U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 1998
Commission file number: 0-21867
BISHOP CAPITAL CORPORATION
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(Name of small business issuer in its charter)
Wyoming 84-0901126
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
716 College View Drive, Riverton, Wyoming 82501
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (307) 856-3800
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months and (2) has
been subject to such filing requirements for the past 90 days. Yes X No __
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. [ ]
Issuer's revenues for fiscal year ended March 31, 1998 were $1,103,553.
The aggregate market value of the voting stock held by non-affiliates as of June
22, 1998 was $585,720.
The number of shares outstanding of the issuer's Common Stock as of June 22,
1998 was 838,365.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format (Check one): Yes __ No X
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Part I
Item 1. Description of Business
-----------------------
Bishop Capital Corporation (the "Company), formerly known as Bishop Cable
Communications Corporation, was originally incorporated under the laws of the
State of Colorado on February 22, 1983 and reincorporated under the laws of the
State of Wyoming on June 2, 1992. On November 22, 1995, the Company changed its
name. The Company is primarily engaged in the development and sale of real
estate and has a royalty interest in a natural gas property. The Company was a
wholly-owned subsidiary of a public company (see "Metro/KTOC Transaction") until
its shares were distributed as a partial liquidating dividend on June 20, 1997
(see "Distribution").
Metro/KTOC Transaction
In December 1995, the Company's parent corporation, then known as Metro Capital
Corporation ("Metro"), upon approval of its shareholders, completed a
transaction with Karlton Terry Oil Company and its affiliates ("KTOC") whereby
KTOC exchanged certain oil and gas properties for 80% of the then issued and
outstanding voting securities of Metro (the "Transaction"). The only class of
securities of Metro issued and outstanding prior to the Transaction was Common
Stock. Under terms of the Transaction, Metro issued shares of newly created
Class B Common Stock to KTOC in order to exclude KTOC from participation in a
distribution of the Company's Common Stock. Metro and KTOC previously were not
affiliated. Prior to and in connection with the Transaction, Metro transferred
all of its assets to the Company (a wholly-owned subsidiary of Metro), except
for $700,000 cash and an insignificant oil property. These transferred assets,
together with the Company's previously owned assets, were being operated
autonomously by the prior management of Metro who became officers and directors
of the Company pursuant to the terms of separate five-year Operating and Voting
Agreements. Upon completion of the Transaction, Metro's name was changed to
American Rivers Oil Company ("AROC"). Management of KTOC succeeded to the board
of directors and serve as officers of AROC operating the oil and gas properties
previously owned by KTOC. As a result, AROC and the Company operated separate
businesses under separate management.
The Company's operations, prior to the transfer of assets from Metro, were
primarily related to the development and sale of real estate. Liabilities of the
Company, consisting of trade accounts payable, were insignificant. In connection
with the Transaction, Metro transferred assets of $1,731,000 (excluding $700,000
cash and an insignificant oil property) and related liabilities of $41,000 to
the Company. The assets transferred included $1,055,000 in cash and marketable
securities, net property and equipment of $200,000 and a net gas royalty
interest of $400,000.
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Distribution
Pursuant to the terms of the Transaction, AROC's Board of Directors on November
8, 1996 authorized a spin-off distribution of the Company's Common Stock as a
partial liquidating dividend to AROC's Common shareholders of record on November
18, 1996 on the basis of one share of the Company's Common Stock for four shares
of AROC's Common Stock. AROC's Class B Common shareholders did not participate
in the Distribution. The Distribution occurred on June 20, 1997 and the separate
Operating and Voting Agreements previously discussed were terminated. Subsequent
to the termination of these agreements, the officers and directors of the
Company continued in their present positions.
The Company had four full-time employees as of March 31, 1998.
Real Estate Operations
In October 1993, the Company entered into two limited partnership agreements to
purchase approximately 90 contiguous acres of land in Colorado Springs,
Colorado. The property surrounding the acreage is primarily retail development
(restaurants, major grocery chains, gas stations, convenience stores and small
retailers) to serve nearby residential developments. A summary of the Company's
participation in each partnership is as follows:
(1) The Company contributed $250,000 cash to the first partnership (Bishop
Powers, Ltd.) which purchased approximately 55 acres of land (comprising
separate 20 and 35 acre parcels) for commercial development. The Company, as
general partner, has an 81% interest with the remaining 19% interest held by the
limited partner (Powers Golf LLC) who is the general partner in the second
partnership discussed below. The Company will be allocated 100% of the income
and losses until it has been paid $600,000 plus interest thereon at 8% per annum
(not to exceed $100,000) after which the income and losses will be allocated 81%
to the Company and 19% to the limited partner. The Company, as general partner,
has exclusive management of the partnership. Any transfer of a limited partner's
interest requires the written consent of the general partner. The Company has
commenced a three phase development of commercial pad sites for the 20 acre
parcel. The development plan for the 35 acre parcel is presently anticipated to
be a combination of commercial pad sites on 17 acres and an apartment complex on
the remaining 18 acres.
(2) The Company contributed $100,000 cash to the second partnership (Z-H,
Ltd.) which purchased approximately 35 acres of land on which Z-H, Ltd.
constructed a recreational facility consisting of a 60 station golf driving
range, 36 holes of miniature golf, 9 baseball/softball batting machines, and a
1,200 square foot clubhouse. This facility, which encompasses all of the acreage
purchased, commenced operations in July 1994. The Company, as the limited
partner, has a 19% interest with the remaining 81% interest held by the general
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partner (Powers Golf LLC). There is no affiliation between the Company and
Powers Golf LLC. The Company contributed an additional $250,000 when certain
financing requirements in the partnership consisting of $800,000 of debt
financing were fulfilled by the general partner. The Company is not a guarantor
of any debt in this partnership and the general partner cannot incur additional
debt without the prior written consent of the Company. The Company is not
required to make any further capital contributions to the partnership. The
Company also has the right of first refusal relating to the sale of partnership
assets. In July 1997, the general partner ("Seller") entered into an Agreement
of Purchase and Sale of Leasehold with an unrelated third- party ("Purchaser")
for the sale of all improvements, buildings and fixtures for $71,500 cash,
$100,000 of Purchaser's restricted common stock and assumption by Purchaser of
approximately $887,000 debt. The transaction closed in October 1997. In
connection with the real property, the parties entered into a 25 year Ground
Lease (the "Lease") whereby the Purchaser will pay monthly rents aggregating
$3,909,000 over the Lease term. The Lease provides for a termination fee payable
to the Purchaser if the Lease is cancelled by the Seller after the expiration of
the second lease year of $1,000,000 in lease years 3 through 5, $750,000 in
lease years 6 through 10, $500,000 in lease years 11 through 15, $300,000 in
lease years 16 through 20 and $-0- thereafter. In connection with the Lease, the
Purchaser agreed to have the Seller released from liability on the assumed debt
by the third anniversary of the Lease commencement date. If this event does not
occur, the termination fee previously discussed will be waived. The Seller is
also responsible for the payment of real estate taxes on the land or any
improvements up to a maximum amount of $18,000 per lease year. Any amount in
excess of $18,000 per lease year will be paid by the Purchaser. At March 31,
1998, the net carrying value of the Company's 19% interest is $210,600.
The undeveloped real estate is subject to local zoning laws and regulations. The
undeveloped real estate must be surveyed, designed and platted and then
submitted to the appropriate governmental authorities for approval, permits and
agreements before it can commence development. The ability of the Company to
obtain necessary approvals and permits for its planned development is often
beyond the Company's control. The length of time necessary to obtain permits and
approvals increases the carrying costs of unimproved land acquired for the
purpose of development. The western boundary of the undeveloped real estate
borders a drainage channel and appropriate governmental authorities will require
that certain improvements be made along the drainage channel as sections of the
undeveloped land are platted for development. The Company estimates that the
remaining drainage channel improvement costs will approximate $400,000.
The Company developed approximately 5 acres (comprising 5 lots) in Phase I of
the 20 acre parcel. The costs for the Phase I site development work consisting
of grading, utilities, channel lining, storm sewer, paving and curb and gutter
were approximately $446,000. These costs were funded primarily by net proceeds
from the closings of three lot sales as follows: (i) Lot 1 (1.14 acre) to
Diamond Shamrock Refining and Marketing Company for $388,850 for a combination
gasoline sales, convenience store and car wash facility; (ii) Lot 2 (.92 acre)
to State Bank & Trust for $329,703 for a branch bank facility and (iii) Lot 4
(1.04 acre) to a Taco Bell franchisee for $350,000 for a fast-food facility. The
Company entered into a sales agreement to sell Lot 3 (.69 acre) to Grease Monkey
International, Inc. for $258,026 and closed the transaction on June 11, 1998.
The remaining Lot 5 (.48 acre) in Phase I is currently unsold.
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Subsequent to March 31, 1998, the Company submitted a Concept Plan for the
remaining 15 acres for Phases II and III along with a Final Plat consisting of
one lot in Phase II to the appropriate governmental authorities for their
approval which occurred on June 4, 1998. The Company entered into a sales
agreement to sell for $300,000 the one lot (1.65 acre) platted in Phase II to
PCRO Limited Liability Company for a retail automotive and tire service center.
The closing was to occur on or before June 1, 1998; however, since the Concept
Plan and Final Plat were not approved until June 4, 1998, the parties have
agreed to close on June 26, 1998. Upon closing, $200,000 of the net proceeds
will be escrowed for the payment of on-site improvements which are to be
completed by the Company. The estimated Phase II development costs for grading,
utilities, channel lining, storm sewer and paving are approximately $327,000.
The Company is presently working on contract specifications for the work which
is anticipated to commence in July 1998.
Subsequent to March 31, 1998, the Company entered into a sales agreement to sell
for $400,000 one lot (1.0 acre) in Phase III. The Concept Plan for Phase III
will be revised and resubmitted along with a one lot Final Plat for approval by
the appropriate governmental authorities. The closing will occur ten (10)
business days following notice to Purchaser from the Company that the Final Plat
was approved. In the event the closing has not occurred on or before September
10, 1998, then either party may elect to terminate the agreement. Since the
location of the lot is adjacent to the Phase II on-site improvements which are
to be completed, the Company does not anticipate incurring any additional major
development costs.
In October 1995 the Company acquired approximately 5 acres of undeveloped real
estate located adjacent to a golf course in Riverton, Wyoming for $80,000 and
expended approximately $154,000 for improvements (utilities, drainage, roadway,
etc.) in developing a 15 lot subdivision. The Company had a one year listing
agreement with a local real estate brokerage company to market at a 6%
commission rate the improved lots. The listing agreement expired in June 1997
and the Company commenced marketing the improved lots. As of March 31, 1998, one
lot sale was closed to an officer of the Company. The Company currently is
having preliminary discussions with a local construction contractor regarding
the building of "spec" homes on several of the lots.
Under various federal, state and local laws, ordinances and regulations relating
to the protection of the environment, a current or previous owner of real estate
may be liable for the cost of removal or remediation of certain hazardous or
toxic substances disposed, stored, released, generated, manufactured or
discharged from, on, at, onto, under or in such property. Environmental laws
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often impose such liability without regard to whether the owner knew of, or was
responsible for, the presence or release of such hazardous or toxic substances.
The Company engaged an independent environmental engineer to do a Phase I
Environmental Assessment ("Assessment") on the 20 acre parcel being developed in
Colorado Springs, Colorado. The Assessment did not reveal any non-compliance
with environmental laws. The Company is not aware of any non-compliance with
environmental laws, environmental liability or other environmental claims on its
real estate properties that the Company believes would likely have a material
adverse effect on the Company.
