer is a licensed
real estate broker in California and a graduate of the University of Southern
California. Mr. Palmer is the husband of Rosemary Palmer.
LEROY HARDY has been a director and the Vice President of the Company since
1993. In addition to his positions with the Company, Mr. Hardy has been
operating a computer accounting service firm in Denver, Colorado for the last
five years. Mr. Hardy also has served as an assistant vice president of
operations for the First National Bank and Trust Company of Wyoming and an
independent oil and gas landman. Mr. Hardy attended the University of Wyoming.
GERALD W. MAY has been a director of the Company since 1993 and was the
Treasurer of the Company from 1993, to 1995. Mr. May has been an independent
accountant since 1977 and is a graduate of Creighton University, with a B.S. in
business administration.
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A. G. KADING has been Treasurer of the Company since 1995. From 1990 to 1995
he was president of Kading Company, a real estate development and construction
company. Prior to that he held various positions with real estate management,
development and construction companies.
ROSEMARY PALMER has been Secretary of the Company since 1995. She is and has
for the past five years been a homemaker. Ms. Palmer is the wife of Howard M.
Palmer.
All directors hold office until the next annual meeting of shareholders of the
Company and the election and qualification of their successors. Officers are
elected annually by, and serve at the discretion of, the Board of Directors.
All directors are reimbursed for out-of-pocket expenses in connection with
attendance at Board of Directors' meetings and receive a $100 per meeting
director's fee.
Compliance with Beneficial Ownership Reporting Rules
Section 16(a) of the Securities Act of 1934, as amended ("Exchange Act"),
requires the Company's executive officers and directors, and persons who
beneficially own more than 10% of a registered class of the Company's Common
Stock to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission ("Commission"). Such officers,
directors and shareholders are required by Commission regulations to furnish the
Company with copies of all such reports that they file.
Based solely upon a review of copies of such reports furnished to the Company
during its fiscal year ended June 30, 1995 and thereafter, or any written
representations received by the Company from a director, officer or beneficial
owner of more than 10% of the Company's Common Stock ("reporting persons") that
no other reports were required, the Company believes that, during the Company's
1995 fiscal year, all Section 16(a) filing requirements applicable to the
Company's reporting persons were complied with.
ITEM 10. EXECUTIVE COMPENSATION.
Effective October 1, 1993, Howard Palmer entered into an employment agreement
with the Company, pursuant to which Mr. Palmer is entitled to base cash
compensation of $120,000 per year. Currently, this salary is being accrued. The
Board of Directors is exploring the future possibility of exchanging some or all
of this accrued salary for Common Stock of the Company. The Company also
maintains a reimbursement policy whereby executive officers are reimbursed for
actual expenses incurred in connection with the management of the Company and
its business.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 30, 1996, certain information with
respect to the beneficial ownership of the Company's Common Stock held by each
director and officer and by all directors and officers as a group, as well as
the identity of each person known to the Company to be the beneficial owner of
more than 5% of the Company's Common Stock and the respective beneficial
ownerships of those persons.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Ownership Percent of
of Beneficial Owner(1)(2) of Common Stock Common Stock(3)
- ------------------------------------- ----------------------- ---------------
<S> <C> <C>
Howard M. and 986,000 25.3%
Rosemary Palmer(4)
Julia Murray(5) 800,000 22.9%
Robert and Lynda Cullen(6) 470,792 12.3%
1050 N. Anaheim Blvd.
Anaheim, California 92801
Estate of James T. Hays(7) 302,018 8.5%
518 Dwyer Drive
Anaheim, California 92801
Don Zink(8) 254,500 6.9%
2100 Sepulveda Blvd., #24
Manhattan Beach, California 90266
William Jones 200,000 5.7%
P. O. Box 27282
Tempe, Arizona 85285
Leroy Hardy(9) 79,783 2.3%
Gerald W. May(10) 79,783 2.3%
All Directors and Officers 1,145,566 29.0%
as a Group (4 persons)
</TABLE>
__________________
(1) The address of each officer and director is c/o Focal Corporation, 518
Dwyer Drive, Anaheim, California 92801.
(2) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in this table
have sole voting and investment power with respect to all shares of
Common Stock.
(footnotes continued at bottom of following page)
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with the reorganization of the Company and the Board of
Directors' desire to acquire real estate assets, operating funds and additional
management personnel, the Company entered into an agreement dated July 29, 1993
among the Company, Focal Development Corporation of Nevada ("FDCN") (a Nevada
corporation controlled by the estate of James T. Hays) and Howard M. Palmer.
Pursuant to the agreement, Mr. Palmer became President of the Company and began
the process of locating and negotiating for shopping center properties through
his independent network of experienced retail site selectors, lease negotiators
and property managers. Each acquisition will be negotiated and approved by the
Company's Board of Directors on an individual basis. In connection with the
agreement, FDCN transferred its 404,839 shares of the Company's Common Stock as
follows: 160,000 shares to Mr. Palmer, 80,000 shares to Don Zink and the
balance to Mr. Hays. Mr. Zink subsequently transferred his 80,000 shares to a
business associate. Mr. Hays subsequently gifted his shares to various
individuals, including 64,054 shares to his wife. In addition, Coast Advisors,
Inc., an affiliate of Mr. Palmer, was issued 10,000 shares of the Company's
Common Stock in exchange for a $5,000 capital contribution.
In August 1993, Howard M. Palmer was issued 250,000 shares of the Company's
Common Stock in connection with his appointments as Chairman of the Board and
President of the Company. Mr. Palmer subsequently transferred these shares to
Coast Advisors, Inc., a Nevada corporation affiliated with Mr. Palmer.
__________________
(3) All percentages have been calculated to include warrants which are
immediately exercisable into shares of Common Stock by the particular
shareholder.
(4) Includes 316,000 shares which Mr. Palmer owns of record. Also includes
(i) 260,000 shares held by Coast Advisors, Inc., a Nevada corporation
affiliated with Mr. Palmer and (ii) warrants to purchase 410,000 shares
of Common Stock. Mr. Palmer is the President and Chairman of the Board
of Directors of the Company, and his wife, Rosemary, is the Secretary.
(5) Consists of 800,000 shares of Common Stock held in an informal escrow
pending performance by Ms. Murray with respect to obtaining a
$5,000,000 loan for the Company.
(6) Includes (i) 200,000 shares held of record by the Cullen Family Trust,
a trust administered by the Cullens, and (ii) warrants to purchase
260,000 shares of Common Stock held by the Cullen Family Trust.
(7) Prior to his death on July 17, 1994, Mr. Hays was the Secretary and a
director of the Company. Mr. Hays owned the Company's Common Stock as
follows: (i) 4,637 shares held directly by Mr. Hays, (ii) 50,000 shares
held by Mr. Hays and his wife as joint tenants, (iii) 27,568 shares
held directly by Mr. Hays' wife, (iv) 135,393 shares held by Focal
Development Corporation, a Colorado corporation controlled by Mr. Hays'
wife ("FDC") and (v) 29,783 shares held by Interdec Corporation, a
Colorado corporation affiliated with Mr. Hays ("Interdec"), and (vi)
warrants to purchase 54,637 shares of Common Stock.
(8) Includes (a) 54,500 shares held by 1st S. I. Fund Trust, a trust
administered by Mr. Zink and (b) 200,000 shares which Mr. Zink has the
right to acquire upon exercise of warrants granted to him in connection
with financial and real estate services rendered to the Company.
(9) Includes 25,000 shares which Mr. Hardy owns of record. Also includes
(i) 29,783 shares held by Interdec, for which Mr. Hardy serves as an
officer and director and (ii) warrants to purchase 25,000 shares of
Common Stock.
(10) Includes 25,000 shares which Mr. May owns of record. Also includes (i)
29,783 shares held by Interdec, for which Mr. May serves as an officer
and director and (ii) warrants to purchase 25,000 shares of Common
Stock.
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In September 1993 and for services rendered to the Company, the directors of
the Company were issued warrants to purchase shares of Common Stock as follows:
Howard M. Palmer, 410,000 shares; James T. Hays, 54,637 shares; Gerald W. May,
25,000 shares; and Leroy Hardy, 25,000 shares. The warrants issued to the
Company's directors are exercisable into Common Stock at $1.00 per share through
December 31, 1999. Other than the exercise price, the terms and conditions of
the warrants issued to the directors are identical to the warrants issued in the
Company's private placement of Common Stock and warrants in October 1993 through
June 1994. The fair market value of the Company's Common Stock, as determined by
the Company's Board of Directors, was $0.50 per share on the date of the grant
of the warrants.
In September 1993, Don Zink was issued warrants to purchase 200,000 shares of
the Company's Common Stock for financial and real estate services previously
rendered to the Company. The warrants issued to Mr. Zink contain the same terms
and conditions as those issued to directors of the Company and described above.
The fair market value of the Company's Common Stock, as determined by the
Company's Board of Directors, was $0.50 per share on the date of the grant of
the warrants. In addition, Mr. Zink was issued an additional 40,000 shares of
the Company's Common Stock pursuant to a consulting arrangement with the
Company, whereby Mr. Zink had rendered financial and real estate services to the
Company.
In November 1993, Robert and Lynda Cullen, as trustees for the Cullen Family
Trust, purchased 60,000 shares of Common Stock at $0.50 per share and warrants
to purchase an additional 60,000 shares of Common Stock at an exercise price
between $1.00 and $3.00 per share pursuant to the Company's private placement.
In April 1994, the Cullen Family Trust purchased 140,000 shares of Common Stock
and warrants to purchase an additional 140,000 shares of Common Stock on
identical terms as those described above. In addition, in April 1994, the Cullen
Family Trust was issued warrants to purchase an additional 60,000 shares of
Common Stock at an exercise price between $1.00 and $3.00 per share for
consulting services rendered to the Company by Mr. and Mrs. Cullen.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) EXHIBITS
<C> <S>
3.1............. Articles of Incorporation of the Company.*
3.2............. Amendment to the Articles of Incorporation changing the
Company's name to TVM Global Entertainment, Inc.*
3.3............. Amendment to the Articles of Incorporation changing the
Company's name to Cinema Features, Inc.*
3.4............. Amendment to the Articles of Incorporation changing the
Company's name to Focal Corporation.*
3.5............. Restated Bylaws of the Company.*
</TABLE>
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<TABLE>
<CAPTION>
<C> <S>
3.6............. Amendment to the Articles of Incorporation authorizing
the Series A Convertible Preferred Stock.*
4.1............. Specimen stock certificate of the Company.*
10.1............ Form of Warrant Certificate issued to directors of the
Company (schedule of directors receiving Warrants
attached thereto).*
10.2............ Employment Agreement dated October 1, 1993 between the
Company and Howard M. Palmer.*
10.3............ Agreement dated July 29, 1993 between the Company and
Howard M. Palmer, whereby the Company acquired operating
funds, management expertise and potential real estate
assets in exchange for Common Stock and future
consideration.*
10.4............ Bill of Sale and Transfer of Rights in Movie Properties
dated June 27, 1993 between the Company and
Maverick Marketing Management, Inc.*
10.5............ Form of Convertible Promissory Note.
10.6............ Purchase Agreement dated June 18, 1996, between the
Registrant and Gilbert Arizona Development
Corporation.
10.7............ Amendment to Purchase Agreement and Escrow Instructions
dated June 26, 1995, between the Registrant and
Myung Hee Lee.
</TABLE>
_______________
* Filed as an exhibit to the Company's Registration Statement on Form 10-SB
dated November 26, 1993 or amendment thereto dated March 28, 1994
(Registration No. 0-22968) and incorporated herein by reference.
(b) REPORTS ON FORM 8-K.
Inapplicable.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOCAL CORPORATION
Dated: October 31, 1996 By: /s/ HOWARD M. PALMER
-------------------------------------
Howard M. Palmer, Chairman of the
Board and President
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ HOWARD M. PALMER Chairman of the Board and October 31, 1996
- --------------------
Howard M. Palmer President (Principal
Executive Officer)
/s/ A. G. KADING Treasurer October 31, 1996
- ----------------
A. G. Kading (Principal Financial
and Accounting Officer)
/s/ LEROY HARDY Vice President and October 29, 1996
- ---------------
Leroy Hardy Director
/s/ GERALD W. MAY Director October 29, 1996
- -----------------
Gerald W. May
</TABLE>
13
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JUNE 30, 1995
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report F-2
Prior Independent Auditors' Report F-3 - F-4
Balance Sheet as of June 30, 1995 F-5
Statements of Operations
For the Years Ended June 30, 1995 and 1994 F-6
Statement of Operations
From Inception of Development Stage to June 30, 1995 F-7
Statement of Shareholders' Equity (Deficit)
From Inception of Development Stage to June 30, 1995 F-8
Statements of Cash Flows
For the Years Ended June 30, 1995 and 1994 F-9
Statement of Cash Flows
From Inception of Development Stage to June 30, 1995 F-10
Notes to Financial Statements F-11 - F-14
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
November 20, 1995
To the Board of Directors
Focal Corporation
Anaheim, California
We have audited the accompanying balance sheet of Focal Corporation (a
development stage company) as of June 30, 1995, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the year ended
June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audit. The financial statements of Focal
Corporation (a development stage company) from inception (July 1, 1993) to June
30, 1994 were audited by other auditors whose report has been furnished to us
and is included in these financial statements. Our opinion insofar as it
relates to the amounts included for Focal Corporation (a development stage
company) for the period stated above, is based solely on the report of the other
auditors.
