American International Construction Inc.
A Division of American International Consolidated Inc.
14603 Xxxxxxxx
Xxxxxxx, Xxxxx 00000
(000) 000-0000 o FAX (000) 000-0000
December 31, 1996
Xx. Xxx Xxxxxx
M.B.C.I.
14031 West Hardy
Xxxxxxx, Xxxxx 00000
Re: Loan Agreement - April 24, 1996
Dear Xxx:
During the process of refiling our Registration Statement with the S.E.C.,
and the review by our accountants Xxxx and Associates, it has been noted that we
need to update your consent relative to the following Negative Covenants in our
loan agreement with your company:
(A) For the fiscal year ended 4/30/96 we exceeded $120,000 aggregate limit
on capital expenditures by acquiring $148,264 in fixed assets. I believe this
limit would not be applicable until the fiscal year beginning May 1, 1996 since
we executed the loan agreement on April 24, 1996. Your confirmation concerning
the effective date of this covenant is requested.
I. M.B.C.I. hereby acknowledges that this covenant is effective for the
fiscal year beginning May 1, 1996 and consents to the capital expenditures
incurred for the fiscal year ended 4/30/96.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(B) During the current fiscal year we have acquired a "Metal Muncher" or
Hydraulic Gap-Bed Punch Press which costs $32,500. I have previously advised you
of this purchase and agreed to provide you the following explanation to justify
this acquisition.
This machine is utilized to punch bolt holes into plate steel. We presently are
fabricating a project which has approximately 18,000 holes. This project will
complete shipment in late November. Without this piece of equipment our options
are to hand-drill them at a cost of approximately $3.00 per hole or subcontract
them at a cost of $1.00 per hole. The anticipated payback due to this large
project is estimated to be 12 months. Excluding the large project indicated
above, we would normally recover our costs for this equipment in approximately
24 months.
I have arranged to lease/finance this equipment through Glesby/Marks
Leasing for 36 months at approximately $1,100 per month. A copy of the Lease
Agreement and the invoice for the equipment is enclosed for your verification.
Your consent concerning this single capital expenditure in excess of $25,000 is
requested.
II. M.B.C.I. hereby acknowledges and consents to the "Metal Muncher"
acquired for a cost of $32,500 and lease financed by Glesby Marks as indicated
above.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(C) During the current fiscal year ended April 1997 we have acquired
$125,262 in fixed assets or capital expenditures. Except for capital
expenditures from net proceeds of the public offering, we anticipate spending
less than $5,000 during the remaining fiscal year for capital expenditures.
III. M.B.C.I. hereby acknowledges and consents to up to $11,000 in capital
expenditures in excess of $120,000.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(D) In paragraph 5.1(C) it is provided that A.I.C.I. may incur (up to
$300,000 - exclusive of broker's commission) in pursuit of said public offering.
I have enclosed a schedule detailing all the costs incurred since inception,
amounts expensed and amounts capitalized. Please note I have included the costs
and proceeds from the "Bridge Loan" which was consummated in July. It is
anticipated that the Company will incur approximately $50,000 of additional
costs prior to the effective date of the Initial Public Offering. Please confirm
if we are in compliance with the limit specified in this covenant.
IV. M.B.C.I. hereby acknowledges and consents to the costs incurred to date
pursuing the Initial Public Offering of its stock and the anticipated future
costs of $50,000. We confirm the Company is in compliance with this covenant as
a result of off-setting the proceeds of the $300,000 "Bridge Loan".
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(E) The present status of the I.P.O. is that we plan to file our responses
to the S.E.C. by December 30, 1996. We anticipate that we will clear all their
comments, obtain their final approval, and "go effective" by February 25, 1997.
As a result of these delays we request a reasonable extension of the
October 31, 1996 deadline specified in the Loan Documents Covenants.
V. M.B.C.I. hereby acknowledges and agrees to extend the Initial Public
Offering deadline to April 30, 1997.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(F) During the present fiscal year we have experienced two material adverse
changes which require disclosure:
(1) Chatham Self Storage Project, Chatham, New Jersey. We recently
settled a dispute on the above referenced project whereby we have
to write-off approximately $200,000 of previously recognized
(fiscal 95-96) profit;
(2) The Building Systems Division recognized a loss of approximately
$450,000 in gross margins as a result of sales estimating and
management procedures.
VI. M.B.C.I. hereby acknowledges and consents to the material adverse
changes.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(G) AICI has acquired a 37% interest in a Limited Liability Company. This
Limited Liability Company is a general partner (45% ownership) in a Limited
Partnership that owns a mini-storage project (U.S. Storage/Westheimer). The
Company also secured the construction contract for the related mini-storage
project for approximately $1.4 million.
VII. M.B.C.I. hereby acknowledges and consents to this investment in Third
Parties.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(H) AICI has presently contracted to construct another mini-warehouse
project for approximately $1.5 million (U.S. Storage/Woodlands), and will
acquire approximately 24.5% in a Limited Liability Company that owns 45%
ownership in a Limited Partnership that owns the project.
VIII. M.B.C.I. hereby acknowledges and consents to this investment in Third
Parties.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(I) AICI is currently delinquent in the timely payment of its accounts
payable with MBCI and it is estimated the amount past due (over 45 days old)
will be approximately $850,000.00 at December 31, 1996.
IX. M.B.C.I. hereby acknowledges and consents to this past due amount at
December 31, 1996.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(J) AICI has allowed the Life Insurance on its key executives to lapse due
to non-payment. However, we have now paid the premiums and are awaiting
notification of reinstatement.
X. M.B.C.I. hereby acknowledges and consents to this lapsed coverage.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
(K) AICI anticipates that it will not reach its Gross Profit Covenant
requirement of 1.5% of gross revenues based on the losses sustained in the first
eight months of the current fiscal year.
XI. M.B.C.I. hereby acknowledges, consents and waives the required gross
profit covenant for the period 5/1/96 up to and including 12/31/96.
/s/ Xxx Xxxxxx, M.B.C.I. Vice President/CFO
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Signature
Your prompt response to the items addressed in this letter is requested so
Xxxx and Associates can resolve the S.E.C.'s comments. Please feel free to
contact Xxxx Xxxxxx, Xxxx Xxxxxxx or me if you need any further information.
Sincerely,
/s/ Xxx Xxxxxxxx
Xxx Xxxxxxxx
VP - Finance
Enclosures
cc: Xxxx Xxxxxx
Xxxx Xxxxxxx
JW/ad
STATE OF TEXAS
COUNTY OF XXXXXX
SWORN TO AND SUBSCRIBED by the said before
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and undersigned, a Notary Public in and for the County and State aforesaid this
day of , 19 .
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My Commission Expires
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Notary Public
