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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
CAPITOL COMMUNITIES CORPORATION
(Name of Small Business Issuer as specified in its charter)
Nevada 88-0361144
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25550 Hawthorne Boulevard
Suite 207
Torrance, CA 90505
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (310) 375-2266
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock ($.01 Par Value)
(Title of Class)
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TABLE OF CONTENTS
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ITEM 1. DESCRIPTION OF BUSINESS.............................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION..........................................18
ITEM 3. DESCRIPTION OF PROPERTY............................29
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.....................................37
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS....................................38
ITEM 6. EXECUTIVE COMPENSATION.............................40
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.......................................42
ITEM 8. LEGAL PROCEEDINGS..................................43
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................44
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES............45
ITEM 11. DESCRIPTION OF SECURITIES..........................46
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS..........50
ITEM 13. DESCRIPTION OF FINANCIAL STATEMENTS................52
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................52
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS..................52
(a) INDEX TO FINANCE STATEMENTS............52
(b) INDEX TO EXHIBITS......................54
GLOSSARY....................................................57
FINANCIAL STATEMENTS..............................F-1 to F-37
EXHIBITS..........................................E-1 to E-243
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ITEM 1. DESCRIPTION OF BUSINESS.
See "Glossary" for the definitions of certain real estate industry
terms used in this Registration Statement.
BUSINESS DEVELOPMENT
Capitol Communities Corporation, a Nevada corporation (the "Company"),
was formed on August 21, 1995. It is the successor-by-merger to AWEC
Resources, Inc., a New York corporation (the "Predecessor Corporation").
Unless the context otherwise requires, all references to the "Company" in this
Registration Statement include the Predecessor Corporation, and all references
to the Company's business and properties include the business and properties of
Capitol Communities Corporation and its two wholly-owned subsidiaries discussed
in more detail below.
The Predecessor Corporation was incorporated in the State of New York
as Century Cinema Corporation in November 1968. In 1969, the Predecessor
Corporation conducted its initial public offering of common stock, pursuant to
a Form S-2 registration statement filed with the Securities and Exchange
Commission (the "SEC"). From 1970 to 1971, the Predecessor Corporation filed
annual reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Since then, neither the Predecessor Corporation nor its
successor, Capitol Communities Corporation, has been in compliance with the
reporting requirements under the Exchange Act.
By 1983, current management of the Company believes that the
Predecessor Corporation had virtually no assets and was essentially dormant.
In April 1984, the Predecessor Corporation acquired the business of Diagnostic
Medical Equipment Corporation ("DMEC") (the "DMEC Acquisition"). In June 1983,
the Predecessor Corporation changed its name to Diagnostic Medical Equipment
Corp. After the DMEC Acquisition, the Predecessor Corporation was in the
pharmaceutical, medical equipment and surgical supplies business. In August
1987, the Predecessor Corporation filed a registration statement with the SEC
on Form S-18 for a proposed offering of securities. The registration statement
never became effective and was deemed abandoned by the SEC, as of August 1991.
The Company's management believes that, by December 1992, the Predecessor
Corporation had virtually no assets.
In February 1993, Charles L. Silengo Sr. and certain affiliates and
related persons (the "Silengo Group") sold all of the outstanding shares of
Lion Coal Co. ("Lion Coal") to the Predecessor Corporation in return for the
issuance of shares of common stock representing a majority interest in the
Predecessor Corporation. In August 1993, the Silengo Group sold most of its
Predecessor Corporation common stock to Joe Vick ("Vick"), thereby transferring
control of the Predecessor Corporation to
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Vick. The Predecessor Corporation transferred its interest in Lion Coal to
Charles L. Silengo, for nominal consideration, in connection with the Silengo
Group's sale of its Predecessor Corporation common stock to Vick.
In October 1993, the Predecessor Corporation formed a wholly-owned
subsidiary, Resource Equity Corporation, a Texas corporation ("Resource
Equity"), to hold options on oil and gas properties purchased by the
Predecessor Corporation from PetroSource Energy Corporation ("PetroSource"), a
company controlled by Vick. The Predecessor Corporation issued shares of
common stock representing a controlling interest in the corporation to
PetroSource as consideration for the options. Although, at the time of the
purchase, the board of directors of the Predecessor Corporation valued the
options at $1,395,356, the amount of cash that PetroSource paid for the
options, the options were later discovered to be worthless. Resource Equity
was subsequently dissolved on February 13, 1996, by the State of Texas for
failure to pay State franchise taxes.
On November 29, 1993, the Predecessor Corporation filed a Form 10
registration statement with the SEC to register its common stock pursuant to
Section 12(g) of the Exchange Act. The Predecessor Corporation later withdrew
the registration statement, for reasons which are unknown to current management
of the Company.
On December 20, 1993, the Predecessor Corporation changed its name to
AWEC Resources, Inc. On February 11, 1994, the Predecessor Corporation formed
a wholly-owned subsidiary, AWEC Development Corporation, an Arkansas
corporation, which later changed its name on January 29, 1996, to Capitol
Development of Arkansas Inc. (the "Operating Subsidiary").
In February 1994, PetroSource transferred the majority of its shares
of Predecessor Corporation common stock to Prescott Investments Limited
Partnership, a Nevada limited partnership, ("Prescott LP") and Charlie
Corporation, a Nevada corporation ("Charlie Corporation"), both of which were
then, and presently are, affiliates of Michael G. Todd ("Todd"), Herbert E.
Russell ("Russell") and John W. DeHaven ("DeHaven"). See ITEM 4. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The shares were
transferred as payment for public relations services provided by Prescott LP
and Charlie Corporation to the Predecessor Corporation.
On February 15, 1994, the Operating Subsidiary purchased approximately
2,041 acres of land in Maumelle, Arkansas (the "Maumelle Property") from
Century Realty, Inc. ("Century") for an aggregate purchase price of $8,430,000.
The purchase price was comprised of $1,693,000 paid in cash at the closing of
the sale
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and a promissory note payable to Century in the original principal amount of
$6,737,000, secured by a first priority security interest in a portion of the
Maumelle Property. The cash paid at the closing was obtained from the proceeds
of Maumelle Property lot sales to third parties that occurred concurrently with
the Operating Subsidiary's acquisition of the Maumelle Property. Since
purchasing the Maumelle Property, the Operating Subsidiary has sold, as of
August 31, 1996, approximately 196 acres of the Maumelle Property, for
aggregate sales of $2,394,473.
The Maumelle Property was previously owned by Todd and DeHaven,
through a general partnership known as DeHaven, Todd & Company ("DTC"), for
approximately five years, from 1988 to 1993. In an uncontested foreclosure
action, DTC transferred the Maumelle Property to Century, successor to the
Resolution Trust Corporation (the "RTC"), which then was receiver for San
Jacinto Savings Association, the holder of a DTC promissory note secured by the
Maumelle Property. Century acquired rights to its claims on the Maumelle
Property from the RTC in February, 1993.
On February 17, 1994, the Predecessor Corporation filed another Form
10 registration statement with the SEC, but later withdrew it because of
significant comments from the SEC and the Predecessor Corporation's lack of
sufficient resources to satisfactorily respond to the SEC's comments. To the
knowledge of the Company's present management, the Company has filed no reports
or registration statements with the SEC since the aforementioned Form 10
registration statement.
In May 1994, the Predecessor Corporation formed a wholly-owned
subsidiary, AWEC Homes, Inc., an Arkansas corporation (the "Home Construction
Subsidiary"), for the purpose of building single family homes on lots owned by
the Predecessor Corporation. The Home Construction Subsidiary, which later
changed its name to Capitol Homes, Inc. on January 29, 1996, has had no
construction operations.
In November 1994, Vick and PetroSource sold their remaining shares of
the Predecessor Corporation common stock to Charlie Corporation and Prescott LP
in consideration of strategic planning services.
The Operating Subsidiary refinanced its $6,737,000 Century promissory
note in September 1995 by (a) borrowing $3,500,000 from Resure, Inc., an
Illinois Insurance Exchange member syndicate, ("Resure"), to make a cash payment
of $2,500,000 to Century, (b) issuing two promissory notes to Century, in the
amount of $1,400,000 and $350,000, respectively, to replace the original Century
promissory note, and (c) issuing 700,000 shares of Common Stock to Century which
then represented, and continues to represent,
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10% of the Company's outstanding Common Stock. See ITEM 4, "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." In consideration of the cash
payment, promissory notes, and stock, Century released all of the real property
securing the original promissory note and accepted approximately 36 acres of
Maumelle Property commercial lots as collateral to secure the $1,400,000
promissory note. The $3,500,000 loan from Resure is secured by approximately
1,111 acres of the Maumelle Property residential acreage. See ITEM 2,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND
CAPITAL RESOURCES--Indebtedness and other Liquidity Requirements."
Concurrently with the aforementioned loan from Resure, the Operating
Subsidiary acquired a subordinated surplus debenture of Resure in the original
principal amount of $3,500,000 (the "Resure Debenture"). Resure issued the
Resure Debenture to the Operating Subsidiary in return for a second $3,500,000
promissory note issued by the Operating Subsidiary and secured by approximately
410 acres of the 1,111 acres of residential property securing the first
$3,500,000 Resure promissory note. See ITEM 3, "DESCRIPTION OF PROPERTY --
RESURE DEBENTURE."
In order to effectuate a change in domicile and name change approved
by a majority of the Predecessor Corporation shareholders, the Predecessor
Corporation merged, effective January 30, 1996, into Capitol Communities
Corporation, a Nevada corporation formed in August 1995 solely for the purpose
of the merger. Under the terms of the merger, each share of Predecessor
Corporation common stock was converted to a single share of Capitol Communities
Corporation common stock (the "Common Stock"), and Capitol Communities
Corporation succeeded to all of the assets, rights, obligations and liabilities
of the Predecessor Corporation.
BUSINESS OF THE COMPANY
GENERAL. The Company is in the business of developing and selling
real estate, primarily in the City of Maumelle, Arkansas, a 5,000 acre planned
community located on the Arkansas River, across from the western Little Rock
area and fifteen miles from downtown Little Rock, Arkansas. The Company's real
estate as of August 31, 1996, consisted of the remaining unsold portion of the
Maumelle Property (approximately 1,392 acres) and six single-family improved
lots in Calexico, California, held by a joint venture between the Company and
the Monterra Group, Inc., a California real estate developer (the "Monterra
Group"). See ITEM 3, "DESCRIPTION OF PROPERTY." The Company also intends to
enter into the business of providing financial services and products,
particularly insurance-related services and products, by acquiring an existing
insurance company, although the Company
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has not yet entered into any agreement to do so. See "Growth Strategies --
Strategic Acquisitions," below.
In the last three years, the Company's business has consisted
primarily of selling unimproved residential and commercial lots from its
Maumelle Property inventory to private individuals and other developers.
Although management of the Company recently decided to shift the Company's
primary focus from selling land to the construction and sale of single-family
homes, the Company has not yet commenced material development or building
activities and will require substantial additional funding before it can do so.
See "RISK FACTORS--Limited Operating Capital," below.
The Maumelle Property is managed by Maumelle Enterprises, Inc.
("Maumelle Enterprises"), a real estate management firm affiliated with certain
officers, directors and controlling shareholders of the Company. The Company
expects that Maumelle Enterprises will continue in the foreseeable future to
manage the Maumelle Property and any other Maumelle-area real property the
Company may acquire. In other geographic areas, the Company expects to engage
local unaffiliated brokers to manage its properties. See ITEM 7, "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS--SERVICES PROVIDED BY AFFILIATED
COMPANIES."
PRINCIPAL PRODUCTS AND MARKETS. The Company intends to construct
single-family homes, apartments and commercial buildings on the land that it
presently owns or may acquire in the future. The developed properties will be
sold to private home purchasers or apartment or commercial building operators,
as appropriate. The Company's initial focus will be to develop single-family
homes in the $115,000 to $200,000 price range on the approximately 3,500
single-family home lots it owns in Maumelle. The Company does not expect to
operate, manage or lease any properties it may develop.
The Company intends to sell vacant property from its real estate
inventory only as needed to meet liquidity requirements or if Company
management determines that a particular property is not appropriate for
development by the Company. The Company expects that any such land sold in the
future likely will be land which has been zoned for commercial or multi-family
use, since the Company wishes to retain as many single-family home lots as it
can for development and sale by the Company. Company management expects that
any such commercial or multi-family properties sold will be purchased by other
real estate developers, who may compete with the Company in any development
activity undertaken by the Company.
The Company plans to conduct its development and construction
activities primarily in Arkansas and California,
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through the Operating Subsidiary and/or the Home Construction Subsidiary. When
appropriate, the Company may acquire and/or develop properties with joint
venture partners, and may acquire and/or develop properties in other areas of
the United States. See ITEM 3, "DESCRIPTION OF PROPERTY--POLICIES WITH RESPECT
TO CERTAIN ACTIVITIES."
The Company intends to develop a marketing and advertising plan, with
emphasis on the print media, to promote the sale of homes built by the Company
on the Maumelle Property. The Company also plans to build, decorate, furnish
and landscape model homes to facilitate sales on the Maumelle Property. The
Company intends to use community, regional and cooperative brokers to sell the
homes and other properties it develops.
GROWTH STRATEGIES. The Company's primary business objective is to
increase long-term total returns to shareholders through appreciation in value
of the Common Stock. The Company intends to achieve this objective by
implementing the following long-term growth strategies:
Initial Focus on Maumelle Development Opportunities. The Company
believes that, at present, its most significant growth opportunity is the
development of the Maumelle Property, particularly the building and sale of
single-family homes on the approximately 3,500 single-family home lots that are
part of the Maumelle Property. Accordingly, the Company intends to focus
initially on the building and sale of single- family homes on the Maumelle
Property, assuming it can raise sufficient capital to do so.
Based on current sales trends as evidenced by building permits issued,
recent improvement bond refinancing and renewed efforts of the Maumelle City
staff to attract industrial development, management of the Company believes
that there is substantial unmet demand in the Maumelle area for single-family
homes in the $115,000 to $200,000 price range. Although there can be no
assurance as to how long such demand will continue or that the Company will be
able to sell all of the homes it may build in Maumelle, the Company believes
there will be sufficient demand in Maumelle to support Company sales of new
homes in the $115,000 to $200,000 price range at a rate of 200 homes per year,
for 17 years.
Of the approximately 5,000 single-family vacant sites in the City of
Maumelle, approximately 1,500 sites are not owned by the Company. The Company
plans to acquire some of these single-family sites, including some that are
owned by affiliates of the Company, if it can raise sufficient funds to do so.
Given the Company's ownership of a majority of available home sites in
Maumelle, and the fact that under Maumelle's Master Land Use Plan
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little or no new property can be added to the City of Maumelle without public
hearings regarding any proposed annexation of land by the City and the
subsequent approval by the City's Board of Directors, the Company believes it
can achieve virtual dominance in the market for single- family home sites in
Maumelle. Management expects that this dominance will enable the Company to
implement an orderly build-out program designed to maximize the selling prices
of the homes it sells. See ITEM 7, "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--POSSIBLE ACQUISITIONS OF LAND FROM AFFILIATES."
Geographic Markets Diversification. The Company believes that
geographic diversity in its real property development activities will be a key
factor in achieving long-term stability and growth. By forming a joint venture
with the Monterra Group to build and sell six homes in the City of Calexico,
California, the Company has taken an initial step towards expanding into the
Southern California housing market and achieving geographic diversity.
Product Diversification. Although, initially, the Company's primary
focus will be on the construction of single-family homes, the Company intends
to diversify its portfolio and income sources by developing for sale the
commercial and multi-family properties it currently owns or may acquire in the
future.
Strategic Acquisitions. The Company intends to make strategic
acquisitions of businesses in geographic areas outside of Arkansas,
particularly in the home construction industry.
The Company also wishes to diversify into financial services,
primarily the insurance industry, by carefully targeting companies that carry
excess and surplus lines coverage and reinsurance services. The Company
recently signed a non-binding letter of intent to acquire an insurance holding
company. The letter of intent has since expired, and the parties have not
resumed negotiations.
COMPETITION. The real estate development industry, especially the
home building sector, is highly competitive. In Arkansas and California--the
geographic areas in which the Company initially intends to build homes--there
are numerous large national and regional firms with significantly greater
experience and financial resources than the Company currently possesses. Such
firms will likely compete with the Company in the acquisition of land for
development, the hiring of sub-contractors, experienced management personnel,
construction workers and other employees, and the sale of product. The Company
also will compete for residential sales with the resale market for existing
homes, multi-family home sales, including
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townhouses and condominiums, and with available rental properties.
The Company currently has no material presence or reputation in
Arkansas, California, or any other area in the real estate development industry
and currently does not have sufficient capital to commence significant
development activities. As a result, the Company may experience difficulties
in competing with established developers. The Company intends to improve its
ability to compete by entering into joint venture or similar development
agreements with established real estate developers and raising additional
capital, although there can be no assurance of the success of any such
agreements or attempts to raise capital.
The Company believes that its ownership of a substantial majority of
the available undeveloped single-family home properties in Maumelle will assist
it in its entry in the home building market in Maumelle. The Company has
submitted a proposal to two qualified joint venture partners to develop 735
homes in Maumelle over the next three to four years. Discussions with these
sources are preliminary, however, and there is no assurance the Company will be
successful in consummating the proposal.
RAW MATERIALS. The main raw materials used in the construction of
homes are concrete and lumber. In addition, the Company will use a variety of
other construction material, including glass and sheetrock. For commercial
construction the primary materials are steel, concrete and glass. The Company
intends to use materials that are commercially available on competitive terms
from a variety of sources, but there can be no assurance that such materials
will be available on terms that are acceptable to the Company. Since the
Company has not commenced significant construction activities, it does not yet
have any principal suppliers.
GOVERNMENTAL REGULATIONS. The building industry is subject to
extensive and complex regulations. The Company, its subcontractors and any
joint venture partners must comply with various federal, state and local laws,
ordinances, rules and regulations regarding zoning, architectural design,
construction, population density, availability and installation of utility
services, such as water, electricity, gas, and waste disposal, the preservation
of the natural terrain, and other related matters, which requires resources and
expertise which, for the most part, the Company currently lacks. The Company
intends to obtain such resources and expertise by raising additional capital,
hiring appropriate sub-contractors, and entering into consulting agreements
and/or joint venture agreements with experienced real estate developers and
other appropriate parties.
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The Maumelle Property is subject to the City of Maumelle's Master Land
Use Plan. Under this Plan, approximately 1,307 acres of the approximately
1,392 acres of the Maumelle Property which is developable land is already zoned
for single-family homes. The current zoning allows the Company to apply for
building permits for the 3,500 single-family home sites located on this
acreage. Although much of the Company's property is currently zoned for
single-family homes, none of the developable land acreage is subdivided and the
Company will be required to incur a significant additional cost to subdivide
the property into individual lots. The Company believes it can satisfy all
anticipated governmental requirements involved in the subdivision process, if
it obtains adequate additional funding and expertise.
The Company must seek building permits from the City of Maumelle
Building Inspector for each home it builds. The Company must apply for
building permits for each commercial property it develops from the Maumelle
City Planning Commission and the City's Board of Directors. Although the
Company believes it can satisfy all necessary requirements to obtain building
permits, at the present time, the Company is not seeking building permits and
does not intend to do so until it raises additional capital. The current
zoning of the six lots the Company acquired in the City of Calexico, California
with the Monterra Group is for single-family home development. The Company and
the Monterra Group have not yet obtained the necessary building permits for the
six homes they plan to build on the lots, but the company believes they will be
able to comply with all necessary requirements to obtain such permits.
The Company may be required to mitigate any environmental impact on
its 446 acres of wetlands in Maumelle that may be caused by the Company's
proposed development activities in Maumelle. Although the Company is not
currently aware of any such mitigation requirements, the Company will be
required to obtain approval from the Army Corp of Engineers of any required
mitigation efforts. The Company may incur additional costs and delays in
seeking such approvals and performing such mitigation.
Delays in obtaining governmental permits and approvals may increase
development costs to the Company. Zoning requirements and restrictions could
become more restrictive in the future, resulting in additional time and money
being spent to obtain approvals for development of the Company's properties.
The Company also may be subject to periodic delays or may be precluded
from developing projects due to building moratoriums or slow- growth or
no-growth initiatives that could be implemented in the future in the areas
which it does business. In addition, governmental authorities could change the
zoning of all or some
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of the Company's properties, which could result in a decrease in value.
ENVIRONMENTAL LAWS. The Company is subject to various federal, state
and local laws, ordinances and regulations regarding environmental matters.
Under these laws, an owner or operator of real property may be liable for the
costs of removal or decontamination of certain hazardous or toxic substances on
or in its property. The penalty is imposed whether or not the owner or
operator was aware of, or responsible for the hazardous or toxic substances.
The costs of inquiry, removal or decontamination of such substances could be
substantial. If such substances are found on real property or there is a
failure to properly remove or decontaminate the area, the property could be
difficult to sell, develop or use to secure debt financing. In connection with
its ownership of real property, the Company potentially may be liable under
such laws and could incur costs relating to the removal or decontamination of
such substances.
With respect to the Maumelle Property, the Company has had studies
conducted on approximately 63% of the property by an environmental engineering
company. Environmental Scientists Incorporated conducted a Phase I
investigation in July and August 1995 and found no evidence of soil or ground
water contamination on the studied property and recommended that a Phase II
study was not warranted. In 1986, an Environmental Protection Agency ("EPA")
representative stated in a letter to a previous owner of the Maumelle Property,
that although part of the Maumelle Property had been used by the United States
government during World War II as a munitions ordnance facility until 1950, the
entire site had been decontaminated by the U.S. government prior to its sale in
1961. In the letter, the EPA characterized the property as not having any
further environmental concerns. There can be no assurance, however, that the
Maumelle Property does not contain hazardous or toxic substances particularly
on the property which has not been subjected to a Phase I investigation, or
that the Company will not incur costs associated with the decontamination of
any such substances.
NUMBER OF EMPLOYEES. The Company has one employee, its President,
Michael Todd, who is a full-time employee.
RISK FACTORS
The following risk factors should be considered carefully, in addition
to the other information contained in this registration statement, in
evaluating the Company and its business prospects.
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LIMITED OPERATING CAPITAL. The Company currently has very limited
operating capital and, aside from the sale of vacant land from its Maumelle
Property inventory, has no internal sources of operating capital. The home
building and construction industry is capital-intensive and generally involves
a high degree of leveraging and up-front expenses to acquire land, improve it,
and begin development. In order to commence building or other development
activities or implement any of its growth strategies, the Company will need to
raise substantial additional capital or enter into joint venture or other
development agreements with well-funded development partners. There can be no
assurance that the Company will be able to raise sufficient additional capital
or enter into joint venture or other development agreements with developers
under terms that are favorable to the Company, or at all.
MATURED SECURED DEBT; INABILITY TO SERVICE CERTAIN SECURED DEBT. As
of the date of this Registration Statement, approximately $1,950,000 of Company
debt has matured or been accelerated as a result of cross-default provisions.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND
CAPITAL RESOURCES--Indebtedness and Other Liquidity Requirements." Such debt
is secured by parcels of the Maumelle Property (the "Century Encumbered
Property") having an aggregate market value of $3,050,000, as estimated by an
independent appraiser in a 1995 appraisal prepared for the Company. Century,
the holder of such debt, has recently filed a foreclosure complaint against the
Company with respect to this debt. Although the Company has commenced
negotiations with Century to obtain extensions and/or a restructuring of the
debt, there can be no assurance that such negotiations will be successful.
Unless the Company can obtain relief from Century or obtain substitute
financing or otherwise raise sufficient funds to pay off the Century debt
within the next six months, the Company will likely lose the Century Encumbered
Property.
Commencing October 1, 1996, the Company will be required to make
quarterly payments in the amount of $101,591 under a $3,500,000 promissory note
that is secured by approximately 1,111 acres of the Maumelle Property parcels
having an aggregate market value of $6,900,000, as estimated by independent
certified appraisers as of May 25, 1993, in their appraisal for Resure, Inc.
See ITEM 2, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION--LIQUIDITY AND CAPITAL RESOURCES--Indebtedness and other Liquidity
Requirements." The Company currently has no ability to pay these quarterly
installments, unless it liquidates real property inventory. The Company is
negotiating an $18,400,000 loan, of which the Company intends to use a portion
to service its outstanding debt until it generates sufficient cash flow from
operations to service debt. See ITEM 2,
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"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND
CAPITAL RESOURCES--Prospective Sources of Liquidity." However, there can be no
assurance that the Company will be able to obtain such loan, and the failure of
the Company to pay monthly installments under the aforementioned promissory
note could result in the Company losing the property secured by such note,
which represents a substantial majority of the Company's assets.
LACK OF EXPERIENCE. The Company has no operational experience in the
real estate development industry. Although management believes it can
successfully enter the building industry, there can be no assurance that the
Company will be able to conduct its proposed real estate development operations
profitably or compete successfully against more experienced and better
capitalized companies, given the Company's current lack of experience and
capital.
THE HOME BUILDING INDUSTRY. The nature of the home building industry
is cyclical and is affected by various factors beyond the Company's control
which could have an adverse effect on the Company's business. Such factors
include changes in the general and local economy, unemployment rates,
availability of home purchase financing, interest rates, changes in
demographics, housing demands, as well as changes in government regulations.
As a real estate developer, the Company is subject to a number of other factors
outside its control, including the availability and cost of land, materials and
labor, weather conditions, construction delays, cost overruns, the entitlement
process, the effect of building moratoriums and environmental controls, and
increases in real property taxes and other local government fees.
INTEREST RATES; MORTGAGE FINANCING. Demand for homes, as well as for
commercial construction, is adversely affected by increases in interest rates.
If interest rates increase, demand for homes and other projects the Company may
develop may be significantly reduced due to prospective buyers' inability to
obtain financing. In addition, any adverse changes in the availability of
Federal Housing Administration or Veterans Administration mortgage financing
may also adversely impact the Company's housing sales.
GEOGRAPHIC CONCENTRATION. For the next two years, the Company expects
that a substantial portion, if not all, of the Company's resources will be
devoted to building single-family homes in the Maumelle, Arkansas area. In
addition, the majority of the Company's assets are located in Maumelle. There
has been an increase in home growth in the Maumelle area over the last 5 years,
and current demographic statistics, such as employment rate, education level,
and household income, are favorable. See
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ITEM 3, DESCRIPTION OF PROPERTY--MAUMELLE PROPERTY--The City of Maumelle."
There can be no assurance, however, that the conditions represented by such
statistics will continue into the future. Given the foregoing geographic
concentration of the Company's assets and businesses, the performance of the
Company is particularly susceptible to possible economic downturns and other
possible adverse developments in the Maumelle area.
COMPETITION. The home building and construction industry is highly
competitive. The Company currently has few resources with which to compete with
more experienced, better capitalized and better known real estate developers.
See "DESCRIPTION OF BUSINESS--BUSINESS OF THE COMPANY--COMPETITION," above.
DEPENDENCE ON KEY PERSONNEL. Although the Company's President,
Michael G. Todd, does not have experience in the building industry, he has
extensive experience in the analysis and financing of such businesses as a
result of his 15 years as a bank executive. Furthermore, Todd has been
directly involved in land development and sales in the Maumelle area since
1988. The Company believes that its success will depend in large part upon
Todd's efforts and experience. The loss of Todd could have a material adverse
effect on the Company's business. The Company has a five-year written
employment contract with Todd which expires in September 2000. Todd is a
controlling shareholder of the Company and Todd currently devotes his full time
to the affairs of the Company.
ENVIRONMENTAL LAWS. The Company is subject to various federal, state
and local laws, ordinances and regulations regarding environmental matters.
The Company could be liable under these laws for substantial costs of removal
or decontamination of certain hazardous or toxic substances that could be
present on or in its property. See "DESCRIPTION OF BUSINESS--BUSINESS OF THE
COMPANY--ENVIRONMENTAL LAWS."
CONTROL OF THE COMPANY. The President of the Company, Michael G. Todd,
controls 40.74% of the Company's issued and outstanding Common Stock. John W.
DeHaven, who has been a business partner of Todd for approximately 10 years, is
the sole income beneficiary of a trust that controls 40.74% of the Company's
issued and outstanding Common Stock. The sole trustee and grantor of said trust
is Herbert E. Russell, who is a director of the Company. See ITEM 4, "SECURITY
OWNERSHIP." As a result of their control of a majority of the outstanding
Common Stock, Todd and Russell will be able to control the affairs and policies
of the Company and will be able to elect all members of the Company's Board of
Directors and to approve or disapprove any matter submitted to a vote of the
shareholders. With respect to any matter that may arise
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involving a conflict of interest between Todd, DeHaven, and/or Russell, on the
one hand, and the Company, on the other, there can be no assurance that Todd
and Russell will exercise their control of the Company in a way that resolves
the conflict for the benefit of the Company. See ITEM 7, "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." Such controlling interest in the
Company, along with the anti-takeover provisions contained in the Company's
Articles of Incorporation and under the provisions of Nevada law, could make it
more difficult for a third party to acquire control of the Company and remove
existing management and could prevent the shareholders of the Company from
being paid a premium for their shares of Common Stock over then-prevailing
market prices. See ITEM 11, "DESCRIPTION OF SECURITIES."
ISSUANCE OF PREFERRED STOCK. The Board of Directors has authority to
issue up to 10,000,000 shares of Preferred Stock and fix rights, preferences,
limitations and restrictions, including voting rights of those shares without
any further vote or action by the stockholders. The rights of holders of the
Common Stock will be subject to, and may be adversely affected by the rights of
the holders of Preferred Stock that may be issued in the future. See ITEM 11,
"DESCRIPTION OF SECURITIES."
LIMITS OF ACQUISITIONS AND CHANGES IN CONTROL. Certain provisions of
Nevada law and the Company's Articles of Incorporation could have the effect of
delaying, deferring or preventing a change in control of the Company or the
removal of existing management and, as a result, could prevent the shareholders
of the Company from being paid a premium for their shares of Common Stock over
then-prevailing market prices. See ITEM 11, "DESCRIPTION OF SECURITIES."
CONFLICTS OF INTEREST. Certain ongoing arrangements between the
Company and affiliates of certain management personnel and controlling
shareholders of the Company may lead to conflicts of interest on the part of
directors and officers of the Company, as may certain contemplated transactions.
Such arrangements and transactions include (i) the management of the Maumelle
Property by Maumelle Enterprises, (ii) the Company's subleasing of office space
from DTC, and (iii) the possible acquisition of approximately 121 improved lots
in Maumelle from an affiliated partnership. See ITEM 7, "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS." There can be no assurance that such conflicts of
interest will be resolved in favor of the Company, although the Company intends
to observe certain conflict of interest policies designed to reduce the
likelihood of conflicts of interest adversely affecting the Company. See ITEM
3, "DESCRIPTION OF PROPERTY--POLICIES WITH RESPECT TO CERTAIN ACTIVITIES--
Conflict of Interest Policies." See also ITEM 7, "CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS--POSSIBLE ACQUISITIONS OF LAND FROM AFFILIATES."
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SHARES ELIGIBLE FOR FUTURE SALE. No prediction can be made as to the
effect, if any, that future sales of shares, or the availability of shares for
future sale, will have on the market price of the Common Stock. Sales of
substantial amounts of Common Stock or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock.
Michael G. Todd, through his indirect controlling interest in Prescott LP,
controls 2,851,589 shares of Common Stock, representing 40.74% of the
outstanding Common Stock. Herbert E. Russell, as trustee of the irrevocable
trust that controls Charlie Corporation, controls 2,851,589 shares of Common
Stock, representing 40.74% of the outstanding Common Stock. Under certain
circumstances, and subject to compliance with the applicable provision of SEC
Rule 144, Prescott LP and Charlie Corporation each may sell, within any
three-month period, a number of shares which does not exceed the greater of one
percent of the then-outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Century, which holds
10% of the outstanding Common Stock, could commence such sales by November 1997,
which is when the two-year holding period imposed by Rule 144 expires with
respect to the shares held by Century. Under Rule 144, Century can, under
certain circumstances, sell all of its shares without any quantity limitation
commencing September 1998, provided Century is not then, nor for the preceding
three months, deemed an affiliate of the Company. Sales of shares by Prescott
Investments or Charlie Corporation could occur at any time and could severely
affect the ability of the Company to secure the necessary debt or equity funding
for the Company's proposed building projects. Sales of shares by Century could
occur within the time periods indicated above and could have similar adverse
effects. See ITEM 4, "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
LIMITED MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE.
The Common Stock is listed for trading in the over-the-counter market on the
electronic bulletin board of the National Association of Securities Dealers
Automated Quotation System (the "Nasdaq") under the symbol "CPCY." Currently,
there is only a limited trading market for the Common Stock, and there can be
no assurance that a more active market will develop or that the present market
will be sustained. The market price for the Common Stock may be affected by
numerous factors beyond the control of the Company. National stock markets
have experienced, and will continue to experience, extreme price and volume
fluctuations which have affected the market price of many small capital
companies. These market fluctuations may adversely affect the market price of
the Common Stock.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
The following discussion should be read in conjunction with the
financial statements and the notes thereto appearing elsewhere in this
registration statement (the "Financial Statements"). During the period covered
by the financial statements, the Company suffered an extraordinary
non-operating loss, acquired the bulk of its assets, and significantly changed
the nature of its business activities from land sales to real estate
development (all as discussed in more detail herein). As a result, the
Company's management does not believe the historical financial information
presented in the Financial Statements is indicative of likely future results of
operations. The Company believes that its ability to generate revenues in the
future from real estate development activities will depend in large part on the
success of the Company's future capital-raising efforts and the Company's
ability to develop or acquire greater construction, sales and other real estate
development expertise than the Company now possesses.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED JUNE 30, 1996 TO NINE MONTHS ENDED
JUNE 30, 1995. For the nine months ended June 30, 1996, the Company
experienced a loss of $874,900 compared with a loss of $550,950 for the nine
months ended June 30, 1995. The difference in performance was primarily due to
additional general and administrative costs for the nine months ended June 30,
1996, as discussed in more detail below.
Sales decreased from $436,600 for the nine months ended June 30, 1995,
to $0 for the nine months ended June 30, 1996, as a result of a shift in the
Company's business plan, and activities from selling vacant lots out of
existing real property inventory to retaining lots in the expectation of
developing and building homes and commercial properties on the lots. This
decrease had a negligible effect on net income because of the high cost of
sales of the properties sold during the nine months ended June 30, 1995. The
gross profit for the nine months ended June 30, 1996, because of $0 sales, was
$0. This was a decrease of $17,987 from the nine months ended June 30, 1995.
From the nine months ended June 30, 1995 to the nine-month period
ending June 30, 1996, general and administrative expenses increased from
$135,636 to $479,856, an increase of $344,220. A portion of this increase was
due to recognizing, as an expense, a $75,346 investment in certain residential
property. The
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investment was considered a loss due to the failure to obtain adequate
re-zoning and annexation of the property to the City of Little Rock. In
addition, during the nine months ended June 30, 1996, the Company accrued
general and administrative expenses such as officers' salaries, office lease
and directors' fees, that had not previously been accrued.
COMPARISON OF YEAR ENDED SEPTEMBER 30, 1995 TO YEAR ENDED SEPTEMBER
30, 1994. For the year ended September 30, 1995, the Company had a net loss
before interest income of $899,135 (there was no extraordinary item for that
year), while the Company had net income before interest income and
extraordinary item of $1,089,821 for the year ended September 30, 1994,
representing a total decrease in net income from 1994 to 1995 of 183%.
The change in net income from 1994 to 1995 is primarily the result of
the shift in the Company's business plan and activities to retaining, instead
of selling, lots in the expectation of developing and building homes and
commercial properties on the lots. Although the Company conducted no building
activity in 1995 because of a lack of operating capital, the Company reduced
its selling activity during that period to retain lots for future development.
The change in net income can also be attributable to a 68% increase in cost of
sales and general and administrative expenses in the 1995 fiscal year, as
discussed in more detail below. The Company anticipates that cost of sales
will increase as an absolute amount in the future, generally in proportion to
any increase in sales activity experienced by the Company in future years. As
a percentage of gross sales, the Company estimates that the cost of sales will
stabilize at approximately 80% at such time as the Company commences
substantial home sales activity, based on the Company's estimate of
construction and development costs, sales and marketing costs, and overhead.
The estimated stabilized cost of sales is lower than industry standards and
reflects the Company's low cost base of its land inventory.
The following discussion addresses the significant fluctuations
between the 1995 and 1994 fiscal years in the Company's Statements of
Operations.
Sales decreased $1,397,406 or 71% from $1,962,873 to $565,467 as a
result of the aforementioned shift in the Company's business plan from lot
sales to home building and development. In the 1995 fiscal year, the Company
generally sold properties only for the purpose of satisfying liquidity
requirements. Given the Company's present limited experiences in the real
estate development industry and lack of operating capital, the Company cannot
predict future sales levels.
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Cost of sales in the 1995 fiscal year increased by $237,202, or 68%,
over the costs of sales for the 1994 fiscal year, notwithstanding the decrease
in sales activity in 1995, because of the higher cost base of the property sold
in the 1995 fiscal year, which cost base included assumed improvement bond debt
to which the property was subject. Much of the land inventory sold in the 1994
fiscal year was not subject to such bond indebtedness. In addition, 1995
fiscal year sales included the sale of a condominium unit for $129,000, with a
cost basis of $127,167. This transaction accounts for a substantial portion of
the increase in 1995 fiscal year cost of sales as a percentage of sales.
From the 1994 fiscal year to the 1995 fiscal year, general and
administrative expenses increased by 68%, or $354,348, primarily as a result of
the effect of having a full 12 months of expenses related to the Maumelle
Property in the 1995 fiscal year, versus only 7-1/2 months of such expenses in
the 1994 fiscal year (the Maumelle Property was acquired on February 15, 1994).
Interest expense for fiscal year 1995 was $593,685 versus a 1994 expense of
$335,090 for the 7-1/2 months from February 15, 1994 to September 30, 1994, an
increase of $238,595 attributable to the additional 4-1/2 months of interest
accrual in the 1995 fiscal year. Expenses for management and consulting fees
increased from $53,536 in fiscal year 1994 to $180,416 in fiscal year 1995, an
increase of $126,880. The primary cause of this was the accrual, in fiscal
year 1995, of $103,000 in management and consulting fees due to Maumelle
Enterprises. In the 1994 fiscal year, Maumelle Enterprises did not charge the
Company for the full amount of eligible expenses. It was decided by Maumelle
Enterprises that the eligible expenses that were eligible for reimbursement
from the Company were disproportionate to the services rendered and therefore
were not billed to the company.
The Company deducted $1,360,567 from its taxable income in fiscal year
1994, which is reflected as an extraordinary item in the Company's 1994
statement of operations. This extraordinary item relates to a series of
transactions involving the issuance of shares constituting 54% of the issued
and outstanding shares of stock of the Predecessor Corporation to PetroSource,
then an affiliate of the Predecessor Corporation, in return for certain options
to petroleum-related royalty rights which had been granted to PetroSource by a
third party. The third party's interest in the royalty rights was discovered
to be illusory in March 1994. The Predecessor Corporation's legal counsel
advised the Predecessor Corporation that the loss resulting from the
transaction should be deemed a loss arising from theft deductible from the
Predecessor Corporation's taxable income. Given the unique nature of this
transaction, the Company does not expect an extraordinary item of such
magnitude to occur again in the
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future. See ITEM 1, "DESCRIPTION OF BUSINESS--BUSINESS DEVELOPMENT."
The Company expects to report a material operating loss for the fiscal
year ending September 30, 1996. It is not expected that the Company will
report any material sales of property in the 1996 fiscal year, other than the
pending sales discussed herein. Reported income will have been derived from
interest on investments. Expenses will largely consist of interest expenses
due on mortgages owed by the Operating Subsidiary and secured by a portion of
its land assets.
The Company believes that its results of operations can improve in the
future if it is able to raise sufficient additional capital to take advantage
of certain trends that the Company perceives in Maumelle. The Maumelle Board
of Realtors reported an increase in building activity in Maumelle in 1996 as
compared to 1995. In the 1995 calendar year, 176 permits were issued by the
City of Maumelle for the construction of new homes. As of August 15, 1996, 134
permits have been issued in the 1996 calendar year. The Company believes that
this trend will continue for the following reasons:
(1) In June 1995, three of the outstanding improvement bond issues
in the City of Maumelle, to which 558 improved lots in the City of Maumelle
were subject, were refinanced with a new bond issue whose terms of indenture
were more favorable to homeowners. The Company believes that such bond issue
will result in an increase in the availability of building capital, because
management believes that home loan lenders are more likely to make loans if
they are secured by property that has no bond assessments.
(2) In June 1996, two additional improvement bond issues to which
approximately 655 Maumelle improved lots were subject were refinanced with a
new issue, again on more favorable terms.
(3) The Country Club of Arkansas, a golf-oriented development in
Maumelle, is expected to complete improvements to its new golf course in the
Fall of 1996. This development has approximately 500 home sites remaining to
be developed. The owner/developer of the Country Club of Arkansas has placed
substantial amounts of advertising and promotion into local print media which
may produce a positive effect for future development activity in Maumelle.
The Company does not foresee any significant elements of income or loss
that would not arise from its ordinary course of proposed business. There may
be some seasonal variance in the flow of income as the Company executes its plan
to build homes in
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Maumelle. Such variances could arise, for example, from the impact of weather
on any construction in progress. Typically, substantial rainfall is
experienced in Central Arkansas from November through March.
The nature of the home building industry is cyclical and is affected
by various factors beyond the Company's control, including changes in the
general and local economy, employment, availability of financing, interest
rates, changes in demographics, housing demands, as well as changes in
government regulations. The home building industry is capital intensive and
can involve significant expenses in acquiring and improving land and the
subsequent development. Developers are subject to a number of other risks,
including availability and cost of land, materials, and labor, weather
conditions, construction delays, costs overruns, the entitlement process,
effects of building moratoriums and environmental controls, and increases in
real property taxes and other local government fees. Any or all of these
factors could have an adverse material affect on the Company's results of
operations. See ITEM 1, "DESCRIPTION OF BUSINESS--RISK FACTORS."
LIQUIDITY AND CAPITAL RESOURCES
INDEBTEDNESS AND OTHER LIQUIDITY REQUIREMENTS. The principle amount
of the Company's total debt at June 30, 1996 includes the following (see ITEM
3, "DESCRIPTION OF PROPERTY--MAUMELLE PROPERTY" for descriptions of encumbered
properties referenced below):
o $1,400,000 recourse note ("Century Note I") payable to
Century, matured January 9, 1996, secured by approximately 36
acres of the Commercial Lots; 9% interest, payable at
maturity.
o $350,000 recourse note ("Century Note II") payable to Century,
matures September 11, 1998, but is deemed due and payable as
of January 9, 1996, by its terms, as a result of the Century
Note I default; unsecured; 10% interest, paid semi-annually on
each June 30 and December 31.
o $3,500,000 recourse note (the "Resure Note I") payable to
Resure Inc. ("Resure"), matures July 1, 2000, secured by the
approximately 1,111-acre Large Residential Tract; 10%
interest, paid quarterly until October 1, 1996, then monthly
payments of principle and interest are required.
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o $3,500,000 non-recourse note (the "Resure Note II") payable to
Resure matures July 1, 2000, secured by approximately 410
acres of the Large Residential Tract; 7% interest, paid
semi-annually on each June 30 and December 31.
o $200,000 recourse note payable to Davister Corp. (the
"Davister Note"), matured January 9, 1996, unsecured; 9%
interest payable at maturity.
o $149,250 in Special Improvement District Taxes due October 10,
1996, secured by certain portions of the Commercial Lots.
Additional Special Improvement District Taxes due for 1995 in
the amount of $56,780 were delinquent as of October 10, 1995,
and are secured by portions of the Commercial Lots. Penalties
in the aggregate amount of $14,200 are also due.
o $60,000 in ad valorem real property taxes, relating to all
portions of the Maumelle Property, due October 10, 1996, for
the calendar year 1995. In addition, approximately $25,000 of
delinquent taxes, penalties and costs payable with respect to
the Commercial Lots were due October 10, 1995.
The Company will require approximately $2,500,000 to reduce short term
debt within the next six months, including the $1,950,000 of Century and
Davister debt principal that is currently in default. Management believes that
the Company cannot commence substantial single-family home development on the
Maumelle Property unless it raises additional capital or otherwise obtains
revolving construction financing in the approximate amount of $5,000,000. In
addition, the Company will require general working capital to cover overhead
and administrative expenses in the amount of at least $750,000.
The Company is contemplating certain strategic acquisitions which may
require cash payments or involve the incurrence or assumption of additional
debt, although the amount of any such cash payments or debt cannot be estimated
at this time, given the preliminary stage of the Company's acquisition plans.
The Century Note I matured January 9, 1996, and remains unpaid. As a
result of cross-default provisions in the Century Note II, the Century Note II
is also now in default. Century filed a foreclosure complaint against the
Company with respect to this debt on August 12, 1996. See ITEM 1.
"DESCRIPTION OF BUSINESS--RISK FACTORS--Matured Secured Debt; Inability to
Service Certain Secured Debt" and ITEM 8, "LEGAL PROCEEDINGS."
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PROSPECTIVE SOURCES OF LIQUIDITY. Current operating cash flows will
be insufficient to service the Company's existing debt or the Company's
anticipated future operating cash needs.
With respect to prospective long-term liquidity, the Company intends
to generate the bulk of its cash from operations by building and selling homes.
At present, management of the Company believes that the most likely source of
substantial cash flow during the next two years is the development of
single-family home product in the $115,00 to $200,000 price range on the
approximately 3,500 single-family home sites it owns in Maumelle, assuming the
Company can obtain the necessary financial resources to undertake substantial
building operations on the Maumelle Property. Although there can be no
assurance that the Company can obtain such resources, the Company believes that
its ownership of a majority of the undeveloped home sites in Maumelle will
enable the Company to attract the necessary financing to implement an orderly
build- out program that will generate cash flow. See ITEM 1, "DESCRIPTION OF
BUSINESS--BUSINESS OF THE COMPANY--Growth Strategies" and "--RISK
FACTORS--Limited Operating Capital, --Matured Secured Debt; Inability to
Service Certain Secured Debt, and --Lack of Experience."
The Company intends to raise operating capital by selling debt and/or
equity securities to the public or in private transactions. There can be no
assurance, however, that such public or private offerings will be successful.
The Company intends to meet home building operating capital
requirements by obtaining development financing in the form of secured credit
line facilities from lenders, although there can be no assurance that such
financing can be obtained on attractive terms, or at all. See ITEM 3,
"Description of Property."
The Company has been negotiating with representatives of Century to
extend the defaulted Century Note I and Century Note II. At this time the
Company has been unable to meet Century's proposed refinance terms, due to the
Company's lack of liquidity. The Company currently is attempting to raise
additional funds to retire these Notes by using unencumbered portions of the
Maumelle Property to secure new debt, although there can be no assurance that
such attempts will be successful or that additional funds can be raised prior
to Century's foreclosure on the 36 acres of the Commercial Lots.
The Company expects to repay the $200,000 note payable to Davister
Corp., referred to above, by utilizing funds obtained from any additional debt
financing secured to satisfy the Century Note I and the Century Note II.
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The Company is in negotiations for an $18,400,000 loan from a European
lender, which would result in net proceeds to the Company of $17,000,000 (the
"Euro Loan). As presently structured, the terms of the Euro Loan would require
$10,000,000 of the net proceeds to be placed in an asset management account to
service the loan. The Company presently intends to use approximately
$5,000,000 of the $7,000,000 net proceeds balance to acquire an insurance
company, although discussions with the insurance company that the Company
wishes to acquire have terminated and there can be no assurance that an
acquisition can be consummated. See ITEM 1, "DESCRIPTION OF BUSINESS--BUSINESS
OF THE COMPANY--Growth Strategies--Strategic Acquisitions." The Company
expects that the balance of the proceeds would be used to assist the Company in
servicing its existing debt and begin home development on improved lots the
Company would acquire with the proceeds. In the event an acquisition of an
insurance company is not consummated, the Company expects to use the additional
remaining proceeds to implement production building homes on a more aggressive
scale. The Euro Loan lender and the Company have discussed making the Euro
Loan convertible into shares of convertible preferred stock of the Company.
Although the Company has had substantial negotiations with the lender to date
and has been presented with a proposed loan agreement, certain issues have yet
to be resolved, and there can be no assurance that the Company will be able to
obtain the Euro Loan on terms that are favorable to the Company or at all.
Quarterly payments of principle and interest in the amount of $101,591
commence October 1, 1996, under the Resure Note I. The Company currently has
no source of cash from operations for those payments, other than liquidation of
Maumelle Property inventory. The Company intends to use part of the proceeds
from the prospective Euro Loan to service this debt until it can generate
sufficient cash flow from operations to service its debt. The semi-annual
interest payments on the Resure Note II are paid by the Company from interest
payments made by Resure on the Resure Debenture. See ITEM 3, "DESCRIPTION OF
PROPERTY--RESURE DEBENTURE."
The Company expects to raise approximately $652,000 from pending
sales of two parcels from the Commercial Lots portion of the Maumelle Property,
which the Company intends to partially use for payment of Special Improvement
District Taxes on the two properties and ad valorem real property taxes for
1995 and 1996 relating to certain portions of the Commercial Lots. The payment
of those taxes will retire certain bonds secured by the Special Improvement
District Taxes and leave the majority of the Commercial Lots free of the liens
securing such Taxes. Sale proceeds will also be used to pay accrued interest
on the Resure Note I.
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The Company believes that the closing of a $110,000 sale of one of the
Commercial Lots will occur on or before November 15, 1996, with the Company
receiving net proceeds of approximately $100,000. The sale of approximately 11
acres from the Commercial Lots is scheduled to close on or before December 29,
1996. The Company expects to receive net proceeds of $500,000 from this sale.
The Company intends to use net proceeds from these sales to pay special
improvement district taxes and ad valorem real property taxes for the years
1995 and 1996.
COMPARISON OF NINE MONTHS ENDED JUNE 30, 1996 TO NINE MONTHS ENDED
JUNE 30, 1995. Cash decreased $386,920 during the nine months ended June 30,
1996 compared to a decrease of $57 during the nine months ended June 30, 1995.
The difference was the result of cash used to pay quarterly interest payments
on the Resure Note I in the nine months ended June 30, 1996, and the decrease
in sales revenue during that period. In addition, a timing difference in
payments to Resure under the Resure Note II, and payments received from Resure
under the Resure Debenture, resulted in a cash payment of $122,164 in June,
with the equivalent payment from Resure under the Resure Debenture not received
until July 1996. See ITEM 3, "DESCRIPTION OF PROPERTY--RESURE DEBENTURE."
Net cash used for operations increased $386,920 from $156,071 for the
nine-month periods ended June 30, 1996, and June 30, 1995, respectively. This
difference is due primarily to the change in net loss and differences in
adjustments to reconcile Net Income to Net Cash Applied to Operating Activities
between the two nine-month periods. Among the differences for the nine months
ended June 30, 1995, is a decrease of $122,722 in real estate holdings which
resulted from sales of real property. During the same period in 1996, there
was an increase in real estate holdings of $133,176. This increase was not due
to acquisition of new property, but a result of capitalizing Special
Improvement District Taxes on the Commercial Lots. During the nine-month
period ended June 30, 1996, accrued interest increased by $109,670 for interest
earned on the Resure Debenture. There was no effect on the nine-month period
ended June 30, 1995.
Another significant difference between the two nine-month periods was
the change in Accounts Payable and Accrued Expenses. In the nine-month period
ended June 30, 1995, these accrued expenses decreased by $334,565. This
decrease included an increase in accrued ad valorem taxes of $44,767 and a
decrease in accrued Special Taxes payable of $39,028. The main component of
the decrease was the reclassification on the Statements of Cash Flow, of the
accrued interest at September 30, 1994 of $355,091 from Accrued Expense to
Accrued Interest Payable. For the nine months ending June 30, 1996, Accounts
Payable and Accrued
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Expenses increased by $503,959. This increase included increases of $127,376
for Special Improvement District Taxes Payable and $43,871 for ad valorem taxes
payable. The amount payable to Maumelle Enterprises increased by $96,030 for
advances to, or payments made on behalf of, the Company. Additionally,
approximately $209,700 was accrued during the period by the Company for
officers' salaries, directors' fees and office lease.
Accrued Interest was also a significant difference between these two
nine-month periods. During the nine months ended June 30, 1995, accrued
interest increased by $581,291. The reclassification on the Statement of Cash
Flows of Accrued Interest from Accrued Expenses to Accrued Interest accounted
for $355,091 of this increase. The balance of the increase, $266,200, was
accrued during the nine months ended June 30, 1995. This amount included a
reduction in Accrued Interest of $203,300 for a payment to Century in December
1994 as well as an increase of $429,500 for new accruals during that nine-month
period. For the nine month period ended June 30, 1996, Accrued Interest
increased $191,202. This included interest payments of $316,822 as well as new
accruals of Interest Payable of $508,024.
Cash flows from financing activities increased by $285,014 during the
nine months ended June 30, 1995, compared to a cash flow of $0 for the nine
months ended June 30, 1996. The increase in the nine months ended June 30,
1995 resulted from an increase in long-term debt. This increase arose from the
financing for the purchase of a residential condominium unit in 1995 by the
Home Construction Subsidiary and from an increase in the original Maumelle
Property acquisition note to Century in the amount of $186,563, which was used
for payment of Special Improvement District Taxes on the Commercial Lots.
Cash flow from investing activities decreased by $129,000 in the nine
months ended June 30, 1995 as a result of the aforementioned acquisition of a
residential condominium unit. This compared to an impact on cash flow of $0
from investing activities for the nine months ended June 30, 1996.
COMPARISON OF YEAR ENDED SEPTEMBER 30, 1995 TO SEPTEMBER 30, 1994.
Cash increased $235,307 during the 1995 fiscal year compared to an increase of
$30,396 during the 1994 fiscal year. This increase is due to the effect of the
refinancing of the original Century Maumelle Property acquisition debt on
September 11, 1995. The cash balance at September 30, 1995 consisted almost
entirely of the remaining proceeds of the refinancing after payment of all
associated costs and retirement of certain existing debt and accrued interest.
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<PAGE> 28
Net cash used for operations decreased by $7,098,098 from $8,501,960
in the 1994 fiscal year to $1,403,862 in the 1995 fiscal year, due primarily to
differences in adjustments to reconcile income to net cash used for the two
fiscal years. For the 1994 fiscal year, the primary element of such
adjustments was an $8,810,486 increase in real estate holdings, compared to a
$90,935 increase in real estate holdings for the 1995 fiscal year. The
difference in real estate holdings for these periods arose from the Maumelle
Property acquisition in the 1994 fiscal year. The only purchase of real estate
holdings in the 1995 fiscal year was the acquisition of a condominium unit that
was resold in fiscal year 1995. The net increase in real estate holdings is
due to the capitalization of Special Improvement District Taxes on certain
tracts of the Commercial Lots.
An additional difference in the adjustments to reconcile income to net
cash used for operating activities for the 1994 and 1995 fiscal years is the
difference between the increase (decrease) in accrued expenses during those
years. In the 1994 fiscal year, accrued expenses increased by $579,415, as a
result of accrued interest of $355,091 on the original debt to Century incurred
as a result of the acquisition of the Maumelle Property in February 1994 and
accrued Special Improvement District Taxes and ad valorem taxes of $224,324 in
the aggregate, while accrued expenses for the 1995 fiscal year decreased by
$137,766 as a result of a reduction of $314,696 of accrued interest to $40,395
due to the large interest payments made in September 1995 in connection with
from the Century debt refinancing. There was also a decrease in the amount of
$126,439, to $97,885, in the amount of accrued Special Improvement District and
ad valorem taxes payable due to payments of these taxes. These decreases were
partially offset by increases in accounts payable, including fees due to
Maumelle Enterprises and accrual of potential liability on the Pine Ridge
property due to a lawsuit filed against the Pine Ridge Improvement District,
resulting in a net decrease of $137,766. See ITEM 8, "LEGAL PROCEEDINGS." In
addition, there was no increase or decrease in loan origination fees in the
1994 fiscal year, while there was an increase of $271,854 in such fees for the
1995 fiscal year, resulting from the costs associated with the loans obtained
from Resure for the Century refinancing transaction in September 1995.
Cash flows from financing activities increased by $1,639,169 in the
1995 fiscal year, compared to $7,137,000 in the 1994 fiscal year. This
difference arises from the 1994 increase resulting from the acquisition debt
for the purchase of the Maumelle Property in February 1994. The lesser
increase in 1995 resulted from the refinancing of the acquisition debt,
resulting in a cash flow from financing activities that is less than the
amount of the debt refinanced.
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<PAGE> 29
Cash flow from investing activities increased by $1,395,356 in the
1994 fiscal year, compared to $0 cash flow from investing activities in 1995.
This difference arises from the fact that no common stock was issued for cash
consideration by the Company in the 1995 fiscal year, while $1,395,356 of
common stock was issued in the 1994 fiscal year in connection an investment in
options to acquire oil and gas royalty interest from PetroSource.
ITEM 3. DESCRIPTION OF PROPERTY.
GENERAL
The Company's principal asset is the Maumelle Property, located in
Maumelle, Arkansas, title to which is held by the Operating Subsidiary. The
Maumelle Property consists of approximately 1,307 acres of single-family sites
(which includes approximately 3,500 home sites), approximately 53 acres of
commercial property, approximately 32 acres of multi-family sites, and
approximately 450 acres of miscellaneous undevelopable property. The Maumelle
Property is currently zoned under the City of Maumelle Master Land Use Plan for
various development uses, including single-family residences, multi-family
units, and commercial development. As of August 15, 1996, the Company's
single-family home sites in the City of Maumelle represent approximately 70% of
all available vacant land in Maumelle zoned for single-family homes.
The Maumelle Property can be divided into four categories: (1) the
Large Residential Tract, (2) the Pine Ridge Lots, (3) the Commercial Lots, and
(4) the Miscellaneous Tracts and Properties. Each category of Maumelle
Property will be discussed separately below after the following overview of the
City of Maumelle.
The Company, through its joint venture with the Monterra Group, owns 6
lots on 1-1/2 acres of land in Calexico, California (the "Calexico Property"),
which it acquired for an aggregate purchase price of approximately $100,000.
The Calexico Property is entitled and is comprised of six lots which have been
zoned for single-family residential development. The Company and the Monterra
Group intend to build and sell homes on the Calexico Property in the price
range of $115,000 to $135,000.
The Operating Subsidiary also owns the Resure Debenture, which is
described below. See "DESCRIPTION OF PROPERTY--RESURE DEBENTURE," below.
Except as otherwise noted, the Company believes that its real property
assets are in good condition and are suitable and adequate for the uses
indicated.
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<PAGE> 30
MAUMELLE PROPERTY
THE CITY OF MAUMELLE. The City of Maumelle is a 5,000 acre planned
community located off Interstate 40 on the Arkansas River. Fifteen miles from
downtown Little Rock, the capital of Arkansas, Maumelle is patterned after
other "new town" communities such as Reston, Virginia, Irvine Ranch in Orange
County, California and Columbia, Maryland.
Under the Master Plan, Maumelle cannot add new property to the city
for residential development without public hearings regarding any proposed
annexation of land by the City and the subsequent approval by the City Board of
Directors. From Maumelle's inception in 1966 to 1996, approximately $120
million has been spent on infrastructure, including sewer and water capacity
for a city of up to 25,000 residents and a system of designated common areas
including pathways, parks, lakes, golf course and other recreational uses. The
City of Maumelle was incorporated as a city in 1985. It is governed by a mayor
and city council and has police, fire, and emergency services.
The population of Maumelle has grown at a faster rate then that of
neighboring Little Rock, Arkansas. From 1990 to 1996, Maumelle had a 13%
increase in its population; whereas Little Rock grew at only a 2% rate. The
community of Maumelle appears to be attracting more highly educated residents
than does Little Rock. The U.S. Department of Commerce and the Little Rock
Metropolitan Planning Commission ("Metroplan"), a government planning agency,
stated that in 1990, 92.6% of Maumelle residents had completed high school,
with 38.8% having four or more years of college. During the same period, only
76.6% of Little Rock residents had completed high school and 20.4% had four
years or more of college. Maumelle also exceeds the national average for high
school and college attendance. As of 1990, only 75.2% of U.S. citizens had
completed high school and 20.3% had four or more years of college.
Since 1979, Maumelle has attracted some major companies to its
industrial areas, including Target Distribution Center, Kinney Shoe
Distribution Center, Carrier (a manufacturing facility), Kimberly Clark (a
manufacturing facility), Ace Hardware Distribution Center, Family Dollar
Distribution Center, and Lamb Packaging and Iskco (both manufacturing
facilities). The job growth rate in the City of Maumelle has increased by 7.5%
from 1990 to 1995; during the same period Little Rock had a job growth rate
increase of 14%.
As of June 30, 1996, the average new home price in Maumelle was
$152,551 and in Little Rock was $162,339. The number of
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building permits issued by Maumelle has increased 112% between 1990 and 1995,
according to Metroplan. During the same period, Little Rock experienced a
growth rate in building permit issuances of 58%.
LARGE RESIDENTIAL TRACT. The Large Residential Tract is comprised of
approximately 1,111 acres of undeveloped residential land, which can be
subdivided into approximately 3,000 single-family lots. The Large Residential
Tract currently is zoned for residential development. The Operating Subsidiary
has fee title to the Large Residential Tract, which is subject to a
first-priority mortgage securing the $3,500,000 Resure Note I. Approximately
410 acres of the Large Residential Tract is subject to a lien securing the
$3,500,000 Resure Note II. See ITEM 2, "MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES--Indebtedness and other
Liquidity Requirements."
The Company intends to build moderately priced single-family homes on
the Residential Tract for sales prices in the range of $115,000 to $200,000.
The estimated cost of such development, on a per-home basis, is from $97,500 to
$170,000, inclusive of general and administrative expenses, sales and marketing
expenses, and closing costs. The Company intends to raise the necessary funds
for such development by obtaining secured credit line facilities from
institutional lenders.
PINE RIDGE LOTS. The Pine Ridge Lots are comprised of approximately
197 acres, including 487 single-family lots which have a preliminary plat filed
with the City of Maumelle. The property is zoned for residential development.
The Operating Subsidiary has fee title to the Pine Ridge Lots. There are no
mortgages or liens for indebtedness or any other material encumbrances on the
property. There are, however, certain legal proceedings that may affect the
property. See ITEM 8, "LEGAL PROCEEDINGS."
COMMERCIAL LOTS. The Commercial Lots are approximately 55 acres of
lots which have been zoned for commercial and multi-family use. The Operating
Subsidiary has fee title to these lots, although approximately 36 acres of the
property are subject to a mortgage for the benefit of Century, as security for
the matured $1,400,000 Century Note I discussed above, and certain portions of
the Commercial Lots are subject to liens for Special Improvement District Taxes
for 1995, $56,780 of which was delinquent as of October 10, 1995. In addition,
certain of the commercial lots have delinquent ad valorem taxes which would
constitute a lien against the property. These delinquent ad valorem taxes
total approximately $25,000. Approximately 13 acres of the Commercial Lots are
in escrow for sale to certain
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unaffiliated third parties for an aggregate purchase price of $652,000. See
ITEM 2, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY
AND CAPITAL RESOURCES--Prospective Sources of Liquidity."
MISCELLANEOUS TRACTS AND PROPERTIES. The Miscellaneous Tracts and
Properties are approximately 477 acres of land, including approximately 7 acres
of miscellaneous commercial tracts, 19 acres of multi-family land,
approximately 2 acres of easements property, 2 acres of utility property and
approximately 446 acres of wetlands. The Company has no current development
plans for such property. The wetlands property is located in the Arkansas
River and, therefore, is unsuitable for development.
PROGRAM OF DEVELOPMENT. The Company intends to commence development
activity on the aforementioned properties within the next two years. The
Company intends initially to acquire improved single-family lots from
third-party property owners, including DTLP, and focus its initial development
activities on such property. See ITEM 7, "Certain Relationships And Related
Transactions." Management intends to build approximately 250 homes on acquired
single-family lots. Because the Company lacks experience in the home
construction industry, Management believes the Company may find it difficult to
obtain conventional credit sources sufficient to finance that amount of homes.
Management, therefore, believes it may be necessary to enter into joint
ventures with funding sources to capitalize the Company's building program.
Management anticipates that the Company will begin developing its
existing inventory with the Pine Ridge Lots. The Pine Ridge Lots are fully
entitled with a preliminary subdivision plat recorded with the City of
Maumelle. The Pine Ridge Lots are comprised of 487 lots in four subdivisions,
averaging approximately 120 lots each. The improvement district in which the
Pine Ridge Lots are located is already partially improved, with a roughly
graded roadway. Because the Pine Ridge Lots were partially improved prior to
the Company's acquisition, the Company expects its cost to develop an improved
lot will be less in Pine Ridge than the other Maumelle Property. The Company
intends to start home site improvements on at least one Pine Ridge subdivision
in the third quarter of 1997, assuming it is able to acquire the necessary
capital for such development. It anticipates the project shall be funded from
a development loan the Company hopes to secure in 1997.
Management plans to commence single-family construction on the first
Pine Ridge subdivision lots in the 1998 calendar year. Management forecasts
construction costs on single-family homes built on the acquired lots and on
Pine Ridge Lots will average
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approximately $44 per square foot. This is higher than the national average
and is reflective of the Company's inexperience in the home construction
industry. However, due to the relatively low cost basis of its lot inventory,
the Company expects this cost to decrease as it gains experience in the home
construction industry.