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, based on our audit and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Focal Corporation (a development stage company) as of
June 30, 1995, and the results of their operations and their cash flows for the
years ended June 30, 1995 and 1994 and from inception (July 1, 1993) to June 30,
1995, 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 11 to the
financial statements, there is doubt about the ability of the company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Caldwell, Becker, Dervin, Petrick & Company
- -----------------------------------------------
CALDWELL, BECKER, DERVIN, PETRICK & COMPANY
Woodland Hills, California
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Board of Directors
Focal Corporation
We have audited the accompanying consolidated balance sheet of Focal Corporation
and subsidiary as of June 30, 1994, and the consolidated statements of
operations, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Focal Corporation as of June 30, 1993
were audited by other auditors whose report dated August 2, 1993 on those
financial statements included an explanatory paragraph that described the going
concern issue and management's plan in Note 2(b) of those financial statements.
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Focal
Corporation as of June 30, 1994, and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 5 to the
consolidated financial statements, the Company has no operations, and has
negative working capital and a stockholders' deficit at June 30, 1994. The
Company's ability to achieve the described elements of its management plan are
uncertain due to the lack of any identifiable sources of capital necessary to
meet the required fiscal demands. The Company's financial position and operating
results raise substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
5. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
F-3
<PAGE>
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
KELLY & COMPANY
/s/ Kelly & Company
- -------------------
Tustin, California
October 7, 1994
F-4
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 1995
ASSETS
------
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash $ 3,702
--------
Total Current Assets 3,702
--------
REFUNDABLE LOAN COMMITMENT FEE (Note 2) 120,000
DEFERRED TAX ASSET (Note 3) --
--------
Total Assets $123,702
========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C>
Accounts payable $ 347,730
Accrued expenses - related parties (Note 10) 65,412
Accrued taxes (Note 4) 35,074
Accrued vacation (Note 4) 6,230
Interest payable 2,487
Notes payable (Note 5) 30,000
Loans payable - related parties (Note 6) 15,000
Loan payable (Note 7) 150,000
Loan fee payable 5,000
-----------
Total Current Liabilities 656,933
-----------
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock; 100,000,000 shares authorized, no shares
outstanding, no par value --
Common stock; 40,000,000 shares authorized, 2,690,676 shares
issued and outstanding, $0.10 par value (Note 12) 269,068
Additional paid in capital 1,923,393
Deficit accumulated before the development stage (1,739,945)
Deficit accumulated during the development stage (985,747)
-----------
Total Shareholders' Equity (Deficit) (533,231)
-----------
Total Liabilities and Shareholders' Equity (Deficit) $ 123,702
===========
</TABLE>
The Accompanying Footnotes are an Integral Part of These Financial Statements
F-5
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
REVENUES (Note 1) $ 0 $ 0
OPERATING COSTS AND EXPENSES 511,625 472,322
--------- ---------
(Loss) Before Income Taxes (511,625) (472,322)
PROVISION FOR INCOME TAXES 1,000 800
--------- ---------
Net (Loss) $(512,625) $(473,122)
========= =========
(Loss) per common share and common share
equivalent (Note 8) $ (.21) $ (.25)
========= =========
</TABLE>
The Accompanying Footnotes are an Integral Part of These Financial Statements
F-6
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
REVENUES $ 0
OPERATING COSTS AND EXPENSES 983,947
---------
(Loss) Before Income Taxes (983,947)
PROVISION FOR INCOME TAXES 1,800
---------
Net (Loss) $(985,747)
=========
</TABLE>
The Accompanying Footnotes are an Integral Part of These Financial Statements
F-7
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1995
<TABLE>
<CAPTION>
Total
Share-
Common Stock Preferred Stock Additional holders'
------------------- ----------------- Paid-in Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficit)
--------- --------- -------- -------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
July 1, 1993 -
Balance at
beginning of
development
stage 1,526,396 $ 152,640 -- $ -- $ 1,576,181 $ (1,739,945) $ (11,124)
Stock issued
for services 349,960 34,996 21,484 56,480
Sale of stock 414,120 41,412 165,648 207,060
Net (Loss) (473,122) (473,122)
--------- --------- -------- -------- ------------ -------------- -----------
Balance at
June 30, 1994 2,290,476 229,048 -- -- 1,763,313 (2,213,067) (220,706)
Stock issued
for services 114,800 11,480 45,920 57,400
Stock issued
to officer
in lieu of
salary 200,000 20,000 80,000 100,000
Sale of stock 75,400 7,540 30,160 37,700
Stock issued
for payment
of note 10,000 1,000 4,000 5,000
Net (Loss) (512,625) (512,625)
--------- --------- -------- -------- ------------ -------------- -----------
Balance at
June 30, 1995 2,690,676 $ 269,068 -- $ -- $ 1,923,393 $ (2,725,692) $ (533,231)
========= ========= ======== ======== ============ ============== ===========
</TABLE>
The Accompanying Footnotes are an Integral Part of These Financial Statements
F-8
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING
ACTIVITIES:
Net (loss) $ (512,625) $ (473,122)
Adjustments to reconcile net (loss) to net cash provided
(used) by operating activities:
Non-cash compensation and promotion -- 83,960
Operating expenses paid by issuance of stock 57,400 --
Compensation to officer paid by issuance of stock 100,000 --
Operating expenses paid by reduction of loan
commitment fee 30,000 --
Loss on write-off of assets -- (18,250)
Decrease in prepaid expenses 10,000 --
Increase in accounts payable and accrued expenses 218,282 210,810
----------- -----------
Net Cash Flows (Used) by Operating Activities (94,456) (196,602)
----------- -----------
CASH FLOWS (USED) BY INVESTING ACTIVITIES:
Refundable loan commitment fee (150,000) --
----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Issuance of notes payable 50,000 --
Issuance of common stock 37,700 207,060
Issuance of loan payable 150,000 --
----------- -----------
Net Cash Flows Provided by Financing Activities 237,700 207,060
----------- -----------
NET INCREASE (DECREASE) IN CASH (6,756) 10,458
CASH AT THE BEGINNING OF THE YEAR 10,458 0
----------- -----------
CASH AT THE END OF THE YEAR $ 3,702 $ 10,458
=========== ===========
ADDITIONAL DISCLOSURES:
Cash paid during each year for:
Interest $ 0 $ 0
=========== ===========
Income taxes $ 1,000 $ 0
=========== ===========
NON CASH INVESTING AND FINANCING
TRANSACTIONS:
Common stock issued in consideration of loan $ 5,000 $ --
=========== ===========
</TABLE>
The Accompanying Footnotes are an Integral Part of These Financial Statements
F-9
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) $(985,747)
Adjustments to reconcile net (loss) to net cash provided
(used) by operating activities:
Non-cash compensation and promotion 83,960
Operating expenses paid by issuance of stock 57,400
Compensation to officer paid by issuance of stock 100,000
Operating expenses paid by reduction of loan commitment fee 30,000
Loss on write-off of assets (18,250)
Decrease in prepaid expenses 10,000
Increase in accounts payable and accrued expenses 429,092
Increase in interest payable 2,487
---------
Net Cash Flows (Used) by Operating Activities (291,058)
---------
CASH FLOWS (USED) BY INVESTING ACTIVITIES
Refundable loan commitment fee (150,000)
---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Issuance of notes payable 50,000
Issuance of common stock 244,760
Issuance of loan payable 150,000
---------
Net Cash Flows Provided by Financing Activities 444,760
---------
NET INCREASE IN CASH 3,702
CASH AT THE BEGINNING OF THE PERIOD 0
---------
CASH AT JUNE 30, 1995 $ 3,702
=========
ADDITIONAL DISCLOSURES:
Cash paid during the period for:
Interest $ 0
=========
Income taxes $ 1,000
=========
NON CASH INVESTING AND FINANCING TRANSACTIONS:
Common stock issued in consideration of loan $ 5,000
=========
</TABLE>
The Accompanying Footnotes are an Integral Part of These Financial Statements
F-10
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Focal Corporation was incorporated in the State of Utah in 1980 as Petro-
Funding. The Company sold and distributed its assets from the movie
distribution business during May and June of 1993. The Company then changed the
focus of its business on July 1, 1993 to the acquisition, development and
management of commercial real estate, primarily shopping centers. The Company
has not acquired any properties as of the date of this report, and has not
recognized any income from the date of inception (July 1, 1993) to June 30,
1995. As the Company was involved in other businesses prior to July 1, 1993, an
accumulated deficit of $1,739,945 had been incurred to the last day of those
operations on June 30, 1993. Focal Corporation has not generated revenue since
the sale and distribution of assets from the movie distribution business during
May and June of 1993, as such, the accompanying financial statements have been
prepared using the accounting formats described for development stage companies
since July 1, 1993.
Income Taxes
The Company files federal income and state franchise tax returns. The Company
accounts for deferred income taxes using the liability method in accordance with
Statement of Financial Accounting Standards No. 109 (SFAS No. 109), which it
adopted during 1994. Deferred income taxes are computed based on the tax
liability or benefit in future years of the reversal of temporary differences in
the recognition of income or deduction of expenses between financial and tax
reporting purposes. The net difference between tax expense and taxes currently
payable is reflected in the balance sheet as deferred taxes. Deferred tax
assets and/or liabilities are classified as current and noncurrent based on the
classification of the related asset or liability for financial reporting
purposes, or based on the expected reversal date for deferred taxes that are not
related to an asset or liability.
NOTE 2 - REFUNDABLE LOAN COMMITMENT FEE
The Company has a refundable loan commitment deposit in an account with a bank.
This is a deposit toward a loan commitment fee for a pending project. The
project, for which the deposit was made, was due to close as of November 21,
1994; however, as of the date of the financial statements the project has not
closed and the deposit remains with the bank. The original deposit was
$150,000. As of June 30, 1995 $120,000 remains on deposit (see Note 7). As of
the date of the financial statements, the Company has incurred approximately
$24,500 of costs associated with this loan commitment. These costs will be
applied against the refundable deposit.
NOTE 3 - INCOME TAXES
Deferred tax assets and liabilities are recorded based on the difference between
the financial statement and tax return bases of assets and liabilities.
Deferred tax assets and liabilities at the end of each period are determined
using the tax rate expected to be in effect when taxes on these accounts are
expected to be paid or recovered. Accordingly, the current period tax provision
can be affected by the enactment of new tax rates.
F-11
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 3 - INCOME TAXES (CONTINUED)
The net deferred tax amounts included in the accompanying balance sheet include
the following amounts of deferred tax assets and liabilities at June 30, 1995:
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Asset - Non-Current $ 393,600
Deferred Tax Liability - Non-Current --
---------
393,600
Valuation allowance (393,600)
---------
Net Deferred Tax Asset - Non-Current $ 0
=========
</TABLE>
The deferred tax asset results from ordinary loss carryforwards available to
reduce future taxable income. The valuation allowance account is established to
reduce the tax asset account to $0 because the operating losses may not be
utilized. The valuation allowance increased by $204,800 from June 30, 1994 to
June 30, 1995 as a result of additional operating losses.
As of June 30, 1995 and 1994, for income tax purposes, the Company had
approximately $984,000 and $472,000, respectively, of ordinary loss carryforward
available to reduce future taxable income through the year 2010.
NOTE 4 - ACCRUED EXPENSES
The Company has $35,074 of accrued payroll taxes which existed as of June 30,
1994 for individuals held out to be employees rather than independent
contractors. No assessment has been imposed for such taxes. However, because
at the present time there is no assurance that the taxes or applicable penalties
and interest will not be imposed, the estimated payroll taxes have remained
accrued.
The Company has $6,230 of accrued vacation pay from June 30, 1994 for the
president of the Company. The president of the Company has waived his rights to
vacation pay earned during fiscal year 1995. Accrued vacation pay from June 30,
1994 will be paid when funds are available.
NOTE 5 - NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable consisted of the following at June 30, 1995:
<S> <C>
Note payable - David Pamintuan, with interest at 12%, currently due $15,000
Notes payable - various individuals, with interest at 10%, currently due 15,000
-------
$30,000
=======
</TABLE>
Neither of these notes is collateralized. Renewal of these notes is at the
discretion of the holders. However, management expects renewals to occur in the
normal course of business for the foreseeable future.
F-12
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 6 - LOANS PAYABLE - RELATED PARTIES
Loans payable - related parties consisted of the following at June 30, 1995:
<TABLE>
<CAPTION>
<S> <C>
Loan payable - K. Palmer, son of Howard Palmer, no stated terms $10,000
Loan payable - Howard Palmer, president of the Company, no stated terms 5,000
-------
Total Loans Payable $15,000
=======
</TABLE>
Neither of these loans is collateralized. Renewal of these loans is at the
discretion of the holders. However, management expects renewals to occur in the
normal course of business for the foreseeable future.
NOTE 7 - LOAN PAYABLE
The Company received an unsecured loan from a non-related third party. The loan
was due on November 21, 1994 (the anticipated closing date of the pending
project as referenced in Note 2); however, as of the date of the financial
statements, the pending project has not closed and the loan has not been paid.
Upon either closing or termination of the pending project, the full $150,000 is
payable to the non-related third party. Interest is not accruing on this
payable.