The success of the Company depends, among other factors, upon national and local
trends of the economy, including interest rates, construction costs,
governmental regulations and legislation, including environmental requirements,
real estate fluctuations, retailing trends, population trends, zoning laws,
availability of financing and capital on satisfactory terms and the ability of
the Company to compete with other owners and developers with greater resources
and whose management may have more experience than the Company's officers.
Natural Gas Royalty Interest
In December 1990, the Company purchased a royalty interest in certain natural
gas properties located in Wyoming from an unrelated third-party. Since the
Company did not have access to reserve information, the Company engaged an
independent petroleum geologist to review available geologic, engineering and
production data and to estimate the value for the natural gas royalty interest.
Based on this study and other factors, the Company paid approximately $1,067,000
for the royalty interests. At March 31, 1998, the net carrying value of this
interest is $250,000. In connection with the purchase, the Company formed a tax
partnership (Bridger Creek Partnership) which allocates to the Company, as
general partner, the first $40,000 of annual net income (as defined) from the
partnership and 80% of annual net income in excess of $40,000. After the Company
has received cumulative net income of $1,050,000, plus interest at prime
adjusted semi-annually, the Company will receive 60% of the annual net income
thereafter.
The royalty interest is in the Madden Unit (the "Unit") which produces natural
gas from producing horizons between 5,500 and 24,000 feet. A gas processing
plant in which the Company has no ownership interest treats the "sour gas"
produced from the Madison formation (24,000 feet). The plant processes 50 MMCFD
(million cubic feet per day) from two completed Madison wells. The operator of
the Unit recently commenced modification plans to increase the plant capacity
from 50 MMCFD to 66 MMCFD and is expected to be completed by September 1998. A
third Madison well was completed in June 1997 and is currently shut-in awaiting
construction of a second "sour gas" processing plant to be located north of the
existing plant. The new plant will have the capacity to process 66 MMCFD and is
estimated to be completed in July 1999. The plant products include methane,
sulfur and carbon dioxide. The Company's royalty interest is only subject to
plant processing costs and severance and ad valorem taxes. The Company and other
royalty owners are negotiating with the plant operator to eliminate the
deduction of certain processing costs which may not be in accordance with
applicable state rules and regulations.
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Item 2. Description of Property
-----------------------
The Company's principal properties consist of approximately 50 acres of
undeveloped real estate in Colorado and an improved 14 lot subdivision and
natural gas royalty interest in Wyoming. None of the properties are held subject
to any encumbrance.
Real Estate Investment Policies
Although the Company has no formal policy as to the allocation of assets among
its real estate investments, the Company has limited such investments to its
present real estate holdings which were acquired primarily for possible capital
gain.
The Company's major investment in real estate is approximately 50 acres of
undeveloped real estate in Colorado Springs, Colorado which was acquired in
October 1993 and consists of separate 15 acre and 35 acre parcels. The Colorado
Springs, Colorado area has sustained a consistent growth in population over the
past twenty-five years. Population forecasts for the year 2000 reflect a 20%
increase over 1990 which is a conservative 2% annualized growth rate. Several
new retail development centers and residential areas north and east of the
Company's property have been constructed or are in the planning stages.
Demographic and marketing studies by independent third-parties project higher
retail sales and population growth over a five-year period within a one to five
mile radius of the Company's property which is zoned PBC-2 (Planned Business
Center) and OC (Office Complex). The PBC zoning allows most commercial and
retail uses and the OC zoning permits office uses as well as destination
restaurants.
The Company is presently planning the development of commercial pad sites for
Phases II and III on the 15 acre parcel. Phase I of the development, consisting
of 5 lots (approximately 5 acres of the original 20 acre parcel), was completed
and the Company closed sales on four lots. Subsequent to March 31, 1998, the
Concept Plan for Phases II and III and a Final Plat for Phase II were submitted
to the appropriate governmental authorities for approval which occurred on June
4, 1998. The estimated Phase II site development costs for grading, utilities,
channel lining, storm sewer and paving are approximately $327,000. The costs
will be funded primarily by the net proceeds from the closing of lot sales.
Subsequent to March 31, 1998, the Company established two lines of credit
($150,000 and $250,000) with a bank to ensure that funds would be available to
commence the Phase II site improvements. The $150,000 line of credit is
collateralized by $160,000 of U. S. Treasury securities. The $250,000 line of
credit will be used for the issuance of letters of credit which may be required
by the governmental authorities and is collateralized by the Company's executive
office building. The Company has furnished a bank letter of credit for $164,310
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to the City of Colorado Springs (the "City") to provide assurance that the
channel work in Phases I and II will be completed. Since the channel work in
Phase I has been completed, the City released $52,710 which decreased the bank
letter of credit to $111,600.
The Company's development plan for the remaining 35 acre parcel is presently
anticipated to be a combination of retail pad sites on 17 acres and an apartment
complex on the remaining 18 acres. The construction of an apartment complex will
be based upon a variety of factors, including (i) applying for a zoning change
from PBC-2 to R-5 (ii) external demographic studies; (iii) financial review as
to the feasibility of the proposed project, including projected profit margins,
return on capital employed and the capital payback period; (iv) competition for
the proposed project; (v) the ability to obtain financing on favorable terms;
and (vi) management's judgment as to the real estate market and economic trends.
The Company would also consider various financial resources such as a
partnership, joint venture or other financing arrangements to minimize risk. The
Company had market and feasibility studies completed by independent consultants
for the proposed apartment complex. The studies concluded that the proposed
apartment complex would be a viable project within certain parameters relating
to construction costs, types of units, financing, etc. The Company is currently
having preliminary discussions with a company involved in the financing,
construction, leasing and managing of apartment complexes which has expressed
interest in participating with the Company in developing the proposed apartment
complex.
The Company does not anticipate any major investments in real estate mortgages
or securities of, or interests in, persons primarily engaged in real estate
activities.
Reserves
Reserve information relating to the natural gas royalty interest owned is not
included because the information is not made available to royalty interest
owners by Louisiana Land and Exploration Company, the operator of the
properties. The Company's share of production from the royalty interest for the
year ended March 31, 1998 was 53,000 mcf.
Item 3. Legal Proceedings
-----------------
The Company is not a party to any pending legal proceedings involving a claim
for damages which amount exceeds 10% of the current assets of the Company and
its subsidiaries on a consolidated basis and no such proceedings are known to be
contemplated.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year ended March 31, 1998.
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Part II
Item 5. Market for Common Equity and Related Stockholder Matters
--------------------------------------------------------
Common Stock
The Company's common stock (trading symbol "BPCC") is traded on the OTC
(non-NASDAQ) Bulletin Board Service used by members of the National Association
of Securities Dealers, Inc. ("NASD"). The following table shows the high and low
bid prices for the common stock of the Company, which was distributed on June
20, 1997 as a partial liquidating dividend, for the periods indicated as
reported by the NASD. The quotations represent prices between dealers and do not
include retail mark-up, markdown, or commission and may not represent actual
transactions.
Quarter Ended High Bid Low Bid
------------- -------- -------
6/30/97 $ -- (1) $ -- (1)
9/30/97 -- (1) -- (1)
12/31/97 -- (1) -- (1)
3/31/98 .875 .125
(1) The NASD form required for the initiation of quotations on the
OTC Bulletin Board Service was submitted by a market maker in
July 1997 and approved by the NASD in February 1998.
As of June 22, 1998, there were approximately 2,000 holders of record of the
Company's common stock (which number does not include shareholders whose shares
are held of record by brokerage firms).
Dividends
The Company has paid no dividends on its Common Stock and does not intend to pay
cash dividends in the foreseeable future. Payment of cash dividends, if any, in
the future, will be determined by the Company's Board of Directors in light of
the Company's earnings, financial condition and other relevant considerations.
There are no restrictions on the Company's present or future ability to pay
dividends.
Item 6. Management Discussion and Analysis of Financial Condition and Results
of Operations
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Certain statements contained herein are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, such as
statements relating to financial results and plans for future business
development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
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cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's Securities Exchange
Act filings.
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.
Results of Operations
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The Company's net income for the fiscal year ended March 31, 1998 was $169,800
compared to a net loss of $524,300 for fiscal 1997. The improved results for
fiscal year 1998 were attributable primarily to sales of improved real estate.
Fiscal 1998 Compared to Fiscal 1997
Gross profit on real estate sold of $524,622 in fiscal 1998 resulted primarily
from the sale of improved real estate in Colorado Springs, Colorado. Real estate
sales of $1,103,553 were offset by costs of real estate sold of $578,931. There
were no real estate sales in fiscal 1997.
General and administrative expenses decreased $29,300 or 6% in fiscal 1998
primarily due to a general reduction in overhead costs and expenses.
Depreciation and amortization increased $10,400 or 58% in fiscal 1998 compared
to fiscal 1997 due to the purchase of vehicles and equipment in fiscal 1998.
Gas royalties, net of amortization, increased $93,500 in fiscal 1998 compared to
fiscal 1997 primarily due to a decrease in amortization of $90,000 or 87% in
fiscal 1998 which resulted from a change in the estimated remaining life of the
gas royalty interest to 20 years, effective January 1, 1997, based on
management's review and evaluation of new public data released by the operator.
Natural gas production increased 16% (53,000 mcf in 1998 compared to 45,837 mcf
in 1997) and was offset by a 9% decrease in the average sales price of natural
gas ($1.76 per mcf in 1998 compared to $1.94 per mcf in 1997) and a 7% increase
in gas processing costs and production taxes ($20,514 in 1998 compared to
$19,129 in 1997).
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Interest income decreased $8,800 or 21% in fiscal 1998 from fiscal 1997
primarily due to the sale of fixed income securities in fiscal 1997.
The net loss on sale of marketable securities of $31,700 in fiscal 1998 resulted
from the sale of equity securities for other investment opportunities.
The net unrealized gain on marketable securities of $199,600 in fiscal 1998
represents the net change in the fair value of trading securities from fiscal
1997.
Equity in limited partnership loss decreased $35,500 or 90% in fiscal 1998 from
fiscal 1997 primarily due to the sale of all improvements related to the
operations (exclusive of real property) in October 1997 to an unrelated
third-party. In connection with the real property, the purchaser entered into a
25 year ground lease which provides for the payment of monthly rents. The
Company's share of the gain from the sale of improvements was approximately
$50,000. The gain, which was deferred, will be recognized proportionately by the
installment method.
Interest expense increased $4,000 or 37% in fiscal 1998 compared to fiscal 1997
primarily due to bank fees incurred for the issuance of letters of credit for
the real estate project in Colorado Springs, Colorado.
Financial Condition
At March 31, 1998, the Company had working capital of $369,800.
The following summary table reflects comparative cash flows for the Company for
the two years ended March 31, 1998:
Years Ended
March 31,
---------------------
1998 1997
---- ----
Net cash provided by (used in):
Operating activities $ 90,500 $(71,600)
Investing activities (50,900) 51,600
Financing activities (50,900) --
Net cash provided by operating activities increased $162,000 in fiscal 1998 from
fiscal 1997 primarily due to sales of improved real estate. Net cash used in
operating activities of $71,600 in fiscal 1997 resulted primarily from the net
loss incurred.
Net cash used in investing activities in fiscal 1998 resulted primarily from the
purchase of vehicles and equipment. In fiscal 1997, net cash provided by
investing activities resulted from net cash proceeds of $188,100 from the
purchase and sale of marketable securities and $146,600 from collections of
notes receivable being offset by land development costs of $153,600, funds
advanced under notes receivable of $120,000 and purchase of equipment for
$9,500.
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Net cash used in financing activities in fiscal 1998 resulted from the purchase
of treasury stock. The Company also had borrowings of $50,000 and repayment of
borrowings of $50,000. There were no cash flows from financing activities for
the year ended March 31, 1997.