The Company expects to fund improvements on the Large Residential
Tract through similar credit extensions or from the Company's cash flow or
joint venture projects, or from an equity offering. The Company cannot now
predict when it will commence improvements on the Large Residential Tract.
RESURE DEBENTURE.
On September 1, 1995, the Operating Subsidiary acquired the Resure
Debenture in connection with the $3,500,000 loan it obtained from Resure to
refinance the Maumelle Property acquisition debt owed to Century. See ITEM 1,
"DESCRIPTION OF BUSINESS--BUSINESS DEVELOPMENT," and ITEM 2, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL
RESOURCES--Indebtedness and Other Liquidity Requirements." The Resure
Debenture was issued to the Operating Subsidiary in return for the $3,500,000
Resure Note II issued by the Operating Subsidiary to Resure. The Operating
Subsidiary is entitled to receive semi-annual payments of principal and
interest on the Resure Debenture, which generally match the amount of the
semi-annual principal and interest payments payable by the Company to Resure
under the Resure Note II. The semi-annual principal and interest payments
commenced December 1995 and will terminate in June 2000. Interest under the
Resure Debenture accrues at a rate of 7% per annum.
Neither principal nor interest under the Resure Debenture can be paid
except after prior authorization from the Board of Trustees ("Board of
Trustees") of the Illinois Insurance Exchange (the "Exchange"), which
authorization cannot be reasonably withheld under the terms of the Resure
Debenture, as acknowledged by the Exchange. However, the Resure Debenture
provides that it shall be considered reasonable for the Board to withhold
authorization for any payment of principal or interest if such payment of
principal or interest (i)would render Resure out of compliance with Exchange
regulations, or (ii) would constitute the principal cause for the Exchange
suffering regulatory sanctions in any state. In addition, the Debenture
permits payment of principal or interest only with the approval of the Board of
Trustees when the Board of Trustees is satisfied that the financial condition
of Resure warrants such payment, but, absent specific identifiable conditions,
approval may not be withheld by the Board of Trustees if Resure shall have
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<PAGE> 34
satisfactory evidence that such repayment of principal or interest would not
reduce policyholder surplus of the Company to less than $5,000,000.
Resure can withhold payment of the semi-annual installments under the
Resure Debenture in the event the Operating Subsidiary fails to make its
installment payments under the Resure Note II. However, the Operating
Subsidiary must continue to make payments under the Resure Note II despite any
failure by Resure to make payments on the Resure Debenture.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
GENERAL. The following is a discussion of investment policies,
financing policies, conflict of interest policies, and policies with respect to
certain other activities of the Company. The policies with respect to these
activities have been determined by the Company's Board of Directors and may be
amended or revised from time to time at the discretion of the Board without a
vote of the shareholders of the Company, except that changes in certain
policies with respect to conflicts of interest must be approved by a majority
of the independent directors and otherwise be consistent with legal
requirements.
INVESTMENT POLICIES.
Investments in Real Estate or Interests in Real Estate. The Company
generally conducts all of its investment activities through the Operating
Subsidiary and intends to do so for the foreseeable future, except that any
construction activity will likely be conducted through the Home Construction
Subsidiary. The Company's investment objective is to increase long-term total
returns to shareholders through appreciation in the value of the Common Stock.
The Company's policy is to acquire or develop assets where the Company believes
that favorable investment opportunities exist based on market conditions at the
time of the investment.
The Company expects to pursue its investment objectives primarily
through the direct ownership of properties by the Operating Subsidiary,
although, as discussed below, the Company may also pursue indirect property
ownership opportunities, particularly if it is necessary or advisable to do so
in order to acquire the development resources and expertise which the Company
now lacks. The Company intends to acquire or develop residential
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<PAGE> 35
and commercial properties primarily in the Maumelle area and in California, but
may pursue the acquisition or development of residential and commercial
properties in other areas of the United States.
Future development or investment activities will not be limited by the
governing documents of the Company or its subsidiaries to any geographic area,
product type or specified percentage of the Company's assets. It is the
Company's policy to acquire assets primarily for possible capital gain.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. The Company also may invest in securities of
other entities engaged in real estate activities or invest in securities of
other issuers, including investments by the Company for the purpose of
exercising control over such entities. No such investments will be made,
however, unless the Board of Directors determines the proposed investment would
not cause the Company to be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
Should management recommend prospective acquisitions in the financial services
industry to the Company's Board of Directors, it will be the policy of the
Company to consider only those prospects where management is able to enumerate
a correlation between the strategic objectives of the Company and the
prospective acquisition, or a plan to enhance shareholder value as measured by
future book value or earnings per share.
Investments in Mortgages. The Company does not own any mortgages and
has no immediate plans to invest in mortgages, or to engage in originating,
servicing, or warehousing mortgages. However, the Company may determine that
it is in its best interests to engage in such activities as a means of
providing enhanced service to its home buying customers. Furthermore, while
the Company does not intend to purchase mortgages, it may hold mortgages
generated from the sale of its real property inventory.
FINANCING POLICIES. The organizational documents of the Company and
its subsidiaries impose no limits on the amount of indebtedness they may incur.
The Company will from time to time determine its borrowing policies in light of
then-current economic conditions, relative costs of debt and equity capital,
market value of the Company's real estate assets, growth and acquisition
opportunities and other factors.
The Company intends to raise additional capital through equity
offerings, debt financing, or a combination thereof,
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although there can be no assurance that the Company will be able to raise such
capital on favorable terms or at all.
The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on the Company's
portfolio as a whole.
CONFLICTS OF INTEREST POLICIES. The Board of Directors is subject to
certain provisions of Nevada law that are designed to eliminate or minimize
certain potential conflicts of interest. There can be no assurances, however,
that these policies always will be successful in eliminating the influence of
such conflicts, and if they are not successful, decisions could be made that
might fail to reflect fully the interest of all shareholders. See ITEM 7,
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
Under Nevada law, each director is subject to restrictions on the
misappropriation of corporate opportunities to himself or his affiliates of
which he becomes aware solely as a result of his service as a director. The
Company may transact business with one or more of its directors or officers or
a corporation, firm or association in which one or more of its directors or
officers are directors, officers or are financially interested; provided any of
the following requirements are satisfied:
(a) The interested directors or officers must disclose the common
directorship, office or financial interest to the board of
directors, have it noted in the minutes, and a majority of the
disinterested directors must approve or ratify the contract or
transaction; or
(b) The interested directors or officers must disclose the common
directorship, office or financial interest to the
shareholders, and the shareholders must approve by a majority
vote the contract or transaction. The votes of the interested
director or officer must be counted in any such vote of the
shareholders; or
(c) The common directorship or office or financial interest is not
known to the director and officer at the time the transaction
is brought before the board of directors and therefore is not
disclosed; or
(d) The contract or transaction is fair as to the Company at the
time it is authorized or approved.
CERTAIN POLICIES WITH RESPECT TO OTHER ACTIVITIES. The Company and
its subsidiaries have authority to offer their securities and to repurchase and
otherwise acquire their
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securities, and they are likely to engage in such activities. In the future,
the Company and its subsidiaries may make loans to joint ventures in which they
participate in order to meet working capital needs. The Company and its
subsidiaries have not engaged in trading, underwriting, agency distribution, or
sale of securities of other issuers and do not intend to do so. The Company
and its subsidiaries intend to make investments in a manner such that they will
not be treated as an investment company under the Investment Company Act.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the beneficial ownership of shares of
Common Stock at August 30, 1996, for (i) each person who holds more than a 5%
interest in the Company, (ii) directors of the Company, (iii) the sole "named
executive officer" of the Company, as defined in Item 402(a)(2) of SEC
Regulation S-B, and (iv) the directors and named executive officer of the
Company as a group. Unless otherwise indicated in the footnotes, all such
interests are owned directly, and the indicated person or entity has sole
voting and investment power. Addresses are provided only for 5% owners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
Name and
Title of Class address of Amount and Percent of
beneficial nature of bene- class
owner(1) ficial owner
<S> <C> <C> <C>
Common Stock Michael G. Todd(2) 2,851,589 shares 40.74%
Common Stock John W. DeHaven(3)(4) 2,851,589 shares 40.74%
Common Stock Herbert E. Russell(3) 2,851,589 shares 40.74%
Common Stock Century Realty, Inc. 700,000 shares 10%
Common Stock Ronald J. Campbell 0 shares 0%
Common Stock Robert R. Neyland 0 shares 0%
Common Stock Director and Executive
Officers as a Group 5,703,178 shares 81.48%
</TABLE>
(1) Unless otherwise indicated, the address of the beneficial owner is
25550 Hawthorne Boulevard, Suite 207, Torrance, California 90505.
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<PAGE> 38
(2) All of these shares are owned by Prescott Investments, L.P. Michael
G. Todd is the sole managing member of Granite Industries LLC, which
is the managing general partner of Prescott LP. Todd is the sole
"named executive officer" of the Company, as defined in Item 402(a)(2)
of SEC Regulation S-B. See ITEM 5, "DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS."
(3) All of these shares are owned by Charlie Corporation, of which Herbert
E. Russell, as grantor and trustee of an irrevocable trust, owns 100%
of the outstanding stock. John W. DeHaven is the sole income
beneficiary of the trust, but Russell has sole investment and voting
power over the trust. The trust terminates on the death of DeHaven.
See ITEM 5. "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS."
(4) DeHaven disclaims beneficial ownership of these shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Date of Director Term
Name Age Position Election Expires
- - ---- --- -------- -------- -------------
<S> <C> <C> <C> <C>
Michael G. Todd 46 Chairman and 7/95 1996
President
Ronald J. Campbell 52 Director and 3/94 1996
Secretary
Herbert E. Russell 70 Director 3/94 1996
Robert R. Neyland 42 Director 4/94 1996
David R. Paes 41 Vice President, 7/95 N/A
Treasurer and
Assistant Secretary
</TABLE>
The following is a biographical summary of the experience of the
directors and executive officers of the Company:
MICHAEL G. TODD. Chairman of the Board, President and Chief Executive Officer
of the Company. Todd also is the sole Director and President of the Operating
Subsidiary. Todd is a general partner of DeHaven Todd & Co., a merchant
banking partnership he co-founded in 1985 with DeHaven. Todd has extensive
experience in the banking industry, having been the President and Chief
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<PAGE> 39
Executive Officer of two Southern California banks, Orange City Bank and Bay
Cities National Bank.
RONALD J. CAMPBELL. Director and Secretary. Campbell is the President of
Financial Economic Research & Counsel, a research and business consulting firm
he founded in 1993. Campbell also has 26 years experience as an executive in
the banking industry.
HERBERT E. RUSSELL. Director. Russell is the President of Charlie
Corporation, a Nevada corporation, which is a controlling shareholder of the
Company. Russell is also President of Hermico Corporation, a company founded
by Russell and engaged in the business of prospecting and producing precious
metal concentrates. Prior to forming Hermico, Russell owned and operated an
oil field trucking company and a cotton farm.
ROBERT R. NEYLAND. Director. Neyland also serves on the Board of Directors
of HomeCapital Investment Corporation, a public company. Since 1993, Neyland
has been the Chief Financial Officer for Select Switch Systems, Inc., a
privately-held Texas company. He was also a partner in Living Suite, a weekly
and monthly residential rental company, from 1990 to 1996.
DAVID R. PAES. Vice President, Treasurer, and Assistant Secretary. Paes is
Executive Vice President and a controlling shareholder of Maumelle Enterprises,
a real estate management company that currently provides management and
administrative service to the Company. See ITEM 7, "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS--SERVICES PROVIDED BY AFFILIATED COMPANIES." He has been
involved in real estate development as a chief financial officer of two real
estate land companies since 1977, and is a certified public accountant.
SIGNIFICANT EMPLOYEES
The Company's sole employee is Michael G. Todd, its Chairman,
President and Chief Executive Officer.
FAMILY RELATIONSHIPS
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Except as set forth below, during the past five years, no director,
person nominated to become a director, executive officer, promoter or control
person of the Company:
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<PAGE> 40
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy
or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the SEC or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
Robert R. Neyland ("Neyland") was a controlling shareholder, officer
and director of Hiawatha Savings and Loan Association, at the time it went into
receivership in March 1990.
ITEM 6. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation that was paid in 1994 and 1995 and the first three quarters of the
Company's 1996 fiscal year to the Company's executive officers.
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
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<PAGE> 41
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name & Year Salary Bonus Other Res- Securi- LTIP All
Prin- or ($) ($) Annual tric- ties Pay- Other
cipal Period Compen- ted Under- outs Compen-
Position Ended sation Stock Lying sation
Options
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael 6/30/96 $180,000(1) 0 0 0 0 0 0
Todd,
Chairman/
President
David 6/30/96 0 0 0 0 0 0 0
Paes(2)
- - -------------
</TABLE>
(1) Michael Todd has been employed as President of the Company since November
1994. Todd received no salary from the Company for the period November 1994
through September 30, 1995. The amount of salary shown represents deferred
salary owed to Todd for the period October 1, 1995 through June 30, 1996. Todd
has received no other compensation.
(2) David Paes has been Vice-President of the Company since July 1995 but has
not devoted any significant amount of time to its operations. Paes has
received no salary or other compensation from the Company from July 1995
through June 30, 1996.
The Company does not have any stock or option plans. The Board of
Directors has proposed initiating a stock option plan and a nonqualified stock
option plan for key employees, directors and other employees that contribute
materially to the success of the Company. As of August 30, 1996, the terms of
the plans have not been defined by the board; however the Company anticipates
that such plans will be adopted within the next six months.
The Company has a five-year written agreement with Todd to perform the
duties of President. Under the agreement, which became effective on October 1,
1995, Todd is to be compensated at a rate of $20,000 per month. The agreement
expires on September 30, 2000. The Company is not party to any other
employment agreements.
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<PAGE> 42
DIRECTOR COMPENSATION
Outside directors are compensated for their services in the amount of
$500 per month. Outside directors, Neyland, Russell, and Campbell, have agreed
to defer such compensation until the Treasurer of the Company determines that
sufficient funds are available to make such payments. Such compensation has
been deferred since April 1994, and continues to be deferred. As of June 30,
1996, the Company had an aggregate deferred liability in the amount of $40,000
for outside directors' compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
SERVICES PROVIDED BY AFFILIATED COMPANIES
The Company has paid fees or expects to pay fees to certain affiliated
companies for various types of services, and will continue to do so in the
future. These arrangements are summarized below.
MAUMELLE ENTERPRISES, INC. AGREEMENT. The Company has an oral
agreement with Maumelle Enterprises, Inc. to provide management and
administrative services for the Maumelle Property. Currently, Maumelle
Enterprises manages the Company's inventory of property, oversees any sale of
property, and manages administrative matters such as ensuring payment of taxes,
mortgages and other expenditures incurred in management of the property.
Maumelle Enterprises also represents the Company at local and state hearings
that may affect the Company's property. Maumelle Enterprises is owned
primarily by officers and directors of the Company and has no clients other
than the Company and DeHaven Todd Limited Partnership, an Arkansas limited
partnership ("DTLP"), which is owned almost entirely by Todd and DeHaven. The
stock of Maumelle Enterprises is owned by officers, directors and security
holders named in response to Item 403 of SEC Regulation S-B, as follows: Todd
owns ten percent (10%); DeHaven owns ten percent (10%); and Paes owns forty
percent (40%). Paes is also an officer and director of Maumelle Enterprises
and receives a salary in the amount of $48,000 per year from Maumelle
Enterprises. Ann Alridge ("Alridge"), an officer of the Company's
subsidiaries, is employed by Maumelle Enterprises and receives a salary of
$30,000 per year.
Under the oral management and administrative services agreement,
payment to Maumelle Enterprises for management services depends upon the actual
services rendered in a given month and the current liquidity of the Company. If
funds are not available, Maumelle Enterprises has agreed to defer payment of
its fees. For the fiscal year ended September 30, 1995, the Company paid
Maumelle Enterprises $74,381 and the Company had
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<PAGE> 43
accrued unpaid fees to Maumelle Enterprises of $103,000 for the period October
1, 1994 to September 30, 1995.
The Company intends to formalize its management agreement with
Maumelle Enterprises in writing. The duration, terms and conditions of the
contract have not yet been determined and will be subject to approval by the
independent directors of the Company.
SUBLEASING OF OFFICE SPACE. The Company is currently subleasing its
principal office space in Torrance, California from DTC, a California
partnership. The partnership, owned equally by Todd and DeHaven, charges the
Company $1,800 per month. The Company owes DeHaven, Todd & Co. $16,200 in
rental payments for the period October 1, 1995 to June 30, 1996.
The Company plans to continue to sublease its office space from
DeHaven & Todd Co., until at least September 30, 1998.
POSSIBLE ACQUISITIONS OF LAND FROM AFFILIATES
LAND ACQUISITION. The Company intends to purchase 121 improved
single-family lots from DTLP. DeHaven, who is the sole general partner of
DTLP, owns 75% of DTLP, while Todd owns 20% as a limited partner. In addition
to the 121 single-family lots, DTLP owns approximately acres of commercial
property and approximately 16 acres of industrial property in Maumelle.
The Company expects to purchase any lots it acquires from DTLP at fair
market value, to be determined at the time of purchase. Such fair market value
will be established by an unaffiliated certified appraiser. Any future
transactions between the Company and its officers, directors and affiliates
will be approved by a majority of the Company's outside directors or will be
consistent with policies approved by such outside directors.
ITEM 8. LEGAL PROCEEDINGS.
On August 12, 1996, a foreclosure action was instituted against the
Operating Subsidiary and the Predecessor Corporation, AWEC Resource, Inc., as
guarantor, by Century in the Chancery Court of Pulaski County, Arkansas.
Century is seeking to foreclose on 36 acres of the Commercial Lots of the
Maumelle Property securing the $1,400,000 Century Note I, which currently is in
default. As a result of cross-default provisions of the $350,000 Century Note
II, the Century Note II is also in default, as also alleged in the Century
complaint.
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<PAGE> 44
The approximately 197-acre Pine Ridge Lots may be affected by a
judgment against the Pine Ridge Addition Residential Property Owners
Multi-Purpose Improvement District No. 9 (the "Pine Ridge Improvement
District") in the amount of $237,811. The Pine Ridge Lots have been indentured
to pay any taxes levied by the Pine Ridge Improvement District in order to
satisfy the judgment.
The Company believes that the Pine Ridge Improvement District has held
discussions with the plaintiff in this matter regarding settling the judgment
at a reduced amount. However, the Company has accrued the full amount of the
liability in its fiscal year 1995 financial statements in case the Commercial
Lots become subject to a tax to satisfy the judgment.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is listed for trading in the over-the-counter market
on the Nasdaq electronic bulletin board under the symbol "CPCY"; however, the
market for shares of the Common Stock is extremely limited. There can be no
assurance that the present limited market for the Company's common stock will
become more active or even be sustained. In addition, any future sale of the
Company's stock by any of the controlling shareholders may have a substantial
adverse impact on any such public market. See ITEM 1, "DESCRIPTION OF
BUSINESS--RISK FACTORS-- Future Sales of Common Stock."
The high and low bid prices for shares of common stock of the Company
for each quarter within the last two fiscal years, as well as for the first
three quarters of 1996, are as follows:
<TABLE>
<CAPTION>
BID
Quarter Ending High Low
- - -------------- ---- ---
<S> <C> <C>
December 31, 1993 3 3/4 3/4
March 31, 1994 1 1/4 .52
June 30, 1994 7/8 1/4
September 30, 1994 5/16 1/8
December 31, 1994 1/4 1/32
March 31, 1995 1/16 1/32
June 30, 1995 1/16 1/32
</TABLE>
-44-
<PAGE> 45
<TABLE>
<S> <C> <C>
September 30, 1995 1 1/16 1/16
December 30, 1995 5/8 3/8
March 31, 1996 2 1/2 2 1/2
June 30, 1996 2 3/4 1 3/4
</TABLE>
These bid prices were obtained from the National Quotation Bureau,
Inc. ("NQB"), and reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not reflect actual transactions.
HOLDERS
The number of record holders of the Company's common stock as of June
30, 1996 was 521, and 524 as of August 15, 1996.
DIVIDENDS
During the last two fiscal years and the first three quarters of the
Company's 1996 fiscal year, the Company has not declared any cash dividends
with respect to its Common Stock. The Company does not expect to declare
dividends in the foreseeable future. The future dividend policy of the Company
cannot be ascertained with any certainly, particularly since the Company has
decided to focus its primary business in the home construction industry, and
has had no operational history as a home builder. There are no material
restrictions limiting, or provisions that are likely to limit, the Company's
ability to pay dividends on its Common Stock in the future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
In October 1993, the Predecessor Corporation issued 6,079,000 shares
of Common Stock to PetroSource Energy Corporation ("PetroSource") as
consideration for certain options on oil and gas properties transferred to a
subsidiary of the Predecessor Corporation by PetroSource. At the time of the
transaction, the board of directors of the Predecessor Corporation valued the
transferred options at $1,395,356, the amount of cash paid by PetroSource to
acquire the Options, although they were later discovered to be worthless.
Present management of the Company believes that such shares were issued in
reliance on Section 4(2) of the Securities Act. At the time of this
transaction, management of the Company believes that PetroSource was owned and
controlled by Joe Vick, then a controlling shareholder of the Predecessor
Corporation.
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<PAGE> 46
In November 1995, the Predecessor Corporation issued 700,000 shares of
Common Stock to Century in connection with the refinancing of the original
$6,737,000 Maumelle Property acquisition promissory note. The shares were
issued as consideration for the payment of $3,321,794 of such debt. Such
shares were issued to Century in reliance on Section 4(2) of the Securities
Act.
In January 1996, the Predecessor Corporation merged into the Company
for the sole purpose of changing its state of domicile and effectuating a name
change. Each outstanding share of the Predecessor Corporation was converted
into a single share of Common Stock of the Company pursuant to such merger.
The shares of the Company issued to the former Predecessor Corporation
shareholders pursuant to this merger were issued pursuant to Section 3(a)(9) of
the Securities Act.
In July 1996, the Company entered into a financial consulting
agreement with Olsen & Associates Consulting, Inc. ("Olsen"), which was amended
in September 1996. As consideration for the financial consulting services to
be rendered by Olsen, the Company is obligated to issue 150,000 shares of
Common Stock to Olsen, as well as an option to purchase up to 350,000 shares of
Common Stock. Although such shares and option have not yet been issued by the
Company, the Company will issue such securities pursuant to Section 4(2) of the
Securities Act.
ITEM 11. DESCRIPTION OF SECURITIES.
GENERAL
The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, $0.01 par value per share, and 10,000,000 shares of
Preferred Stock, $0.01, par value per share. The following description of the
terms and provisions of the shares of stock of the Company and certain other
matters does not purport to be complete and is subject to and qualified in its
entirely by reference to the applicable provisions of the Nevada Revised
Statutes ("NRS"), and the Company's Articles of Incorporation and By-Laws.
COMMON STOCK
Each holder of shares of Common Stock is entitled to one vote at
shareholders' meetings for each share held. Neither the Articles of
Incorporation nor the By-Laws provide for cumulative voting for the election of
directors. However, the Articles of Incorporation do provide the Board of
Directors with the authority to issue shares by resolution in one or more
series with such voting powers, designations, preferences and rights or
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<PAGE> 47
qualifications, limitations or restrictions. Subject to the prior rights of
any series of Preferred Stock that may be issued, holders of Common Stock are
entitled to receive, pro rata, such distributions as may be declared by the
Board of Directors out of funds legally available therefor, and are also
entitled to share, pro rata, in any other distributions to shareholders. As of
the date of this filing, there have been no distributions paid to shareholders
for the prior three fiscal years.
There are no redemption or sinking fund provisions and no direct
limitations in any indenture or agreement on payment of distributions to
shareholders.
Holders of Common Stock do not have any preemptive rights or other
rights to subscribe for additional shares.
PREFERRED STOCK
Under the Articles of Incorporation of the Company, the Board of
Directors may issue, without any further action by the shareholders, shares of
Preferred Stock of one or more series, which may have different preferences,
conversion and other rights, voting powers, and restrictions granted or imposed
upon any wholly unissued series of preferred stock. The Board of Directors
may, without further action by the shareholders, fix, alter or reduce (but not
below the number then outstanding) the number of shares comprising any series
and the designation thereby, and may provide for the rights and terms of
redemptions or conversion of the shares of any such series. Such terms of any
series shall be set forth in resolutions adopted by the Board of Directors.
CLASSIFICATION AND REMOVAL OF THE BOARD OF DIRECTORS
The Articles of Incorporation provide that the Board of Directors
shall consist of four members. The number of the Board of Directors may be
increased or decreased by a resolution duly adopted by the Board of Directors
to amend the By-Laws of the Company. The term of office for each director is
one year. At each annual meeting of the shareholders, directors are elected to
hold a one-year term. Because shareholders have no right to cumulative voting
for the election of directors, the holders of the majority of the outstanding
shares will be able to elect all of the directors. At the present time,
management controls the majority of the shares eligible to vote for directors.
The By-Laws of the Company provide that any director may be removed,
with or without cause, by a vote representing not less than two- thirds of the
issued and outstanding voting Shares of the Company. Vacancies on the Board of
Directors may be filled
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<PAGE> 48
by the affirmative vote of the remaining directors or by the shareholders by a
majority of the votes entitled to be cast for the election of directors at any
regular or special meeting. A vote of the majority of the directors or a vote
of the majority of the shareholders entitled to vote is required to amend,
alter, change, repeal or adopt any provisions inconsistent with the foregoing
provisions.
SPECIAL MEETINGS
Under the By-Laws, special meetings of the shareholders may be called
by the President or the Board of Directors or by shareholders holding
outstanding shares representing not less than 51 percent of all votes entitled
to be cast on any issue proposed to be considered at any such special meeting.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The By-Laws provide that with respect to an annual meeting of
shareholders, any business that is properly put forth before the meeting may be
considered and voted on by the shareholders including the election of
directors; except the following actions must be stated in any shareholder
notice in order for them to be voted on by the shareholders: actions with
respect to any contract or transactions between the Company and one or more
directors or officers, or a firm, corporation, or association in which one or
more of its directors or officers have a material financial interest; adoption
of amendments to the Articles of Incorporation, and any action with respect to
a merger, consolidation, reorganization, or partial or complete liquidation or
dissolution of the Company.
MANAGEMENT LIABILITY
The Articles of Incorporation eliminate, subject to certain
exceptions, the personal liability of a director to the Company or its
shareholders for monetary damage for breaches of such director's duty of care
or other duties as a director. The Articles do not provide for the elimination
of or any limitation on the personal liability of a director for (i) acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the unlawful payment of dividends. The Articles further state
that any repeal or modification of these Articles shall not be retroactive and
shall not limit the personal liability of a director or officer for acts or
omissions prior to the repeal or modification. These provisions of the
Articles of Incorporation will limit the remedies available to a shareholder in
the event of breaches of any director's duties to such shareholder or the
Company.
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<PAGE> 49
ANTI-TAKEOVER PROVISIONS
The Articles of Incorporation and Section 78.438 of the NRS contain
provisions that might have the effect of entrenching current management and
delaying or discouraging a hostile takeover of the Company. These provisions
include, among others, the following:
ISSUANCE OF PREFERRED STOCK. The Board of Directors has the power to
issue up to 10,000,000 shares of Preferred Stock, in one or more classes or
series and with such rights and preferences as determined by the Board of
Directors, all without shareholder approval. Because the Board of Directors
has the power to establish the preferences and rights of each class or series
of Preferred Stock, it may afford the holders in any series or class of
Preferred Stock preferences, powers and rights, voting or otherwise, senior to
the rights of holders of Common Stock. The Board of Directors presently is in
negotiations with a European lender to obtain an $18,400,000 loan that is
convertible into shares of Preferred Stock.
VOTING REQUIREMENTS. The By-Laws of the Company provide that no
transaction of a fundamental nature, including mergers, consolidations,
reorganization, partial or complete liquidation or dissolution of the Company,
may be effectuated without the affirmative vote of a majority of the
shareholders entitled to vote generally in any such matter. The By-Laws may be
amended either by an affirmative vote of majority of the shareholders entitled
to vote or by an affirmative vote of a majority of the Board of Directors then
holding office. Management currently controls a majority of the votes required
to effect any of these changes.
NEVADA ANTI-TAKEOVER STATUTES. The NRS generally restricts a company
from entering into certain business combinations with an interested shareholder
(which is defined as a person who directly or indirectly exercises the voting
power of an issuing corporation and who is an acquiring person, an officer of
the corporation; or an employee and director of the corporation) or its
affiliates for a period of three years after the date on which the shareholder
acquired the shares, unless (i) the combination is approved by the board of
directors of the company prior to the date such person became an interested
shareholder, (ii) the combination is approved by the affirmative vote of the
holders of stock representing a majority of the outstanding voting power not
beneficially owned by the interested shareholder proposing the combination, or
any affiliate or associate of the interested shareholder, or (iii) the
combination may be permissible if after the interested shareholder's date of
acquiring shares and before the date of consummation with respect
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<PAGE> 50
to the combination, the interested stockholder has not become the beneficial
owner of any additional voting shares of the company except as part of the
transaction that resulted in him becoming an interested shareholder or by
virtue of proportionate splitting of shares, dividends distributed in shares
not constituting a combination.
VOTING RIGHTS
Shareholders are entitled to elect the Company's Board of Directors at
each annual shareholder meeting of the Company. Directors shall serve annually
or until their successor or successors have been elected and qualified. The
By-Laws of the Company also provide that an affirmative vote of majority of all
of the votes entitled to be cast on any matter shall be necessary to approve
and authorize the following acts of the Company:
(a) amendment of the Articles of Incorporation;
(b) consolidation of the Company;
(c) merger of the Company into another company, with the Company not being
the survivor;
(d) a share exchange in which shares of the Company will be acquired;
(e) sale, lease, exchange or other transfer of all, or substantially all
of the property and assets of the Company, including its goodwill and
its corporate franchises; or
(f) the voluntary or involuntary liquidation, dissolution or winding-up of
the Company.
TRANSFER AGENT
The Company's transfer agent is Olde Monmouth Stock Transfer Company
of 77 Memorial Parkway, Suite 101, Atlantic Highlands, New Jersey 07716.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a
Nevada corporation to indemnify any director, officer, employee, or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation" due to his corporate role. Section 78.751(1) extends this
protection "against expenses, including
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<PAGE> 51
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or proceeding if
he acted in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification or the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the right
of the corporation. The party must have been acting in good faith and with the
reasonable belief that his actions were not opposed to the corporation's best
interests. Unless the court rules that the party is reasonably entitled to
indemnification, the party seeking indemnification must not have been found
liable to the corporation.
To the extent that a corporate director, officer, employee, or agent
is successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS
requires that he be indemnified "against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense."
Section 78.751(4) of the NRS limits indemnification under Sections
78.751(1) and 78.751(2) to situations in which either (1) the stockholders, (2)
the majority of a disinterested quorum of directors, or (3) independent legal
counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may advance
an officer's or director's expenses incurred in defending any action or
proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides that
the rights to indemnification and advancement of expenses shall not be deemed
exclusive of any other rights under any bylaw, agreement, stockholder vote or
vote of disinterested directors. Section 78.751(6)(b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors and administrators.
Regardless of whether a director, officers, employee or agent has the
right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability arising from this corporate
role.
Article VII, Section 7 of the Company's Bylaws restates the
above-referenced indemnification provisions of the NRS. Article
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<PAGE> 52
9 of the Company's Articles of Incorporation requires the Company, to the
fullest extent permitted by Nevada law, to indemnify all persons whom it shall
have the power to indemnify under said law against any and all expenses,
liabilities or other makers referred to in or covered thereby, without
excluding any other rights to which the party to be indemnified may have.
These rights continue as to persons who have ceased to be agents of the Company
and inures to the benefit of such persons' heirs, executors and administrators.
ITEM 13. DESCRIPTION OF FINANCIAL STATEMENTS.
The audited financial statements of the Company are included in this
Registration Statement at pages F-1 to 37.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE.
The Company has not changed accountants during the last two fiscal
years, or during the interim period; nor has the Company had any disagreements
with the accountants on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedures.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) INDEX TO FINANCIAL STATEMENTS
CAPITOL COMMUNITIES CORPORATION, INCLUDING PREDECESSOR CORPORATION AND
SUBSIDIARIES.
<TABLE>
<S> <C>
Unaudited Balance Sheet as of June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Unaudited Statement of Operations for the Nine Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Unaudited Statements of Cash Flows for the Nine Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Financial Statements for the Nine Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Balance Sheets as of September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Statements of Operations for the Years Ended September
30, 1995, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Statements of Changes in Shareholders' Equity September
</TABLE>
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<PAGE> 53
<TABLE>
<S> <C>
30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Statements of Cash Flows for the Years Ended September
30, 1995, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
Notes to Financial Statements for September 30, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21
Balance Sheets as of September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
Statements of Operations as of September 30, 1994, 1993,
and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24
Statements of Changes in Shareholder Equity as of
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Statements of Cash Flows as of September 30, 1994, 1993,
1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26
Notes to Financial Statements for September 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31
Balance Sheets as of September 30, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Statements of Operations as of September 30, 1993, 1992,
and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
Statements of Changes in Shareholder Equity as of
September 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34
Statements of Cash Flows as of September 30, 1993, 1992,
1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35
Notes to Financial Statements for September 30, 1993
and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-37
</TABLE>
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<PAGE> 54
(b) INDEX TO EXHIBITS
<TABLE>
<S> <C> <C>
2.1.1 Articles of Merger, filed with State of Nevada, dated November 29, 1995,
merging AWEC Resources into Capitol Communities Corporation. ................................... E-3
2.1.2 Agreement of Merger, filed with State of Nevada, dated November 15, 1995,
between AWEC Resources, Inc., and Capitol Communities Corporation. ............................. E-7
2.2 Certificate of Merger, filed with State of New York, dated January 5, 1996,
merging AWEC Resources, Inc., into Capitol Communities Corporation. ............................ E-13
3.1.1 Articles of Incorporation of Capitol Communities Corporation, dated August 18, 1995. ........... E-20
3.1.2 Certificate of Amendment of Articles of Incorporation of Capitol Communities Corporation,
dated February 6, 1996. ........................................................................ E-25
3.2 Bylaws of Capitol Communities Corporation, dated August 22, 1995. .............................. E-30
10.1 Contribution Agreement, dated September 11, 1995, between AWEC Development
Corporation and Resure, Inc. ................................................................... E-50
10.2 Subordinated Surplus Debenture, dated September 11, 1995, between AWEC Development
Corporation and Resure, Inc. ................................................................... E-65
10.3 Non-Recourse Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Resure, Inc. ................................................................... E-71
10.4 Non-Recourse Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. ................................................................... E-77
10.5 Security Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. ................................................................... E-98
10.6 Environmental Indemnity Agreement, dated September 11, 1995, between AWEC Development
Corporation and Resure, Inc. ................................................................... E-109
10.7 Loan Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. ................................................................... E-115
10.8 Promissory Note, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. ................................................................... E-126
</TABLE>
-54-
<PAGE> 55
<TABLE>
<S> <C> <C>
10.9 Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. .............................................. E-132
10.10 Environmental Indemnity Agreement, dated September 11, 1995,
between AWEC Development Corporation and Resure, Inc. ..................... E-153
10.11 Agreement for Refinance of Secured Note, dated September 11, 1995
between Century Realty, Inc., AWEC Resources, Inc., and AWEC
Development Corporation. .................................................. E-158
10.12 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. in the amount of $1,400,000. ......... E-178
10.13 Mortgage, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. in the amount of $350,000. ........... E-185
10.14 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. ...................................... E-188
10.15 Guaranty, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. ...................................... E-193
10.16 Stock Option Agreement, dated September 11, 1995, between Century
Realty, Inc., and AWEC Development Corporation. ........................... E-200
10.17 Release Deed, dated September 9, 1995, between Century Realty, Inc.,
and AWEC Development Corporation. ......................................... E-204
10.18 Employment Agreement, dated July 14, 1995 between the Company and
Michael G. Todd. .......................................................... E-216
10.19 Financial Consultant Agreement, dated July 3, 1996, between Olsen
Associates Consulting, Inc., and Capitol Communities
Corporation. .............................................................. E-230
21. List of Subsidiaries. ..................................................... E-242
27. Financial Data Schedule
</TABLE>
-55-
<PAGE> 56
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: Capitol Communities Corporation
By: /s/ Michael G. Todd
Michael G. Todd, Chairman,
President and Chief Executive
Officer
-56-
<PAGE> 57
GLOSSARY
"Ad valorem taxes" means a real estate tax based on property value.
"Entitled" when used to describe land, generally means that the land has
received all necessary land use approvals for residential development from the
appropriate state, county, and local governments, including any required tract
maps and subdivision approvals.
"Improved Land" means land that is already subdivided and entitled, and has the
infrastructure, such as utilities and roads, constructed.
"Master Land Use Plan" means a comprehensive, long-range official plan that
guides the physical growth and development of a community, combined with the
basic regulatory and administrative controls needed to attain the physical
objectives; includes land use plan, thoroughfare plan, community facilities
plan and public improvements program.
"Partially improved land" means land that is entitled and subdivided, but does
not have utilities to each of the individual lots and only rough roads built
into the land.
"Preliminary Plat" means a preliminary map or chart of a city, town, section or
subdivision indicating the location and boundaries of individual properties.
"Raw land" means land on which no improvements have been made, which has no
infrastructure or utilities access in place, and is not subdivided or entitled.
"Special Improvement District Taxes" means a special real estate tax levied by
an improvement district on properties within that district. The proceeds of
the tax are used to pay bonds that the improvement district has issued to fund
improvements within the district. The tax is levied on the properties based
upon the benefits received from the improvements funded by the bond issue. The
tax is levied annually until the bonds are retired.
"Unimproved Land" means land that lacks the essential, appurtenant improvements
required to make it useful, such as subdivision, roads and utilities.
"Zoned" means, when used to describe real property, that such property has been
publicly regulated for the character and extent
-57-
<PAGE> 58
of real estate use by establishing districts or areas with uniform restrictions
relating to improvements, structure heights, areas, bulk, density of population,
and other limitations on the use and development of private property.
-58-
<PAGE> 59
INDEX TO FINANCIAL STATEMENTS
CAPITOL COMMUNITIES CORPORATION, INCLUDING PREDECESSOR CORPORATION AND
SUBSIDIARIES.
<TABLE>
<S> <C>
Unaudited Balance Sheet as of June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Unaudited Statement of Operations for the Nine Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Unaudited Statements of Cash Flows for the Nine Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Financial Statements for the Nine Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Balance Sheets as of September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Statements of Operations for the Years Ended September
30, 1995, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Statements of Changes in Shareholders' Equity September
30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Statements of Cash Flows for the Years Ended September
30, 1995, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
Notes to Financial Statements for September 30, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21
Balance Sheets as of September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
Statements of Operations for the Years Ended September
30, 1994, 1993, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24
Statements of Changes in Shareholders' Equity September
30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Statements of Cash Flows for the Years Ended September
30, 1994, 1993, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26
Notes to Financial Statements for September 30, 1994 and
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31
</TABLE>
F-1
<PAGE> 60
<TABLE>
<S> <C>
Balance Sheets as of September 30, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Statements of Operations for the Years Ended September
30, 1993, 1992, 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F=33
Statements of Changes in Shareholders' Equity September
30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34
Statement of Cash Flows For the Years Ended September 30,
1993, 1992, 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35
Notes to Financial Statements For the Years Ended 1993
and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-37
</TABLE>
F-2
<PAGE> 61
CAPITAL COMMUNITIES CORPORATION AND SUBSIDIARIES
BALANCE SHEET
JUNE 30, 1996 and 1995
UNAUDITED
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Current Assets
Cash in Bank $ (121,218) $ 30,339
Account Receivable 24,489 6,657
Prepaid Assets 2,785 4,856
Accrued Interest 122,887 - 0 -
----------- ----------
Total Current Assets 28,943 41,852
Property (Tangible/Intangible)
Net of Depreciation and Amortization 225,909 127,167
Other Assets
Deposits 129 129
Real Estate Holdings 9,034,598 8,657,763
Investments 3,500,000 - 0 -
----------- ----------
Total other Assets 12,534,727 8,657,892
Total Assets $12,789,579 $8,826,911
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable & Accrued Expenses $ 918,430 $ 244,859
Accrued Interest 231,597 581,291
Note Payable 1,602,273 853,383
----------- ----------
Total Current Liabilities 2,752,300 1,679,533
Notes Payable 7,350,000 6,572,015
----------- ----------
Total Liabilities 10,102,300 8,251,548
Shareholders' Equity
Common Stock, $.001 Par Value;
Authorized 100,000,000 Shares;
Issued and Outstanding - 7,000,000
and 2,227,004, respectively 7,000 2,227
Additional Paid in Capital 4,764,110 1,447,089
Accumulated Deficit (2,083,831) (873,953)
----------- ----------
</TABLE>
F-3
<PAGE> 62
<TABLE>
<S> <C> <C>
Total Shareholders' Equity 2,687,279 575,363
----------- ----------
Total Liabilities and
Shareholders' Equity $12,789,579 $8,826,911
=========== ==========
</TABLE>
CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Revenue $ - 0 - $ 436,600
Cost of Sales - 0 - 418,613
Gross Profit - 0 - 17,987
General and
Administrative Expenses 479,856 135,636
----------- ----------
Net (Loss) before
Interest Income/Expense (479,856) (117,649)
Interest Income 184,151 - 0 -
Interest Expense (579,195) (433,301)
----------- ----------
(395,044) (433,301)
Net (Loss) $ (874,900) $ (550,950)
=========== ==========
Earnings Per Share $ (.13) $ (.25)
----------- ----------
Weighted Average of Shares Outstanding 7,000,000 2,227,004
=========== ==========
</TABLE>
CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
F-4
<PAGE> 63
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (874,900) $ (550,950)
Adjustments to Reconcile Income to
Net Cash Used for Operating Activities:
Depreciation/Amortization 42,924 1,833
(Increase) Accounts Receivable (7,799) (4,800)
(Increase) Decrease Real Estate (133,176) 122,722
(Increase) in Accrued Expenses (109,670) - 0 -
(Increase) in Prepaid Assets (356) (4,856)
Decrease in Deposits - 0 - 29,871
Increase (Decrease) in Accounts Payable 503,959 (334,565)
Increase in Accrued Interest 191,202 581,291
Increase in Short Term Notes 896 3,383
----------- ----------
Net Cash (Used) for Operations (386,950) (156,071)
Cash Flows From Financing Activities:
Increase in Long Term Debt - 0 - 285,014
Cash Flow From Investing Activities:
Acquisition of Property - 0 - 129,000
----------- ----------
Net (Decrease) in Cash (386,920) (52)
Cash - Beginning of Year 265,702 30,396
----------- ----------
Cash - End of Year $ (121,218) $ 30,339
=========== ==========
</TABLE>
F-5
<PAGE> 64
CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. BACKGROUND
The Company was incorporated in the State of New York
on November 8, 1968 under the name of Century Cinema
Corporation. In 1983, the Company merged with a
privately owned company, Diagnostic Medical Equipment
Corp. and as a result changed its name to that of the
acquired company. By 1990, the Company was an
inactive publicly held corporation. In 1993, the
Company changed its name to AWEC Resources, Inc. and
commenced operations. In January, 1996 the Company
merged with a Nevada corporation with it being the
new parent and survivor. The name was changed to
Capitol Communities Corporation. The Company is
currently in the business acquiring real estate
properties.
B. PRINCIPLES OF CONSOLIDATION
The Consolidated financial statements include
accounts of its wholly-owned subsidiaries. All
material inter company transactions have been
eliminated.
C. REAL ESTATE HOLDINGS
Real estate investments are stated at the lower of
cost or market. Acquisition costs are allocated to
respective properties based on appraisals of the
various properties acquired in the acquisition.
D. INCOME TAXES
At September 30, 1995, the Company had a net
operating loss of $885,918. The carryforward will be
available for the reduction of future Federal Income
Tax provisions, the extent and timing of which are
not determinable.
NOTE 2 - CAPITAL TRANSACTIONS
A. In May 1993, the Company executed a 15 to 1 reverse stock split.
B. In September 1993, the company issued an additional 4,282,126 shares
of common stock to existing stockholders.
C. In October 1993, the Company issued 6,079,000 shares of common stock
to acquire royalty interests in oil and gas
F-6
<PAGE> 65
properties owned by Petro Source Energy Corp.
D. In July 1995, the Company executed a 5 to 1 reverse stock
split.
E. In July 1995, the Company issued an additional 4,772,996
shares of common stock to existing stockholders.
NOTE 3 - MORTGAGES
The Company entered into a loan agreement with
Resure, Inc. as lender and the Corporation as
borrower, borrowing $3,500,000 from the lender and
granting a mortgage on an approximate 701.03 acre
tract of land and an approximate 409.73 acre tract of
land all in the city of Maumelle, Pulaski County,
Arkansas.
NOTE 4 - INVESTMENT IN OIL AND GAS PROPERTIES AND LITIGATION
On October 20, 1993, the Company incorporated
Resource Equity Corporation, a wholly-owned
subsidiary. The purpose of that subsidiary was to
acquire royalty interests in oil and gas producing
properties.
During November, 1993, Resource Equity Corporation
acquired what it believed were deposits to acquire
royalty rights in producing oil and gas fields
located in the State of Texas for a total cost of
$1,360,567.
In 1994, the Company's corporate counsel determined
that these rights were fraudulently conveyed. A
lawsuit was initiated to recover such funds. Although
the threatened lawsuit succeeded in obtaining a
settlement with summary judgment against the party
who had conveyed these rights and received the
deposit proceeds, the Company's corporate counsel
does not believe any efforts to collect on the
judgement will be successful. Accordingly, the
Company has concluded that this asset be written off
as a non-recurring loss.
NOTE 5 - REFINANCING DEBT
AWEC Development Inc, a wholly owned subsidiary of
the corporation, negotiated with Century Realty to
eliminate a portion of the debt; $3,321,794 of the
balance owed was converted into not more than 10% of
the outstanding common stock of the corporation.
F-7
<PAGE> 66
The transaction has been completed but the stock
certificates have not been issued due to a stipulation
with the By-Laws of New York. (See note 2, D & E.)
NOTE 6 - INVESTMENT - DEBENTURE
The corporation entered into a contribution agreement
with Resure, Inc. contributing to Resure, Inc. a note
from the corporation in the principal amount of
$3,500,000 secured by that approximately 409.73 acre
tract of land in the city of Maumelle, Pulaski
County, Arkansas, in exchange for which Resure, Inc.
shall issue to the corporation a subordinated surplus
debenture in the amount of $3,500,000.
NOTE 7 - AGREEMENTS
The corporation entered into an agreement with
Century 21 Metro, Inc. for managerial and agency
services, for 1 year ending March 31, 1995,
automatically renewing annually unless either party
cancels before thirty (30) days prior to the
expiration date.
NOTE 8 - CONTINGENCIES
There is a lawsuit pending in the amount of $200,000
reflecting interest at 5% per annum dated February
09, 1994 against Pine Ridge Improvement District,
filed by Robert D. Holloway, Inc. for engineering
services, planning, and surveying. AWEC is not a
party to the action; however, as owner of the
property, any judgement against the property is a
liability of AWEC. Negotiations are currently taking
place in order to settle this lawsuit.
The Company is in default and foreclosure proceedings
have been initiated on their note with Century
Realty, Inc. Management is in discussions with
Century to resolve this situation.
F-8
<PAGE> 67
AWEC RESOURCES, INC
AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
SEPTEMBER 31, 1995 AND 1994
F-9
<PAGE> 68
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of AWEC Resources, Inc. and Subsidiaries
We have audited the accompanying balance sheets of AWEC Resources, Inc. and
Subsidiaries as of September 30, 1995 and 1994 and the related statements of
income and accumulated deficit, stockholders equity and cash flows for the
years ended September 30, 1995, 1994, 1993 and 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of AWEC Resources, Inc. and
Subsidiaries as of September 30, 1995 and 1994 and the results of its
operations and the related statements of income and accumulated deficit,
stockholders equity and cash flows for the periods ended September 30, 1995,
1994, 1993 and 1992 in conformity with generally accepted accounting
principles.
November 17, 1995
Joel S. Baum, PA, CPA
Coral Springs, Florida
F-10
<PAGE> 69
AWEC RESOURCES, INC AND SUBSIDIARIES
BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
ASSETS
------
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Current Assets
Cash in Bank $ 265,703 $ 30,396
Account Receivable 11,689 1,857
Prepaid Assets 7,428 - 0 -
Accrued Interest 13,217 - 0 -
----------- ----------
Total Current Assets 298,037 32,253
Loan & Origination Fees,
Net of Amortization (3,021) 268,833 - 0 -
Other Assets
Deposits 129 - 0 -
Real Estate Holdings 8,901,421 8,810,486
Investments 3,500,000 - 0 -
----------- ----------
Total other Assets 12,401,550 8,810,486
Total Assets $12,968,420 $8,842,739
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable & Accrued Expenses $ 414,471 $ - 0 -
Accrued Interest 40,395 579,415
Note Payable 1,601,366 850,000
----------- ----------
Total Current Liabilities 2,056,232 1,429,415
Notes Payable 7,350,000 6,287,000
----------- ----------
Total Liabilities 9,406,232 7,716,415
Shareholders' Equity
Common Stock, $.001 Par Value;
Authorized 100,000,000 Shares;
Issued and Outstanding - 7,000,000
for 1995, and 11,135,018 for 1994 7,000 11,135
Additional Paid in Capital 4,764,108 1,438,191
Accumulated Deficit (1,208,920) (323,002)
----------- ----------
</TABLE>
F-11
<PAGE> 70
<TABLE>
<S> <C> <C>
Total Shareholders' Equity 3,562,188 1,126,324
----------- ----------
Total Liabilities and
Shareholders' Equity $12,968,420 $8,842,739
=========== ==========
</TABLE>
See Accompanying Auditor's Report and Notes.
F-12
<PAGE> 71
AWEC RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1995, 1994, 1993, AND 1992
<TABLE>
<CAPTION>
1995 1994 1993 1992
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 565,467 $ 1,962,873 $ 8,104 $ - 0 -
Cost of Sales 587,525 350,323 - 0 - - 0 -
----------- ----------- ---------- ----------
Gross Profit (22,058) 1,612,550 8,104 - 0 -
Operating Expenses:
General & Administrative
Expenses 877,077 522,729 8,104 - 0 -
----------- ----------- ---------- ----------
Net Income (Loss) Before
Interest Income and
Extra ordinary item: (899,135) 1,089,821 - 0 - - 0 -
Interest Income 13,217 1,714 - 0 - - 0 -
----------- ----------- ---------- ----------
Net Income (Loss) Before
Extraordinary Item (885,918 1,091,535 - 0 - - 0 -
Extraordinary Item - 0 - (1,360,567) - 0 - - 0 -
----------- ----------- ---------- ----------
Net (Loss) (885,918) (269,032) - 0 - - 0 -
Accumulated Deficit (323,002) (53,970) (53,970) (53,970)
=========== =========== ========== ==========
(1,208,920) $(323,002) $ (53,970) $ (53,970)
=========== =========== ========== ==========
Weighted Average
Common Shares Outstanding (.086) (.033)
=========== ===========
</TABLE>
F-13
<PAGE> 72
<TABLE>
<S> <C>
(NIL) (NIL)
==== ====
</TABLE>
See Accompanying Auditor's Report and Notes
AWEC RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
# SHARES AMOUNT CAPITAL DEFICIT
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
September 30, 1992 11,083,412 $ 11,083 $ 42,887 $ (53,970)
Reverse Stock Split
(May, 1993) (10,344,518) (10,344) 10,344 - 0 -
Additional Stock
issued 4,282,126 4,282 (4,282) - 0 -
----------- --------- ---------- -----------
September 30, 1993 5,021,020 5,021 48,949 (53,970)
Additional Stock
issued 6,113,998 6,114 1,389,242 (269,032)
----------- --------- ---------- -----------
September 30, 1994 11,135,018 11,135 1,438,191 (323,002)
Reverse Stock
Split (July, 1995) (8,908,014) (8,908) 8,908 - 0 -
Additional Stock
Issued 4,772,996 4,773 3,317,009 - 0 -
Net (Loss) - 0 - - 0 - - 0 - (885,918)
----------- --------- ---------- -----------
September 30, 1995 7,000,000 $ 7,000 $4,764,108 $(1,208,920)
=========== ========= ========== ===========
</TABLE>
See Accompanying Auditor's Report and Notes
- 4 -
F-14
<PAGE> 73
AWEC RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1995 1994 1993 1992
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net (Loss) $ (885,918) $ (269,032) $ - 0 - $ - 0 -
Adjustments to Reconcile
Income to Net Cash Used
for Operating Activities:
(Increase) Decrease in
Receivables (9,832) (1,857) - 0 - - 0 -
(Increase) Decrease in
Real Estate Holdings (90,935) (8,810,486) 8,104 - 0 -
Increase (Decrease) in
Accrued Expenses (137,766) 579,415 (8,104) - 0 -
(Increase) Decrease in
Prepaid Assets (7,557) - 0 - - 0 - - 0 -
(Increase) Decrease in
Loan Origination Fees (271,854) - 0 - - 0 - - 0 -
----------- ----------- --------- ---------
Net Cash (Used)
For Operations (1,403,862) (8,501,960) - 0 - - 0 -
Cash Flows From Financing
Activities:
Increase in Long Term
Debt 1,639,169 7,137,000 - 0 - - 0 -
Cash Flow From Investing
Activities:
Issuance of Common Stock - 0 - 1,010 - 0 - - 0 -
Additional Paid in
Capital Generated as a
result of Issuance of
Common Stock - 0 - 1,394,346 - 0 - - 0 -
----------- ----------- --------- ---------
Net Increase (Decrease in
Cash 235,307 30,396 - 0 - - 0 -
</TABLE>
F-15
<PAGE> 74
<TABLE>
<S> <C> <C> <C> <C>
Cash - Beginning of Year 30,396 - 0 - - 0 -
----------- ----------- --------- ---------
Cash - End of Year $ 265,703 $ 30,396 $ - 0 - $ - 0 -
=========== =========== ========= =========
</TABLE>
F-16
<PAGE> 75
AWEC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. BACKGROUND
The Company was incorporated in the State of New York on
November 8, 1968 under the name of Century Cinema Corporation.
In 1983, the Company merged with a privately owned company,
Diagnostic Medical Equipment Corp. and as a result changed its
name to that of the acquired company. By 1990, the Company was
an inactive publicly held corporation. In 1993, the Company
changed its name to AWEC Resources, Inc. and commenced
operations. The Company is currently in the business acquiring
real estate properties.
B. PRINCIPLES OF CONSOLIDATION
The Consolidated financial statements include accounts of its
wholly-owned subsidiaries. All material inter company
transactions have been eliminated.
C. REAL ESTATE HOLDINGS
Real estate investments are stated at the lower of cost or
market. Acquisition costs are allocated to respective
properties based on appraisals of the various properties
acquired in the acquisition.
D. INCOME TAXES
At September 30, 1995, the Company had a net operating loss of
$885,918. The carryforward will be available for the reduction
of future Federal Income Tax provisions, the extent and timing
of which are not determinable.
NOTE 2 - CAPITAL TRANSACTIONS
A. In May 1993, the Company executed a 15 to 1 reverse stock split.
B. In September 1993, the company issued an additional 4,282,126 shares
of common stock to existing stockholders.
C. In October 1993, the Company issued 6,079,000 shares of common stock
to acquire royalty interests in oil and gas properties owned by Petro
Source Energy Corp.
D. In July 1995, the Company executed a 5 to 1 reverse stock split.
E. In July 1995, the Company issued an additional 4,772,996
F-17
<PAGE> 76
shares of common stock to existing stockholders.
AWEC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 3 - MORTGAGES
The Company entered into a loan agreement with
Resure, Inc. as lender and the Corporation as
borrower, borrowing $3,500,000 from the lender and
granting a mortgage on an approximate 701.03 acre
tract of land and an approximate 409.73 acre tract of
land all in the city of Maumelle, Pulaski County
Arkansas.
NOTE 4 - INVESTMENT IN OIL AND GAS PROPERTIES AND LITIGATION
On October 20, 1993, the Company incorporated
Resource Equity Corporation, a wholly-owned
subsidiary. The purpose of that subsidiary was to
acquire royalty interests in oil and gas producing
properties.
During November, 1993, Resource Equity Corporation
acquired what it believed were deposits to acquire
royalty rights in producing oil and gas fields
located in the State of Texas for a total cost of
$1,360,567.
In 1994, the Company's corporate counsel determined
that these rights were fraudulently conveyed. A
lawsuit was initiated to recover such funds.
Although the threatened lawsuit succeeded in
obtaining a settlement with summary judgment against
the party who had conveyed these rights and received
the deposit proceeds, the Company's corporate counsel
does not believe any efforts to collect on the
judgement will be successful. Accordingly, the
Company has concluded that this asset be written off
as a non-recurring loss.
NOTE 5 - REFINANCING DEBT
AWEC Development Inc, a wholly owned subsidiary of
the corporation, negotiated with Century Realty to
eliminate a portion of the debt; $3,321,794 of the
balance owed was converted into not more than 10%
F-18
<PAGE> 77
of the outstanding common stock of the corporation.
The transaction has been completed but the stock
certificates have not been issued due to a
stipulation with the By-Laws of New York. (See note
2, D & E.)
NOTE 6 - INVESTMENT - DEBENTURE
The corporation entered into a contribution agreement
with Resure, Inc. contributing to Resure, Inc. a note
from the corporation in the principal amount of
$3,500,000 secured by that approximately 409.73 acre
tract of land in the city of Maumelle, Pulaski
County, Arkansas, in exchange for which Resure, Inc.
shall issue to the corporation a subordinated surplus
debenture in the amount of $3,500,000.
NOTE 7 - AGREEMENTS
The corporation entered into an agreement with
Century 21 Metro, Inc. for managerial and agency
services, for 1 year ending March 31, 1995,
automatically renewing annually unless either party
cancels before thirty (30) days prior to the
expiration date.
NOTE 8 - CONTINGENCIES
There is a lawsuit pending in the amount of $200,000
reflecting interest at 5% per annum dated February
09, 1994 against Pine Ridge Improvement District,
filed by Robert D. Holloway, Inc. for engineering
services, planning, and surveying. AWEC is not a
party to the action; however, as owner of the
property, any judgement against the property is a
liability of AWEC. Negotiations are currently taking
place in order to settle this lawsuit.
F-19
<PAGE> 78
AWEC RESOURCES, INC
AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
SEPTEMBER 31, 1994 AND 1993
F-20
<PAGE> 79
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of AWEC Resources, Inc. (formerly
Diagnostic Medical Equipment Corp.) and Subsidiaries
We have audited the accompanying balance sheets of AWEC Resources, Inc.
(formerly Diagnostic Medical Equipment Corp.) and Subsidiaries as of September
30, 1994 and 1993 and the related statements of income and accumulated deficit,
stockholders equity and cash flows for the years ended September 30, 1994, 1993
and 1992. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also included assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of AWEC Resources, Inc.
(formerly Diagnostic Medical Equipment Corp.) and Subsidiaries as of September
30, 1994 and 1993 and the results of its operations and the related statements
of income and accumulated deficit, stockholders equity and cash flows for the
periods ended September 30, 1994, 1993 and 1992 in conformity with generally
accepted accounting principles.
February 20, 1995
Joel S. Baum, PA, CPA
Coral Springs, Florida
F-21
<PAGE> 80
AWEC RESOURCES, INC AND SUBSIDIARIES
(FORMERLY DIAGNOSTIC MEDICAL EQUIPMENT CORP.)
BALANCE SHEET
SEPTEMBER 30, 1994 AND 1993
ASSETS
------
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Current Assets
Cash in Bank $ 30,396 $ - 0 -
Account Receivable 1,857 - 0 -
----------- -----------
32,253 - 0 -
Other Assets
Real Estate Holdings 8,810,486 - 0 -
----------- -----------
Total Assets $ 8,842,739 $ - 0 -
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Note Payable $ 850,000 $ - 0 -
Accrued Interest 579,415 - 0 -
----------- -----------
Total Current Liabilities 1,429,415 - 0 -
Notes Payable 6,287,000 - 0 -
----------- -----------
Total Liabilities 7,716,415 - 0 -
----------- -----------
Shareholders' Equity
Common Stock, $.001 Par Value;
Authorized 20,000,000 Shares;
Issued and Outstanding - 5,021,020
for 1993, and 11,135,018 for 1994 11,135 5,021
Additional Paid in Capital 1,438,191 48,949
Accumulated Deficit (323,002) (53,970)
----------- -----------
Total Shareholders' Equity 1,126,324 - 0 -
----------- -----------
</TABLE>
F-22
<PAGE> 81
<TABLE>
<S> <C> <C>
Total Liabilities and
Shareholders' Equity $ 8,842,739 $ - 0 -
=========== ===========
</TABLE>
See Accompanying Auditor's Report and Notes.
F-23
<PAGE> 82
AWEC RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY DIAGNOSTIC MEDICAL EQUIPMENT CORP.)
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- -----------
<S> <C> <C> <C>
Revenues
Sales $ 1,851,873 $ 8,104 $ - 0 -
Cost of Sales 350,323 - 0 - - 0 -
----------- ---------- -----------
Gross Profit 1,612,550 8,104 - 0 -
Operating Expenses:
General & Adminis-
trative Expenses 522,729 8,104 - 0 -
----------- ---------- -----------
Net Income (Loss) Before
Interest Income and
Extraordinary item: 1,089,821 - 0 - - 0 -
Interest Income 1,714 - 0 - - 0 -
----------- ---------- -----------
Net Income (Loss) Before
Extraordinary Item 1,091,535 - 0 - - 0 -
Extraordinary Item 1,360,567 - 0 - - 0 -
----------- ---------- -----------
Net (Loss) (267,032) - 0 - - 0 -
Accumulated Deficit -
Beginning (53,970) (53,970) (53,970)
----------- ---------- -----------
Accumulated Deficit -
Ending $ (323,002) $ (53,970) $ (53,970)
=========== ========== ===========
Weighted Average
Common Shares
Outstanding $ (.033) NIL NIL
=========== ========== ===========
</TABLE>
F-24
<PAGE> 83
AWEC RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY DIAGNOSTIC MEDICAL EQUIPMENT CORP.)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
# SHARES AMOUNT CAPITAL DEFICIT
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
September 30, 1992 11,083,412 $ 11,083 $ 42,887 $ (53,970)
Reverse Stock Split
(May, 1993) (10,344,518) (10,344) 10,344 - 0 -
Additional Stock
issued 4,282,126 4,282 (4,282) - 0 -
----------- ---------- ---------- ----------
September 30, 1993 5,021,020 5,021 48,949 (53,970)
Additional Stock
issued 6,113,998 6,114 1,389,242 (267,032)
----------- ---------- ---------- ----------
September 30, 1994 11,135,018 $ 11,135 $1,438,191 $ (321,002)
=========== ========== ========== ==========
</TABLE>
See Accompanying Auditor's Report and Notes
F-25
<PAGE> 84
AWEC RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY DIAGNOSTIC MEDICAL EQUIPMENT CORP.)
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ---------
<S> <C> <C> <C>
Cash Flows From Operating
Activities:
Net (Loss) $ (269,032) $ - 0 - $ - 0 -
----------- ---------- ----------
Adjustments to Reconcile
Income to Net Cash Used
for Operating Activities:
(Increase) Decrease in
Receivables (1,857) - 0 - - 0 -
(Increase) Decrease in
Real Estate Holdings (8,810,486) 8,104 - 0 -
Increase (Decrease) in
Accrued Expenses 579,415 (8,104) - 0 -
----------- ---------- ---------
Net Cash (Used)
For Operations (7,651,960) - 0 - - 0 -
Cash Flows From Financing
Activities:
Increase in Long Term
Debt 7.137,000 - 0 - - 0 -
----------- ---------- ---------
Cash Flow From Investing
Activities:
Issuance of Common
Stock 1,010 - 0 - - 0 -
Additional Paid in
Capital Generated as a
result of Issuance of
</TABLE>
F-26
<PAGE> 85
<TABLE>
<S> <C> <C> <C>
Common Stock 1,394,46 - 0 - - 0 -
----------- ---------- ---------
Net Increase (Decrease) in
Cash 30,396 - 0 - - 0 -
Cash - Beginning of Year - 0 - - 0 - - 0 -
----------- ---------- ---------
Cash - End of Year $ 30,396 $ - 0 - $ - 0 -
=========== ========== =========
</TABLE>
See Accompanying Auditor's Report and Notes.
F-27
<PAGE> 86
AWEC RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY DIAGNOSTIC MEDICAL EQUIPMENT CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994 AND 1993
NOTE 1- SIGNIFICANT ACCOUNTING POLICIES
A. Background
The Company was incorporated in the State of New York on November 8,
1968 under the name of Century Cinema Corporation. In 1983, the
Company merged with a privately owned company, Diagnostic Medical
Equipment Corp. and as a result changed its name to that of the
acquired company. By 1990, the Company was an inactive publicly held
corporation. In 1993, the Company changed its name to AWEC
Resources, Inc. and commenced operations. The Company is currently
in the business acquiring real estate properties.
B. Principles of Consolidation
The Consolidated financial statements include accounts of its
wholly-owned subsidiaries. All material inter company transactions
have been eliminated.
C. Real Estate Holdings
Real estate investments are stated at the lower of cost or market.
Acquisition costs are allocated to respective properties based on
appraisals of the various properties acquired in the acquisition.
D. Income Taxes
At September 30, 1994, the Company had a net operating loss of
$267,032. The carryforward will be available for the reduction of
future Federal income tax provisions, the extent and timing of which
are not determinable.