NOTE 8 - LOSS PER COMMON SHARE
Primary loss per common and common equivalent share, assuming no dilution, is
computed based on the weighted average number of shares of common stock and
common stock equivalents outstanding during each year. The number of weighted
average common and common equivalent shares, as applicable, outstanding during
the years ended June 30, 1995 and 1994 was 2,453,368 and 1,863,386,
respectively. Fully diluted per share data is not presented as the effects
would be antidilutive.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company has entered into an employment contract with its president that
provides for a monthly salary and annual vacation pay. The contract expires at
June 30, 1996. At the present time, due to lack of Company funds, this amount
is being accrued. However, the president of the Company has elected to waive
his rights to all vacation pay earned during fiscal year 1995 and, as such, no
amounts have been accrued for that period.
The Company has been named in lawsuits for unpaid expenses to vendors. These
expenses have been accrued by the Company.
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company has accrued expenses of $65,412 due to officer and directors of the
Company at June 30, 1995. The Company issued stock valued at $100,000 to Howard
Palmer, president of the Company, in lieu of salary during fiscal year 1995.
F-13
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 11 - UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
The financial statements have been prepared assuming the Company will continue
as a going concern. The Company currently has no operations and is dependent
upon funds from a private placement for funding its day-to-day cash
requirements. The Company has been directing its efforts to acquiring well-
leased, existing ten to twenty acre discount shopping centers, anchored by major
national retail tenants. The Company has located properties in Arizona,
California and Nevada that fit its investment criteria and is exploring ways to
finance the acquisition of these properties. If the Company is able to acquire
these properties, the properties may generate adequate revenues for the Company
to finance its operations. The Company's president, who has been in the
discount shopping center development business for over twenty-five years, is
currently working with representatives of national retail chains to select
possible sites in various areas for future development of shopping centers. The
Company proposes to construct the facilities and lease them back to the
retailers on long term leases. At the present time there is no assurance that
these events will take place. The effect of the foregoing matters raises
substantial doubt about the ability of the Company to continue as a going
concern. As discussed in Notes 5 and 6, the Company is also dependent upon
creditors not calling the loans.
NOTE 12 - WARRANTS TO PURCHASE COMMON STOCK
In connection with the restructuring of the Company, 774,637 warrants were
issued to certain officers and key employees of the Company to purchase common
stock. Each warrant represents the right to purchase one share of the Company's
common stock for $1 per share. The warrants expired on December 31, 1995.
In connection with the private placement that took place during 1994, the
Company issued 234,120 warrants to the investors to purchase common stock at $2
per share through December 31, 1994 and $3 per share from January 1, 1995 to
December 31, 1995. There are certain provisions in the warrant for adjustment
of the exercise price if certain events occur. It is not possible to determine
at this time if the exercise price would be adjusted. The warrants expired on
December 31, 1995.
In connection with the issuance of stock and notes payable during 1995, the
Company issued 425,200 warrants to purchase common stock at prices ranging from
$1.00 per share to $3.00 per share. The warrants expire at different times
through July 31, 1998.
F-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<C> <S> <C>
3.1 Articles of Incorporation of the Company.*
3.2 Amendment to the Articles of Incorporation changing
the Company's name to TVM Global Entertainment, Inc.*
3.3 Amendment to the Articles of Incorporation changing
the Company's name to Cinema Features, Inc.*
3.4 Amendment to the Articles of Incorporation changing
the Company's name to Focal Corporation.*
3.5 Restated Bylaws of the Company.*
3.6 Amendment to the Articles of Incorporation authorizing
the Series A Convertible Preferred Stock.*
4.1 Specimen stock certificate of the Company.*
10.1 Form of Warrant Certificate issued to directors of
the Company.*
10.2 Employment Agreement dated October 1, 1993 between
the Company and Howard M. Palmer.*
10.3 Agreement dated July 29, 1993 between the Company and
Howard M. Palmer, whereby the Company acquired operating
funds, management expertise and potential real estate
assets in exchange for Common Stock and future
consideration.*
10.4 Bill of Sale and Transfer of Rights in Movie Properties
dated June 27, 1993 between the Company and Maverick
Marketing Management, Inc.*
10.5 Form of Convertible Promissory Note.
10.6 Purchase Agreement dated June 18, 1996, between the
Registrant and Gilbert Arizona Development Corporation.
10.7 Amendment to Purchase Agreement and Escrow Instructions
dated June 26, 1995, between the Registrant and
Myung Hee Lee.
27 Financial Data Schedule
</TABLE>
_______________
* Filed as an exhibit to the Company's Registration Statement on Form 10-SB
dated November 26, 1993 or amendment thereto dated March 28, 1994
(Registration No. 0-22968) and incorporated herein by reference.
1
<PAGE>
EXHIBIT 10.5
A PROMISE TO PAY BY FOCAL CORPORATION
PROMISSORY NOTE
-------------------------------------------
Focal Corporation, a registered Securities and Exchange Commission corporation,
has accepted the funds in the amount shown below:
$ , and
------------------------------------------
hereby promises to pay at this address:
----------------
-------------------------------------------------------,
, this sum on or before .
--------- -----------------------
The interest on the principal amount will be twelve (12%) percent per annum,
paid monthly, on the fifteenth (15th) day of each month until the principal has
been repaid. The first interest payment will be thirty (30) days after the date
above, and if the thirty (30) day period does not fall on the fifteenth (15th),
the first interest payment will be prorated accordingly on a daily basis.
Thereafter, it will be paid on the fifteenth (15th) day of each month based upon
the monthly cycle.
The holder or assignee of this Note may convert a like amount of the principal
sum to Focal Corporation common stock.
The Note will be convertible at the option of the registered holder at any time
after the date of its issuance and prior to its maturity. This Note will be
convertible into fully paid and nonassessable shares of common stock of the
Company at the rate of one share for each $.50 principal amount to be converted.
In order to exercise the conversion privilege granted, the holder of this Note
will surrender this Note to the Company with the form for conversion hereinafter
provided dully executed. If the common stock into which this Note is convertible
is to be issued in a name of names other than that of the registered holder of
this Note, such Note must bear or be accompanied by proper endorsement or
assignment of the Note.
NOTICE OF CONVERSION AND RIGHT
A holder desiring so to convert this Note into Focal Corporation stock must give
written notice to the Company (See Exhibit B), and simultaneously with the
giving of such notice, surrender this Note, together with the duly executed
instrument of assignment and transfer in blank, at the principal office of the
Company at 518 Dwyer Drive, Anaheim, California 92801. The Company will promptly
order this for the holder of the shares of stock into which this Note is to be
convertible. Shares of the capital stock of the Company issued upon the
conversion of this Note will not be entitled to any dividend declared upon such
stock prior to the date of the receipt by the Company of such notice of election
to convert and of this Note accompanied by such instrument of assignment and
transfer, and upon such conversion the holder will not be entitled
<PAGE>
-2-
to any interest on this Note not due and payable after the date such notice of
conversion is received by the Company.
SURRENDER AND CANCELLATION OF NOTES
This Note will be deemed to have been surrendered for conversion and converted
at the close of business on the date on which it is received by the Company or a
designated agent of the Company with the form of election (Exhibit B) to convert
duly executed, and on such receipt the Company will promptly have issued and
delivered to the person or persons entitled, a certificate or certificates of
its common stock evidencing the number of shares into which this Note will have
been converted. The Company will then cancel this Note. If this Note is
surrendered by the full payment of the principal and any accrued interest, by
action of the Note holder, and the money due paid, then simultaneously the Note
holder will return the Warrant Certificate (Exhibit A) and any rights that the
former Note holder has for the exercising of any stock warrants will be null and
voided by the return of the principal shown on the face of this Note.
DEFAULT
Without notice, except as expressly provided here,. the following will be deemed
to be events of default by the Company:
Default in the payment of any installment of interest upon any of the Notes
as and when the same becomes due and payable and the continuance of such
default for a period of fifteen (15) days.
If the Company fails to make payment to the holder of the Note as provided,
the holder of the Note will be entitled and empowered to take such measures
as may be appropriate to enforce the Company's obligations under the Note
held by such order, by judicial proceedings or otherwise. In the event suit
is brought to enforce payment of this Note, the Company promises to pay a
reasonable attorney's fee to be fixed by the court.
TRANSFERABILITY
This Note, when registered, is transferable by any registered holder in person
or by his attorney duly authorized in writing on a register maintained by the
Company, only on the surrender of this Note, duly endorsed without recourse, and
the Company will not be required to make any transfer unless and until it
receives this Note duly and properly endorsed without recourse by the registered
holder or by his attorney duly authorized in writing. On the surrender of this
Note for transfer of registration of this Note,
<PAGE>
-3-
the Company will issue a new Note with the same terms and conditions as the
surrendered Note. The Company may treat the registered holder at the absolute
owner for the purpose of receiving payment of or on account of principal and
interest due, for the purpose of effecting the conversion of this Note into
shares of common stock of the Company, and for all other purposes, and may
require guaranty of authenticity of signatures with respect to endorsements.
------------------------------------
FOCAL CORPORATION
HOWARD M. PALMER, PRESIDENT
<PAGE>
EXHIBIT B
FORM FOR EXERCISING ELECTION TO CONVERT
The undersigned holder of the within Promissory Note due ,
----------------------
surrenders aggregate principal amount of such Promissory Note
----------------
for conversion upon the terms and conditions set forth in such Note, and
requests that the shares issuable upon such conversion be issued to the
following person or persons:
Name Address
......................... ..............................
......................... ..............................
......................... (signature of registered owner)
NOTE: In the event that the aggregate principal amount of the within Note
which is being surrendered for conversion has not been specified, it is
agreed that the entire aggregate principal amount evidenced by the within
Note will be deemed to have been so surrendered for conversion into shares
of common stock of the Company.
Upon written notification by the holder to convert, the stock certificate will
be issued and recorded by the official registration agency and delivered to the
holder, then this Promissory Note will be marked "paid in full." Along with the
recording of the ownership in the stock and the issuance of the stock
certificate itself, a corporate document (see Exhibit A) shown here will allow
the holder of the stock, or assigned, to purchase an equal number of common
stock shares over a three year period. In accordance with Exhibit A, the
purchase of the stock for the first year would be $1.00 (one dollar) per share,
the second year would be $2.00 (two dollars) per share, and the third year would
be $3.00 (three dollars) per share.
Holder:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
Date:
-----------------------------------------
<PAGE>
EXHIBIT 10.6
FOCAL CORPORATION
518 Dwyer Drive, Anaheim, California 92801
Mailing Address: Post Office Box 3940, Anaheim, California 92803
Telephone: (714) 635-8821 * FAX: (714) 635-8156
June 18, 1996
First American Title Insurance Company
2525 East Camelback Road, Suite 250
Phoenix, Arizona 85016
Attention: Ms. Pamela Swoboda
- ---------
Reference: Escrow File Number: 226-100-618907
- ----------
Purchase-Sale, Mesa Commons Shopping Center
Mesa, Arizona
Gilbert Arizona Development Corporation, Seller
Focal Corporation, Buyer
Dear Ms. Swoboda:
Please consider the below Purchase Agreement and Escrow Instructions to
supersede all other documents pertaining to the above escrow.
1. Purchase Price. The purchase price has been adjusted and
--------------
will be at a figure of $9,700,000.
The purchase price would be paid as follows:
(a) Assignment of a commercial loan from ALI, Inc. by Fleet Real
Estate Capital Inc. d/b/a Fleet Management and Recovery Company
("Fleet Management and Recovery Company"), in the amount of
$7,100,000, said loan number 3170019933, obligation number 42
(see attached letter, May 3, 1996). The transfer fee of Fleet
Management and Recovery Company's loan from Gilbert Arizona to
Focal Corporation will be paid through escrow by Focal
Corporation in the amount of $71,000 from Buyer's escrowed funds.
This fee is not to be released to Fleet until the title has
passed to Focal Corporation and the loan has been signed and
recorded in Focal Corporation's ownership.
(b) There will be a $400,000 Second Trust Deed carried by the Seller
encumbering the Property and a subordinated lien to the First
Trust Deed above. The Second Trust Deed loan in favor of Gilbert
Arizona will be for two years from the date of the
1
<PAGE>
final sale recording transaction between Gilbert Arizona and
Focal Corporation. There will be no interest or interest payments
for the first year. Starting the second year, Focal Corporation
will pay eight percent (8%) interest (pre-paid) and paid
quarterly thereafter, starting 365 days following the recording
of the sale transaction. The $400,000 owed to Gilbert Arizona
will be, all due and payable 730 days from the sale recording
date. The balance of the purchase price will be $2,200,000, to be
paid by Focal Corporation through escrow. Focal Corporation will
deposit a Cashier's Check for $2,300,000, or a bank letter of
credit, or a similar bank guaranteed instrument into the above-
numbered escrow. It will be payable to First American Title
Insurance Company, and shall not be cashed until the final
written evidence is deposited in escrow that Federal bankruptcy
Case number 94-13739 (United States Bankruptcy Court, Buffalo,
New York) with Gilbert Arizona Development Corp. has been
discharged, and the title company will guarantee to the Buyer
that the title is free of any liens or encumbrances related to
the bankruptcy and all other contingent conditions, if any, are
satisfied and all bankruptcy related Property liens have been
extinguished.
(c) When all documents pertaining to the transfer and assignment of
the loan have been signed by the Lender and Seller, Focal
Corporation will authorize the release of $31,500 from Buyer's
escrowed funds to the Seller and/or Lender, said amount to
represent the cost of the loan from Fleet Management and
Recovery Company.