The Company's material commitments for capital expenditures in the next twelve
months will be in conjunction with the Phase II and III development of a 15 acre
parcel located in Colorado Springs, Colorado. The Concept Plan for Phases II and
III and the Final Plat relating to Phase II of the development have been
submitted to the appropriate governmental authorities and were approved on June
4, 1998. The Company has entered into a sales contract for the one lot platted
in Phase II. The estimated costs for the Phase II site improvements are
approximately $327,000. The Company expects that such expenditures will be
funded primarily by the net proceeds from the sale of lots. Subsequent to March
31, 1998, the Company established two lines of credit ($150,000 and $250,000)
with a bank to ensure that funds would be available to commence the Phase II
site improvement work which is anticipated to commence in July 1998.
Impact of Inflation
The Company cannot determine the precise effects of inflation. However, the
impact of general price inflation has not had a material adverse effect on the
results of the Company's operations.
The Year 2000 Issue
The Year 2000 Issue is the result of computer programs using two digits rather
than four to define the applicable year. Computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
leading to disruptions in a company's operations. The Company has begun a review
of its computer system to assess the potential costs and scope of the Year 2000
Issue. The Company's goal is to complete all relevant internal software
remediation and testing by March 31, 1999. The total cost to the Company of
these Year 2000 Issue activities is not anticipated to be material to its
financial position or results of operations. Any purchased hardware and/or
software will be capitalized in accordance with normal policy. All other costs
related to the project will be expensed as incurred. The Year 2000 Issue may
impact other entities with which the Company transacts business, and the Company
cannot predict the effect of the Year 2000 Issue on such entities. This
discussion is based upon management's best estimates and there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated.
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Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FASB
No. 130) and No. 131, "Disclosures About Segments of an Enterprise and Related
Information" (FASB No. 131), effective for years beginning after December 15,
1997. FASB No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. FASB No. 131 establishes standards for reporting
information about operating segments and the methods by which such segments were
determined. The Company has not completed its evaluation of these statements,
but does not anticipate a material impact on the consolidated financial
statements from the adoption of the additional disclosure requirements of these
accounting standards.
Item 7. Financial Statements
--------------------
Information with respect to this item appears on page F-1 of this report. Such
information is incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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None
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Part III
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Item 9. Directors and Executive Officers of the Registrant
--------------------------------------------------
a. Identification of Directors and Executive Officers
Name Age Office
---- --- ------
Robert E. Thrailkill 66 Chairman of the Board, President
and Chief Executive Officer
John A. Alsko 57 Secretary/Treasurer and Director
Robert J. Thrailkill 39 Vice President and Director
Robert E. Thrailkill. Mr. Thrailkill has been President, Chief Executive
Officer and Director of the Company since its inception in February 1983. Mr.
Thrailkill previously served as Chairman of the Board, President and Chief
Executive Officer of Metro Capital Corporation, the Company's former parent
corporation, from February 1981 to December 1995 at which time there was a
change in control. Mr. Thrailkill's business background spans over 33 years of
management responsibility in privately and publicly-held companies.
John A. Alsko. Mr. Alsko was appointed as Secretary/Treasurer and a
Director of the Company in November 1995. Previously, Mr. Alsko served as Vice
President - Finance of Metro Capital Corporation from February 1987 to December
1995. Prior to joining Metro Capital Corporation, he was employed in various
financial positions with other companies and public accounting firms. Mr. Alsko
is a Certified Public Accountant.
Robert J. Thrailkill. Mr. Thrailkill was appointed as Vice President -
Operations and a Director of the Company in November 1995. Previously, Mr.
Thrailkill served as Director of Operations of Metro Capital Corporation from
January 1989 to December 1995. Prior to joining Metro Capital Corporation, he
was employed in various supervisory and managerial positions with other
companies.
The directors of the Company are elected to hold office until the next annual
meeting of shareholders or until a successor has been elected and qualified.
Officers of the Company are elected annually by the Board of Directors and hold
office until their successors are duly elected and qualified. All of the
officers and directors devote full time to the business of the Company.
No arrangement or understanding exists between any of the above directors and
officers pursuant to which any one of those persons were selected to such office
or position. None of the directors hold directorships in other companies.
14
<PAGE>
b. Identification of Certain Significant Employees
Not applicable.
c. Family Relationships
Robert J. Thrailkill is the son of Robert E. Thrailkill.
d. Involvement in Certain Legal Proceedings
Not applicable.
e. Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, certain officers and persons who own more than ten percent of
the outstanding Common Stock of the Company, to file with the Securities
and Exchange Commission reports of changes in ownership of the Common Stock
of the Company held by such persons. Officers, directors and greater than
ten percent shareholders are also required to furnish the Company with
copies of all forms they file under this regulation. To the Company's
knowledge, based solely on a review of the copies of such reports furnished
to the Company and representations that no other reports were required, all
Section 16(a) filing requirements applicable to all of its officers and
directors were complied with during fiscal 1998, except one filing by
Robert E. Thrailkill, President, who inadvertently filed late due to an
administrative oversight.
Item 10. Executive Compensation
----------------------
a. Summary Compensation Table
The following table sets forth the compensation received by the Chief Executive
Officer for the years ended March 31, 1998, 1997 and 1996. No other executive
officer had total annual salary and bonus exceeding $100,000 for the year ended
March 31, 1998.
<TABLE>
<CAPTION>
Long Term
Name Annual Compensation Compensation Awards
and ---------------------------------------- --------------------------
Principal Other Annual Restricted Options
Position Year Salary Bonus Compensation Stock Award ($) SARS (#)
-------- ---- ------ ----- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Thrailkill 1998 $145,000 $-- $ -- $ -- --
President, Chief 1997 145,000 -- 46,200(2) -- 45,000(3)
Executive Officer 1996 145,000 -- -- 22,500(4) 25,000(5)
and Director (1)
- ----------
15
</TABLE>
<PAGE>
(1) Robert E. Thrailkill was the Chief Executive Officer of Metro Capital
Corporation ("Metro") from February 1981 to December 1995 when a change in
control occurred. In December 1995, Mr. Thrailkill became Chief Executive
Officer of Bishop Capital Corporation, a wholly-owned subsidiary of Metro, into
which the majority of assets of Metro were transferred when the change in
control occurred. Metro subsequently changed its name to American Rivers Oil
Company ("AROC"). On June 20, 1997, the Company's Common Stock was distributed
to AROC's Common shareholders as a partial liquidating dividend.
(2) Consists of 40,300 registered shares allocated and issued from AROC's
1987 Stock Bonus Plan with a fair market value of $1.31 per share (22,000
shares) and $.94 per share (18,300 shares) on the award dates.
(3) Consists of AROC's securities underlying options exercisable on date of
grant (July 31, 1996) at a per share exercise price of $1.38 and expires two
years thereafter.
(4) Consists of 15,000 shares allocated and issued from AROC's 1987 Stock
Bonus Plan with a fair market value of $1.50 per share on the award date.
(5) Consists of AROC's securities underlying options exercisable on date of
grant (October 11, 1995) at a per share exercise price of $1.65 and expires five
years thereafter.
The columns for "Long-Term Incentive Plan Payouts" and "All Other Compensation"
were omitted from the Summary Compensation Table since there was no information
reportable for the three years ended March 31, 1998.
b. Option/SAR Grants Table
The Company does not have any stock option plans or outstanding Stock
Appreciation Rights ("SARs").
c. Aggregated Option Exercise and Fiscal Year-End Option Value Table
The Company does not have any stock options nor any SARs outstanding at
March 31, 1998.
d. Compensation of Directors
There are no current arrangements for the compensation of directors for
services rendered since the current directors are employees of the Company.
There are no other arrangements whereby any of the Company's directors received
compensation for services as a director during fiscal 1998.
e. Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
16
<PAGE>
In November 1995, a Management Agreement (the "Agreement") was entered into
between the Company, Robert E. Thrailkill, the Company's President, and the
Company's previous parent company. The Agreement is for a five year term and is
renewable from year to year thereafter unless terminated previously by either
party. Under the Agreement, Mr. Thrailkill is paid an annual salary of $145,000,
which salary may be increased by the Board of Directors from time to time in
accordance with normal business practices of the Company; his expenses are
reimbursed in accordance with the Company's policies and procedures; he
participates in and receives established employee benefits and he is entitled to
participate in any future benefit made available by the Company to its
executives. The Agreement terminates upon death or disability and may be
terminated by the Company for cause (as defined in the Agreement). The Agreement
may also be terminated upon a breach of the Agreement, and in the event there is
a change in control of the Company (as defined in the Agreement). If the
Agreement is terminated because of a breach of the Agreement by the Company or a
change in control, the Company shall pay severance pay equal to the product of
(a) the annual salary rate in effect multiplied by (b) the greater of the number
of years (including partial years) remaining in the term of employment or the
number three. The Agreement provides that upon death, the Company shall pay an
amount equal to the annual salary; upon disability, the Company shall pay salary
for the balance of the term of the Agreement (less amounts paid by insurance) or
until the executive becomes gainfully employed, whichever is sooner; and, upon
termination for cause, the Company shall pay any salary due up to the
termination date.
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
a. Security Ownership of Certain Beneficial Owners
The following table shows, as of June 22, 1998, those persons known by the
Company to be the beneficial owners of more than 5% of the Company's Common
Stock:
Amount and Nature
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- -------------- ------------------- --------- --------
Common Stock Robert E. Thrailkill (1) 133,470 15.9%
716 College View Drive
Riverton, WY 82501
Common Stock Consult & Assist (2) 68,750 8.2%
P.O. Box 9856
Rancho Santa Fe, CA 92067
Common Stock Francarep, Inc. (3) 68,750 8.2%
50 Av. des Champs-Elysees
75008 Paris, France
- ----------
17
<PAGE>
(1) On January 20, 1998, Mr. Thrailkill purchased 47,000 shares of the
Registrant's Common Stock, which shares are restricted, for a purchase
price of $49,820.
(2) All shares are beneficially owned by Georg Ligenbrink.
(3) All shares are beneficially owned by Georges Babinet.
b. Security Ownership of Management
The following table shows, as of June 22, 1998, management's ownership of the
Company's Common Stock:
Amount and Nature
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- -------------- ------------------- --------- --------
Common Stock Robert E. Thrailkill (1) 133,470 15.9%
716 College View Drive
Riverton, WY 82501
Common Stock John A. Alsko 19,563 2.3%
716 College View Drive
Riverton, WY 82501
Common Stock Robert J. Thrailkill 15,938 1.9%
716 College View Drive
Riverton, WY 82501
Common Stock All officers and directors
as a group (three persons) 168,971 20.1%
- ----------
(1) On January 20, 1998, Mr. Thrailkill purchased 47,000 shares of the
Registrant's Common Stock, which shares are restricted, for a purchase
price of $49,820.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
a. Certain Relationships
There were no transactions during the last two fiscal years, or proposed
transactions, in which the Company was or is to be a party with any director,
executive officer or any member of the immediate family of any director or
executive officer having a direct or indirect material interest of more than 10%
in any business or professional entity involved in such transactions.
b. Indebtedness of Management
No officer or director of the Company has been indebted to the Company
directly or indirectly during fiscal year 1998 in an amount exceeding $60,000.