NOTE 2 - CAPITAL TRANSACTIONS
A. In May 1993, the Company executed a 15 to 1 reverse stock split.
B. In September 1993, the company issued an additional 4,282,126 of
common stock to existing stockholders.
C. In October 1993, the Company issued 6,079,000 shares of common stock
to acquired royalty interests in oil and gas properties owned by
Petro Source Energy Corp.
NOTE 3 - MORTGAGE PAYABLE
F-28
<PAGE> 87
On February 15, 1994, the Company acquired parcels of land for a
promissory note of $6,737,000. The note is payable annually on
February 15, minimum principal payments of $850,000 plus accrued
interest. Interest accrues at maximum allowable under the laws of
the State of Texas. The indebtedness is secured by the various
properties acquired. As of February 15, 1994, the mortgagor has
granted a ninety day extension in the annual payment required.
NOTE 4 - INVESTMENT IN OIL AND GAS PROPERTIES AND LITIGATION
On October 20, 1993, the Company incorporated
Resource Equity Corporation, a wholly-owned
subsidiary. The purpose of that subsidiary was to
acquire royalty interests in oil and gas producing
properties.
During November, 1993, Resource Equity Corporation
acquired what it believed were deposits to acquire
royalty rights in producing oil and gas fields
located in the State of Texas for a total cost of
$1,360,567.
In 1994, the Company's corporate counsel determined
that these rights were fraudulently conveyed. A
lawsuit was initiated to recover such funds.
Although the threatened lawsuit succeeded in
obtaining a settlement with summary judgment against
the party who had conveyed these rights and received
the deposit proceeds, the Company's corporate counsel
does not believe any efforts to collect on the
judgement will be successful. Accordingly, the
Company has concluded that this asset be written off
as a non-recurring loss.
F-29
<PAGE> 88
AWEC RESOURCES, INC.
(formerly Diagnostic Medical Equipment Corp.)
AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1993 AND 1992
F-30
<PAGE> 89
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of AWEC Resources, Inc. (formerly
Diagnostic Medical Equipment Corp.)
We have audited the accompanying balance sheets of AWEC Resources, Inc.
(formerly Diagnostic Medical Equipment Corp.) as of September 30, 1993 and 1992
and the related statements of income and accumulated deficit, stockholders
equity and cash flows for the years ended September 30, 1993, 1992 and 1991.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. an audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of AWEC Resources, Inc.
(formerly Diagnostic Medical Equipment Corp.) as of September 30, 1993 and 1992
and the results of its operations and the related statements of income and
accumulated deficit, stockholders equity and cash flows for the periods ended
September 30, 1993, 1992, and 1991 in conformity with generally accepted
accounting principles.
Joel S. Baum, P.A.
Coral Springs, Florida
November 4, 1993
F-31
<PAGE> 90
AWEC RESOURCES, INC.
(formerly Diagnostic Medical Equipment Corp.)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
------------------------
1993 1992
---- ----
<S> <C> <C>
Assets
------
Current Assets
Cash in Bank $ - 0 - $ - 0 -
Inventory - 0 - 8,104
Total Assets $ - 0 - $ 8,104
======= =======
Liabilities and shareholders' Equity
------------------------------------
Liabilities
Accounts Payable $ - 0 - $ 8,104
Shareholders' Equity
Common Stock, $.001 par value;
Authorized 20,000,000 shares; issued
and outstanding - 11,083,412 and
5,021,020 for 1992 and 1993,respectively 5,021 11,083
Additional paid-in capital 48,949 42,887
Accumulated Deficit (53,970) (53,970)
- 0 - - 0 -
-------- --------
Total Liabilities and Shareholders' Equity $ - 0 - $ 8,104
======== ========
</TABLE>
See accompanying accountants' report and notes to the
financial statements
F-32
<PAGE> 91
AWEC RESOURCES, INC.
(formerly Diagnostic Medical Equipment Corp.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
September 30,
----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Revenues $ 8,104 $ -0- $-0-
Operating expenses 8,104 -0- -0-
-------- -------- --------
Net Income - 0 - - 0 - - 0 -
Accumulated Deficit - Beginning (53,970) 953,970) (53,970)
-------- -------- --------
Accumulated Deficit - Ending $(53,970) $(53,970) $(53,970)
-------- -------- --------
Earnings per share - 0 - - 0 - - 0 -
======== ======== ========
</TABLE>
See accompanying accountants' report and notes to the financial statements
F-33
<PAGE> 92
AWEC RESOURCES, INC.
(formerly Diagnostic Medical Equipment Corp.)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
$.001 PAR VALUE
AUTHORIZED
20,000,000 SHARES ADDITIONAL
------------------------- PAID-IN ACCUMULATED
#SHARES AMOUNT CAPITAL DEFICIT
------------- -------- ---------- -----------
<S> <C> <C> <C> <C>
September 30, 1992 11,083,412 $ 11,083 $ 42,887 $(53,970)
----------- -------- -------- --------
Reverse
Stock Split
(May, 1993) (10,344,518) (10,344) 10,344 - 0 -
----------- -------- -------- --------
Additional
Stock issued
(September, 1993) 4,282,126 4,282 (4,282) - 0 -
----------- -------- -------- --------
September 30, 1993 5,021,020 $ 5,021 $ 48,949 $(53,970)
=========== ======== ======== ========
</TABLE>
See accompanying accountant's report and notes to the
financial statements
F-34
<PAGE> 93
AWEC RESOURCES, INC.
(formerly Diagnostic Medical Equipment Corp.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
September 30,
---------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
- - -------------------------------------
Net Loss $ - 0 - $ - 0 - $ - 0 -
Adjustments to Reconcile
Net Loss to Net Cash
Provided from Operations:
Decrease in Inventory 8,104 - 0 - - 0 -
Decrease in Accounts Payable $(8,104) - 0 - - 0 -
------- ------- -------
Net Cash Provided from
Operations - 0 - - 0 - - 0 -
Cash in Bank - Beginning - 0 - - 0 - - 0 -
------- ------- -------
Cash in Bank - Ending $ - 0 - $ - 0 - $ - 0 -
======= ======= =======
</TABLE>
F-35
<PAGE> 94
See accompanying accountant's report and notes to the financial statements
F-36
<PAGE> 95
AWEC RESOURCES, INC.
(formerly Diagnostic Medical Equipment Corp.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1993 AND 1992
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. Background
The company was incorporated in the State of New York on
November 8, 1968 under the name of Century Cinema Corporation.
In 1983, the Company merged with a privately owned company,
Diagnostic Medical Equipment Corp. and as a result changed its
name to that of the acquired company. By 1990, the Company was
an inactive publicly held corporation. By 1993, the Company
changed its name to AWEC Resources, Inc. and commenced
operations. The Company is currently in the business
acquiring oil and gas properties.
NOTE 2 - CAPITAL TRANSACTIONS
A. In May 1993, the Company executed a 15 to 1 reverse
stock split.
B. In September 1993, the Company issued and additional 4,282,126
shares of common stock to existing shareholders.
NOTE 3 - SUBSEQUENT EVENTS
A. In October 1993, the Company incorporated Resource Equity
Corporation, a wholly-owned subsidiary. The principal purpose
of the new subsidiary is the acquisition of oil and gas
producing properties.
F-37
<PAGE> 96
Index to Exhibits
<TABLE>
<S> <C> <C>
2.1.1 Articles of Merger, filed with State of Nevada, dated November 29,
1995, merging AWEC Resources into Capitol Communities Corporation. . . . . . . . E-3
2.1.2 Agreement of Merger, filed with State of Nevada, dated November 15,
1995, between AWEC Resources, Inc., and Capitol Communities
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-7
2.2 Certificate of Merger, filed with State of New York, dated January 5,
1996, merging AWEC Resources, Inc., into Capitol Communities
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-13
3.1.1 Articles of Incorporation of Capitol Communities Corporation, dated
August 18, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-20
3.1.2 Certificate of Amendment of Articles of Incorporation of Capitol
Communities Corporation, dated February 6, 1996. . . . . . . . . . . . . . . . . E-25
3.2 Bylaws of Capitol Communities Corporation, dated August 22, 1995. . . . . . . . E-30
10.1 Contribution Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . E-50
10.2 Subordinated Surplus Debenture, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . E-65
10.3 Non-Recourse Promissory Note, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . E-71
10.4 Non-Recourse Mortgage, dated September 11, 1995 between AWEC
Development Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . E-77
10.5 Security Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . E-98
10.6 Environmental Indemnity Agreement, dated September 11, 1995, between
AWEC Development Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . E-109
10.7 Loan Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . E-115
10.8 Promissory Note, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . E-126
10.9 Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . E-132
</TABLE>
E-1
<PAGE> 97
<TABLE>
<S> <C> <C>
10.10 Environmental Indemnity Agreement, dated September 11, 1995, between
AWEC Development Corporation and Resure, Inc. . . . . . . . . . . . . . . . . . E-153
10.11 Agreement for Refinance of Secured Note, dated September 11, 1995
between Century Realty, Inc., AWEC Resources, Inc., and AWEC
Development Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-158
10.12 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . E-178
10.13 Mortgage, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . E-185
10.14 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . E-188
10.15 Guaranty, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . E-193
10.16 Stock Option Agreement, dated September 11, 1995, between Century
Realty, Inc., and AWEC Development Corporation. . . . . . . . . . . . . . . . . E-200
10.17 Release Deed, dated September 9, 1995, between Century Realty, Inc.,
and AWEC Development Corporation. . . . . . . . . . . . . . . . . . . . . . . . E-204
10.18 Employment Agreement, dated July 14, 1995, between the Company and
Michael G. Todd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-216
10.19 Financial Consultant Agreement, dated July 3, 1996, between Olsen
Associates Consulting, Inc., and Capitol Communities Corporation. . . . . . . . E-230
21. List of Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-242
27. Financial Data Schedule.
</TABLE>
E-2
<PAGE> 1
EXHIBIT 2.1.1
Articles of Merger, filed with State of Nevada, dated November 29, 1995,
merging AWEC Resources into Capitol Communities Corporation.
STAMP OF THE SECRETARY OF STATE
OF THE STATE OF NEVADA DATED
DECEMBER 29, 1995 SHOWING DATE
OF FILING, NO. 14245-95, AND
SIGNATURE OF DEAN HELLER, SECRETARY
OF STATE
ARTICLES OF MERGER
OF
AWEC RESOURCES, INC. (FORMERLY KNOWN AS
DIAGNOSTIC MEDICAL EQUIPMENT CORPORATION),
A NEW YORK CORPORATION
INTO
CAPITOL COMMUNITIES CORPORATION,
A NEVADA CORPORATION
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the names and states of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
AWEC RESOURCE, INC., formerly NEW YORK
known as DIAGNOSTIC MEDICAL EQUIPMENT
CORPORATION
CAPITOL COMMUNITIES CORPORATION NEVADA
SECOND: That an agreement of merger between the parties to the merger has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations and in accordance with the requirements of Sections
902, 903 and 907 of the New York Business Corporation Law and Section 78.461 of
the Nevada Revised Statutes, with no requirement that the shareholders of
Capitol Communities Corporation approve the transaction since there are
currently no shareholders of Capitol Communities Corporation (See also
paragraph Seventh).
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<PAGE> 2
THIRD: The name of the surviving corporation of the merger is Capitol
Communities Corporation, a Nevada corporation.
FOURTH: Capitol Communities Corporation is a Nevada corporation organized
under the laws of the state of Nevada on August 21, 1995. Capitol Communities
Corporation will not do business in the state of New York until an application
for authority to do business in the state of New York shall have been filed by
Capitol Communities Corporation with the state of New York.
FIFTH: The certificate of incorporation of AWEC Resources, Inc., formerly
known as Diagnostic Medical Equipment Corporation ("AWEC Resources, Inc.") was
originally filed in the state of New York on November 8, 1968.
SIXTH: Capitol Communities Corporation will promptly pay to the shareholders
of AWEC Resources, Inc. the amount, if any, to which they shall be entitled
under the provisions of Article 9 of the New York Business Corporation Law
relating to the right of shareholders to receive payment for their shares.
SEVENTH: The authorized capital stock of each constituent corporation which is
a party to the merger is as follows:
<TABLE>
<CAPTION>
Number of
Corporation Class of Stock Shares Outstanding
- - ----------- -------------- ------------------
<S> <C> <C>
AWEC Resources, Inc. Common Stock, 11,135,020
$.001 par value
Capitol Communities Common Stock, None Outstanding
Corporation $.01 par value
</TABLE>
EIGHTH: That the executed agreement of merger is on file at the principal
place of business of the surviving corporation. The address of said principal
place of business is 25550 Hawthorne Boulevard, Suite 207, Torrance, California
90505.
NINTH: That a copy of the agreement of merger will be furnished on request and
without cost to any stockholder of any constituent corporation.
TENTH: That Capitol Communities Corporation, a Nevada corporation survives the
merger and may be served with process in the state of New York in any
proceeding for enforcement of any obligation of AWEC Resources, Inc., the
constituent New York corporation, as well as for enforcement of any obligation
of Capitol Communities Corporation arising from the merger, including any suit
or other proceeding to enforce the right of any stockholder as determined in
appraisal proceedings pursuant to the provisions of Article 9 of the New York
Business Corporation Law, and it does hereby irrevocably appoint the
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<PAGE> 3
Secretary of State of New York as its agent to accept service of process in any
such suit or other proceeding. The address to which a copy of such process
shall be mailed by the Secretary of State of New York is 25550 Hawthorne
Boulevard, Suite 210, Torrance, California 90505 until Capitol Communities
Corporation shall have hereafter designated in writing to the said Secretary of
State a different address for such purpose.
DATED November 29th, 1995
CAPITOL COMMUNITIES CORPORATION,
a Nevada corporation
By: /s/ Michael G. Todd
-----------------------------
Michael G. Todd, President
ATTEST:
By: /s/ Ronald J. Campbell
---------------------------------
Ronald J. Campbell, Secretary
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<PAGE> 4
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On 12-29-95 before me Stacy Salou personally appeared Michael G. Todd
and Ronald J. Campbell 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.
NOTARY SEAL OF WITNESS my hand and official seal
STACY SALOU
NOTARY PUBLIC - CALIFORNIA
LOS ANGELES COUNTY /s/ Stacy Salou
-----------------------------------
Signature of Notary
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<PAGE> 1
EXHIBIT 2.1.2
Agreement of Merger, filed with State of Nevada, dated November 15, 1995,
between AWEC Resources, Inc. and Capitol Communities Corporation
STAMP OF THE SECRETARY OF STATE
DATED DECEMBER 27, 1995 SHOWING DATE
OF FILING
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement"), dated as of
November 15, 1995, is made and entered into by and between AWEC RESOURCES,
INC., a New York corporation formerly known as DIAGNOSTIC MEDICAL EQUIPMENT
CORPORATION ("AWEC") and CAPITOL COMMUNITIES CORPORATION, a Nevada corporation
("Capitol"). AWEC and Capitol are hereinafter sometimes collectively referred
to as the "Constituent Corporation."
WHEREAS, AWEC is a corporation duly organized and existing
under the laws of the State of New York; and
WHEREAS, Capitol is a corporation duly organized and existing
under the laws of the State of Nevada; and
WHEREAS, on the date of this Merger Agreement AWEC has
authority to issue 20,000,000 shares of Common Stock, $.001 par value per
share, of which 11,135,020 shares are issued and outstanding ("AWE Common
Stock"); and
WHEREAS, on the date of this Merger Agreement Capitol has
authority to issue 40,000,000 shares of Common Stock, $.01 par value per share,
of which none are issued and outstanding ("Capitol Common Stock"), and
10,000,000 shares of Preferred Stock, $.01 par value per share, of which none
are issued and outstanding ("Capitol Preferred Stock") and
WHEREAS, the Boards of Directors of the Constituent
Corporations have determined that it is advisable and in the best interests of
their respective corporations and stockholders that AWEC merge with and into
Capitol, with Capitol being the surviving corporation, on the terms and subject
to the conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants herein contained, AWEC and Capitol hereby agree as follows:
1. Merger. At the "Effective Time" (as that terms is hereunder
defined), AWEC shall be merged with and into
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<PAGE> 2
Capitol (the "Merger"), the separate existence of AWEC shall
cease, and Capitol as the surviving corporation (hereinafter
sometimes referred to as the "Surviving Corporation") shall
continue to exist by virtue of and shall be governed by the
laws of the State of Nevada. This Agreement shall be filed
pursuant to Section 907 of the New York Business Corporation
Law and Section 78.461 of the Nevada Revised Statutes, and the
merger shall become effective at the close of business on the
day when such filings in New York and Nevada have been
completed (the "Effective Time").
2. Directors, Officers and Governing Documents.
a. The Directors of Capitol immediately prior
to the Effective Time shall be the Directors of the
Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation. The officers of
Capitol immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, each to
hold office in accordance with the Bylaws of the
Surviving Corporation.
b. The Articles of Incorporation of Capitol as
in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the
Surviving Corporation without change or amendment
until thereafter amended in accordance with the
provisions thereof and applicable law.
c. The Bylaws of Capitol, as in effect
immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation without change or
amendment until thereafter amended in accordance with
the provisions thereof and applicable law.
3. Succession. At the Effective Time, the separate
corporate existence of AWEC shall cease, and Capitol shall
possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all
of the restrictions, disabilities and duties of each of the
Constituent Corporations; and all of the rights, privileges,
powers and franchises of each of the Constituent Corporations,
and all property, real, personal and mixed, and all debts due
to either of the Constituent Corporations, on whatever
account, as well as all other things in action or belonging to
each of the Constituent Corporations, shall be vested in the
Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all other interests shall be
thereafter as effectually the property of the Surviving
Corporation as they were of the respective Constituent
Corporations, and the title to any real estate vested by deed
or otherwise, under the laws of the State of Nevada, in either
E-8
<PAGE> 3
of such Constituent Corporations, shall not revert or be in
any way impaired by reason of the general corporation law of
the State of Nevada; but all rights of creditors and all liens
upon any property of any of the Constituent Corporations shall
be preserved unimpaired, and all debts, liabilities and duties
of the respective Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the
respective Constituent Corporations shall thence forth attach
to the Surviving Corporation and may be enforced against it to
the same extent as if said debts, liabilities and duties had
been incurred or contracted by it. All corporate acts, plans,
policies, agreements, arrangements, approvals and
authorizations of AWEC, its shareholders, Board of Directors
and committees thereof, officers and agents which were valid
and effective immediately prior to the Effective Time, shall
be taken for all purposes as the acts, plans, policies,
agreements, arrangements, approvals and authorizations of
Capitol and shall be as effective and binding thereon as the
same were with respect to AWEC. The employees and agents of
AWEC shall become the employees and agents of Capitol and
continue to be entitled to the same rights and benefits which
they enjoyed as employees and agents of AWEC. The
requirements of any plans or agreements of AWEC involving the
issuance or purchase by AWEC of certain shares of AWEC Common
Stock shall be satisfied by the issuance or purchase of a like
number of shares of Capitol Common Stock.
4. Further Assurances. From time to time, as and when
required by Capitol or by its successors and assigns, there
shall be executed and delivered, on behalf of AWEC, such deeds
and other instruments, and AWEC shall take or cause to be
taken all such further and other action, as shall be
appropriate or necessary in order to vest, perfect or confirm,
or record or otherwise in Capitol, the title to and possession
of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of AWEC, and
otherwise to carry out the purposes of this Merger Agreement,
and the officers and directors of Capitol are fully authorized
in the name and on behalf of AWEC or otherwise to take any and
all such action and to execute and deliver any and all such
deeds and other instruments.
5. Conversion of Shares. By virtue of the Merger and
without any action on the part of the holder thereof, each
share of AWEC Common Stock outstanding immediately prior to
the Effective Time shall cease to be outstanding at the
Effective Time and shall be converted into and exchanged for
one fully paid and non-assessable share of Capitol Common
Stock.
6. Stock Certificates. At the Effective Time, the
holders of certificates evidencing shares of AWEC Common
Stock shall
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<PAGE> 4
cease to have any rights as shareholders of AWEC, and their
sole right shall pertain to Capitol Common Stock. After the
Effective Time, each holder of the certificate or certificates
for shares of AWEC Common Stock upon surrender of the same
duly endorsed to Capitol, shall be entitled to receive and
exchange therefor a certificate evidencing the shares of
Capitol Common Stock into which such holder's shares of AWEC
Common Stock have been converted by the Merger. Pending such
surrender or exchange, such holder's certificate or
certificates for shares of AWEC Common Stock shall be deemed
to evidence the full number of shares of Capitol Common Stock
into which said shares of AWEC Common Stock have been changed
and converted by the Merger. No dividends, payments or other
distributions will be paid to persons entitled to receive
certificates for shares of Capitol Common Stock until such
persons have surrendered their certificates for AWEC Common
Stock; provided, however, that once such certificates shall
have been so surrendered and exchanged for certificates of
Capitol Common Stock, there shall be paid to the holders
thereof, but without interest thereon, all dividends, payments
and other distributions payable subsequent to and in respect
of a record date after the Effective Time on the shares of
Capitol Common Stock for which such certificate shall have
been so exchanged.
7. Employee Benefit Plans. As of the Effective Time,
Capitol hereby assumes any and all AWEC employee benefit
plans, and all obligations of AWEC under such employee benefit
plans, in effect at the Effective Time or with respect to
which employee rights or accrued benefits are outstanding at
the Effective Time.
8. Other Options or Warrants. Each option or warrant to
purchase shares of AWEC Common Stock which is outstanding
immediately prior to the Effective Time, shall, by virtue of
the merger, and without any action on the part of holder
thereof, be converted into and become an option or warrant to
purchase the same number of shares of Capitol Common Stock at
the same option or warrant price per share, and upon the same
terms and subject to the same conditions as set forth in such
option or warrant to purchase shares of AWEC Common Stock, as
in effect at the Effective Time. As of the Effective Time,
Capitol hereby assumes any and all obligations of AWEC
pursuant to such options or warrants.
9. Service of Process. Capitol may be served with
process in the State of New York in any proceeding for
enforcement of any obligations of AWEC as well as for
enforcement of any obligation of the Surviving Corporation
arising from the merger, including any suit or other
proceeding to enforce the right of any stockholder as
determined in appraisal proceedings, pursuant to the
provisions of Section 910 of the
E-10
<PAGE> 5
New York Business Corporation Law; and it does hereby
irrevocably appoint the Department of State of New York as its
agent to accept service of process in any such suit or other
proceedings. The address to which a copy of such process
shall be mailed by the Department of State of New York is
25550 Hawthorne Boulevard, Suite 207, Torrance, California
90505, until the Surviving Corporation shall have hereafter
designated in writing to the said Department of State a
different address for such purpose. Service of such process
may be made by personally delivering to and leaving with the
Department of State of New York duplicate copies of such
process, one of which copies the Department of State of New
York shall forthwith send by registered mail to said Surviving
Corporation at the above address.
10. Amendment. Subject to applicable law, this Merger
Agreement may be amended, modified or supplemented by written
agreement of the parties hereto at any time prior to the
Effective Time with respect to any of the terms contained
herein.
11. Abandonment. At any time prior to the Effective
Time, this Merger Agreement may be terminated and the merger
may be abandoned by the Board of Directors of either Capitol
or AWEC, or both, notwithstanding approval of this Merger
Agreement by the shareholders of AWEC.
12. Counterparts. This Merger Agreement may be executed
in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one
and the same instrument.
13. Applicable Law. This Merger Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Nevada.
14. Variation in Pronouns. All pronouns and any
variations thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the
person or persons or entity or entities may require.
15. Headings. All section headings herein are for
convenience of reference only and are not part of this Merger
Agreement and no construction or inference shall be derived
therefrom.
16. Addresses. The address for both the surviving
corporation, CAPITOL COMMUNITIES CORPORATION, and the
disappearing corporation, AWEC RESOURCES, INC., formerly known
as DIAGNOSTIC MEDICAL EQUIPMENT CORPORATION is 25550 Hawthorne
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<PAGE> 6
Blvd., #207, Torrance, CA 90505.
IN WITNESS WHEREOF, the parties to this agreement, pursuant to
the approval and authority duly given by resolutions adopted by their
respective boards of directors have caused this Merger Agreement to be executed
by the President and Secretary of each party hereto as of the date first above
written.
AWEC RESOURCES, INC.,
a New York corporation
/s/ Michael G. Todd
--------------------------------------------
Michael G. Todd, President
SEAL /s/ Ronald J. Campbell
--------------------------------------------
Ronald J. Campbell, Secretary
CAPITOL COMMUNITIES CORPORATION
a Nevada corporation
/s/ Michael G. Todd
--------------------------------------------
Michael G. Todd, President
SEAL /s/ Ronald J. Campbell
--------------------------------------------
Ronald J. Campbell, Secretary
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<PAGE> 1
EXHIBIT 2.2
State of New York - Department of Taxation
and Finance - Corporation Tax
Albany, New York 12227
To: SECRETARY OF STATE Date: January 5, 1996
Name of Corporation
AWEC RESOURCES, INC. (NY) ID# 13-2623726 AA2
Pursuant to provisions of Section 907 of the Business Corporation Law, the
State Tax Commissioner hereby consents to the Merger of the above named
corporation, into Capitol Communities Corporation (NE) if filed on or before
4/5/96.
Certificate and fee are attached.
Filed by: John W. Martin
3699 Wilshire Blvd., Suite 650
Los Angeles, CA 90010
Director, Processing Division
By: /s/ France Balligu
------------------------------
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<PAGE> 2
Certificate of Merger, filed with State of New York, dated January 5, 1996,
merging AWEC Resources, Inc., into Capitol Communities Corporation.
CERTIFICATE OF MERGER
OF
AWEC RESOURCES, INC.
A NEW YORK CORPORATION
INTO
CAPITOL COMMUNITIES CORPORATION,
A NEVADA CORPORATION
Under Section 907 of the
New York Business Corporation Law
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the names and states of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
AWEC RESOURCE, INC., formerly
known as DIAGNOSTIC MEDICAL EQUIPMENT NEW YORK
CORPORATION and CENTURY CINEMA
CORPORATION
CAPITOL COMMUNITIES CORPORATION NEVADA
SECOND: That an agreement of merger between the parties to the merger has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations. With respect to AWEC Resources, Inc., the merger
between the constituent corporations is to occur pursuant to Section 907 of the
New York Business Corporation Law, and has been authorized and approved by the
board of directors of AWEC Resources, Inc.
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<PAGE> 3
pursuant to Section 902 of the New York Business Corporation Law, and by the
shareholders of AWEC Resources, Inc. pursuant to Section 903 of the New York
Business Corporation Law. With respect to Capitol Communities Corporation, the
merger between the constituent corporations is to occur pursuant to Section
78.461 of the Nevada Revised Statutes, with no requirement that the
shareholders of Capitol Communities Corporation approve the transaction since
there are currently no shareholders of Capitol Communities Corporation (see
also paragraph Seventh). The merger of the constituent corporations (as well
as this Certificate of Merger) is permitted by the laws of the State of Nevada
and is in compliance therewith.
THIRD: The name of the surviving corporation of the merger is Capitol
Communities Corporation, a Nevada corporation.
FOURTH: Capitol Communities Corporation is a Nevada corporation organized
under the laws of the state of Nevada on August 21, 1995. Capitol Communities
Corporation will not do business in the state of New York until an application
for authority to do business in the state of New York shall have been filed by
Capitol Communities Corporation with the state of New York. An application for
authority to do business in the State of New York has not been filed by Capitol
Communities Corporation with the State of New York.
FIFTH: The certificate of incorporation of AWEC Resources, Inc., formerly
known as Diagnostic Medical Equipment Corporation and Century Cinema
Corporation ("AWEC Resources, Inc.") was originally filed in the state of New
York on November 8, 1968.
SIXTH: Capitol Communities Corporation will promptly pay to the shareholders
of AWEC Resources, Inc. the amount, if any, to which they shall be entitled
under the provisions of Article 9 of the New York Business Corporation Law
relating to the right of shareholders to receive payment for their shares.
SEVENTH: The authorized capital stock of each constituent corporation which is
a party to the merger is as follows:
Number of
Corporation Class of Stock Shares Outstanding
- - ----------- -------------- ------------------
AWEC Resources, Inc. Common Stock 10,000,000
E-15
<PAGE> 4
$.01 par value
Capitol Communities Common Stock, None Outstanding
Corporation $.01 par value
EIGHTH: That a copy of the agreement of merger will be furnished on request
and without cost to any stockholder of any constituent corporation.
NINTH: That Capitol Communities Corporation, a Nevada corporation survives the
merger and may be served with process in the State of New York in any
proceeding for enforcement of any obligation of AWEC Resources, Inc., the
constituent New York corporation, as well as for enforcement of any obligation
of Capitol Communities Corporation arising from the merger, including any suit
or other proceeding to enforce the right of any stockholder as determined in
appraisal proceedings pursuant to the provisions of Article 9 of the New York
Business Corporation Law, and it does hereby irrevocably appoint the Secretary
of State of New York as its agent to accept service of process in any such suit
or other proceeding. The address to which a copy of such process shall be
mailed by the Secretary of State of New York is 25550 Hawthorne Boulevard,
Suite 210, Torrance, California 90505 until Capitol Communities Corporation
shall have hereafter designated in writing to the said Secretary of State a
different address for such purpose.
IN WITNESS WHEREOF, this certificate has been subscribed this 29th day of
January, 1996, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
CAPITOL COMMUNITIES CORPORATION,
a Nevada corporation and
AWEC Resources, Inc.,
a New York corporation
By: /s/ Michael G. Todd
-------------------------------
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<PAGE> 5
Michael G. Todd, President
Capitol Communities
Corporation and AWEC
Resources, Inc.
By: /s/ Ronald J. Campbell
--------------------------------------
- - -------------------------------------------
Ronald J. Campbell, Secretary,
Capitol Communities Corporation,
a Nevada corporation and
AWEC Resources, Inc.,
a New York corporation
SUBSCRIBED AND SWORN TO BEFORE ME
THIS 25th DAY OF JAN 1996
/s/ John G. Egerter
--- ---- -- -------
NOTARY PUBLIC
OFFICIAL SEAL
JOHN G. EGERTER
NOTARY PUBLIC-CALIFORNIA
COMMISSION # 954801
LOS ANGELES COUNTY
MY COMMISSION EXP. FEB. 2, 1996
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<PAGE> 6
CERTIFICATION
I, Ronald J. Campbell, being duly sworn, depose and state that I am the
Secretary of AWEC Resources, Inc. and Capitol Communities Corporation, the
corporations named in and described in the foregoing certificate and that I
have read the foregoing certificate and know the contents thereof to be true,
except as to the mattes therein stated to be alleged upon information and
belief, and as to those matters, I believe them to be true.
X/s/ Ronald J. Campbell
------------------------------
State of California )
) ss:
County of Los Angeles )
On this 26th day of January, 1996, before me, a Notary Public in and for the
State of California, personally appeared Ronald J. Campbell, known to me to be
the person whose name is subscribed to this instrument, and acknowledged that
he executed it.
/s/ John G. Egerter
- - ---------------------------------------
- - ---------------------------------------
Notary Public in and for
said County and State
My commission expires:
Feb. 2, 1996
OFFICIAL SEAL
JOHN G. EGERTER
NOTARY PUBLIC-CALIFORNIA
COMMISSION # 954801
LOS ANGELES COUNTY
MY COMMISSION EXP. FEB. 2, 1996
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<PAGE> 7
F960130000428
CERTIFICATE OF MERGER
OF
AWEC RESOURCES, INC.
AND
CAPITOL COMMUNITIES CORPORATION
UNDER SECTION 907 OF THE BUSINESS CORPORATION LAW
STATE OF NEW YORK
DEPARTMENT OF STATE
Filed JAN 30 1996
Tax $_____________________________________
__________________________________________
By: /s/ SAC
_______________________________________
FILED BY:
JOHN W. MARTIN
5777 WE CENTURY BOULEVARD
SUITE 1540
LOS ANGELES, CA 90045
960130000470
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<PAGE> 1
EXHIBIT 3.1.1
Articles of Incorporation of Capitol Communities Corporation, dated August 18,
1995
STAMP OF THE SECRETARY OF STATE
OF THE STATE OF NEVADA DATED
AUGUST 21, 1995 SHOWING DATE OF FILING
No. 14245-95
ARTICLES OF INCORPORATION
OF
CAPITAL COMMUNITIES CORPORATION
A Nevada Corporation
I, the undersigned, being the original incorporator herein
named, for the purpose of forming a corporation under the general corporation
laws of the State of Nevada, to do business both within and without the State
of Nevada, do make and file these Articles of Incorporation hereby declaring
and certifying that the facts herein stated are true:
ARTICLE I
NAME
The name of the corporation is: CAPITOL COMMUNITIES
CORPORATION.
ARTICLE II
REGISTERED AGENT
Section 2.01 Registered Agent. The location of the
corporation's registered agent in the State of Nevada is Paracorp Incorporated,
401 Ryland Street, Suite 330, Reno, Nevada 89502.
Section 2.02 Other Offices. The corporation may also
maintain offices for the transaction of any business at such other places
within or without the State of Nevada as it may from time to time determine.
Corporate business of every kind and nature may be conducted, and meetings of
directors and shareholders held, outside the State of Nevada with the same
effect as if in the State of Nevada.
ARTICLE III
PURPOSE
The corporation is organized for the purpose of engaging in
any lawful activity, within or without the State of Nevada.
ARTICLE IV
SHARES OF STOCK
Section 4.01 Authorized Shares. The aggregate number of
shares which the corporation shall have the authority to issue shall consist of
40,000,000 shares of Common Stock having a $.01
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<PAGE> 2
par value and 10,000,000 shares of Preferred Stock having $.01 par value. The
Common Stock may be issued from time to time without action by the
stockholders. The Common Stock may be issued for such consideration as may be
fixed from time to time by the Board of Directors. The Board of Directors may
issue such shares of Common Stock in one or more series, with such voting
powers, designations, preferences and rights or qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions
adopted the them.
The Preferred Stock authorized by these Articles of
Incorporation may be issued from time to time in one or more series. The Board
of Directors is authorized to determine or alter any or all of the rights
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock, and to fix, alter or reduce (but not below
the number then outstanding) the number of shares comprising any such series
and the designation thereof, or any of them, and to provide for the rights and
terms of redemption or conversion of the shares of any such series.
Section 4.02 No Preemptive Rights. Holders of the Common
stock or Preferred Stock of the corporation shall not have any preference,
preemptive right or right of subscription to acquire any shares of the
corporation authorized, issued or sold, or to be authorized, issued or sold, or
to any obligations or shares authorized or issued or to be authorized or
issued, and convertible into shares of the corporation, not to any right of
subscription thereto, other than to the extent, if any, the Board of Directors
in its discretion, may determine from time to time.
Section 4.03 Assessment of Shares. The Common Stock or
Preferred Stock of the corporation, after the amount of the subscription price
has been fully paid in, in money, property or services, as the directors shall
determine, shall not be subject to assessment to pay the debts of the
corporation, nor for any other purpose, and no Common Stock or Preferred Stock
issued as fully paid shall ever be assessable or assessed, and the Articles of
Incorporation shall not be amended to provide for such assessment.
ARTICLE V
DIRECTORS
Section 5.01 Governing Board. The members of the governing
board of the corporation shall be styled directors.
Section 5.02 Initial Board of Directors. The initial Board
of Directors shall consist of four (4) members. The name and address of the
initial members of the Board of Directors is:
NAME ADDRESS
Michael G. Todd 25550 Hawthorne Boulevard Suite 108
Torrance, California 90505
Robert R. Neyland 25550 Hawthorne Boulevard, Suite 108
Torrance, California 90505
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<PAGE> 3
Ronald J. Campbell 25550 Hawthorne Boulevard
Suite 108
Torrance, California 90505
Herbert E. Russell 3410 West Pershing
Phoenix, Arizona 85029
These individuals shall serve as Directors until the first
annual meeting of the shareholders or until their successor or successors shall
have been elected and qualified.
Section 5.03 Change in Number of Directors. The number of
directors may be increased or decreased by a duly adopted amendment to the
Bylaws of the corporation.
ARTICLE VI
INCORPORATORS
The name and address of the incorporator is Pamela J. Reed, of
the Law Offices of John W. Martin, 5777 West Century Boulevard, Suite 1540, Los
Angeles, California 90045.
ARTICLE VII
PERIOD OF DURATION
This corporation is to have a perpetual existence.
ARTICLE VIII
DIRECTORS' AND OFFICERS' LIABILITY
A director or officer of the corporation shall not be
personally liable to this corporation or its stockholders for damages for breach
of fiduciary duty as a director or officer, but this Article shall not eliminate
or limit the liability of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law or (ii) the
unlawful payment of dividends. Any repeal or modification of this Article by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the corporation for acts or omissions prior to such repeal or
modification.
ARTICLE IX
INDEMNITY
Every person who was or is a party to, or is threatened to be
made a party to, or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
he, or a person of whom he is the legal representative, is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless to the fullest extent legally
permissible under the laws of the State of Nevada from time to time against all
expenses, liability and loss (including attorneys' fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
him in connection therewith. Such right of indemnification shall be a contract
right which may be enforced in any manner desired by
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<PAGE> 4
such person. The expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the corporation as
they are incurred and in advance of the final disposition of the action, suit
or proceeding, upon receipt of an undertaking by or on behalf of the director
of officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire, and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law, or otherwise, as well as
their rights under this Article.
Without limiting the application of the foregoing, the Board
of Directors may adopt Bylaws from time to time without respect to
indemnification, to provide at all times the fullest indemnification permitted
by the laws of the State of Nevada, and may cause the corporation to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprises
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
The indemnification provided in this Article shall continue as
to a person who has ceased to be a director, officer, employee or agent, and
shall inure to the benefit of the heirs, executors and administrators of such
person.
ARTICLE X
AMENDMENTS
Subject at all times to the express provisions of Section 4.03
which cannot be amended, this corporation reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation or
its Bylaws, in the manner now or hereafter prescribed by statute or by these
Articles of Incorporation or said Bylaws, and all rights conferred upon the
shareholders are granted subject to this reservation.
ARTICLE XI
POWER OF DIRECTORS
In furtherance, and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
(1) Subject to the Bylaws, if any, adopted by the
shareholders, to make, alter or repeal the Bylaws of the corporation;
(2) To authorize and cause to be executed mortgages and
liens, with or without limit as to amount, upon the real and personal property
of the corporation;
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(3) To authorize the guaranty by the corporation of
securities, evidences of indebtedness and obligations of other persons,
corporations and business entities;
(4) To set apart out of any of the funds of the
corporation available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve; and
(5) By resolution adopted by a majority of the whole
board, to designate one or more committees, each committee to consist of one or
more of the directors of the corporation, which, to the extent provided in the
resolution or in the Bylaws of the corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee or committees shall have
such name or names as may be stated in the Bylaws of the corporation or as may
be determined from time to time by resolution adopted by the Board of
Directors.
All corporate powers of the corporation shall be exercised by
the Board of Directors except as otherwise provided herein or by law.
IN WITNESS WHEREOF, I have hereunder set my hand this 18th day
of August, 1995, hereby declaring and certifying that the facts stated herein
above are true.
/s/ Pamela Reed
___________________________________
Incorporator
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 18th day of August, 1995, personally appeared before
me, a Notary Public, ___________________, who acknowledged to me that he
executed the foregoing statement.
[STAMP OF NOTARY PUBLIC]
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<PAGE> 1
EXHIBIT 3.1.2
Certificate of Amendment of Articles of Incorporation of Capitol Communities
Corporation, dated February 6, 1996
STAMP OF THE SECRETARY OF STATE
OF THE STATE OF NEVADA DATED
FEBRUARY 12, 1996 SHOWING DATE
OF FILING, NO. 14245-95, AND
SIGNATURE OF DEAN HELLER, SECRETARY
OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
CAPITOL COMMUNITIES CORPORATION
a Nevada Corporation
We the undersigned President and Secretary of Capitol Communities
Corporation, a Nevada corporation do hereby certify:
That the Board of Directors of said corporation has adopted a
resolution to amend the original articles as follows:
Article IV is hereby amended to read as follows:
"ARTICLE IV
SHARES OF STOCK
Section 4.01 Authorized Shares. The aggregate number of shares
which the corporation shall have the authority to issue shall consist of
40,000,000 shares of Common Stock having a $.01 par value and 10,000,000 shares
of Preferred Stock having $.01 par value. The common stock may be issued from
time to time without action by the stockholders. The Common Stock may be
issued for such consideration as may be fixed from time to time by the Board of
Directors. The Board of Directors may issue such shares of Common Stock in one
or more series, with such voting powers, designations, preferences and rights
or qualifications, limitations or restrictions thereof as shall be stated in
the resolution or resolutions adopted by them.
The Preferred Stock authorized by these Articles of Incorporation may
be issued from time to time in one or more series. The Board of Directors is
authorized to determine or alter any or all of the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, and to fix, alter or reduce (but not below the
number then outstanding) the number of shares comprising any such series and
the designation thereof, or any of
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<PAGE> 2
them, and to provide for the rights and terms of redemption or conversion of
the shares of any such series.
Upon the amendment of this Article IV to read as set forth herein,
each outstanding five (5) shares of Common Stock are converted into one (1)
share of Common Stock. No fractional shares shall be issued to the current
shareholders of Common Stock as a result of this 5-for-1 reverse stock split,
but instead, all fractional shares of Common Stock resulting from this 5-for-1
reverse stock split shall be rounded, if necessary, to the next higher whole
share.
Section 4.02 No Preemptive Rights. Holders of the Common Stock or
Preferred Stock of the corporation shall not have any preference, preemptive
right or right of subscription to acquire any shares of the corporation
authorized, issued or sold, or to be authorized, issued or sold, or to any
obligations or shares authorized or issued or to be authorized or issued, and
convertible into shares of the corporation, nor to any right of subscription
thereto, other than to the extent, if any, the Board of Directors in its
discretion, may determine from time to time.
Section 4.03 Assessment of Shares. The Common Stock or Preferred
Stock of the corporation, after the amount of the subscription price has been
fully paid, in money, property or services, as the directors shall determine,
shall not be subject to assessment to pay the debts of the corporation, nor for
any other purpose, and no Common Stock or Preferred Stock issued as fully paid
shall ever be assessable or assessed, and the Articles of Incorporation shall
not be amended to provide for such assessment."
* * *
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 11,135,020; that said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Michael G. Todd
________________________________________
Michael G. Todd, President
/s/ Ronald J. Campbell
________________________________________
Ronald J. Campbell, Secretary
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<PAGE> 3
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On 02-06-96, personally appeared before me, a Notary Public, Michael
G. Todd and Ronald J. Campbell, who acknowledged that they executed the above
instrument.
/s/ Renee Soqui
______________________________
Signature of Notary
(NOTARY STAMP OR SEAL)
NOTARY SEAL OF
RENEE SOQUI
COMM. #999106
NOTARY PUBLIC - CALIFORNIA
LOS ANGELES COUNTY
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<PAGE> 4
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
On 02-06-96 before me, Renee Soqui, personally appeared Michael G.
Todd and Ronald J. Campbell personally known to be 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.
NOTARY SEAL OF WITNESS my hand and official seal
RENEE SOQUI
COMM. #999106
NOTARY PUBLIC - CALIFORNIA
LOS ANGELES COUNTY
/s/ Renee Soqui
______________________________________
Signature of Notary
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<PAGE> 5
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another documents.
Description of Attached Document
Title or Type of Document: Certificate of Amendment of Articles of
Incorporation
Document Date: 02-06-96 Number of Pages: 2
Signer(s) Other Than Named Above: None
Capacity(ies) Claimed by Signer(s)
Signer's Name: Michael G. Todd Signer's Name: Ronald J. Campbell
Corporate Officers Corporate Officers
Title President Title Secretary
Signer Is Representing: Signer Is Representing:
Capitol Communities Corporation Capitol Communities Corporation
STAMP OF THE SECRETARY OF STATE
OF THE STATE OF NEVADA DATED
AUGUST 14, 1996 CERTIFYING THAT
"THIS IS A TRUE AND COMPLETE COPY
OF THE DOCUMENT AS FILED THIS OFFICE."
SIGNATURE OF DEAN HELLER, SECRETARY
OF STATE, BY CAROL BIBEE
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<PAGE> 1
EXHIBIT 3.2
Bylaws of Capitol Communities Corporation, dated August 22, 1995
BYLAWS
CAPITOL COMMUNITIES CORPORATION
a Nevada Corporation
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the stockholders of
the corporation shall be held on such date and at such time as shall be
designated from time to time for the purpose of electing directors of the
corporation and to transact all business as may properly come before the
meeting. If the election of the directors is not held on the day designated
herein for any annual meeting of the stockholders, or at any adjournment
thereof, the President shall cause the election to be held at a special meeting
of the stockholders as soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the stockholders
may be called by the President or the Board of Directors and shall be called by
the President at the written request of the holders of not less than 51% of the
issued and outstanding voting shares of capital stock of the corporation.
All business lawfully to be transacted by the stockholders may be
transacted at any special meeting or at any adjournment thereof. However, no
business shall be acted upon at a special meeting except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the stockholders of the
corporation may be held at its principal office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the stockholders entitled to vote may
designate any place for the holding of such meeting.
Section 1.04 Notice of Meetings.
(a) The Secretary shall sign and deliver to all stockholders of record
written or printed notice of any meeting at least ten (10) days, but not more
than sixty (60)days, before the date of such meeting; which notice shall state
the place, date, and time
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of the meeting, the general nature of the business to be transacted, and, in
the case of any meeting at which directors are to be elected, the names of
nominees, if any, to be presented for election.
(b) In the case of any meeting, any proper business may be presented
for action, except that the following items shall be valid only if the general
nature of the proposal is stated in the notice or written waiver of notice:
(1) Action with respect to any contract or transaction between the
corporation and one or more of its directors or officers or another firm,
association, or corporation in which one or more of its directors or officers
has a material financial interest;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to the merger, consolidation, reorganization,
partial or complete liquidation, or dissolution of the corporation.
(c) The notice shall be personally delivered or mailed by first class
mail to each stockholder of record at the last known address thereof, as the
same appears on the books of the corporation, and the giving of such notice
shall be deemed delivered the date the same is deposited in the United States
mail, postage prepaid. If the address of any stockholder does not appear upon
the books of the corporation, it will be sufficient to address any notice to
such stockholder at the principal office of the corporation.
(d) The written certificate of the person calling any meeting, duly
sworn, setting forth the substance of the notice, the time and place the notice
was mailed or personally delivered to the stockholders, and the addresses to
which the notice was mailed shall be prima facie evidence of the manner and
fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the stockholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the stockholders shall meet in person or by proxy, such meeting
shall be valid for all purposes without call or notice, and at such meeting any
corporate action may be taken.
Section 1.06 Determination of Stockholders of Record.
(a) The Board of Directors may at any time fix a future date as a
record date for the determination of the stockholders
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entitled to notice of any meeting or to vote or entitled to receive payment of
any dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action. The record date so
fixed shall not be more than sixty (60) days nor less than ten (10) days prior
to the date of such meeting nor more than sixty (60) days nor less than ten
(10) days prior to any other action. When a record date is so fixed, only
stockholders of record on that date are entitled to notice of and to vote at
the meeting or to receive the dividend, distribution or allotment of rights, or
to exercise their rights, as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after the record date.
(b) If no record date is fixed by the Board of Directors, then (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived at the
close of business on the day next preceding the day on which the meeting is
held;(2)the record date for action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which
written consent is given; and (3) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth
(60th) days prior to the date of such other action, whichever is later.
Section 1.07 Voting.
(a) Each stockholder of record, or such stockholder's duly authorized
proxy or attorney-in-fact shall be entitled to one (1) vote for each share of
voting stock standing registered in such stockholder's name on the books of the
corporation on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy or attorney-in-fact. With respect to shares held by a
representative of the estate of a deceased stockholder, guardian, conservator,
custodian or trustee, votes may be cast by such holder upon proof of capacity,
even though the shares do not stand in the name of such holder. In the case of
shares under the control of a receiver, the receiver may cast in the name of
the receiver provided that the order of the court of competent jurisdiction
which appoints the receiver contains the authority to cast votes carried by
such shares. If shares stand in the name of a minor, votes may be cast only by
the duly appointed guardian of the estate of such minor if such guardian has
provided the
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corporation with written notice and proof of such appointment.
(c) With respect to shares standing in the name of a corporation on
the record date, votes may be cast by such officer or agent as the bylaws of
such corporation prescribe or, in the absence of an applicable bylaw provision,
by such person as may be appointed by resolution of the Board of Directors of
such corporation. In the event no person is so appointed, such votes of the
corporation may be cast by any person (including the officer making the
authorization) authorized to do so by the Chairman of the Board of Directors,
President or any Vice-President of such corporation.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast by shares owned by this corporation or its subsidiaries, if
any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same-binding
instructions on how to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship with respect to the same shares, votes
may be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority so
voting binds all.
(3) If more than one person casts votes, but the vote is evenly split
on a particular matter, the votes shall be deemed cast proportionately, as
split.
(f) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder
is casting affirmative votes with respect to all shares held.
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(g) If a quorum is present, the affirmative vote of the holders of a
majority of the voting shares represented at the meeting and entitled to vote
on any matter shall be the act of the stockholders, unless a vote of greater
number by classes is required by the laws of the State of Nevada, the Articles
of Incorporation or these Bylaws.
Section 1.08 Quorum; Adjourned Meetings.
(a) At any meeting of the stockholders, a majority of the issued and
outstanding voting shares of the corporation represented in person or by proxy,
shall constitute a quorum.
(b) If less than a majority of the issued and outstanding voting
shares are represented, a majority of shares so represented may adjourn from
time to time at the meeting, until holders of the amount of stock required to
constitute a quorum shall be in attendance. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted as originally called. When a stockholder's meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced to the meeting at which the
adjournment is taken, unless the adjournment is for more than ten (10) days in
which event notice thereof shall be given.
Section 1.09 Proxies. At any meeting of stockholders, any holder of
shares entitled to vote may authorize another person or persons to vote by
proxy with respect to the shares held by an instrument in writing and
subscribed to by the holder of such shares entitled to vote. No proxy shall be
valid after the expiration of six (6) months from or unless otherwise specified
in the proxy. In no event shall the term of a proxy exceed seven (7) years from
the date of its execution. Every proxy shall continue in full force and effect
until its expiration or revocation. Revocation may be effected by filing an
instrument revoking the same or a duly executed proxy bearing a later date with
the Secretary of the corporation.
Section 1.10 Order of Business. At the annual stockholder's meeting,
the regular order of business shall be as follows:
1. Determination of stockholders present and existence of quorum;
2. Reading and approval of the minutes of the previous meeting or meetings;
3. Reports of the Board of Directors, the President, treasurer and Secretary of
the corporation, in the order named;
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4. Reports of committees;
5.Election of directors;
6.Unfinished business;
7. New business; and
8. Adjournment.
Section 1.11 Absentees' Consent to Meetings. Transactions of any
meeting of the stockholders are as valid as though had at a meeting duly held
after regular call and notice of a quorum is present, either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy (and those who, although present,
either object at the beginning of the meeting to the transaction of any
business because the meeting has not been lawfully called or convened or
expressly object at the meeting to the consideration of matters not included in
the notice which are legally required to be included there), signs a written
waiver of notice and/or consent to the holding of the meeting or an approval of
the minutes thereof. All such waivers, consents, and approvals shall be filed
with the corporate records and made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except that when the person objects at the beginning of the meeting,
such meeting is not lawfully called or convened and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
not included in the notice i, such objection is expressly made at the
beginning. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any waiver of
notice, except as otherwise provided in Section 1.04(b) of these Bylaws.
Section 1.12 Action Without Meeting. Any action, except the elect on
of directors, which may be taken by the vote of the stockholders at a meeting,
may be taken without a meeting if consented to by the holders of a majority of
the shares entitled to vote or such greater proportion as may be required by
the laws of the State of Nevada, the Articles of Incorporation, or these
Bylaws. Whenever action is taken by written consent, a meeting of
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stockholders need not be called or noticed.
Section 1.13 Telephonic Meetings. Meeting of the stockholders may be
held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such meeting constitutes
presence in person at such meeting.
ARTICLE II
DIRECTORS
Section 2.01 Number Tenure. and Qualifications. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of at
least four persons, who shall be elected at the annual meeting of the
stockholders of the corporation and who shall hold office for one (1) year or
until his or her successor or successors are elected and qualify. If, at any
time, the number of stockholders of the corporation is less than three (3), the
Board of Directors may consist of fewer persons, but shall not be less than the
number of stockholders. A director need not be a stockholder of the
corporation.
Section 2.02 Resignation. Any director may resign effective upon
giving written notice to the Chairman of the Board of Directors, the Present or
the Secretary of the corporation, unless the notice specified a later time for
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future date, the Board
of Directors or the stockholders may elect a successor to take office when the
resignation becomes effective.
Section 2.03 Change In Number. Subject to the limitations in the laws
of the State of Nevada, the Articles of Incorporation or Section 2.01 of these
Bylaws, the number of directors may be changed from time to time by resolution
adopted by the Board of Directors.
Section 2.04 Reduction In Number. No reduction of the number of
directors shall have the effect of removing any director prior the expiration
of his term of office.
Section 2.05 Removal.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office, with or without
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cause, by the vote or written consent of stockholders representing not less
than two-thirds of the issued and outstanding voting capital stock of the
corporation.
Section 2.06 Vacancies.
(a) A vacancy in the Board of Directors because of death, resignation,
removal, change in number of directors, or otherwise may be filled by the
stockholders at any regular or special meeting or any adjourned meeting thereof
(but not by written consent) or the remaining director(s) by the affirmative
vote of a majority thereof. Each successor so elected shall hold office until
the next annual meeting of stockholders or until a successor shall have been
duly elected and qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total number of
shares entitled to vote may call a special meeting of the stockholders to be
held to elect the entire Board of Directors. The term of the office of any
director shall terminate upon such election of a successor.
Section 2.07 Regular Meetings. Immediately following the adjournment
of, and at the same place as, the annual meeting of the stockholders, the Board
of Directors, including directors newly elected, shall hold its annual meeting
without notice other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date, and hour for
holding additional regular meetings.
Section 2.08 Special Meetings. Special meeting of the Board of
Directors may be called by the Chairman and shall be called by the Chairman
upon the request of any two (2) directors or the President of the corporation.
Section 2.09 Place of Meetings. Any meeting of the directors of the
corporation may be held at the corporation's principal office in the State of
Nevada or at such other place in or out of the United States as the Board of
Directors may designate. A waiver of notice signed by the directors may
designate any place for the holding of such meeting.
Section 2.10 Notice of Meetings. Except as otherwise provided in
Section 2.07, the Chairman shall deliver to all directors written or printed
notice of any special meeting, at least 48 hours before the time of such
meeting, by delivery of such notice personally or mailing such notice first
class mail or
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by telegram. If mailed, the notice shall be deemed delivered two (2) business
days following the date the same is deposited in the United States mail,
postage prepaid. Any director may waive notice of any meeting, and the
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, unless such attendance is for the express purpose of objecting to
the transaction of business thereat because the meeting is not properly called
or convened.
Section 2.11 Quorum; Adjourned Meetings.
(a) A majority of the Board of Directors in office shall constitute a
quorum.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.12 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if a written consent thereto is signed by all of
the members of the Board of Directors or of such committee. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board of Directors or committee. Such action by written consent shall have the
same force and effect as the unanimous vote of the Board of Directors or
committee.
Section 2.13 Telephonic Meetings. Meetings of the Board of Directors
may be held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting
constitutes presence in person at such meeting. Each person participating in
the meeting shall sign the minutes thereof which may be in counterparts.
Section 2.14 Board Decisions. The affirmative vote of a majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
Section 2.15 Powers and Duties.
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(a) Except as otherwise provided in the Articles of Incorporation or
the laws of the State of Nevada, the Board of Directors is invested with the
complete and unrestrained authority to manage the affairs of the corporation,
and is authorized to exercise for such purpose as the general agent of the
corporation, its entire corporate authority in such manner as it sees fit. The
Board of Directors may delegate any of its authority to manages control or
conduct the current business of the corporation to any standing or special
committee or to any officer or agent and to appoint any persons to be agents of
the corporation with such powers, including the power to subdelegate, and upon
such terms as may be deemed fit.
(b) The Board of Directors shall present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of the
stockholders at a special meeting of the stockholders, a full and clear
statement of the condition of the corporation, and shall, at request, furnish
each of the stockholders with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual meeting of the stockholders
or any special meeting properly called for the purpose of considering any such
contract or act, provided a quorum is present. The contract or act shall be
valid and binding upon the corporation and upon all the stockholders
thereof,~if approved and ratified by the affirmative vote of a majority of the
stockholders at such meeting.
Section 2.16 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board, and shall
be entitled to receive such compensation for their services as directors as
shall be determined from time to time by the Board of Directors or any
committee thereof.
Section 2.17 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect, from
among its members, a Chairman to preside at meetings of the Board of Directors.
The Board of Directors may also elect such other board officers as it may, from
time to time, determine advisable.
(b) Any vacancy in any board office because of death, resignation,
removal or otherwise may be filled by the Board of Directors for the unexpired
portion of the term of such office.
Section 2.18 Order of Business. The order of business at
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any meeting of the Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting or meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business; and
7. Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of stockholders, shall elect a President, a
Secretary and a Treasurer to hold office for a term of one (1) year and until
their successors are elected and qualified. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and
transfer agents of the corporation as it may deem advisable; prescribe their
duties; and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it, with or without
cause. Any officer may resign at any time upon written notice to the
corporation without prejudice to the rights, if any, of the corporation under
any contract to which the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The President shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The President shall preside
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at all meetings of the stockholders and shall perform such other duties as
shall be prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the President
shall have full power and authority on behalf of the corporation to attend and
to act and to vote at any meetings of the stockholders of any corporation in
which the corporation may hold stock and, at any such meetings, shall possess
and may exercise any and all rights and powers incident to the ownership of
such stock. The Board of Directors, by resolution from time to time, may
confer like powers on any person or persons in place of the President to
represent the corporation for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or
more Vice Presidents who shall be vested with all the powers and perform all
the duties of the President whenever the President is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the Vice President shall perform such other duties as shall be prescribed
by the Board of Directors.
Section 3.06 Secretary. The Secretary shall keep the minutes of all
meetings of the stockholders and the Board of Directors in books provided for
that purpose. The Secretary shall attend to the giving and service of all
notices of the corporation, may sign with the President in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general, perform all duties incident to the
office of the Secretary. All corporate books kept by the Secretary shall be
open for examination by any director at any reasonable time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint
an Assistant Secretary who shall have such powers and perform such duties as
may be prescribed for him by the Secretary of the corporation or by the Board
of Directors.
Section 3.08 Treasurer. The Treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary
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or proper, the Treasurer shall endorse on behalf of the corporation for
collection checks, notes, and other obligations, and shall deposit all monies
to the credit of the corporation in such bank or banks or other depository as
the Board of Directors may designate, and shall sign all receipts and vouchers
for payments by the corporation. Unless otherwise specified by the Board of
Directors, the Treasurer shall sign with the President all bills of exchange
and promissory notes of the corporation, shall also have the care and custody
of the stocks, bonds, certificates, vouchers, evidence of debts, securities,
and such other property belonging to the corporation as the Board of Directors
shall designate, and shall sign all papers required by law, by these Bylaws, or
by the Board of Directors to be signed by the Treasurer. The Treasurer shall
enter regularly in the books of the corporation, to be kept for that purpose,
full and accurate accounts of all monies received and paid on account of the
corporation and, whenever required by the Board of Directors, the Treasurer
shall render a statement of any or all accounts. The Treasurer shall at all
reasonable times exhibit the books of account to any directors of the
corporation and shall perform all acts incident to the position of Treasurer
subject to the control of the Board of Directors.
The Treasurer shall, if required by the Board of Directors, give bond
to the corporation in such sum and with such security as shall be approved by
the Board of Directors for the faithful performance of all the duties of
Treasurer and for restoration to the corporation, in the event of the
Treasurer's death, resignation, retirement or removal from office, of all
books, _records, papers, vouchers, money and other property belonging to the
corporation. The expense of such bond shall be borne by the corporation.
Section 3.09 Assistant Treasurer. The Board of Directors may appoint
an Assistant Treasurer who shall have such powers and perform such duties as
may be prescribed by the Treasurer of the corporation or by the Board of
Directors, and the Board of Directors may require the Assistant Treasurer to
give a bond to the corporation in such sum and with such security as it may
approve, for the faithful performance of the duties of Assistant Treasurer, and
for restoration to the corporation, in the event of the Assistant Treasurer's
death, resignation, retirement or removal from office, of all books, records,
papers, vouchers, money and other property belonging to the corporation. The
expense of such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of
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the corporation shall be issued in such manner and at such times and upon such
conditions as shall be prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the
corporation and shall be signed by the President or a Vice President and also
by the Secretary or an Assistant Secretary. Each certificate shall contain the
then name of the record holder, the number, designation, if any, class or
series of shares represented, a statement of summary of any applicable rights,
preferences, privileges or restrictions thereon, and a statement that the
shares are assessable, if applicable. All certificates shall be consecutively
numbered. The name, address and federal tax identification number of the
stockholder, the number of shares, and the date of issue shall be entered on
the stock transfer books of the corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All
certificates surrendered to the corporation, except those representing shares
of treasury stock, shall be canceled and no new certificate shall be issued
until the former certificate for a like number of shares shall have been
canceled, except that in case of a lost, stolen, destroyed or mutilated
certificate, a new one may be issued therefor. However, any stockholder
applying for the issuance of a stock certificate in lieu of one alleged to have
been lost, stolen, destroyed or mutilated shall, prior to the issuance of a
replacement, provide the corporation with his, her or its affidavit of the
facts surrounding the loss, theft, destruction or mutilation and if required by
the Board of Directors, an indemnity bond it an amount and upon such terms as
the Treasurer, or the Board of Directors, shall require. In no case shall the
bond be in an amount less than twice the current market value of the stock and
it shall indemnify the corporation against any loss, damages cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of
Incorporation are amended in any way affecting the statements contained in the
certificates for outstanding shares of capital stock of the corporation or it
becomes desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue
a new certificate for shares, the corporation shall issue
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an order for stockholders of record to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificate(s) ordered to be
surrendered shall not be entitled to vote, receive dividends or exercise any
other rights of stockholders until the holder has complied with the order,
provided that such order operates to suspend such rights only after notice and
until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid
as against the corporation except on surrender and cancellation of the
certificates therefor accompanied by an assignment or transfer by the
registered owner made either in person or under assignment. Whenever any
transfer shall be expressly made for collateral security and not absolutely,
the collateral nature of the transfer shall be reflected in the entry of
transfer on the books of the corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or
more transfer agents and registrars of transfer and may require all
certificates for shares of stock to bear the signature of such transfer agent
and such registrar of transfer.
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Section 4.07 Stock Transfer Books. The stock transfer books shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of dividends as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and, during such periods, no stock shall be
transferable.
Section 4.08 Miscellaneous. The Board of Directors shall have the
power and authority to make such rules and regulations not inconsistent
herewith as it may deem expedient concerning the issue, transfer, and
registration of certificates for shaves of the capital stock of the
corporation.
ARTICLE V
DIVIDENDS
Dividends may be declared, subject to the provisions of the laws of
the State of Nevada and the Articles of Incorporation, by the Board of
Directors at any regular or special meeting and may be paid in cash, property,
shares of the corporation stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06 of these Bylaws,
prior to the dividend payment for the purpose of determining stockholders
entitled to receive payment of any dividend. The Board of Directors may close
the stock transfer books for such purpose for a period of not more than ten
(10) days prior to the payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS, REPORTS; SEAL AND FINANCIAL
MATTERS
Section 6.01 Principal Office. The principal office of the corporation
in the State of Nevada shall be at 401 Ryland Street, Suite 330, Reno, Nevada
89502.
The Board of Directors may from time to time, by resolution, change
the location of the principal office within the State of Nevada. The
corporation may also maintain an office or offices at such other place or
places, either within or without the State of Nevada, as may be resolved, from
time to time, by the Board of Directors.
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Section 6.02 Records. The stock transfer books and a certified copy of
the Bylaws, Articles of Incorporation, any amendments thereto, and the minutes
of the proceedings of stockholders, the Board of Directors, and Committees of
the Board of Directors shall be kept at the principal office of the corporation
for the inspection of all who have the right to see the same and for the
transfer of stock. All other books of the corporation shall be kept at such
places as may be prescribed by the Board of Directors.
Section 6.03 Financial Report on Request. Any stockholder or
stockholders holding at least five percent (5%) of the outstanding shares of
any class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month or nine (9) month period of
the current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of such
period. In addition, if no annual report of the last fiscal year has been sent
to stockholders, such stockholder or stockholders may make a request for a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year. The statements
shall be delivered or mailed to the person making the request within thirty
(30) days thereafter. A copy of the statements shall be kept on file in the
principal office of the corporation for twelve (12) months, and such copies
shall be exhibited at all reasonable times to any stockholder demanding an
examination of them or a copy shall be mailed to each stockholder. Upon request
by any stockholder, there shall be mailed to the stockholder a copy of the last
annual, semiannual or quarterly income statement which it has prepared and a
balance sheet as of the end of the period. The financial statements referred to
in this Section 6.03 shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting and records and minutes of proceedings of the
stockholders and the Board of Directors and committees of the Board of
Directors shall be open to inspection upon the written demand of any
stockholder or holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to such holder's
interest as a stockholder or as the holder of such voting trust certificate.