(d) At the time that the escrow has finalized all of the
documentation and the loan transfer instruments, and the Seller
has signed all documents relating to the transfer of the loan and
to the transfer of the Property (including the assignment of all
leases and contracts), then the escrow officer may cash the
Certified check, bank Cashier's Check, or wire transfer funds (so
long as the form of payment is recognized by the escrow agency as
immediately collectable funds).
(e) On the closing date, if all other conditions precedent of
closing as set forth have been satisfied, escrow agent shall
disperse the funds held by it as provided herein, and shall
record the Deed to Buyer thereby conveying the Property to
Buyer.
2
<PAGE>
2. Upon execution of these escrow instructions by Buyer and Seller and
delivery of said signed instructions to Buyer and Seller, Focal
Corporation shall pay to LGR Investments Fund, Ltd. the sum of
$150,000 together with all interest earned on said amount which has
been on deposit with local America Bank of Tulsa. This amount is to be
wired immediately upon execution of these escrow instructions by both
parties and delivery of same to Buyer and Seller.
3. Unless extended by mutual agreement of the parties the closing of this
purchase escrow shall take place on or before thirty (30) days after
the contingencies set forth in the Paragraph set forth below under the
title Conditions to Buyers Obligations have been satisfied or waived,
--------------------------------
and providing that the parties to this agreement both Buyer and
Seller, have signed all required transfer documents.
4. At the closing, Seller shall cause First American Title Insurance
Company to issue an Owner's Title Policy in the form of an A.L.T.A.
Extended Owner's Policy Form 4-6-90, to Buyer, showing no matters of
record except those previously or hereafter approved by Buyer. Seller
shall only be responsible for the cost of the standard owner's
C.L.T.A. policy, and Buyer shall pay the excess amount of money needed
to obtain the ALTA Extended Coverage Owner's Form 4-6-90. The Title
Policy shall be issued in the amount of the total purchase price to
insure free title to the Property in Buyer's name.
CONDITIONS TO BUYER'S OBLIGATIONS
- ---------------------------------
1. Prior to the closing date the Buyer has assumed the loan from Fleet
Management and Recovery Company and Focal Corporation has approved, in
its sole and absolute discretion all the documents and any terms and
conditions of the loan.
Seller shall cooperate with Buyer in its efforts to obtain
assignment of the Fleet Management and Recovery Company loan. It is
understood, however, that the obligation to obtain the assignment is
Buyers and Seller shall have no liability to Buyer in the event
Fleet Management and Recovery Company does not permit Buyer to
assume its loan.
Notwithstanding the above, it is a condition of Buyer's obligation to
purchase the Property, that Fleet Management and Recovery permit Focal
Corporation to assume its loan, as extended and modified by the
3
<PAGE>
Agreement dated May 3, 1996 between Fleet Management and Recovery and
Gilbert Arizona Development Corporation. (a copy of which is attached
hereto)
In this connection it is understood and agreed that the $2,300,000
payment referenced in Paragraph 1(b) above shall not be cashed unless
and until all the loan documents pertaining to the original loan from
Fleet Management and Recovery Company to Gilbert Arizona Development
Corporation and all modifications have been delivered to and approved
by Focal Corporation and all documents required by Fleet Management
and Recovery Company to be signed by Focal Corporation in connection
with such loan have been approved and executed by Focal Corporation.
2. Seller obtaining and delivering to the Buyer no later than ten (10)
days before the scheduled closing date, from every tenant of the
Property, an Estoppel Certificate, in the form attached as Exhibit B,
completed with details of the tenants' lease and signed by the
tenants, showing no difference in leasing terms from those shown on
the Rent Roll or in the tenant leases furnished by Seller for Buyer's
review.
3. Seller has not granted any person or entity any right of first refusal
or option to acquire any interest in the Property or any part thereof,
and Seller has not sold or contracted to sell the Property or any
portion thereof or interest therein.
4. Seller has not received nor is aware of any written notification from
any government department or agency with jurisdiction over building,
safety or health, or such other city, county, state, or federal
authority having jurisdiction, requiring any work to be done on the
Property, or advising of any condition that would render the Property
unusable for any part thereof for the commercial/retail purpose of
Buyer.
5. Seller shall not voluntarily allow any lien to attach to the Property
or any part thereof, except the lien for ad valorem taxes, which are
not due and payable nor shall Seller grant, create, or voluntarily
allow the creating of or amending, modifying or change of any
easement, right-of-way, encumbrance, restriction or covenant, or lease
or any other rights affecting the Property or any other part thereof,
without the written consent of the Buyer.
4
<PAGE>
PAYMENTS OF COSTS
- -----------------
At closing, Seller and Buyer shall pay their own respective costs incurred
with respect to the consummation of the purchase and sale of the Property
including, without limitation, attorney's fees. Notwithstanding the
foregoing, it is expressly agreed that Buyer shall pay any excess
costs to obtain an A.L.T.A. Form 4-6-90 Extended Coverage Owners Title
Policy; Seller shall pay any and all transfer and documentary stamp
taxes, or similar charges incident to the conveyance of title to the
Property to Buyer, the premium only for a C.L.T.A. Standard Owner's Title
Policy to be issued by Title Company to Buyer pursuant to the terms
hereof, and any fees and expenses related to the title examination or
title abstract. Seller shall also pay the cost of recording the Deed and,
except as otherwise provided in this Agreement, the parties shall each pay
one-half (1/2) the escrow fees pertaining to this transaction.
APPORTIONMENTS
- --------------
The following items shall be apportioned as of the closing date:
Real estate taxes with respect to the Property based upon the latest
information available;
Electrical, steam, water, sewer and other utility charges, if any, with
respect to the Property;
Rental and other payments received or receivable with respect to the
Property;
Insurance if assigned to Buyer;
Buyer shall be credited with the total security and other deposits held by
Seller from tenants of the Property;
If Seller receives a tax refund with respect to the Property for the tax
year in which the Property is sold to Buyer, such refund shall be
apportioned between the parties hereto on an equitable basis and Seller
shall promptly remit Buyer's allocable share to Buyer. Seller's obligation
hereunder shall survive the closing.
ASSIGNMENT OF LEASES, CONTRACTS AND TRADE NAME
- ----------------------------------------------
1. At the closing, Seller shall assign to Buyer all leases and tenancies
than existing and pay or credit to buyer, through escrow, all security
and other deposits and prepaid rents received from tenants or
occupants of the Property. The assignment shall be in the form
attached as Exhibit "E". Seller shall deliver to Buyer at the
5
<PAGE>
closing the original signed leases for every tenancy existing in the
Property, complete with any amendments, side agreements, a statement
showing all deposits and prepaid rent, if any, and all other
correspondence and agreements governing the relationship between
landlord and tenant in the Property.
2. If demanded by Buyer, Seller shall also assign to Buyer at the
closing, in a form reasonably requested by Buyer, all service
contracts for the Property and all outstanding warranties for any
equipment, fixtures, or personal Property included with the Property
and outstanding warranties for any work done on the Property before
the closing.
3. After the closing, Buyer shall have the right to use the trade name of
the Property and any logos used in connection therewith, if any, and
Seller shall not use that trade name or logo in any way that would
compete with the Property.
4. At the closing Seller shall furnish Buyer, a signed notice to each
tenant of the Property, in the form attached as Exhibit "F", stating
that the Property has been sold to Buyer and all rents should be paid
to Buyer after the closing.
INSURANCE PROCEEDS
- ------------------
1. Buyer shall purchase the Property as required by the terms of this
Agreement, without regard to damage to any improvements on the
Property after the date of this Agreement prior to closing, provided
the cost to repair the same does not exceed $1,000,00. If the cost
exceeds that amount, Buyer may terminate this Agreement by notice to
Seller given within five (5) days of the damage. If Buyer does not so
terminate, Buyer shall receive the insurance proceeds collected as a
result of the damage or destruction, or the proceeds shall be assigned
to Buyer at the closing, if not then collected.
2. If the insurance proceeds are not adequate to repair the damage, Buyer
shall be credited against the cash portion of the purchase price the
amount of the shortage, provided that if this credit exceeds
$1,000,00, Seller, upon notice to Buyer made within thirty (30) days
following the determination of the required credit amount, may
terminate this Agreement, unless Buyer elects, by notice to Seller
given within five (5) days of receipt of Seller's notice, to proceed
and be credited only by the insurance proceeds plus $1,000.
6
<PAGE>
3. The closing date shall be extended up to a maximum extension of thirty
(30) days, as required to obtain repair estimates, determine the
availability and amount of insurance proceeds, and give the notices
necessary under this Paragraph 3. If the closing has not occurred by
the extended closing date through the fault of neither party, then
either party may terminate this Agreement and any deposit shall be
returned to Buyer. Seller and Buyer shall cooperate and exercise due
diligence to obtain damage estimates and insurance proceeds.
CLOSING
- -------
Notwithstanding anything to the contrary set forth herein, any party who is
not in default under this Agreement may terminate this Agreement and escrow
if the escrow does not close on or before ninety (90) days from the date a
fully signed copy of this Agreement is deposited in escrow.
MISCELLANEOUS
- -------------
1. Focal Corporation will be responsible for all sales and real estate
commissions involved with the transaction. The liability for the
payment of these commissions will be at the close of escrow.
2. Notice to Other Owners. Upon close of escrow, Seller shall execute two
----------------------
(2) copies of the Notice of Transfer in the form attached hereto as
Exhibit "N" and Buyer shall execute two (2) copies of the
Acknowledgement and Agreement in the form attached hereto as Exhibit
"O". The Escrow Agent shall then mail originals of each such Exhibit
to the owners of Parcels II and IV of Mesa Commons as follows:
(a) Parcel II:
Sovran Bank/Central South and
Hunter Widner, as Trustee of the
Boyd Family Trust
4225 West Jasper
Chandler, AZ 85225
(b) Parcel IV:
Halle Von Voigtlander
14631 North Scottsdale Road
Scottsdale, AZ 85254-2711
7
<PAGE>
3. Foreign Person. Seller represents and warrants that it is not a
--------------
foreign person and is a "United States Person" as such term is defined
in Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended (the "Code"). Seller shall deliver to Buyer prior to the
Closing an Affidavit prepared by Buyer evidencing such fact and such
other documents as may be required under the Code. The Affidavit shall
be in the form set forth on Exhibit "K" attached hereto and made a
part hereof by reference.
IN WITNESS WHEREOF, the parties have set their hands and seals as of the date
first hereinabove written.
SELLER: GILBERT ARIZONA DEVELOPMENT CORPORATION
a New York corporation
By /s/ Robert N. Richter
------------------------------------
Robert N. Richter, Its President
BUYER: FOCAL CORPORATION, a Utah corporation
By /s/ Howard M. Palmer
------------------------------------
Howard M. Palmer, Its President
8
<PAGE>
ESTOPPEL CERTIFICATE
--------------------
Focal Corporation ___________________, 1996
c/o Howard Palmer
P.O. Box 3940
Anaheim, California 92803
Gentlemen:
The undersigned certifies as follows:
1. _____________________________________, Tenant, and Gilbert Arizona
Development Corp., a New York Corporation, Landlord, entered into a written
lease dated _________________________, 1995 (the "Lease"), in which Landlord
leased to Tenant and Tenant leased from Landlord, premises located in the City
of Mesa, Arizona, commonly known as __________________________ (the "Premises").
(fill in Property address)
2. The Lease constitutes the only agreement between Landlord
and Tenant with respect to the Premises.
3. The Lease is in full force and effect; Tenant has accepted the
Premises and presently occupies them, and is paying rent on a current basis;
Tenant has no setoffs, claims, or defenses to the enforcement of the Lease.
4. As of the date of this Certificate, Tenant is not in default in the
performance of the Lease, and has not committed any breach of the Lease, and no
notice of default has been given to Tenant.
5. As of the date of this Certificate, Landlord is not in default in the
performance of the Lease and has not committed any breach of the Lease.
6. No rent has been paid by Tenant in advance under the Lease, except
_________________________.
(if none, write "none")
7. Tenant has no claim against Landlord for any security deposit or
prepaid rent, except ______________________________.
(if none, write "none")
8. _________________________ acknowledges that Focal Corporation, a Utah
corporation is acquiring ownership of the Premises.
Tenant agrees that if Focal Corporation acquires ownership, Tenant
will attorn and does attorn to Focal Corporation agreeing to recognize Focal
Corporation as Landlord on the condition that Focal Corporation agrees to
recognize the Lease referred to in this document as long as Tenant is not in
default of it.
EXHIBIT B-1
<PAGE>
9. Tenant makes this Certificate with the understanding that
Focal Corporation is contemplating acquiring the Premises, and that if Focal
Corporation acquires the Premises Focal Corporation will do so in material
reliance on this Certificate.
Executed on , 1996.
-----------------------
-----------------------------------------
-----------------------------------------
EXHIBIT B-2
<PAGE>
ASSIGNMENT OF LEASE AND ASSUMPTION AGREEMENT
--------------------------------------------
ASSIGNMENT OF LEASE
-------------------
Effective ______________________, Gilbert Arizona Development
Corporation, a New York corporation ("Assignor"), does hereby assign and
transfer to FOCAL CORPORATION, a Utah corporation ("Assignee"), all of
Assignor's right, title and interest as Landlord in, to and under, that certain
Lease dated ______, 19_____, by and between ______________________________,
as Landlord and _____________________________, a __________________________
as Tenant, covering certain premises located in the MESA COMMONS SHOPPING CENTER
in Mesa, Arizona. Assignor warrants and represents that it has performed all
obligations to be performed by it under the terms of the Lease as of the
effective date set forth above.