18
<PAGE>
c. Transactions with Parent of Issuer
In connection with the Metro/KTOC Transaction in December 1995, the assets
of Metro which were transferred to the Company were operated autonomously by the
prior management of Metro pursuant to the terms of separate five-year Operating
and Voting Agreements which terminated on June 20, 1997.
d. Transactions with Promoters
Not applicable
19
<PAGE>
Part IV
Item 13. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
3.1 Articles of Incorporation and Bylaws (incorporated by reference
to Exhibits 3.1 and 3.2 of the Registrant's Form 10-SB
Registration Statement filed December 11, 1996). (1)
10.1 Management Agreement dated December 8, 1995 between American
Rivers Oil Company (formerly Metro Capital Corporation), Bishop
Capital Corporation (formerly Bishop Cable Communications
Corporation) and Robert E. Thrailkill (incorporated by reference
to Exhibit 10.1 of the Registrant's Form 10-SB Registration
Statement filed December 11, 1996). (1)
10.2 Purchase Option Agreement dated August 28, 1996 between Bishop
Powers, Ltd., a Colorado limited partnership, Bishop Capital
Corporation as General Partner and Diamond Shamrock Refining and
Marketing Company (incorporated by reference to Exhibit 10.2 of
the Registrant's Form 10-SB Registration Statement filed December
11, 1996). (1)
10.3 Contract to Sell Real Estate dated November 14, 1996 between
Powers Ltd., a Colorado limited partnership, Bishop Capital
Corporation as General Partner and 123 Cascade Associates LLC
(incorporated by reference to Exhibit 10.3 of the Registrant's
Form 10-SB Registration Statement filed December 11, 1996). (1)
10.4 Agreement for the Purchase and Sale of Commercial Real Estate
dated March 3, 1997 between Bishop Powers, Ltd., a Colorado
limited partnership, Bishop Capital Corporation as General
Partner and State Bank & Trust of Colorado Springs (incorporated
by reference to Exhibit 10.4 of the Registrant's Form 10-SB/A
Registration Statement filed March 17, 1997). (1)
10.5 Operating Agreement dated December 8, 1995 between American
Rivers Oil Company (formerly Metro Capital Corporation), Karlton
Terry Oil Company and Bishop Capital Corporation (formerly Bishop
Cable Communications Corporation) (incorporated by reference to
Exhibit 10.5 of the Registrant's Form 10-SB/A Registration
Statement filed March 17, 1997). (1)
20
<PAGE>
10.6 Voting Agreement dated December 8, 1995 between American Rivers
Oil Company (formerly Metro Capital Corporation), Karlton Terry
Oil Company and Bishop Capital Corporation (formerly Bishop Cable
Communications Corporation) (incorporated by reference to Exhibit
10.6 of the Registrant's Form 10-SB/A Registration Statement
filed March 17, 1997). (1)
10.7 Bishop Powers, Ltd. Limited Partnership Agreement dated October
15, 1993 between Bishop Capital Corporation (formerly Bishop
Cable Communications Corporation) as General Partner and Powers
Golf LLC as Limited Partner (incorporated by reference to Exhibit
10.7 of the Registrant's Form 10-SB/A Registration Statement
filed March 17, 1997). (1)
10.8 Z-H, Ltd. Limited Partnership Agreement dated October 15, 1993
between Powers Golf LLC as General Partner and Bishop Capital
Corporation (formerly Bishop Cable Communications Corporation) as
Limited Partner (incorporated by reference to Exhibit 10.8 of the
Registrant's Form 10-SB/A Registration Statement filed March 17,
1997). (1)
10.9 Agreement of Bridger Creek Partnership dated December 31, 1990
between Bishop Capital Corporation (successor to interest of
Metro Capital Corporation) and Mr. and Mrs. William N. Spratt
(incorporated by reference to Exhibit 10.9 of the Registrant's
Form 10-SB/A Registration Statement filed March 17, 1997). (1)
10.10 Construction Contract dated June 5, 1997 between Bishop Capital
Corporation as General Partner of Bishop Powers, Ltd. and Pioneer
Sand Company, Inc. (1)
10.11 Agreement for the Purchase and Sale of Commercial Real Estate
dated January 27, 1998 between Bishop Powers, Ltd., a Colorado
limited partnership, Bishop Capital Corporation as General
Partner and Grease Monkey International, Inc.
10.12 Agreement for the Purchase and Sale of Commercial Real Estate
dated March 20, 1998 between Bishop Powers, Ltd., a Colorado
limited partnership, Bishop Capital Corporation as General
Partner and PCRO Limited Liability Company.
10.13 Agreement for the Purchase and Sale of Commercial Real Estate
dated June 10, 1998 between Bishop Powers, Ltd., a Colorado
limited partnership, Bishop Capital Corporation as General
Partner and Sam Khanfar.
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the Registrant's Form 10-SB/A Registration
Statement filed March 17, 1997). (1)
21
<PAGE>
27 Financial Data Schedule (submitted only in electronic format).
- ----------
(1) Not filed herewith. In accordance with Rule 12b-32 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
reference is made to a document previously filed with the
Commission.
b. Reports on Form 8-K
None
22
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BISHOP CAPITAL CORPORATION
(Registrant)
Date: June 22, 1998 By: /s/ Robert E. Thrailkill
------------------------------------
Robert E. Thrailkill
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Date: June 22, 1998 /s/ Robert E. Thrailkill
------------------------------------
Robert E. Thrailkill
Chairman of the Board of Directors
(Principal Executive Officer)
Date: June 22, 1998 /s/ John A. Alsko
------------------------------------
John A. Alsko
Treasurer/Director
(Principal Financial and Accounting
Officer)
Date: June 22, 1998 /s/ Robert J. Thrailkill
------------------------------------
Robert J. Thrailkill
Vice President/Director
23
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report................................................F-2
Consolidated Balance Sheet - March 31, 1998.................................F-3
Consolidated Statements of Operations -
For the Years Ended March 31, 1998 and 1997.............................F-4
Consolidated Statements of Changes in Stockholders' Equity -
For the Years Ended March 31, 1998 and 1997.............................F-5
Consolidated Statements of Cash Flows -
For the Years Ended March 31, 1998 and 1997.............................F-6
Notes to Consolidated Financial Statements..................................F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Bishop Capital Corporation
Riverton, Wyoming
We have audited the accompanying consolidated balance sheet of Bishop Capital
Corporation and subsidiaries as of March 31, 1998, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended March 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bishop Capital
Corporation and subsidiaries as of March 31, 1998, and the results of their
operations and their cash flows for the years ended March 31, 1998 and 1997, in
conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
May 15, 1998
F-2
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
ASSETS
------
CURRENT ASSETS:
Cash and equivalents $ 35,516
Restricted cash 54,310
Marketable securities 633,294
Receivables:
Sale of marketable securities 38,316
Gas royalties 11,723
Interest and other 14,429
Prepaid expenses and other 7,913
-----------
Total current assets 795,501
PROPERTY AND EQUIPMENT:
Building 212,157
Furniture and fixtures 63,162
Vehicles and equipment 91,380
-----------
366,699
Less accumulated depreciation (144,494)
-----------
Net property and equipment 222,205
-----------
OTHER ASSETS:
Land under development 669,632
Investment in limited partnership 210,614
Gas royalty interest, net of accumulated
amortization of $816,959 250,092
Deferred income taxes 23,000
Notes receivable 61,305
Other assets, net 2,718
-----------
Total other assets 1,217,361
-----------
TOTAL ASSETS $ 2,235,067
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 172,376
Income taxes payable 33,000
Deferred income taxes 65,000
Payable to broker 155,283
-----------
Total current liabilities 425,659
COMMITMENTS (Notes 5 and 7)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 5,000,000
shares authorized, no shares issued --
Common stock, $.01 par value; 15,000,000 shares
authorized; 838,365 shares issued and outstanding 8,384
Capital in excess of par value 2,195,609
Accumulated deficit (394,585)
-----------
Total stockholders' equity 1,809,408
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,235,067
===========
See accompanying notes to these consolidated financial statements.
F-3
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
MARCH 31,
----------------------
1998 1997
--------- ---------
REVENUES -
Gross profit on real estate sold $ 524,622 $ --
COSTS AND EXPENSES:
General and administrative 488,669 518,005
Depreciation and amortization 26,411 17,967
--------- ---------
515,080 535,972
--------- ---------
INCOME (LOSS) FROM OPERATIONS 9,542 (535,972)
OTHER INCOME (EXPENSE):
Gas royalties, net of amortization of $13,342
and $103,372, respectively 61,375 (32,090)
Interest income 24,175 33,006
Dividend income 10,839 11,092
Rental income 14,716 13,963
Net gain (loss) on sale of marketable securities (31,705) 62,005
Net unrealized gain (loss) on marketable securities 199,611 (25,992)
Equity in limited partnership loss (3,975) (39,523)
Interest expense (14,766) (10,789)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 269,812 (524,300)
Provision for income taxes:
Current (58,000) --
Deferred (42,000) --
--------- ---------
NET INCOME (LOSS) $ 169,812 $(524,300)
========= =========
EARNINGS PER SHARE $ .20 $ (.59)
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 836,000 885,000
========= =========
See accompanying notes to these consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
Common Stock Treasury Stock
-------------------------- --------------------------
Number of Number of
Shares Amount Shares Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCES, April 1, 1996 885,481 $ 8,855 -- $ --
Issuance of AROC common stock for
employee compensation -- -- -- --
Net change in unrealized holding gain -- -- -- --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCES, March 31, 1997 885,481 8,855 -- --
Purchase of treasury stock -- -- 94,116 (100,677)
Sale of treasury stock to officer -- -- (47,000) 49,820
Retirement of treasury stock (47,116) (471) (47,116) 50,857
Net income -- -- -- --
----------- ----------- ----------- -----------
BALANCES, March 31, 1998 838,365 $ 8,384 -- $ --
=========== =========== =========== ===========
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
(Continued)
Capital in Unrealized
Excess of Holding Accumulated
Par Value Gain Deficit Total
----------- ----------- ----------- -----------
BALANCES, April 1, 1996 $ 2,166,024 $ 66,884 $ (40,097) $ 2,201,666
Issuance of AROC common stock for
employee compensation 79,971 -- -- 79,971
Net change in unrealized holding gain -- (66,884) -- (66,884)
Net loss -- -- (524,300) (524,300)
----------- ----------- ----------- -----------
BALANCES, March 31, 1997 2,245,995 -- (564,397) 1,690,453
Purchase of treasury stock -- -- -- (100,677)
Sale of treasury stock to officer -- -- -- 49,820
Retirement of treasury stock (50,386) -- -- --
Net income -- -- 169,812 169,812
----------- ----------- ----------- -----------
BALANCES, March 31, 1998 $ 2,195,609 $ -- $ (394,585) $ 1,809,408
=========== =========== =========== ===========
See accompanying notes to these consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
MARCH 31,
-------------------------
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 169,812 $(524,300)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 25,837 17,397
Amortization 13,916 103,942
Deferred income taxes 42,000 --
Issuance of AROC common stock for employee
compensation -- 79,971
Equity in limited partnership loss 3,975 39,523
Net (gain) loss on sale of marketable securities 31,705 (62,005)
Net unrealized (gain) loss on marketable securities (199,611) 25,992
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash (54,310) --
Marketable securities (15,471) 175,891
Gas royalties receivable 3,766 (6,090)
Interest other receivables (43,760) 4,273
Receivables from AROC 2,055 21,524
Prepaid expenses 1,413 8,634
Other assets 999 (1,000)
Land under development (104,296) --
Increase (decrease) in:
Accounts payable and accrued expenses 129,332 (40,498)
Income taxes payable 33,000 --
Customer deposit (20,000) --
Payable to broker 70,177 85,106
--------- ---------
Net cash provided by (used in) operating activities 90,539 (71,640)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities -- (477,837)
Proceeds from sale of marketable securities -- 665,894
Funds advanced under notes receivable -- (120,000)
Proceeds from collection of notes receivable 1,414 146,639
Land acquisition and development costs -- (153,627)
Purchase of property and equipment (52,315) (9,464)
--------- ---------
Net cash provided by (used in) investing activities (50,901) 51,605
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 50,000 --
Principal payments on borrowings (50,000) --
Treasury stock acquired (100,677) --
Proceeds from sale of treasury stock to officer 49,820 --
--------- ---------
Net cash used in financing activities (50,857) --
--------- ---------
NET DECREASE IN CASH AND EQUIVALENTS (11,219) (20,035)
CASH AND EQUIVALENTS, beginning of year 46,735 66,770
--------- ---------
CASH AND EQUIVALENTS, end of year $ 35,516 $ 46,735
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 14,766 $ 10,089
========= =========
Cash paid for income taxes $ 25,000 $ --
========= =========
See accompanying notes to these consolidated financial statements.