This right of inspection
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shall extend to the records of the subsidiaries, if any, of the corporation.
Such inspection may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
(b) Every director shall have the absolute right at any reasonable
time to inspect and copy all books, records, and documents of every kind and to
inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or attorney,
and the right of inspection includes the right to copy and make extracts.
Section 6.05 Corporate Seal. The Board of Directors may, by
resolution, authorize a seal, and the seal may be used by causing it, or a
facsimile, to be impressed or affixed or reproduced or otherwise. Except when
otherwise specifically provided herein, any officer of the corporation shall
have the authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year-End. The fiscal year-end of the corporation
shall be such date as may be fixed from time to time by resolution by the Board
of Directors.
Section 6.07 Reserves. The Board of Directors may create, by
resolution, out of the earned surplus of the corporation such reserves as the
directors may, from time to time, in their discretion, think proper to provide
for contingencies, or to equalize dividends or to repair or maintain any
property of the corporation, or for such other purpose as the Board of
Directors may deem beneficial to the corporation, and the directors may modify
or abolish any such reserves in the manner in which they were created.
Section 6.08 Payments to Officers or Directors. Any payments made to
an officer or director of the corporation, such as salary, commission, bonus,
interest, rent or entertainment expense, which shall be disallowed by the
Internal Revenue Service in whole or in part as a deductible expense by the
corporation, shall be reimbursed by such officer or director to the corporation
to the full extent of such disallowance. It shall be the duty of the Board of
Directors to enforce repayment of each such amount disallowed. In lieu of
direct reimbursement by such officer or director, the Board of Directors may
withhold future compensation to such officer or director until the amount owed
to the corporation has been recovered.
ARTICLE VII
INDEMNIFICATION
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Section 7.01 In General. Subject to Section 7.02, the corporation
shall indemnify any director, officer, employee or agent or the corporation, or
any person serving in any such capacity of any other entity or enterprise at
the request of the corporation, against any and all legal expenses (including
attorneys' fees), claims and/or liabilities arising out of any action, suit or
proceeding, except an action by or in the right of the corporation.
Section 7.02 Lack of Good-Faith; Criminal Conduct. The corporation
may, but shall not be required to, indemnify any person where such person acted
in good faith and in a manner reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, where there was not reasonable cause to believe the conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order
or settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, there was reasonable cause to believe that the conduct was
unlawful.
Section 7.03 Successful Defense of Actions. The corporation shall
reimburse or otherwise indemnify any director, officer, employee, or agent
against legal expenses (including attorneys' fees) actually and reasonably
incurred in connection with defense of any action, suit, or proceeding herein
above referred to, to the extent such person is successful on the merits or
otherwise.
Section 7.04 Authorization. Indemnification shall be made by the
corporation only when authorized in the specific case and upon a determination
that indemnification is proper by:
(1) The stockholders;
(2) A majority vote of a quorum of the Board of Directors, consisting
of directors who were not parties to the action, suit, or proceeding; or
(3) Independent legal counsel in a written opinion, if a quorum of
disinterested directors so orders or if a quorum of disinterested directors
cannot be obtained.
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Section 7.05 Advancing Expenses. Expenses incurred in defending any
action, suit, or proceeding may be paid by the corporation in advance of the
final disposition, when authorized by the Board of Directors, upon receipt of
an undertaking by or on behalf of the person defending to repay such advances
if indemnification is not ultimately available under these provisions.
Section 7.06 Continuing Indemnification. The indemnification provided
by these Bylaws shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Section 7.07 Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or who is or was serving at the request of the
corporation in any capacity against any liability asserted.
ARTICLE VIII
BYLAWS
Section 8.01 Amendment. These Bylaws may be altered, amended or
repealed at any regular meeting of the Board of Directors without prior notice,
or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting. These Bylaws may also be altered, amended, or repealed at a meeting of
the stockholders at which a quorum is present by the affirmative vote of the
holders of 51% of the capital stock of the corporation entitled to vote or by
the consent of the stockholders in accordance with Section 1.12 of these
Bylaws. The stockholders may provide by resolution that any Bylaw provision
repealed, amended, adopted or altered by them may not be repealed amended,
adopted or altered by the Board of Directors.
CERTIFICATION
I, the undersigned, being the duly elected Secretary of the
corporation, do hereby certify that the foregoing Bylaws were adopted by the
Board of Directors the 22nd day of August, 1995.
Ronald J. Campbell, Secretary
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EXHIBIT 10.1
Contribution Agreement, dated September 11, 1995, between AWEC Development
Corporation and Resure, Inc.
CONTRIBUTION
AGREEMENT
This Agreement is made and executed as of the 11th day of September, by and
among AWEC Development Corporation, an Arkansas corporation ("AWEC") and Resure,
Inc., an Illinois corporation("Resure").
WITNESSETH:
WHEREAS, AWEC is the beneficial owner of certain real property located
in Pulaski County, Arkansas; and
WHEREAS, AWEC has agreed to contribute to Resure a Note in the
principal sum of Three Million Five Hundred Thousand Dollars ($3,500,000.00) in
exchange for the issuance by Resure to AWEC of a Subordinated Surplus
Debenture; and
WHEREAS, Resure has agreed to issue such Subordinated Surplus
Debenture to AWEC in accordance with and subject to the terms, conditions and
provisions herein contained.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, each of the parties, intending to be legally bound by the
provisions hereof, agrees as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Appraisal" shall mean an appraisal of the Land and Improvements
prepared by an independent appraiser who shall be a member of the American
Institute of Real Estate Appraisers selected by or satisfactory to Resure,
which shows that the value of the Land and Improvements, when completed, will
be no less than Four Million Three Hundred Seventy-Five Thousand and 00/100
Dollars ($4,375,000.00).
"Debenture" shall mean the Subordinated Surplus Debenture to be issued
by Resure and delivered to AWEC in the principal amount of Three Million Five
Hundred Thousand and 00/100 Dollars ($3,500,000.00), bearing interest and being
payable as provided in
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the Debenture, a copy of which is attached hereto as Exhibit "A" and
incorporated herein by reference, together with any and all extensions,
renewals, modifications, substitutions, replacements, amendments or
restatements thereof.
"Current Survey" shall mean an on-the-ground ATLA survey of the Land,
dated currently, with the date such survey is required to be furnished pursuant
to any provision of this Agreement, performed
CONTRIBUTION AGREEMENT/PAGE 1 (8/30/95 Draft)
by a surveyor duly licensed as such in the State of Arkansas, acceptable to
Resure (and, if Resure shall so require, to the Title Company).
"Governmental Authority" shall mean the United States, the State of
Arkansas, the County of Pulaski, the City of Maumelle, and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court of instrumentality of any of them, which now or hereafter
has jurisdiction over Resure, AWEC, the Land, or any part hereof.
"Hazardous Materials" means and includes, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials as defined in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
from time to time amended (42 U.S.C. Section 9601, et seq.), the Hazardous
Waste Materials Transportation Act, as from time to time amended (49 U.S.C.
Section 1801, et seq.), the Resource Conservation and Recovery Act, as from
time to time amended (42 U.S.C. Section 9601, et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Section 1251, et seq.) and the Clean Air Act
(42 U.S.C. Section 7401, et seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or in any other federal, state or
local law, ordinance, rule or regulation.
"Land" shall mean the real property consisting of approximately 409.73
acres of land in the City of Maumelle, Pulaski County, Arkansas, which is
described on Exhibit "B", affixed hereto
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and by this reference made a part hereof.
"Legal Requirements" shall mean any law, ordinance, order, rule or
regulation of a Governmental Authority and any requirements, terms or
conditions contained in any restrictions or restrictive covenants or in any
Governmental Permit affecting the Land.
"Contribution" shall mean the Agreement for the delivery by AWEC to
Resure of the Note in the principal amount of Three Million Five Hundred
Thousand and 00/100 Dollars ($3,500,000.00), bearing interest and being payable
as provided in the said Note, which is incorporated herein by reference, in
exchange for the delivery of the Debenture from Resure to AWEC.
"Contribution Documents" shall include this Agreement, the Note
(including all renewals extensions and modifications thereof), the Mortgage,
and all other instruments executed pursuant hereto or in connection herewith,
or as evidence of, security for payment of the Note or of performance of AWEC's
obligations under this Agreement or other Contribution Documents.
CONTRIBUTION AGREEMENT/PAGE 2(8/30/95 Draft)
Lender Documents" shall include this Agreement, the Debenture
(including all renewals, extensions and modifications thereof), and all other
instruments executed pursuant hereto or in connection herewith, or as evidence
of, security for payment of the Debenture or of performance of AWEC's
obligations under this Agreement or other Lender Documents.
"Mortgager shall mean a Mortgage covering and encumbering the Land
pursuant hereto or in connection herewith, duly executed by AWEC and all other
parties having a beneficial or legal interest in the Land, securing payment of
the Note or of the performance of AWEC's obligations under this Agreement or
other Contribution Documents.
"Note" shall mean the Non-Recourse Promissory Note to be issued by
AWEC and delivered to Resure in the principal amount of Three Million Five
Hundred Thousand and 00/100 Dollars ($3,500,000.00), bearing interest and being
payable as provided in the Note, a copy of which is attached hereto as Exhibit
"C" and
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incorporated herein by reference, together with any and all extensions,
renewals, modifications, substitutions, replacements, amendments or
restatements thereof.
"Title Company" shall mean Beach Abstract & Guaranty Co., as agent for
Chicago Title Insurance Company.
"Title Insurance Policy" shall mean an ALTA Loan Policy in the
principal amount of the Note insuring to Resure that the Mortgage constitutes a
valid binding and enforceable first priority lien covering the Land, and is
subject only to those exceptions and encumbrances which Resure may approve, in
writing, and those set forth on Exhibit "D" affixed hereto, issued by the Title
Company, such Title Insurance Policy to provide extended coverage over the
printed general exceptions and deletion of creditors' rights exclusions, and to
include the following endorsements to Resure: (i) Comp. 1, (ii) usury, (iii)
3.0 zoning, (iv) variable interest rate, (v) doing business (insuring that no
qualification in Arkansas by Resure will be necessary for enforceability), (vi)
access to public road or highway and (vii) tax parcel (tax bills apply only to
the Land).
ARTICLE II
CONTRIBUTION AGREEMENT
2.1 Issuance of Debenture. In reliance upon and induced by the
representations, warranties and covenants of AWEC contained in the Contribution
Documents, Resure agrees to deliver to AWEC at Closing, in accordance with this
Agreement, the Debenture.
CONTRIBUTION AGREEMENT/PAGE 3(8/30/95 Draft)
2.2 Closing. The fully executed Debenture shall be delivered to AWEC
(the "Closing") at the offices of Beach Abstract & Guaranty Co., 100 Center
Street, Little Rock, Arkansas, on or before September 15, 1995, (the "Closing
Date").
ARTICLE III
CONDITIONS PRECEDENT
3.1 Conditions Precedent of Resure to Contribution. As a condition to
the obligation of Resure to Deliver the Debenture, Resure shall have received
on or before the Closing Date each of the following, in form and substance
satisfactory to Resure and its counsel:
(a) This Agreement, duly executed by AWEC;
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(b) The Note, duly executed by AWEC;
(c) The Mortgage, duly executed by AWEC and all other necessary
parties;
(d) The Mortgage shall have been recorded in the mortgage records of
the appropriate county or counties, with all filing fees therefore paid;
(e) A paid Title Insurance Policy;
(f) A Current Survey acceptable to Resure;
(g) Phase I Environmental Audit for the land by an engineering firm
acceptable to Resure reflecting that no Hazardous Materials are located upon the
Land, in form and substance satisfactory to Resure;
(h) The Appraisal;
(i) Certificate of Good Standing for AWEC, from the Arkansas Secretary
of State dated within thirty (30) days prior to Closing;
(k) A certificate, dated the date of the Closing, as to the incumbency
and the authenticity of the signature(s) of the officer(s) of AWEC executing
the Contribution Documents;
(l) A copy of AWEC's Articles of Incorporation and By-Laws, certified
as of the date of closing;
(m) The opinion of AWEC's counsel in substantially the form attached
hereto as Exhibit "E";
CONTRIBUTION AGREEMENT/PAGE 4
(n) A fully executed Environmental Indemnity Agreement in the form
attached hereto as Exhibit "F", and a fully executed Security Agreement in the
form attached hereto as Exhibit "G";
(o) Certificate of Insurance as required by the Mortgage;
(p) A current financial statement of AWEC satisfactory to Resure; and
(q) Evidence, satisfactory to Resure, that the Land has adequate
access to water, sewer, electric and telephone utility services to the
boundaries of the Land.
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3.2 Conditions Precedent of AWEC. As a condition to the obligation of
AWEC to Deliver the Note and Mortgage, AWEC shall have received on or before
the Closing Date each of the following, in form and substance satisfactory to
the AWEC and its counsel:
(a) This Agreement, duly executed by Resure;
(b) The Debenture, duly executed by Resure;
(c) Certificate of Good Standing for Resure, from the Illinois
Secretary of State dated within thirty (30) days prior to Closing;
(d) A certificate, dated the date of the Closing, as to the incumbency
and the authenticity of the signature(s) of the officer(s) of Resure executing
the Resure Documents;
(e) A copy of Resure's Articles of Incorporation and By-Laws,
certified as of the Date of Closing; and
(f) The opinion of Resure's counsel in substantially the form attached
hereto as Exhibit "H".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
AWEC represents and warrants to Resure that:
4.1 Incorporation. Good Standing and Due Qualification. AWEC is a
corporation duly incorporated, validly existing, and in good standing under the
laws of Arkansas, has the corporate power and authority to own its assets and
to transact the business in which it is now engaged or proposed to be engaged
in, and is duly qualified as a foreign corporation and in good standing under
the laws of each other jurisdiction in which such qualification is required.
CONTRIBUTION AGREEMENT/PAGE 5 (8/30/95 Draft)
4.2 Corporate Power and Authority. The execution, delivery, and
performance by AWEC of the Contribution Documents to which it is a party have
been duly authorized by all necessary corporate action and do not and will not
(1) require any consent or approval of the stockholders of such corporation;
(2) contravene such corporation's charter or bylaws; (3) violate any provision
of any law, rule, regulation (including, without limitation, Regulations U and
X of the Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination, or award
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presently in effect having applicability to such corporation; (4) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which such
corporation is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any lien in
favor of third parties, upon or with respect to any of the properties now owned
or hereafter acquired by such corporation; and (6) cause such corporation to be
in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or aware of any such indenture, agreement,
lease or instrument.
4.3 Legally Enforceable Agreement. This Agreement is, and each of the
other Contribution Documents when delivered under this Agreement will be,
legal, valid and binding obligations of AWEC, as the case may be, enforceable
against AWEC in accordance with their respective terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, insolvency, and
other similar laws affecting creditors' rights generally.
4.4 Labor Disputes and Acts of God. Neither the business nor the
properties of AWEC are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by
insurance) materially and adversely affecting such business properties or the
operation of AWEC.
4.5 Other Agreements. AWEC is not a party to any indenture, loan, or
credit agreement, or to any lease or other agreement or instrument, or subject
to any charter or corporate restriction which could have a material adverse
effect on the business, properties, assets, operations, or conditions,
financial or otherwise, of AWEC or the ability of AWEC to carry out its
obligations under the Contribution Documents to which it is a party
4.6 Litigation. There is no pending or threatened action or proceeding
against or affecting AWEC before any court, governmental agency, or arbitrator
which may, in any one case or in the aggregate, materially adversely affect the
financial condition, operations, properties, or business of AWEC or the ability
of AWEC to perform its obligations under the Contribution Documents to
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CONTRIBUTION AGREEMENT/PAGE 6(8/30/95 Draft)
which it is a party. There are no outstanding judgments against AWEC.
4.7 ERISA. AWEC is in compliance in all material respects with all
applicable provisions of the Employee Retirement Incomes Security Act of 1974,
as amended ("ERISA"). Neither a reportable event nor a prohibited transaction
thereunder has occurred and is continuing with respect to any pension plan
covered by Title IV of ERISA in which AWEC is an employer (the "Plan"); no
notice of intent to terminate a Plan has been filed, nor has any Plan been
terminated; no circumstances exist which constitute grounds entitling the
Pension Benefit Guaranty Company ("PBGC") to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; AWEC has not completely or partially withdrawn
from a multi-employer plan; AWEC has met its minimum funding requirements under
ERISA with respect to its Plan, and the present value of all vested benefits
under each Plan exceeds the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan and
in accordance with the provisions of ERISA; and AWEC has not incurred any
liability to the PBGC under ERISA.
4.8 Operation of Business. AWEC possesses all licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted, and AWEC is not in violation of any valid
rights of others with respect to any of the foregoing.
4.9 Taxes. AWEC has filed all tax returns (federal, state, and local)
required to be filed and have paid all taxes, assessments, and governmental
charges and levies thereon to be due, including interest and penalties.
4.10 Environmental Warranty. To the best of its knowledge, information
and belief, after due inquiry, AWEC has duly complied with, and its business,
operations, assets, equipment, property, leaseholds, or other facilities are in
compliance with, the provisions of all federal, state and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder. AWEC has been issued (or has applied for) and will
maintain all required federal, state and
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local permits, licenses, certificates and approvals relating to (1) air
emissions; (2) discharges to surface water or groundwater; (3) noise emissions;
(4) solid or liquid waste disposal; (5) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or wastes
(intended hereby and hereafter to include any and all such materials listed in
any federal, state, or local law, code or ordinance and all rules and
regulations promulgated thereunder as hazardous or potentially hazardous); or
(6) other environmental, health, or safety matters. AWEC has not
CONTRIBUTION AGREEMENT/PAGE 7(8/30/95 Draft)
received notice of, nor knows of, or suspects facts which might constitute any
violations of any federal, state or local environmental, health, or safety
laws, codes or ordinances, and any rules or regulations promulgated thereunder
with respect to its businesses, operations, assets, equipment, property,
leaseholds, or other facilities. Except in accordance with a valid governmental
permit, license, certificate, or approval, there has been no emission, spill,
release, or discharge into or upon (1) the air; (2) soils or any improvements
located thereon; (3) surface water or ground-water; or (4) the sewer, septic
system or waste treatment, storage or disposal system servicing the premises of
any toxic or hazardous substances or wastes at or from the premises; and
accordingly the premises of AWEC and the Land are free of all such toxic or
hazardous substances or wastes. There has been no compliant, order, directive,
claim, citation or notice by any governmental authority or any person or entity
with respect to (1) air emissions; (2) spills, releases or discharges to soils
or improvements located thereon, surface water, groundwater or the sewer,
septic system or waste treatment, storage or disposal systems servicing the
premises; (3) noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation, or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health or safety matters
affecting AWEC or its business, operations, assets equipment, property,
leaseholds, or other facilities. AWEC does not have any indebtedness,
obligation, or liability, absolute or contingent, matured or not matured, with
respect to the storage, treatment, cleanup or disposal of any solid wastes,
hazardous wastes or other toxic or hazardous substances (including, without
limitation, any such indebtedness, obligation or liability with respect to any
current regulation, law, or statute regarding such storage,
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treatment, cleanup or disposal).
4.11 Survival of Warranties. All representations and warranties
contained in this Agreement or any of the other Contributions Documents shall
survive the execution and delivery of this Agreement and shall be true from the
date of this Agreement until the Note shall be paid in full.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF Resure
Resure represents and warrants to AWEC that:
5.1 Incorporation, Good Standing and Due Qualification. Resure is a
corporation duly incorporated, validly existing, and in good standing under the
laws of Illinois, has the corporate power and authority to own its assets and
to transact the business in which it is now engaged or proposed to be engaged
in, and is duly
CONTRIBUTION AGREEMENT/PAGE 8(8/30/95 Draft)
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required.
5.2 Corporate Power and Authority. The execution, delivery, and
performance by Resure of the Contribution Documents to which it is a party have
been duly authorized by all necessary corporate action and do not and will not
(1) require any consent or approval of the stockholders of such corporation;
(2) contravene such corporation's charter or bylaws; (3) violate any provision
of any law, rule, regulation (including, without limitation, Regulations U and
X of the Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination, or award presently in effect
having applicability to such corporation; (4) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which such corporation is a party or
by which it or its properties may be bound or affected; (5) result in, or
require, the creation or imposition of any lien in favor of third parties, upon
or with respect to any of the properties now owned or hereafter acquired by
such corporation; and (6) cause such corporation to be in default under any
such law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or
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aware of any such indenture, agreement, lease or instrument.
5.3 Legally Enforceable Agreement. This Agreement is, and each of the
other Resure Documents when delivered under this Agreement will be, legal,
valid and binding obligations of Resure, as the case may be, enforceable
against Resure in accordance with their respective terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, insolvency, and
other similar laws affecting creditors' rights generally.
5.4 Labor Disputes and Acts of God. Neither the business nor the
properties of Resure are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by
insurance) materially and adversely affecting such business properties or the
operation of Resure.
5.5 Other Agreements. Resure is not a party to any indenture, loan, or
credit agreement, or to any lease or other agreement or instrument, or subject
to any charter or corporate restriction which could have a material adverse
effect on the business, properties, assets, operations, or conditions,
financial or otherwise, of Resure or the ability of Resure to carry out its
obligations under this Agreement or the Lender Documents to which it is a
party.
CONTRIBUTION AGREEMENT/PAGE 9(8/30/95 Draft)
5.6 Litigation. There is no pending or threatened action or proceeding
against or affecting Resure before any court, governmental agency, or
arbitrator which may, in any one case or in the aggregate, materially adversely
affect the financial condition, operations, properties, or business of Resure
or the ability of Resure to perform its obligations under this Agreement or the
Lender Documents to which it is a party. There are no outstanding judgments
against Resure.
5.7 ERISA. Resure is in compliance in all material respects with all
applicable provisions of the Employee Retirement Incomes Security Act of 1974,
as amended ("ERISA"). Neither a reportable event nor a prohibited transaction
thereunder has occurred and is continuing with respect to any pension plan
covered by Title IV of ERISA in which Resure is an employer (the "Plan"); no
notice of
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intent to terminate a Plan has been filed, nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the Pension Benefit
Guaranty Company ("PBGC") to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; Resure has not completely or partially withdrawn from a
multi-employer plan; Resure has met its minimum funding requirements under
ERISA with respect to its Plan, and the present value of all vested benefits
under each Plan exceeds the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan and
in accordance with the provisions of ERISA; and Resure has not incurred any
liability to the PBGC under ERISA.
5.8 Operation of Business. Resure possesses all licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted, and Resure is not in violation of any valid
rights of others with respect to any of the foregoing.
5.9 Taxes. Resure has filed all tax returns (federal, state, and
local) required to be filed and have paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
5.10 Survival of Warranties. All representations and warranties of
Resure contained in this Agreement or any of the other Contributions Documents
shall survive the execution and delivery of this Agreement and shall be true
from the date of this Agreement until the Debenture shall be paid in full.
CONTRIBUTION AGREEMENT/PAGE 10(8/30/95 Draft)
ARTICLE VI
MISCELLANEOUS
6.1 Amendments Etc. No amendment, modification, termination or waiver
of any provision of any Contribution Document to which AWEC is a party, nor
consent to any departure by AWEC from any Contribution Document to which it is
a party, shall in any event be effective unless the same shall be in writing
and signed by Resure,
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and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
6.2 Notices, Etc. All notices and other communications provided for
under this Agreement and under the other Contribution Documents to which AWEC
is a party shall be in writing (including telegraphic, telex, and facsimile
transmissions) and mailed or transmitted or delivered, if to AWEC, at its
address at:
AWEC Development Corporation
600 Pine Forest Circle
Maumelle, Arkansas 72113
ATTN: David Paes
and if Resure, at its address at:
Resure, Inc.
311 South Wacker Drive
Suite 400
Chicago, IL 60606
or, as to each party, at such other address as shall be designated
by such party in a written notice to the other party complying as
to delivery with the terms of this Section. Except as otherwise
provided in this Agreement, all such notices and communications
shall be effective when deposited in the mails or delivered to the
telegraph company, or sent, answer back received, respectively
addressed as aforesaid, except that notices to Resure shall not be
effective until received by Resure.
6.3 Waiver. No failure or delay on the part of Resure in exercising
any right, power, or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. The rights and remedies provided herein are
cumulative, and are not exclusive of any other rights, powers, privileges, or
remedies, now or hereafter existing, at law or in equity or otherwise.
6.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of AWEC and Resure and their respective successors and
assigns.
CONTRIBUTION AGREEMENT/PAGE 11(8/30/95 Draft)
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6.5 Governing Law. The Contribution Documents shall be governed by,
and construed in accordance with, the laws of the State of Arkansas.
6.6 Severability of Provisions. Any provision of any Contribution
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such
Contribution Documents or affecting the validity or enforceability of such
provision in any other jurisdiction.
6.7 Headings. Article and Section headings in the Contribution
Documents are included in such Contribution Documents for the convenience of
reference only and shall not constitute a part of the applicable Contribution
Documents for any other purpose.
6.8 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which together
shall constitute one and the same instrument.
6.9 Additional Documents; Further Assurances. AWEC shall execute,
file, or refile (or cause to be executed, filed or refiled), such mortgages,
security instruments, financing statements, continuation statements,
modification agreements, and like documents as lender may from time to time
require to perfect and maintain or continue to perfect and maintain the
priority of its lien and any and all security interests or assignments granted
or created or intended to be created by AWEC to secure payment of the Note.
6.10 Coordination With Other Contribution Documents. The benefits,
rights and remedies of Resure or AWEC contained herein or provided for in any
of the other Contribution Documents are cumulative. To the extent of any
conflict between any provision of this Agreement and any provision contained in
any of the other Contribution Documents, the provisions of this Agreement shall
control, except that any provision of any other document giving the greater
security or additional rights and remedies to Resure shall control over this
Agreement.
6.11 Construction.
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(a) Each party and counsel for each party have reviewed this Agreement
and, accordingly, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.
CONTRIBUTION AGREEMENT/PAGE 12(8/30/95 Draft)
(b) Whenever the context shall require, the masculine shall include
the feminine and neuter, and the singular shall include the plural, and
conversely.
6.12 Incorporation of Recitals and Exhibits. All of the preambles and
all of the recitals set forth in this Agreement are made a part of this
Agreement. In addition, any and all exhibits to this Agreement are hereby
specifically made a part of and incorporated into this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
AWEC:
AWEC DEVELOPMENT CORPORATION
BY: /s/ David Paes
TITLE: Vice President
RESURE:
RESURE, INC.
BY: /s/ Wolfgang Daniel
TITLE: President
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<PAGE> 1
EXHIBIT 10.2
Subordinated Surplus Debenture, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.
RESURE, INC.
SUBORDINATED SURPLUS DEBENTURE
$3,500,000
Chicago, Illinois
September 11, 1995
FOR VALUE RECEIVED, RESURE, INC., an Illinois business corporation
(the "Company"), subject to the terms and conditions hereinafter set forth,
promises to pay to AWEC Development Corporation (the "Payee"), the principal
sum of Three Million Five Hundred Thousand Dollars ($3,500,000) together with
interest at the rate of seven percent (7%) per annum on the unpaid principal
balance hereof. Commencing on the date hereof and continuing until the
principal balance hereof shall have been paid in full, interest is to be paid
semi-annually on the 30th day of June and 31st day of December of each year
beginning December 31, 1995. The principal hereof and interest hereon shall be
payable at the offices of the Company in Illinois, in lawful money of the
United States of America. The principal hereof shall be paid on June 30, 2000.
The obligation of the Company to pay the principal hereof and the
interest hereon is subject to the following terms and conditions:
1. No part of the principal hereof or interest hereon shall be paid or
payable on demand of the Payee or otherwise, or be carried, considered or
reported as a legal liability of the Company. The entire principal amount
hereof and the accrued interest hereon remaining unpaid from time to time shall
be carried, considered and reported in all financial statements published by
the Company or filed with the Illinois Insurance Exchange (the "Exchange") as a
special surplus account.
2. No part of the principal hereof or interest hereon shall be paid or
payable except after prior authorization for payment thereof by the Board of
Trustees (the "Board") of the Exchange, such authorization not to be
unreasonably withheld. However, it shall be considered reasonable for
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the Board to withhold such authorization, despite the Company's compliance with
all other terms and conditions, if such payment of principal or interest (i)
would render the Company out of compliance with Exchange regulations, or (ii)
would constitute the principal cause for the Exchange suffering regulatory
sanctions in any State. Repayment of the principal hereof or payment of
interest hereon may be made only with the approval of the Board when it is
satisfied that the financial condition of the Company warrants that action,
but, absent specific identifiable conditions, approval may not be withheld by
the Board if the Company shall have satisfactory evidence that such repayment
of principal or interest would not reduce the surplus as regards policyholders
of the Company to less than $5,000,000. "Surplus as regards policyholders," for
the purpose of this paragraph, is to be calculated as it would be for the
Company's most recent annual audited financial statement.
3. Subject to the foregoing, the Company shall have the right to
redeem this debenture and to pay interest accrued thereon, in whole or in part,
to the holder of this debenture without any penalty or premium whatsoever, at
any time. In the event that Talon Re Holdings, Inc. (the current sole
shareholder of the Company) enters into a definitive purchase agreement for the
sale of a controlling interest in the Company to any "unaffiliated" (as such
term is contemplated in Section 27 of the Exchange Regulations) person, the
Company shall have the right to repay or redeem this debenture and to pay
interest accrued thereon, without regard to the limitations set forth in
Paragraph 2 hereof, but only to the extent that such action would not render
the Company insolvent. At any time after August 31, 1997, the Payee shall have
the right, upon 30 days' prior written notice to the Company, to cause the
Company to redeem this debenture if, and only if, either prior to the date for
redemption or at the time of redemption, all principal, interest and any other
amounts due pursuant to the "Loan Documents" (as defined in paragraph 5 below)
have been satisfied in full (it being expressly understood, however, that even
if prior to August 31, 1997 Payee has satisfied in full all principal, interest
and any other amounts due pursuant to the Loan Documents, the Payee shall have
no right to cause the Company to redeem the debenture prior to such date). The
Company may redeem this debenture by tendering
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to the Payee the Contribution Note of AWEC Development Corporation of even date
herewith, marked "Paid in Full," along with the aggregate amount of all
principal payments made by the Payee to the Company under such Contribution
Note through the redemption date. In exchange, the Payee shall mark this
debenture "Paid in Full" and return it to the Company. Notwithstanding the
foregoing, the Company may not redeem this debenture without first obtaining
the prior approval of the Board, as set forth in Paragraph 2 above.
4. Repayment of the principal hereof and payment of the interest
hereon shall be and is hereby subordinated to the prior payment of, or
provision for all general liabilities of the Company, and the claims of
policyholders and creditors of the Company, but shall rank superior to the
claim, interest and equity of the shareholder of the Company, and such
subordination and superiority shall be equally applicable in the case of any
merger, consolidation, liquidation, rehabilitation, reorganization,
dissolution, sale or other disposal of all, or substantially all, of the assets
of the Company (including the assumption, whether by reinsurance or otherwise,
of a major portion of the business of the Company in force).
5. No act by the Company, or failure or default on the part of the
Company in any of its obligations under this debenture, shall give to the Payee
any right to declare the unpaid principal hereof or interest accrued hereon to
be due and payable immediately or otherwise, than in accordance with the terms
and conditions hereof. If at any time there is a failure to pay any installment
of interest or principal due pursuant to the debenture on its due date, the
Company shall cease to pay any dividends to its shareholder until such time as
all such past-due installments are made current. Notwithstanding any other
provision in this debenture to the contrary, the Company may offset any balance
or amounts due under this debenture against any amounts due to the Company from
the Payee under or in connection with any other contracts, obligations or
relationships between the Company and the Payee (including, but not limited to,
Payee's obligations under the following documents (collectively, the "Loan
Documents): the Contribution Agreement and the Loan Agreement of even date
herewith between the Company and the Payee and
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the Promissory Note, Mortgage and Environmental Indemnity Agreement executed by
Payee in connection with each such agreement), and if Payee is in default,
delinquent in its payment obligations, or otherwise fails to perform under or
in connection with any such contract, obligation or relationship (such default,
delinquency or failure being hereinafter referred to as a "Breach"), the
Company shall have the right to suspend the payment of all amounts due and
payable under this debenture while any such Breach is in effect. Such
suspension of the Company's obligations under this debenture shall not be
construed as a default by the Company under this debenture. At such time as the
Payee cures any and all Breaches (which, in the case of any default or event of
default as defined in any of the Loan Documents, shall not alter or extend any
cure period set forth in, or establish any new cure periods under, any of the
Loan Documents), the Company's obligations under this debenture shall resume as
if no Breach had occurred.
6. The debenture herein referred to shall be deemed to be recorded as
to both principal amount and interest, and no assignment hereof in whole or in
part, or of any interest hereunder, shall be effective or binding upon the
Company without the Company's written consent, and until such transfer or
assignment shall have been duly recorded on the books of the Company to be
maintained for such purpose, and any transfer or assignment hereof shall
require the surrender hereof to the Company at its principal office accompanied
by an appropriate instrument of transfer or assignment in form satisfactory to
the Company, provided that the Company may not and cannot be compelled or
required to act or effectuate any such assignment or transfer except after
compliance by the Payee or holder hereof with securities laws or regulations
deemed applicable by the Company. Neither may this debenture or any interest
hereunder be pledged or hypothecated except upon compliance with the foregoing.
7. By acceptance and as a part of the consideration for the issuance
hereof, the Payee acknowledges that it has been informed and has knowledge that
this debenture has not been registered under the Securities Act of 1933, as
amended, or the securities laws of any state, and that the Company has issued
this debenture pursuant to exemptions from registration under such act or laws.
Payee further acknowledges it is acquiring this
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debenture for investment purposes only and not with a view to, or as any part
of a plan for, public distribution and that this debenture may not be sold or
otherwise transferred in the absence of a registration statement or an
exemption from registration.
8. The Company and the Payee agree that no fee, commission,
compensation or valuable consideration whatever is or shall be paid, given or
allowed, directly or indirectly, to or for any person for in any manner aiding,
promoting or assisting the placement or purchase of this debenture and that no
discount in the principal amount hereof is or shall be paid or allowed in any
manner. The Company and the Payee further agree that the proceeds of this
debenture are being obtained by the Company to provide additional surplus funds
and the same shall be held and used by the Company for its general corporate
purposes and may be deposited, invested, reinvested or expended by the Company
for any such purpose. The Payee further agrees it shall have no right by reason
of the acquisition or ownership of this debenture, to direct, see to or inquire
as to the use, application or disposition made by the Company of the proceeds
hereof, nor shall such Payee, by reason of the acquisition or ownership hereof,
have any vote or voice in the affairs of the Company or its shareholder, nor
shall the Company have any sinking fund obligation with respect to the
repayment of this debenture.
9. If this debenture be called for redemption in accordance with its
terms and payment be duly provided therefor, interest shall cease to accrue
hereon from and after the date fixed for such redemption.
10. No recourse shall be had for the payment of the principal of, or
interest on, this debenture, or for any claim based hereon or otherwise in
respect hereof against any past, present or future incorporator, shareholder,
officer, or director, of the Company, or of any affiliate, predecessor or
successor corporation, all such liability being by the acceptance of this
debenture expressly waived and released.
11. This debenture is issued and delivered in the State of Illinois,
and its terms and provisions shall be interpreted, construed, enforced and
observed in accordance with the internal
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laws (as opposed to conflicts of law provisions) and decisions of the State of
Illinois, and the rules and regulations of the Illinois Insurance Exchange.
12. This debenture shall first be submitted to and approved by not
less than a majority of the voting shares of the Company and by the Board of
the Exchange. The terms hereof may be amended, modified, and altered from time
to time only by the mutual agreement of the parties subject to the prior
approval thereof by the holders of not less than a majority of the voting
shares of the Company and by the Board of the Exchange.
RESURE, INC.
By:
/s/ Wolfgang D. Daniel
President
ATTEST
By:
/s/ Frederick C. Easty
Vice President and Secretary
The terms and conditions of the foregoing instrument are hereby accepted by the
Illinois Insurance Exchange.
/s/ Gary.D. Hackley
V.P.-Regulatory Compliance
ATTEST
/s/ Gerald F. Murray, Secretary
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EXHIBIT 10.3
Non-Recourse Promissory Note, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.
NON-RECOURSE
PROMISSORY NOTE
(Secured by 409.73 Acre Tract)
$3.500,000.00
Little Rock, Arkansas
September 11, 1995
FOR VALUE RECEIVED, AWEC Development Corporation, an Arkansas
corporation (referred to as "Maker"), promises to pay to the order of Resure,
Inc., an Illinois corporation ("Payee"), at its office at 311 South Whacker
Drive, Suite 400, Chicago, Illinois 60606, or such other place as the holder of
this Note may from time to time designate, the principal sum of Three Million
Five Hundred Thousand Dollars ($3,500,000.00), together with interest thereon,
until maturity, at the rate of Seven Percent (7%) per annum. Interest shall be
calculated on the basis of a 365-day year. All payments hereunder shall be
payable in lawful money of the United States which shall be legal tender for
public and private debts at the time of payment. Said sums shall be due and
payable as follows:
Commencing on the date hereof and continuing until the principal balance hereof
shall have been paid in full, interest is to be paid semi-annually on the 30th
day of June and 31st day of December of each year beginning December 311995.
The entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon, shall be due and payable on June 30, 2000.
If any payment of principal or interest due under this Note shall
become due on a Saturday, Sunday or public holiday under the laws of the State
of Arkansas on which Payee is not open for business, such payment shall be made
on the next succeeding business day, and such extension of time shall in such
case be included in computing interest in connection with such payment.
This Note is secured by a Mortgage of even date herewith, executed by
Maker in favor of Payee, and the holder hereof is entitled to all of the liens,
benefits, rights and privileges thereof, including all collateral provided for
therein or in
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connection therewith. This Note may sometimes be referred to as the
"Contribution Note."
In the event of default in the payment of any installment of principal
or interest due hereunder, or any part thereof, or if there is an Event of
Default as defined in the Mortgage, then in such event the entire unpaid
principal balance hereof, together with all accrued interest, shall, at the
option of Payee, become at once due and payable without notice or demand except
such notice or
NON-RECOURSE PROMISSORY NOTE/PAGE 1(8/30/95 Draft)
demand, if any, as may be required in the Mortgage. Failure of Payee or other
holder hereof to exercise this option shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default. The
acceptance by Payee of any payment, partial or otherwise, made hereunder after
the time when it becomes due as herein set forth shall not establish a custom
or constitute a waiver by Payee of any right to enforce prompt payment hereof.
After any event of default, as defined in the Mortgage, and until such event of
default has been completely cured, this Note shall continue to bear interest on
the outstanding unpaid principal balance.
Maker may pre-pay this Note in whole or in part at any time without
premium or penalty.
If this obligation, after default, is placed in the hands of an
attorney for collection, or if Payee is made a party defendant in connection
with any litigation involving the real estate secured by the Mortgage of even
date herewith, the Maker, Guarantors and all other persons now or hereafter
liable hereon will be obligated to pay the holder hereof an additional sum, as
a reasonable attorney's fee, not to exceed Ten Percent (10%) of the unpaid
principal plus all accrued interest. This clause is intended to be in
compliance with Act 350 of the Arkansas Acts of 1951, approved March 20, 1951,
and any acts amendatory thereof. The payment of such amount shall be an
additional liability owing hereunder by Maker, payable on demand and bearing
interest, from the date of such demand until payment thereof to Payee or the
holder hereof.
Notwithstanding any provisions to the contrary contained in
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this Note or in any agreement securing or relating to the debt evidenced
hereby, it is expressly provided that in no case or event whatsoever shall the
aggregate of (i) all interest on the unpaid balance hereof, accrued or paid
from the date hereof and (ii) the aggregate of any other amounts accrued or
paid pursuant hereto or to any such other agreement, which under applicable
laws are or may be deemed to constitute interest, ever exceed the maximum rate
of interest which could lawfully be contracted for, charged or received on the
unpaid principal balance hereof, plus any other pertinent indebtedness. In this
connection, it is expressly stipulated and agreed that it is the intent of the
Maker and the Payee to contract in strict compliance with the applicable usury
laws from time to time in effect. In furtherance thereof, none of the terms of
this Note or any related agreement shall ever be construed to create a contract
to pay, as consideration for the use, forbearance or detention of money,
interest at a rate in excess of the maximum rate permitted to be contracted
for, charged or received by applicable law. If under any circumstances the
aggregate amounts paid hereon include amounts which by law are deemed interest,
which would exceed the maximum amount of interest which could lawfully have
been contracted for, charged or received, Maker stipulates that such amounts
will be deemed to have been paid
NON-RECOURSE PROMISSORY NOTE/PAGE 2(8/30/95 Draft)
as a result of an error on the part of both Maker and Payee, and the party
receiving such excess payment shall, promptly upon receiving such payment,
refund the amount of such excess or, at the Payee's option, credit such excess
against the unpaid principal balance hereof. In addition, all sums paid or
agreed to be paid to the holder hereof for the use, forbearance or detention of
money shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of the indebtedness represented
hereby, in the manner provided by law to the end that the actual rate of
interest hereon shall never exceed the applicable maximum rate. If any term or
provision of this Note or of any related agreement under any circumstances
would require the payment of an amount for the use, forbearance or detention of
money which, in addition to all other amounts theretofore paid and
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constituting interest under the applicable law, would exceed the maximum rate
of interest which could lawfully be charged under such circumstances, then the
amount which Maker or any other person liable therefor is obligated to pay in
such circumstances, but only in such circumstances, is hereby automatically
reduced to the maximum amount which could lawfully be charged under applicable
law. The maximum lawful rate of interest applicable hereto shall be the highest
of (i) the maximum rate provided by the laws of the State of Arkansas for loans
of the type evidenced hereby and by the instruments securing the indebtedness
evidenced hereby, or (ii) the maximum rate provided in applicable federal law
which preempts otherwise applicable state law, or (iii) the maximum rate
provided in any subsequently enacted law of the State of Arkansas applicable
hereto. To the extent that otherwise applicable state law is preempted by a
federal law which does not limit the rate of interest which may be charged,
this paragraph shall be inapplicable. The provisions of this paragraph shall
control all other provisions hereof and of all agreements, whether now or
hereafter existing and whether written or oral, between the Maker and the Payee
or between the Payee and any other person liable hereon. In connection with
this paragraph, Maker acknowledges and represents to Payee that the proceeds of
the loan evidenced hereby are and shall be used solely for a business purpose.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective heirs, personal representatives, successors and
assigns.
The records of Payee or any holder of this Note shall be prima facie
evidence of the amount owing under this Note.
This Note is being executed and delivered in Little Rock, Pulaski
County, Arkansas, and shall be construed and enforced in accordance with, and
be governed by, the laws of the State of Arkansas, except insofar as the laws
of the United States of America shall have application.
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NON-RECOURSE PROMISSORY NOTE/PAGE 3(8/30/95 Draft)
The Maker hereof hereby irrevocably appoints G. Robert Hardin, whose
address is 410 West Third, Suite 200, Little Rock, Arkansas, as its agent to
receive service of process for any and all lawsuits which may arise in Pulaski
County, Arkansas, concerning the enforcement of this Note.
The Maker hereof and all parties who at the time may be liable hereon
in any capacity, jointly and severally, waive presentment, demand for payment,
protest and notice of dishonor of this Note.
If any provision of this Note shall be held invalid, prohibited or
unenforceable under any applicable law, such invalidity, prohibition or
unenforceability shall be limited to such provision and shall not affect or
invalidate any other provision herein, and to that extent, the provisions
hereof are severable. Provided, however, that if any provision that is held
invalid, prohibited or unenforceable relates to the payment of any monetary
sum, then the entire outstanding principal balance hereunder, together with all
interest accrued thereon and all other amounts payable hereunder to the extent
permitted by law, shall become immediately due and payable at the option of
Payee or the holder hereof.
The liability of the Maker, for payment of principal and interest
under this Note is limited. The Maker shall not be subject to any judgment or
liability whatsoever, other than to the extent of the Maker's interest in any
asset which secures the unpaid principal balance of this Note, plus interest
thereof. No personal liability shall be ascertained or enforceable against the
Maker with respect to any amount due the noteholder under this Note. No party
claiming by, through, or under the noteholder shall have any rights against the
Maker in excess of, or greater than, the rights conferred upon Maker under the
terms of this Note. Nothing contained in this paragraph shall be construed to
prevent Payee or the holder hereof from exercising any other remedy allowed by
law, in equity, by
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statute or by the terms of this Note, the Mortgage or in any agreement relating
to the debt evidenced hereby which is not inconsistent with the foregoing.
Notwithstanding the limitation on Maker's liability as set forth in
the preceding paragraph, the Payee or the holder hereof may seek and obtain a
monetary judgment against the Maker, its successors and assigns, and the Maker
and its successors and assigns shall have full personal recourse liability, for
all damages resulting from the following:
(a) Fraud or misrepresentation by the Maker or any agent or
representative of Maker;
NON-RECOURSE PROMISSORY NOTE/PAGE 4 (8/30/95 Draft)
(b) The misapplication of any proceeds or awards resulting from the
condemnation of all or any part of the real estate described in the Mortgage
(to the full extent of such misapplication of proceeds or awards);
(c) Failure of Maker to comply with the environmental covenants and
obligations set forth in the Environmental Indemnity Agreement of even date
herewith by Maker for the benefit of the Payee; and
(d) The filing of a voluntary petition or assenting to an involuntary
petition in any bankruptcy, liquidation or receivership proceedings by the
Maker and/or any of the Maker's shareholders (to the extent of costs and
expenses, including, but not limited to, attorneys' and other professionals'
fees and costs, incurred in representation of Payee or the holder hereof in
such bankruptcy or other proceeding).
AWEC DEVELOPMENT CORPORATION
BY: /s/ David Paes
TITLE: Vice President
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EXHIBIT 10.4
Non-Recourse Mortgage, dated September 11, 1995, between AWEC Development
Corporation and Resure, Inc.
95 53328
Non-Recourse Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. 95 53328
NON-RECOURSE MORTGAGE
(with Assignment of Leases and Rents securing Contribution Note)
KNOW ALL MEN BY THESE PRESENTS:
1. Grant of Mortgage in Property. That AWEC Development Corporation,
an Arkansas corporation (hereinafter sometimes referred to as the "Mortgagor"),
for valuable consideration, and in order to induce Resure, Inc., an Illinois
corporation (the "Mortgagee"), to loan to Mortgagor the principal sum of Three
Million Five Hundred Thousand Dollars ($3,500,000.00), does hereby grant,
bargain, sell, convey, assign, grant a security interest in and deliver unto
the Mortgagee, and unto its successors and assigns, the following described
lands lying in Pulaski County, Arkansas:
That approximately 409.73 acres tract of land in the City of Maumelle, Pulaski
County, Arkansas, which is marked Exhibit "A" affixed hereto and by this
reference made a part hereof (the "Land").
Together with all easements, rights-of-way and rights used in connection
therewith, or as a means of access thereto, and all tenements, hereditaments
and appurtenances thereunto belonging, or appertaining thereto, and all water
rights and shares of stock evidencing the same;
Together with, all right, title and interest of Mortgagor, now owned or
hereafter acquired, in or to any land lying within the right-of-way of any
street, open or proposed, adjoining the Land, and any and all sidewalks, alleys
and strips and gores of land adjacent to or used in connection with the Land;
Together with, all of the estate, interest, right, title, other claim or
demand, including claims or
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demands with respect to the proceeds of insurance and effect with respect
thereto, which Mortgagor now has or may hereafter acquire in the Land, and any
and all awards made for the taking by eminent domain, or by any proceeding or
purchase in lieu thereof of the whole or any part of the Land, including
without limitation any awards resulting from a change in grade of streets and
awards for severance damages. (collectively referred to as the "Property").
MORTGAGE/PAGE 1
2. Assignment of Leases and Rents.
2.1 Assignment. Mortgagor hereby assigns to Mortgagee all of
Mortgagor's interest as lessor in any and all leases now or hereafter existing
with respect to any part of the Property, and all rentals, issues and profits
due or which may become due to Mortgagor under the terms of such leases.
2.2 Rights of Mortgagor Prior to Default. This assignment is an
absolute assignment and not an assignment as security only. However, so long
as no Event of Default exists hereunder, Mortgagor shall have the right to
collect all rents due or which may become due under any of the assigned leases
(provided that Mortgagor may not accept prepayment of any rent due more than
one month in advance unless it has received the prior written consent of
Mortgagee to such action), to execute new leases, to renew and extend leases,
to enforce any covenants or conditions of such leases, and otherwise to deal
with such leases as if Mortgagor were the owner thereof. In no event, however,
shall Mortgagor, without prior written permission of Mortgagee, accept a
surrender of any such lease, or modify any such lease in a manner which would
materially amend or modify any such lease so as to have an adverse effect on
Mortgagee's interest therein. Such material modifications include but are not
limited to payment of rent more than thirty (30) days in advance, reduction of
rent and modification in length of the term of any such lease.
2.3 Rights of Mortgagee Upon Default. From and after the occurrence of
any Event of Default hereunder, Mortgagor shall no longer have any rights with
respect to any leases assigned hereby, and Mortgagee shall be entitled to
notify any lessees to pay all rentals due, or which may thereafter become due,
under such leases
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directly to Mortgagee (MORTGAGOR HEREBY DIRECTING AND AUTHORIZING ALL TENANTS
UNDER SUCH LEASES TO PAY ALL RENTS AND OTHER AMOUNTS DUE UNDER SUCH LEASES TO
MORTGAGEE UPON DEMAND WITHOUT THE NECESSITY OF ANY FURTHER CONSENT OF OR
LIABILITY TO MORTGAGOR AND ANY TENANT SHALL BE ENTITLED TO RELY UPON A WRITTEN
DEMAND BY MORTGAGEE FOR SUCH PAYMENT AND SHALL BE FULLY PROTECTED FROM ANY
CLAIMS BY MORTGAGOR FOR ALL PAYMENTS MADE TO MORTGAGEE FOLLOWING SUCH DEMAND
FROM MORTGAGEE), and in all other respects to exercise all the rights and
privileges of ownership of such leases, either in its own name or in
Mortgagor's name. Without in any way limiting the foregoing, Mortgagee shall
have the right, power and privilege (but shall be under no duty) to take
possession of the property subject to any lease and have, hold, manage, lease
and operate the same on such terms and for such period of time as Mortgagee may
deem proper; and either with or without taking possession of the property
subject to any lease, Mortgagee shall have the right, power and privilege (but
shall be under no duty) immediately to demand, collect and sue for, in its own
name or in the name of Mortgagor, all rents, rentals and other sums of money
due and payable under the leases, as they become due and payable, including
those past due and unpaid, and to apply such rents, rentals and other sums of
money (in such order as Mortgagee shall determine) to the payment of:
(a) All expenses of managing the property subject to any lease,
including, but not limited to, the salaries, fees and wages of a managing agent
and such other employees as Mortgagee may deem necessary or desirable, and all
expenses of operating and maintaining the property subject to any such leases,
including, but not limited to, all taxes, assessments, charges, claims, utility
costs, and premiums for insurance, and the costs of all alterations,
renovations, repairs or replacements, and all expenses incident to taking and
retaining possession of the property subject to any lease and/or collecting the
rent, rentals and other sums of money due and payable under any lease; and
(b) The Note, principal and interest, and attorneys' and collection
fees, in such order as Mortgagee, in its sole discretion, may determine. A
written demand by Mortgagee under such leases for the payment of rents, rentals
and other sums of money that become due under the leases shall be sufficient to
warrant
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such lessees or tenants to make all future payments of such rents, rentals and
other sums of money directly to Mortgagee without the necessity of further
consent by or from Mortgagor. Each such lessee or tenant shall be entitled to
rely upon a written demand by Mortgagee for such payment and shall be fully
protected from any claims by Mortgagor for all payments made to Mortgagee after
receipt of such written demand.
Mortgagee shall not be liable for any loss sustained by Mortgagor
resulting from Mortgagee's failure to let the property subject to any lease, or
any part thereof, or from any other act or omission of Mortgagee in managing
the property subject to any lease.
2.4 Exculpation of Mortgagee/Assignee. The acceptance by Mortgagee of
this Assignment of Leases and Rents (as a result of Mortgagee's acceptance and
recordation of this instrument), with all of the rights, powers, privileges and
authority created hereby, shall not, prior to entry upon and taking possession
of the Property by Mortgagee, be deemed or construed to constitute Mortgagee as
a "mortgagee in possession" nor thereafter or at any time or in any event
obligate the Mortgagee to appear in or defend any action or proceeding relating
to the leases, the rents, issues and profits due or to become due therefrom, or
the Property, or to take any action hereunder, or to expend any money or incur
any expenses or perform or discharge any obligation, duty or liability under
any leases, or to assume any obligation or responsibility for any security
deposits or other deposits delivered to Mortgagor by any lessee or tenant and
not assigned and delivered to Mortgagee, nor shall Mortgagee be liable in any
way for any injury or damage to person or property sustained by any person or
persons, firm or corporation in or about the Property.
2.5 Reassignment. Upon final release of this Mortgage, Mortgagee shall
assign to Mortgagor or its successors all leases assigned by this Article.
3. Obligations Secured by Mortgage. To have and to hold the same unto
the above-named Mortgagee and unto its successors and assigns forever.
This Mortgage is to secure a loan from Mortgagee to Mortgagor
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in the principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000.00), together with interest thereon until maturity at the rate of
Seven Percent (7%) per annum (see paragraph 5 below).
4. Mortgagor covenants with the Mortgagee, its successors and assigns,
that Mortgagor will forever warrant and defend the title to all of the Property
against all lawful claims whatever; provided, however, the interest owned by
the Mortgagor in the Land, is subject to a junior Mortgage in favor of Resure,
Inc., filed September 12, 1995, as Document No95 53327 with the records of the
Pulaski County Circuit Clerk and Recorder's Office, Pulaski County, Arkansas.
5. Provided, however, the foregoing conveyance is given as a Mortgage
for the purpose of securing the following:
(a) A Promissory Note (referred to therein as the Contribution Note)
of even date herewith executed and delivered by Mortgagor (the "Note"), and all
successive extensions and renewals of the indebtedness represented thereby,
evidencing a principal indebtedness (which indebtedness, and all extensions and
renewals thereof are referred to as the "Primary Indebtedness") of Three
Million Five Hundred Dollars ($3,500,000.00), executed by Mortgagor and payable
to the order of Mortgagee, said Note bearing interest from date until paid at
the rate recited in said Note and payable in full on June 30, 2000, and
interest only Semi-Annually, the terms of which are hereby incorporated by
reference.
(b) The repayment to the Mortgagee of all of its reimbursable
expenses, at any time accruing to the Mortgagee under the provisions of this
Mortgage and the performance of every other obligation of Mortgagor in this
Mortgage.
Upon payment of all such sums, this Mortgage shall become void and
will be released by release deed to be recorded at the expense of the
Mortgagor.
6. Covenants. Mortgagor agrees not to (i) commit, suffer or permit any
act to be done in or upon the Property in violation of any law, ordinance or
regulation relating to Property, (ii) make or
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erect any improvements or alterations upon the Property, or construct any
buildings thereon, without the prior written consent of Mortgagee; (iii) change
the zoning, use or character of the Property, without the prior written consent
of Mortgagee; and (iv) hereafter pledge, hypothecate, mortgage, encumber, sell
or otherwise transfer all or any portion of the Property, or the Mortgagor's
interest therein, excepting only a sale thereof with the Mortgagee's prior
written consent.
7. Insurance. Mortgagor at all times shall carry and maintain the
following insurance:
7.1 Coverage Required.
(i) Comprehensive public liability insurance on an "occurrence basis"
against claims for "personal injury" including, without limitation, bodily
injury, death or property damage occurring on, in or about the Property and the
adjoining streets, sidewalks and passageways.
All such policies of insurance required by the Mortgagee shall be in
the form, with such companies and in amounts satisfactory to the Mortgagee and
shall name the Mortgagee as an additional party insured. All policies of
insurance required by the Mortgagee shall contain an endorsement or agreement
by the insurer that any 1088 shall be payable in accordance with the terms of
such policy notwithstanding any act or negligence of the Mortgagor which might
otherwise result in forfeiture of said insurance and the further agreement of
the insurer waiving all rights of setoff, counterclaim or deduction against
Mortgagor.
7.2 Delivery of Policies, Payments of Premiums. That all policies of
insurance shall be issued by companies in an amount in each company
satisfactory to Mortgagee. All policies of insurance shall have attached
thereto a lender's 1088 payable endorsement for the benefit of Mortgagee in a
form satisfactory to Mortgagee. Mortgagor shall furnish Mortgagee with an
original policy of all policies of required insurance. If Mortgagee consents to
Mortgagor providing any of the required insurance through blanket policies
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carried by Mortgagor and covering more than one location, then Mortgagor shall
furnish Mortgagee with a certificate of insurance of each such policy setting
forth the coverage, the limits of liability, the name of carrier, the policy
number, and the expiration date. At least thirty (30) days prior to the
expiration of each such policy, Mortgagor shall furnish Mortgagee with evidence
satisfactory to Mortgagee of the payment of premium and the reissuance of a
policy continuing insurance in force as required by this Mortgage. All such
policies shall contain a provision that such policies will not be cancelled or
materially amended, which term shall include any reduction in the scope or
limits of coverage, without at least thirty (30) days prior written notice to
Mortgagee. In the event Mortgagor fails to provide, maintain, keep in force or
deliver and furnish to Mortgagee the policies of insurance required by this
Mortgage, Mortgagee may procure such insurance or single-interest insurance for
such risk covering Mortgagee's interest and Mortgagor will pay all premiums
thereon promptly upon demand by Mortgagee, and until such payment is made by
Mortgagor, the amount of all such premiums, together with interest thereon at
the rate recited in the Note shall be secured by this Mortgage.
8. Taxes and Impositions. Mortgagor covenants to pay, prior to
delinquency, all taxes, special improvement assessments and other governmental
charges against the Property at any time levied or becoming due.
9. Priority of Lien. Mortgagor covenants to prevent the Property from
becoming encumbered by any lien or charge having priority over, or on a parity
with, the lien of this Mortgage. In the event the Property becomes subject to
any federal, state, county or municipal tax lien, special assessment lien,
improvement district lien, mechanic's lien or any other lien or claim for lien
of whatever kind or nature, Mortgagor shall promptly pay or cause to be paid
the obligation or indebtedness evidenced by such lien or claim and shall
promptly deliver to the Mortgagee evidence satisfactory to the Mortgagee of the
payment and discharge of such lien or claim. If Mortgage shall fail to promptly
pay or cause to be paid such obligation or indebtedness, Mortgagee shall have
the right, but shall not be obligated, to pay such obligation or indebtedness
to the claimant thereof, and in the event of such
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payment, (i) Mortgagee shall be subrogated to the rights of such claimant,
notwithstanding that the lien or claim may be released of record; and (ii) the
amount of such payment shall be an additional liability owing hereunder by
Mortgagor, payable on demand and bearing interest, from the date of such demand
until payment thereof to Mortgagee, at the rate set forth in the Note.
10. Events of Default. The occurrence of any of the following shall be
deemed an "Event of Default":
(a) Upon the filing of a voluntary or involuntary petition to subject
Mortgagor (or any party obligated as maker, endorser, surety or guarantor for
the payment of the secured indebtedness) to any bankruptcy, debt adjustment,
receivership or other insolvency proceeding.
(b) Upon the occurrence of any event, which, under the terms of the
instrument(s) at any time evidencing the indebtedness secured hereby, warrants
an acceleration (at the option of the payee) of the maturity of said
indebtedness.
MORTGAGE/PAGE 6 (8/30/95 Draft)
(c) If default shall be made in the payment of any part of the Primary
Indebtedness secured hereby, or any interest accruing on such Primary
Indebtedness, as the same becomes due and payable according to the terms or the
original note, or of any extension or renewal thereof at any time evidencing
such indebtedness.
(d) If Mortgagor shall fail to comply with any of the agreements
contained in paragraph 5 of this Mortgage.
(e) If the Mortgagor fails or neglects to timely perform, keep or
observe any of its covenants, duties, obligations, warranties and agreements
contained elsewhere in this Mortgage, the Loan Agreement between Mortgagor and
Mortgagee of even date herewith, and/or the Mortgagor's Environmental Indemnity
Agreement of even date herewith.
(f) If any statement, report or certificate made or delivered to
Mortgagee by the Mortgagor, or any of the Mortgagor's directors, officers,
employees or agents, is materially untrue, incorrect or incomplete.
(g) If any of the Mortgagors assets are seized, attached, subjected to
a writ or distress warrant, or are
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levied upon, or come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors.
(h) If the Mortgagor makes an assignment for the benefit of creditors,
or an application is made by or against the Mortgagor for the appointment of a
receiver, trustee, custodian or conservator for the Mortgagor or any of the
Mortgagor's assets.
(i) If the Mortgagor is enjoined, restrained or in any way prevented
by court order from conducting any part of its business.
(j) If a lawsuit or other proceeding is filed by or against the
Mortgagor to liquidate any of its assets.
(k) If a notice of a lien, levy or assessment is filed of record with
respect to the Mortgagor or any of its assets by the United States of America,
any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental department, agency or instrumentality.
It is understood that the foregoing acceleration provisions will be
applicable not only to the maturities recited in the Note, but also to any
substituted maturities created by extension or
MORTGAGE/PAGE 7(8/30/95 Draft)
renewal and also to any other indebtedness secured by this Mortgage. The
failure of the Mortgagee to declare any acceleration of maturities when a
ground therefor exists, even though such forbearance may be repeated from time
to time, or the default be a continuing one, will not constitute a waiver of
the right of the Mortgagee to accelerate maturities upon a recurrence of the
same ground therefor; nor will the act of the Mortgagee in remedying any
condition resulting from Mortgagor's default bar the Mortgagee from declaring
an acceleration of maturities by reason of such default.
11. Remedies Upon Default. Upon the occurrence of an Event of Default,
the Mortgagee shall be entitled to the following remedies:
(a) At the option of the Mortgagee, declare the
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entire unmatured portion of all indebtedness secured hereby, together with all
interest accrued on the entire secured debt, to be immediately due and payable,
(which acceleration of maturity may be accomplished without notice to anyone).
(b) Foreclosure of this Mortgage by appropriate proceeding in any
court of competent jurisdiction, appoint a receiver, or specifically enforce
any of the covenants hereof. In such event, there shall be added to and
included as part of the indebtedness secured by this Mortgage, and allowed in
any decree for sale of the Property or in any judgment rendered in connection
with this Mortgage the following: (i) all of the costs, fees and expenses of
taking possession of the Property and of the holding, using, leasing,
maintaining, insuring, repairing and selling of the Property, including, but
not limited to, the costs, fees, charges, expenses and attorneys' fees
specified in paragraphs 2.3 and 12.5 of this Mortgage; (ii) receivers' fees;
(iii) any and all expenditures which may be paid or incurred by or on behalf of
the Mortgagee for appraisers' fees, documentary and expert evidence,
stenographers' charges, publication costs, fees and expenses for examination of
title, title searches, guaranty policies, and other similar data and assurances
with respect to the title to the Property; (iv) all other costs, fees and
expenses which the Mortgagee deems necessary to prosecute or enforce any right
or remedy that it has under this Mortgage, at law, in equity or otherwise. All
such costs, charges, expenses, premiums, fees and other expenditures shall be
part of the indebtedness secured by this Mortgage, payable on demand and shall
bear interest at the rate set forth in the Note from the date of Mortgagee's
payment thereof until repaid to the Mortgagee.
(c) Make any expenditures for the protection of the Property or of the
lien of this Mortgage (the Mortgagee shall have the uncontrolled discretion as
to the necessity of making any such expenditure), the repayment of such sum on
demand with interest at the rate recited in the Note shall be the personal
obligation of the Mortgagor and such obligation to repay will constitute a part
of the indebtedness secured hereby.
(d) In the event the Mortgagee at any time holds additional security
for any of its obligations secured hereby, it may enforce the sale thereof or
otherwise realize upon the same, at its option, either before or concurrently
herewith or after a sale is made hereunder
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pursuant to a foreclosure proceeding.
(e) The Mortgagee may enforce the lien of this Mortgage in respect to
all real and personal property encumbered hereby by proceedings that are
prosecuted simultaneously or are prosecuted separately in such order as the
Mortgagee may select, to the extent permitted by law.
(f) In the event the Mortgagee takes possession of the Property, it
shall have no obligation to continue to operate any business conducted on the
Property.
(g) Mortgagee may exercise any right or remedy available either under
this Mortgage or the Contribution Agreement, or the laws of Arkansas, either
concurrently or independently, and in such order as it may determine, to the
extent permitted by law.
12. Miscellaneous Provisions.
12.1 Waiver of Statutory Rights. The Mortgagor agrees that it will not
apply for or avail itself of any appraisement, valuation, stay, extension or
exemption laws or so-called "moratorium laws", now existing or hereinafter
enacted, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage, and hereby expressly waives the benefit of such laws, and the
Mortgagor specifically waives all rights of redemption from any sale made by
decree of Court on foreclosure of this instrument.
12.2 Inspections. The Mortgagee, or its agents, representatives or
workmen, are authorized to enter at any reasonable time upon or in any part of
the Property for the purpose of inspecting the same and for the purpose of
performing any acts it is authorized to perform under the terms of this
Mortgage.
12.3 Notices. Any notice which either party hereby may desire or be
required to give to the other party shall be in writing and shall be effective
only if the same is delivered by personal service or mailed by certified mail,
postage prepaid, return receipt requested, addressed as follows:
Mortgagor:
AWEC Development Corporation
600 Pine Forest Drive
Maumelle, Arkansas 72113
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Mortgagee:
Resure, Inc.