Dated: , 1996 "Assignor"
--------------------
GILBERT ARIZONA DEVELOPMENT CORPORATION,
a New York corporation
By
----------------------------------------
Robert N. Richter, Its President
Assumption Agreement
--------------------
The undersigned as transferee of the Landlord's interest in the Leased
Premises covered by that certain Lease ("Lease") dated ______________, 19__,
and executed by ________________________ as "Landlord", and ___________________,
a _____________, as "Tenant", does hereby assume and agrees to perform all
of the obligations, responsibilities and duties of the Landlord as set forth in
said Lease accruing on or after the effective date set forth above.
Dated: , 1996 FOCAL CORPORATION,
----------- a Utah corporation
By
---------------------------------------
Howard M. Palmer, Its President
By
---------------------------------------
, Its Secretary
----------------
EXHIBIT E-1
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF )
--------------------
On ______________________________________________________ before me,
_______________________, personally appeared __________________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature
--------------------------------------------------------
STATE OF CALIFORNIA )
) SS.
COUNTY OF )
--------------------
On ______________________________________________________ before me,
_______________________, personally appeared __________________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature
--------------------------------------------------------
EXHIBIT E-2
<PAGE>
NOTICE TO TENANTS OF SALE OF PROPERTY
Dear Tenant:
This will notify you that on ______________________, 1996, the buildings
at 1830-1936 East Baseline Road, Mesa, Arizona 85204, in which you are a tenant,
was sold to Focal Corporation, a Utah corporation. The buildings will be managed
by _______________________________.
From this date on, please mail your rent checks, payable to Focal
Corporation, to:
Focal Corporation
P.O. Box 3940
Anaheim, California 92801
Attn: Howard M. Palmer
Any written notices you desire or are required to make to the Lessor
under your lease should be sent to the new owner at this address, and any
inquiries about the Property or your lease should be made to the new owner at
this address, or by telephone to Howard M. Palmer (714) 635-8821.
The new owner will be responsible for any refundable deposits, subject to
the terms of your lease.
Thank you.
Very truly yours,
GILBERT ARIZONA DEVELOPMENT CORPORATION, a New
York corporation
By
-----------------------------------------
-----------------------------------------
EXHIBIT F
<PAGE>
ENTITY TRANSFEROR
-----------------
CERTIFICATE OF NON-FOREIGN STATUS
---------------------------------
1. Section 1445 of the Internal Revenue Code provides that a transferee
(Buyer) of a U.S. real property interest must withhold tax if the transferor
(Seller) is a foreign person. To inform the transferee that withholding of tax
is not required upon the disposition of a U.S. real property interest by Gilbert
Arizona Development Corporation, the undersigned hereby certifies the following
on behalf of Gilbert Arizona Development Corporation, a New York corporation:
A. Gilbert Arizona Development Corporation is not a foreign
corporation, foreign partnership, foreign trust or foreign estate (as these
terms are defined in the Internal Revenue Code and Income Tax Regulations).
B. Gilbert Arizona Development Corporation's employer identification
number is _______________________________.
C. Gilbert Arizona Development Corporation's office address is:
c/o Robert N. Richter
2730 Transit Road
West Seneca, New York 14224
2. Gilbert Arizona Development Corporation understands that this
certification may be disclosed to the Internal Revenue Service by the
transferee and that any false statement contained herein could be punished by
fine, imprisonment or both.
3. Gilbert Arizona Development Corporation understands that the transferee
is relying on this certificate in determining whether withholding is required
and that the transferee may face liabilities if any statement in this
certificate is false. Gilbert Arizona Development Corporation and the
undersigned hereby indemnifies the transferee and agrees to hold the transferee
harmless from any liability or cost which the transferee may incur as a result
of the transferor's failure to pay any U.S. Federal Income tax which transferor
is required to pay under applicable law, or any false or misleading statement
contained herein.
EXHIBIT K-1
<PAGE>
4. Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and I have authority to sign this document on behalf of Gilbert Arizona
Development Corporation.
Executed in
------------------------------------,
on 1996.
- -------------- ------------------------------,
----------------------------------------
----------------------------------------
NOTICE: The transferee must retain this Certificate until the end of the 5th
taxable year following the taxable year in which the transfer takes
place, and make it available to the Internal Revenue Service when
requested. DO NOT RECORD.
EXHIBIT K-2
<PAGE>
NOTICE OF TRANSFER
------------------
Pursuant to Section 13.17 of that certain Declaration of Construction and
Operation Covenants and Restrictions and Grant of Easements (Mesa, Arizona)
recorded on November 29, 1989 in 89-548094 of Official Records in Maricopa
County, Arizona, as amended by that certain First Amendment to Declaration of
Construction and Operation Covenants and Restrictions and Grant of Easements
(Mesa, Arizona) recorded on June 29, 1990 in 90-293333 of Official Records in
Maricopa County, Arizona (collectively, "Declaration"), this is to notify you
that the undersigned, Gilbert Arizona Development Corp., a New York corporation,
has sold and transferred the Property described as Parcels I, III and V of Mesa
Commons, according to the plat of record in the office of the County Recorder of
Maricopa County, Arizona, recorded in Book 336 of Maps, page 49, to Focal
Corporation, a Utah corporation, whose address is P.O. Box 3940, Anaheim,
California 92803.
Attached hereto is an acknowledgment by Focal Corporation of its
obligations under the Declaration and its agreement to be bound thereby and
perform all our future obligations thereunder.
Dated: , 1996
----------------------
GILBERT ARIZONA DEVELOPMENT CORPORATION
a New York corporation
By:
----------------------------------
Robert N. Richter, President
EXHIBIT N
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT
-----------------------------
Pursuant to Section 13.17 of that certain Declaration of Construction and
Operation Covenants and Restrictions and Grant of Easements (Mesa, Arizona)
recorded on November 29, 1989 in 89-548094 of Official Records in Maricopa
County, Arizona, as amended by that certain First Amendment to Declaration of
Construction and Operation Covenants and Restrictions and Grant of Easements
(Mesa, Arizona) recorded on June 29, 1990 in 90-293333 of Official Records in
Maricopa County, Arizona (collectively, "Declaration") as the new owner of
Parcels I, III and V of Mesa Commons, according to the plat of record in the
office of the County Recorder of Maricopa County, Arizona recorded in Book 336
of Maps, page 49, the undersigned does hereby acknowledge its obligations under
the Declaration and agrees to be bound by the Declaration and to perform all
obligations of Gilbert Arizona Development Corporation, a New York corporation,
hereinafter incurred under the Declaration.
Dated: , 1996
--------------------
FOCAL CORPORATION
A Utah Corporation
By:
----------------------------------
Howard M. Palmer, President
EXHIBIT O
<PAGE>
[LETTERHEAD OF FLEET MANAGEMENT AND RECOVERY]
May 3, 1996
Gilbert Arizona Development Corp.
Att: Mr. Lawrence Reger
2730 Transit Road
West Secca, NY 14224
RE: Mesa Commons Shopping Center, Basetine and Gilbert Roads, Mesa, Arizona
Commercial Loan #3170019933; Obligation #42
Gentlemen:
ALI, Inc. ("ALI") is pleased to advise you that ALI will make certain
credit accommodations to Gilbert Arizona Development Corp. (the "Borrower") in
the form of an extension and modification to the existing indebtedness of
Borrower to ALI, the ("Indebtedness") as evidenced and secured by all debt
instruments previously executed by Borrower to ALI, collectively the ("Loan
Documents"), in accordance with the terms and conditions of this loan commitment
letter.
This commitment is subject to all of the terms and conditions contained
herein.
MODIFICATIONS OF LOAN DOCUMENTS
-------------------------------
The indebtedness of Borrower to ALI as evidenced and secured by the Loan
Documents shall be extended and modified in accordance with the following:
Loan Principal Reduction. The Indebtedness shall be paid down to a
------------------------
principal balance of $7,100,000.00 by Borrower either prior to, or at the time
of closing of the transaction evidenced by this commitment letter.
Interest Rate. Interest will be charged on outstanding principal balances
-------------
at the rate of nine percent (9%) per annum. In the event that any interest
payment to or retention of interest by ALI provided for in the
extension/modification agreement is deemed to exceed the lawful amount, then the
amount of such interest shall be reduced to such lawful amount and any
overpayment shall be considered as a payment of principal.
<PAGE>
Gilbert Arizona Development Corp.
May 3, 1996
Page 2
Principal and Interest Payments. Payments of principal and interest,
-------------------------------
determined as above set forth, on outstanding principal balances hereunder shall
be due on the first day of every month based on a twenty-five (25) year
amortization period.
Late Payments. Payments made more than ten (10) days after the due date
-------------
shall be subject to a late payment charge equal to 6% of the payment due.
Prepayment Consideration. If ALI in its sole discretion, should determine
------------------------
that current market conditions can accommodate a prepayment request, the
Borrower shall have the right at any time and from time to time to repay the
Indebtedness in whole (but not in part), and the Borrower shall pay to ALI a
yield maintenance fee in an amount computed as follows. The current rate for
United States Treasurer securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the Maturity
Date shall be subtracted from the "cost of funds" component of the fixed rate in
effect at the time of prepayment. If the result is zero or a negative number,
there shall be no yield maintenance fee. If the result is a positive number,
then the resulting percentage shall be divided by 360 and multiplied by the
number of days remaining prior to the Maturity Date. Said amount shall be
reduced to present value calculated by using the number of days remaining prior
to the Maturity Date and using the above referenced United States Treasury
security rate and the number of days remaining prior to the Maturity Date. The
resulting amount shall be the yield maintenance fee due to ALI upon prepayment
of the Indebtedness.
Maturity. All remaining principal and interest on the indebtedness shall
--------
be due and payable seven (7) years from the date of closing.
Collateral:
----------
1. ALI will require confirmation of first security interests in all
assets of Borrower including without limitation accounts, inventory,
chattel paper, documents, instruments, general intangibles, machinery,
equipment, furniture and fixtures.
2. The Indebtedness shall continue to be secured by the existing Deed of
Trust by and between Borrower, ALI and the Trustee therein named
encumbering the above captioned real property.
3. Unencumbered, marketable and insurable title to the mortgage property
must be acceptable to ALI's attorneys.
In conjunction therewith, an endorsement will be required to the
existing title insurance policy insuring the Indebtedness insuring
that the Deed of Trust, as
<PAGE>
Gilbert Arizona Development Corp.
May 3, 1996
Page 3
extended and modified continues to be a first lien against the subject
property. Borrower must comply with all requirements of the title
insurance company issuing said endorsement relating thereto.
4. Guarantees. All obligations of the Borrower shall continue to be
guaranteed by all existing guarantees previously delivered to ALI
securing the Indebtedness and all such guarantors shall consent to
these modifications.
5. Extension/Modification Agreement. Execution, delivery and recording of
an extension/modification agreement in form and content acceptable to
ALI and its counsel incorporating the terms and conditions of this
commitment letter and all such other necessary terms and conditions as
required by ALI and its counsel.
General Requirements. The Indebtedness shall be documented in form
--------------------
satisfactory to ALI and its legal counsel. Among other items:
1. Annually, Borrower to submit audited financial statements and copies
of tax returns within 120 days of Borrower's fiscal year end.
2. Annually, Guarantors to submit updated personal financial statements
and copies of tax returns.
3. Annually, Borrower to submit certified rent roll and tenant list for
the premises.
4. As requested by ALI, Borrower to submit interim financial statements.
5. Real property taxes must be kept current and paid receipts must be
submitted to ALI within 30 days of payment due date.
6. The Borrower shall notify ALI of any material adverse litigation,
administrative proceeding, or business development or of the
occurrence of any Event of Default (which shall include, without
limitation default in payment due of any principal or interest,
default with respect to any other obligations to ALI of the Borrower
or its affiliates or guarantor, any representation or warranty or
certificate or report furnished to ALI being materially false or
misleading, bankruptcy or insolvency proceedings by or against the
Borrower or the guarantors, a reportable event occurring under ERISA,
or default by the Borrower or the guarantors under any other material
obligation for borrowed money or its equivalent).
7. The maturity of all obligations of Borrower shall be accelerated upon
the occurrence of an Event of Default.
<PAGE>
Gilbert Arizona Development Corp.
May 3, 1996
Page 4
8. The Borrower and its affiliates shall comply in all respects with
ERISA.
9. The Borrower shall maintain insurance (including without limitation
hazard, liability including products liability, workers' compensation,
loss of rent and business interruption) in form and amount
satisfactory to ALI. Such policies shall provide for thirty days prior
written notice of cancellation to ALI and shall name ALI as
mortgage/lost payee as its interest appears.
10. The Borrower shall not be involved in consolidations, acquisitions of,
or mergers with, any other entity, or sales of material assets of the
Borrower other than in the ordinary course of business, or dissolution
or liquidation of the Borrower or change in the ownership interests in
the Borrower.
11. The Borrower shall maintain its due organization and authority, and
shall comply with all governmental requirements and the terms of all
corporate restrictions on it.
12. The Borrower shall cause the prompt payment when due of all taxes and
similar charges.
13. There shall be an Event of Default in the event the Borrower borrows
funds from, leases from, or pledges or otherwise encumbers in any way
its assets to, anyone other than ALI.
14. If the premises is sold prior to the afore-noted Maturity and the Deed
of Trust is extended and modified is assumed as part of the
transaction. Borrower shall pay to ALI, or its assign, a fee of 1% of
the gross sale price of the premises. If the premises is sold prior to
Maturity and the Deed of Trust as extended and modified is paid in
full, then there will be no fee owing to ALI or its assign.