F-6
</TABLE>
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
----------------------
Reverse Acquisition - In October 1995, Metro Capital Corporation (Metro)
and Karlton Terry Oil Company (KTOC) entered into an Asset Purchase
Agreement whereby KTOC agreed to exchange certain oil and gas properties
(the "Contributed Properties") for a total of 7,717,820 shares of Class B
common stock of Metro, which represented 80% of the issued and outstanding
voting securities of Metro. On November 29, 1995, the shareholders of Metro
approved this transaction and the closing occurred on December 8, 1995. The
shareholders also approved changing the name of the Company from Metro to
American Rivers Oil Company (AROC).
Metro's assets, except for $700,000 cash and an insignificant oil property,
were transferred at their historical carrying value to a wholly-owned
subsidiary, Bishop Capital Corporation, formerly Bishop Cable
Communications Corporation ("Bishop" or the "Company"), where they were
operated autonomously by the prior management of Metro pursuant to the
terms of separate five-year Operating and Voting Agreements. The Operating
Agreement provided that Bishop's management had sole authority and
discretion with respect to the business, operations, and assets of Bishop.
The Voting Agreement appointed Bishop's president as attorney and proxy to
vote in his sole and absolute discretion, all of the shares of all classes
of the common stock of AROC and/or Bishop owned by them with respect to any
matter brought before the shareholders of AROC and/or Bishop relating to or
involving exclusively Bishop.
Change in Capital Structure and Spinoff - Since inception of the Company
there have been 4,500,000 shares of common stock outstanding. In November
1996, the Board of Directors of AROC (the Company's sole stockholder)
agreed to make a pro rata distribution of 885,481 shares of the Company's
common stock to AROC's common stockholders (excluding holders of Class B
common stock) of record on November 18, 1996. The pro rata distribution of
shares occurred on June 20, 1997, and the remaining 3,614,519 shares of the
Company's common stock owned by AROC were canceled. Accordingly, all share
and per share amounts in the accompanying financial statements have been
retroactively restated to give effect to the change in capital structure.
2. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------------------------------------------
Nature of Operations - The Company is primarily engaged in the development
and sale of real estate.
Principles of Consolidation - The Company's subsidiaries consist of Bishop
Powers, Ltd. and Bridger Creek Partnership in which the Company holds
general partner interests of 81% and 80%, respectively. The accompanying
financial statements include the accounts of the Company and both
majority-owned partnerships. All material intercompany transactions and
accounts have been eliminated in consolidation.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is provided by the straight-line method over estimated useful
lives of three to thirty-one years.
F-7
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maintenance and repairs are charged to expense as incurred, and
expenditures for major improvements are capitalized. When assets are
retired or otherwise disposed of, the property accounts are relieved of
costs and accumulated depreciation, and a gain or loss is recognized.
Land Under Development - Costs that clearly relate to land development
projects are capitalized. Costs are allocated to project components by the
specific identification method whenever possible. Otherwise, acquisition
costs are allocated based on their relative fair value before development,
and development costs are allocated based on their relative sales value.
Impairment of Long-lived Assets - The Company periodically compares the net
carrying value of long-lived assets to the related estimates of
undiscounted future cash flows for such assets. If the net carrying value
exceeds the estimated cash flows, then impairment will be recognized to
reduce the carrying value to the estimated fair value.
Gas Royalty Interest - Through December 31, 1996, the gas royalty interest
was being amortized utilizing the straight-line method over an estimated
life of eight years. Effective January 1, 1997, management determined that
the estimated remaining life of the gas royalty interest was 20 years,
based upon information that the operator released publicly. As a result of
this change in estimate, amortization expense for the year ended March 31,
1997, was reduced by approximately $30,000 (approximately $.03 per share).
Cash Equivalents - The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Marketable Securities - Management determines the appropriate
classification of its investments at the time of acquisition and
reevaluates such determination at each balance sheet date. Trading
securities are carried at fair value, with unrealized holding gains and
losses included in earnings. Available-for-sale securities are carried at
fair value, with unrealized holding gains and losses, net of tax, reported
as a separate component of stockholders' equity. Realized gains and losses
on all securities are computed based on average cost.
Through December 31, 1996, all securities were classified as available for
sale. Effective January 1, 1997, management reevaluated the Company's
investment policies and began classifying all securities as trading since
management's intent is to hold the securities principally for the purpose
of selling them in the near term. This reclassification had no effect on
earnings.
Investments - The Company's 19% ownership interest in a limited partnership
(Z-H, LTD.) is stated at cost, adjusted for its share of losses incurred.
Income Taxes - The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates.
F-8
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AROC included the Company's operations in its consolidated income tax
return through June 20, 1997, when the spin-off was effected. Income taxes
were allocated between AROC and the Company as if the Company was a
separate taxpayer.
Revenue Recognition - Sales of real estate generally are accounted for
under the full accrual method. Under that method, gain is not recognized
until the collectibility of the sales price is reasonably assured and the
earnings process is virtually complete. When a sale does not meet the
requirements for income recognition, gain is deferred until those
requirements are met. Sales of real estate are accounted for under the
percentage-of-completion method when the Company has material obligations
under sales contracts to provide improvements after the property is sold.
Under the percentage-of-completion method, the gain on sale is recognized
as the related obligations are fulfilled.
Stock-Based Compensation - The Company accounts for stock-based
compensation issued to employees using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. Accordingly,
compensation cost for stock options granted to employees is measured as the
excess, if any, of the quoted market price of the Company's (or AROC's)
common stock at the measurement date (generally, the date of grant) over
the amount an employee must pay to acquire the stock.
Stock-based compensation issued to non-employees is accounted for by the
fair value method as prescribed by Accounting for Stock-Based Compensation
(FAS 123). FAS 123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value. Companies that do not adopt
the fair value accounting rules must disclose the impact of adopting the
new method in the notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be accounted for
by the fair value method. The Company has elected not to adopt the fair
value accounting prescribed by FAS 123 for employees, and will be subject
only to the disclosure requirements prescribed by FAS 123.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. The actual
results could differ from those estimates.
The Company's financial statements are based on a number of significant
estimates, including the amortization period for the gas royalty interest,
realizability of the carrying value of land under development and the
limited partnership investment discussed in Note 5. The Company's estimates
are expected to change as additional information becomes available.
Earnings Per Share - The net loss per share calculation for 1997 is based
on the weighted average number of shares outstanding during the year, as
retroactively restated for the changes in capital structure due to the
spin-off as discussed in Note 1.
In February 1997, the Financial Accounting Standards Board issued a new
statement titled Earnings Per Share (FAS 128) which specifies new standards
to simplify the existing computational guidelines, revise the disclosure
F-9
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
requirements and increase the comparability of earnings per share data on
an international basis. Since FAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, the provisions were
adopted in the current period. Since the Company does not have any
outstanding common stock equivalents, the adoption of SFAS No. 128 did not
have any impact on previously reported earnings per share information and
there is no difference between basic and diluted earnings per share.
Reclassifications - Certain reclassifications have been made to the 1997
financial statements to conform to the presentation in 1998. The
reclassifications had no effect on the 1997 net loss.
3. MARKETABLE SECURITIES:
----------------------
The cost and estimated fair market value of trading securities at March 31,
1998, are as follows:
Fair Net
Market Unrealized
Cost Value Gains
-------- -------- --------
U.S. Treasury securities $172,758 $173,741 $ 983
Redeemable preferred securities 89,500 101,500 12,000
Equity securities 197,418 358,053 160,635
-------- -------- --------
$459,676 $633,294 $173,618
======== ======== ========
Cash proceeds from the sale of available-for-sale securities during the
year ended March 31, 1997 were $665,894. Net gains from available-for-sale
securities sold during the year ended March 31, 1997 amounted to $51,340
(gross gains of $69,511 and gross losses of $18,171).
4. GAS ROYALTY INTEREST:
---------------------
In December 1990, the Company purchased a royalty interest in certain gas
properties located in Wyoming for approximately $1,067,000. At March 31,
1998, the net carrying value of this interest amounts to $250,092. Revenues
related to this royalty interest are affected by local gas transportation,
processing, and marketing arrangements. Reserve disclosures related to the
gas royalty interest are not presented because the information is
unavailable from the operator of the properties.
In connection with the purchase, the Company formed a tax partnership
(Bridger Creek Partnership), which allocates to the Company the first
$40,000 of annual net income from the partnership and 80% of annual net
income in excess of $40,000. After the Company receives cumulative net
income of $1,050,000 plus interest at prime adjusted semi-annually, the
Company will be entitled to 60% of the annual net income of the
partnership. Through March 31, 1998, the minority interest's share of the
partnership's profits and cash flows has not been material.
F-10
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LAND DEVELOPMENT PARTNERSHIPS:
------------------------------
General Partnership Interest - In October 1993, the Company became the
general partner of a limited partnership to develop or sell 55 acres of
undeveloped real estate. The Company contributed $250,000 cash for its 81%
general partnership interest. The remaining 19% interest is held by the
limited partner who is the general partner in the partnership described
below. The Company will be allocated 100% of the income and losses until it
has been paid $700,000, after which the allocation will be apportioned
according to ownership interests. Through March 31, 1998, the Partnership's
activities have been focused on the development of five commercial pad
sites on approximately 4.62 acres (Phase I) of a 20-acre parcel. Three of
the pad sites were sold during the year ended March 31, 1998, and one was
sold subsequent to year-end.
As of March 31, 1998, the Company had furnished a bank letter of credit for
approximately $164,000 to the City of Colorado Springs (City) to provide
assurance that the channel work relating to the remaining acreage in the
20-acre parcel would be completed. The Company also has available an unused
line-of-credit for $50,000 with the bank. The outstanding bank letter of
credit and the line-of-credit are collateralized by cash of $54,310, which
is reflected as restricted cash, and $160,000 of U.S. government
securities.
In April 1998, the Company obtained a $250,000 line-of-credit which is
collateralized by the Company's building. This line-of-credit is available
for the issuance of letters of credit and the $164,000 letter of credit
discussed above was reissued under this line-of-credit. In April 1998, the
Company also obtained a $150,000 line-of-credit which is available for cash
advances. This line-of-credit is collateralized by $160,000 of U.S.
government securities.
In connection with the real estate sales, the Company used the
percentage-of-completion method to determine the amount of gross profit to
be recognized for the year ended March 31, 1998 as follows:
Sales of real estate $1,103,553
Less cost of real estate sold 578,931
----------
Gross profit on sales of real estate $ 524,622
==========
At March 31, 1998, all required development work related to fiscal 1998
sales had been completed and, accordingly, no profit was required to be
deferred.
Limited Partnership Interest - The Company also became a limited partner in
a limited partnership, which purchased approximately 35 acres of
undeveloped land adjacent to the land mentioned above. The partnership
constructed a golf driving range, miniature golf, and batting facility
which was completed in July 1994. The Company contributed $350,000 cash for
its 19% partnership interest, which is reported under the equity method of
accounting. In July 1997, the general partner (Seller) entered into an
Agreement of Purchase and Sale of Leasehold with an unrelated third party
(Purchaser) for the sale of all improvements, buildings, and fixtures for
F-11
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$71,500 cash, $100,000 of Purchaser's restricted common stock and
assumption by Purchaser of approximately $887,000 of debt. The closing of
the transaction occurred in October 1997. In connection with the real
property, the parties entered into a 25-year Ground Lease (the "Lease")
whereby the Purchaser will pay annual rents aggregating $3,909,000 over the
Lease term. The Lease provides for a termination fee payable to the
Purchaser if the Lease is canceled by the Seller after the expiration of
the second lease year of $1,000,000 in lease years 3 through 5 and
declining thereafter to $-0- in lease year 21. The Company's share of the
gain from the sale of the improvements is approximately $45,000 of which
$4,000 was recognized using the installment method of accounting during the
year ended March 31, 1998.