311 S. Whacker Drive
Suite 400
Chicago, IL 60606
Any party may at any time change its address for such notices by delivering or
mailing to the other parties hereto, as aforesaid, a notice of such change.
12.4 Construction of this Instrument. Notwithstanding the use of the
feminine, masculine or neuter gender with reference to any party in this
Agreement, the same shall, in each instance, be construed to refer to the
individual party. The captions and headings of various paragraphs of this
Mortgage are for convenience only and are not to be construed as defining or
limiting in any way, the scope or intent of the provisions hereof. This
Mortgage and all provisions hereof shall extend to and be binding upon the
Mortgagor and all parties claiming by, through or under the Mortgagor and the
word "Mortgagor" when used herein shall include all persons liable for the
payment of the indebtedness secured hereby or any part thereof, whether or not
such persons shall have executed the Note or this Mortgage. The word
"Mortgagee" when used herein shall include the successors and assigns of the
Mortgagee named herein, and the holder or holders, from time to time, of the
notes secured hereby.
12.5 Indemnifications; and Subrogations.
(i) If Mortgagee is made a party defendant to any litigation
concerning this Mortgage or the Property or any part hereof or any interest
therein, or the occupancy thereof by Mortgagor, then the Mortgagor shall
indemnify, defend and hold Mortgagee harmless from all liability by reason of
such litigation, including reasonable attorneys' fees and expenses incurred by
litigation if prosecuted to judgment. If Mortgagee commences an action against
Mortgagor to enforce any of the terms hereof or because of the breach by
Mortgagor of any of the terms hereof, or for the recovery of any sums secured
hereby, Mortgagor shall pay to Mortgagee reasonable attorneys' fees and
expenses and the right to attorneys' fees and expenses shall be deemed to have
been accrued on the commencement of such action and shall be enforceable
whether or not such
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action is prosecuted to judgment. If Mortgagor breaches any term of this
Mortgage, Mortgagee may employ an attorney or attorneys to protect its rights
hereunder, and in the event of such employment following any breach by
Mortgagor, Mortgagor shall pay Mortgagee reasonable attorneys' fees and
expenses incurred by Mortgagee, not to exceed Ten Percent (10%) of the
principal and interest indebtedness secured hereby, whether or not an action is
actually commenced against Mortgagor by reason of breach. The payment of all
amounts pursuant to this provision shall be an additional liability owing
hereunder by Mortgagor, payable on demand and bearing interest, from the date
of such demand until payment thereof to Mortgagee, at the rate as recited in
the Note.
(ii) Mortgagor waives any and all right to claim or recover against
Mortgagee, its officers, employees, agents and representatives, for loss or
damage to Mortgagor, the Property, Mortgagor's property or the property of
others under Mortgagor's control from any cause insured against or required to
be insured against by provisions of this Mortgage.
(iii) All sums payable by Mortgagor hereunder shall be paid without
notice, demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of: (1)
any damage to or destruction of or any condemnation or similar taking of the
Property or any part thereof; (2) any restriction or prevention of or
interference with any use of the Property or any part thereof; (3) any title
defect or encumbrance or any eviction from the Property or the improvements
thereon or any part thereof by title paramount or otherwise; (4) any
bankruptcy, insolvency, reorganization, composition, dissolution, liquidation,
or other like proceeding relating to Mortgagee, or any action taken with
respect to this Mortgage by any trustee or receiver of Mortgagee or by any
Court, in any such proceeding; (5) any claim which Mortgagor has or might have
against Mortgagee; (6) any default or failure on part of Mortgagee to perform
or comply with any of the terms hereof or of any other agreement with
Mortgagor; or (7) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Mortgagor shall have notice or
knowledge
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of any of the foregoing. Except as expressly provided herein, Mortgagor waives
all rights now or hereafter conferred by statute or otherwise to any abatement,
suspension, deferment, diminution or reduction of any such sums or indebtedness
secured hereby and payable by Mortgagor.
12.6 Eminent Domain. Mortgagor acknowledges that all condemnation
awards have been assigned to Mortgagee, which awards Mortgagee is hereby
irrevocably authorized to collect and receive, and to give appropriate receipts
and acquittances therefor, and at Mortgagee's sole discretion and option, to
apply the same toward the payment of the Primary Indebtedness in such order of
application as Mortgagee may elect and whether or not the same may then be due
and payable or otherwise adequately secured. Mortgagor covenants and agrees
that Mortgagor will give Mortgagee immediate notice of the actual or threatened
commencement of any proceedings under condemnation or eminent domain affecting
all or any part of the Property, including, without limitation, any easement
therein or appurtenance thereof or severance and consequential damage or change
in grade of streets, and will deliver to Mortgagee copies of any and all papers
served in connection with any such proceedings. Mortgagor further covenants and
agrees to make, execute and deliver to Mortgagee, at any time or times upon
request, free, clear and discharged of any encumbrances of any kind whatsoever,
any and all further assignments and/or instruments deemed necessary by
Mortgagee for the purpose of validly and sufficiently assigning all awards and
other compensation heretofore permanent or temporary, under any such
proceeding.
12.7 Covenants Run With Land. All the covenants contained in this
Mortgage shall run with the Property. Time is of the essence of this Mortgage
and all provisions herein relating thereto shall be strictly construed.
12.8 Severability. Wherever possible, each provision of this Mortgage
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Mortgage is held to be invalid or
unenforceable by a court of
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competent jurisdiction, such provision shall be severed hear from and such
invalidity or unenforceability shall not affect any other provision of this
Mortgage, the balance of which shall remain in and have its intended full force
and effect. Provided, however, if such provision may be modified so as to be
valid and enforceable as a matter of law, such provision shall be deemed to be
modified so as to be valid and enforceable to the maximum extent permitted by
law.
12.9 Other Agreement. The terms and provisions of the Contribution
Agreement between Mortgagor and Mortgagee of even date herewith and Mortgagor's
Environmental Indemnity Agreement of even date herewith are incorporated herein
by this reference thereto.
12.10 Service of Process. Mortgagor hereby irrevocably appoints G.
Robert Hardin, whose address is 410 West Third Street, Suite 200, Little Rock,
Arkansas 72201, as its agent to receive service of process for any and all
lawsuits which may arise in Pulaski County, Arkansas, concerning the
enforcement of this Mortgage.
12.11 Non-Recourse. The liability of the Mortgagor, for payment of
principal and interest under this Mortgage and the Promissory Note is limited.
The Mortgagor shall not be subject to any judgment or liability whatsoever,
other than to the extent of the Mortgagor's interest in the property which
secures the unpaid
MORTGAGE/PAGE 12
principal balance of this Mortgage and the Promissory Note, plus interest
thereon and any other indebtedness secured hereby. No personal liability shall
be ascertained or enforceable against the Mortgagor with respect to any amount
due Mortgagee or holder hereof under this Mortgage or the Promissory Note. No
party claiming by, through or under Mortgagee shall have any rights against the
Mortgagor in excess of, or greater than, the rights conferred upon Mortgagee
under the terms of this Mortgage and the Promissory Note. Nothing contained in
this paragraph shall be construed to prevent Mortgagee from exercising any
other remedy allowed by law, in equity, by statute or by the terms of this
Mortgage, the Note or in any agreement relating to the Primary Indebtedness
which is not
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inconsistent with the foregoing.
12.12 Exceptions From Non-Recourse Liability. Notwithstanding the
limitation on Mortgagor's liability as set forth in the preceding paragraph,
the Mortgagee may seek and obtain a monetary judgment against the Mortgagor,
its successors and assigns, and the Mortgagor and its successors and assigns
shall have full personal recourse liability, for all damages resulting from the
following:
(a) Fraud or misrepresentation by the Mortgagor or any agent or
representative of Mortgagor;
(b) The misapplication of any proceeds or awards resulting from the
condemnation of all or any part of the Property to the full extent of such
misapplication of proceeds or awards);
(c) Failure of Mortgagor to comply with the environmental covenants
and obligations set forth in the Environmental Indemnity Agreement of even date
herewith by Mortgagor for the benefit of the Mortgagee; and
(d) The filing of a voluntary petition or assenting to an involuntary
petition in any bankruptcy, liquidation or receivership proceedings by the
Mortgagor and/or any of the Mortgagor's shareholders (to the extent of costs
and expenses, including, but not limited to, attorneys' and other
professionals' fees and costs, incurred in representation of Mortgagee in such
bankruptcy or other proceeding).
12.13 Selective Harvesting of Pine Timber. Mortgagor hereby
specifically reserves the right to selectively cut the standing pine timber on
the Land free and clear of any claims by Mortgagee and free and clear of any
encumbrance by this Mortgage. Mortgagor shall indemnify, defend and hold
Mortgagee harmless from all claims of bodily injury, death or property damage
arising or resulting from such harvesting activities.
12.14 Release Provisions; Assignment of Cash Collateral Deposit or
Other Substituted Collateral. Mortgagee and its assignees and subsequent
noteholders of the Note, shall deliver partial releases of this Mortgage for
portions of the Land secured by this Mortgage, upon deposit with Mortgagee cash
("Cash Collateral") in an amount equal to a release price of $10,000.00 per
acre for each
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acre of Land being released. Further, Mortgagee and its assigns and subsequent
noteholders of the Note, shall deliver partial releases of this Mortgage for
portions of the Land secured by this Mortgage, upon the conveyance to Mortgagee
of a perfected first priority lien and mortgage in form and substance and with
supporting documentation (such as a mortgagee's title policy, current survey,
environmental report, etc.) acceptable to Mortgagee in its sole and absolute
discretion, in other real estate ("Substituted Collateral") which Mortgagee, in
its sole and absolute discretion, determines to have a value equal to or greater
than $10,000.00 per acre for each acre of Land being released. There shall be a
minimum of 25 acres for each parcel which Mortgagee seeks a release for the
deposit of Cash Collateral or Substituted Collateral, provided (i) Mortgagor
will not be entitled to a partial release if there is any default remaining
uncured pursuant to the Note or Mortgage, or if there is any default remaining
uncured pursuant to that separate note and mortgage of even date herewith (the
"Loan Note and Mortgage") which evidence an additional $3,500,000.00 loan from
Mortgagee to Mortgagor and which conveys to Mortgagee a second mortgage on the
Land and a first mortgage on other real estate; (ii) Mortgagor shall first have
submitted a survey designating the parcel to be released and its total square
footage, and also showing the remainder of the Land; (iii) such release shall
not cause any of the remaining Land to become landlocked; (iv) the dimensions
and layout of the parcel being released shall be reasonably acceptable to the
Mortgagee with respect to there not being a disproportionate amount of road
frontage included, and the release shall not render the size or configuration of
the remainder of the Land to be commercially unacceptable or otherwise adversely
impacted; and (v) any easements necessary to extend utility lines or facilities
under or across the parcel to be released to serve the remainder of the Land
shall be created and granted concurrently with the release. Mortgagee shall
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hold the Cash Collateral in a separate segregated account (the "Cash Collateral
Account") as collateral security pursuant to that Security Agreement between
Mortgagee and Mortgagor of even date herewith. The Cash Collateral Account and
any Substituted Collateral shall secure payment and performance of all
obligations secured by this Mortgage and by the Loan Note and Mortgage.
MORTGAGE/PAGE 14 (8/30/95 Draft)
EXECUTED as of the 11 day of September, 1995.
MORTGAGOR:
AWEC DEVELOPMENT CORPORATION
BY: /s/ David Paes
TITLE: Vice President
STATE OF ARKANSAS
COUNTY OF PULASKI
ACKNOWLEDGMENT
On this 5th day of September 1995, before me, a Notary Public, duly
commissioned, qualified and acting, within and for said County and State,
appeared in person the within named David R. Paes, being the person authorized
by said corporation to execute such instrument, to me personally well known,
who stated that he/she was the Vice President of Awec Development Corporation,
executed and delivered said foregoing instrument for the consideration, uses
and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this 5th
day of September, 1995.
/s/
NOTARY PUBLIC
MY COMMISSION EXPIRES: 7/25/2000
EXHIBIT "A"
Lands lying in a fractional part of Section 31, and the West 1/2 of Section 32,
all in Township 3 North, Range 13 West, Pulaski County, Arkansas and more
particularly described as follows:
Commencing at the Northwest Corner Section 32, South 88 degrees 32 minutes 48
seconds East, 640.25 feet; thence South
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<PAGE> 19
26 degrees 57 minutes 30 seconds West, 497 feet to the point of beginning;
thence South 21 degrees 05 minutes 41 seconds East, 437.97 feet; thence South 79
degrees 09 minutes 38 seconds East 774.03 feet to the West right of way line of
Odom Boulevard; thence South 11 degrees 59 minutes 41 seconds West 269.45 feet;
thence leaving the said West right of way line South 46 degrees 02 minutes 26
seconds West 146.64 feet; thence South 03 degrees 38 minutes 01 seconds West
392.67 feet; thence along a 06 degree 14 minutes 38 seconds curve to the left a
distance of 197.28 feet to a point to which there is a chord bearing and
distance of South 05 degrees 50 minutes 09 seconds West 196.90 feet; thence
South 58 degrees 21 minutes 13 seconds West 743.36 feet; thence South 51 degrees
19 minutes 44 seconds East 170.00 feet; thence South 42 degrees 12 minutes 58
seconds East 334.86 feet; thence South 18 degrees 38 minutes 28 seconds West
144.20 feet; thence along a 15 degrees 09 minutes 19 seconds curve to the left a
distance of 378.55 feet to a point to which there is a chord bearing and
distance of North 79 degrees 57 minutes 23 seconds East 362.93 feet; thence
North 51 degrees 16 minutes 17 seconds East 271.10 feet; thence along a 143
degrees 14 minutes 22 seconds curve to the left a distance of 64.99 feet to a
point to which there is a chord bearing and distance of North 04 degrees 43
minutes 21 seconds East 58.08 feet to a point on the West right of way line of
Odom Boulevard; thence along the said West right of way line along the following
bearings and distances: along a 06 degrees 25 minutes 08 seconds curve to the
left a distance of 404.65 feet to a point to which there is a chord bearing and
distance of South 54 decrees 48 minutes 50 seconds East 401.20 feet; thence
South 67 degrees 47 minutes 51 seconds East 110.02 feet; thence leaving the said
West right of way line of Odom Boulevard South 34 degrees 10 minutes 36 seconds
West 207.84 feet; thence South 27 degrees 48 minutes 21 seconds West 800.00
feet; thence South 64 degrees 10 minutes 59 seconds East 150.09 feet; thence
South 04 degrees 15 minutes 29 seconds West 339.65 feet; thence South 67 degrees
04 minutes 18 seconds West 223.74 feet; thence South 23 degrees 56 minutes 24
seconds West 710.90 feet; thence South 62 degrees 30 minutes 03 seconds East
493.10 feet; thence South 49 degrees 19 minutes 45 seconds West 111.30 feet;
thence South 70 degrees 58 minutes 07 seconds West 645.93 feet; thence North 75
degrees 26 minutes 49 seconds West 1,291.05 feet; thence North 60 degrees 05
minutes 23 seconds West 578.01 feet; thence North 57 degrees 43 minutes 01
seconds West 1,141.62 feet; thence North 48 degrees 41 minutes 18 seconds West
647.01 feet; thence North 45 degrees 44 minutes 57 seconds West 562.28 feet;
thence North 80 degrees 20 minutes 39 seconds West 680.03 feet; thence South 13
degrees 52 minutes 52 seconds East 1,233.39 feet to a point on the ordinary high
water line on the North bank of the Arkansas River; thence in a Northwestern
direction along the meanders of the said ordinary
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high water which is approximately by the following bearing and distances; North
49 degrees 45 minutes 26 seconds West 94.11 feet; thence North 39 degrees 48
minutes 54 seconds West 513.87 feet; thence North 46 degrees 03 minutes 02
seconds West 378.55 feet; thence North 40 degrees 44 minutes 17 seconds West
314.87 feet; thence North 53 degrees 34 minutes 17 seconds West 251.25 feet;
thence North 70 degrees 12 minutes 54 seconds West 157.95 feet; thence North 43
degrees 17 minutes 10 seconds West 211.26 feet; thence North 14 degrees 18
minutes 35 seconds West 273.34 feet; thence North 23 degrees 36 minutes 13
seconds West 223.69 feet to the North line of the Southwest 1/4 of Section 31;
thence leaving the said ordinary high water line on the North bank of the
Arkansas River and running along the said North line South 88 degrees 23
minutes 40 seconds East 2,170.00 feet to the center of said Section 31; thence
along the West line of the Northeast 1/4 of said Section 31 North 00 degrees 35
minutes 57 seconds East 1,307.43 feet; thence continuing along the said West
line North 01 degrees 19 minutes 08 seconds East 1,324.38 feet to the Southwest
corner of the Southeast 1/4 of Section 30; thence South 57 degrees 53 minutes
35 seconds East 1359.32 feet; thence North 80 degrees 35 minutes 15 seconds
East 1908.70 feet to the point of beginning.
Less and Except: Well Site No. 3: Part of the Fractional SW1/ 4 Section 31,
Township 3 North, Range 13 West, Pulaski County, Arkansas and more particularly
described as follows: Commencing at the Southeast corner of said Section 31
(Arkansas State Plane Coordinates of North 186,067.311, East 1,872,179.178);
thence North 1,109.69 feet; thence West 3,296.86 feet to the point of
beginning; thence South 13 degrees 52 minutes 52 seconds East 103.01 feet;
thence due West 39.30 feet; thence due North 100.00 feet; thence due East 14.59
feet to the point of beginning.
And Less and Except: Well Site No. 4: Part of the Fractional SW1/4 Section 31,
Township 3 North, Range 13 West, Pulaski County, Arkansas and more particular
described as follows: Commencing at the Southeast corner of Section 31,
Township 3 North, Range 13 West; (Arkansas State Plane Coordinates-North
Zone-North 186,067.311 East, 1,872,179.178) run North 2,296.086 feet to a
point; thence run West 3,961.965 feet to the point of beginning; thence run
South 100.00 feet to a point; thence run East 100.00 feet to a point; thence
run North 100 feet to a point; thence run 100.00 feet West to the point of
beginning.
And Less and Except: The following lands lying in a fractional part of the
NE1/4 of Section 31, Township 3 North, Range 13 West, Pulaski County, Arkansas,
and more
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particularly described as follows: Commencing at the Northeast corner of said
Section 31, (Arkansas State Plane Coordinates of North 191,343.281 East
1,872,217.486), thence South 1,061.89 feet, thence West 1,799.95 feet to the
point of beginning, thence South 24 degrees 22 minutes 56 seconds East 293.20
feet, thence South 56 degrees 13 minutes 48 seconds West 129.22 feet, thence
South 85 degrees 21 minutes 34 seconds West 173.66 feet, thence North 60
degrees 08 minutes 15 seconds West 176.03 feet; thence North 21 degrees 43
minutes 52 seconds East 290.13 feet, thence South 88 degrees 48 minutes 58
seconds East 204.75 feet to the point of beginning.
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EXHIBIT 10.5
Security Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.
SECURITY AGREEMENT
(Cash Collateral Account)
THIS SECURITY AGREEMENT ("Agreement") is made as of the 11th day of
September 1995 by AWEC Development Corporation, an Arkansas corporation
("Pledgor") in favor of Resure, Inc., an Illinois corporation ("Secured
Party"). All capitalized terms used herein but not defined shall have the
meaning ascribed in that certain Contribution Agreement of even date herewith
by and between Pledgor and Secured Party ("Contribution Agreement"), or in that
certain Loan Agreement of even date herewith by and between Pledgor and Secured
Party ("Loan Agreement").
RECITALS
A. Pursuant to the Contribution Agreement, Pledgor has executed and
delivered to Secured Party a Mortgage covering and encumbering certain real
estate, consisting of approximately 409.73 acres in the City of Maumelle,
Pulaski County, Arkansas (the "Land"), which Mortgage secures Pledgor's payment
of a certain Contribution Note and performance of Pledgor's obligations under
the Contribution Agreement and the other Contribution Documents.
B. Pursuant to the Loan Agreement, Pledgor has also granted to Secured
Party a second mortgage on the Land referenced in Recital A above to further
secure Pledgor's payment of a certain $3,500,000.00 Loan Note and performance
of Pledgor's obligations under the Loan Agreement and the various loan
documents and other instruments executed pursuant thereto (collectively, the
"Loan Documents") (the Loan Documents, together with the Contribution Agreement
and other Contribution Documents, being hereinafter sometimes collectively
referred to as the "Contribution and Loan Documents").
C. Subject to the terms, conditions and requirements of the
Contribution and Loan Documents, Pledgor may obtain partial releases of the
Land from the liens of the first and second Mortgages in favor of Secured Party
by depositing into a Collateral Account (as defined below) the required payment
for each such partial release, and all of such payments shall be held by
Secured Party as further collateral for the performance of all obligations
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of Pledgor under the Contribution and Loan Documents. The Collateral Account,
together with all other monies or funds from time to time deposited therein and
all accrued interest earned thereon and proceeds thereof, are hereinafter
sometimes collectively referred to as the "Funds").
1. Recitals. The recitals set forth above are incorporated herein as
if fully set forth herein.
2. Pledge and Assignment. The Pledgor hereby pledges and assigns to
the Secured Party, for its benefit and that of its successors and assigns, all
of the Pledgor's right, title and interest in, and hereby grants to the Secured
Party and its successors and assigns a security interest in and right of
set-off against, the following collateral, whether now owned by the Pledgor or
hereafter acquired (collectively, the "Collateral"):
(i) A segregated account to be established and maintained by Secured
Party in its name for Pledgor, the beneficial owner, which account shall be at
a bank selected by Secured Party (the "Cash Collateral Account") (to the extent
permitted by such bank, such account shall be titled, "Resure, Inc., as secured
party for AWEC Development Corporation, the beneficial owner," with all
interest accruing on such account being reported for tax purposes to the
Pledgor, but with all signatory and withdrawal rights to such account,
including all accrued interest therein, being vested solely and exclusively in
Secured Party so long as this Security Agreement is in effect);
(ii) the Funds and all certificates and instruments if any, from time
to time representing or evidencing the Funds;
(iii) the Investments (as hereinafter defined) and all certificates
and instruments, if any, from time to time representing or evidencing the
Investments;
(iv) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or foregoing; and
(v) to the extent not covered by clauses (i) through (iv) above, all
additions, alterations, substitutions thereto and therefor and the proceeds of
any of the foregoing.
3. Security for Obligations. This Security Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by acceleration or otherwise, of all
obligations, covenants and
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agreements now or hereafter existing under this Security Agreement or any of
the Contribution and Loan Documents, including any and all extensions,
modifications or renewals of any of the foregoing (the "Secured Obligations").
4. Delivery of Collateral. Any and all certificates or instruments
representing or evidencing the Collateral or any part thereof shall be
delivered to and held by or on behalf of Secured Party pursuant hereto and
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Secured Party. After the occurrence of an "Event of
Default" (as defined in any of the Contribution and Loan Documents), Secured
Party shall have the right at any time to transfer to, or register in the name
of, any of its nominees all or any of the Collateral.
5. Investment of the Funds. The Collateral Account shall be interest
bearing as hereinafter provided. Provided that no Event of Default shall have
occurred and be continuing, the Pledgor shall have the right to direct the
Secured Party (said direction to be made by the Pledgor in writing) (the
"Investment Notice"), subject to the provisions of this Security Agreement, to
direct the Secured Party to invest the Funds, subject to the terms and
limitations set forth in Exhibit A attached hereto and made a part hereof (any
and all investments of the Funds or any part thereof, and any and all profits,
gains, income, interest and security therefrom, are herein collectively referred
to as the "Investments"). Notwithstanding anything to the contrary contained
herein, Pledgor shall not invest or direct the investment of the Funds in
investments other than those specified in the attached Exhibit A (the "Permitted
Investments"), or in any manner which violates the terms hereof. Upon receipt
of an Investment Notice specifying Permitted Investments, the Secured Party
shall use reasonable efforts to comply with said notice, and the Secured Party
shall have a reasonable period of time to invest the Funds in the Permitted
Investments. All interest and other proceeds derived from Investments of the
Funds shall be held in the Collateral Account. All Investments shall be held as
security for the Secured Obligations. All Investments, and the profits, gains,
income, interest, security and proceeds therefrom, shall constitute
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<PAGE> 4
Collateral. The Secured Party may take such action as is required (in the
Secured Party's sole discretion) to perfect and protect the security interest
granted in the Investments. The Pledgor hereby authorizes the Secured Party to
take such action as it may deem necessary or desirable to perfect the security
interests in the Investments and the Pledgor agrees to cooperate therewith.
6. Withdrawal from the Collateral Account. For so long as this Security
Agreement is in effect, the Pledgor shall not have the right to, or be permitted
to make, any withdrawals from the Collateral Account. Notwithstanding any of the
foregoing or any other provision of this Security Agreement, at any time that
all of the obligations due to the Secured Party pursuant to the Contribution
Agreement and the other Contribution Documents have been satisfied in full,
Pledgor shall have the right, upon written notice to the Secured Party, to
direct the Secured Party to apply, and the Secured party shall apply, all or any
portion of the Funds to pay any outstanding principal, interest and attorneys'
and collection fees due the Secured Party pursuant to the Loan Documents (which
payment shall be applied in such order as Secured Party, in its sole discretion,
may determine); provided, however, that such application of all or any portion
of the Funds shall not (i) constitute a waiver by Secured Party of any right to
enforce its rights and remedies under this Security Agreement or under the Loan
Documents for any Event of Default which may have occurred; and (ii) constitute
a waiver, release or discharge of Pledgor's liability or responsibility for all
remaining outstanding Secured Obligations.
7. Representations and Warranties. Pledgor hereby represents and
warrants to Secured Party that:
(a) The pledge of the Collateral pursuant to this Security Agreement
creates a valid and perfected security interest in the Collateral, in favor of
the Secured Party, and a right of setoff against the Secured Obligations owed
by the Pledgor to Secured Party.
(b) Pledgor has the full power and authority to pledge all of the
Collateral pursuant to this Agreement, and the execution and delivery of this
Agreement has been duly authorized by Pledgor.
(c) This Agreement has been duly authorized and
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constitutes the legal, valid and binding obligation of Pledgor enforceable
against Pledgor in accordance with its terms.
8. Further Assurances. Pledgor agrees that at any time, and from time
to time, at the expense of the Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action that
Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Secured party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
9. Rights to Payments. Any and all payments for releases of the Land
shall be made directly to Secured Party for deposit into the Collateral
Account. So long as such payments are being held as Collateral, none of such
payments shall be credited against or shall otherwise reduce the outstanding
indebtedness under the Contribution Note or the Loan Note.
10. Transfers and Other Liens. Pledgor shall not directly or
indirectly, by operation of law or otherwise (i) sell, assign or otherwise
dispose of, or grant any option with respect to, any of the Collateral, or (ii)
create or permit to exist any lien, security interest, option or other charge
or encumbrance upon or with respect to any of the Collateral, except for the
security interest and right of set-off created herein.
11. Secured Party Appointed Attorney-in-Fact. Pledgor hereby appoints
Secured Party as the Pledgor's attorney-in-fact, with full power and authority
in the place and stead of the Pledgor and in the name of the Pledgor, to
receive, endorse, negotiate and collect in the name of the Pledgor all checks
and other instruments and certificates made payable to the Pledgor,
representing any interest payment, principal payment, or other distribution
with respect to the Collateral or any part thereof and to deposit the same into
the Collateral Account. The power of attorney created hereunder, being coupled
with an interest, shall be irrevocable.
12. Secured Party May Perform. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform or cause the
performance of such agreement, and the expenses of Secured Party incurred in
connection therewith, plus interest at the rate specified in the Contribution
Agreement from the date of
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each advance to the date of reimbursement, shall be payable by Pledgor and
constitute additional Secured Obligations.
13. Standard of Care. Except as otherwise specifically provided for
herein, the Secured Party shall not have any responsibility for (a)
ascertaining or taking any action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral,
whether or not the Secured Party has or is deemed to have knowledge of such
matters, or (b) taking any necessary steps to preserve rights against any
persons with respect to any Collateral. The Secured Party shall not be under
any duty to invest any portion of the Funds, except as specifically provided
herein. The Secured Party shall not be liable, except for its own gross
negligence or willful misconduct, and under no circumstances shall be liable
for consequential damages in connection with any of the foregoing. Without
limiting the generality of the foregoing, the Secured Party shall not be liable
in connection with the investment or reinvestment of any portion of the Funds
in accordance with the terms hereof, including, without limitation, any
liability for any delays in the investment or reinvestment of the Funds, or any
loss of interest incident to any such delays. The Secured Party shall be
entitled to rely upon any order, judgment, certification, demand, notice,
instrument or other writing delivered to the Secured Party, without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service or delivery thereof. The
Secured Party may act in reliance upon any instrument or signature assumed by
the Secured Party to be genuine, and the Secured Party may assume that any
person purporting to make any statement or execute any document in connection
with the provisions hereof has been duly authorized to do so. The Secured Party
may act pursuant to the advice of counsel with respect to any matter relating
to this Security Agreement and shall not be liable for any action taken (or not
taken) in good faith in accordance with such advice.
14. Remedies upon Default.
(a) If any Event of Default under the Contribution and Loan Documents
shall have occurred and be continuing (i) the
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Pledgor shall not be entitled to direct or require the Secured Party to direct
the investment of any of the Funds; (ii) the Secured Party shall not be
obligated to invest any of the Funds; (iii) the Secured Party may exercise one
or more of those rights and remedies set forth herein and in the Contribution
and Loan Documents (all such remedies being cumulative); (iv) the Secured Party
may, without notice to the Pledgor, except as required by law, and at any time
or from time to time, charge, set-off and otherwise apply all or any part of
the Collateral against the Secured Obligations or any part thereof without
demand of performance or other demand, advertisement or notice of any kind to
or upon the Pledgor or any other person (all demands, advertisements and
notices being expressly waived); and (v) the Secured Party may exercise all the
rights and remedies of a secured party under the Uniform Commercial Code in
effect in the State of Arkansas (the "Code").
(b) Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Pledgor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if Secured Party accepts the first offer received and does not offer
such Collateral to more than one offeree, and in all events such sale shall be
deemed to be commercially reasonable. At any such public or private sale,
Secured Party may be the purchaser of the Collateral.
15. No Presentment, Demand or Protest. Except as herein above
expressly provided or as required by law, Secured Party shall not be required
to make presentment, demand or protest or give any notices thereof, and need
not take action to preserve any rights against prior parties in connection with
the Collateral or any obligation secured hereby. Pledgor further waives any
right to require Secured Party to proceed against or exhaust the Collateral, or
any other security, or to proceed against any other person or to pursue any
other remedy available to Secured Party before proceeding against Pledgor or
the Collateral.
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16. Expenses and Fees. The Pledgor will, upon demand, pay to the
Secured Party reasonable costs (and reasonable attorneys fees) incurred by the
Secured Party in connection with (a) the sale of, collection from, or other
realization upon, any of the Collateral, (b) the exercise or enforcement of any
of the rights of the Secured Party hereunder, or (c) the failure by the Pledgor
to perform or observe any of the provisions hereof.
17. Continuing Security Interest. This Security Agreement shall create
a continuing assignment of, security interest in, and right of set-off against,
the Collateral. The creation of the rights and security interests set forth
herein shall be absolute and unconditional irrespective of:
(a) the lack of enforceability of the Contribution and Loan Documents,
or any of them, or other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Contribution and Loan
Documents, or any of them, or other agreement or instrument relating thereto;
or
(c) any exchange, release or non-perfection of any other collateral.
18. Amendments, Waivers. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Pledgor hear from shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
19. Notices. Any notice, demand, request or other communication which
any party hereto may be required or may desire to give hereunder shall be in
writing and shall be deemed to have been properly given (i) upon receipt if hand
delivered, or (ii) if mailed (effective three (3) business days after mailing)
by United States registered or certified mail, postage prepaid, return receipt
requested, or (iii) upon receipt, if delivered by overnight express delivery
courier, addressed as follows:
If to Pledgor to:
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AWEC Development Corporation
600 Pine Forest Circle
Maumelle, Arkansas 72113
Attn: David Paes
If to Secured Party to:
Resure, Inc.
4132 South Rainbow Boulevard - #359
Las Vegas, Nevada 89103
or to such other address as a party may designate as provided in this
paragraph.
20. Successors and Assigns. This Security Agreement shall be binding
upon and benefit the Pledgor, the Secured Party and their respective successors
and assigns. The Pledgor's successors and assigns shall include, without
limitation, a receiver, trustee or debtor-in-possession of or for the Pledgor.
21. Governing Law. This Security Agreement shall be construed in all
respects in accordance with, and governed by, all of the provisions of the Code
and by the other internal laws (as opposed to conflicts of laws provisions) of
the State of Arkansas.
22. Conflict between Documents. The terms, covenants, conditions,
rights and obligations contained in this Security Agreement are in addition to
and not in limitation of those set forth in the Contribution and Loan
Documents. Nevertheless, in the event of any conflict or inconsistency between
the terms of this Security Agreement and the terms of the Contribution and Loan
Documents, the terms of the Contribution and Loan Documents shall prevail. A
provision herein shall not be deemed contrary or inconsistent with the
Contribution and Loan Documents by reason of the fact that such provision
covers the same subject matter as a provision in the Contribution and Loan
Documents, except to the extent the provisions of the Contribution and Loan
Documents and this Security Agreement are, when taken together, incapable of
interpretation in a manner which is not contrary or inconsistent, as opposed to
merely additive or supplementary.
23. Severability. The parties hereto intend and believe that each
provision herein comports with all applicable local, state and federal laws and
judicial decisions. However, if any provision or provisions, or if any portion
of any provision or provision in this
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Security Agreement is found by a court of law to be in violation of any
applicable local, state or federal ordinance, statute, law, administrative or
judicial decision, or public policy, and if such court should declare such
portion, provision or provisions of this Security Agreement to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent of
all parties hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and
enforceable, that the remainder of this Security Agreement shall be construed
as if such illegal, invalid, unlawful, void or unenforceable portion, provision
or provisions were not contained therein, and that the rights, obligations and
interest of the Pledgor and the Secured Party under the remainder of this
Security Agreement remain in full force and effect.
24. Counterparts. This Security Agreement may be executed in one or
more counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and shall
become binding when one or more counterparts have been signed by each of the
parties hereto and delivered to each of Secured Party and Pledgor.
IN WITNESS WHEREOF, the Pledgor and Secured Party have duly executed
and delivered this Security Agreement as of the date first above written.
Pledgor:
AWEC Development Corporation
By: /s/ David Paes
Title: Vice President
Secured Party:
Resale, Inc.
By: /s/ Wolfgang Daniel
Title: President
EXHIBIT "A"
Permitted Investments
1. Certificates of Deposit or other interest-bearing account with a national
bank with assets in excess of $500 million.
2. An obligation of the United States.
3. A money market fund consisting primarily of government securities, which
fund shall be approved in writing by Secured Party, and which approval may be
granted or withheld in Secured Party's sole and absolute discretion.
4. Any other investment which shall be approved in writing by Secured Party,
which approval may be granted or withheld in
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Secured Party's sole and absolute discretion.
In all cases, the investment shall have a maturity not exceeding one year or
the maturity date of the Loan Note, whichever is earlier.
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EXHIBIT 10.6
Environmental Indemnity Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc. [Pursuant to Contribution Agreement]
THIS ENVIRONMENTAL INDEMNITY AGREEMENT is made as of September 11, 1995, by
AWEC Development Corporation, an Arkansas corporation ("Indemnitor"), for the
benefit of Resure, Inc., an Illinois corporation (hereinafter referred to as
"Lender").
RECITALS
A. Pursuant to the terms and conditions of that certain Contribution
Agreement of even date herewith between Indemnitor and Lender, Lender has
agreed to make a loan to Indemnitor (the "Loan"), as evidenced by that certain
Non-Recourse Promissory Note in the principal amount of $3,500,000.00 dated the
date hereof, executed by Indemnitor and made payable to the order of Lender.
C. The Loan is secured by a first mortgage on the real estate (the
"Property") located in Pulaski County, State of Arkansas, which Property is
legally described on Exhibit "A" attached hereto and hereby made a part hereof.
D. As a precondition to making the Loan, Lender has required that
Indemnitor extend to Lender the indemnities set forth in this agreement.
NOW, THEREFORE, to induce Lender to make the Loan and for Ten Dollars
($10.00) and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and
agrees as follows:
1. Indemnitor represents and warrants that, except in strict compliance
with all Environmental Laws (as hereinafter defined): (a) neither Indemnitor,
nor to the best of Indemnitor's knowledge after due and diligent inquiry, has
any other person or entity caused or permitted, nor will Indemnitor cause to be
permitted in the future, any Contaminants (as hereinafter defined) to be (i)
generated, released, stored, disposed of, buried or deposited over, beneath, in
or upon, the Property or any part thereof, or from the Property into the
atmosphere or any watercourse, body of water, ground water, wetlands or publicly
or privately owned well or onto
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any other parcel of property; or (ii) used in any nature whatsoever on the
Property or over, beneath, in or on adjacent parcels or parcels in the
immediate vicinity of the Property; (b) Indemnitor has conducted or has caused
to be conducted appropriate inquiry into the current and previous uses of the
Property in a manner consistent with good commercial or customary practice for
purposes of meeting the standards for an "Innocent Purchaser," under CERCLA (as
hereinafter defined); (c) Indemnitor's operations and the Property are, and at
all times will be, in compliance with all Environmental Laws; (d) no permits
are held or required to be held nor are any registrations or notices required
to be made with respect to the Property under any Environmental Laws; (e) none
of the Property has ever been used (whether by Indemnitor or, to the best of
Indemnitor's knowledge after due and diligent inquiry, by any other person) as
a treatment, storage or disposal (whether permanent or temporary) site for any
Contaminants; (f) Indemnitor has not received any notice of any violations of
(and is not aware of any existing violations) of any Environmental Laws and, to
the best of Indemnitor's knowledge after due and diligent inquiry, there have
been no actions commenced or threatened by any party against Indemnitor or the
Property for noncompliance with any Environmental Laws; and (g) no lien,
encumbrance or preferential arrangement of any kind for any liabilities arising
under any Environmental Laws has attached to, or been asserted against, all or
any portion of the Property.
2. Indemnitor agrees to keep and maintain the Property in compliance
with, and shall not cause or permit the Property to be in violation of, any
Environmental Laws. Indemnitor at its own cost, shall take all actions which
are necessary or desirable to clean up any Contaminants or other environmental
problems affecting the Property, including removal, containment or any other
remedial action required by any applicable governmental authorities.
3. Indemnitor shall give prompt written notice to Lender of:
(a) any proceeding, investigation or inquiry commenced by any
governmental authority with respect to the presence of any Contaminants on,
under or about the Property or the migration thereof to or from adjoining
property;
(b) any notice of a violation of any Environmental Laws and any claims
made or threatened by any individual or entity against Indemnitors or the
Property relating to any loss or injury allegedly resulting from any
Contaminants; and
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(c) the discovery by Indemnitor of any occurrence or condition on any
real property adjoining or in the vicinity of the Property which might cause
the Property or any part thereof to be subject to any restriction on the
ownership, occupancy, transferability or use of the Property under any
Environmental Laws.
4. For purposes of this Environmental Indemnity Agreement:
(a) the term "Environmental Laws" means and includes, without
limitation, any federal, state or local law, statute, regulation or ordinance
and any order, judgment or decree of any court or administrative body now or
hereafter enacted or issued, relating to any Contaminants or pertaining to
health, industrial hygiene or the environmental or ecological conditions on,
under or about the Property, including without limitation each of the
following: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section
6901, et seq.; the Toxic Substance Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.;
the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et
seq.; the Federal Hazardous Materials Transportation Act, 49 U.S.C. Section
1801 et seq.:; the National Environmental Policy Act of 1975, as amended, 42
U.S.C. Section 4321 et seq.; and the rules, regulations and ordinances of the
U.S. Environmental Protection Agency, the County of Pulaski, and State of
Arkansas, and of all other agencies, boards, commissions and other governmental
bodies and officers having jurisdiction over the Property or the use or
operation thereof.
(b) The term "Contaminants" means and includes, without limitation:
(i) Those substances included within the definitions of "hazardous
substance," "hazardous waste," "toxic substance," "solid waste," "pollutant" or
"contaminant" in any Environmental Laws; and
(ii) Any material, waste or substance which is any of the following:
(A) asbestos or any material composed of or containing asbestos; (B)
polychlorinatedbiphenyls; (C) petroleum or any petroleum based substance or
waste or any constituent of any such substance, waste or product; (D) highly
flammable or explosive; or (E) radioactive; and
(iii) Those other substances, materials and wastes which are or become
regulated under any Environmental Laws, or which are or become classified as
hazardous or
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toxic by any Environmental Laws.
5. Indemnitor covenants and agrees that Indemnitor will indemnify,
hold harmless, and defend Lender and any current or former officer, director,
employee or agent of Lender (individually an "Indemnitee" and collectively, the
"Indemnitees"), immediately upon demand by any Indemnitee from any and all
claims, losses, damages, liabilities, judgments, decrees, injuries, response
costs, fines, penalties, clean-up costs and expenses arising out of or in any
way relating to: (i) the existence of Contaminants over, beneath, in or upon
the Property, or the escape, seepage, leakage, spillage, discharge, emission,
transportation or release from the Property of any Contaminants into the
atmosphere or any watercourse, body of water, ground water, wetlands or
publicly or privately owned well, or onto any other parcel of property; (ii)
any violation or alleged violation of any Environmental Laws, regarding,
arising out of or in connection with the Property or the operations of
Indemnitor; or (iii) the breach of any of the representations, warranties,
covenants and agreements set forth in the foregoing paragraphs hereof; with
such claims, losses, damages, liabilities, judgments, decrees, injuries,
response costs, fines, penalties, clean-up costs and expenses to include, but
not be limited to: (a) claims of third parties (including, without limitation,
governmental agencies) for damages, fines, penalties, response costs, clean-up,
costs, injunctive or other relief; (b) costs and expenses of clean-up, removal,
or containment whether incurred by Lender or any third parties, including fees
of attorneys and experts, and costs of reporting the existence of Contaminants
to any governmental agency; and (c) any and all expenses or obligations
incurred at, before and after any trial or appeal therefrom whether or not
taxable as costs, including, without limitation, reasonable attorneys' fees,
witness fees, deposition costs, copying and telephone charges and other
expenses.
6. The representations, warranties, covenants and agreements contained
herein and the obligations of Indemnitor to indemnify Lender and the other
Indemnitees with respect to the expenses, damages, losses, costs, damages and
liabilities set forth in the foregoing paragraphs (collectively, "Indemnitor's
Environmental Obligations"), shall not be limited to the amount of the Loan and
shall expressly survive: (i) the foreclosure of any liens or security interests
in favor of Lender or a third party (and shall not be limited to the amount of
any deficiency in any liquidation or foreclosure action); (ii) repayment of all
amounts due under the Loan; (iii) the cancellation of any promissory notes
evidencing
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the Loan; and (iv) the discharge or release of any and all collateral securing
repayment of the Loan.
7. Indemnitor's liabilities, obligations and indemnifications
hereunder are several and independent of the obligations of any person liable
for all or any part of the Loan (collectively "Borrowers"). Separate actions
may be brought against Indemnitor or Borrowers, regardless of whether
Indemnitor or Borrowers are joined in any such action or actions and
irrespective of any invalidity, illegality, irregularity or unenforceability of
the indebtedness comprising the Loan, any of the documents evidencing or
securing the Loan (collectively, the "Contribution Documents") or any
Environmental Obligations of the Indemnitor.
8. In the event that Lender or the other Indemnitees incur any costs
to collect or enforce the Indemnitor's Obligations hereunder, Indemnitor shall,
upon demand by Lender or the other Indemnitees, immediately reimburse Lender or
the other Indemnitees therefor, with interest from the date so incurred until
paid at the rate of twelve percent (12%) per annum including, without
limitation, reasonable attorneys' fees and court costs incurred in any
litigation and bankruptcy and administrative proceedings, and appeals
therefrom.
9. For so long as the Contribution Documents shall be in effect, any
breach, default or event of default hereunder shall, for the limited purpose
set forth herein, be deemed a default under each of the Contribution Documents
and, although the Environmental Obligations of the Indemnitor hereunder are
unsecured by the Contribution Documents, shall give the Lender the right to
declare the indebtedness evidenced by the Contribution Documents immediately
due and payable.
10. This Environmental Indemnity Agreement may not be amended,
modified, revised, supplemented or restated except by a writing signed by each
of the parties hereto. Any consent, waiver or suspension of any of Indemnitor's
Environmental Obligations or other duty or responsibility of Indemnitor
hereunder shall not be deemed effective unless in writing and signed by a duly
authorized officer of the Lender.
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11. This Environmental Indemnity Agreement has been made and delivered
in Arkansas and shall be construed according to and governed by the internal
laws of the State of Arkansas without regard to its conflict of law rules. If
any provision hereof shall be held invalid, prohibited or unenforceable under
any applicable laws of any applicable jurisdiction, such invalidity,
prohibition or unenforceability shall be limited to such provision and shall
not affect or invalidate the other provisions hereof or affect the validity or
enforceability of such provision in any other jurisdiction, and to that extent,
the provisions hereof are
12. This Environmental Indemnity Agreement and Indemnitors'
Environmental Obligations shall be binding upon and enforceable against
Indemnitor and its successors and assigns.
IN WITNESS WHEREOF, Indemnitor has caused this Agreement to be
executed as of the day and year first above written.
AWEC Development Corporation,
an Arkansas corporation
By: /s/ David Paes
Title: Vice President
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EXHIBIT 10.7
Loan Agreement, dated September 11, 1995, between AWEC Development Corporation
and Resure, Inc.
LOAN AGREEMENT
This Agreement is made and executed as of the 11th day of September,
1995, by and among AWEC Development Corporation, an Arkansas corporation
("Borrower") and Resure, Inc., an Illinois corporation ("Lender").
WITNESSETH:
WHEREAS, Borrower is the beneficial owner of certain real property
located in Pulaski County, Arkansas; and
WHEREAS, Borrower has made application to establish with and borrow
from Lender a loan in the principal sum of Three Million Five Hundred Thousand
and 00/100 Dollars ($3,500,000.00) for the purpose of enabling it to refinance
its existing debt secured by certain real property and for operating capital;
and
WHEREAS, Lender has agreed to make such loan to Borrower in accordance
with and subject to the terms, conditions and provisions herein contained.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, each of the parties, intending to be legally bound by the
provisions hereof, agrees as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Appraisal" shall mean an appraisal of the Land and Improvements
prepared by an independent appraiser who shall be a member of the American
Institute of Real Estate Appraisers selected by or satisfactory to Lender,
which shows that the value of the Land will be no less than Four Million Three
Hundred Seventy-Five Thousand Dollars ($4,375,000.00).
"Current Survey" shall mean an on-the-ground ALTA survey of the Land,
dated currently, with the date such survey is required to be furnished pursuant
to any provision of this Agreement, performed by a surveyor duly licensed as
such in the State of Arkansas,
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acceptable to Lender (and, if Lender shall so require, to the Title Company).
"Governmental Authority" shall mean the United States, the State of
Arkansas, the County of Pulaski, the City of Maumelle, and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court of instrumentality of any of them, which now or hereafter
has jurisdiction over Lender, Borrower, the Premises, or any part hereof.
"Hazardous Materials" means and includes, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials as defined in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
from time to time amended (42 U.S.C. Section 9601, et seq.), the Hazardous
Waste Materials Transportation Act, as from time to time amended (49 U.S.C.
Section 1801, et seq.), the Resource Conservation and Recovery Act, as from
time to time amended (42 U.S.C. Section 9601, et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Section 1251, et seq.) and the Clean Air Act
(42 U.S.C. Section 7401, et sea.), and in the regulations adopted and
publications promulgated pursuant thereto, or in any other federal, state or
local law, ordinance, rule or regulation.
"Land" shall mean Parcel 1 and Parcel 2. "Parcel 1" shall mean the
approximately 701.03 acres tract of real property located in the City of
Maumelle, Pulaski County, Arkansas, which is described on Exhibit "A-1",
affixed hereto and by this reference made a part hereof. "Parcel 2" shall mean
the approximately 409.73 acres tract of real property located in the City of
Maumelle, Pulaski County, Arkansas, which is described on Exhibit "A-2",
affixed hereto and by this reference made a part hereof.
"Legal Requirements" shall mean any law, ordinance, order, rule or
regulation of a Governmental Authority and any requirements, terms or
conditions contained in any restrictions or restrictive covenants or in any
Governmental Permit affecting the Premises.
"Loan" shall mean the loan contemplated by this Agreement in
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the principal amount of Three Million Five Hundred Thousand and 00/ 100 Dollars
($3,500,000.00), bearing interest and being payable as provided in the Note,
which is incorporated herein by reference.
"Loan Documents" shall include this Agreement, the Note (including all
renewals, extensions and modifications thereof), the Mortgage, and all other
instruments executed pursuant hereto or in connection herewith, or as evidence
of, security for payment of the Loan or of performance of Borrower's
obligations under this Agreement or other Loan Documents.
"Mortgage" shall mean a Mortgage covering and encumbering the Land,
duly executed by Borrower and all other parties having a beneficial or legal
interest in the Land, in form satisfactory to the Title Company and to Lender's
counsel, and securing Borrower's obligations under the Note.
"Note" shall mean the Promissory Note to be issued by Borrower and
delivered to Lender in the principal amount of Three Million Five Hundred
Thousand and 00/100 Dollars ($3,500,000.00), bearing interest and being payable
as provided in the Note, a copy of which is attached hereto as Exhibit "C" and
incorporated herein by reference, together with any and all extensions,
renewals, modifications, substitutions, replacements, amendments or
restatements thereof.
"Title Company" shall mean Beach Abstract & Guaranty Co., as agent for
Chicago Title Insurance Company.
"Title Insurance Policy" shall mean an ALTA Loan Policy in the amount
of the Loan insuring to Lender that the Mortgage constitutes a valid binding
and enforceable first priority lien covering Parcel 1 and a second priority
lien covering Parcel 2, and is subject only to those exceptions and
encumbrances which Lender may approve, in writing, those set forth on Exhibit
"B" affixed hereto, and Parcel 2 shall be subject to a first mortgage to Lender
securing an obligation other than the Note, issued by the Title Company, such
Title Insurance Policy to provide extended coverage over the printed general
exceptions and deletion of creditors' rights exclusions, and to include the
following endorsements to Lender: (i) Comp. 1, (ii) usury, (iii) 3.0 zoning,
(iv) variable
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interest rate, (v) doing business (insuring that no qualification in Arkansas
by Resure will be necessary for enforceability), (vi) access to public road or
highway and (vii) tax parcel (tax bills apply only to the mortgaged property).
ARTICLE II
LENDING AGREEMENT
2.1 Lending Agreement. In reliance upon and induced by the
representations, warranties and covenants of Borrower contained in the Loan
Documents, Lender agrees to lend to Borrower, in accordance with this
Agreement, Three Million Five Hundred Thousand and 00/100 Dollars
($3,500,000.00). Said sum shall be used to refinance existing debt of the
Borrower and for working capital.
2.2 Manner of Disbursement. The full amount of the Loan shall be
delivered to Borrower on the date of Closing by wire transfer from Beach
Abstract & Guaranty Co.
ARTICLE III
CONDITIONS PRECEDENT
3.1 Conditions Precedent to Loan. As a condition to the obligation of
Lender to make the Loan, Lender shall have received each of the following, in
form and substance satisfactory to the Lender and its counsel:
(a) This Agreement, duly executed by Borrower;
(b) The Note, duly executed by Borrower;
(c) The Mortgage, duly executed by Borrower and all other necessary parties;
(d) The Mortgage shall have been recorded in the mortgage records of the
appropriate county or counties, with all filing fees therefore paid;
(e) A paid Title Insurance Policy;
(f) A Current Survey acceptable to Lender;
(g) Phase I Environmental Audit for the Land by an engineering firm acceptable
to Lender reflecting that no Hazardous Materials are located upon the Land, in
form and substance satisfactory to Lender;
(h) The Appraisal;
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(i) Certificate of Good Standing for Borrower, from the Arkansas Secretary of
State dated within thirty (30) days prior to closing;
(k) A certificate, dated the date of the closing, as to the incumbency and the
authenticity of the signature(s) of the officer(s) of Borrower executing the
Loan Documents;
(l) A copy of Borrower's Articles of Incorporation and By-Laws, certified as of
the date of closing;
(m) The opinion of Borrower's counsel in substantially the form attached hereto
as Exhibit "D"; and
(n) A fully executed Environmental Indemnity Agreement in the form attached
hereto as Exhibit "E", and a fully executed Security Agreement in the form
attached hereto as Exhibit "F".
(o) Certificate of Insurance as required by the Mortgage.
(p) A current financial statement of the Borrower, satisfactory to Lender.
(q) Evidence, satisfactory to Lender, that the Land has adequate access to
water, sewer, electric and telephone utility services to the boundaries of the
Land.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
4.1 Incorporation. Good Standing and Due Qualification. Borrower is a
corporation duly incorporated, validly existing, and in good standing under the
laws of Arkansas, has the corporate power and authority to own its assets and
to transact the business in which it is now engaged or proposed to be engaged
in, and is duly qualified as a foreign corporation and in good standing under
the laws of each other jurisdiction in which such qualification is required.
4.2 Corporate Power and Authority. The execution, delivery, and
performance by Borrower of the Loan Documents to which it is a party have been
duly authorized by all necessary corporate action
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and do not and will not (1) require any consent or approval of the stockholders
of such corporation; (2) contravene such corporation's charter or bylaws; (3)
violate any provision of any law, rule, regulation (including, without
limitation, Regulations U and X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree, determination, or
award presently in effect having applicability to such corporation; (4) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which such
corporation is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any lien in
favor of third parties, upon or with respect to any of the properties now owned
or hereafter acquired by such corporation; and (6) cause such corporation to be
in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or aware of any such indenture, agreement,
lease or instrument.
4.3 Legally Enforceable Agreement. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be, legal, valid
and binding obligations of Borrower, as the case may be, enforceable against
Borrower in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
4.4 Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by
insurance) materially and adversely affecting such business properties or the
operation of Borrower.
4.5 Other Agreements. Borrower is not a party to any indenture, loan,
or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction which could have a material
adverse effect on the business, properties, assets, operations, or conditions,
financial or otherwise, of Borrower or the ability of Borrower to carry out
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its obligations under the Loan Documents to which it is a party.
4.6 Litigation. There is no pending or threatened action or proceeding
against or affecting Borrower before any court, governmental agency, or
arbitrator which may, in any one case or in the aggregate, materially adversely
affect the financial condition, operations, properties, or business of Borrower
or the ability of Borrower to perform its obligations under the Loan Documents
to which it is a party. There are no outstanding judgments against Borrower.
4.7 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Incomes Security Act of 1974,
as amended ("ERISA"). Neither a reportable event nor a prohibited transaction
thereunder has occurred and is continuing with respect to any pension plan
covered by Title IV of ERISA in which Borrower is an employer (the "Plan"); no
notice of intent to terminate a Plan has been filed, nor has any Plan been
terminated; no circumstances exist which constitute grounds entitling the
Pension Benefit Guaranty Company ("PBGC") to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; Borrower has not completely or partially
withdrawn from a multi-employer plan; Borrower has met its minimum funding
requirements under ERISA with respect to its Plan, and the present value of all
vested benefits under each Plan exceeds the fair market value of all Plan
assets allocable to such benefits, as determined on the most recent valuation
date of the Plan and in accordance with the provisions of ERISA; and Borrower
has not incurred any liability to the PBGC under ERISA.
4.8 Operation of Business. Borrower possesses all licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted, and Borrower is not in violation of any
valid rights of others with respect to any of the foregoing.
4.9 Taxes. Borrower has filed all tax returns (federal, state, and
local) required to be filed and have paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
4.10 Environmental Warranty. To the best of its knowledge, information
and belief, after due inquiry, Borrower has duly complied
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with, and its business, operations, assets, equipment, property, leaseholds, or
other facilities are in compliance with, the provisions of all federal, state
and local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder. Borrower has been issued (or has
applied for) and will maintain all required federal, state and local permits,
licenses, certificates and approvals relating to (1) air emissions; (2)
discharges to surface water or groundwater; (3) noise emissions; (4) solid or
liquid waste disposal; (5) the use, generation, storage, transportation, or
disposal of toxic or hazardous substances or wastes (intended hereby and
hereafter to include any and all such materials listed in any federal, state, or
local law, code or ordinance and all rules and regulations promulgated
thereunder as hazardous or potentially hazardous); or (6) other environmental,
health, or safety matters. Borrower has not received notice of, nor knows of, or
suspects facts which might constitute any violations of any federal, state or
local environmental, health, or safety laws, codes or ordinances, and any rules
or regulations promulgated thereunder with respect to its businesses,
operations, assets, equipment, property, leaseholds, or other facilities. Except
in accordance with a valid governmental permit, license, certificate, or
approval, there has been no emission, spill, release, or discharge into or upon
(1) the air; (2) soils or any improvements located thereon; (3) surface water or
ground-water; or (4) the sewer, septic system or waste treatment, storage or
disposal system servicing the premises of any toxic or hazardous substances or
wastes at or from the premises; and accordingly the premises of Borrower and the
Land are free of all such toxic or hazardous substances or wastes. There has
been no compliant, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to (1) air
emissions; (2) spills, releases or discharges to soils or improvements located
thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (3) noise
emissions; (4) solid or liquid waste disposal; (5) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or waste; or (6)
other environmental, health or safety matters affecting Borrower or its
business, operations, assets equipment, property, leaseholds, or other
facilities. Borrower does not have any indebtedness, obligation, or liability,
absolute or contingent, matured or not matured, with respect to the storage,
treatment,
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cleanup or disposal of any solid wastes, hazardous wastes or other toxic or
hazardous substances (including, without limitation, any such indebtedness,
obligation or liability with respect to any current regulation, law, or statute
regarding such storage, treatment, cleanup or disposal).
4.11 Survival of Warranties. All representations and warranties
contained in this Agreement or any of the other Loan Documents shall survive
the execution and delivery of this Agreement and shall be true from the date of
this Agreement until the Loan shall be said in full.
ARTICLE V
MISCELLANEOUS
5.1 Amendments, Etc. No amendment, modification, termination or waiver
of any provision of any Loan Document to which Borrower is a party, nor consent
to any departure by Borrower from any Loan Document to which it is a party,
shall in any event be effective unless the same shall be in writing and signed
by Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
5.2 Notices, Etc. All notices and other communications Provided for
under this Agreement and under the other Loan Documents to which Borrower is a
party shall be in writing (including telegraphic, telex, and facsimile
transmissions) and mailed or transmitted or delivered, if to Borrower, at its
address at:
AWEC Development Corporation
600 Pine Forest Circle
Maumelle, Arkansas 72113
Attn: David Paes
and if Lender, at its address at:
311 South Wacker Drive
Suite 400
Chicago, IL 60606
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section. Except as otherwise provided in this Agreement, all such
notices and communications shall be effective when deposited in the mails or
delivered to the telegraph company, or sent, answer back received, respectively
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addressed as aforesaid, except that notices to Lender shall not be effective
until received by Lender.
5.3 Waiver. No failure or delay on the part of Lender in exercising
any right, power, or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. The rights and remedies provided herein are
cumulative, and are not exclusive of any other rights, powers, privileges, or
remedies, now or hereafter existing, at law or in equity or otherwise.
5.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns.
5.5 Governing Law. The Loan Documents shall be governed by, and
construed in accordance with, the laws of the State of Arkansas.
5.6 Severability of Provisions. Any provision of any Loan Document
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Documents or affecting the validity or enforceability of such provision in any
other jurisdiction.
5.7 Headiness. Article and Section headings in the Loan Documents are
included in such Loan Documents for the convenience of reference only and shall
not constitute a part of the applicable Loan Documents for any other purpose.
5.8 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which together shall constitute one and the same
instrument.
5.9 Additional Documents; Further Assurances. Borrower shall execute,
file, or refile (or cause to be executed, filed or refiled), such mortgages,
security instruments, financing statements, continuation statements,
modification agreements, and like documents as lender may from time to time
require to perfect and maintain or continue to perfect and maintain the
priority of its lien and any and all security interests or assignments granted
or created or intended to be created by Borrower to secure
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payment of the Loan.
5.10 Coordination With Other Loan Documents. The benefits, rights and
remedies of Lender contained herein or provided for in any of the other Loan
Documents are cumulative. To the extent of any conflict between any provision
of this Agreement and any provision contained in any of the other Loan
Documents, the provisions of this Agreement shall control, except that any
provision of any other document giving the greater security or additional
rights and remedies to Lender shall control over this Agreement.
5.11 Construction.
(a) Each party and counsel for each party have reviewed this Agreement
and, accordingly, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.
(b) Whenever the context shall require, the masculine shall include
the feminine and neuter, and the singular shall include the plural, and
conversely.
5.12 Incorporation of Recitals and Exhibits. All of the preambles and
all of the recitals set forth in this Agreement are made a part of this
Agreement. In addition, any and all exhibits to this Agreement are hereby
specifically made a part of and incorporated into this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
BORROWER:
AWEC DEVELOPMENT CORPORATION
By: /s/ David Paes
Title: Vice President
LENDER
RESURE, INC.
By: /s/ Wolfgang Daniel
Title: President
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EXHIBIT 10.8
Promissory Note dated September 11, 1995 between AWEC
Development Corporation and Resure Inc.
PROMISSORY NOTE
(Secured by 701.03 Acre
Tract and 409.73 Acre Tract)
$3,500,000.00 Little Rock, Arkansas September 11, 1995
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FOR VALUE RECEIVED, AWEC Development Corporation, an Arkansas
corporation (referred to as "Maker"), promises to pay to the order of Resure,
Inc., an Illinois corporation ("Payee"), at its office at 311 South Wacker
Drive, Suite 400, Chicago, Illinois 60606, or such other place as the holder of
this Note may from time to time designate, the principal sum of Three Million
Five Hundred Thousand Dollars ($3,500,000.00), together with interest thereon,
until maturity, at the rate of Ten Percent (10%) per annum. Interest shall be
calculated on the basis of a 365-day year. All payments hereunder shall be
payable in lawful money of the United States which shall be legal tender for
public and private debts at the time of payment. All past due principal and
interest shall bear interest (the "Default Rate") at the lesser of (i) 15% per
annum; or (ii) the maximum rate permitted by applicable law to be charged for
past due principal and interest.
Payments under this Note shall be due and payable as follows:
The entire unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be due and payable in full on July
1, 2000. Accrued interest only of this Note shall be due for one year payable
Quarter Annually on the unpaid principal balance of this Note, with the first
such payment due on October 1, 1995. Then there shall be due payments in the
sum of $101,591.16 Quarter Annually with the first such payment due on October
1, 1996. "Quarter Annually" of this Note shall be October 1, January 1, April 1
and July 1 each year until the entire balance of this Note is due in full on
July 1, 2000. All payments shall be applied first to interest, or so much
thereof as shall from time to time remain unpaid on the entire unpaid principal
balance of this Note, and the balance of any payment shall be applied on
account of principal, but without reducing the quarter-annual payments, unless
the number of such payments shall be necessarily reduced.
If any payment of principal or interest due under this Note shall
become due on a Saturday, Sunday or public holiday under the laws of the State
of Arkansas on which Payee is not open for business, such payment shall be made
on the next succeeding business day, and such extension of time shall in such
case be included in computing interest in connection with such payment.
This Note is secured by a Mortgage of even date herewith, executed by
Maker in favor of Payee, and the holder hereof is entitled to all of the liens,
benefits, rights and privileges thereof, including all collateral provided for
therein or in connection therewith. This Note may sometimes be referred to as
the "Loan Note."
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In the event of default in the payment of any installment of principal
or interest due hereunder, or any part thereof, or if there is an event of
default as defined in the Mortgage, then in any such event the entire unpaid
principal balance hereof, together with all accrued interest, shall, at the
option of Payee, become at once due and payable without notice or demand except
such notice or demand, if any, as may be required in the Mortgage. Failure of
Payee or other holder hereof to exercise this option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent
default. The acceptance by Payee of any payment, partial or otherwise, made
hereunder after the time when it becomes due as herein set forth shall not
establish a custom or constitute a waiver by Payee of any right to enforce
prompt payment hereof. After any event of default, as defined in the Mortgage,
and until such event of default has been completely cured, this Note shall bear
interest on the outstanding unpaid principal balance at the Default Rate.
Maker may pre-pay this Note in whole or in part at any time without
premium or penalty.
If this obligation, after default, is placed in the hands of an
attorney for collection, or if Payee is made a party defendant in connection
with any litigation involving the real estate secured by the Mortgage of even
date herewith, the Maker, Guarantors and all other persons now or hereafter
liable hereon will be obligated to pay the holder hereof an additional sum, as
a reasonable attorney's fee, not to exceed Ten Percent (10%) of the unpaid
principal plus all accrued interest. This clause is intended to be in
compliance with Act 350 of the Arkansas Acts of 1951, approved March 20, 1951,
and any acts amendatory thereof. The payment of such amount shall be an
additional liability owing hereunder by Maker, payable on demand and bearing
interest, from the date of such demand until payment thereof to Payee or the
holder hereof, at the Default Rate.