Closing Requirements. In addition to the General Requirements above set
--------------------
forth, the following Closing Requirements, satisfactory in form and content to
Bank and its counsel must be submitted.
1. An affidavit of no change relative to the existing survey of the
premises.
2. Letter from the City of Mesa stating that the premises is in
compliance with all building codes.
<PAGE>
Gilbert Arizona Development Corp.
May 3, 1996
Page 5
3. Insurance binders for all types of insurance above mentioned.
4. Current, certified rent roll and tenant list.
5. Borrower corporate good standing certificate from state of incorporation
and certification of authority to do business from the State of Arizona.
6. Borrower corporate tax status reports from the state of incorporation,
and, if applicable, the State of Arizona.
Miscellaneous
- -------------
1. By acceptance of this commitment, Borrower agrees to pay all costs in
connection with preparation for closing, the closing, and post-closing
items including without limitation all charges for recording and filing
fees and the legal fees and disbursements of ALI's counsel, including
Edwards & Angel, and Arizona counsel, Murphy & Posner.
2. Borrower warrants that all matters, documents and instruments furnished
to ALI and upon which the commitment are based, including without
limitation, financial statements, are complete and that there has been no
material omission therefrom.
3. Borrower agrees to execute and/or deliver to ALI such further
documentation, covenants, and items as ALI or its counsel may reasonably
require or as may become necessary to effect the consummation of this
transaction.
4. This commitment is contingent upon there being no detrimental or adverse
change in the physical or financial condition of the Borrower or the
Guarantors.
5. This commitment replaces any previous commitments and shall be the only
commitment between the parties and all prior commitments whether oral or
in writing relating to this financing are hereby null and void.
6. A commitment fee of $35,500.00 is due at the time of acceptance of this
commitment.
7. The pending Bankruptcy case No. 94-13739B shall be dismissed prior to the
closing of the transaction evidenced by this commitment letter.
<PAGE>
Gilbert Arizona Development Corp.
May 3, 1996
Page 6
8. ALI shall terminate its pending litigation against the Borrower
simultaneous with the closing of the transaction evidenced by this
commitment letter.
9. Borrower must accept this commitment letter by May 10, 1996 and close on
the transaction described herein by May 24, 1996.
Very truly yours,
ALI, Inc.,
By its attorney-in-fact
Fleet Real Estate Capital, Inc.,
d/b/a Fleet Management and Recovery
/s/ Christopher P. Hickey
Christopher P. Hickey
Assistant Vice President
Accepted and Agreed:
GILBERT ARIZONA DEVELOPMENT CORP.
By: _______________________
Date: May ___, 1996
GUARANTORS
___________________________
___________________________
___________________________
cc: Earl E. Berg, Esquire
Patricia L. Kantor, Esquire
<PAGE>
EXHIBIT 10.7
AMENDMENT TO PURCHASE AGREEMENT
AND ESCROW INSTRUCTIONS
Re: Commonwealth Land Title Company
275 W. Hospitality Lane
San Bernardino, California 92408
Escrow Number: 13782-005
Escrow Officer: Dee Fitzpatrick
Myung Hee Lee, as "Seller" and Focal Corporation, a Utah Corporation, as
"Buyer", (in place and stead of Palmer Development Company) do agree to modify
and amend that certain Purchase Agreement and Escrow Instructions dated February
17, 1995 (the "Agreement") in the following respects only, namely:
FIRST: Reference is made to Section 3, entitled Deposit. The Buyer and
the Seller agree that said Section 3 shall be deleted in its entirety and the
following substituted in its place and stead, to wit:
"SECTION 3
Deposit
3.1 Deposit of Letter of Credit. On or before June 30, 1995, but not
---------------------------
earlier than the last date on which the Buyer and the Seller have executed and
deposited in Escrow this Agreement and such Superseded Contract Escrow
Instructions as may be required and prepared for execution by the parties, by
the Escrow Holder, incorporating the provisions of this Agreement, Buyer shall
deposit into Escrow a Letter of Credit in the amount of Twenty-Five Thousand
Dollars ($25,000), in the form and in accordance with the terms of Exhibit "A-1"
attached hereto and made a part hereof by reference ("Letter of Credit").
3.2 Return of Letter of Credit. If any of the following events shall
--------------------------
occur, then Escrow Holder shall immediately return the Letter of Credit to Buyer
upon written demand made by Buyer and delivered to seller and Escrow Holder:
a. If the transaction contemplated by this Agreement does not close
for any reason other than the default of Buyer.
1
<PAGE>
b. If this transaction does close and if the Letter of Credit
has not been drawn upon, because the Buyer has deposited the entire down
payment as required under Section 5.2 in Escrow.
c. Pursuant to the provisions of Section 4.1b., Buyer has
delivered to Seller and Escrow Holder a notice of termination of its
obligations under this Agreement.
d. Buyer deposits the sum of Twenty-Five Thousand Dollars
($25,000) in escrow.
3.3 Letter of Credit Draw. The Letter of Credit may not be drawn
---------------------
upon except only on the following conditions:
a. The Buyer has consented in writing.
b. In the event the Escrow is cancelled or does not close for
any reason other than the default of the Seller and the Buyer has not
deposited the amount of any escrow cancellation costs required to be paid
by Buyer within thirty (30) days, after which event the Letter of Credit
may be drawn upon only for the amount of such escrow cancellation costs.
In no event may the Letter of Credit be drawn upon prior to June
30, 1996, unless escrow closing is extended, in which event the Letter of
Credit may not be drawn upon earlier than the extended escrow closing date,
provided that if the escrow closes prior to June 30, 1996, the Letter of
Credit may be drawn upon only with the consent of the Buyer."
SECOND: Reference is made to Subsection b. of Section 4.1 on page 5 of
the Agreement. Buyer and the Seller agree that said Subsection b. shall be
deleted in its entirety and the following substituted in its place and stead, to
wit:
"b. On timely disapproval by Buyer of any of the above conditions or
failure of any of the above conditions to be satisfied within the time
provided, Buyer may terminate its obligations under this Agreement by
giving notice to Seller within the time allowed for each condition. In that
case, instruct the Escrow to return Buyer's Letter of Credit to Buyer, as
in paragraph 3.2. Failure of Buyer to elect to terminate its obligation
shall constitute a waiver of the condition by Buyer. All of the
contingencies set forth above in this Section 4.1 are for the benefit of
Buyer and may be waived by Buyer at any time."
2
<PAGE>
THIRD: Reference is made to Section 4.3, entitled "Seller's Cooperation",
----------------------
as set forth on Page 5 of the Agreement. By this reference the Buyer and the
Seller agree that said Section 4.3 is hereby deleted in its entirety and the
following is substituted in its place and stead, to wit:
"4.3 Seller's Cooperation. Seller shall cooperate with Buyer
--------------------
as reasonably required for satisfaction of the conditions, and Seller
shall furnish information and sign documents and applications as may be
required, for example, by government agencies, utility companies, and
lenders, including without limitation, a subdivision or parcel map or
maps, provided, that: (i) Buyer shall pay all costs of the work and
applications; (ii) Seller shall not be required to incur any debt or
cost or place any lien on the Property; and (iii) Seller shall not be
required to take any actions which would materially detract from the
value of the Property or create any permanent changes to the legal
status of the Property if the closing is not consummated."
FOURTH: Reference is made to Section 5 entitled "Purchase Price" as set
forth on Pages 6 and 7 of the Agreement. By said reference, the Buyer and
Seller agree that all of the provisions set forth on Page 6 and the Paragraph
"b" on the top of Page 7 of the Agreement are hereby deleted in their entirety
and the following is substituted in their place and stead, to-wit:
SECTION 5
Purchase Price
5.1 Amount. The Purchase Price for the Property shall be $2,800,000, for
------
approximately 26.8 acres gross.
5.2 Payment. The Purchase Price shall be paid at the close of Escrow as
-------
follows:
a. $800,000 will be paid as a down payment. Included in the down
payment will be the $25,000 deposit, paid through Escrow at the
conclusion of all of the conditions and the recording of the Grant Deed
in favor of Focal Corporation, or assign. In addition, a Promissory
Note for $2,000,000 will be executed in favor of the Seller, payable
with interest at the rate of nine percent (9%) per annum, payable
quarterly, commencing ninety (90) days from the close of Escrow, and
the principal payable on or before five (5) years from the close of
Escrow. Attached hereto marked Exhibits "1" and "2" are true copies of
the Promissory Note and Deed of Trust. By execution of this Agreement,
the parties hereto do approve of the form and content of said
Promissory Note and Deed of Trust, the
3
<PAGE>
provisions of which are incorporated herein by this reference as
though set forth in full hereat. The parties hereto do authorize and
direct the escrow officer to complete the appropriate blanks for the
date of each instument to coincide with the date of the close of
escrow and to insert in the Promissory Note the appropriate date for
the first quarterly interest payment to be made in accordance with the
provisions of said Note. Excluded from the Deed of Trust attached as
Exhibit "2" is the legal description on Exhibit "3" (which Exhibit
describes the entire 26.8 acres of real property subject to this
escrow) which will be encumbered by the lien of said Deed of Trust as
security for the Promissory Note in the amount of $2,000,000.
5.3 Security and Scope of Security. The above Note shall be secured by a
------------------------------
first deed of trust executed by Buyer, or its assigns, as Trustor in favor of
Seller as Beneficiary, encumbering a portion, but not all of the property
described in the Grant Deed recorded in favor or Buyer or its assigns. That
portion of the aggregate 26.8 acres gross, referenced in Section 5.1 above, to
be excluded from the property to be encumbered by the deed of trust securing the
$2,000,000 Promissory Note, in consideration for the payment of the down payment
in the amount of $800,000, shall be determined hereafter and written notice of
said determination shall be given to the escrow holder and to the Seller not
less than fifteen (15) days prior to the closing date.
a. Property To Be Excluded From Encumbrance Under Deed of Trust:
------------------------------------------------------------
The Buyer has represented to the Seller that, prior to or
concurrently with the close of escrow, all or portions of the
aggregate 26.8 acres gross will be legally divided by one or more
parcel maps into multiple parcels containing full and fractional acres
in such sizes and configurations as the Buyer shall hereafter
determine to effect the Buyer's best utlization of the aggregate
property. Upon close of escrow and in consideration of the payment to
Seller of the down payment in the amount of $800,000, the Buyer shall
be entitled to receive, free and clear of the lien of the above-
referened deed of trust, one or more of said parcels, as the same are
selected and designated in the above written notice, containing not
more than 6.4 acres of the original aggregate 26.8 acres gross. The
agreed amount per share for said 6.4 acres is in the sum of $125,000
per acre.
4
<PAGE>
b. Additional Acreage To Be Excluded From Encumbrance Under Deed Of
----------------------------------------------------------------
Trust.
-----
In the event Buyer desires to acquire parcels comprised of more than
6.4 acres of the aggregate 26.8 acres gross, free of the lien and
encumbrance of the Deed of Trust, Buyer shall be required to deposit in
escrow, prior to close of escrow, an additional amount to be applied to the
Purchase Price based on the rate of $125,000 per acre for each acre or
fraction of an acre to be added to the original 6.4 acres to be excluded in
consideration of the original down payment of $800,000. Such additional
amount constituting the adjusted down payment shall reduce the face amount
of the $2,000,000 Promissory Note in a like amount.
c. Exclusion Of Less Than 6.4 Acres Under Deed of Trust.
----------------------------------------------------
In the event the legal parcel or parcels designated in writing by
Buyer prior to close of escrow should comprise less than 6.4 acres, the
Buyer shall nonetheless deposit as the down payment the balance of the down
payment provided in Section 5.2 as above. To the extent that said down
payment constitutes an overpayment, based on an acreage valuation at the
rate of $125,000 per acre, the Buyer shall be entitled to a credit in a like
amount of said overpayment against the next payment to be made by Buyer to
Seller in reduction of principal due under the Promissory Note to effect the
further release of the remaining acreage, in the form of legal parcels from
the lien and encumbrance of the Deed of Trust securing the balance of the
purchase price in the amount of $2,000,000.
NOTE: (i) As to Subsection 5.3b above, upon close of escrow, the escrow
officer is authorized and directed to revise and redraft the
Promissory Note, as to the principal amount thereof only, to
reflect the adjusted principal balance of the purchase price by
deducting the total increased down payment tendered by Buyer for
the additional acres, or fractions thereof and to revise and
redraft the Deed of Trust, to effect the exclusion of more than 6.4
acres from the legal description to be attached to the Deed of
Trust. All other terms and provisions of said Promissory Note and
Deed of Trust shall remain the same as depicted on Exhibits "1" and
"2" hereto.
5
<PAGE>
(ii) As to Subsection 5.3c above, upon close of escrow, the
escrow officer is authorized and directed to furnish to buyer
and Seller a written statement setting forth the amount of
the overpayment that shall constitute a credit against the
release price for the remaining acreage contained within the
legal description to be attached to the Deed of Trust in the
event more than 20.4 acres are included within the parcels
comprising said legal description.
(iii) Whenever the term "Buyer" is used herein, it is deemed
to include the assignee of Buyer.