Following is a summary of condensed financial information pertaining to
this limited partnership:
Balance sheet data at March 31, 1998:
Current assets $ 147,000
Noncurrent assets 114,000
Deferred profit (242,000)
Notes payable - general partners (319,000)
YEARS ENDED MARCH 31,
----------------------
1998 1997
--------- ---------
Operations data:
Revenue $ 100,000 $ 276,000
Costs and expenses (121,000) (484,000)
--------- ---------
Net loss $ (21,000) $(208,000)
========= =========
Company's equity in limited partnership loss $ (3,975) $ (39,523)
========= =========
The land owned by the partnerships discussed above is located in Colorado
Springs, Colorado and, accordingly, the value of these properties is
directly affected by local economic and operating conditions. At March 31,
1998, there is a difference of approximately $268,000 between the carrying
value of the Company's investment and its 19% interest in the net assets
and liabilities of the limited partnership. This difference is primarily
attributable to the value of the lease and the residual value of the land.
F-12
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES:
-------------
Actual income tax expense differs from the amounts computed using the
statutory rate of 34% as follows:
YEARS ENDED MARCH 31,
----------------------
1998 1997
--------- ---------
Computed tax benefit (expense) at the expected
statutory rate $ (92,000) $ 178,000
State income taxes, net of Federal benefit (4,000) 9,000
Non-deductible expenses (1,000) (2,000)
Change in valuation allowance (11,000) (185,000)
Surtax exemption 8,000 --
--------- ---------
Income tax expense $(100,000) $ --
========= =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of March 31, 1998,
are presented below:
Deferred tax assets:
Gas royalty interest $ 251,000
Net operating loss carryforward 32,000
Investment in limited partnership 16,000
---------
Total deferred tax assets 299,000
Less valuation allowance (228,000)
---------
Net deferred tax asset 71,000
---------
Deferred tax liabilities:
Net unrealized gain on marketable securities (62,000)
Land under development (48,000)
Other (3,000)
---------
Total deferred tax liabilities (113,000)
---------
Net deferred tax liabilities $ (42,000)
=========
The above balances are classified in the accompanying consolidated balance
sheet as follows:
Net deferred tax asset, long-term $ 23,000
Net deferred tax liability, current (65,000)
---------
$ (42,000)
=========
F-13
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 1998, Bishop has a net operating loss carryforward for
Federal income tax purposes of approximately $87,000, net of $534,000 which
will not be available to the Company due to limitations under IRS Section
382 as a result of the spin-off discussed in Note 1. In addition,
utilization of the $87,000 loss carryforward is subject to limitations
under IRS Section 382. If not previously utilized, this carryforward will
expire primarily in 2013.
7. COMMITMENTS:
------------
Effective December 1995, the Company entered into a five-year employment
agreement (the "Agreement") with the Company's president (the "Executive"),
which provides for minimum annual compensation of $145,000 plus employee
benefits. On the last day of September of each year thereafter, the term of
the Agreement shall be automatically extended an additional year unless,
prior to such last day of September, the Company or the Executive shall
have delivered written notice that the term of employment will not be
extended. The Agreement may be terminated by the Company only upon the
death or disability of the Executive or for cause. If the Executive is
terminated without cause, the Company would be required to pay as severance
pay an amount equal to the Executive's salary in effect as of the date of
termination multiplied by the greater number of years remaining in the term
of employment or the number three.
The Company also entered into a three-year employment agreement in December
1995 with two other officers which provide for aggregate annual
compensation of $95,000 plus employee benefits. The agreements shall be
automatically extended an additional year on September 30 of each year
thereafter unless written notice is given by either party that the term of
employment will not be extended. The agreements may be terminated upon the
death or disability of the individual officer or for cause.
8. FINANCIAL INSTRUMENTS:
----------------------
Statement of Financial Accounting Standards No. 107 requires the Company to
disclose the fair value of certain financial instruments in its financial
statements. Accordingly, at March 31, 1998, management's best estimate is
that the carrying amount of cash and equivalents, notes and other
receivables, accounts payable, accrued expenses, and payable to broker,
approximates fair value due to the short maturity of these instruments. Due
to the early stages of real estate development activities in the area where
the limited partnership's land is located, management is unable to estimate
the fair value of the Company's 19% limited partner interest discussed in
Note 5. However, management believes that fair value exceeds the carrying
value at March 31, 1998.
9. RELATED PARTY TRANSACTIONS:
---------------------------
During the year ended March 31, 1997, the Company loaned an additional
$100,000 to AROC which was subsequently collected during the year. The note
provided for interest at 10% and was collateralized by oil and gas
properties in Louisiana. During the year ended March 31, 1996, an officer
paid a $20,000 cash deposit to the Company for the sale of land. During the
year ended March 31, 1998, the same officer traded a plot of land valued at
$15,000 plus the $20,000 deposit for a different plot of land.
F-14
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has notes receivable for a total of $25,000 from two officers
of the Company. These notes provide for interest at 6.25% and are due in
April 1999. The officers pledged 25,000 shares of AROC common stock as
collateral for the notes.
For the years ended March 31, 1998 and 1997, the Company billed AROC for
accounting services which amounted to approximately $14,000 and $26,000,
respectively.
10. STOCK-BASED COMPENSATION:
-------------------------
Stock Grants - During the year ended March 31, 1997, AROC issued 70,000
shares of its common stock to certain employees of the Company for services
performed on behalf of the Company. The Company recognized a charge to
operations for the fair value of these shares of $79,971 for the year ended
March 31, 1997.
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for stock options
which were granted to its employees. In July 1996, AROC granted a two-year
option to an officer to purchase 45,000 shares of its common stock at an
exercise price of $1.38 per share. Accordingly, the Company did not
recognize any compensation cost for options to purchase AROC's common stock
that were granted to employees of the Company in 1997 since the market
prices of AROC's common stock did not exceed the exercise prices on the
dates of grant. The Company has never issued any stock options, warrants or
similar instruments.
If compensation cost had been recognized using the fair value method
prescribed by FAS 123 rather than the intrinsic value method under APB 25,
the Company's net loss and net loss per share would have been changed to
the pro forma amounts indicated below for the year ended March 31, 1997:
Net loss:
As reported $ (524,300)
Pro forma $ (551,300)
Net loss per share:
As reported $ (.59)
Pro forma $ (.62)
F-15
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of each employee option granted in 1997 was estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
Expected volatility 75.0%
Risk-free interest rate 6.5%
Expected dividends --
Expected terms (in years) 1.8
F-16
Exhibit 10.11
AGREEMENT FOR THE PURCHASE AND
SALE OF COMMERCIAL REAL ESTATE
THIS AGREEMENT FOR THE PURCHASE AND SALE OF COMMERCIAL REAL ESTATE
("Agreement") is entered into as of January 27, 1998 ("Effective Date") between
Bishop Powers, Ltd., a Colorado limited partnership ("Seller") and Grease Monkey
International, Inc., a Colorado corporation ("Purchaser"), upon the basis of the
following facts:
RECITALS
--------
Seller is developer of the commercial retail shopping center commonly known
as the "The Crossing at Palmer Park Center", located in Colorado Springs, El
Paso County, Colorado. A portion of the Center has been subdivided into five
lots. Purchaser desires to purchase from Seller one of the subdivided lots, as
identified below. Purchaser proposes to use the Property (as hereinafter
defined) for a motor vehicle oil change and lubrication facility ("Purchaser's
Intended Use").
Subject to the terms of this Agreement, Seller has agreed to sell the
"Property", as hereinafter described, to Purchaser.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which the parties hereby acknowledge, the parties hereby agree as follows:
SECTION 1. SALE OF PROPERTY. Subject to the terms and conditions provided
in this Agreement, Seller agrees to sell and Purchaser agrees to purchase all of
Seller's right, title and interest in and to the real property described in
Exhibit A and incorporated herein by reference the "Property").
SECTION 2. PURCHASE PRICE. The purchase price to be paid by Purchaser to
Seller for the property is $258,026.00 (the "Purchase Price"), adjusted as
provided in Section 3.2(c). Purchaser will pay the purchase price in the
following manner:
2.1 Earnest Money Deposit. Purchaser has deposited the sum of $10,000.00
with Lawyers Title Insurance Company, 555 East Pikes Peak, Suite 120, Colorado
Springs, Colorado 80903 (the "Title Company") as earnest money and as a deposit
towards payment of the Purchase Price (together with any additions to such
deposit, herein the "Earnest Money Deposit"). The Earnest Money Deposit shall be
credited against the Purchase Price at Closing (as defined below). The Earnest
Money Deposit shall earn interest, and any interest accrual shall belong to the
party entitled to the Earnest Money Deposit in accordance with this Agreement.
2.2 Funds at Closing. At Closing, Purchaser shall pay to Seller the balance
of the Purchase Price, which balance shall be paid in immediately available good
funds.
SECTION 3. TITLE MATTERS.
3.1 Permitted Exceptions. Seller shall transfer and convey its right, title
and interest in the Property to Purchaser, subject only to such matters as
Purchaser may waive or consent to pursuant to Section 3.3 (the "Permitted
Exceptions").
3.2 Title Documents. On or before February 25, 1998, Seller shall deliver
to Purchaser at Seller's expense the following title evidence covering the
Property (collectively, the "Title Documents"):
(a) Title Commitment. A title insurance commitment (the "Title
Commitment") issued by the Title Company showing the status of record title to
the Property, together with copies of all recorded documents referred to in the
Title Commitment. The Title Commitment must commit to insure title to the
Property in Purchaser in the full amount of the Purchase Price, subject only to
the Permitted Exceptions. The Title Commitment shall further commit to delete
the standard printed exceptions. Seller shall, at its expense and promptly after
Closing, cause the owner's policy of title insurance to be issued to Purchaser
pursuant to the Title Commitment.
<PAGE>
(b) Tax Certificate. A certificate of taxes due covering the Property
prepared by the Treasurer of El Paso County, Colorado.
(c) Survey. A land survey plat (as defined in Section 38-51-102,
Colorado Revised Statutes) of the Property, prepared by a licensed Colorado
surveyor, which shall comply with ALTA 1992 Standards for an Urban Class survey
(the "Survey"). The Survey shall contain a legal description of the Property and
shall show the bearing and distances of all boundary lines of the Property, all
improvements to the Property, all easements and other title matters encumbering
or appurtenant to the Property, any encroachments onto or off of the Property,
the Federal flood zone designation and any other matters that would be disclosed
by an accurate survey of the Property, including the square footage of the
Property. The Survey shall also contain the certification of the surveyor
sufficient for deletion of the standard survey exception from the Title
Commitment. If the square footage of the Property as determined by the Survey is
different than 30,356 square feet, then the Purchase Price shall be increased or
decreased at the rate of $8.50 per square foot for every square foot by which
the area of the Property exceeds or is less than 30,356 square feet.
3.3 Defects of Title. Purchaser shall have the right to object to any
defect of title which appears in the Title Documents and which renders title to
the Property unmerchantable or which makes the Property unsuitable for
Purchaser's Intended Use (a "defect of title"). Any objection to a defect of
title must be in writing and must be received by Seller no later than the
expiration of the Inspection Period (as defined in Section 4.2). Purchaser's
failure to provide Seller with written notice of an objection to any title
matter appearing in the Title Documents within the Inspection Period shall be
deemed to be a waiver by Purchaser of any objection it might otherwise have; and
all such title matters shall become additional "Permitted Exceptions."