Notwithstanding any provisions to the contrary contained in this Note
or in any agreement securing or relating to the debt evidenced hereby, it is
expressly provided that in no case or event whatsoever shall the aggregate of
(i) all interest on the unpaid balance hereof, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant
hereto or to any such other agreement, which under applicable laws are or may
be deemed to constitute interest, ever exceed the maximum rate of
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interest which could lawfully be contracted for, charged or received on the
unpaid principal balance hereof, plus any other pertinent indebtedness. In this
connection, it is expressly stipulated and agreed that it is the intent of the
Maker and the Payee to contract in strict compliance with the applicable usury
laws from time to time in effect. In furtherance thereof, none of the terms of
this Note or any related agreement shall ever be construed to create a contract
to pay, as consideration for the use, forbearance or detention of money,
interest at a rate in excess of the maximum rate permitted to be contracted
for, charged or received by applicable law. If under any circumstances the
aggregate amounts paid hereon include amounts which by law are deemed interest,
which would exceed the maximum amount of interest which could lawfully have
been contracted for, charged or received, Maker stipulates that such amounts
will be deemed to have been paid as a result of an error on the part of both
Maker and Payee, and the party receiving such excess payment shall, promptly
upon receiving such payment, refund the amount of such excess or, at the
Payee's option, credit such excess against the unpaid principal balance hereof.
In addition, all sums paid or agreed to be paid to the holder hereof for the
use, forbearance or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of the indebtedness represented hereby, in the manner provided by law
to the end that the actual rate of interest hereon shall never exceed the
applicable maximum rate. If any term or provision of this Note or of any
related agreement under any circumstances would require the payment of an
amount for the use, forbearance or detention of money which, in addition to all
other amounts theretofore paid and constituting interest under the applicable
law, would exceed the maximum rate of interest which could lawfully be charged
under such circumstances, then the amount which Maker or any other person
liable therefor is obligated to pay in such circumstances, but only in such
circumstances, is hereby automatically reduced to the maximum amount which
could lawfully be charged under applicable law. The maximum lawful rate of
interest applicable hereto shall be the highest of (i) the maximum rate
provided by the laws of the State of Arkansas for loans of the
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type evidenced hereby and by the instruments securing the indebtedness
evidenced hereby, or (ii) the maximum rate provided in applicable federal law
which preempts otherwise applicable state law, or (iii) the maximum rate
provided in any subsequently enacted law of the State of Arkansas applicable
hereto. To the extent that otherwise applicable state law is preempted by a
federal law which does not limit the rate of interest which may be charged,
this paragraph shall be inapplicable. The provisions of this paragraph shall
control all other provisions hereof and of all agreements, whether now or
hereafter existing and whether written or oral, between the Maker and the Payee
or between the Payee and any other person liable hereon. In connection with
this paragraph, Maker acknowledges and represents to Payee that the proceeds of
the loan evidenced hereby are and shall be used solely for a business purpose.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective heirs, personal representatives, successors and
assigns.
The records of Payee or any holder of this Note shall be prima facie
evidence of the amount owing under this Note.
The Maker shall pay to the Payee a late charge for any installment not
received by the Payee within ten (10) days after the installment is due in the
amount of five percent (5%) of the applicable payment due, but in no event
greater than One Thousand and 00/100 Dollars ($1,000.00); such late charge
shall apply separately to each installment past due, but shall only be assessed
once as to each late payment. Such late charge shall not be deemed a penalty,
but a charge to partially reimburse the Payee for its administrative and
handling costs and expenses. The payment of any such late charge shall be an
additional liability owing hereunder by Maker, payable on demand and bearing
interest, from the date of such demand until payment thereof to Payee on the
holder hereof, at the Default Rate.
This Note is being executed and delivered in Little Rock, Pulaski
County, Arkansas, and shall be construed and enforced in accordance with, and
be governed by, the laws of the State of Arkansas, except insofar as the laws
of the United States of America shall have application.
The Maker hereof hereby irrevocably appoints G. Robert Hardin,
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whose address is 410 West Third, Suite 200, Little Rock, Arkansas, as its agent
to receive service of process for any and all lawsuits which may arise in
Pulaski County, Arkansas, concerning the enforcement of this Note.
The Maker hereof and all parties who at the time may be liable hereon
in any capacity, jointly and severally, waive presentment, demand for payment,
protest and notice of dishonor of this Note.
If any provision of this Note shall be held invalid, prohibited or
unenforceable under any applicable law, such invalidity, prohibition or
unenforceability shall be limited to such provision and shall not affect or
invalidate any other provision herein, and to that extent, the provisions
hereof are severable. Provided, however, that if any provision that is held
invalid, prohibited or unenforceable relates to the payment of any monetary
sum, then the entire outstanding principal balance hereunder, together with all
interest accrued thereon and all other amounts payable hereunder to the extent
permitted by law, shall become immediately due and payable at the option of
Payee or the holder hereof.
AWEC DEVELOPMENT CORPORATION
BY: /s/ David Paes
TITLE: Vice President
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EXHIBIT 10.9
Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc. MORTGAGE (with Assignment of Leases and Rents
securing Loan Note)
KNOW ALL MEN BY THESE PRESENTS:
1. Grant of Mortgage in Property. That AWEC Development Corporation,
an Arkansas corporation (hereinafter sometimes referred to as the "Mortgagor"),
for valuable consideration, and in order to induce Resure, Inc., an Illinois
corporation (the "Mortgagee"), to loan to Mortgagor the principal sum of Three
Million Five Hundred Thousand Dollars ($3,500,000.00), does hereby grant,
bargain, sell, convey, assign, grant a security interest in and deliver unto
the Mortgagee, and unto its successors and assigns, the following described
lands lying in Pulaski County, Arkansas:
Parcel 1: That approximately 701.03 acre tract of land in the City of
Maumelle, Pulaski County, Arkansas, which is marked Exhibit "A", affixed hereto
and by this reference made a part hereof ("Parcel 1").
Parcel 2: That approximately 409.73 acre tract of land in the City of
Maumelle, Pulaski County, Arkansas, which is marked Exhibit "B" affixed hereto
and by this reference made a part hereof ('Parcel 2").
(Parcel 1 and Parcel 2 may be cumulatively referred to herein as the
"Land".)
Together with all easements, rights-of-way and rights used in
connection therewith, or as a means of access thereto, and all tenements,
hereditaments and appurtenances thereunto belonging, or appertaining thereto,
and all water rights and shares of stock evidencing the same;
Together with, all right, title and interest of Mortgagor, now owned
or hereafter acquired, in or to any land lying within the right-of-way of any
street, open or proposed, adjoining either Parcel 1 or Parcel 2, and any and
all sidewalks, alleys and strips and gores of land adjacent to or used in
connection with the Parcel 1 or Parcel 2;
Together with, all of the estate, interest, right, title, other claim
or demand, including claims or demands with respect to the proceeds of
insurance and effects with respect thereto, which Mortgagor now has or
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may hereafter acquire in the Parcel 1 or Parcel 2 and any and all awards made
for the taking by eminent domain, or by any proceeding or purchase in lieu
thereof of the whole or any part of the Parcel 1 or Parcel 2, including without
limitation any awards resulting from a change in grade of streets and awards
for severance damages. (collectively referred to as the "Property").
2. Assignment of Leases and Rents.
2.1 Assignment. Mortgagor hereby assigns to Mortgagee all of
Mortgagor's interest as lessor in any and all leases now or hereafter existing
with respect to any part of the Property, and all rentals, issues and profits
due or which may become due to Mortgagor under the terms of such leases.
2.2 Rights of Mortgagor Prior to Default. This assignment is an
absolute assignment and not an assignment as security only. However, so long
as no Event of Default exists hereunder, Mortgagor shall have the right to
collect all rents due or which may become due under any of the assigned leases
(provided that Mortgagor may not accept prepayment of any rent due more than
one month in advance unless it has received the prior written consent of
Mortgagee to such action), to execute new leases, to renew and extend leases,
to enforce any covenants or conditions of such leases, and otherwise to deal
with such leases as if Mortgagor were the owner thereof. In no event, however,
shall Mortgagor, without prior written permission of Mortgagee, accept a
surrender of any such lease, or modify any such lease in a manner which would
materially amend or modify any such lease so as to have an adverse effect on
Mortgagee's interest therein. Such material modifications include but are not
limited to payment of rent more than thirty (30) days in advance, reduction of
rent and modification in length of the term of any such lease.
2.3 Rights of Mortgagee Upon Default. From and after the occurrence of
any Event of Default hereunder, Mortgagor shall no longer have any rights with
respect to any leases assigned hereby, and Mortgagee shall be entitled to
notify any lessees to pay all rentals due, or which may thereafter become due,
under such leases directly to Mortgagee (MORTGAGOR HEREBY DIRECTING AND
AUTHORIZING ALL TENANTS UNDER SUCH LEASES TO PAY ALL RENTS AND OTHER AMOUNTS
DUE UNDER SUCH LEASES TO MORTGAGEE UPON DEMAND WITHOUT THE NECESSITY OF ANY
FURTHER CONSENT OF OR LIABILITY TO MORTGAGOR AND
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ANY TENANT SHALL BE ENTITLED TO RELY UPON A WRITTEN DEMAND BY MORTGAGEE FOR
SUCH PAYMENT AND SHALL BE FULLY PROTECTED FROM ANY CLAIMS BY MORTGAGOR FOR ALL
PAYMENTS MADE TO MORTGAGEE FOLLOWING SUCH DEMAND FROM MORTGAGEE), and in all
other respects to exercise all the rights and privileges of ownership of such
leases, either in its own name or in Mortgagor's name. Without in any way
limiting the foregoing, Mortgagee shall have the right, power and privilege
(but shall be under no duty) to take possession of the property subject to any
lease and have, hold, manage, lease and operate the same on such terms and for
such period of time as Mortgagee may deem proper; and either with or without
taking possession of the property subject to any lease, Mortgagee shall have
the right, power and privilege (but shall be under no duty) immediately to
demand, collect and sue for, in its own name or in the name of Mortgagor, all
rents, rentals and other sums of money due and payable under the leases, as
they become due and payable, including those past due and unpaid, and to apply
such rents, rentals and other sums of money (in such order as Mortgagee shall
determine) to the payment of:
(a) All expenses of managing the property subject to any lease,
including, but not limited to, the salaries, fees and wages of a managing agent
and such other employees as Mortgagee may deem necessary or desirable, and all
expenses of operating and maintaining the property subject to any such leases,
including, but not limited to, all taxes, assessments, charges, claims, utility
costs, and premiums for insurance, and the costs of all alterations,
renovations, repairs or replacements, and all expenses incident to taking and
retaining possession of the property subject to any lease and/or collecting the
rent, rentals and other sums of money due and payable under any lease; and
(b) The Note, principal and interest, and attorneys' and collection
fees, in such order as Mortgagee, in its sole discretion, may determine. A
written demand by Mortgagee under such leases for the payment of rents, rentals
and other sums of money that become due under the leases shall be sufficient to
warrant such lessees or tenants to make all future payments of such rents,
rentals and other sums of money directly to Mortgagee without the necessity of
further consent by or from Mortgagor. Each such lessee or tenant shall be
entitled to rely upon a written demand by Mortgagee for such payment and shall
be fully protected from any claims by Mortgagor for all payments made to
Mortgagee after receipt of such written demand.
Mortgagee shall not be liable for any loss
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sustained by Mortgagor resulting from Mortgagee's failure to let the property
subject to any lease, or any part thereof, or from any other act or omission of
Mortgagee in managing the property subject to any lease.
2.4 Exculpation of Mortgagee/Assigned. The acceptance by Mortgagee of
this Assignment of Leases and Rents (as a result of Mortgagee's acceptance and
recordation of this instrument), with all of the rights, powers, privileges and
authority created hereby, shall not, prior to entry upon and taking possession
of the Property by Mortgagee, be deemed or construed to constitute Mortgagee as
a "mortgagee in possession" nor thereafter or at any time or in any event
obligate the Mortgagee to appear in or defend any action or proceeding relating
to the leases, the rents, issues and profits due or to become due therefrom, or
the Property, or to take any action hereunder, or to expend any money or incur
any expenses or perform or discharge any obligation, duty or liability under
any leases, or to assume any obligation or responsibility for any security
deposits or other deposits delivered to Mortgagor by any lessee or tenant and
not assigned and delivered to Mortgagee, nor shall Mortgagee be liable in any
way for any injury or damage to person or property sustained by any person or
persons, firm or corporation in or about the Property.
2.5 Reassignment. Upon final release of this Mortgage, Mortgagee shall
assign to Mortgagor or its successors all leases assigned by this Article.
3. Obligation Secured by Mortgage. To have and to hold the same unto
the above-named Mortgagee and unto its successors and assigns forever.
This Mortgage is to secure a loan from Mortgagee to Mortgagor in the
principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000.00), together with interest thereon until maturity at the rate of
Ten Percent (10%) per annum (see paragraph 5 below).
4. Mortgagor covenants with the Mortgagee, its successors and assigns,
that Mortgagor will forever warrant and defend the title to all of the Property
against all lawful claims whatever; provided, however, the interest owned by
the Mortgagor in Parcel 2 of the Property is subject to a prior first Mortgage
in favor of Resure, Inc., filed September _, 1995, as Document No. 95 53328
with the records of the Pulaski County Circuit Clerk and Recorder's Office,
Pulaski County, Arkansas (the "Contribution
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Mortgage").
5. Provided, however, the foregoing conveyance is given as a Mortgage
for the purpose of securing the following:
(a) A Promissory Note (referred to therein as the Loan Note) of even
date herewith executed and delivered by Mortgagor (the "Note"), and all
successive extensions and renewals of the indebtedness represented thereby,
evidencing a principal indebtedness (which indebtedness, and all extensions and
renewals thereof are referred to as the "Primary Indebtedness") of Three
Million Five Hundred Dollars ($3,500,000.00), executed by Mortgagor and payable
to the order of Mortgagee, said Note bearing interest from date until paid at
the rate recited in said Note and payable in full on July 1, 2000, and interest
only Quarter-Annually for the first year, and thereafter payments of interest
and principal payable quarter annually, the terms of which are hereby
incorporated by reference.
(b) The repayment to the Mortgagee of all of its reimbursable
expenses, at any time accruing to the Mortgagee under the provisions of this
Mortgage and the performance of every other obligation of Mortgagor in this
Mortgage.
Upon payment of all such sums, this Mortgage shall become void and
will be released by release deed to be recorded at the expense of the
Mortgagor.
6. Covenants. Mortgagor agrees not to (i) commit, suffer or permit any
act to be done in or upon the Property in violation of any law, ordinance or
regulation relating to Property, (ii) make or erect any improvements or
alterations upon the Property, or construct any buildings thereon, without the
prior written consent of Mortgagee; (iii) change the zoning, use or character
of the Property, without the prior written consent of Mortgagee; and (iv)
hereafter pledge, hypothecate, mortgage, encumber, sell or otherwise transfer
all or any portion of the Property, or the Mortgagor's interest therein,
excepting only a sale thereof with the Mortgagee's prior written consent.
7. Insurance. Mortgagor at all times shall carry and maintain the
following insurance:
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7.1 Coverage Required.
(i) Comprehensive public liability insurance on an "occurrence basis"
against claims for "personal injury" including, without limitation, bodily
injury, death or property damage occurring on, in or about the Property and the
adjoining streets, sidewalks and passageways.
All such policies of insurance required by the Mortgagee shall be in
the form, with such companies and in amounts satisfactory to the Mortgagee and
shall name the Mortgagee as an additional party insured. All policies of
insurance required by the Mortgagee shall contain an endorsement or agreement
by the insurer that any loss shall be payable in accordance with the terms of
such policy notwithstanding any act or negligence of the Mortgagor which might
otherwise result in forfeiture of said insurance and the further agreement of
the insurer waiving all rights of setoff, counterclaim or deduction against
Mortgagor.
7.2 Delivery of Policies. Payments of Premiums. That all policies of
insurance shall be issued by companies in an amount in each company
satisfactory to Mortgagee. All policies of insurance shall have attached
thereto a lender's loss payable endorsement for the benefit of Mortgagee in a
form satisfactory to Mortgagee. Mortgagor shall furnish Mortgagee with an
original policy of all policies of required insurance. If Mortgagee consents to
Mortgagor providing any of the required insurance through blanket policies
carried by Mortgagor and covering more than one location, then Mortgagor shall
furnish Mortgagee with a certificate of insurance of each such policy setting
forth the coverage, the limits of liability, the name of carrier, the policy
number, and the expiration date. At least thirty (30) days prior to the
expiration of each such policy, Mortgagor shall furnish Mortgagee with evidence
satisfactory to Mortgagee of the payment of premium and the reissuance of a
policy continuing insurance in force as required by this Mortgage. All such
policies shall contain a provision that such policies will not be canceled or
materially amended, which term shall include any reduction in the scope or
limits of coverage, without at least thirty (30) days prior written notice to
Mortgagee. In the event Mortgagor fails to provide, maintain, keep in force or
deliver and furnish to Mortgagee the policies of insurance required by this
Mortgage, Mortgagee may procure such insurance or single-interest insurance for
such risk
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covering Mortgagee's interest and Mortgagor will pay all premiums thereon
promptly upon demand by Mortgagee, and until such payment is made by Mortgagor,
the amount of all such premiums, together with interest thereon at the Default
Rate as defined in the Note shall be secured by this Mortgage.
8. Taxes and Impositions. Mortgagor covenants to pay, prior to
delinquency, all taxes, special improvement assessments and other governmental
charges against the Property at any time levied or becoming due.
9. Priority of Lien. Mortgage covenants to prevent the Property from
becoming encumbered by any lien or charge having priority over, or on a parity
with, the lien of this Mortgage. In the event the Property becomes subject to
any federal, state, county or municipal tax lien, special assessment lien,
improvement district lien, mechanic's lien or any other lien or claim for lien
of whatever kind or nature, Mortgagor shall promptly pay or cause to be paid
the obligation or indebtedness evidenced by such lien or claim and shall
promptly deliver to the Mortgagee evidence satisfactory to the Mortgagee of the
payment and discharge of such lien or claim. If Mortgage shall fail to promptly
pay or cause to be paid such obligation or indebtedness, Mortgagee shall have
the right, but shall not be obligated, to pay such obligation or indebtedness
to the claimant thereof, and in the event of such payment, (i) Mortgagee shall
be subrogated to the rights of such claimant, notwithstanding that the lien or
claim may be released of record; and (ii) the amount of such payment shall be
an additional liability owing hereunder by Mortgagor, payable on demand and
bearing interest, from the date of such demand until payment thereof to
Mortgagee, at the Default Rate as defined in the Note.
10. Events of Default. The occurrence of any of the following shall be
deemed an "Event of Default":
(a) Upon the filing of a voluntary or involuntary petition to subject
Mortgagor (or any party obligated as maker, endorser, surety or guarantor for
the payment of the secured indebtedness) to any bankruptcy, debt adjustment,
receivership or other insolvency proceeding.
(b) Upon the occurrence of any event, which, under the terms of the
instrument(s) at any time evidencing the indebtedness secured hereby, warrants
an acceleration (at
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the option of the payee) of the maturity of said indebtedness.
(c) If default shall be made in the payment of any part of the Primary
Indebtedness secured hereby, or any interest accruing on such Primary
Indebtedness, as the same becomes due and payable according to the terms or the
original note, or of any extension or renewal thereof at any time evidencing
such indebtedness.
(d) If Mortgagor shall fail to comply with any of the agreements
contained in paragraphs 4 and 5 of this Mortgage.
(e) If the Mortgagor fails or neglects to timely perform, keep or
observe any of its covenants, duties, obligations, warranties and agreements
contained elsewhere in this Mortgage, the Loan Agreement between Mortgagor and
Mortgagee of even date herewith, and/or the Mortgagor's Environmental Indemnity
Agreement of even date herewith.
(f) If any statement, report or certificate made or delivered to
Mortgagee by the Mortgagor, or any of the Mortgagor's directors, officers,
employees or agents, is materially untrue, incorrect or incomplete.
(g) If any of the Mortgagors assets are seized, attached, subjected to
a writ or distress warrant, or are levied upon, or come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors.
(h) If the Mortgagor makes an assignment for the benefit of creditors,
or an application is made by or against the Mortgagor for the appointment of a
receiver, trustee, custodian or conservator for the Mortgagor or any of the
Mortgagor's assets.
(i) If the Mortgagor is enjoined, restrained or in any way prevented
by court order from conducting any part business.
(j) If a lawsuit or other proceeding is filed by or against the
Mortgagor to liquidate any of its assets.
(k) If a notice of a lien, levy or assessment is filed of record with
respect to the Mortgagor or any of its assets by the United States of America,
any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental department, agency or instrumentality.
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Upon any Event of Default, the unpaid Primary Indebtedness shall bear
interest at the default rate as defined in the Note.
It is understood that the foregoing acceleration provisions will be
applicable not only to the maturities recited in the Note, but also to any
substituted maturities created by extension or renewal and also to any other
indebtedness secured by this Mortgage. The failure of the Mortgagee to declare
any acceleration of maturities when a ground therefor exists, even though such
forbearance may be repeated from time to time, or the default be a continuing
one, will not constitute a waiver of the right of the Mortgagee to accelerate
maturities upon a recurrence of the same ground therefor; nor will the act of
the Mortgagee in remedying any condition resulting from Mortgagor's default bar
the Mortgagee from declaring an acceleration of maturities by reason of such
default.
11. Remedies Upon Default. Upon the occurrence of an Event of Default,
the Mortgagee shall be entitled to the following remedies:
(a) At the option of the Mortgagee, declare the entire unmatured
portion of all indebtedness secured hereby, together with all interest accrued
on the entire secured debt, to be immediately due and payable, (which
acceleration of maturity may be accomplished without notice to anyone).
(b) Foreclosure of this Mortgage by appropriate proceeding in any
court of competent jurisdiction, appoint a receiver, or specifically enforce
any of the covenants hereof. In such event, there shall be added to and
included as part of the indebtedness secured by this Mortgage, and allowed in
any decree for sale of the Property or in any judgment rendered in connection
with this Mortgage the following: (i) all of the costs, fees and expenses of
taking possession of the Property and of the holding, using, leasing,
maintaining, insuring, repairing and selling of the Property, including, but
not limited to, the costs, fees, charges, expenses and attorneys' fees
specified in paragraphs 2.3 and 12.5 of this Mortgage; (ii) receivers' fees;
(iii) any and all expenditures which may be paid or incurred by or on behalf of
the Mortgagee for appraisers' fees, documentary and expert evidence,
stenographers' charges, publication costs, fees and expenses for examination of
title, title searches, guaranty policies, and other similar data and
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assurances with respect to the title to the Property; (iv) all other costs,
fees and expenses which the Mortgagee deems necessary to prosecute or enforce
any right or remedy that it has under this Mortgage, at law, in equity or
otherwise. All such costs, charges, expenses, premiums, fees and other
expenditures shall be part of the indebtedness secured by this Mortgage,
payable on demand and shall bear interest at the Default Rate as defined in the
Note from the date of Mortgagee's payment thereof until repaid to the
Mortgagee.
(c) Make any expenditures for the protection of the Property or of the
lien of this Mortgage (the Mortgagee shall have the uncontrolled discretion as
to the necessity of making any such expenditure), the repayment of such sum on
demand with interest at the Default Rate recited in the Note shall be the
personal obligation of the Mortgagor and such obligation to repay will
constitute a part of the indebtedness secured hereby.
(d) In the event the Mortgagee at any time holds additional security
for any of its obligations secured hereby it may enforce the sale thereof or
otherwise realize upon the same, at its option, either before or concurrently
herewith or after a sale is made hereunder pursuant to a foreclosure
proceeding.
(e) The Mortgagee may enforce the lien of this Mortgage in respect to
all real and personal property encumbered hereby by proceedings that are
prosecuted simultaneously or are prosecuted separately in such order as the
Mortgagee may select, to the extent permitted by law.
(f) In the event the Mortgagee takes possession of the Property, it
shall have no obligation to continue to operate any business conducted on the
Property.
(g) Mortgagee may exercise any right or remedy available either under
this Mortgage or the Loan Agreement, or the laws of Arkansas, either
concurrently or independently, and in such order as it may determine, to the
extent permitted by law.
12. Miscellaneous Provisions.
12.1 Waiver of Statutory Rights. The Mortgagor agrees that it will not
apply for or avail itself of any appraisement, valuation, stay, extension or
exemption laws or so-called "moratorium laws", now existing or hereinafter
enacted, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage, and hereby expressly waives
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the benefit of such laws, and the Mortgagor specifically waives all rights of
redemption from any sale made by decree of Court on foreclosure of this
instrument.
12.2 Inspections. The Mortgagee, or its agents, representatives or
workmen are authorized to enter at any reasonable time upon or in any part of
the Property for the purpose of inspecting the same and for the purpose of
performing any acts it is authorized to perform under the terms of this
Mortgage.
12.3 Notices. Any notice which either party hereby may desire or be
required to give to the other party shall be in writing and shall be effective
only if the same is delivered by personal service or mailed by certified mail,
postage prepaid, return receipt requested, addressed as follows:
Mortgagor: AWEC Development Corporation
600 Pine Forest Circle
Maumelle, AR 72113
ATTN: David Paes
Mortgagee: Resure, Inc.
311 South Whacker Drive
Suite 400
Chicago, IL 60606
Any party may at any time change its address for such
notices by delivering or mailing to the other parties
hereto, as aforesaid, a notice of such change.
12.4 Construction of this Instrument. Notwithstanding the use of the
feminine, masculine or neuter gender with reference to any party in this
Agreement, the same shall, in each instance, be construed to refer to the
individual party. The captions and headings of various paragraphs of this
Mortgage are for convenience only and are not to be construed as defining or
limiting in any way, the scope or intent of the provisions hereof. This
Mortgage and all provisions hereof shall extend to and be binding upon the
Mortgagor and all parties claiming by, through or under the Mortgagor and the
word "Mortgagor" when used herein shall include all persons liable for the
payment of the indebtedness secured hereby or any part thereof, whether or not
such persons shall have executed the Note or this Mortgage. The word
"Mortgagee" when used herein shall include the successors and assigns of the
Mortgagee named herein, and the holder or holders, from time to time, of the
notes secured hereby.
12.5 Indemnifications; Subrogations and Waiver of Setoff.
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(i) If Mortgagee is made a party defendant to any litigation
concerning this Mortgage or the Property or any part hereof or any interest
therein, or the occupancy thereof by Mortgagor, then the Mortgagor shall
indemnify, defend and hold Mortgagee harmless from all liability by reason of
such litigation, including reasonable attorneys' fees and expenses incurred by
litigation if prosecuted to judgment. If Mortgagee commences an action against
Mortgagor to enforce any of the terms hereof or because of the breach by
Mortgagor of any of the terms hereof, or for the recovery of any sums secured
hereby, Mortgagor shall pay to Mortgagee reasonable attorneys' fees and
expenses and the right to attorneys' fees and expenses shall be deemed to have
been accrued on the commencement of such action and shall be enforceable
whether or not such action is prosecuted to judgment. If Mortgagor breaches any
term of this Mortgage, Mortgagee may employ an attorney or attorneys to protect
its rights hereunder, and in the event of such employment following any breach
by Mortgagor, Mortgagor shall pay Mortgagee reasonable attorneys' fees and
expenses incurred by Mortgagee, not to exceed Ten Percent (10%) of the
principal and interest indebtedness secured hereby, whether or not an action is
actually commenced against Mortgagor by reason of breach. The payment of all
amounts pursuant to this provision shall be an additional liability owing
hereunder by Mortgagor, payable on demand and bearing interest, from the date
of such demand until payment thereof to Mortgagee, at the Default Rate as
recited in the Note.
(ii) Mortgagor waives any and all right to claim or recover against
Mortgagee, its officers, employees, agents and representatives, for loss or
damage to Mortgagor, the Property, Mortgagor's property or the property of
others under Mortgagor's control from any cause insured against or required to
be insured against by provisions of this Mortgage.
(iii) All sums payable by Mortgagor hereunder shall be paid without
notice, demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of: (1)
any damage to or destruction of or any condemnation or similar
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taking of the Property or any part thereof; (2) any restriction or prevention
of or interference with any use of the Property or any part thereof; (3) any
title defect or encumbrance or any eviction from the Property or the
improvements thereon or any part thereof by title paramount or otherwise; (4)
any bankruptcy, insolvency, reorganization, composition, dissolution,
liquidation, or other like proceeding relating to Mortgagee, or any action
taken with respect to this Mortgage by any trustee or receiver of Mortgagee or
by any Court, in any such proceeding; (5) any claim which Mortgagor has or
might have against Mortgagee; (6) any default or failure on part of Mortgagee
to perform or comply with any of the terms hereof or of any other agreement
with Mortgagor; or (7) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Mortgagor shall have notice or
knowledge of any of the foregoing. Except as expressly provided herein,
Mortgagor waives all rights now or hereafter conferred by statute or otherwise
to any abatement, suspension, deferment, diminution or reduction of any such
sums or indebtedness secured hereby and payable by Mortgagor.
12.6 Eminent Domain. Mortgagor acknowledges that all condemnation
awards have been assigned to Mortgagee, which awards Mortgagee is hereby
irrevocably authorized to collect and receive, and to give appropriate receipts
and acquittances therefor, and at Mortgagee's sole discretion and option, to
apply the same toward the payment of the Primary Indebtedness in such order of
application as Mortgagee may elect and whether or not the same may then be due
and payable or otherwise adequately secured. Mortgagor covenants and agrees
that Mortgagor will give Mortgagee immediate notice of the actual or threatened
commencement of any proceedings under condemnation or eminent domain affecting
all or any part of the Property, including, without limitation, any easement
therein or appurtenance thereof or severance and consequential damage or change
in grade of streets, and will deliver to Mortgagee copies of any and all papers
served in connection with any such proceedings. Mortgagor further covenants
and agrees to make, execute and deliver to Mortgagee, at any time or times upon
request, free, clear and discharged of any encumbrances of any kind whatsoever,
any and all further assignments and/or instruments deemed necessary by
Mortgagee for the purpose of validly and sufficiently assigning all
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<PAGE> 14
awards and other compensation heretofore permanent or temporary, under any such
proceeding.
12.7 Covenants Run With Land. All the covenants contained in this
Mortgage shall run with the Property. Time is of the essence of this Mortgage
and all provisions herein relating thereto shall be strictly construed.
12.8 Severability. Wherever possible, each provision of this Mortgage
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Mortgage is held to be invalid or
unenforceable by a court of competent jurisdiction, such provision shall be
severed hear from and such invalidity or unenforceability shall not affect any
other provision of this Mortgage, the balance of which shall remain in and have
its intended full force and effect. Provided, however, if such provision may
be modified so as to be valid and enforceable as a matter of law, such
provision shall be deemed to be modified so as to be valid and enforceable to
the maximum extent permitted by law.
12.9 Other Agreement. The terms and provisions of the Loan Agreement
between Mortgagor and Mortgagee of even date herewith and Mortgagor's
Environmental Indemnity Agreement of even date herewith are incorporated herein
by this reference thereto.
12.10 Service of Process. Mortgagor hereby irrevocably appoints G.
Robert Hardin, whose address is 410 West Third Street, Suite 200, Little Rock,
Arkansas 72201, as its agent to receive service of process for any and all
lawsuits which may arise in Pulaski County, Arkansas, concerning the
enforcement of this Mortgage.
12.11 Release Provisions. Mortgagee and its assignees and subsequent
noteholders of the Note, shall deliver to Mortgagor partial releases of this
Mortgage for portions of Parcel 1, secured by this Mortgage, upon payment of a
release price equal to $5,500.00 per acre for each acre of land being released,
with a minimum of 25 acres for each parcel which Mortgagee seeks a release for
payment, and for portions of Parcel 2, secured by this Mortgage, upon payment
of a release price equal to $10,000.00 per acre for each acre of land being
released, with a minimum of 25 acres for each parcel which Mortgagee seeks a
release for payment, provided (i) Mortgagor will not be entitled to a partial
release if there is any default remaining uncured pursuant to the Note or
Mortgage; (ii) Mortgagor shall first have submitted a survey designating the
parcel to be released and its total square footage, and also showing the
remainder of the Property; (iii) such release shall not cause any of the
remaining Property to become landlocked; (iv) the dimensions and layout of the
parcel being released shall be reasonably acceptable to the Mortgagee with
respect to there not being a disproportionate
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amount of road frontage included, and the release shall not render the size or
configuration of the remainder of the Property to be commercially unacceptable
or otherwise adversely impacted; (v) any easements necessary to extend utility
lines or facilities under or across the parcel to be released to serve the
remainder of the Property shall be created and granted concurrently with the
release; and (vi) the payment for the release shall include the accrued
interest thereon, and the principal payment shall be applied against the Note
in the reverse order of maturity. Each such payment of a release price shall be
applied as a principal payment due pursuant to the Note. Notwithstanding any
other provision to the contrary provided herein, in the event that any portion
or all of Parcel 2 is released from the lien of the Contribution Mortgage due
to the deposit of Cash Collateral or Substituted Collateral pursuant to Section
12.14 of the Contribution Mortgage, then Mortgagee and its assignees and
subsequent noteholders of the Note, shall deliver to Mortgagor releases of this
Mortgage for such portions of Parcel 2 as is being released from the
Contribution Mortgage without the payment of any additional sums of money as
payment of the Note.
12.12 Selective Harvesting of Pine Timber. Mortgagor hereby
specifically reserves the right to selectively cut the standing pine timer on
the Land free and clear of any claims by Mortgagee and fee and clear of any
encumbrance by this Mortgage. The Mortgagor shall indemnify defend and hold
Montage harmless form all claims of bodily injury, death or property damage
arising or resulting from such harvesting activities.
EXECUTED AS OF the 11th day of September, 1995.
MORTGAGOR:
AWEC DEVELOPMENT CORPORATION
BY: /s/ David R. Paes
Title: Vice President
State of Arkansas
County of Pulaski
ACKNOWLEDGMENT
On this 5th day of September, 1995, before me, a Notary public, duly
commissioned, qualified and acting, within and for said County and State,
appeared in person the within named David R. Paes, being the person authorized
by said corporation to execute such instrument, to me personally well-known,
who stated that he/she was the Vice President of Awec Development Corporation,
acted and delivered said foregoing instrument for
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the consideration, sues and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this 5th day of September, 1995.
NOTARY PUBLIC
My Commission Expires 7/25/2000
EXHIBIT "A"
Lands lying in a fractional part of Section 29 and a part of the East 1/2 of
Section 30, and a part of Section 32 and a part of the East 1/2 of Section 31,
and a part of the Southwest 1/4 of Section 31, all in Township 3 North, Range
13 West, Pulaski County, Arkansas and more particularly described as follows:
Commencing at the Northwest corner of said Section 29 and the Northeast corner
of said Section 30, (Arkansas State Plane Coordinates of North 196,663.3542
East 1,872,319.4376) being the point of beginning; thence along the West line
of Section 29, South 00 degrees 29 minutes 07 seconds West 130.00 feet; thence
leaving the said West Section line South 67 degrees 08 minutes 52 seconds East
227.52 feet; thence South 87 degrees 58 minutes 13 seconds East 1,044.66 feet;
thence North 75 degrees 55 minutes 37 seconds East 378.36 feet; thence South 89
degrees 11 minutes 35 seconds East 355.04 feet; thence South 67 degrees 37
minutes 12 seconds East 147.08 feet; thence South 50 degrees 41 minutes 28
seconds East 206.79 feet; thence South 34 degrees 34 minutes 27 seconds East
257.35 feet to a point on the North right of way line of Odom Boulevard; thence
along the said North right of way line along a 05 degrees 02 minutes 11 seconds
curve to the right a distance of 221.86 feet to a point to which there is a
chord bearing and distance of South 65 degrees 02 minutes 41 seconds West
221.51 feet; thence continuing along the said North right of way line South 70
degrees 37 minutes 41 seconds West 914.55 feet; thence leaving the said North
right of way line South 19 degrees 22 minutes 19 seconds East 120.00 feet to a
point on the South right of way line
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of Odom Boulevard; thence along the said South right of way line North 70
degrees 37 minutes 41 seconds East 914.55 feet; thence continuing along the
said South right of way line along a 04 degrees 33 minutes 21 seconds curve to
the left a distance of 353.13 feet to a point to which there is a chord bearing
and distance of North 62 degrees 35 minutes 03 seconds East 351.97 feet to a
point on the West right of way line on Naylor Drive; thence leaving the said
South right of way line and continuing along the said West right of way line
along the following bearings and distances: South 82 degrees 31 minutes 09
seconds East 57.69 feet; thence along a 05 degrees 40 minutes 21 seconds curve
to the right a distance of 361.43 feet to a point to which there is a chord
bearing and distance of South 27 degrees 29 minutes 52 seconds East 359.50
feet; thence South 17 degrees 14 minutes 48 seconds East 251.54 feet; thence
along a 06 degrees 02 minutes 33 seconds curve to the left a distance of 504.12
feet to a point to which there is a chord bearing and distance of South 32
degrees 28 minutes 40 seconds East 498.20 feet; thence South 47 degrees 42
minutes 31 seconds East 642.29 feet; thence along a 05 degrees 48 minutes 55
seconds curve to the right a distance of 383.27 feet to a point to which there
is a chord bearing and distance of South 36 degrees 33 minutes 51 seconds East
380.86 feet; thence South 25 degrees 25 minutes 11 seconds East 60.70 feet;
thence South 17 degrees 26 minutes 39 seconds West 36.65 feet to a point on the
West right of way line of Millwood Circle; thence leaving the said West right
of way line of Naylor Drive and continuing along the said West right of way
line of Millwood Circle along the following bearings and distances: along a 05
degrees 42 minutes 37 seconds curve to the left a distance of 1,492.75 feet to
a point to which there is a chord bearing and distance of South 16 degrees 58
minutes 23 seconds West
1,358.84 feet; thence South 25 degrees 38 minutes 53 seconds East 441.69 feet;
thence along a 04 degrees 10 minutes 57
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seconds curve to the right a distance of 385.93 feet to a point to which there
is a chord bearing and distance of South 17 degrees 25 minutes 08 seconds East
384.65 feet to a point on the North boundary line of Phase II Edgewater
Addition to the City of Maumelle; thence leaving the said West right of way
line and along the said North Boundary line along the following bearings and
distances; South 84 degrees 19 minutes 03 seconds West 170.31 feet; thence
North 73 degrees 03 minutes 03 seconds West 1,097.68 feet; thence South 33
degrees 18 minutes 58 seconds West 254.89 feet; thence South 45 degrees 41
minutes 45 seconds West 349.34 feet; thence South 58 degrees 48 minutes 54
seconds West 399.77 feet; thence North 77 degrees 28 minutes 16 seconds West
156.73 feet to a point on the East right of way line of Odom Boulevard; thence
leaving the said North boundary line and along the said East right of way line
South 11 degrees 59 minutes 41 seconds West 271.19 feet; thence leaving the
said East right of way line North 78 degrees 00 minutes 19 seconds West 120.00
feet to a point on the West right of way line of Odom Boulevard; thence along
the said~West right of way line South 11 degrees 59 minutes 41 seconds West
411.42 feet; thence leaving said right of way North 60 degrees 20 minutes 33
seconds West 482.14 feet; thence North 84 degrees 08 minutes 09 seconds West
412.97 feet; thence South 26 degrees 57 minutes 31 seconds West 559.97 feet;
thence South 80 degrees 35 minutes West 1908.70 feet; thence North 57 degrees
53 minutes 35 seconds West 1359.32 feet; thence North 01 degrees 31 minutes 10
seconds East, 2665.85 feet; thence North 00 degrees 29 minutes 24 seconds East
2515.59 feet; thence South 88 degrees 39 minutes 35 seconds East 952.34 feet;
thence North 35 degrees 38 minutes 05 seconds West 187.96 feet; thence South 88
degrees 39 minutes 35 seconds East, 462.49 feet; thence South 88 degrees 39
minutes 40 seconds East 1324.98 feet to the point of beginning.
EXHIBIT "B"
Lands lying in a fractional part of Section 31, and the West 1/2 of Section 32,
all in Township 3 North, Range 13 West, Pulaski County, Arkansas and more
particularly described as follows:
Commencing at the Northwest Corner Section 32, South 88 degrees 32 minutes 48
seconds East, 640.25 feet; thence South 26 degrees 57 minutes 30 seconds West,
497 feet to the point of beginning; thence South 21 degrees 05 minutes 41
seconds East, 437.97 feet; thence South 79 degrees 09 minutes 38 seconds East
774.03 feet to the West right of way line of Odom Boulevard; thence South 11
degrees 59 minutes 41 seconds West 269.45 feet; thence leaving the said West
right of way line South 46 degrees 02 minutes 26 seconds West 146.64 feet;
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thence South 03 degrees 38 minutes 01 seconds West 392.67 feet; thence along a
06 degree 14 minutes 38 seconds curve to the left a distance of 197.28 feet to
a point to which there is a chord bearing and distance of South 05 degrees 50
minutes 09 seconds West 196.90 feet; thence South 58 degrees 21 minutes 13
seconds West 743.36 feet; thence South 51 degrees 19 minutes 44 seconds East
170.00 feet; thence South 42 degrees 12 minutes 58 seconds East 334.86 feet;
thence South 18 degrees 38 minutes 28 seconds West 144.20 feet; thence along a
15 degrees 09 minutes 19 seconds curve to the left a distance of 378.55 feet to
a point to which there is a chord bearing and distance of North 79 degrees 57
minutes 23 seconds East 362.93 feet; thence North 51 degrees 16 minutes 17
seconds East 271.10 feet; thence along a 143 degrees 14 minutes 22 seconds
curve to the left a distance of 64.99 feet to a point to which there is a chord
bearing and distance of North 04 degrees 43 minutes 21 seconds East 58.08 feet
to a point on the West right of way line of Odom Boulevard; thence along the
said West right of way line along the following bearings and distances: along a
06 degrees 25 minutes 08 seconds curve to the left a distance . of 404.65 feet
to a point to which there is a chord bearing and distance of South 54 degrees
48 minutes 50 seconds East 401.20 feet; thence South 67 degrees 47 minutes 51
seconds East 110.02 feet; thence leaving the said West right of way line of
Odom Boulevard South 34 degrees 10 minutes 36 seconds West 207.84 feet; thence
South 27 degrees 48 minutes 21 seconds West 800.00 feet; thence South 64
degrees 10 minutes 59 seconds East 150.09 feet; thence South 04 degrees 15
minutes 29 seconds West 339.65 feet; thence South 67 degrees 04 minutes 18
seconds West 223.74 feet; thence South 23 degrees 56 minutes 24 seconds West
710.90 feet; thence South 62 degrees 30 minutes 03 seconds East 493.10 feet;
thence South 49 degrees 19 minutes 45 seconds West 111.30 feet; thence South 70
degrees 58 minutes 07 seconds West 645.93 feet; thence North 75 degrees 26
minutes 49 seconds West 1,291.05 feet; thence North 60 degrees 05 minutes 23
seconds West 578.01 feet; thence North 57 degrees 43 minutes 01 seconds West
1,141.62 feet; thence North 48 degrees 41 minutes 18 seconds West 647.01 feet;
thence North 45 degrees 44 minutes 57 seconds West 562.28 feet; thence North 80
degrees 52 minutes 52 seconds East 1,233.39 feet to a point on the ordinary
high water line on the North bank of the Arkansas River; thence in a
Northwestern direction along the meanders of the said ordinary high water which
is approximately by the following bearing and distances; North 49 degrees 45
minutes 26 seconds West 94.11 feet; thence North 39 degrees 48 minutes 54
seconds West 513.87 feet; thence North 46 degrees 03 minutes 02 seconds West
378.55 feet; thence North 40 degrees 44 minutes 17 seconds West 314.87 feet;
thence North 53 degrees 34 minutes 17 seconds West 251.25 feet; thence North 70
degrees 12 minutes 54 seconds West 157.95 feet; thence North 43 degrees 17
minutes 10 seconds West 211.26 feet; thence North 14 degrees 18 minutes 35
seconds West 273.34 feet; thence North 23 degrees 36
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minutes 13 seconds West 223.69 feet to the North line of the Southwest 1/4 of
Section 31; thence leaving the said ordinary high water line on the North bank
of the Arkansas River and running along the said North line South 88 degrees 23
minutes 40 seconds East 2,170.00 feet to the center of said Section 31, thence
along the West line of the Northeast 1/4 of said Section 31 North 00 degrees 35
minutes 57 second East 1,307.43 feet; thence continuing along the said West
line North 01 degrees 19 minutes 08 seconds East 1,324.38 feet to the Southwest
corner of the Southeast 1/4 of Section 30; thence South 57 degrees 53 minutes
35 seconds East 1359.32 feet; thence North 80 degrees 35 minutes 15 seconds
East 1908.70 feet to the point of beginning.
Less and Except: Well Site No. 3: Part of the Fractional SW1/4 Section 31,
Township 3 North, Range 13 West, Pulaski County, Arkansas and more particularly
described as follows: Commencing at the Southeast corner of said Section 31
(Arkansas State Plane Coordinates of North 186,067.311, East 1,872,179.178);
thence North 1,109.69 feet; thence West 3,296.86 feet to the point of
beginning; thence South 13 degrees 52 minutes 52 seconds Fact 103.01 feet;
thence due West 39.30 feet; thence due North 100.00 feet; thence due East 14.59
feet to the point of beginning.
And Less and Except: Well Site No. 4: Part of the Fractional SW1/4 Section 31,
Township 3 North, Range 13 West, Pulaski County, Arkansas and more particularly
described as follows: Commencing at the Southeast corner of Section 31,
Township 3 North, Range 13 West; (Arkansas State Plane Coordinates-North
Zone-North 186,067.311 west, 1,872,179.178) run North
2,296.086 feet to a point; thence run West 3,961.965 feet to the point of
beginning; thence run South 100.00 feet to a point; thence run East 100.00 feet
to a point; thence run North 100 feet to a point; thence run 100.00 feet West
to the point of beginning.
And Less and Except: The following lands lying in a fractional part of the
NE1/4 of Section 31, Township 3 North, Range 13 West, Pulaski County, Arkansas,
and more particularly described as follows: Commencing at the Northeast corner
of said Section 31, (Arkansas State Plane Coordinates of North 191,343.281 East
1,872,217.486), thence South 1,061.89 feet, thence West 1,799.95 feet to the
point of beginning, thence South 24 degrees 22 minutes 56 seconds East 293.20
feet, thence South 56 degrees 13 minutes 48 seconds West 129.22 feet, thence
South 85 degrees 21 minutes 34 seconds West 173.66 feet, thence North 60
degrees 08 minutes 15 seconds West 176.03 feet; thence North 21 degrees 43
minutes 52 seconds East 290.13 feet, thence South 88 degrees 48 minutes 58
seconds East 204.75 feet to the point
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of beginning.
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EXHIBIT 10.10
ENVIRONMENTAL INDEMNITY AGREEMENT
[Pursuant to Loan Agreement]
THIS ENVIRONMENTAL INDEMNITY AGREEMENT is made as of the 11th day of
September, 1995, by AWEC Development Corporation, an Arkansas corporation
("Indemnitor"), for the benefit of Resure, Inc., an Illinois corporation
(hereinafter referred to as "Lender").
RECITALS
A. Pursuant to the terms and conditions of that certain Loan Agreement
of even date herewith between Indemnitor and Lender, Lender has agreed to make
a loan to Indemnitor (the "Loan"), as evidenced by that certain Promissory Note
in the principal amount of $3,500,000.00 dated the date hereof, executed by
Indemnitor and made payable to the order of Lender.
B. The Loan is secured by a first mortgage on the real estate (the
"Property") located in Pulaski County, State of Arkansas, which Property is
legally described on Exhibit "A" attached hereto and hereby made a part hereof.
C. As a precondition to making the Loan, Lender has required that
Indemnitor extend to Lender the indemnities set forth in this agreement.
NOW, THEREFORE, to induce Lender to make the Loan and for Ten Dollars
($10.00) and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and
agrees as follows:
1. Indemnitor represents and warrants that, except in strict compliance with
all Environmental Laws (as hereinafter defined): (a) neither Indemnitor, nor to
the best of Indemnitor's knowledge after due and diligent inquiry, has any
other person or entity caused or permitted, nor will Indemnitor cause to be
permitted in the future, any Contaminants (as hereinafter defined) to be (i)
generated, released, stored, disposed of, buried or deposited over, beneath, in
or upon, the Property or any part thereof, or from the Property into the
atmosphere or any watercourse, body of water, ground water, wetlands or
publicly or privately owned well or onto any other parcel of property; or (ii)
used in any nature whatsoever on the Property or over, beneath, in or on
adjacent parcels or parcels in the immediate vicinity of the Property; (b)
Indemnitor has conducted or has caused to be conducted appropriate inquiry into
the current and previous uses of the Property in a manner consistent with good
commercial or customary practice for purposes of meeting the standards for an
"Innocent Purchaser," under CERCLA (as hereinafter defined); (c)
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Indemnitor's operations and the Property are, and at all times will be, in
compliance with all Environmental Laws; (d) no permits are held or required to
be held nor are any registrations or notices required to be made with respect
to the Property under any Environmental Laws; (e) none of the Property has ever
been used (whether by Indemnitor or, to the best of Indemnitor's knowledge
after due and diligent inquiry, by any other person) as a treatment, storage or
disposal (whether permanent or temporary) site for any Contaminants; (f)
Indemnitor has not received any notice of any violations of (and is not aware
of any existing violations) of any Environmental Laws and, to the best of
Indemnitor's knowledge after due and diligent inquiry, there have been no
actions commenced or threatened by any party against Indemnitor or the Property
for noncompliance with any Environmental Laws; and (g) no lien, encumbrance or
preferential arrangement of any kind for any liabilities arising under any
Environmental Laws has attached to, or been asserted against, all or any
portion of the Property.
2. Indemnitor agrees to keep and maintain the Property in compliance with, and
shall not cause or permit the Property to be in violation of, any Environmental
Laws. Indemnitor at its own cost, shall take all actions which are necessary or
desirable to clean up any Contaminants or other environmental problems affecting
the Property, including removal, containment or any other remedial action
required by any applicable governmental authorities.
3. Indemnitor shall give prompt written notice to Lender of:
(a) any proceeding, investigation or inquiry commenced by any
governmental authority with respect to the presence of any Contaminants on,
under or about the Property or the migration thereof to or from adjoining
property;
(b) any notice of a violation of any Environmental Laws and any claims
made or threatened by any individual or entity against Indemnitors or the
Property relating to any loss or injury allegedly resulting from any
Contaminants; and
(c) the discovery by Indemnitor of any occurrence or condition on any
real property adjoining or in the vicinity of the Property which might cause
the Property or any part thereof to be subject to any restriction on the
ownership, occupancy, transferability or use of the Property under any
Environmental Laws.
4. For purposes of this Environmental Indemnity Agreement:
(a) the term "Environmental Laws" means and includes,
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without limitation, any federal, state or local law, statute, regulation or
ordinance and any order, judgment or decree of any court or administrative body
now or hereafter enacted or issued, relating to any Contaminants or pertaining
to health, industrial hygiene or the environmental or ecological conditions on,
under or about the Property, including without limitation each of the
following: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), 42 U.S.C. 5 9601 et seq.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901, et
seq.; the Toxic Substance Control Act, amended, 15 U.S.C. Section 2601 et
seq.; the Clean Air Act, amended. 42 U.S.C. Section 7401 et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the
Federal Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq.; the National Environmental Policy Act of 1975, as amended, 42 U.S.C.
Section 4321 et seas; and the rules, regulations and ordinances of the U.S.
Environmental Protection Agency, the County of Pulaski, and State of Arkansas,
and of all other agencies, boards, commissions and other governmental bodies
and officers having jurisdiction over the Property or the use or operation
thereof.
(b) The term "Contaminants" means and includes, without limitation:
(i) Those substances included within the definitions of "hazardous
substance," "hazardous waste," "toxic substance, n "solid waste," "pollutants
or "contaminant" in any Environmental Laws; and
(ii) Any material, waste or substance which is any of the following:
(A) asbestos or any material composed of or containing asbestos; (B)
polychlorinated biphenyls; (C) petroleum or any petroleum based substance or
waste or any constituent of any such substance, waste or product; (D) highly
flammable or explosive; or (E) radioactive; and
(iii) Those other substances, materials and wastes which are or become
regulated under any Environmental Laws, or which are or become classified as
hazardous or toxic by any Environmental Laws.
5. Indemnitor covenants and agrees that Indemnitor will indemnify,
hold harmless, and defend Lender and any current or former officer, director,
employee or agent of Lender (individually an "Indemnitee" and collectively, the
"Indemnitees"), immediately upon demand by any Indemnitee from any and all
claims, losses, damages, liabilities, judgments, decrees, injuries, response
costs, fines, penalties, clean-up
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costs and expenses arising out of or in any way relating to: (i) the existence
of Contaminants over, beneath, in or upon the Property, or the escape, seepage,
leakage, spillage, discharge, emission, transportation or release from the
Property of any Contaminants into the atmosphere or any watercourse, body of
water, ground water, wetlands or publicly or privately owned well, or onto any
other parcel of property; (ii) any violation or alleged violation of any
Environmental Laws, regarding, arising out of or in connection with the
Property or the operations of Indemnitor; or (iii) the breach of any of the
representations, warranties, covenants and agreements set forth in the
foregoing paragraphs hereof; with such claims, losses, damages, liabilities,
judgments, decrees, injuries, response costs, fines, penalties, clean-up costs
and expenses to include, but not be limited to: (a) claims of third parties
(including, without limitation, governmental agencies) for damages, fines,
penalties, response costs, clean-up, costs, injunctive or other relief; (b)
costs and expenses of clean-up, removal, or containment whether incurred by
Lender or any third parties, including fees of attorneys and experts, and costs
of reporting the existence of Contaminants to any governmental agency; and (c)
any and all expenses or obligations incurred at, before and after any trial or
appeal therefrom whether or not taxable as costs, including, without
limitation, reasonable attorneys' fees, witness fees, deposition costs, copying
and telephone charges and other expenses.
6. The representations, warranties, covenants and agreements contained herein
and the obligations of Indemnitor to indemnify Lender and the other Indemnitees
with respect to the expenses, damages, losses, costs, damages and liabilities
set forth in the foregoing paragraphs (collectively, "Indemnitor's Environmental
Obligations"), shall not be limited to the amount of the Loan and shall
expressly survive: (i) the foreclosure of any liens or security interests in
favor of Lender or a third party (and shall not be limited to the amount of any
deficiency in any liquidation or foreclosure action); (ii) repayment of all
amounts due under the Loan; (iii) the cancellation of any promissory notes
evidencing the Loan; and (iv) the discharge or release of any and all collateral
securing repayment of the Loan.
7. Indemnitor's liabilities, obligations and indemnifications hereunder are
several and independent of the obligations of any person liable for all or any
part of the Loan (collectively "Borrowers"). Separate actions may be brought
against Indemnitor or Borrowers, regardless of whether Indemnitor or Borrowers
are joined in any such action or actions and irrespective of any invalidity,
illegality, irregularity or unenforceability of the indebtedness comprising the
Loan, any of the documents evidencing or securing the Loan (collectively, the
"Loan Documents") or any Environmental Obligations of the Indemnitor.
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8. In the event that Lender or the other Indemnitees incur any costs to collect
or enforce the Indemnitor's Obligations hereunder, Indemnitor shall, upon demand
by Lender or the other Indemnitees, immediately reimburse Lender or the other
Indemnitees therefor, with interest from the date so incurred until paid at the
rate of twelve percent (12%) per annum including, without limitation, reasonable
attorneys' fees and court costs incurred in any litigation and bankruptcy and
administrative proceedings, and appeals therefrom.
9. For so long as the Loan Documents shall be in effect, any breach, default or
event of default hereunder shall, for the limited purpose set forth herein, be
deemed a default under each of the Loan Documents and, although the
Environmental Obligations of the Indemnitor hereunder are unsecured by the Loan
Documents, shall give the Lender the right to declare the indebtedness evidenced
by the Loan Documents immediately due and payable.
10. This Environmental Indemnity Agreement may not be amended, modified,
revised, supplemented or restated except by a writing signed by each of the
parties hereto. Any consent, waiver or suspension of any of Indemnitor's
Environmental Obligations or other duty or responsibility of Indemnitor
hereunder shall not be deemed effective unless in writing and signed by a duly
authorized officer of the Lender.
11. This Environmental Indemnity Agreement has been made and delivered in
Arkansas and shall be construed according to and governed by the internal laws
of the State of Arkansas without regard to its conflict of law rules. If any
provision hereof shall be held invalid, prohibited or unenforceable under any
applicable laws of any applicable jurisdiction, such invalidity, prohibition or
unenforceability shall be limited to such provision and shall not affect or
invalidate the other provisions hereof or affect the validity or enforceability
of such provision in any other jurisdiction, and to that extent, the provisions
hereof are severable.
12. This Environmental Indemnity Agreement and Indemnitors' Environmental
Obligations shall be binding upon and enforceable against Indemnitor and its
successors and assigns.
IN WITNESS WHEREOF, Indemnitor has caused this Agreement to be
executed as of the day and year first above written.
AWEC Development Corporation,
an Arkansas corporation
BY: /s/ David R. Paes
-------------------------
Title: Vice President
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EXHIBIT 10.11
AGREEMENT FOR REFINANCE OF SECURED NOTE, DATED SEPTEMBER 11, 1995 BETWEEN
CENTURY REALTY, INC., AWEC RESOURCES, INC., AND AWEC DEVELOPMENT CORPORATION
AGREEMENT FOR REFINANCE OF SECURED NOTE
This Agreement, entered into effective the 11th day of September, 1995
(the "Effective Date"), between Century Realty, Inc., a Texas corporation
thereinafter referred to as "Seller"), AWEC Resources, Inc., a New York
corporation (hereinafter referred to as "Resources"), and AWEC Development
Corporation, an Arkansas corporation (hereinafter referred to as "ADC").
PREMISES:
A. ADC is obligated to Seller pursuant to a Note (the "Century Note")
dated February 15, 1994, in the original principal amount of $6,737,000.00,
which is secured by a mortgage (the "Century Mortgage") of even date therewith
and recorded with the Pulaski Circuit Clerk and Recorders Office on February
18, 1994, as instrument number 94-12806, encumbering several tracts of land in
Maumelle, Pulaski County, Arkansas (the "Century Collateral").
B. Seller and ADC have reached agreement on the terms of a transaction
where ADC shall pay down and refinance the balance of the Century Note.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE ONE
PARTIAL PREPAYMENT AND REFINANCE OF CENTURY NOTE
1.1 payments of Century Note. At Closing, ADC shall make the following
payments of the Century Note which shall be applied as full satisfaction of the
Century Note:
(1) ADC shall pay to Seller the sum of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00) in cash or immediately available
funds in U.S. dollar denominations.
(2) ADC shall execute and deliver to Seller a promissory note in the
principal amount of $1,400,000.00 which shall bear interest at the rate of nine
percent (9%) from the Closing Date and shall be due and payable in one lump sum
one hundred twenty (120) days after the Closing Date (the "Refinance Note"). In
the event that ADC makes payments in the total sum
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of $1,100,000.00, together with a sum equal to the amount of accrued interest
on the principal sum of $1,100,000.00 at the rate stated in the Refinance Note
on or before sixty (60) days following the Closing Date, then the Refinance
Note will be deemed satisfied in full, thereby discounting the principal amount
of the Refinance Note by the sum of $300,000.00 effective as of the Closing
Date and the interest on the Refinance Note shall be recalculated to reflect
such discount. ADC shall not be entitled to a partial or pro-rata discount if
ADC makes payments to Seller in any amount less than the accrued interest on
$1,100,000.00 and the principal sum of $1,100,000.00 on or before sixty (60)
days following the Closing Date. To the extent from any such recalculations ADC
overpaid interest, then the amount of any such overpayment also shall be
credited to the principal amount of the Refinance Note. The Refinance Note
shall be in the form marked Exhibit "'A", affixed hereto and by this reference
made a part hereof. Payment of the Refinance Note shall be secured by a
mortgage (the "Refinance Mortgage") from ADC encumbering Tracts D-1, D-2 and
D-3, being a replat of Tract D, Maumelle Town Center Addition to the City of
Maumelle, Pulaski County, Arkansas (the "Refinance Mortgage Tract"). The form
of the Refinance Mortgage is marked Exhibit "B", affixed hereto and by this
reference made a part hereof. As consideration for the delivery of the
Refinance Note and Refinance Mortgage to Seller at Closing, the Seller shall
credit the principal balance of the Century Note by the sum of $1,400,000.00.
(3) ADC shall execute and deliver to Seller, a Promissory Note in the
principal amount of $350,000.00, which shall bear interest at the rate of Ten
Percent (10%) from the Closing Date and shall be due and payable in one lump
sum three years after the Closing Date (the "Tract I Note"). The Tract I Note
shall be in the form marked Exhibit "C", affixed hereto and by this reference
made a part hereof. As consideration for the delivery of the Tract I Note, the
Seller shall credit the principal balance of the Century Note by the sum of
$350,000.00 as of the Closing Date. ADC shall have the right to deliver to
Seller a Special Warranty Deed to that approximately 10 acre tract of land in
the City of Maumelle, Pulaski County, Arkansas, which is described on Exhibit
"D" affixed hereto ("Tract I") Tract I and a title insurance commitment (the
"Tract I Commitment") reflecting good title in Seller upon recordation of the
Special Warranty Deed with no special exceptions other than set forth on
Exhibit "D-1" affixed hereto, in full satisfaction of the entire principal
balance and accrued interest of the Tract I Note, at any time prior to a date
three years after the Closing Date.
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(4) ADC shall deliver, or cause to be delivered, to Seller 700,000
shares (the "AWEC Shares") of the common capital stock of Purchaser. The
consideration for the AWEC Shares is equal to the remaining principal balance
of the Century Note and equal all accrued but unpaid interest of the Century
Note, after crediting the payments described in subsections (1), (2) and (3) of
this Section 1.1.
1.4 Option Rights of Purchaser in AWEC Shares. ADC shall have the
right and option to purchase all or any portion of the AWEC Shares from Seller
at any time within two (2) years after the Closing Date for the purchase price
of Five Dollars ($5.00) per share. At Closing, Seller shall execute and deliver
to ADC the Option Agreement which is marked Exhibit "E", affixed hereto and by
this reference made a part hereof (the "AWEC Shares Option").
1.5 Option Rights of ADC in Maumelle Lots. ADC shall have the right
and option to purchase for the purchase price of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00) all of the seventy (70) single-family residential
lots in Maumelle, Pulaski County, Arkansas in the Waterside, North Ridge, and
West Point Additions, more particularly described in the ADC Lot Option
Agreement, which is marked Exhibit "F".
ARTICLE TWO
CLOSING
2.1 Closing. The transactions contemplated in this Agreement (the
"Closing") shall take place on or about September 15, 1995 (the "Closing Date")
at the offices of Beach Abstract and Guaranty Co., 100 Center Street, Little
Rock, Arkansas, or such other time and place as Seller and Purchaser shall
mutually agree.
2.2 Conduct of Closing. At the Closing, the following events shall
occur as conditions precedent to Closing, and as conditions concurrent with the
performance by the other party of its obligations under this Agreement:
(1) Satisfaction and Delivery of the Century Note. Seller shall mark
the original Century Note satisfied in full and deliver same to ADC, together
with the original of any written modifications thereto.
(2) Evidence of Seller's Authority. Seller shall deliver to ADC a
certified resolution of the Board of Directors of Seller authorizing Seller to
execute and perform this Agreement and all aspects of the transaction
contemplated herein.
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(3) Execution and Delivers of Refinance Note and Refinance Mortgage.
ADC shall execute and deliver to Seller the Refinance Note and the Refinance
Mortgage.
(4) Execution and Delivery of Tract I Note. ADC shall execute and
deliver to Seller the Tract I Note.
(5) Release of Collateral. Seller shall execute and deliver to ADC a
release of the lien of the Century Mortgage of all of the Century Collateral .
(6) Mortgagee Policy For Refinance Mortgage. ADC shall purchase and
deliver to Seller, or its designated assigns, a Mortgagee Policy of Title
Insurance, issued by Chicago Title Insurance Company, insuring Seller's first
and prior liens of the Refinance Mortgage on the collateral securing the
Refinance Note, without exceptions except those exceptions which are set forth
on Exhibit "G", affixed hereto and by this reference made a part hereof.
(7) AWEC Shares Option. Seller shall execute and deliver to Purchaser
the AWEC Shares Option.
(8) ADC Lot Option Agreement. Seller and ADC shall execute the ADC Lot
Option Agreement.
(9) AWEC Shares. Resources shall execute and deliver to Seller the
AWEC Shares as soon as practicable after the shareholders meeting and the
five-for-one reverse stock split of Purchaser which was held on August 14,
1995, but in no event will the AWEC Shares be delivered to Seller any later
than September 15, 1995 (the "Share Delivery Date").
(10) Guaranty of Refinance Note and Tract I Note by Resources.
Resources shall execute and deliver to the Seller at Closing a Guaranty
Agreement in the form which is marked Exhibit "H", affixed hereto and by this
reference made a part hereof.
(11) Board Resolution of Resources. Resources shall deliver to Seller
a true and correct copy of a resolution of the Board of Directors of Resources
authorizing the Resources to execute and perform this Agreement and all aspects
of the transactions contemplated herein.
(12) Board Resolution of ADC. ADC shall deliver to Seller a true and
correct copy of a resolution of the Board of Directors of ADC authorizing ADC
to execute and perform this Agreement and all aspects of the transactions
contemplated herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller hereby represents
and warrants to ADC and Resources that as of the Closing Date:
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(1) Seller is the sole, current, legal and equitable owner and holder
of the Century Note and Century Mortgage.