5.4 Partial Release Provision. The Deed of Trust shall contain the
-------------------------
following provision regardless of the original principal amount of the
Promissory Note secured by said Deed of Trust, to-wit:
"So long as Trustor shall not be in default concerning any of the
covenants contained in this Deed of Trust, or with respect to payments
due on the Note secured hereby, partial reconveyance may be had and
will be given from the lien or charge hereof of any one or more acres,
or fractions of an acre, of the real property described herein as
total separate legal parcels upon payment of amounts to be applied on
the principal of the Note, for each acre or fraction of an acre so
reconveyed, to be determined by dividing the total original amount of
the Note by the total number of acres or fractions thereof,
constituting such legal parcel or parcels, contained within the
described property and then by multiplying the quotient so obtained by
120%. The product so obtained shall constitute the Release Price for
each acre or fraction of any acre to be reconveyed as the same are
contained within the legal parcel or parcels to be released hereafter
from the lien and encumbrance of this Deed of Trust. In no event shall
the monies paid to Beneficiary by Trustor for the last release and
reconveyance of the Property last remaining subject to the lien of
this Purchase Money Deed of Trust be more than the unpaid principal
balance of the Purchase Money Note, plus all accrued and unpaid
interest owing thereunder. Trustor agrees to provide satisfactory
evidence to Beneficiary that any request for partial reconveyance
requested pursuant to this provision shall not violate any State laws
or City/County ordinances relating to lot split, parcel map or tract
map requirements. Any costs related to same shall be the sole expense
of the Trustor."
6
<PAGE>
5.5 Late Payment Provision. The Promissory Note shall contain the following
----------------------
provision, to wit:
"The Maker acknowledges that late payment to Payee will cause
Payee to incur costs not contemplated by this indebtedness, the exact
amount of such costs being difficult and impracticable to assess. Such
costs include, without limitation, processing and accounting charges.
Therefore, if any installment is not received by Payee or holder of
this Note when due, Maker shall pay to Payee an additional sum of Ten
Percent (10%) of the overdue amount as a late charge. Said late charge
shall be assessed on the fifteenth (15th) day following the date said
payment was due if payment has not been delivered by said date, or
mailed with a postmark not later than fifteen (15) days following the
due date of each said payment. The parties agree that this late charge
represents a fair and reasonable estimate of costs the Payee will incur
by reason of late payment. Acceptance of any late charge shall not
constitute a waiver of the default with respect to the overdue payment
and shall not prevent Payee from exercising any of the rights and
remedies available to Payee. Should any Late Payment Penalty accrue,
the amount of same shall be added to and tendered with the next
succeeding payment. Non-payment of any accrued and unpaid Late Payment
Penalty charges shall constitute a default under this Note. Payee's
acceptance of any payment which does not include such charge does not
constitute a waiver of same."
FIFTH: Escrow Closing
--------------
Reference is made to Section 9.3, entitled "Escrow Closing", and to the
second paragraph thereof, entitled "Escrow Closing Date," on page 12 of the
--------------------
Agreement, beginning with the words "Except as otherwise provided" and ending
with the words "... property to Buyer." By this reference the Buyer and Seller
agree that said second paragraph only of Section 9.3 is deleted in its entirety
and the following is substituted in its place and stead, to wit:
"Escrow Closing Date. Except as otherwise provided in this
-------------------
Section, Escrow shall close, or be deemed automatically canceled,
without the need for further escrow cancellation instructions, on that
date which is thirty (30) days following the Buyer's approval or
waiver, as the case may be, of those conditions precedent to the
Buyer's obligation to purchase as more particularly set forth and
described above in Section 4.1a, Subsections (i) through (xi),
inclusive, but in no
7
<PAGE>
event later than 365 days from the date Seller and Buyer have executed
and deposited in Escrow an executed counterpart of this Agreement and
such Superseded Contract Escrow Instructions as may be required and
prepared for execution by the parties by the Escrow Holder,
incorporating the provisions of the Agreement, as hereby amended. The
Escrow Holder shall be obligated to provide the parties with written
notice as to the date of opening of Escrow, which shall be the date
the Agreement, as hereby amended, and such Superseded Contract Escrow
Instructions are signed and deposited in Escrow by Seller and Buyer,
but not later than June 30, 1995. If Buyer has not executed and
deposited comparable counterparts of the Agreement, as hereby amended,
and such Superseded Contract Escrow Instructions with the Escrow
Holder, together with Buyer's deposit as required by Section 3.1
above, by June 30, 1995, then and in that event at Seller's option
this Agreement shall have no force or effect, and Seller shall be
released and discharged from any further duty to sell the subject
property to Buyer."
SIXTH: Assignment.
Reference is made to Section 10.7, entitled "Assignment", as set forth
on Page 15 of the Agreement. By said reference, the Buyer and the Seller agree
that said Section 10.7 is hereby deleted in its entirety and the following is
substituted in its place and stead, to wit:
"10.7 Assignment. The Buyer may assign all or any part of its rights
in this Purchase Agreement to a joint venture, partnership (general or limited)
corporation or any other entity in which an interest is owned by Focal
Corporation or Howard M. Palmer or by any entity in which Focal Corporation or
Howard M. Palmer has an interest, without the consent of the Seller and without
supplying the materials referred to in subparagraph (6) below. All other
transfers shall be subject to the Seller's approval, which shall not be
unreasonably withheld. However, no assignment shall be effective until the
assignee assumes the obligation in writing and a signed copy is delivered to the
Seller. An assignor shall not remain obligated after such assignment is made. As
a condition to the foregoing assignment of such rights under this Agreement,
Buyer, as assignor, shall first provide to Seller the following information
concerning the proposed assignee, namely: (1) his, her or its name and address
in California and elsewhere; (2) if the assignee is a corporation, the state of
8
<PAGE>
incorporation, a Certificate of Good Standing from the state of
incorporation, the names and addresses and qualifications of its officers
and directors, its most recent financial statement and a copy of its most
recent federal tax return; (3) if the assignee is a foreign corporation,
evidence that it is qualified to do business in California; (4) if the
assignee is a General Partnership, a Statement of Partnership; (5) if the
assignee is a Limited Partnership, a copy of the filed LP-1, Statement
of Limited Partnership; and (6) any other materials reasonably requested
by Seller that demonstrate that the financial and other qualifications of
the assignee are substantially equivalent to those of Buyer.
Except as above provided by deletion and substitution, the parties do
hereby reaffirm the remaining provisions of the Agreement dated February 17,
1995.
Executed in counterparts, to be delivered forthwith to escrow, on the dates
and at the places set forth below.
BUYER SELLER
FOCAL CORPORATION /s/ Myung Hee Lee
A Utah Corporation ---------------------------------
Myung Hee Lee
By: /s/ Howard M. Palmer
------------------------------ Executed on this 26th day of
Howard M. Palmer, President ----
June, 1995 at Orange County,
--------------
Executed on this 20 day of California.
--- -----------
June, 1995 at Orange County,
--------------
California.
- -----------
9
<PAGE>
THESE INSTRUCTIONS SUPERCEDE AND RENDER NULL AND VOID THOSE PREVIOUS
INSTRUCTIONS DATED FEBRUARY 24, 1995
ESCROW INSTRUCTIONS
THIS DOCUMENT WILL AFFECT YOUR LEGAL RIGHTS-READ IT CAREFULLY!
TO: COMMONWEALTH LAND TITLE COMPANY Escrow No. : 13782.005
275 W. Hospitality Lane No. 200 Date : 06/27/95
San Bernardino, CA 92408 Page No. : 1
(909) 888-7541 Escrow Officer : Dee Lopez
THE ESCROW HOLDER IS COMMONWEALTH LAND TITLE COMPANY WHICH IS LICENSED BY THE
CALIFORNIA DEPARTMENT OF INSURANCE.
- -------------------------------------------------------------------------------
1. The Purchase Agreement and Escrow Instructions (Agreement) dated February
17, 1995 and Amendment to Purchase Agreement and Escrow Instructions executed by
and between Myung Hee Lee, as Seller, and Focal Corporation, a Utah Corporation,
as Buyer is the complete Agreement between the parties, and is to be construed
as your escrow instructions. You, as Escrow Holder, are instructed to act in
accordance with the terms and conditions of said Agreement insofar as is
required to close this escrow. The undersigned, as principals to said Agreement
hereby agree as a condition of your acceptance of the limited agency as Escrow
Holder, to the general provisions of your company contained in these
instructions.
2. The following items of said Agreement are hereby clarified as follows:
A. The legal description of the subject property is as per Exhibit "A"
attached hereto and made a part hereof and substitutes for Exhibit 3 of
the Agreement.
B. Escrow Holder shall not be concerned with the payment of any sales
tax.
C. Escrow Holder shall prorate only real property taxes and interest
on assessments if any, that continue to encumber the property.
D. Exhibit "B" attached hereto and made a part hereof substitutes for
Exhibit 4 of the Agreement.
3. The parties hereto fully understand the total responsibility and agency
authority of Escrow Holder is limited to those actions requiring the performance
and compliance by the principals that are identified as conditions precedent to
the recording of the documents and delivery of the instruments to the respective
parties entitled thereto, and the disbursement of funds in escrow as a
consequence of said closing. The parties thereto, by execution of these
instructions acknowledge that escrow holder assumes no responsibility or
liability for the supervision of any act or the performance of any condition
which is a condition subsequent to the closing of this transaction.
4. Any provisions of said Agreement notwithstanding, Escrow Holder shall have
the right and authority to withhold any action and require the written consent
of all necessary parties, if, in the judgment of Escrow Holder, such action
calls or appears to require the use of discretionary judgment by the Escrow
Holder or is not within the ordinary scope of escrow holder's activity.
5. Any instructions that may be contained in said Agreement providing for the
payment of funds that are on deposit with escrow holder prior to close of escrow
is a specific instruction to escrow holder to pay same in accordance with the
terms thereof and is without liability or recourse upon Escrow Holder for the
return of said funds regardless of the outcome of this transaction.
6. The parties hereto are hereby notified that pursuant to Chapter 598,
California Statutes of 1989 (AB512); Ins. Code Sec. 2413.1) effective January 1,
1990, all funds deposited in this escrow must be available for withdrawal from
Escrow Holder's trust account prior to the disbursement of said funds through
this escrow. Only funds deposited by electronic transfer "wired funds" will be
immediately available for disbursement upon confirmation of deposit. Funds
deposited in the form of cashier's checks, teller checks, or certified funds
will be available for disbursement one business day after deposit. Funds
deposited in any other form, including personal, corporate, partnership and
mortgage or loan broker checks and drafts may cause material delays in
<PAGE>
Escrow No. : 13782.005
Date : 06/27/95
Page No. : 2
Escrow Officer : Dee Lopez
the disbursement of funds through this escrow. To avoid delays it is
recommended that all funds be deposited by wire transfer or cashier's check.
Seller's Initials MHL Buyer's Initials HMP
--- ---
7. In the event Buyer or Seller utilize "facsimile" transmitted signed
documents (by panafax, telefax, etc.,) Buyer and Seller hereby agree to accept,
and instruct the Escrow Holder to rely upon, such documents as if they bore
original signatures. Buyer and Seller hereby acknowledge and agree to provide
to the Escrow Holder, within 72 hours of transmission or prior to the close of
escrow, whichever occurs first, such documents bearing the original signatures.
Buyer and Seller further acknowledge and agree that documents necessary for
recording with non-original (facsimile) signatures will not be accepted for
recording by the County Recorder, thus delaying the close of escrow.
8. The obtaining of or assignment of insurance, if applicable, shall not be
handled through this escrow. Escrow Holder is hereby relieved of all liability
and/or responsibility in connection with the closing of this escrow without
benefit of evidence of insurance coverage.
9. Parties to this transaction are aware and understand that as a result of
the passage of the Tax Reform Act of 1986 which added Section 6045(e) to the
Internal Revenue Code, the seller(s) in this transaction are to deposit, prior
to close of escrow, certain information including all sellers' name(s) and tax
identification numbers. Escrow Holder will forward information as required by
above Internal Revenue Code Section on forms as prescribed therein.
10. If preliminary change of ownership report is not completed and accepted by
the County Recorder at the time of recording, Escrow Holder is instructed to
charge buyer's account the initial penalty of $20.00 to be paid directly to the
County. Buyer is aware that a follow-up request for such form will be sent by
the County, AFTER CLOSE OF ESCROW, and that additional penalties will be
assessed by the County if the form is not filed. Escrow Holder is held harmless
in this matter.
11. Seller is aware based on Section 483 and 1271-1275 of the Internal Revenue
Code, in the event the interest rate of financing is too low or none charged, a
portion of the principal due on the financing is converted into interest for tax
purposes which is termed "imputed interest". Seller further acknowledges that
Commonwealth Land Title Company has made no representations whatsoever and that
they have advised us to seek counsel by our attorney, accountant and/or other
competent person(s) of our choice and do agree that Commonwealth Land Title
Company shall be held harmless of any liability in connection with same.
<PAGE>
EXHIBIT "A"
-----------
PARCEL NO. 1:
THE SOUTH 336 FEET OF THE NORTH 1,027 FEET, AS MEASURED ALONG THE EASTERLY LINE
OF THAT PORTION OF THE SOUTHEAST ONE-QUARTER OF SECTION 28, TOWNSHIP 9 NORTH,
RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO,
STATE OF CALIFORNIA, ACCORDING TO THE DEPENDENT RESURVEY AND SUBDIVISION OF
SECTIONS ON FILE IN THE UNITED STATES DEPARTMENT OF INTERIOR, BUREAU OF LAND
MANAGEMENT, DATED MARCH 28, 1933, LYING EASTERLY OF THE LAND CONVEYED TO THE
STATE OF CALIFORNIA FOR FREEWAY PURPOSES, BY DEED RECORDED NOVEMBER 5, 1956, IN
BOOK 4080, PAGE 8, OFFICIAL RECORDS.