Notwithstanding the foregoing, if a defect of title is not revealed in the Title
Documents and is discovered by Purchaser after the close of the Inspection
Period, Purchaser shall have until five (5) days after the date of its discovery
of the defect of title or the date of Closing, whichever is earlier, to provide
Seller with notice of its objection to the defect of title, provided, however,
that Purchaser shall be deemed to have approved and accepted any matters that
are shown on the Plat as described in Section 10.6. If Seller receives timely
written notice from Purchaser of a defect of title, Seller shall have the right,
in its sole discretion, to (a) correct or cure the defect of title, (b) obtain
title insurance over the defect of title through title policy endorsement or
otherwise, or (c) notify Purchaser that Seller does not intend to cure or insure
over the defect of title. If Seller is unable or unwilling to cure or insure
over a defect of title, Purchaser shall have the right to either (a) terminate
this Agreement and its obligations hereunder, or (b) waive its objection to the
defect of title. If Purchaser elects to terminate this Agreement, the Title
Company shall return the Earnest Money Deposit to Purchaser and neither party
shall have any further obligation hereunder. If Purchaser elects to waive its
objection to the defect of title, the title matter objected to shall thereafter
be considered a "Permitted Exception." A defect of title, regardless of its
disposition under this Section, shall not result in a reduction of the Purchase
Price.
SECTION 4. INSPECTION OF PROPERTY.
4.1 Inspection Items. Seller has, prior to the Effective Date, delivered to
Purchaser an environmental assessment, dated December 12, 1996, and prepared by
E-Quest Corporation (the "Environmental Audit"), together with copies of all
other studies or reports in Seller's possession with respect to soils,
engineering and environmental matters.
4.2 Inspection Period. Purchaser shall have from the Effective Date through
April 27, 1998 (the "Inspection Period"), in which to determine whether or not
the Property is suitable for Purchaser's Intended Use, which determination shall
be in Purchaser's sole discretion. At anytime during the Inspection Period,
Purchaser shall have the right to terminate this Agreement and all of its
obligations hereunder by providing written notice to Seller of its election to
2
<PAGE>
terminate. Upon receipt of such a notice of termination by Seller, this
Agreement shall be automatically terminated without further action by either
party. Upon termination, the Title Company shall immediately return the Earnest
Money Deposit to Purchaser.
4.3 Access to Property. During the Inspection Period, Purchaser and its
agents and representatives shall have access to the Property to conduct a
physical inspection and to conduct such testing, including core drilling and
soils reports, as Purchaser deems appropriate. Until the Closing, Purchaser
shall not materially alter the existing condition of the Property. Purchaser
hereby indemnifies and holds Seller harmless from any and all losses, costs or
expenses (including lien and personal injury claims, settlement and reasonable
attorneys' fees) which arise from such entry and work, and which may be asserted
against either Seller or the Property.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5.1 Seller's Representations and Warranties. As of the Effective Date and
as of the date of Closing, Seller hereby represents and warrants to Purchaser
that:
(a) Seller is the owner and has full right, power and authority to
sell, convey and transfer the Property to Buyer as provided in this Agreement
and to carry out Seller's obligations under this Agreement. This Agreement and
all documents executed by Seller that are to be delivered prior to or at Closing
have been duly authorized and have been (or, when executed and delivered will
be) duly executed and delivered by Seller and (or, when executed and delivered
will be) legal, valid and binding obligations of Seller.
(b) The execution, delivery, and performance of this Agreement, and
the consummation of the transaction contemplated hereby, will not result in any
breach of or constitute any default under or result in the imposition of any
lien or encumbrance against any part of the Property under any agreement or
other instrument to which Seller is a party or by which Seller of any part of
the Property might be bound.
(c) Seller is aware of the provisions of the Deficit Reduction Act of
1984, 26 U.S.C. Section 1445, et seq., and the Internal Revenue Service
regulations implementing said Act referring to the withholding tax on the
disposition of United States real property interests by foreign persons and
foreign corporations, and Seller is not a foreign person or corporation as
defined by said Act and regulations.
(d) In the event any claim is made by any party for the payment of
sums due for the furnishing of labor, materials, equipment or fuel to Seller or
to the Property at the request of Seller prior to Closing, or in the event any
lien is filed against the Property subsequent to Closing as a result of the
furnishing of such materials, labor, equipment or fuel at the request of Seller,
Seller shall immediately cause said lien to be released of record or otherwise
satisfy Buyer, to Buyer's reasonable satisfaction, that such lien will be
immediately released.
5.2 Purchaser's Representations and Warranties. As of the Effective Date
and as of the date of Closing, Purchaser hereby represents and warrants to
Seller that:
(a) Neither the entering into of this Agreement nor the consummation
or the transaction contemplated hereby will constitute a violation or breach by
Purchaser of any contract or other instrument to which Purchaser is a party, or
to which it is subject or by which any of its assets or properties may be
affected, or of any judgment, order, writ, injunction or decree issued against
or imposed upon it, or will result in a violation of any applicable law, order,
rule or regulation of any governmental authority affecting Purchaser.
(b) To the best of Purchaser's knowledge, there is no action, suit or
proceeding pending or threatened against Purchaser which would affect
Purchaser's ability to enter into or consummate this Agreement.
3
<PAGE>
SECTION 6. CONDITION OF PROPERTY; DISCLAIMER OF WARRANTIES.
6.1 As Is. Except as specifically set forth in Sections 5, 10 and 16
of this Agreement:
(a) Purchaser acknowledges and agrees that Seller has not made, does
not make and specifically negates and disclaims any representations, warranties,
promises, covenants, agreements or guaranties of any kind or character
whatsoever, whether express or implied, oral or written, past, present or
future, of, as to, concerning or with respect to (i) the value, nature, quality
or condition of the Property, including, without limitation, the water, soil and
geology; (ii) the income to be derived from the Property; (iii) the suitability
of the Property for any and all activities and uses which Purchaser may conduct
thereon; or, (iv) the habitability, merchantability, marketability,
profitability or fitness for a particular purpose of the Property; and Seller
specifically disclaims any representations regarding compliance with any
environmental protection, pollution or land use laws, rules, regulations, orders
or requirements, including solid waste, as defined by the U.S. Environmental
Protection Agency regulations at 40 C.F.R., Part 261, or the disposal or
existence, in or on the Property, of asbestos or any hazardous substance, as
defined by the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, and regulations promulgated thereunder.
(b) Purchaser further acknowledges and agrees that having been given
the opportunity to inspect the Property, Purchaser is relying solely on its own
investigation of the Property and not on any information provided or to be
provided by Seller or Broker other than information referred to in this
Agreement.
(c) Purchaser further acknowledges and agrees that any information
provided or to be provided by or on behalf of Seller with respect to the
Property was obtained from a variety of sources and that Seller has not made any
independent investigation or verification of such information and makes no
representations as to the accuracy or completeness of such information.
(d) Seller is not liable or bound in any manner by any oral or written
statements, representations or information pertaining to the Property, or the
operation thereof, furnished by any real estate broker, agent, employee, servant
or other person.
(e) Purchaser further acknowledges and agrees that to the maximum
extent permitted by law, the sale of the Property as provided for herein is made
on an "AS IS" condition and basis with all faults.
It is understood and agreed that the Purchase Price has been adjusted by prior
negotiation to reflect that all of the Property is sold by Seller and purchased
by Purchaser subject to the foregoing.
6.2 Radon. The Colorado Department of Health and the United States
Environmental Protection Agency ("EPA") have detected elevated levels of
naturally occurring radon in structures in the Colorado Springs area. EPA has
raised concerns with respect to adverse effects on human health of long-term
exposure to high levels of radon. Purchaser may conduct radon tests to determine
the possible presence of radon in the Property and may conduct such other
investigations and consult such experts as Purchaser deems appropriate to
evaluate radon mitigation measures that can be employed in the design and
construction of improvements on the Property. Purchaser shall rely solely upon
such investigations and consultations and acknowledges that Seller has made no
representation, express or implied, concerning the presence or absence of radon
in the Property, the suitability of the Property for development or the design
or construction techniques, if any, that can be employed to reduce any radon
levels in improvements built on the Property; and Purchaser, for itself and its
successors and assigns, releases Seller from any liability whatsoever with
respect to the foregoing matters.
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SECTION 7. CONDITIONS PRECEDENT TO PURCHASE AND SALE.
7.1 Conditions Precedent to Purchaser's Obligations. The following matters
shall constitute absolute conditions precedent to Purchasers obligations to
purchase the Property:
(a) Sellers representations and warranties set forth in Section 5.1 of
this Agreement shall be true and correct as of the closing date.
In the event that the conditions set forth above are not met or satisfied
on or before Closing, then Purchaser may either obtain a refund of the Earnest
Money Deposit, following which neither party shall thereafter have any further
liability to the other hereunder, or Purchaser may waive in writing the
nonfulfillment of any portion of these conditions and purchase the Property
pursuant to the terms and provisions hereof without any reduction in the
Purchase Price.
7.2 Condition Precedent to Seller's Obligation. The following matters shall
constitute absolute conditions precedent to Sellers obligations to sell the
Property:
(a) Purchasers representations and warranties set forth in Section 5.2
of this Agreement shall be true and correct as of the closing date.
In the event the condition set forth above is not met or satisfied on or
before Closing, then Seller may terminate this Agreement by giving written
notice of termination to Purchaser in which event the Earnest Money Deposit
shall be refunded to Purchaser following which neither party shall thereafter
have any further liability to the other hereunder, or Seller may waive in
writing the nonfulfillment of the condition and sell the Property to the
Purchaser pursuant to the terms and provisions hereof.
SECTION 8. CLOSING.
8.1 Closing Date. The closing of the purchase and sale of the Property (the
"Closing") shall occur on June 11, 1998. The Closing shall occur at the offices
of the Title Company.
8.2 Purchaser's Obligations at Closing. In addition to delivery of the
balance of the Purchase Price as described in Section 2.2., Purchaser shall
execute and deliver the following to Seller at Closing:
(a) Such affidavits, instruments or agreements that may be required by
the Title Company in its issuance of the policy of title insurance pursuant to
the Title Commitment.
(b) A statement which reflects the settlements and prorations provided
for in Section 9.
(c) Such other documents that may be necessary to carry out the
purposes of this Agreement.
8.3 Seller's Obligations at Closing. Seller shall execute and deliver the
following to Purchaser at Closing:
(a) A Special Warranty Deed conveying the Property to Purchaser,
subject only to the Permitted Exceptions.
(b) A FIRPTA Affidavit.
(c) Such affidavits, instruments or agreements that may be required by
the Title Company in its issuance of the policy of title insurance pursuant to
the Title Commitment.
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(d) A statement which reflects the settlements and prorations provided
for in Section 9.
(e) Such other documents that may be necessary to carry out the
purposes of this Agreement.
SECTION 9. SETTLEMENT AND PRORATIONS. The following items shall be prorated
or settled between Purchaser and Seller at Closing:
9.1 Taxes and Assessments. Prior to Closing, Seller shall pay the amount of
any unpaid real and personal property taxes allocable to the Property for tax
years prior to the year of Closing and any special assessments for improvements
installed prior to Closing. If Seller fails to pay the entire amount of such
taxes and assessments by Closing, Seller shall be debited on its settlement
sheets with the unpaid amount of such taxes and assessments and any resulting
penalties. Real property taxes and assessments for the Property for the year of
Closing, payable in the following calendar year, shall be apportioned between
Seller and Purchaser as of the date of Closing. Such apportionment shall be
computed on the basis of the most recent assessed valuation and mill levy
information, and shall be final.