(2) Seller, and the person or persons executing this Agreement on
behalf of Seller, possess all right, power and authority, and have complied
with all legal requirements, necessary in order to execute and perform this
Agreement, and release the lien of the Century Mortgage in accordance with the
terms hereof.
(3) Seller is acquiring the AWEC Shares for Seller's own account for
investment and not with a view to distribute or to participate in the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations thereunder, and Seller will
not dispose of any of the AWEC Shares without compliance with the registration
requirements of the Act and any applicable state blue sky laws or in accordance
with any exemptions therefrom. Seller has such knowledge and experience in
business and financial matters as to be capable of evaluating the merits and
risks of the investment contemplated to be made hereunder; and acknowledges
that, during the negotiation of the transactions contemplated herein, Seller
and its representatives have been afforded access to corporate books, records,
leases, contracts, documents, correspondence and other information concerning
Purchaser, and relating to its offices and facilities, and has been afforded an
opportunity to ask such questions of Purchaser's officers, employees, agents,
accountants and representatives concerning their respective business
operations, financial condition, assets, liabilities and other relevant matters
as Seller deemed necessary or desirable, and Seller has been given all such
information that has been requested by Seller in order to evaluate the merits
and risks of the prospective investment contemplated herein.
3.2 Survival of Representations and Warranties. The representations
and warranties contained in Section 3.1(1) and (2) shall survive performance of
this Agreement for 120 days and such representations and warranties shall not
be assignable by ADC. The representations and warranties contained in Section
3.1(3) shall survive performance of this Agreement.
3.3 Representations and Warranties of Resources and ADC. Resources
and ADC hereby represent, warrant and covenant to Seller as follows:
(1) Shares. The AWEC Shares shall represent 10% of the aggregate
issued and outstanding common stock of Resources and there are no additional
classes of shares of Resources
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outstanding. Furthermore, Resources acknowledges that Seller is not permitted
to own more than 10% of the aggregate issued and outstanding stock of
Resources. Therefore, Resources covenants that at no time will Resources redeem
or cancel shares of the Resources which would result in Seller owning more than
10% of the aggregate issued and outstanding stock of the Purchaser without the
prior written consent of Resources.
(2) Liens. As of the Share Delivery Date, the AWEC Shares will be free
from all liens, claims and encumbrances of any and all kind.
(3) Good Title to AWEC Shares. As of the Share Delivery Date,
following the delivery of the AWEC Shares by Resources pursuant to subsection
(9) of Section 2.2 hereof, Resources will be the lawful owner of the AWEC
Shares.
(4) Resources, ADC and the person or persons executing this Agreement
on behalf of Resources and ADC, possess all right, power and authority, and
have complied with all legal requirements, necessary in order to execute and
perform this Agreement, to transfer the AWEC share, execute the Refinance Note,
Tract I Note, and execute and deliver the Refinance Mortgage in accordance with
the terms hereof.
3.4 Survival of Representations and Warranties. The representations
and warranties contained in Section 3.3 shall survive execution, delivery and
performance of this Agreement and shall survive the transfer of the AWEC shares
to Seller. It is understood and agreed that the representations and warranties
are continuing representations and warranties and inure to the benefit of
Seller.
3.5 Mutual Covenant of Parties. Resources and Seller hereby covenant
and agree that from the date of this Agreement until the Closing Date:
(1) Resources will make or cause to be made all such filings and
submissions under laws and regulations applicable to Resources, if any, as may
be required of Resources for the consummation of the conveyance of the AWEC
Shares pursuant to this Agreement. Seller will make or cause to be made all
such other filings and submissions under laws and regulations applicable to
Seller, as may be required of Seller for the consummation of the conveyance of
AWEC Shares pursuant to this Agreement. Resources and Seller shall coordinate
and cooperate with one another in exchanging such information and reasonable
assistance as the other may request in connection with such filings.
ARTICLE IV
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CONDITIONS TO OBLIGATION OF PURCHASER
TO CLOSE
Each and every obligation of Resources under this Agreement to be
performed on or prior to the Closing Date, shall be subject to the fulfillment,
on or prior to the Closing Date, of each of the following conditions:
4.1 Representations and Warranties True at Closing. The
representations and warranties made by Seller in or pursuant to this Agreement
or given on its behalf hereunder shall be true and correct in all material
respects on and as of the Closing Date with the same affect as though such
representations and warranties had been made or given on and as of the Closing
Date. It is understood that in determining whether there has been any material
misrepresentation, all misrepresentations shall be aggregated to determine the
applicability or breach of the provisions of this Agreement.
4.2 Obligations Performed. Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
4.3 Consents. Seller shall have obtained and delivered to Resources
written consents or approvals of all persons or entities whose consent or
approval is required to consummate the transactions contemplated herein.
ARTICLE V
CONDITIONS TO OBLIGATION OF SELLER TO CLOSE
Each and every obligation of Seller under this Agreement to be
performed on or prior to the Closing Date, shall be subject to the fulfillment,
on or prior to the Closing Date, of each of the following conditions:
5.1 Representations and Warranties True at Closing. The
representations and warranties made by Resources and ADC in or pursuant to this
Agreement or given on its behalf hereunder shall be true and correct in all
material respects on and as of the Closing Date with the same affect as though
such representations and warranties had been made or given on and as of the
Closing Date. It is understood that in determining whether there has been any
material misrepresentation, all misrepresentations shall be
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aggregated to determine the applicability or breach of the provisions of this
Agreement.
5.2 Obligations Performed. Each of Resources and ADC shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
5.3 Consents. Resources and ADC shall have obtained and delivered to
Seller written consents or approvals of all persons or entities whose consent
or approval is required to consummate the transactions contemplated herein.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Notices. All demands, notices and communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed by
certified mail, return receipt requested, to the addresses indicated below:
IF TO SELLER: Century Realty, Inc.
10670 North Central Expressway
Suite 300
Dallas, Texas 75231
Attention: Bruce Endendyke
IF TO ADC: AWEC Development Corporation
600 Pine Forest Circle
Maumelle, Arkansas 72113
Attention: David Paes, Treasurer
IF TO RESOURCES: AWEC Resources, Inc.
25550 Hawthorne Boulevard,
Suite 103
Torrance, California 90505
Attention: Michael G. Todd,
President
6.2 Separability Clause. Any provision, representation or warranty of
this Agreement which is prohibited or unenforceable in any jurisdiction shall
be, as to such jurisdiction, ineffective to the extent of such prohibition
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such
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provision in any other jurisdiction. To the extent permitted by applicable law,
the parties hereto waive any provision of law which prohibits or renders
unenforceable any provision hereon.
6.3 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
6.4 The Place of Delivery and Governing Law. The Agreement shall be
deemed in effect when a counterpart fully executed by Resources and ADC is
received by Seller in Dallas, Texas. The Agreement shall be construed in
accordance with the laws of the State of Texas, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws. Seller and Resources and ADC consent to the personal jurisdiction of the
Texas state courts and agree that any lawsuit brought by either one of the
parties to enforce, contest or otherwise interpret the terms of this Agreement
shall only be brought in Dallas County, Texas.
6.5 Execution of Documents. Seller agrees to execute and deliver such
instruments and documents and take such actions as Resources and ADC may
request, from time to time, in order to effectuate the purpose and terms of
this Agreement.
6.6 Complete Agreement. This Agreement contains the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior arrangements and understandings with respect
thereto. There are no restrictions, agreements, promises, warranties, covenants
or undertakings other than those expressly set forth herein.
6.7 Modifications and Amendments. This Agreement may be modified or
amended by the parties only by written agreement.
IN WITNESS WHEREOF, the parties have executed the foregoing Agreement
this 11th day of September, 1995.
SELLER:
CENTURY REALTY, INC.
BY: /s/ Bruce Enderdyke
AWEC DEVELOPMENT CORPORATION
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BY: /s/ David R. Paes
Vice President
AWEC RESOURCES, INC.
BY: /s/ David R. Paes
Vice President and Treasurer
EXHIBIT "A"
PROMISSORY NOTE
See Executed Document included as Exhibit 10.12 to this Registration
Statement
EXHIBIT "B"
MORTGAGE
See Executed Document included as Exhibit 10.13 to this Registration
Statement
EXHIBIT "C"
TRACT I NOTE
PROMISSORY NOTE
($350,000)
[See executed document included as Exhibit 10.14 to this Registration
Statement]
EXHIBIT "D"
DESCRIPTION OF TRACT I
BEACH ABSTRACT & GUARANTY COMPANY
100 CENTER STREET - P.O. Box 2580
LITTLE ROCK, ARKANSAS 72203
Agent For: CHICAGO TITLE INSURANCE COMPANY
American Land Title Association Commitment
for Title Insurance - 1966
Prepared For:
SCHEDULE A
COMMITMENT NUMBER: EFFECTIVE DATE OF THIS COMMITMENT
IS:
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<PAGE> 11
95-7332 July 11, 1995 at 7:00 A.M.
Inquiries Should be Directed to: MARTHA VESTAL , Examiner (501)
376-5671
1. POLICY OR POLICIES TO BE ISSUED: AMOUNT
(a) ALTA OWNERS POLICY - B - 1992 $250,000.00
Proposed Insured:
Century Realty, Inc.
2. The estate or interest in the land described or referred to in this
Commitment and covered herein is a FEE SIMPLE .
3. Title to said estate or interest in said land is at the effective
date hereof vested in:
AWEC Development Corporation
4. The land referred to in this Commitment is located in the County of
Pulaski, State of Arkansas and described as follows:
Tract I, Maumelle Town Center Addition to the City of
Maumelle, Pulaski County, Arkansas.
END OF SCHEDULE A
EXHIBIT "D-1"
PERMITTED EXCEPTIONS TO TRACT I TITLE COMMITMENT
proposed Insured acquirer for value of record the estate
or interest or mortgage thereon covered
by this Commitment.
STANDARD EXCEPTIONS:
1. (a) Rights or claims of parties in possession not shown by the
public records.
(b) Easements, or claims of easements, not shown by the public
records.
(c) Encroachments overlaps, boundary line disputes, or other matters
which would be disclosed by an accurate survey or inspection of the premises.
(d) Any lien, or right to a lien, for services, labor, or material
heretofore or hereafter furnished, imposed by law and not shown by the public
records.
(e) Taxes or special assessments which are not shown as existing
liens by the public records.
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SPECIAL EXCEPTIONS:
1. GENERAL TAXES FOR THE YEAR 1995, AND SUBSEQUENT YEARS, AND FUTURE
INSTALLMENTS OF THE FOLLOWING SPECIAL IMPROVEMENT DISTRICTS: Multipurpose
Property Owners Improvement District No. 2 of Maumelle, Arkansas.
2. Restrictions, covenants, easements, reservations, charges and liens
contained in Bill of Assurance recorded in Book 1214, Page 61, and Amended Bill
of Assurance recorded in Book 1263, Page 527, records of Pulaski County,
Arkansas.
3. Right of Way Easement in favor of Arkansas Power and Light Company
recorded in Book 902, Page 617, and Modification thereto filed for record April
19, 1988, and recorded as Instrument No. 88-18800, records of Pulaski County,
Arkansas.
4. Covenants, conditions, reservations and restrictions contained in
Bill of Assurance recorded as Instrument No. 89-10128 and 89-58141, records of
Pulaski County, Arkansas, which contain no forfeiture, express or implied.
5. Referents and building setback lines as shown on plat recorded as
Plat No. C-870, records of Pulaski County, Arkansas.
END OF SCHEDULE B
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EXHIBIT "E"
FORM OF AWEC SHARES OPTION
[See executed document included as Exhibit 10.16 to this Registration
Statement.]
EXHIBIT " F "
ADC LOT OPTION
STATE OF ARKANSAS
COUNTY OF PULASKI
OPTION
This Option Agreement, made and entered into this _ day of September,
1995 (the "Effective Date"), by and between Century Realty, Inc., a Texas
corporation (hereinafter referred to as "Seller"), and AWEC Development
Corporation, an Arkansas corporation, its successors and assigns (hereinafter
referred to as "Buyer" ) .
WITNESSETH:
WHEREAS, Seller is the owner of those certain seventy (70)
single-family residential lots in Pulaski County, Arkansas, described as Lots
5, 8, 9, 11, 21, 22, 36, 74, 92, 94, 97, 98, 105, 107, 112, 117, 144, 146, 147,
153, 161, 162, 165, 166, 170, 171, 172, 180, 198, 205, 206, 217, 221, 223 and
224 Waterside Addition, Lots 4, 15, 22, 33, 35, 37, 44, 46, 63, 66, 67, 71, 73,
85, 96, 98, 100 and 104 North Ridge Addition and Lots 154, 155, 169, 176, 182,
188, 189, 210, 211, 218, 219, 240, 248, 254, 257, 259, and 261 West Point
Addition, all in Pulaski County, Arkansas (the "Property"), and
WHEREAS, Seller desires to grant to Buyer an option to purchase the
Property on the terms and conditions hereinafter set forth; and
WHEREAS, Buyer desires to obtain an option to purchase the Property on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the option
money paid to Seller this date as set forth in paragraph 3, and in
consideration of the terms and conditions hereinafter set
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forth, Seller and Buyer agree as follows:
1. Option to Purchase. Seller hereby grants to Buyer, its successors
and assigns, the exclusive option to purchase the Property, together with all
privileges and appurtenances thereto.
2. Option Period. The option granted by Seller to Buyer in this
Agreement shall commence on the date hereto and shall expire at five o'clock
(5:00) p.m., Central Time, on the 60th day after the Effective Date or such
later date as extended pursuant to the provisions of paragraph 4 hereof (the
"Expiration Date").
3. Option Money. Seller acknowledges receipt of the sum of One Hundred
and 00/100 Dollars ($100.00) upon the execution of this Agreement as Buyer's
consideration for this option. Said sum is hereinafter referred to as "Option
Money".
4. Extension of Option Period. On or before five o'clock (5:00) p.m.,
Central Time of the Expiration Date, Buyer shall be entitled to extend the
Expiration Date of the option to five o'clock (5:00) p.m., Central Time, on the
120th day after the Effective Date, by payment to the Seller on or before the
Expiration Date of an additional sum of Ten Thousand Dollars ($10,000.00). Said
sum is hereinafter referred to as "Additional Option Money".
5. Notice of Exercise of Option. This option shall be exercised by
Buyer by written notice to Seller postmarked prior to five o'clock (5:00) p.m.,
Central Time, on the Expiration Date, as extended pursuant to the provisions of
paragraph 4 hereof, advising Seller that Buyer is exercising its option. The
closing shall take place at a mutually convenient location in Pulaski County,
Arkansas, on a date selected by Buyer, which shall not be more than 30 days
subsequent to the date of such notice.
6. Purchase Price. In the event that Buyer exercises its option rights
hereunder, it is agreed that the purchase price to be paid by Buyer to Seller
shall be a sum equal to Two Hundred Fifty Thousand Dollars ($250,000.00),
payable as follows:
(a) Seller shall give Buyer credit for all Option Money and all
Additional Option Money paid to Seller as the fee for this option.
(b) Buyer shall pay to Seller the balance of the purchase price, in
cash at closing, or as may be otherwise agreed to in writing by Seller and
Buyer.
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i. Contract of Purchase of Sale. As of the date that Buyer shall have
given written notice to Seller of Buyer '8 election to exercise the option
herein granted, this Agreement shall become a binding contract of purchase and
sale; and the terms and conditions hereof, to the extent that they have not
been fulfilled, shall become the terms and conditions of the agreement of
purchase and sale and shall govern the obligations of the parties, without the
execution of any further documentation or instruments, other than the documents
required to be delivered at closing or subsequent to closing.
8. Conditions Precedent. Seller's right to retain the Option Money and
Additional Option Money and Buyer's obligation to purchase the Property, after
exercise of the option, is subject to full performance by Seller hereunder and
to fulfillment prior to or at closing of each of the conditions precedent as
set forth in subparagraphs (a) through (e) below.
Upon failure of any of the following conditions precedent, Seller
shall return to Buyer all Option Money and Additional Option Money paid, upon
demand, and Buyer shall be relieved of its obligations under this Agreement.
(a) Title. Buyer shall have received an owner' 9 title insurance
commitment for an ALTA (Form B) policy with standard exceptions deleted issued
by a national title insurance company, which shall be effective as of closing,
certifying that Seller's title to the Property be conveyed to Buyer as a fee
simple ownership in the Property, except for encumbrances and liens that
occurred prior to the ownership of the lots and liens due to delinquent taxes
and such other encumbrances or defects as may have been waived by Buyer prior
to closing.
The above representations and warranties shall survive closing and
shall be deemed to be continuous representations and warranties after the date
of this Agreement.
9. Closing and Closing Documentation. Closing shall take place at such
time and place in Pulaski County, Arkansas, as may be designated by Buyer in
accordance with paragraph 5 hereof.
At closing, Seller shall execute and deliver to Buyer a special
warranty deed conveying the Property to Buyer in the form marked Exhibit n to
and affixed hereto.
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10. Real Estate Taxes and Assessments and Closing Costs at Closing.
The Seller will pay all outstanding general real estate taxes which are liens
against the Property. The current years general real estate taxes shall be
pro-rated between Seller and Buyer as of the Closing Date. Purchaser shall take
the Property subject to any and all outstanding special assessments by
improvement districts which are liens against the Property.
With respect to closing costs, Seller shall be responsible for the
payment of their attorney's fees, preparation of the deed, title insurance
premium, and one-half the revenue stamps. Buyer shall be responsible for its
attorney's fees, all recording costs, survey costs incurred by Buyer, title
examination fees, and one-half the revenue stamps.
11. Continuing Effect of Agreement. Any provision herein contained
which by its nature and effect is required to be Observed, kept, or performed
after closing shall survive the closing and remain binding upon and for the
benefit of the parties hereto to be fully observed, kept, or performed.
12. Notice 8. All notices given in connection with this Agreement
shall be in writing, delivered in person, or by registered or certified postage
prepaid mail addressed as follows:
IF TO BUYER: AWEC Development Corporation
550 Edgewood Drive
Maumelle, AR 72113
Attention: David Paes, Treasurer
IF TO SELLER: Century Realty, Inc.
10670 North Central Expressway
Suite 300
Dallas, Texas 75231
Attention: Bruce Endendyke
The addresses may be changed by any party by notice given in the
manner provided herein.
13. Rights Upon Default.
(a) In the event Buyer shall fail to close the purchase of the
Property in accordance with the terms of this Agreement, Seller shall be
entitled to retain all Option Money and Additional Option Money paid hereunder
as liquidated damages and in full satisfaction of any and all claims which
Seller might have arising in any manner whatsoever out of this transaction, it
being agreed that in no
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event shall Buyer's liability for failure to close be in excess of the Option
Money and Additional Option Money paid hereunder.
(b) Notwithstanding anything contained herein to the contrary, in the
event of a default hereunder by Seller, Buyer's sole remedies hereunder shall
be termination of this Agreement and a return of Option Money and Additional
Option Money paid to Seller, or, at Buyer's option a suit for specific
performance.
14. Other Covenants.
(a) Condemnation. If, prior to the closing all or any part of the
Property shall be taken in any proceeding by public authority, or any other
body vested with the power of eminent domain, by condemnation or otherwise, or
shall be acquired for public or quasi-public purposes, or condemnation
proceedings therefore shall have been threatened or instituted, then Buyer
shall have the right and election of canceling this Agreement, said election to
be exercised by Buyer by giving Seller notice to such effect. In the event
Buyer elects to cancel this Agreement, both parties shall be relieved and
released from all liability hereunder, and Seller shall return all Option Money
and Additional Option Money to Buyer. Unless this Agreement is so cancelled, it
shall remain in full force and effect. If this option is exercised, then at
the option of Buyer, Seller shall either (i) assign, transfer and set over to
Buyer all of its right, title and interest in and to any award that may be made
for such taking, in which event the purchase price of the Property shall remain
unchanged, (ii) retain the award, in which event the purchase price of the
Property shall be reduced by the amount of such award.
(b) No Brokerage Fee. Seller and Buyer each represent that they have
not dealt with any broker, finder or other intermediary, in connection with
this transaction which would necessitate the payment of a brokerage fee by the
other. Each party hereby agrees to indemnify the other and hold the other
harmless from and against the claims of any and all brokers, finders and other
intermediaries, claiming by, through or under the other party in connection
with
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the sale of the Property. This paragraph (b) shall expressly survive closing
hereunder or termination of this Agreement.
(c) Parties Bound. This option shall be binding upon and inure to the
benefit of the parties hereto, their heirs, successors and assigns.
(d) Entire Understanding This Option Agreement represents the entire
understanding and agreement of Seller and Buyer with respect to the Property.
This Option Agreement may not be modified or amended except by a writing signed
by all parties.
(e) Option Agreement Enforcement. This Option Agreement shall be
construed, interpreted and enforced in accordance with the laws of the State of
Arkansas.
IN WITNESS WHEREOF, Seller has executed this Agreement, and Buyer has
caused this Agreement to be executed by its duly authorized officers all as of
the day and year first above written, in multiple originals, each party
retaining an executed copy .
BUYER: SELLER: AWEC DEVELOPMENT CORPORATION CENTURY REALTY, INC.
STATE OF
COUNTY OF
ACKNOWLEDGMENT
On this day of , 1995, before me, a Notary Public, duly commissioned,
qualified and acting, within and for said County and State, appeared in person
the within named , being the person authorized by said corporation execute such
instrument, to me personally well known, who stated that he was the of Century
Realty, Inc., executed and delivered said foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this day of , 1995.
NOTARY PUBLIC MY COMMISSION
EXPIRES:
STATE OF ARKANSAS
COUNTY OF PULASKI
ACKNOWLEDGMENT
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On this _____ day of __________ , 1995, before me, a Notary Public,
duly commissioned, qualified and acting, within and for said County and State,
appeared in person the within named, being the person authorized by said
corporation to execute such instrument, who stated that he was the
of AWEC Development Corporation, executed and delivered said foregoing
instrument for the consideration, uses and purposes therein mentioned and set
forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this day of_________, 1995.
NOTARY PUBLIC MY COMMISSION
EXPIRES:
EXHIBIT "G"
EXCEPTIONS TO TITLE POLICY FOR REFINANCE MORTGAGE
STANDARD EXCEPTIONS:
1. (a) Rights or claims of parties in possession not shown by the
public records. (b) Easements, or claims of easements, not shown by the public
records. (c) Encroachments, overlaps, boundary line disputes, or other matters
which would be disclosed by an accurate survey or inspection of the premises.
(d) Any lien, or right to a lien, for services, labor, or material heretofore
or hereafter furnished, imposed by law and not shown by the public records.
(e) Taxes or special assessments which are not shown as existing liens by the
public records.
SPECIAL EXCEPTIONS:
1. Item(s) (a) through (e) of the above STANDARD EXCEPTIONS are hereby
eliminated as exception(s) to this commitment.
2. GENERAL TAXES FOR THE YEAR 1995, AND SUBSEQUENT YEARS, AND FUTURE
INSTALLMENTS OF THE FOLLOWING SPECIAL IMPROVEMENT DISTRICTS: Multipurpose
Property Owners Improvement District No. 2 of Maumelle, Arkansas.
3. Restrictions, covenants, easements, reservations, charges and liens
contained in Bill of Assurance recorded in Book 1214, Page 61, and Amended Bill
of Assurance recorded in Book 1263, Page 527, records of Pulaski County,
Arkansas.
4. Right of Way easement in favor of Arkansas Power and Light
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Company recorded in Book 902, Page 617, and Modification thereto filed for
record April 19, 1988, and recorded as Instrument No. 88-18800, records of
Pulaski County, Arkansas.
5. Covenants, conditions, reservations and restrictions contained in
Bill of Assurance recorded as Instrument No. 89-10128 and 89-58141, records of
Pulaski County, Arkansas, which contain no forfeiture, express or implied.
6. Easements and building setback lines as shown on plat recorded as
Plat No. C-870, records of Pulaski County,
Arkansas.
EXHIBIT "H"
AWEC RESOURCES, INC. GUARANTY
[See executed document included as Exhibit 10.15 to this Registration
Statement.]
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EXHIBIT 10.12
Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc.
PROMISSORY NOTE
$1,400,000.00 Little Rock, Arkansas September 11, 1995
FOR VALUE RECEIVED, AWEC Development Corporation, an Arkansas
corporation (referred to herein as "Maker"), promises to pay to the order of
Century Realty, Inc., a Texas corporation (referred to herein as "Payee"), at
its office at 10670 North Central Expressway, Suite 300, Dallas, Texas 75231,
or such other place as the Payee or any subsequent holder of this Note may from
time to time designate in writing, the principal sum of One Million Four
Hundred Thousand Dollars ($1,400,000.00), together with interest thereon from
the date hereof, until maturity, at the rate of Nine Percent (9%) per annum.
Interest shall be calculated on the basis of actual days elapsed in a year
consisting of 365, or 366, days, as the case may be. All payments hereunder
shall be payable in lawful money of the United States which shall be legal
tender for public and private debts at the time of payment. Said sums shall be
due and payable as follows:
The entire unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be due and payable in full on
January 9, 1996. All payments shall be applied first to interest, or so much
thereof as shall from time to time remain unpaid on the entire unpaid principal
balance of this Note, and the balance of any payment shall be applied on
account of principal.
If any payment of principal or interest due under this Note shall
become due on a Saturday, Sunday or public holiday under the laws of the State
of Texas on which Payee is not open for business, such payment shall be made on
the next succeeding business day, and such extension of time shall in such case
be included in computing interest in connection with such payment.
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Early Payment Discount. In the event that Maker makes payments in the
total sum of $1,100,000.00, together with a sum equal to the amount of accrued
interest on the principal sum of $1,100,000.00 at the rate stated in this Note
on or before sixty (60) days following the date hereof, then this Note will be
deemed satisfied in full, thereby discounting the principal amount of this Note
by the sum of $300,000.00 effective as of the date of this Note and the
interest on this Note shall be recalculated to reflect such discount. Maker
shall not be entitled to a partial or prorata discount if Maker makes payments
to Payee in any amount less than the accrued interest on $1,100,000.00 and the
principal sum of $1,100,000.00 on or before sixty (60) days following the date
hereof. To the extent from any such recalculations Maker overpaid interest,
then the amount of any such overpayment also shall be credited to the principal
amount of this Note.
Security Instruments. This Note is secured by, among other things, a
pledge of certain collateral covered by certain mortgages, a guaranty from AWEC
Resources, Inc., a New York corporation, security agreements, financing
statements and other collateral documents executed by or on behalf of the Maker
and/or others to or in favor of the Payee (collectively, the "Security
Instruments") to secure all indebtedness of Maker to Payee under this Note,
which Security Instruments relate, inter alia, to the Maker's interest in
certain assets described in such Security Instruments. Reference is made to the
Security Instruments for a description of the properties mortgaged and
assigned, the nature and extent of the security, and the rights of the parties
under the Security Instruments in respect of such security. Upon the occurrence
of an "Event of Default" (as such term is defined below), the principal balance
hereof and accrued interest hereon may be declared to be forthwith due and
payable. In the event of a conflict in terms among this Note or
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the Security Instruments, the terms of this Note shall be controlling.
Event of Default. The term "Event of Default," as used herein means
the occurrence of any of the following events:
(i) the failure of Maker to make timely payment of any installment of
principal or interest due upon this Note when same becomes due, including on
demand, if made; or
(ii) if any endorser or guarantor of this Note for any obligation of
Maker shall repudiate (or attempt to repudiate) its obligations to Payee in
connection herewith or any provision of any document executed by the Maker or
if any endorsement or guaranty of this Note or any obligation of Maker in favor
of Payee shall for any reason cease to be valid, binding and enforceable upon
the Maker or any such endorser or guarantor, as the case may be; or
(iii) any "event of default" shall occur under the terms of any of the
Security Instruments; or
(iv) the liquidation, termination or dissolution of Maker or Guarantor
of this Note; or
(v) the bankruptcy or insolvency of, or the assignment for the benefit
of creditors by, or the appointment of a receiver for, any property of any
party ever liable for the payment of this Note, whether as maker, endorser,
guarantor, surety or otherwise; or
(vi) any failure or default shall occur and be continuing under any
other agreement or instrument involving or evidencing indebtedness of borrowed
money by Maker or any agreement or instrument to which Maker and Payee are both
parties.
Upon the occurrence of an Event of Default, in addition to any other
rights or remedies which the Payee may then have hereunder, Payee or any
subsequent holder hereof may, at its option, (a) declare the
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entire unpaid principal amount of and all accrued interest on this Note
immediately due and payable without notice, demand or presentment, all of which
are hereby waived; (b) reduce its claim to judgment; (c) apply by appropriate
judicial proceedings for the appointment of a receiver for Maker; or (d) take
such other and further action as Payee or any subsequent holder deems
appropriate, it being expressly understood that Payee's remedies are not
mutually exclusive and the exercise of one or more rights or remedies shall not
prejudice or impair the current or subsequent exercise of any other rights or
remedies by Payee or any subsequent holder hereof. All rights, powers and
interests held whole or in part, as such time and upon such terms as Payee
shall deem advisable. Acceptance by the Payee on this Note of any payment
hereunder which is less than the payment in full of all amounts then due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise the foregoing remedies at that time or to nullify any prior
exercise of such remedies.
Attorney's Fees. If this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings at law or
in equity of in bankruptcy, receivership or other court proceedings, Maker
agrees to pay all costs of collection including, but not limited to, court
costs and reasonable attorney's fees.
Legal Interest Limitations. Regardless of any provision contained
herein or in any other document executed in connection herewith, the holder
hereof shall never be entitled to receive, collect or apply as interest hereon
any amount in excess of the interest that Payee is allowed to contract for,
charge, take, reserve or receive, under the applicable laws of the State of
Texas or the United States of America (whichever from time to time permits the
highest rate) after taking into account, to the extent required by applicable
law, and all
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relevant payments or charges hereunder, or under any other document or
instrument executed and delivered in connection herewith and the indebtedness
and evidenced hereby (hereinafter referred to as "Maximum Rate"), and in the
event the holder hereof ever receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall be deemed a partial
prepayment of principal and treated hereunder as such; and, if the principal
hereof is paid in full, any remaining excess shall be forthwith paid to Maker.
If any construction of this Note or any other document executed in connection
herewith indicates a different right given to Payee or any holder hereof to ask
for, demand or receive any larger sum as interest, such is a mistake in
calculation or wording, which this clause shall override and control, it being
the intention of the parties that this Note and all other documents executed in
connection herewith shall in all things comply with applicable law and proper
adjustment shall automatically be made accordingly. In determining whether or
not the interest paid or payable under any specific contingency exceeds the
Maximum Rate, the Maker and the holder hereof shall, to the maximum extent
permitted by law, (a) characterize any non-principal payment as an expense, fee
or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term
hereof, provided that if the principal is paid in full or becomes due and
payable prior to the end of the entire contemplated term hereof, and if the
interest received for the actual term hereof exceeds the Maximum Rate, the
holder hereof shall either credit the excess against the principal hereof or
refund the excess to the Maker. To the extent that otherwise applicable state
law is preempted by a federal law which does not limit the rate of interest
which may be charged, this paragraph shall be inapplicable. The provisions of
this paragraph shall control all other provisions hereof and of all agreements,
whether now or hereafter existing and whether written or oral, between the
Maker and the Payee or between the
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Payee and any other person liable hereon. In connection with this paragraph,
Maker acknowledges and represents to Payee that the proceeds of the loan
evidenced hereby are and shall be used solely for a business purpose.
Waivers. Except as otherwise provided herein, the Maker and all
guarantors, sureties and endorses of this Note severally waive demand,
presentment, notice of dishonor, notice of intent diligence in collecting,
grace notice of protest, any and all other notices of any kind, and agree to
one or more extensions for the period or periods of time and partial payments,
before or after maturity, without prejudice to the holder and consent to all
renewals and extensions which, from time to time, may be granted by the holder
hereof and all partial payments hereon, whether before or after maturity.
Severability. In the event any one or more of the provisions contained
in this Note shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Note shall be construed
as if such invalid, illegal or unenforceable provision had never been included
herein.
Successors and Assigns. This Note and the covenants, promises and
agreements contained herein shall be binding upon and inure to the benefit of
the respective legal representatives, personal representatives, successors and
assigns of the Maker and Payee hereof.
This Note is being executed and delivered in Dallas, Dallas County,
Texas, and shall be construed and enforced in accordance with, and be governed
by, the laws of the State of Texas, except insofar as the laws of the United
States of America shall have application.
The records of Payee or any holder of this Note shall be prima facie
evidence of the amount owing under this Note.
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<PAGE> 7
AWEC DEVELOPMENT CORPORATION
BY: /s/ David R. Paes
TITLE: Vice President
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<PAGE> 1
EXHIBIT 10.13
Mortgage, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc.
MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
That AWEC Development Corporation, an Arkansas corporation
(hereinafter called "Mortgagor"), for valuable consideration, does hereby
grant, bargain, sell, convey and deliver unto Century Realty, Inc., a Texas
corporation (hereinafter called "Mortgagee'), and unto its successors and
assigns, the following described property in Pulaski County, Arkansas:
All that land described on Exhibit "A", affixed hereto and by this
reference made a part hereof (the "Mortgaged Assets").
This mortgage also conveys all buildings and improvements now or at
any time hereafter located on any land herein above described.
TO HAVE AND TO HOLD the same unto the said Mortgagee, its successors
and assigns forever.
And Mortgagor covenants with Mortgagee, its successors and assigns,
that Mortgagor will forever warrant and defend the title to the above-described
property against any and all lawful claims whatever.
PROVIDED, however, the foregoing conveyance is given as a mortgage for
the purpose of securing:
(a) The payment of a promissory note (the "Refinance Note"), in the
sum of $1,400,000.00 of even date herewith which is incorporated herein by
reference, and all successive extensions and renewals of the indebtedness
represented thereby, evidencing an indebtedness being due and payable in full
on January 9, 1995; and
(b) The repayment to the Mortgagee of the indebtedness secured hereby
of all reimbursable expenses at any time accruing to such Mortgagee under the
provisions hereof.
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<PAGE> 2
(1) The Mortgagee may, at its option, declare the entire unmatured
portion of all indebtedness secured hereby, together with all interest accrued
on the entire secured debt, to be immediately due and payable, and the same
shall forthwith become immediately due and payable, (which acceleration of
maturity may be accomplished without notice to anyone), in any of the following
events:
(a) If default shall be made in the payment of any part of the
principal indebtedness secured hereby, or any interest accruing on such
principal indebtedness, as the same becomes due and payable according to the
terms of the Purchase Note, or of any extension or renewal thereof.
(b) If Mortgagor cuts, removes, harvests or causes to be cut, removed
or harvested any timber, minerals, soil or water off the Mortgaged Assets, or
if Mortgagor causes the Mortgaged Assets to deteriorate in value due to any
other act of Mortgagor or caused by Mortgagor.
(c) If Mortgagor shall fail to comply with any of the agreements or
covenants contained in this mortgage.
The foregoing acceleration provisions will be applicable not only to
the maturities recited in the Refinance Note but also to any substituted
maturities created by extension or renewal. The failure of the Mortgagee to
declare an acceleration of maturities when a ground therefor exists, even
though such forbearance may be repeated from time to time, will not constitute
a waiver of right of such Mortgagee to accelerate maturities upon a
reoccurrence of the same ground therefor; nor will the act of Mortgagee in
remedying any condition resulting from Mortgagor's default bar Mortgagee from
declaring an acceleration of maturities by reason of such default.
(2) If Mortgagee shall expend any sum or sums for the protection of
any of the Mortgaged Assets or the lien of this mortgage (Mortgagee to have
uncontrolled discretion as to the necessity of making any such expenditures),
the repayment of such sum or sums on demand
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(with interest thereon at the rate of 9% per annum from the date of each
expenditure) shall be the obligation of the Mortgagor; and such obligation to
repay will constitute a part of the indebtedness secured hereby. The
expenditures thus made reimbursable will include (without limiting the
foregoing) taxes, special improvement assessments, insurance premiums, repairs
and maintenance expenses and sums paid to discharge prior liens. The cost of
any abstract or supplemental abstract procured by the Mortgagee of the secured
indebtedness to facilitate foreclosure will also constitute a part of the
reimbursable expenses secured hereby.
(3) In the event of a default hereunder, the Mortgagee may enforce the
lien of this Mortgage in respect to Mortgaged Assets hereby by foreclosure or
otherwise in proceedings that are prosecuted simultaneously or are prosecuted
separately in such order as the Mortgagee may select.
(4) The Mortgagor hereby waives any and all rights of appraisement,
sale, redemption and homestead under the laws of Arkansas, and especially under
the Act of May 8, 1899, and Acts amendatory thereto.
(5) The Mortgagor shall be entitled to obtain the release of the
Mortgaged Assets upon Mortgagor's payment in full of all the principal and
interest due pursuant to the Refinance Note.
(6) All payments of the Refinance Note shall be first applied to
interest and then to principal.
Executed on this 11th day of September, 1995 .
AWEC DEVELOPMENT CORPORATION
BY: /s/ David R. Paes, Vice President
[ACKNOWLEDGMENT]
EXHIBIT "A"
Tracts D-1, D-2 and D-3, being a Replat of Tract D, Maumelle Town
Center Addition to the City of Maumelle, Pulaski County, Arkansas.
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EXHIBIT 10.14
Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc.
PROMISSORY NOTE
$350,000.00 Little Rock, Arkansas, September 11, 1995
FOR VALUE RECEIVED, AWEC Development Corporation, an Arkansas
corporation (referred to herein as "Maker"), promises to pay to the order of
Century Realty, Inc., a Texas corporation (referred to herein as "Payee"), at
its office at 10670 North Central Expressway, Suite 300, Dallas, Texas 75231,
or such other place as the Payee or any subsequent holder of this Note may from
time to time designate in writing, the principal sum of Three Hundred Fifty
Thousand and 00/100 Dollars ($350,000.00), together with interest thereon from
the date hereof, until maturity, at the rate of Ten Percent (10%) per annum.
Interest shall be calculated on the basis of actual days elapsed in a year
consisting of 365, or 366, days, as the case may be. All payments hereunder
shall be payable in lawful money of the United States which shall be legal
tender for public and private debts at the time of payment. Said sums shall be
due and payable as follows:
The entire unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be due and payable in full on
September 11, 1998. All payments shall be applied first to interest, or so much
thereof as shall from time to time remain unpaid on the entire unpaid principal
balance of this Note, and the balance of any payment shall be applied on
account of principal.
If any payment of principal or interest due under this Note shall
become due on a Saturday, Sunday or public holiday under the laws of the State
of Texas on which Payee is not open for business, such payment shall be made on
the next succeeding business day, and such extension of time shall in such case
be included in computing interest in connection with such payment.
The Guaranty. This Note is secured by a guaranty from AWEC Resources,
Inc., a New York corporation. Upon the occurrence of an "Event of Default" (as
such term is defined below), the principal balance hereof and
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<PAGE> 2
accrued interest hereon may be declared to be forthwith due and payable. In the
event of a conflict in terms among this Note or the Guaranty, the terms of this
Note shall be controlling.
Event of Default. The term "Event of Default," as used herein means
the occurrence of any of the following events:
(i) the failure of Maker to make timely payment of any installment of
principal or interest due upon this Note when same becomes due, including on
demand, if made; or
(ii) if any endorser or guarantor of this Note for any obligation of
Maker shall repudiate (or attempt to repudiate) its obligations to Payee in
connection herewith or any provision of any document executed by the Maker or
if any endorsement or guaranty of this Note or any obligation of Maker in favor
of Payee shall for any reason cease to be valid, binding and enforceable upon
the Maker or any such endorser or guarantor, as the case may be; or
(iii) any "event of default" shall occur under the terms of any of the
Security Instruments; or
(iv) the liquidation, termination or dissolution of Maker or Guarantor
of this Note; or
(v) the bankruptcy or insolvency of, or the assignment for the benefit
of creditors by, or the appointment of a receiver for, any property of any
party ever liable for the payment of this Note, whether as maker, endorser,
guarantor, surety or otherwise; or
(vi) any failure or default shall occur and be continuing under any
other agreement or instrument involving or evidencing indebtedness of borrowed
money by Maker or any agreement or instrument to which Maker and Payee are both
parties.
Upon the occurrence of an Event of Default, in addition to any other
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rights or remedies which the Payee may then have hereunder, Payee or any
subsequent holder hereof may, at its option, (a) declare the entire unpaid
principal amount of and all accrued interest on this Note immediately due and
payable without notice, demand or presentment, all of which are hereby waived;
(b) reduce its claim to judgment; (c) apply by appropriate judicial proceedings
for the appointment of a receiver for Maker; or (d) take such other and further
action as Payee or any subsequent holder deems appropriate, it being expressly
understood that Payee's remedies are not mutually exclusive and the exercise of
one or more rights or remedies shall not prejudice or impair the current or
subsequent exercise of any other rights or remedies by Payee or any subsequent
holder hereof. All rights, powers and interests held whole or in part, as such
time and upon such terms as Payee shall deem advisable. Acceptance by the Payee
on this Note of any payment hereunder which is less than the payment in full of
all amounts then due and payable at the time of such payment shall not
constitute a waiver of the right to exercise the foregoing remedies at that
time or to nullify any prior exercise of such remedies.
Attorney's Fees. If this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings at law or
in equity of in bankruptcy, receivership or other court proceedings, Maker
agrees to pay all costs of collection including, but not limited to, court
costs and reasonable attorneys fees.
Legal Interest Limitations. Regardless of any provision contained
herein or in any other document executed in connection herewith, the holder
hereof shall never be entitled to receive, collect or apply as interest hereon
any amount in excess of the interest that Payee is allowed to contract for,
charge, take, reserve or receive, under the applicable laws of the State of
Texas or the United States of America (whichever from time to time permits the
highest rate)
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after taking into account, to the extent required by applicable law, and all
relevant payments or charges hereunder, or under any other document or
instrument executed and delivered in connection herewith and the indebtedness
and evidenced hereby (hereinafter referred to as "Maximum Rate"), and in the
event the holder hereof ever receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall be deemed a partial
prepayment of principal and treated hereunder as such; and, if the principal
hereof is paid in full, any remaining excess shall be forthwith paid to Maker.
If any construction of this Note or any other document executed in connection
herewith indicates a different right given to Payee or any holder hereof to ask
for, demand or receive any larger sum as interest, such is a mistake in
calculation or wording, which this clause shall override and control, it being
the intention of the parties that this Note and all other documents executed in
connection herewith shall in all things comply with applicable law and proper
adjustment shall automatically be made accordingly. In determining whether or
not the interest paid or payable under any specific contingency exceeds the
Maximum Rate, the Maker and the holder hereof shall, to the maximum extent
permitted by law, (a) characterize any non-principal payment as an expense, fee
or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term
hereof, provided that if the principal is paid in full or becomes due and
payable prior to the end of the entire contemplated term hereof, and if the
interest received for the actual term hereof exceeds the Maximum Rate, the
holder hereof shall either credit the excess against the principal hereof or
refund the excess to the Maker. To the extent that otherwise applicable state
law is preempted by a federal law which does not limit the rate of interest
which may be charged, this paragraph shall be inapplicable. The provisions of
this paragraph shall control all other provisions hereof and of all agreements,
whether now or hereafter existing and whether written or oral, between the
Maker and the Payee or between the Payee and any other
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person liable hereon. In connection with this paragraph, Maker acknowledges and
represents to Payee that the proceeds of the loan evidenced hereby are and
shall be used solely for a business purpose.
Waivers. Except as otherwise provided herein, the Maker and all
guarantors, sureties and endorses of this Note severally waive demand,
presentment, notice of dishonor, notice of intent diligence in collecting,
grace notice of protest, any and all other notices of any kind, and agree to
one or more extensions for the period or periods of time and partial payments,
before or after maturity, without prejudice to the holder and consent to all
renewals and extensions which, from time to time, may be granted by the holder
hereof and all partial payments hereon, whether before or after maturity.
Severability. In the event any one or more of the provisions contained
in this Note shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Note shall be construed
as if such invalid, illegal or unenforceable provision had never been included
herein.
Successors and Assigns. This Note and the covenants, promises and
agreements contained herein shall be binding upon and inure to the benefit of
the respective legal representatives, personal representatives, successors and
assigns of the Maker and Payee hereof.
This Note is being executed and delivered in Dallas, Dallas County,
Texas, and shall be construed and enforced in accordance with, and be governed
by, the laws of the State of Texas, except insofar as the laws of the United
States of America shall have application.
The records of Payee or any holder of this Note shall be prima facie
evidence of the amount owing under this Note.
AWEC DEVELOPMENT CORPORATION
/s/ David R. Paes
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EXHIBIT 10.15
Guaranty, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc.
GUARANTY
FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted to
AWEC Development Corporation, an Arkansas corporation (herein called
"Borrower"), pursuant to that certain Agreement for Refinance of Secured Note
effective September 11, 1995 (herein, together thereto, called the "Agreement")
between Borrower and Century Realty, Inc. (herein called "Lender") and the
undersigned, the undersigned (jointly and severally if more than one) hereby
unconditionally guarantee(s) the performance by Borrower under the Agreement
and the full and prompt payment when due, whether by acceleration or otherwise,
and at all times thereafter, of all of the "Guaranteed Indebtedness" (as that
term is defined below),and the undersigned further agree(s) to pay all expenses
(including attorneys' fees and legal expenses) paid or incurred by Lender in
endeavoring to obtain the required performance under the Agreement or to
collect the Guaranteed Indebtedness, or any part thereof, and in enforcing this
Guaranty. Terms utilized in this Guaranty which are defined in the Agreement
and not otherwise re-defined herein are used herein as therein defined. The
term "Guaranteed Indebtedness" means all interest, penalties, expenses and fees
(specifically including, but not limited to, attorneys' fees) or otherwise with
respect to any and all indebtedness or other liability of Borrower to Lender,
plus the principal amount of all indebtedness or other liability, fixed or
contingent, including, but not limited to, the interest and principal arising
by the Agreement, the Refinancing Note dated September 11,
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1995, payable to the order of Lender executed by Borrower in the original
principal amount of $1,400,000.00 and that certain Tract I Note dated September
11, 1995, payable to the order of Lender executed by Borrower in the original
principal amount of $350,000.00 (both of which are referred to as the "Notes")
which Borrower may now or at any time hereafter owe to Lender. The right of
recovery against the undersigned under this Guaranty is, however, not limited
to the amount of principal and interest outstanding from time to time under the
Notes, plus interest from demand on such amount, plus all expenses of enforcing
this Guaranty but is, instead, unlimited.
Each of the undersigned agrees that, in the event of the filing for
dissolution or insolvency of the undersigned, or the inability of the Borrower
or the undersigned to pay debts as they mature, or an assignment by the
Borrower or the undersigned for that benefit of creditor, or the institution of
any proceeding by or against the Borrower or the undersigned alleging that the
Borrower or the undersigned, as the case may be, is insolvent or unable to pay
debts as they mature, and if such event shall occur at a time when any of the
Guaranteed Indebtedness may not then be due and payable, the undersigned will
pay to the Lender forthwith the full amount which would be payable hereunder by
the undersigned if all Guaranteed Indebtedness was then due and payable.
To secure all obligations of the undersigned hereunder, the Lender
shall have a lien upon and security interest in any and all property of every
kind or description of or in the name of the undersigned now or hereafter, for
any reason or purpose whatsoever, in the possession or control of, or in the
transit to, the Lender or any agent or bailee for the undersigned.
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This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the dissolution or insolvency of any of
the undersigned or that at any time or from time to time all Guaranteed
Indebtedness may have been paid in full), subject to discontinuance as to the
undersigned only upon (a) payment in full of all of the Guaranteed Indebtedness
and (b) the receipt by Lender of a written notice by the undersigned addressed
to the Lender that the undersigned will not be liable hereunder for any
indebtedness or other liability of the Borrower incurred after the receipt of
such notice by Lender; provided, however, that no such notice or discontinuance
shall affect or impair any of the agreements and obligations of the undersigned
hereunder with respect to any and all Guaranteed Indebtedness which existed
prior to the time of occurrence of all of (a) and (b) preceding.
The undersigned further agrees that if at any time all or any part of
any payment heretofore applied by the Lender to any of the Guaranteed
Indebtedness is or must be rescinded or returned by Lender for any reason
whatsoever (including, without limitation, the insolvency or bankruptcy of the
Borrower), such Guaranteed Indebtedness shall, for the purpose of this
Guaranty, to the extent that such payment is or must be rescinded or returned,
be deemed to have been continued in existence, notwithstanding such application
by the Lender, and this Guaranty shall continue to be effective or be
reinstated, as the case may be, as to such Guaranteed Indebtedness, all as
though such application by Lender had not been made.
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Lender may, from time to time, at his sole discretion and without
notice to the undersigned (or any of them) take any and all of the following
actions:
(a) Retain or obtain a security interest in any property to secure any
of the Guaranteed Indebtedness or any obligation hereunder;
(b) Retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to the undersigned, with respect to any of the
Guaranteed Indebtedness;
(c) Extend or renew for one or more periods (whether or not longer
than the original period), alter or exchange any of the Guaranteed
Indebtedness, or release or compromise any obligation of the undersigned
hereunder or any obligation of any nature or any other obligor with respect to
any of the Guaranteed Indebtedness;
(d) Release any security interest in, or surrender, release or permit
any substitution or exchange for, all or any part of any property securing any
of the Guaranteed Indebtedness or any obligation hereunder, or extend or renew
for one or more periods (whether or not longer than the original period) or
release, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and
(e) Resort to the undersigned (or any of them) for the payment of any
of the Guaranteed Indebtedness, whether or not Lender shall have resorted to
any property securing any of the Guaranteed Indebtedness or any obligation
hereunder or shall have
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proceeded against any other obligor primarily or secondarily obtained with
respect to any of the Guaranteed Indebtedness.
Any amounts received by Lender from whatever source on account of the
Guaranteed Indebtedness may be applied by Lender toward the payment of such of
the Guaranteed Indebtedness, and in such order of application, as the Lender
may, from time to time, elect; and, notwithstanding any payments made by or for
the account of the undersigned pursuant to this Guaranty, the undersigned shall
not be subrogated to any rights of the Lender until such time as this Guaranty
shall have been discontinued as to all of the undersigned and the Lender shall
have received payment of the full amount of all Guaranteed Indebtedness and of
all obligations of the undersigned hereunder.
The undersigned hereby expressly waive(s):
(i) Notice of the acceptance by Lender of this Guaranty;
(ii) Notice of the existence or creation or non- payment of all or any
of the Guaranteed Indebtedness;
(iii) Presentment, demand, notice of dishonor, protest, and all of the
notices whatsoever;
(iv) All diligence in collection or protection of or realization upon
the Guaranteed Indebtedness or any part thereof, any obligation hereunder, or
any security for or guaranty of any of the foregoing; and
(v) All rights of the undersigned under Chapter 34 of the Texas
Business and Commerce Code, except the undersigned reserves the right under any
judgment pursuant to Section 34.04 thereof.
The creation or existence from time to time of Guaranteed Indebtedness
in excess of the amount existing on the date of execution of this Guaranty or
thereafter and in excess of the amount to which the right of recovery under
this Guaranty is limited, if any, is hereby authorized, without notice to the
undersigned (or any of them), and shall in no way affect or impair the rights
of Lender and the obligation of the undersigned under this Guaranty.
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<PAGE> 6
Lender may, from time to time, whether before or after any particular
event, without notice to the undersigned (or any of them), assign or transfer
any or all of the Guaranteed Indebtedness or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Indebtedness shall be remain Guaranteed
Indebtedness for the purposes of this Guaranty, and each and every immediate
and successive assignee or transferee of any of the Guaranteed Indebtedness, or
any part thereof, or of any interest therein shall, to the extent of the
interest of such assignee or transferee in the Guaranteed Indebtedness, be
entitled to the benefits of this Guaranty to the same extent as if such
assignee or transferee were the Lender; provided, however, that, unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to
enforce this Guaranty, for the benefit of the Lender, as to those of the
Guaranteed Indebtedness which the Lender has not assigned or transferred.
No delay on the part of the Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Lender of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall any
modification or waiver or amendment of any of the provisions of this Guaranty
be binding upon the Lender except as expressly set forth in writing duly signed
and delivered on behalf of the Lender. No action of the Lender permitted
hereunder or permitted under or in connection with the Agreement shall in any
way affect or impair the rights of the Lender and the obligation of the
undersigned under this Guaranty. For purposes of this Guaranty, the Guaranteed
Indebtedness shall also include all obligations of the Borrower to the Lender
notwithstanding any right or power of the Borrower or anyone else to assert any
claim or defense as to the invalidity or unenforceability of any such
obligation, and no such claim or defense shall affect or impair the obligations
of the undersigned hereunder.
This Guaranty shall be binding upon the undersigned, and upon the
heirs, legal representatives, successors and assigns of the undersigned and to
the extent that the Borrower or any of the undersigned is either a
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<PAGE> 7
partnership or corporation, all references herein to the Borrower and to the
undersigned, respectively, shall be deemed to include any successor or
successors, whether immediate or remote, to such partnership or corporation. If
more than one party shall execute this Guaranty, the term "undersigned" as used
herein shall mean all parties executing this Guaranty and each of them and all
such parties shall be jointly and severally liable and obligated hereunder.
This Guaranty has been executed and delivered at Dallas, Dallas
County, Texas, and shall be construed in accordance with and governed by the
laws of the State of Texas, except insofar as the laws of the United States of
America have application. The undersigned hereby submits to the jurisdiction of
the state and federal courts located in Texas. Wherever possible, each
provision of this Guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Guaranty.
EXECUTED AND DELIVERED at Dallas, Dallas County, Texas, on and as of
September 11, 1995.
AWEC RESOURCES, INC., a New York corporation
/s/ David R. Paes, Vice President
ADDRESS AND TELEPHONE NUMBER:
25550 Hawthorne Boulevard
Suite 108
Torrance, CA 90505
(310) 375-2266
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<PAGE> 1
EXHIBIT 10.16
Stock Option Agreement, dated September 11, 1995, between Century
Realty, Inc., and AWEC Development Corporation.
STOCK OPTION AGREEMENT
AGREEMENT, dated this 11 day of September, 1995, between CENTURY
REALTY, INC., a Texas corporation (referred to herein as "CENTURY") and AWEC
Development Corporation, an Arkansas corporation, or its assigns ("ADC").
PREMISES:
CENTURY desires to grants ADC an option to purchase up to Seven
Hundred Thousand (700,000) shares of common stock of ARI, which equals ten
percent (10%) of all of the issued and outstanding shares of ARI, upon the
terms and conditions set forth herein.
This Stock Option Agreement is executed by CENTURY as a requirement of
that Agreement For Purchase and Sale of Secured Note, dated September n , 1995,
between CENlUKY, AWEC Development Corporation and ARI concerning the
acquisition by ARI from CENTURY of a note (the "Note") dated February 15, 1994
executed by AWEC Development Corporation payable to the order of CENTURY in the
original stated principal sum of $6,737,000.00
NOW THEREFORE, in consideration of the premises and the promises and
covenants stated herein, the parties hereto mutually agree as follows:
1. Grant of the Option. In consideration of Ten Dollars and No/100
($10.00) and other good and valuable consideration paid by ADC, CENTURY hereby
grants ADC an option (the "Option") to purchase all or any portion of Seven
Hundred Thousand (700,000) shares of ARI owned by CENTURY (the "Optioned
Shares") for a period of Twenty-Four (24) months from the date hereof (the
"Option Period"), subject to the conditions set forth herein. The Option shall
be exercisable at any time and from time to time during the Option Period by a
written notice of exercise of the Option delivered by ADC to CENTURY, as
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<PAGE> 2
provided in Section 10 hereof.
2. Purchase Price. In the event that ADC exercises the Option, the
purchase price (the "Purchaser Price") for each of the Optioned Shares shall be
an amount equal to the sum of Five Dollars ($5.00). The Purchase Price shall be
payable in cash at any Closing, as defined in Section 4 herein.
3. Restriction. CENTURY hereby acknowledges and agrees that the
Optioned Shares shall be subject to the Option during the term of the Option,
regardless of the identity of the holder thereof, and that any sale, gift or
other transfer shall be subject to the Option. CENTURY hereby further
acknowledges and agrees that any certificate issued representing any of the
Optioned Shares, shall bear the following restrictive legend:
RESTRICTION ON TRANSFER OF STOCK
"The sale, transfer or assignment of the stock evidenced by this
certificate is subject to that certain Option Agreement, dated September 2,
1995, between AWEC Development Corporation, and any holder of the stock
evidenced by this certificate shall take subject thereto. Any transfer contrary
to such restriction is VOID."
4. Closing. Each closing (the "Closing") of the sale and purchase of
any of the Optioned Shares shall take place at the offices of Hardin & Grace, a
Professional Association, 410 W. Third, Suite 200, Little Rock, Arkansas within
ten (10) days after the exercise of an Option (the "Closing Date") or at such
time and location as the parties shall mutually agree.
5. Waiver. Any of the terms or conditions of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, but
only by a written notice signed by such party.
6. Amendment to Agreement. This Agreement may be amended,
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<PAGE> 3
supplemented or interpreted at any time only by written instrument duly
executed by CENTURY and ADC.
7. Counterparts. This Agreement may be executed in two or more
counterparts each of which may be deemed an original, and any person may become
a party thereto be executing a counterpart hereof, but all such counterparts
together shall be deemed to be one in the same instrument.
8. Contents of Agreement and Binding Effect. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this Agreement.
9. Restriction on Assignment. The sale, transfer or assignment of this
Option is prohibited without registration of the same under the Securities Act
of 1933 and such Blue Sky Laws as might be applicable or obtaining a prior
opinion of counsel for either CENTURY or ADC that such is not then necessary.
Any transfer contrary to such restriction is VOID.
10. Notices. All notices, consents, waivers or other communications
which are required to or permitted hereunder shall be considered sufficient if
given in writing and delivered personally or by certified mail, return receipt
requested, postage prepaid to the last known address of the addressee. All such
notices shall be deemed to have been given on the date delivered or mailed in
the manner above.
11. The Governing Law. This Agreement shall be construed and
interpreted in accordance with the law of the State of Arkansas.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement, effective as of the date first written above.
CENTURY REALTY, INC.
BY: /s/ Bruce Endendyke
TITLE: Sr. Vice President
AWEC DEVELOPMENT CORPORATION
BY: /s/ David Paes
TITLE: Vice President
E-202
<PAGE> 4
BY:
TITLE:
E-203
<PAGE> 1
EXHIBIT 10.17
Release Deed, dated September 9, 1995, between Century Realty, Inc.
and AWEC Development Corporation
RELEASE DEED
KNOW ALL MEN BY THESE PRESENTS:
That Century Realty, Inc., a corporation organized under the laws of
the State of Texas, hereby acknowledges full payment and satisfaction of the
debt and obligation secured by a real estate Mortgage, dated the 15th day of
February, 1994, and executed by AWEC Development Corporation, in the principal
sum of $6,737,000.00, upon the following described lands situated in the County
of Pulaski, State of Arkansas:
All that land described on Exhibit "A" affixed hereto and by
this reference made a part hereof ("Mortgage Assets").
Said Mortgage is recorded in the office of the Recorder and Clerk of
the Circuit Court of said County as Instrument No. 90-12806. Said Mortgage is
hereby released and discharged of record.
IN WITNESS WHEREOF, Century Realty, Inc., by its President, duly
authorized by Resolution of its Board of Directors, has hereunto signed its
corporate name on this 9th day of September, 1995.
CENTURY REALTY, INC.
/s/ Bruce A. Endendyk
---------------------
Bruce A. Endendyk, President
E-204
<PAGE> 2
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF DALLAS )
On this 9th day of September, 1995, before me Nancy A. Arnett, the
undersigned Notary Public, personally appeared, Bruce A. Endendyk, who
acknowledged himself to be the President of Century Realty, Inc., a
corporation, and that he as such officer, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the
name of the corporation by himself as President.
IN WITNESS WHEREOF, I have hereunto set by hand and official seal.
My Commission Expires:
5/2/96 /s/ Nancy A. Arnett
- - ------------------------------ -------------------------------
(SEAL) NOTARY PUBLIC
(NOTARY PUBLIC STATE OF TEXAS)
NOTARY SEAL OF
NANCY A. ARNETT
NOTARY PUBLIC
STATE OF TEXAS
My Comm. Exp. 06-02-96
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<PAGE> 3
"EXHIBIT A"
"MORTGAGE ASSETS"
94 12806
TRACT 3:
TRACTS D-1, D-2 and D-3, BEING A REPLAT OF TRACT D, MAUMELLE TOWN CENTER
ADDITION TO THE CITY OF MAUMELLE, PULASKI COUNTY, ARKANSAS.
AND
TRACTS E, AND I, MAUMELLE TOWN CENTER ADDITION TO THE CITY OF MAUMELLE, PULASKI
COUNTY, ARKANSAS.
TRACT 4:
TRACT NO. 1, SINGLE-FAMILY ATTACHED ADDITION TO THE CITY OF MAUMELLE, PULASKI
COUNTY, ARKANSAS.