PARCEL NO. 2:
THAT PORTION OF THE SOUTHEAST ONE-QUARTER OF SECTION 28, IN THE COUNTY OF SAN
BERNARDINO, STATE OF CALIFORNIA, TOWNSHIP 9 NORTH, RANGE 2 WEST, SAN BERNARDINO
BASE AND MERIDIAN, ACCORDING TO THE DEPENDENT RESURVEY AND SUBDIVISION OF
SECTIONS ON FILE IN THE UNITED STATES DEPARTMENT OF INTERIOR, BUREAU OF LAND
MANAGEMENT, DATED MARCH 28, 1933, LYING EASTERLY OF THE LAND CONVEYED TO THE
STATE OF CALIFORNIA FOR FREEWAY PURPOSES, BY DEED RECORDED NOVEMBER 5, 1956, IN
BOOK 4080, PAGE 8, OFFICIAL RECORDS.
EXCEPTING THEREFROM THE NORTH 1,027 FEET THEREOF, AS MEASURED ALONG THE EASTERLY
LINE.
ALSO EXCEPTING THEREFROM THE SOUTH 1,320 FEET THEREOF, AS MEASURED ALONG THE
EASTERLY LINE.
<PAGE>
Escrow No. :13782.005
Date :06/27/95
Page :6
Escrow Officer:Dee Lopez
I agree to pay: Per Agreement
BUYER(S) SIGNATURE(S):
Focal Corporation
a Utah Corporation
BY______________________________
its_____________________________
Mailing: Focal Corporation, P. O. Box 3940, Anaheim, CA 92803
The foregoing terms, conditions and instructions are hereby concurred in,
approved and accepted. I will hand you all instruments and money necessary of me
to enable you to comply therewith, which you are authorized to use and/or
deliver when you hold in this escrow for my account the funds, prorata
adjustments and instruments deliverable to me under these instructions. Indicate
on deed required documentary transfer tax and charge my account therefor.
I agree to pay: Per Agreement
SELLER(S) SIGNATURE(S):
/s/ Myung Hee Lee
- ---------------------------
Myung Hee Lee
Mailing: Myung Hee Lee, c/o Sue Kint, 5522 Lockhaven Dr., Buena Park, CA 90621
<PAGE>
EXHIBIT "B"
CERTIFICATION OF NONFOREIGN STATUS
----------------------------------
(Individual)
Escrow File No.:________
Section 1445 of the Internal Revenue Code provides that a transferee (buyer)
of a U.S. real property interest must withhold tax if the transferor (seller)
is a foreign person. To inform the transferee (buyer) that withholding of tax is
not required upon my disposition of a U.S. real property interest, I,
Myung Hee Lee, hereby certify the following:
- -------------
1. I am not a nonresident alien for purposes of U.S. income taxation
2. My U.S. taxpayer identifying number is ###-##-#### ; and
------------------------
(Social Security Number)
3. My home address is
8234 St. Andrew's Place, P. O. Box 9805
------------------------------------------------------------------------
Rancho Santa Fe, Calif. 92067
------------------------------------------------------------------------
I understand that this certification may be disclosed to the Internal Revenue
Service by the transferee and that any false statement I have made here could be
punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this certification
and to the best of my knowledge and belief it is true, correct, and complete.
Date: June 29, 1995
-------------------------------------
/s/ Myung Hee Lee
-------------------------------------
(Signature of Seller)
-------------------------------------
(Signature of Seller)
<PAGE>
Escrow No. : 13782.005
Date : 06/27/95
Page : 3
Escrow Officer : Dee Lopez
GENERAL PROVISIONS
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1. All prorations and adjustments called for in this escrow are to be made on
the basis of a 30 day month unless otherwise instructed in writing. You are
not responsible for any payment, adjustment or proration of Homeowners
Association (or similar) charge, fee or unrecorded lien unless set forth in
the escrow instructions.
2. The phrase "close of escrow" (or COE or CE) as used in this escrow means
the date on which documents are recorded, unless otherwise specified.
3. Recordation of any instruments delivered through this escrow, if necessary
or proper for the issuance of the policy of title insurance called for, is
authorized.
4. You are authorized and instructed to furnish a copy of these instructions,
any amendments thereto and/or final closing statement to the Real Estate
Broker representing any of the parties in this transaction, also to any
lender holding or contemplating a loan against the subject property. You
are not required to submit any title report issued in connection with this
escrow to any party or agent unless directed to do so by written mutual
instructions. You may, however, do so without incurring liability to any
party for such submission. You are hereby authorized to submit such reports
to any proposed lender.
5. All funds received in this escrow shall be deposited with other escrow
funds in a general escrow account or accounts of Commonwealth Land Title
Company, with any state or national bank, and may be transferred to any
other such general escrow account or accounts. All disbursements shall be
made by check of Commonwealth Land Title Company. Commonwealth Land Title
Company shall not be responsible for any delay in closing if funds received
by escrow are not available for immediate withdrawal. Said bank account(s)
may or may not be insured by the Federal Deposit Insurance Corporation and
all risk of loss shall accrue to the principals.
6. These instructions shall become effective as an escrow only upon receipt
thereof by Escrow Holder as signed by all parties thereto and acceptance by
Escrow Holder. Neither a Real Estate Deposit Receipt nor any other
agreement between the principals shall constitute Escrow Instructions,
except as otherwise provided herein.
7. You shall not be responsible or liable in any manner whatsoever for the
sufficiency or correctness as to form, manner of execution or validity of
any documents deposited in escrow, nor as to the identity, authority or
rights of any person executing the same, either as to documents of record
or those handled in this escrow. Your duties hereunder shall be limited to
the safekeeping of such money and documents received by you as escrow
holder, and for the disposition of the same in accordance with the written
instructions accepted by you in this escrow. You shall not be liable for
any of your acts or omissions done in good faith, nor for any claims,
demands, losses or damages made, claimed or suffered by any party to this
escrow, excepting such as may arise through or be cause by your
willful(neglect) or(gross) misconduct. You shall not be required to take
any action in connection with the collection, maturity or apparent outlaw
of any obligations deposited in this escrow, unless otherwise instructed.
8. You are to be concerned only with the directives specifically set forth in
the escrow instructions and amendments thereto, except as otherwise
provided herein and are not to be concerned or liable for items designated
as "memoranda" in the within escrow instructions nor with any other
agreement or contract between the parties except as otherwise provided
herein. Notwithstanding that provisions of the Real Estate Deposit Receipt
or any other agreement may be a part of these Escrow Instructions, said
provisions shall not be applicable to Escrow Holder, except as otherwise
provided herein. Any amendments of or supplements to any instructions
affecting this escrow must be in writing. Signatures on any documents and
instructions pertaining to this escrow indicate the signer's unconditional
approval thereof.
<PAGE>
Escrow No. : 13782.005
Date : 06/27/95
Page : 4
Escrow Officer : Dee Lopez
9. You are not to be concerned with any questions of usury in any loan or
encumbrance involved in the processing of this escrow and you are hereby
released from any responsibility or liability therefor.
10. If there is no written activity by a principal delivered to this escrow
within any six-month period after the time limit date as set forth in the
escrow instructions or written extension thereof, your agency obligation
shall terminate at your option and all documents, monies or other items
held by you shall be returned to the respective parties depositing same,
less fees and charges herein provided.
11. Upon receipt of any conflicting or unilateral instructions, other than
cancellation instructions described in paragraph 16 below, you are no
longer obligated to take any further action in connection with this escrow
until further concurring instructions are received from the principals to
this escrow.
12. In the event of failure to pay fees or expenses due you hereunder on demand
I agree to pay a reasonable fee for any attorney's services which may be
required to collect such fees or expenses.
13. The parties hereto acknowledge that they have been advised that title
companies and Escrow Holders are not authorized to give legal advice and
that if they desire legal advice they should consult an attorney.
14. Any funds abandoned or remaining unclaimed, after good faith efforts have
been made by the escrow holder to return same to the party(ies) entitled
thereto, shall be assessed a custodian fee of $25.00 per month. After three
years the amount thereafter remaining unclaimed may escheat to the State of
California.
15. You shall have no responsibility of notifying me or any of the parties to
this escrow of any sale, resale, loan, exchange or other transaction
involving any property herein described or of any profit realized by any
person, firm or corporation in connection therewith, regardless of the fact
that such transaction(s) may be handled by you in this escrow or in another
escrow.
16. If a demand to cancel is submitted after the time limit date, any principal
so requesting you to cancel this escrow shall file notice of demand to
cancel in your office in writing. You shall within five (5) working days
thereafter mail by certified mail one copy of such notice to each of the
other principals at the addresses stated in this escrow. Unless written
objection thereto is filed in your office by a principal within fifteen
(15) calendar days after date of such mailing, you are authorized to cancel
this escrow. If written objection is filed with you, you are authorized to
hold all money and documents in this escrow and take no further action
until otherwise directed, either by the principals mutual written
instructions or by final order of a court of competent jurisdiction. If
this is a sale escrow, you may return lender's papers and/or funds upon
lender's demand. This provision does not apply to the return of the letter
of credit, Escrow Holder shall return the letter of credit as provided for
in Amendment to Purchase Agreement and Escrow Instructions by and between
Seller and Buyer herein.
17. In the event of cancellation of this escrow, the fees and charges due
Commonwealth Land Title Company including expenditures incurred or
authorized shall be borne by the parties hereto unless otherwise
specifically agreed to or determined by a court of competent jurisdiction.
18. In the event of cancellation of this escrow, you are authorized to demand
payment of your charges and, on payment thereof, return documents and
monies to the respective parties depositing same or for whose benefit an
unconditional deposit was made; and to void executed instruments.
19. The principals hereto understand and acknowledge that you, as escrow
holder, have the absolute right at your election to file an action in
interpleader in a court of competent jurisdiction requiring the principals
to answer and litigate their several claims and rights among themselves and
you are authorized to deposit with the clerk of the court all documents and
funds held in this escrow. In the event such action is filed, the
principals jointly and severally agree to pay your cancellation charges and
costs, expenses, reasonable attorney's fees which you are required to
expend or incur in such interpleader action, the amount thereof to be fixed
and judgment to be rendered by the court. Upon the filing of such action,
you shall thereupon be fully released and discharged from all obligations
to further perform any duties or obligations otherwise imposed by the terms
of this escrow.
<PAGE>
Escrow No. : 13782.005
Date : 06/27/95
Page No. : 5
Escrow Officer : Dee Lopez
20. You are authorized to destroy or otherwise dispose of any and all
documents, papers, instructions, correspondence and other material
pertaining to this escrow or cancellation thereof, without liability and
without further notice to parties to the transaction after close of escrow
or cancellation in accordance with Escrow Holder's usual and customary
practice.
21. A controversy between Escrow Holder and the principals arising out of any
escrow involving less than $25,000.00 may be arbitrated at the option of
either the Escrow Holder or the principals, pursuant to the Rules of the
American Arbitration Association in effect on the date of the demand for
arbitration, or at the option of the principals, the Rules in effect at the
date escrow is closed. Arbitration shall be binding upon Escrow Holder and
the principals. The arbitration award may include attorney's fees to the
prevailing party, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
Time is of the essence of these instructions. If this escrow is not in a
condition to close by the TIME LIMIT DATE provided herein and written demand for
cancellation is received by you from any principal to this escrow after said
date, you shall act in accordance with Paragraph 16 of said General Provisions.
In the event one or more of the above General Provisions is held to be invalid
in judicial proceedings, the remaining respective General Provisions will
continue to be operative. Principals will hand you any funds and instructions
required from each respectively to complete this escrow.
If no demand for cancellation is made, you will proceed to close this escrow
when the principals have complied with the escrow instructions. These
instructions may be executed in counterparts, each of which shall be deemed an
original regardless of date of execution or deliver, and together shall
constitute one and the same documents. If these instructions relate to sale,
buyer agrees to buy and seller agrees to sell upon the terms and conditions
hereof. All documents, balances and statements due the undersigned are to be
mailed to the respective addresses shown herein, unless otherwise directed. In
these instructions, whenever the context so requires, the masculine gender
includes the feminine and/or neuter, and the singular number includes the
plural.
If any check submitted to escrow is dishonored upon presentment for payment, you
are authorized to notify all principals and/or their respective agents of such
nonpayment.
ALL OF THE TERMS, CONDITIONS AND PROVISIONS AS SET FORTH HEREINABOVE ARE
APPROVED, ACCEPTED AND CONCURRED IN BY THE PARTIES WHOSE SIGNATURES APPEAR
HEREIN.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS OTHER
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-START> JUL-01-1994 JUL-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 3,702 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,702 0
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<CURRENT-LIABILITIES> 656,933 0
<BONDS> 0 0
269,068 0
0 0
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<OTHER-SE> 1,923,393 0
<TOTAL-LIABILITY-AND-EQUITY> 123,702 0
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<OTHER-EXPENSES> 511,625 983,947
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<INCOME-PRETAX> (511,625) (983,947)
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<INCOME-CONTINUING> (512,625) (985,747)
<DISCONTINUED> 0 0
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<NET-INCOME> (512,625) (985,747)
<EPS-PRIMARY> (.21) 0
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</TABLE>