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<PAGE> 4
TRACT 17:
LANDS LYING IN THE SOUTHEAST QUARTER OF SECTION 20, AND THE EAST 1/2 OF SECTION
29, AND THE NORTHWEST QUARTER OF SECTION 28, ALL IN TOWNSHIP 3 NORTH, RANGE 13
WEST, PULASKI COUNTY, ARKANSAS, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29, ARKANSAS STATE PLANE
COORDINATES OF NORTH 191,207.530, EAST 1,877,569.419; THENCE NORTH 731.17 FEET;
THENCE WEST 1368.79 FEET TO THE POINT OF BEGINNING, SAID POINT OF BEGINNING
BEING ON THE EAST RIGHT OF WAY LINE OF MILLWOOD CIRCLE; THENCE ALONG THE SAID
EAST RIGHT OF WAY LINE NORTH 09 DEGREES 43 MINUTES 47 SECONDS WEST 249.96 FEET;
THENCE LEAVING THE SAID EAST RIGHT OF WAY LINE SOUTH 80 DEGREES 30 MINUTES 00
SECONDS WEST 80.00 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE OF MILLWOOD
CIRCLE; THENCE ALONG THE SAID WEST RIGHT OF WAY LINE ALONG THE FOLLOWING
BEARINGS AND DISTANCES: ALONG A 4.1826 DEGREE CURVE TO THE LEFT A DISTANCE OF
385.93 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF NORTH
17 DEGREES 25 MINUTES 08 SECONDS WEST 384.65 FEET; THENCE NORTH 25 DEGREES 38
MINUTES 53 SECONDS WEST 441.69 FEET; THENCE ALONG A 5.7104 DEGREE CURVE TO THE
RIGHT A DISTANCE OF 1492.75 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING
AND DISTANCE OF NORTH 16 DEGREES 58 MINUTES 23 SECONDS EAST 1358.84 FEET TO A
POINT ON THE WEST RIGHT OF WAY LINE OF NAYLOR DRIVE; THENCE LEAVING SAID WEST
RIGHT OF WAY ON NAYLOR DRIVE AND CONTINUING ALONG SAID WEST RIGHT OF WAY LINE
OF MILLWOOD CIRCLE ALONG A 5.7104 DEGREE CURVE TO THE RIGHT A DISTANCE OF
110.04 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF NORTH
62 DEGREES 44 MINUTES 12 SECONDS EAST 109.99 FEET TO A POINT ON THE EAST RIGHT
OF WAY LINE OF NAYLOR DRIVE; THENCE LEAVING THE SAID WEST RIGHT OF WAY LINE OF
MILLWOOD CIRCLE AND CONTINUING ALONG THE SAID EAST RIGHT OF WAY LINE OF NAYLOR
DRIVE ALONG THE FOLLOWING BEARINGS AND DISTANCES: NORTH 70 DEGREES 07 MINUTES
34 SECONDS WEST 35.54 FEET; THENCE NORTH 25 DEGREES 25 MINUTES 11 SECONDS WEST
58.77 FEET; THENCE ALONG A 5.4816 DEGREE CURVE TO THE LEFT A DISTANCE OF 406.61
FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF NORTH 36
DEGREES 33 MINUTES 51 SECONDS WEST 404.05 FEET; THENCE NORTH 47 DEGREES 42
MINUTES 31 SECONDS WEST 642.29 FEET; THENCE ALONG A 6.4508 DEGREE CURVE TO THE
RIGHT A DISTANCE OF 472.22 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING
AND DISTANCE OF NORTH 32 DEGREES 28 MINUTES 10 SECONDS WEST 466.68 FEET; THENCE
NORTH 17 DEGREES 14 MINUTES 48 SECONDS WEST 251.54 FEET; THENCE ALONG A 5.3544
DEGREE CURVE TO THE LEFT A DISTANCE OF 383.83 FEET TO A POINT TO WHICH THERE IS
A CHORD BEARING AND DISTANCE OF NORTH 27 DEGREES 31 MINUTES 22 SECONDS WEST
381.78 FEET; THENCE NORTH 05 DEGREES 12 MINUTES 00 SECONDS EAST 57.67 FEET TO A
POINT ON THE SOUTH RIGHT OF WAY LINE OF ODOM BOULEVARD; THENCE LEAVING THE SAID
EAST RIGHT OF WAY LINE OF NAYLOR DRIVE AND CONTINUING ALONG THE SAID SOUTH
RIGHT OF WAY LINE OF ODOM BOULEVARD ALONG THE FOLLOWING BEARINGS AND DISTANCES:
ALONG A 4.5559 DEGREE CURVE TO
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<PAGE> 5
THE LEFT A DISTANCE OF 317.64 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING
AND DISTANCE OF NORTH 40 DEGREES 55 MINUTES 33 SECONDS EAST 316.80 FEET; THENCE
NORTH 33 DEGREES 41 MINUTES 24 SECONDS EAST 950.00 FEET; THENCE ALONG A 7.6385
DEGREE CURVE TO THE RIGHT A DISTANCE OF 449.06 FEET TO A POINT TO WHICH THERE
IS A CHORD BEARING AND DISTANCE OF NORTH 50 DEGREES 50 MINUTES 27 SECONDS EAST
442.38 FEET; THENCE NORTH 67 DEGREES 59 MINUTES 30 SECONDS EAST 396.69 FEET;
THENCE ALONG A 5.8490 DEGREE CURVE TO THE RIGHT A DISTANCE OF 372.36 FEET TO A
POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF NORTH 78 DEGREES 52
MINUTES 52 SECONDS EAST 370.13 FEET; THENCE NORTH 89 DEGREES 46 MINUTES 15
SECONDS EAST 546.46 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE OF WOODLAND
DRIVE; THENCE LEAVING THE SAID SOUTH RIGHT OF WAY LINE OF ODOM BOULEVARD AND
RUNNING ALONG THE SAID WEST RIGHT OF WAY LINE OF WOODLAND DRIVE ALONG THE
FOLLOWING BEARINGS AND DISTANCES: SOUTH 43 DEGREES 15 MINUTES 22 SECONDS EAST
38.83 FEET; THENCE SOUTH 03 DEGREES 45 MINUTES 34 SECONDS EAST 38.74 FEET;
THENCE SOUTH 07 DEGREES 25 MINUTES 38 SECONDS EAST 159.60 FEET TO A POINT ON
THE WEST BOUNDARY LINE OF STONELEDGE ADDITION TO THE CITY OF MAUMELLE; THENCE
LEAVING THE SAID WEST RIGHT OF WAY LINE OF WOODLAND DRIVE AND CONTINUING ALONG
THE SAID WEST BOUNDARY LINE ALONG THE FOLLOWING BEARINGS AND DISTANCES: SOUTH
76 DEGREES 48 MINUTES 04 SECONDS WEST 148.03 FEET; THENCE SOUTH 77 DEGREES 55
MINUTES 02 SECONDS WEST 130.60 FEET; THENCE SOUTH 65 DEGREES 17 MINUTES 48
SECONDS WEST 208.10 FEET; THENCE SOUTH 45 DEGREES 44 MINUTES 39 SECONDS WEST
222.00 FEET; THENCE SOUTH 30 DEGREES 13 MINUTES 44 SECONDS WEST 196.70 FEET;
THENCE SOUTH 09 DEGREES 48 MINUTES 23 SECONDS WEST 199.90 FEET; THENCE SOUTH 03
DEGREES 29 MINUTES 20 SECONDS EAST 294.60 FEET; THENCE NORTH 59 DEGREES 09
MINUTES 49 SECONDS WEST 138.60 FEET; THENCE SOUTH 73 DEGREES 24 MINUTES 08
SECONDS WEST 188.90 FEET; THENCE SOUTH 03 DEGREES 10 MINUTES 42 SECONDS WEST
199.30 FEET; THENCE SOUTH 46 DEGREES 20 MINUTES 34 SECONDS EAST 149.20 FEET;
THENCE SOUTH 58 DEGREES 03 MINUTES 51 SECONDS EAST 209.30 FEET; THENCE SOUTH 16
DEGREES 57 MINUTES 21 SECONDS EAST 237.70 FEET; THENCE SOUTH 03 DEGREES 45
MINUTES 14 SECONDS EAST 244.50 FEET; THENCE SOUTH 17 DEGREES 40 MINUTES 36
SECONDS EAST 118.60 FEET; THENCE SOUTH 27 DEGREES 52 MINUTES 27 SECONDS EAST
117.60 FEET; THENCE SOUTH 05 DEGREES 44 MINUTES 56 SECONDS WEST 139.70 FEET;
THENCE SOUTH 50 DEGREES 11 MINUTES 47 SECONDS EAST 249.90 FEET; THENCE NORTH 87
DEGREES 02 MINUTES 12 SECONDS EAST 232.30 FEET; THENCE SOUTH 74 DEGREES 40
MINUTES 08 SECONDS EAST 257.20 FEET; THENCE SOUTH 80 DEGREES 56 MINUTES 51
SECONDS EAST 254.20 FEET; THENCE SOUTH 84 DEGREES 54 MINUTES 44 SECONDS EAST
248.00 FEET; THENCE NORTH 88 DEGREES 42 MINUTES 02 SECONDS EAST 265.10 FEET;
THENCE NORTH 77 DEGREES 50 MINUTES 46 SECONDS EAST 431.28 FEET TO A POINT ON
THE WEST RIGHT OF WAY LINE OF WOODLAND DRIVE; THENCE LEAVING THE SAID WEST
BOUNDARY LINE AND CONTINUING ALONG THE SAID WEST RIGHT OF WAY LINE ALONG THE
FOLLOWING BEARINGS AND DISTANCES: ALONG A 11.6219 DEGREE CURVE TO THE RIGHT A
DISTANCE OF 177.95 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND
DISTANCE OF SOUTH 10 DEGREES 13 MINUTES 56 SECONDS WEST
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<PAGE> 6
176.99 FEET; THENCE SOUTH 19 DEGREES 45 MINUTES 16 SECONDS WEST 67.84 FEET;
THENCE ALONG A 21.8687 DEGREE CURVE TO THE LEFT A DISTANCE OF 244.93 FEET TO A
POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF SOUTH 07 DEGREES 01
MINUTES 42 SECONDS EAST 236.10 FEET; THENCE SOUTH 33 DEGREES 48 MINUTES 35
SECONDS EAST 31.88 FEET; THENCE SOUTH 09 DEGREES 40 MINUTES 59 SECONDS WEST
36.27 FEET TO A POINT ON THE NORTH RIGHT OF WAY LINE OF EDGEWOOD DRIVE; THENCE
ALONG THE SAID NORTH RIGHT OF WAY LINE ALONG A 7.0288 DEGREE CURVE TO THE LEFT
A DISTANCE OF 186.98 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND
DISTANCE OF SOUTH 45 DEGREES 43 MINUTES 34 SECONDS WEST 186.58 FEET TO A POINT
ON THE NORTH BOUNDARY LINE OF WINDWOOD ADDITION TO THE CITY OF MAUMELLE; THENCE
LEAVING THE SAID NORTH RIGHT OF WAY LINE AND CONTINUING ALONG THE SAID NORTH
BOUNDARY LINE NORTH 70 DEGREES 49 MINUTES 40 SECONDS WEST 353.98 FEET TO A
POINT ON THE WEST BOUNDARY LINE OF SAID WINDWOOD ADDITION; THENCE LEAVING THE
SAID NORTH BOUNDARY LINE AND CONTINUING ALONG THE SAID WEST BOUNDARY LINE ALONG
THE FOLLOWING BEARINGS AND DISTANCES: SOUTH 06 DEGREES 51 MINUTES 39 SECONDS
WEST 248.36 FEET; THENCE ALONG A 10.8870 DEGREE CURVE TO THE LEFT A DISTANCE OF
14.00 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF SOUTH
43 DEGREES 10 MINUTES 59 SECONDS WEST 14.00 FEET; THENCE SOUTH 09 DEGREES 38
MINUTES 05 SECONDS WEST 76.13 FEET; THENCE SOUTH 12 DEGREES 40 MINUTES 13
SECONDS WEST 128.22 FEET; THENCE LEAVING THE SAID WEST BOUNDARY LINE NORTH 61
DEGREES 20 MINUTES 34 SECONDS WEST 220.00 FEET; THENCE NORTH 88 DEGREES 48
MINUTES 07 SECONDS WEST 144.03 FEET; THENCE NORTH 67 DEGREES 31 MINUTES 14
SECONDS WEST 139.53 FEET THENCE SOUTH 24 DEGREES 49 MINUTES 11 SECONDS WEST
111.80 FEET; THENCE NORTH 81 DEGREES 52 MINUTES 46 SECONDS WEST 147.62 FEET;
THENCE NORTH 68 DEGREES 56 MINUTES 33 SECONDS WEST 241.00 FEET TO A POINT ON
THE NORTH RIGHT OF WAY LINE OF MILLWOOD CIRCLE; THENCE LEAVING THE SAID NORTH
RIGHT OF WAY LINE SOUTH 22 DEGREES 51 MINUTES 46 SECONDS WEST 80.03 FEET TO A
POINT ON THE SOUTH RIGHT OF WAY LINE OF MILLWOOD CIRCLE; SAID POINT ALSO BEING
ON THE WEST BOUNDARY LINE OF LEISUREWOOD ADDITION TO THE CITY OF MAUMELLE;
THENCE LEAVING THE SAID SOUTH RIGHT OF WAY LINE AND CONTINUING ALONG THE SAID
WEST BOUNDARY LINE ALONG THE FOLLOWING BEARINGS AND DISTANCES: SOUTH 25
DEGREES 45 MINUTES 19 SECONDS WEST 258.94 FEET; THENCE SOUTH 14 DEGREES 43
MINUTES 09 SECONDS WEST 244.01 FEET; THENCE SOUTH 19 DEGREES 42 MINUTES 42
SECONDS EAST 198.64 FEET; THENCE SOUTH 62 DEGREES 07 MINUTES 18 SECONDS EAST
156.12 FEET; THENCE SOUTH 36 DEGREES 54 MINUTES 30 SECONDS EAST 355.00 FEET;
THENCE SOUTH 55 DEGREES 19 MINUTES 17 SECONDS WEST 105.43 FEET; THENCE SOUTH 05
DEGREES 22 MINUTES 21 SECONDS EAST 160.20 FEET; THENCE SOUTH 13 DEGREES 45
MINUTES 11 SECONDS EAST 147.22 FEET; THENCE SOUTH 25 DEGREES 24 MINUTES 28
SECONDS EAST 154.99 FEET; THENCE SOUTH 66 DEGREES 50 MINUTES 18 SECONDS EAST
89.52 FEET TO A POINT ON THE NORTH BOUNDARY LINE OF EDGEPARK ADDITION TO THE
CITY OF MAUMELLE; THENCE LEAVING THE SAID WEST BOUNDARY LINE AND CONTINUING
ALONG THE SAID NORTH BOUNDARY LINE ALONG THE FOLLOWING BEARINGS AND DISTANCES;
SOUTH 47 DEGREES 14 MINUTES 20 SECONDS
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WEST 77.54 FEET; THENCE SOUTH 47 DEGREES 28 MINUTES 21 SECONDS WEST 503.00
FEET; THENCE SOUTH 53 DEGREES 43 MINUTES 27 SECONDS WEST 193.15 FEET; THENCE
SOUTH 64 DEGREES 40 MINUTES 12 SECONDS WEST 140.85 FEET; THENCE SOUTH 80
DEGREES 09 MINUTES 18 SECONDS WEST 636.92 FEET TO THE POINT OF BEGINNING,
CONTAINING 196.522 ACRES MORE OR LESS.
LESS AND EXCEPT: GROUND STORAGE TANK SITE: PART OF THE FRACTIONAL SOUTHEAST
1/4, SECTION 29, TOWNSHIP 3 NORTH, RANGE 13 WEST, PULASKI COUNTY, ARKANSAS, AND
MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHEAST CORNER,
SECTION 29, TOWNSHIP 3 NORTH, RANGE 13 WEST, (ARKANSAS STATE PLANE
COORDINATE-NORTH ZONE-NORTH 191,207.530; EAST 1,877,569.419); RUN NORTH
2,043.885 FEET TO A POINT; THENCE WEST 1,299.176 FEET TO THE POINT OF
BEGINNING; THENCE RUN SOUTH 300 FEET TO A POINT; THENCE RUN EAST 300.000 FEET
TO A POINT; THENCE NORTH 300 FEET TO A POINT; THENCE RUN WEST 300 FEET TO THE
POINT OF BEGINNING.
TRACT 23:
LANDS LYING IN A FRACTIONAL PART OF SECTION 29 AND A PART OF THE EAST 1/2 OF
SECTION 30, AND A PART OF SECTION 32 AND A PART OF THE EAST 1/2 OF SECTION 31,
AND A PART OF THE SW 1/4 OF SECTION 31, ALL IN TOWNSHIP 3 NORTH, RANGE 13 WEST,
PULASKI COUNTY, ARKANSAS, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHWEST CORNER OF SAID SECTION 29 AND THE NORTHEAST CORNER
OF SAID SECTION 30, (ARKANSAS STATE PLANE COORDINATES OF, NORTH 196,663.3542
EAST 1,872,319.4376) BEING THE POINT OF BEGINNING; THENCE ALONG THE WEST LINE
OF SECTION 29, SOUTH 00 DEGREES 29 MINUTES 07 SECONDS WEST 130.00 FEET; THENCE
LEAVING THE SAID WEST SECTION LINE SOUTH 67 DEGREES 08 MINUTES 52 SECONDS EAST
227.52 FEET; THENCE SOUTH 87 DEGREES 58 MINUTES 13 SECONDS EAST 1,044.66 FEET;
THENCE NORTH 75 DEGREES 55 MINUTES 37 SECONDS EAST 378.36 FEET; THENCE SOUTH 89
DEGREES 11 MINUTES 35 SECONDS EAST 355.04 FEET; THENCE SOUTH 67 DEGREES 37
MINUTES 12 SECONDS EAST 147.08 FEET; THENCE SOUTH 50 DEGREES 41 MINUTES 28
SECONDS EAST 206.79 FEET; THENCE SOUTH 34 DEGREES 34 MINUTES 27 SECONDS EAST
257.35 FEET TO A POINT ON THE NORTH RIGHT OF WAY LINE OF ODOM BOULEVARD; THENCE
ALONG THE SAID NORTH RIGHT OF WAY LINE ALONG A 05 DEGREE 02 MINUTES 11 SECONDS
CURVE TO THE RIGHT A DISTANCE OF 221.86 FEET TO A POINT TO WHICH THERE IS A
CHORD BEARING AND DISTANCE OF SOUTH 65 DEGREES 02 MINUTES 41 SECONDS WEST
221.51 FEET; THENCE CONTINUING ALONG THE SAID NORTH RIGHT OF WAY LINE SOUTH 70
DEGREES 37 MINUTES 41 SECONDS WEST 914.55 FEET; THENCE LEAVING THE SAID NORTH
RIGHT OF WAY LINE SOUTH 19 DEGREES 22 MINUTES 19 SECONDS EAST 120.00 FEET TO A
POINT ON THE SOUTH RIGHT OF WAY LINE OF ODOM BOULEVARD; THENCE ALONG THE SAID
SOUTH RIGHT OF WAY LINE NORTH 70 DEGREES 37 MINUTES 41 SECONDS EAST 914.55
FEET; THENCE CONTINUING ALONG THE SAID SOUTH RIGHT OF WAY LINE ALONG A 04
DEGREE 33 MINUTES 21 SECONDS CURVE TO THE LEFT A DISTANCE OF 353.13 FEET TO A
POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF NORTH 62 DEGREES 35
MINUTES 03 SECONDS
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<PAGE> 8
EAST 351.97 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE ON NAYLOR DRIVE;
THENCE LEAVING THE SAID SOUTH RIGHT OF WAY LINE AND CONTINUING ALONG THE SAID
WEST RIGHT OF WAY LINE ALONG THE FOLLOWING BEARINGS AND DISTANCES; SOUTH 82
DEGREES 31 MINUTES 09 SECONDS EAST 57.69 FEET; THENCE ALONG A 05 DEGREE 40
MINUTES 21 SECONDS CURVE TO THE RIGHT A DISTANCE OF 361.43 FEET TO A POINT TO
WHICH THERE IS A CHORD BEARING AND DISTANCE OF SOUTH 27 DEGREES 29 MINUTES 52
SECONDS EAST 359.50 FEET; THENCE SOUTH 17 DEGREES 14 MINUTES 48 SECONDS EAST
251.54 FEET; THENCE ALONG A 06 DEGREE 02 MINUTES 33 SECONDS CURVE TO THE LEFT A
DISTANCE OF 504.12 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND
DISTANCE OF SOUTH 32 DEGREES 28 MINUTES 40 SECONDS EAST 498.20 FEET; THENCE
SOUTH 47 DEGREES 42 MINUTES 31 SECONDS EAST 642.29 FEET; THENCE ALONG A 05
DEGREE 48 MINUTES 55 SECONDS CURVE TO THE RIGHT A DISTANCE OF 363.27 FEET TO A
POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF SOUTH 36 DEGREES 33
MINUTES 51 SECONDS EAST 380.86 FEET; THENCE SOUTH 25 DEGREES 25 MINUTES 11
SECONDS EAST 60.70 FEET; THENCE SOUTH 17 DEGREES 26 MINUTES 39 SECONDS WEST
36.65 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE OF MILLWOOD CIRCLE; THENCE
LEAVING THE SAID WEST RIGHT OF WAY LINE OF NAYLOR DRIVE AND CONTINUING ALONG
THE SAID WEST RIGHT OF WAY LINE OF MILLWOOD CIRCLE ALONG THE FOLLOWING BEARINGS
AND DISTANCES; ALONG A 05 DEGREE 42 MINUTES 37 SECONDS CURVE TO THE LEFT A
DISTANCE OF 1,492.75 FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND
DISTANCE OF SOUTH 16 DEGREES 58 MINUTES 23 SECONDS WEST 1,358.84 FEET; THENCE
SOUTH 25 DEGREES 38 MINUTES 53 SECONDS EAST 441.69 FEET; THENCE ALONG A 04
DEGREE 10 MINUTES 57 SECONDS CURVE TO THE RIGHT A DISTANCE OF 385.93 FEET TO A
POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF SOUTH 17 DEGREES 25
MINUTES 08 SECONDS EAST 384.65 FEET TO A POINT ON THE NORTH BOUNDARY LINE OF
PHASE II EDGEWATER ADDITION TO THE CITY OF MAUMELLE; THENCE LEAVING THE SAID
WEST RIGHT OF WAY LINE AND ALONG THE SAID NORTH BOUNDARY LINE ALONG THE
FOLLOWING BEARINGS AND DISTANCES; SOUTH 84 DEGREES 19 MINUTES 03 SECONDS WEST
170.31 FEET; THENCE NORTH 73 DEGREES 03 MINUTES 03 SECONDS WEST 1,097.68 FEET;
THENCE SOUTH 33 DEGREES 18 MINUTES 58 SECONDS WEST 254.89 FEET; THENCE SOUTH 45
DEGREES 41 MINUTES 45 SECONDS WEST 349.34 FEET; THENCE SOUTH 58 DEGREES 48
MINUTES 54 SECONDS WEST 399.77 FEET; THENCE NORTH 77 DEGREES 28 MINUTES 16
SECONDS WEST 156.73 FEET TO A POINT ON THE EAST RIGHT OF WAY LINE OF ODOM
BOULEVARD; THENCE LEAVING THE SAID NORTH BOUNDARY LINE AND ALONG THE SAID EAST
RIGHT OF WAY LINE SOUTH 11 DEGREES 59 MINUTES 41 SECONDS WEST 271.19 FEET;
THENCE LEAVING THE SAID EAST RIGHT OF WAY LINE NORTH 78 DEGREES 00 MINUTES 19
SECONDS WEST 120.00 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE OF ODOM
BOULEVARD; THENCE ALONG THE SAID WEST RIGHT OF WAY LINE SOUTH 11 DEGREES 59
MINUTES 41 SECONDS WEST 1,471.00 FEET; THENCE LEAVING THE SAID WEST RIGHT OF
WAY LINE SOUTH 46 DEGREES 02 MINUTES 26 SECONDS WEST 146.64 FEET; THENCE SOUTH
03 DEGREES 38 MINUTES 01 SECONDS WEST 392.67 FEET; THENCE ALONG AN 06 DEGREES
14 MINUTES 38 SECONDS CURVE TO THE LEFT A DISTANCE OF 197.28 FEET TO A POINT TO
WHICH THERE IS A CHORD BEARING AND
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<PAGE> 9
DISTANCE OF SOUTH 05 DEGREES 50 MINUTES 09 SECONDS WEST 196.00 FEET; THENCE
SOUTH 58 DEGREES 21 MINUTES 13 SECONDS WEST 743.36 FEET; THENCE SOUTH 51
DEGREES 19 MINUTES 44 SECONDS EAST 170.00 FEET; THENCE SOUTH 42 DEGREES 12
MINUTES 58 SECONDS EAST 334.86 FEET; THENCE SOUTH 18 DEGREES 38 MINUTES 28
SECONDS WEST 144.20 FEET; THENCE ALONG A 15 DEGREES 09 MINUTES 19 SECONDS CURVE
TO THE LEFT A DISTANCE OF 378.55 FEET TO A POINT TO WHICH THERE IS A CHORD
BEARING AND DISTANCE OF NORTH 79 DEGREES 57 MINUTES 23 SECONDS EAST 362.93
FEET; THENCE NORTH 51 DEGREES 16 MINUTES 17 SECONDS EAST 271.00 FEET; THENCE
ALONG A 143 DEGREE 14 MINUTES 22 SECONDS CURVE TO THE LEFT A DISTANCE OF 64.99
FEET TO A POINT TO WHICH THERE IS A CHORD BEARING AND DISTANCE OF NORTH 04
DEGREES 43 MINUTES 21 SECONDS EAST 58.08 FEET TO A POINT ON THE WEST RIGHT OF
WAY LINE OF ODOM BOULEVARD; THENCE ALONG THE SAID WEST RIGHT OF WAY LINE ALONG
THE FOLLOWING BEARINGS AND DISTANCES; ALONG A 06 DEGREE 25 MINUTES 08 SECONDS
CURVE TO THE LEFT A DISTANCE OF 404.65 FEET TO A POINT TO WHICH THERE IS A
CHORD BEARING AND DISTANCE OF SOUTH 54 DEGREES 48 MINUTES 50 SECONDS EAST
401.20 FEET; THENCE SOUTH 67 DEGREES 47 MINUTES 51 SECONDS EAST 110.02 FEET;
THENCE LEAVING THE SAID WEST RIGHT OF WAY LINE OF ODOM BOULEVARD SOUTH 34
DEGREES 10 MINUTES 36 SECONDS WEST 207.84 FEET; THENCE SOUTH 27 DEGREES 48
MINUTES 21 SECONDS WEST 800.00 FEET; THENCE SOUTH 64 DEGREES 10 MINUTES 59
SECONDS EAST 150.09 FEET; THENCE SOUTH 04 DEGREES 15 MINUTES 29 SECONDS WEST
339.65 FEET; THENCE SOUTH 67 DEGREES 04 MINUTES 18 SECONDS WEST 223.74 FEET;
THENCE SOUTH 23 DEGREES 56 MINUTES 24 SECONDS WEST 710.90 FEET; THENCE SOUTH 62
DEGREES 30 MINUTES 03 SECONDS EAST 493.10 FEET; THENCE SOUTH 49 DEGREES 19
MINUTES 45 SECONDS WEST 111.30 FEET; THENCE SOUTH 70 DEGREES 58 MINUTES 07
SECONDS WEST 645.93 FEET; THENCE NORTH 75 DEGREES 26 MINUTES 49 SECONDS WEST
1,291.05 FEET; THENCE NORTH 60 DEGREES 05 MINUTES 23 SECONDS WEST 578.01 FEET;
THENCE NORTH 57 DEGREES 43 MINUTES 01 SECONDS WEST 1,141.62 FEET; THENCE NORTH
48 DEGREES 41 MINUTES 18 SECONDS WEST 647.01 FEET; THENCE NORTH 45 DEGREES 44
MINUTES 57 SECONDS WEST 562.28 FEET; THENCE NORTH 80 DEGREES 20 MINUTES 39
SECONDS WEST 680.03 FEET; THENCE SOUTH 13 DEGREES 52 MINUTES 52 SECONDS EAST
1,233.39 FEET TO A POINT ON THE ORDINARY HIGH WATER LINE ON THE NORTH BANK OF
THE ARKANSAS RIVER; THENCE IN A NORTHWESTERN DIRECTION ALONG THE MEANDERS OF
THE SAID ORDINARY HIGH WATER WHICH IS APPROXIMATELY BY THE FOLLOWING BEARINGS
AND DISTANCES; NORTH 49 DEGREES 45 MINUTES 26 SECONDS WEST 94.11 FEET; THENCE
NORTH 39 DEGREES 48 MINUTES 54 SECONDS WEST 513.87 FEET; THENCE NORTH 46
DEGREES 03 MINUTES 02 SECONDS WEST 378.55 FEET; THENCE NORTH 40 DEGREES 44
MINUTES 17 SECONDS WEST 314.87 FEET; THENCE NORTH 53 DEGREES 34 MINUTES 17
SECONDS WEST 251.25 FEET; THENCE NORTH 70 DEGREES 12 MINUTES 54 SECONDS WEST
157.95 FEET; THENCE NORTH 43 DEGREES 17 MINUTES 10 SECONDS WEST 211.26 FEET;
THENCE NORTH 14 DEGREES 18 MINUTES 35 SECONDS WEST 273.34 FEET; THENCE NORTH 23
DEGREES 36 MINUTES 13 SECONDS WEST 223.69 FEET TO THE NORTH LINE OF THE SW 1/4
OF SECTION 31; THENCE LEAVING THE SAID ORDINARY HIGH WATER LINE ON THE NORTH
BANK OF THE ARKANSAS RIVER AND RUNNING ALONG THE SAID NORTH LINE SOUTH
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<PAGE> 10
88 DEGREES 23 MINUTES 40 SECONDS EAST 2,170.00 FEET TO THE CENTER OF SAID
SECTION 31; THENCE ALONG THE WEST LINE OF THE NE 1/4 OF SAID SECTION 31, NORTH
00 DEGREES 35 MINUTES 57 SECONDS EAST 1,307.43 FEET; THENCE CONTINUING ALONG
THE SAID WEST LINE NORTH 01 DEGREES 19 MINUTES 08 SECONDS EAST 1,324.38 FEET
TO THE SOUTHWEST CORNER OF THE SE 1/4 OF SECTION 30; THENCE ALONG THE WEST LINE
OF THE SE 1/4 OF SAID SECTION 30, NORTH 01 DEGREES 31 MINUTES 10 SECONDS EAST
2,665.85 FEET TO THE SOUTHWEST CORNER F THE NE 1/4 OF SAID SECTION 30; THENCE
CONTINUING ALONG THE WEST LINE OF THE NE 1/4 OF SAID SECTION 30 NORTH 00
DEGREES 29 MINUTES 24 SECONDS EAST 2,515.59 FEET; THENCE LEAVING THE SAID WEST
LINE SOUTH 88 DEGREES 39 MINUTES 35 SECONDS EAST 952.34 FEET; THENCE NORTH 35
DEGREES 38 MINUTES 05 SECONDS WEST 187.96 FEET TO THE NORTH LINE OF THE NE 1/4
OF SAID SECTION 30; THENCE ALONG THE SAID NORTH LINE SOUTH 88 DEGREES 39
MINUTES 35 SECONDS EAST 462.49 FEET; THENCE CONTINUING ALONG THE SAID NORTH
LINE SOUTH 88 DEGREES 39 MINUTES 40 SECONDS EAST 1,324.98 FEET TO THE POINT OF
BEGINNING CONTAINING 1,129.04 ACRES, MORE OR LESS.
LESS AND EXCEPT: WELL SITE NO. 3: PART OF THE FRACTIONAL SW 1/4 SECTION 31,
TOWNSHIP 3 NORTH, RANGE 13 WEST, PULASKI COUNTY, ARKANSAS AND MORE PARTICULARLY
DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 31
(ARKANSAS STATE PLANE COORDINATES OF NORTH 186,067.311, EAST 1,872,179.178);
THENCE NORTH 1,109.69 FEET; THENCE WEST 3,296.86 FEET TO THE POINT OF
BEGINNING; THENCE SOUTH 13 DEGREES 52 MINUTES 52 SECONDS EAST 103.01 FEET;
THENCE DUE WEST 39.30 FEET; THENCE DUE NORTH 100.00 FEET; THENCE DUE EAST 14.59
FEET TO THE POINT OF BEGINNING.
AND LESS AND EXCEPT: WELL SITE NO. 4: PART OF THE FRACTIONAL SW 1/4 SECTION
31, TOWNSHIP 3 NORTH, RANGE 13 WEST, PULASKI COUNTY, ARKANSAS AND MORE
PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHEAST CORNER OF
SECTION 31, TOWNSHIP 3 NORTH, RANGE 13 WEST; (ARKANSAS STATE PLANE
COORDINATES-NORTH ZONE-NORTH 186,067.311, EAST 1,872,179.178) RUN NORTH
2,296.086 FEET TO A POINT; THENCE RUN WEST 3,961.965 FEET TO THE POINT OF
BEGINNING; THENCE RUN SOUTH 100.000 FEET TO A POINT; THENCE RUN EAST 100.00
FEET TO A POINT; THENCE RUN NORTH 100 FEET TO A POINT; THENCE RUN 100.000 FEET
WEST TO THE POINT OF BEGINNING, CONTAINING 02.230 ACRES, MORE OR LESS.
AND LESS AND EXCEPT: THE FOLLOWING LANDS LYING IN A FRACTIONAL PART OF THE NE
1/4 OF SECTION 31, TOWNSHIP 3 NORTH, RANGE 13 WEST, PULASKI COUNTY, ARKANSAS,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER
OF SAID SECTION 31, (ARKANSAS STATE PLANE COORDINATES OF NORTH 191,343.281 EAST
1,872,217.486), THENCE SOUTH 1,061.89 FEET, THENCE WEST 1,799.95 FEET TO THE
POINT OF BEGINNING, THENCE SOUTH 24 DEGREES 22 MINUTES 56 SECONDS EAST 293.20
FEET, THENCE SOUTH 56 DEGREES 13 MINUTES 48 SECONDS WEST 129.22 FEET, THENCE
SOUTH 85 DEGREES 21 MINUTES 34 SECONDS WEST 173.66 FEET, 60 DEGREES 08
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<PAGE> 11
MINUTES 15 SECONDS WEST 176.03 FEET; THENCE NORTH 21 DEGREES 43 MINUTES 52
SECONDS EAST 290.13 FEET, THENCE SOUTH 88 DEGREES 48 MINUTES 58 SECONDS EAST
204.75 FEET TO THE POINT OF BEGINNING, CONTAINING 2.52 ACRES MORE OR LESS.
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<PAGE> 12
94 12806
AREA III
Lands lying in the East 1/2 of Section 21, Township 3 North, Range 13 West,
Pulaski County, Arkansas and more particularly described as follows:
Commencing at the Southeast corner of said Section 21; thence North 2,178.93';
thence West 1,346.92' to the point of beginning said point of beginning being
on the West right of way line of Maumelle Boulevard and the North Right of Way
line of Rolling Oaks Drive; thence along the said North right of way line of
Rolling Oaks Drive on the following bearings and distances:
North 89 degrees 59'18" West 56.56'; thence North 44 degrees 58'35"
West 41.73'; thence along a 14.2534 degrees curve to the left 139.86'
to a point to which there is a chord bearing and distance of North 54
degrees 56'38" West 139.16';
thence leaving the said North right of way line North 5 degrees 42'38" West
303.45'; thence North 77 degrees 26'59" East 289.93'; thence North 15 degrees
24'23" West 365.12'; thence North 29 degrees 35'37" East 36.89' to the South
right of way line of the Missouri Pacific Railroad; thence along the said South
right of way line along a 1.8993 degrees curve to the right 170.18' to a point
to which there is a chord bearing and distance of South 69 degrees 6' East
170.16'; thence continuing along the said right of way line South 67 degrees
29'2" East 386.42' to the West right of way line of Maumelle Boulevard; thence
along the said West right of way line along an 8.8148 degrees curve to the
right 387.75' to a point to which there is a chord bearing and distance of South
27 degrees 47'41" West 382.03'; thence continuing along the said West right of
way line South 45 degrees West 441.03' to the point of beginning containing
7.439 acres more or less.
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<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT dated October 1, 1995,
between the Company and Michael G. Todd
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into and made
effective as of July 14, 1995 by and between AWEC Resources, Inc., a New York
/corporation, with its principal executive offices 25550 Hawthorne Boulevard,
Suite 108, Torrance, California 90505 and Michael G. Todd (the "Executive").
RECITALS
WHEREAS, the Executive is a key employee of AWEC Resources, Inc. (the
"Company") and has made and is expected to continue to make major contributions
to the profitability, growth and financial strength of the Company;
WHEREAS, the Company wishes to induce its key employees to remain in
the employment of the Company and to assure itself of both present and future
continuity of management; and
WHEREAS, the parties hereto desire to delineate the responsibilities
of the Executive and the expectations of the Company;
NOW, THEREFORE, for and in consideration of the foregoing recitals and
mutual covenants and obligations herein contained, the parties hereto agree as
follows:
AGREEMENT
1. Employment and Duties
(a) Scope of Duties. Upon the terms and conditions herein set forth,
the Company hereby confirms its engagement and employment of the Executive as
President of the Company. The Executive hereby formally accepts the
aforementioned engagement and employment. The Executive's duties as President
shall require his full time and devotion to the management and operation of the
Company's business. As President, the Executive shall be the general manager of
the Company and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
Company. In addition, President, the Executive shall have such other duties as
President of the Company as may be prescribed by the Board of Directors or
Bylaws of the
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<PAGE> 2
Company.
(b) Responsibility to Board of Directors. In the performance of his
duties as President of the Company, the Executive hereby understands and agrees
that he shall be directly responsible to the Board of Directors of the Company.
In this connection, the nature and scope of his authority as President of the
Company, shall not be enhanced, nor shall the nature and scope of his duties
and responsibilities be diminished by reason of the incorporation of all or any
portion of the business operations of the Company into one or more
subsidiaries.
(c) Relationships with other Companies. The provisions of paragraph 1
of this Agreement shall not be construed as preventing the Executive from
investing his personal assets in such manner or form as will not interfere with
the Executive's performance of his duties to the Company and which will not
compete with or constitute a conflict of interest with his duties to the
Company.
2. Term of Employment
The Company hereby agrees to employ the Executive for a period of five
(5) years commencing October 1, 1995, and continuing until September 30, 2000,
and thereafter from year to year with the mutual written consent of the Board
of Directors and the Executive, unless such employment is terminated sooner as
provided in paragraph 8 herein, and the Company shall have delivered to the
Executive or the Executive shall have delivered to the Company written notice
that the term of the Executive's employment hereunder will not be extended.
3. Place of Performance
In connection with the Executive's employment by the Company, the
Executive shall be based at the principal executive offices of the Company or
its subsidiaries except for required travel on the Company's business to an
extent substantially consistent with present business travel obligations.
4. Compensation and Related Matters
(a) Base Salary. For all services rendered under this Agreement, the
Company shall pay the Executive a base salary of $240,000 per
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<PAGE> 3
annum, in equal monthly or semi-monthly installments. The Board of Directors
will review, at least annually, the Executive's compensation with a view to
increasing it, if in the sole judgment of the Board of Directors, the earnings
of the Company or the services of the Executive merit such an increase.
Compensation of the Executive by the salary payments shall not be deemed
exclusive and shall not prevent the Executive from participating in any other
compensation or benefit plan of the Company. The salary payments (including
any increased salary payments) thereunder shall not in any way limit or reduce
any other obligation of the Company hereunder, and no other compensation,
benefit, or payment hereunder shall in any way limit or reduce the obligation
of the Company to pay the Executive's salary hereunder.
The Company shall have the right to deduct from the compensation due
to the Executive hereunder any and all sums required for social security and
withholding taxes and for other federal, state or local taxes or charges which
may now be in effect or which may hereinafter be enacted or required as a
charge on the compensation of the Executive.
(b) Reimbursement. The parties hereto recognize that in the course of
performing his duties hereunder, the Executive may incur expenses on behalf of
the Company for such items as entertainment, travel, hotels and similar items.
The Executive shall be entitled to be reimbursed for all reasonable and
necessary expenses so incurred by him in the performance of his duties
hereunder, upon submission by him to the Company of vouchers supporting such
expenditures and the approval of such expenditures by the Chief Financial
Officer of the Company before incurring any single items of expenditure to be
reimbursed pursuant to this paragraph in excess of
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<PAGE> 4
$1,000.
(c) Fringe Benefits. The Company shall maintain in full force and
effect, and the Executive shall be entitled to continue to participate in, all
of its employee benefit plans and arrangements in effect on the date hereof in
which the Executive participates or plans or arrangements providing the
Executive with at least equivalent benefits thereunder (including without
limitation each pension and retirement plan and arrangement, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
and health-and-accident plan and arrangement, medical insurance plan,
disability plan and survivor income plan, relocation plan and vacation plan).
The Company shall not make any changes in such plans or arrangements which
would adversely affect the Executive's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executives of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to the Executive as compared with any other executives of
the Company. The Executive shall be entitled to participate in or receive
benefits under any employee benefit plan or arrangement made available by the
Company in the future to its executives and key management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to the Executive
pursuant to paragraph 4(a) herein. Any payments or benefits payable to the
Executive hereunder in respect of any calendar year during which the Executive
is employed by the Company for less than the entire such year shall, unless
otherwise provided in the
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<PAGE> 5
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed.
(d) Bonus. At the end of each fiscal year, the Board of Directors
shall consider the Executive for a year end bonus. The bonus shall be based
upon the Executive's performance during the year as determined by a review of
the Executive by the Board of Directors.
(e) Vacations. The Executive shall be entitled to two weeks (10
days) of paid vacation per annum. The time for such vacation shall be selected
by the Executive and approved by the Board of Directors of the Company. The
Executive shall also be entitled to all paid holidays given by the Company to
its executives. A maximum of twenty (20) days of unexercised vacation may be
accrued.
(f) Services Furnished. The Company shall furnish the Executive
with office space, stenographic assistance and such other facilities and
services as shall be suitable to the Executive's position and adequate for the
performance of his duties set forth in paragraph 1 hereof.
5. Offices. The Executive agrees to serve without additional
compensation, if elected or appointed thereto, as a director of the Company and
in one or more executive offices of the Company, provided that the Executive is
indemnified for serving in any and all such capacities on a basis no less
favorable than which may currently be provided for in the Company's Bylaws.
6. Property Rights of the Parties and Disclosure of Information
The Executive recognizes that as President of the Company, and during the term
of employment under this Agreement, he will occupy a position of trust and
therefore will have access to and become
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<PAGE> 6
acquainted with various trade secrets consisting of formulas, patterns,
compilations of records and specifications, which are owned by the Company,
which are regularly used in the operation of the business of the Company and
which may be imparted to him from time to time in the course of his duties. The
Executive therefore agrees that:
(A) He shall not at any time, whether in the course of his employment
or thereafter, disclose any of the aforesaid trade secrets, directly or
indirectly, or use them in any way, either during the term of this Agreement or
at any time thereafter, except as required in the course of his employment. All
files, records, documents, drawings, specifications, equipment, and similar
items relating to the business of the Company, whether prepared by the Company
or otherwise coming into his possession, shall remain the exclusive property of
the Company and shall not be removed from the premises of the Company under any
circumstances whatsoever without the prior written consent of the Company.
(B) All records of the accounts of customers, route books, and any
other records and books relating in any manner whatsoever to the customers of
the Company, whether prepared by the Company or otherwise coming into his
possession, shall be the exclusive property of the Company regardless of who
actually purchased the original book or record. All such books and records
shall be immediately returned to the Company by the Executive on any
termination of his employment. If the Executive purchases any such original
book or record, he shall immediately notify the Company, who then shall
immediately reimburse him.
(C) The Executive shall not for a period of three (3) years
immediately following the termination of his employment with the Company,
either directly or indirectly, make known to
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any person, firm or corporation the names or addresses of any of the customers
of the Company or any other information pertaining to them, or call on,
solicit, or take away, or attempt to call on, solicit, or take away any of the
customers of the Company on whom the Company called or with whom he became
acquainted during his employment with the Company, either for himself or for
any other person, firm or corporation.
(D) For the purpose of this Agreement, the term "trade secrets" shall
mean, in addition to the foregoing, information of any nature and in any form
which at the time or times concerned is not generally known to persons other
than directors, officers and employees of the Company and which relates to any
one or more of the aspects of the Company's business or business properties of
the Company, including, but not limited to customer list and financial
accounting and statistical data of customers of the Company, personnel
information and all other information of any time or description which is
protectable by law as a trade secret or as proprietary information of the
Company.
7. Noncompetition by Executive
During the term of this Agreement, the Executive shall not, without
the prior written consent of the Company, directly or indirectly, either as an
employer, consultant, agent, principal, partner, principal stockholder,
corporate officer, director, or in any other individual or representative
capacity, engage in or participate in any business that is in competition in
any manner whatsoever with the business of the Company.
8. Termination of Employment The Executive's employment hereunder
may be terminated without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment shall terminate upon
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his death.
(b) Disability. If as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full-time basis for the entire period of three
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such
three-month period) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment hereunder.
(c) Cause. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon (i) the willful
and continued failure by the Executive to substantially perform his duties
hereunder (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness), after demand for substantial
performance is delivered by the Company that specifically identifies the manner
in which the Company believes the Executive has not substantially performed his
duties, (ii) the willful engaging by the Executive in misconduct which is
materially injurious to the Company, momentarily or otherwise, (iii) the
willful engaging by the Executive of an act or acts of dishonesty constituting
a felony under the laws of the State of California and resulting or intending
to result directly or indirectly in gain or personal enrichment at the expense
of the Company to which the Executive is not legally entitled or (iv) the
willful violation by the Executive of the provisions of paragraph 7 herein. For
purposes of this paragraph, no act, or failure to act, on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause
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without (x) reasonable notice to the Executive setting forth the reasons for
the Company's intention to terminate for Cause, (y) an opportunity for the
Executive, together within his counsel, to be heard before the Board of
Directors, and (z) delivery to the Executive of a Notice of Termination as
defined in paragraph 8(e) hereof from the Board of Directors finding that in
the good faith opinion of the Board of Directors, the Executive was guilty of
conduct set forth in clause (i), (ii), (iii) or (iv) of the preceding sentence,
and specifying the particulars thereof in detail.
(d) Termination by the Executive. The Executive may terminate his
employment hereunder if his health should become impaired to an extent that
makes his continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that the Executive shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that , at the Company's request, the Executive
shall submit to an examination by a doctor selected by the Company and such
doctor shall have concurred in the conclusion of the Executive's doctor.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to paragraph 8(a) above) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated pursuant to paragraph 8(b) above,
thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), (iii) if the Executive's
employment is terminated pursuant to paragraph 8(c) above, the
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date specified in the Notice of Termination, and (iv) if the Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination is given the party receiving such Notice of Termination notified
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined,-
either by written agreement of the parties, by a binding and final arbitration
or by a final judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal having been
perfected).
9. Compensation During Disability
(a) Compensation During Disability Period. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due
to physical or mental illness ("disability period"), the Executive shall
continue to receive his full salary at the rate then in effect for such period
until his employment is terminated pursuant to paragraph 8(b) hereof, provided
that payments so made to the Executive during the first ninety (90) days of the
disability period shall be reduced by the sum of the amounts, if any, payable
to the Executive at or prior to the time of any such payment under disability
benefit plans of the Company and which were not previously applied to reduce
any such payment.
(b) Compensation Upon Death. If the Executive's employment is
terminated by his death, the Company shall pay to the Executive's spouse, or if
he leaves no spouse, to his estate, commencing on the next succeeding day
which is the fifteenth day or the last day of each month, until a total of six
payments has been made, an amount on each payment date equal to the
semi-monthly salary payment
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payable to the Executive pursuant to paragraph 4(a) hereof at the time of his
death.
(c) Compensation Upon Termination For Cause. If the Executive's
employment shall be terminated for Cause, the Company shall pay the Executive
his full salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given and the Company shall have no further
obligations to the Executive under this Agreement.
(d) Compensation Upon Breach Of Agreement. If, in breach of this
Agreement, the Company shall terminate the Executive's employment other than
pursuant to paragraph 8(b) hereof and paragraph 8(c) hereof (it being
understood that a purported termination pursuant to paragraph 8(b) hereof or
paragraph 8(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement), then
the Company shall pay the Executive his full salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
and the Company shall pay all other damages to which the Executive may be
entitled as a result of such breach, including damages for any and all loss of
benefits to the Executive under the Company's employee benefit plans which the
Executive would have received if the Company had not breached this Agreement
and had the Executive's employment continued for the full term provided in
paragraph 2 hereof (including specifically but without limitation the benefits
which the Executive would have been entitled to receive pursuant to any
supplemental retirement income plan or arrangement had his employment continued
for the full term provided in paragraph 2 hereof at the rate of
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compensation specified herein), and including all legal fees and expenses
incurred by him as a result of such termination.
(e) Compensation Upon Termination by Executive. If the Executive shall
terminate his employment pursuant to paragraph 8(d) hereof, the Company shall
pay the Executive his full salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given.
(f) Effect of Termination on Employee Benefit Plans. Unless the
Executive is terminated for Cause, the Company shall maintain in full force and
effect, for the continued benefit of the Executive for the greater of (i) the
number of years (including partial years) remaining in the term of employment
hereunder or (ii) for two (2) years, all employee benefit plans and programs in
which the Executive was entitled to participate immediately prior to the Date
of Termination provided that the Executive's continued participation is
possible under the general terms and provisions of such plans and programs. In
the event that the Executive's participation in any such plan or program is
barred, the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is barred.
10. General Provisions
(a) Attorneys Fees. If any action in law or in equity is necessary to
enforce or interpret the terms of this Agreement the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
(b) Notices. All notices, requests, demands and other communications
called for or contemplated hereunder shall be in writing and shall be deemed to
have been duly given when delivered personally or when mailed by United States
certified or registered mail, postage prepaid, addressed to the parties, their
successor in interest or
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assignees at the following addresses or such other addresses as the parties may
designate by notice in the manner aforesaid:
The Company: AWEC Resources, Inc.
25550 Hawthorne Boulevard, #108
Torrance, California 90505
Executive: Michael G. Todd
25550 Hawthorne Boulevard, #108
Torrance, California 90505
(c) No Third Party Beneficiaries. None of the provisions herein for
payment by the Company or other benefits of any kind to the Executive shall
create third party beneficiary rights in any other person whether or not named
or described herein, and the provisions of this Agreement may at any time or
from time to time be modified solely by an agreement between the Executive and
the Company.
(d) Partial Invalidity. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
(e) Law Governing. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
(f) Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all negotiations, prior discussions and preliminary agreements.
This Agreement may not be amended except in writing executed by the parties
hereto.
(g) Modifications and Amendments. The Board of Directors and the
Executive may agree to any modification or amendment of this Agreement as may
be mutually agreeable to the Company and the Executive; and any such
modification shall likewise not operate as a cancellation of this Agreement,
but merely as an amendment, and all other terms and conditions shall continue
in full force and effect as provided herein.
(h) Construction of Agreement. The language
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and all parts of this Agreement shall be in all cases construed according to
its fair meaning and not strictly for or against any of the parties hereto.
Each of the parties hereto has agreed to the use of the particular language of
the provisions of this Agreement, and any questions of doubtful interpretation
shall not be resolved by any rule or interpretation against the party who
causes the uncertainty to exist or against the draftsman.
(i) Section Headings. Paragraph titles or captions contained in this
Agreement are inserted only as a matter of convenience and are for reference
purposes only. Such titles and captions in no way define or limit the intent of
any provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and date first above set forth.
COMPANY
AWEC Resources, Inc.
/s/ Ronald Campbell
Director
By: /s/ EXECUTIVE EMPLOYEE
By: /s/ Michael G. Todd
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EXHIBIT 10.19
Financial Consultant Agreement, dated July 3, 1996, between Olsen
Associates Consulting, Inc., and Capitol Communities Corporation.
FINANCIAL CONSULTANT AGREEMENT
THIS FINANCIAL CONSULTANT AGREEMENT (the "Agreement") is made and
entered into as of July 3, 1996 by and between Olsen & Associates Consulting,
Inc., having a principal place of business at 230 Park Avenue, Suite 1000, New
York, New York 10169 ("Consultant") and Capitol Communities Corporation, a
Nevada corporation, having its principal place of business at 25550 Hawthorne
Boulevard, Suite 207, Torrance, California 90505 ("Client").
RECITALS
WHEREAS, Consultant has expertise in public relations and provides
services designed to heighten public awareness of the business conducted and
performance results achieved by specified companies, which services consist
primarily of organizing and assembling information provided to the Consultant
by the Client in a format which profiles the Client and which is conducive to
dissemination in appropriate information channels and networks, and
disseminating such information; and
WHEREAS, Client wishes to enlist Consultant to provide such services,
and Consultant and Client wish to formalize in a written agreement the terms
and conditions under which Consultant will provide such services to Client.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Incorporation of Recitals. The foregoing recitals are incorporated
herein by reference and made a part hereof as though set forth at
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length throughout the rest of this Agreement.
2. Information to be Furnished by Client. Client shall furnish
Consultant with current public information about Client, including any and all
statements and reports filed by Client with the United States Securities and
Exchange Commission, its most recent annual report to shareholders, any share
offerings, either registered or unregistered, and shall also provide any other
public information reasonably requested by Consultant. Client shall not provide
to Consultant any confidential or nonpublic information concerning Client, and
any and all information concerning client provided to Consultant by Client
shall be deemed nonconfidential and public.
3. Term. The term of this Agreement shall be for a period of one (1)
year, commencing on the date hereof and terminating on July 31, 1997, unless
terminated earlier pursuant to Paragraph 4 below. The Client and Consultant may
mutually agree to extend the Agreement for additional periods. In the absence
of such an agreement, this Agreement shall automatically terminate upon the
Expiration Date.
4. Termination.
(a) If Consultant, or any of its employees, agents or representatives
(i) is convicted of a felony, a crime of moral turpitude, dishonesty, breach of
trust or unethical business conduct, (ii) engages in willful misconduct,
willful or gross neglect, fraud, misappropriation or embezzlement in the
performance of its duties hereunder or otherwise to the detriment of Client; or
(iii) breaches in any material respect the terms and provisions of this
Agreement and fails to cure such breach within ten (10) days following written
notice from the Client specifying such breach; then Client may terminate this
Agreement hereunder on written notice given to Consultant at any time not less
than three (3) days following the occurrence of any of the events described in
clauses (i) through (iv) above.
(b) If Client, or any of its officers or directors (i) is convicted of
a felony, a crime of moral turpitude, dishonesty, breach of trust or unethical
business conduct, (ii) engages in willful misconduct, willful or gross neglect,
fraud, misappropriation, or misrepresentation or failure to
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disclose information information as required hereunder to the detriment of
Consultant; or (iii) breaches in any material respect the terms and provisions
of this Agreement and fails to cure such breach within ten (10) days following
written notice from the Consultant specifying such breach; then Consultant may
terminate this Agreement hereunder on written notice given to Client at any
time not less than three (3) days following the occurrence of any of the events
described in clauses (i) through (iv) above.
5. Services to be Provided by Consultant
(a) Consultant has provided since June 15, 1996, and shall continue to
provide through July 31, 1997, unless otherwise extended or terminated pursuant
to the provisions herein, consultation to Client as requested by the Client in
consideration of the compensation provided under this Agreement.
(b) Consultant shall further exercise its best efforts to identify and
establish appropriate informational channels and networks capable of maximizing
dissemination of Client Information to licensed brokers and dealers in
jurisdictions where the Client's common stock has been legally qualified for
secondary trading. Consultant shall also exercise its best efforts to assemble
and organize Client Information in a format and medium which best facilitates
dissemination through such channels and networks, and shall further exercise
its best efforts to instigate and facilitate such dissemination.
(c) Consultant agrees to perform its duties hereto as an independent
contractor. Nothing contained herein shall be considered to create the
relationship of employer/employee between the parties to this Agreement. Client
shall not be liable to third parties for the acts of Consultant or its servants
or agents in performing its duties hereunder, except in the case of damages or
injuries caused directly by Client's agents or employees, or if Consultant
shall have been acting on behalf of Client. Client shall not make social
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security, workers' compensation or unemployment insurance payments on behalf of
Consultant.
(d) It is acknowledged by Client that Consultant carries no
professional licenses and is not rendering legal advice or performing
accounting services, nor acting as an investment advisor or broker-dealer
within the meaning of applicable state and federal securities laws.
6. Warranties and Representations of Consultant.
(a) Neither the entering into nor the delivery of this Agreement nor
the completion of the transaction contemplated hereby by Consultant will result
in the violation of: (i) any agreement to which Consultant is a party or by
which Consultant is bound and (ii) any applicable law, including but not
limited to, federal and state securities laws.
(b) Consultant and its personnel shall comply with all applicable
statutes, rules and regulations governing all aspects of the services to be
performed under this Agreement.
(c) Neither Consultant, its employees, agents or officers (or any
other person serving in a similar capacity):
(i) Has been convicted within ten years prior hereto of any crime or
offense involving the purchase or sale of any security; involving the making of
a false statement with the Securities and Exchange Commission ("Commission");
or has been convicted or charged with a crime or offense arising out of
Consultant engaging in the business of an underwriter, broker, dealer,
municipal securities dealer, or investment adviser.
(ii) Is subject to any order, judgment or decree of any court of
competent jurisdiction temporarily or permanently enjoining or restraining such
person from engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security; involving the making of a false
statement with the Commission; or has been convicted or charged with a crime or
offense arising out of such person engaging in the business of an underwriter,
broker, dealer, municipal securities dealer, or investment adviser.
(iii) Is subject to an order of the Commission entered pursuant to
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Section 15 (b), 15B (a), or l5B (c) of the Exchange Act; has been found by the
Commission to be a cause of any such order which is still in effect; or is
subject to an order of the Commission entered pursuant to Section 203(e) or (f)
of the Investment Advisers Act of 1940.
(iv) Is subject to a United States Postal Service fraud order or is
subject to any restraining order or preliminary injunction entered under
Section 3007 of Title 39, United States Code, with respect to any conduct
alleged to constitute postal fraud.
(d) OTHER THAN THE FOREGOING REPRESENTATIONS AND WARRANTIES,
CONSULTANT MAKES NO WARRANTIES WITH RESPECT TO THE QUALITY OF THE SERVICES TO
BE PROVIDED HEREUNDER OR ANY RESULTS TO BE ACHIEVED, AND HEREBY EXPRESSLY
DISCLAIMS THE EXISTENCE OF ANY SUCH REPRESENTATIONS OR WARRANTIES. CONSULTANT
SHALL HAVE NO LIABILITY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
SUFFERED BY CLIENT AS A RESULT OF ANY FAILURE ON THE PART OF CONSULTANT IN THE
PERFORMANCE OF ITS DUTIES HEREUNDER.
7. Warranties and Representations of Client.
(a) Client has good and sufficient corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly authorized, executed and delivered by Client and,
assuming due authorization, execution and delivery by Client, constitutes the
legal, valid and binding obligation of Client enforceable against Client in
accordance with its terms.
(b) Neither the entering into nor the delivery of this Agreement nor
the completion of the transaction contemplated hereby by Client will result in
the violation of: (i) any of the provisions of Client's charter documents, (ii)
any agreement to which Client is a party or by which Client is bound and (iii)
any applicable law.
(c) Client will make available to Consultant, upon Consultant's
request, any and all information regarding Consultant, which Consultant deems
necessary in order to perform his obligations under this Agreement.
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8. Compensation. In consideration of Consultant's services described in
paragraph 5, Client shall authorize the Consultant to receive 150,000 shares of
the Client's Common Stock (the "Shares"), all to be registered on Form S-8, and
an option to purchase 350,000 shares of the Corporation's Common Stock (the
"Shares"), all to be registered on Form S-8 and the price and form of the
option as attached hereto as Exhibit A.
9. Reimbursement for Expenses. Consultant shall be entitled to be
reimbursed by Client for reasonable out-of pocket expenses incurred by
Consultant in performing the services agreed to under this Agreement, upon
submission by Consultant to Client of vouchers supporting such expenditures.
However, notwithstanding the foregoing, in no event shall Consultant incur any
expenses, either singularly or in the aggregate, on behalf of Client hereunder
in excess of $250 without the prior written consent of Client.
10. Successors; Affiliates. This Agreement shall inure to the benefit
of and be binding upon Client, its successors and assigns, including, without
limitation, any person, partnership or corporation which may acquire all or
substantially all of Client's assets in business, or with or into which Client
may be consolidated, merged or otherwise reorganized, and this provision shall
apply in the event of any subsequent merger, consolidation, reorganization, or
transfer. Consultant may transfer or assign this Agreement or any of the rights
granted hereunder to an entity owned completely by Consultant, provide d such
transfer or assignment does not violate any applicable law and such assignment
does not relieve Consultant of his obligations hereunder and any costs shall be
borne by Consultant.
11. Severability. Consultant acknowledges and agrees that it has had
an opportunity to seek advice of counsel in connection with this Agreement. If
it is determined that any of the provisions of this Agreement, or any part
thereof, is invalid or unenforceable, the remainder of the
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provisions of this Agreement shall not thereby be affected and shall be given
full effect, without regard to the invalid portions.
12. Notice and Waivers. Any notice, waiver, demand or other
communication required or permitted by this Agreement must be in writing and
shall be deemed to have been given and received (i) if delivered by messenger,
when delivered, or (ii) if mailed, on the third business day after deposit in
the United States mail, certified or registered postage prepaid, return receipt
requested, (iii) if faxed, telexed or telegraphed, six hours after being
dispatched by fax, telegram or telex; in every case addressed to the party to
be notified as follows:
If to Consultant:
Olsen & Associates Consulting, Inc. 230 Park Avenue, Suite 1000 New
York, New York 10169 Telephone #(212) 808-3048 Facsimile #(212) 697-0317
Attention: Mr. Jens Olsen, President
If to Client:
Capitol Communities Corporation 25550 Hawthorne Boulevard, Suite 207
Torrance, California 90505 Telephone #(310) 375-2266 Facsimile #(310) 375-3841
Attention: Mr. Michael G. Todd, President
or to such other addresses as may be designated in writing by either
of the parties.
13. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior agreements, written or oral, with respect thereto.
14. Waiver and Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege
nor any single or partial exercise of any such right, power or
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privilege, preclude any other further exercise thereof or the exercise of any
other such right, power or privilege.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to
principles of conflicts of law.
16. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original but all such counterparts together shall constitute one and the
same instrument. Each counterpart may consist of two copies hereof each signed
by one of the parties hereto.
17. Headings. The subject headings of the paragraphs and subparagraphs
'of this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
IN WITNESS WHEREOF, Client and Consultant have executed this Agreement
on the date first written above.
Consultant: Olsen & Associates Consulting, Inc.
By: /s/ Robert E. Wolfe
Its: Director
Client: Capitol Communities Corporation
By: /s/ Michael G. Todd
Its: President
AMENDMENT
THAT FINANCIAL CONSULTANT AGREEMENT (the Agreement") which was made
and entered into as of July 3, 1996 by and between Olsen & Associates
Consulting, Inc., having a principal place of business at 230 Park Avenue,
Suite 1000, New York, New York 10169 (the "consultant") and Capitol Communities
Corporation, a Nevada corporation, having its principal place of business at
25550 Hawthorne Boulevard, Suite 207, Torrance, California 90505 ("Client"),
is herewith amended as follows.
Term: The term of the Agreement is extended to September 30, 1397
Stock Option Agreement: The Stock Option Agreement. which is a
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part of the Agreement is amended to include the following paragraph, which
hereafter shall be referred to as Paragraph 5 of the Stock Option Agreement:
5. Expiration The Stock Option Agreement shall expire at 12:00 P.M.
Pacific Standard Time on December 31, 1997, unless the Agreement is terminated
earlier pursuant to its Paragraph 4. Upon expiration of the Stock Option
Agreement, any options not then exercised shall be canceled and thereafter be
null and void, unless the Stock Option Agreement is extended, which shall only
be by written instrument signed by the Client prior to the expiration of the
Stock Option Agreement
IN WITNESS WHEREOF, Client and Consultant have executed this Amendment
to the Agreement this 9th day of September, 1996.
Consultant Olsen & Associates Consulting, Inc.
By: /s/ Jens Olsen
Its: President
Client. Capitol Communities Corporation
By: /s/ Michael G. Todd
Its: President
EXHIBIT A
STOCK OPTION AGREEMENT
AGREEMENT is made this day of July, 1996 by and between Olsen &
Associates Consulting, Inc. (hereinafter referred to as "Consultant"), and
Capitol Communities Corporation (hereinafter referred to as the "Corporation").
WHEREAS, Consultant is an important and valuable consultant to the
Corporation, and the Corporation deems it to be in its interest to secure the
services of Consultant for the Corporation or such of its subsidiary companies
as may be designated by the Corporation; and,
WHEREAS, the Corporation desires to enter into this Agreement with
Consultant containing the terms and conditions hereinafter set
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forth and to grant it an option to purchase shares of the Common Stock of the
Corporation;
NOW THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:
1. Grant of Option. In consideration of the foregoing, the Corporation
hereby grants to Consultant the right and option (hereinafter referred to as
"the options"), to purchase three hundred fifty thousand (350,000) shares of
the Corporation's Common Stock ("Shares") at prices as defined by Attachment A
hereto. This option is granted pursuant to the terms and conditions of the
Professional Consulting Agreement between Capitol Communities Corporation and
Olsen & Associates Consulting, Inc. dated the ___ day of July, 1996.
2. Method of Exercising Options. The options may be exercised in whole
at any time or in part from time to time (but only in multiples of 25,000
shares unless such exercise is as to the remaining balance of this option), by
giving to the Corporation notice in writing to that effect. The options
evidenced hereby shall be exercisable by the delivery to and receipt by the
Consultant (i) a written notice of election to exercise in the form set forth
in Attachment B hereto, specifying the number of shares to be purchased; (ii)
accompanied by the payment of the full purchase price thereof in cash or
certified check payable to the order of the Corporation.
3. Restriction Against Assignment. Except as otherwise expressly
provided above, Consultant agrees on behalf of itself and of any other person
or persons claiming any benefits by virtue of this Agreement, that this
Agreement and the rights, interest and benefits under it shall not be assigned,
transferred, pledged or hypothecated in any way by Consultant or any other
person claiming under Consultant by virtue of this Agreement. Such rights,
interests or benefits shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or other
disposition of this Agreement or of such rights, interests, and benefits
contrary to the preceding provisions, or the levy of any attachment or
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<PAGE> 11
similar process thereupon, shall be null and void and without effect.
4. Notices. Any notice to be given by Consultant as required by this
Agreement shall be sent to the Corporation at its principal executive offices
and any notice from the Corporation to Consultant shall be sent to Consultant
at its address as appears on the Corporation's books and records. Either party
may change the address to which notices are to be sent by informing the other
party in writing of the new address.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer as of the date first written above.
Capitol Communities Corporation
By:
Michael G. Todd, President
ATTEST:
By:
ATTACHMENT A
<TABLE>
<CAPTION>
Price Per Share
Net to Capitol Number of Shares
<S> <C>
$2.00 50,000 $100,000
$2.50 50,000 125,000
$2.75 50,000 137,500
$3.00 50,000 150,000
$3.25 50,000 162,500
$3.50 50,000 175,000
$4.00 50.000 200,000
TOTAL 350,000 $1,050,000
</TABLE>
ATTACHMENT B
NOTICE OF EXERCISE
TO: AWEC RESOURCES, INC.
1. The undersigned hereby elects to purchase ---- shares of Common
Stock of Capitol Communities Corporation pursuant to the terms of the attached
Stock Option Agreement, and tenders herewith payment of the purchase price of
such shares in full.
E-240
<PAGE> 12
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
(Name)
(Address)
(Social Security or Tax I.D. Number)
3. I acknowledge that I have received no formal prospectus or offering
memorandum describing the business and operations of the Company. I have,
however, by virtue of my involvement with the Company, been given access to all
information that I believe is material to my decision to exercise the stock
option referred to above. I have had the opportunity to ask questions of, and
receive answers from, representatives of the Company concerning its business
operations. Any questions raised by me have been answered to my satisfaction.
Date: _______________ ,19____
Purchaser
Fax to: Michael G. Todd, Capitol Communities Corp., (310) 375-3841
John Troster, Olde Monmouth Stock Transfer, (908) 671-0209
E-241
<PAGE> 1
EXHIBIT 21.
List of Subsidiaries.
List of Subsidiaries.
1. Capitol Development of Arkansas, Inc., incorporated in the State of
Arkansas.
2. Capitol Homes, Inc., incorporated in the State of Arkansas.
E-242
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1996 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<PERIOD-START> JUN-30-1995 OCT-1-1994
<PERIOD-END> JUN-30-1996 SEP-30-1995
<CASH> (121,218) 265,703
<SECURITIES> 3,500,000 3,500,000
<RECEIVABLES> 24,489 11,689
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 28,943 298,037
<PP&E> 9,034,598 8,901,421
<DEPRECIATION> 45,945 0
<TOTAL-ASSETS> 12,789,579 12,968,420
<CURRENT-LIABILITIES> 2,752,300 2,056,232
<BONDS> 7,350,000 7,350,000
0 0
0 0
<COMMON> 7,000 7,000
<OTHER-SE> 2,680,279 3,555,188
<TOTAL-LIABILITY-AND-EQUITY> 12,789,579 12,968,420
<SALES> 0 565,467
<TOTAL-REVENUES> 0 (22,058)
<CGS> 0 587,525
<TOTAL-COSTS> 0 587,525
<OTHER-EXPENSES> 479,856 877,077
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 579,195 40,395
<INCOME-PRETAX> (874,900) (885,918)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (874,900) (885,918)
<EPS-PRIMARY> (.13) (.86)
<EPS-DILUTED> (.13) (.86)
</TABLE>