9.2 Miscellaneous Closing Costs. Seller shall pay the costs associated with
providing Purchaser with the title insurance policy described in Section 3.2.
All real estate recording and documentary fees payable in connection with the
purchase and sale of the Property shall be paid by Purchaser. Any fee for
closing services which is charged by the Title Company shall be shared equally
by Seller and Purchaser. Except as otherwise expressly provided in this
Agreement, Purchaser and Seller shall pay their own fees and expenses incurred
in the preparation, execution and performance of their respective obligations
under this Agreement.
SECTION 10. APPROVALS, PLANNING, PLATTING AND DEVELOPMENT.
10.1 Reserved.
10.2 Reserved.
10.3 Reserved.
10.4 Reserved.
10.5 Purchaser's Development Plan and Building Plans. Purchaser
acknowledges that the City will require a development plan or development plans
("Purchaser's Development Plan") for the Property to be approved in accordance
with applicable zoning laws and City subdivision ordinances prior to the
issuance of any building permit for construction of improvements on the
Property. In addition, Purchaser acknowledges that in accordance with the
provisions of the CC&R's (as hereinafter defined Section 11.1) Seller has
certain approval rights, including the right to approve development plans prior
to their submission to the City, and the right to approve the plans for any
proposed building or improvement before construction is started. Before
submitting any Purchasers Development Plan for the Property to the City,
Purchaser shall submit Purchaser's Development Plan to Seller for approval in
accordance with
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the CC&R's. Purchaser shall not permit any development plan to become final and
binding on the Property or Seller until after Closing. Purchaser shall be
solely responsible for obtaining the City's approval of Purchasers Development
Plan, and Seller will cooperate with Purchasers efforts to obtain the City's
approval of Purchasers Development Plan as approved by Seller.
10.6 Reserved.
10.7 Seller's Plat Responsibilities. Contingent upon Closing, Seller shall
be responsible for all improvements, fees and agreements with the City
concerning either installation of improvements or provisions for public
facilities that were required pursuant to the City's approval of the subdivision
plat (the "Plat") affecting the Property. Purchaser shall be responsible for all
fees and charges payable in connection with building permits or otherwise
payable with respect to the property, except for the specific obligations of
Seller identified in this Agreement.
10.8 Utility Service. Seller shall be responsible for extending water,
natural gas, electric and sewer utility lines from their current locations to
the Property boundary, for repairing streets damaged by such extensions.
Purchaser shall be responsible for extending such utility services to the
improvements it constructs on the Property and for paying all tap, line
extension and other City imposed charges and fees in connection with the
extension of such utility services to the improvements. Purchaser acknowledges
that the City installs all electric lines and that Purchaser will be solely
responsible for making arrangements with the City's Department of Utilities to
extend electric lines and to provide electrical service to meet the particular
needs of the improvements to be constructed on the Property. Purchaser will also
be responsible for obtaining telephone and cable television lines and service
for the Property. Purchaser acknowledges that the Plat will have to provide for
utility easements as required by the City.
10.9 Streets. Access to the Property is provided via public and private
streets shown on the Plat. Purchaser shall be solely responsible for
constructing all driveways within the boundaries of the Property and all curbs
and sidewalks on or adjacent to the Property required by governmental
authorities.
10.10 Drainage. Seller shall be responsible for installing, or causing to
be installed, all drainage facilities required by the City outside of the
Property that relate to development on the Property. Purchaser will be solely
responsible for providing all drainage facilities required within the boundaries
of the Property in accordance with the Purchasers Development Plan and any
applicable drainage plans approved by the city.
10.11 Park and Drainage Fees. Seller will hold Purchaser harmless from all
requirements and obligations to the City for park fees and drainage fees with
respect to the Property.
10.12 Reserved.
10.13 Cooperation. The Seller and Purchaser shall cooperate with one
another in a reasonable manner to the end that the Closing occurs as
contemplated by this Agreement. All approvals required to be obtained by either
party pursuant to this Agreement shall be sought in a reasonable manner and
acted upon diligently and expeditiously. Whenever the provisions of this
Agreement require one party to obtain the other party's approval, such approval
shall not be unreasonably withheld or delayed. Each party shall use its good
faith efforts to satisfy all the conditions to its performance of this
Agreement.
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SECTION 11. THE COVENANTS FOR THE CENTER.
11.1 Covenants. There is recorded, at Reception No. 097066132 of the
records of El Paso County Colorado, a Declaration of Covenants, Conditions and
Restrictions for The Crossing at Palmer Park Center ("the CC&R's"). Purchaser
acknowledges receipt of a copy of the CC&R's.
11.2 Other Development. Purchaser acknowledges that Seller has made no
representations or warranties to Purchaser concerning the development of any
other property adjacent to or in the vicinity of the Property on which Purchaser
has relied.
SECTION 12. Reserved.
SECTION 13. NAME AND LOGO. Except for directional and location
identification purposes, neither the name "The Crossing at Palmer Park Center,"
any derivatives thereof, nor the logos associated with such name may be used in
any way in connection with the Property or any promotion of it, unless Seller
has given its prior written approval to such use.
SECTION 14. CONDEMNATION. If, between the Effective Date and Closing, any
portion of the Property is taken in condemnation, Purchaser shall have the
option to terminate this Agreement and its obligations hereunder. The option to
terminate contained in this Section must be exercised by written notice to
Seller no later than ten (10) business days after Purchaser is notified by
Seller or others of the condemnation, if Purchaser exercises its option to
terminate in accordance with this Section, the Title Company shall return the
Earnest Money Deposit to Purchaser and neither party shall have any further
obligation hereunder. If Purchaser does not exercise its option to terminate as
provided in this Section, the Agreement shall continue in full force and effect.
In such event, the Purchase Price shall be paid by Purchaser at Closing without
reduction, but Seller shall remit to Purchaser all awards received by Seller as
a result of the condemnation.
SECTION 15. DEFAULT AND REMEDIES. In the event of default by either party
under this Agreement, Purchaser and Seller agree as follows:
15.1 Default by Purchaser. If Purchaser shall default in the performance of
its obligations hereunder, Seller's sole and only remedy shall be to terminate
this Agreement and to retain the Earnest Money Deposit as liquidated damages.
15.2 Default by Seller. If Seller shall default in the performance of its
obligations hereunder, Purchaser shall have the right to either (a) terminate
this Agreement and to obtain the return of the Earnest Money Deposit, or (b)
enforce this Agreement through an action for specific performance. Purchaser
hereby waives its right to recover damages from Seller, including without
limitation any loss of profits, consequential damages, punitive damages or any
other damages or losses suffered by Purchaser in connection with this Agreement.
SECTION 16. BROKERS. Seller represents and warrants to Purchaser that,
other than Highland Commercial Group, LLC, ("Seller's Broker"), no broker or
finder has been engaged by Seller in connection with any of the transactions
contemplated by this Agreement. Seller further represents and warrants that no
person or entity, other than Broker, now claims or will claim any commission,
finder's fee or other amounts by, through, under or as a result of any
relationship with Seller because of such transactions. Seller agrees to pay
Broker a commission equal to ten percent (10%) of the Purchase Price, which
commission shall not be earned or payable until the occurrence of the Closing
and Seller's receipt of the Purchase Price. In the event of a termination of
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this Agreement, Broker shall have no right to share in the Earnest Money Deposit
if retained by Seller. Purchaser represents and warrants to Seller that other
than Hamilton Griggs Commercial Properties, Inc. ("Purchaser's Broker"), no
broker or finder has been engaged by Purchaser in connection with any of the
transactions contemplated by this Agreement. Purchaser further represents that
no person or entity, other than Broker, claims or will claim any commission,
finder's fee or other amounts by, through, under or as a result of any
relationship with Purchaser because of such transactions. Each party agrees to
hold the other party harmless from and against any and all costs, expenses,
claims, losses or damages, including reasonable attorneys' fees, resulting from
any breach of the representations and warranties contained in this Section.
SECTION 17. ASSIGNMENT. Buyer shall have the right, in its sole discretion,
to assign its rights hereunder; provided, however that Buyer shall remain
obligated hereunder notwithstanding any such assignment.
SECTION 18. MISCELLANEOUS.
18.1 Notices. All notices required or permitted under this Agreement shall
be given by nationally recognized overnight courier, for "next day" delivery,
with all delivery costs paid, or by hand delivery, directed as follows:
If intended for Seller, to:
Bishop Powers, Ltd.
c/o Bishop Capital Corporation
716 College View Drive
Riverton, WY 82501
Attn: Robert Thrailkill
Phone: (307) 856-3800
If intended for Purchaser, to:
Grease Monkey International, Inc.
16th Street, Suite 1100
Denver, CO 80202
Attn: Dana Klapper Cohen
with a copy in each case to:
Flynn McKenna Wright & Karsh, Ilc
Plaza of the Rockies, Suite 202
111 South Tejon
Colorado Springs, Co 80903
Attn: R. Tim McKenna
Any notice delivered by overnight carrier in accordance with this paragraph
shall be deemed to have been duly given when delivered. Any notice which is hand
delivered shall be effective upon receipt by the party to whom it is addressed.
Either party, by notice given as above, may change the address to which future
notices should be sent.
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18.2 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, personal representatives, successors and permitted assigns.
18.3 Entire Agreement. This Agreement, together with the exhibits attached
hereto, constitutes the entire agreement between Seller and Purchaser, and may
not be modified in any manner except by an instrument in writing signed by both
parties.
18.4 Headings. The section and subsection headings contained in this
Agreement are inserted only for convenient reference and do not define, limit or
proscribe the scope of this Agreement or any exhibit attached hereto.
18.5 Counterparts. This Agreement may be executed in any number of
counterparts which together shall constitute one and the same instrument.
18.6 Unenforceable Provisions. If any provision of this Agreement, or the
application thereof to any person or situation shall be held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to persons or situations other than those to which it shall have been
held invalid of, unenforceable, shall continue to be valid and enforceable to
the fullest extent permitted by law.
18.7 Time of the Essence. Time is strictly of the essence with respect to
each and every term, condition, obligation and provision of this Agreement, and
the failure to timely perform any of the terms, conditions, obligations or
provisions hereunder by either party shall constitute a breach of and a default
under this Agreement by the party so failing to perform. In calculating any
period of time provided for in this Agreement, the number of days allowed shall
refer to calendar and not business days. If any day scheduled for performance of
any obligation hereunder shall occur on a weekend or holiday, the time period
allowed and day for performance shall be continued to the next business day.
18.8 Waivers. No waiver by either party of any provision hereof shall be
effective unless in writing or shall be deemed to be a waiver of any other
provision hereof or of any subsequent breach by either party of the same or any
other provision.
18.9 Attorneys' Fees and Costs. In the event of litigation between Seller
and Purchaser arising out of the enforcement of or a default under this
Agreement, the prevailing party shall be entitled to judgment for court costs
and reasonable attorneys' fees in an amount to be determined by the court.
18.10 Governing Law; Construction of Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Colorado.
Seller and Purchaser and their respective counsel have reviewed, revised and
approved this Agreement. Accordingly, the normal rule of construction that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or exhibits hereto.
18.11 Duration of Offer. Purchaser has executed and submitted this
Agreement to Seller as an offer for acceptance by Seller to be evidenced by
Seller's execution of this Agreement. Purchaser's offer as represented by this
Agreement shall continue in effect only until February 6, 1998. If Purchaser has
not received a copy of this Agreement executed by Seller on or before that date,
Purchaser's offer and this Agreement shall immediately terminate and shall no
longer be of any force or effect.
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This Agreement for the Purchase and Sale of Commercial Real Estate has been
executed as of the date first written above.
SELLER:
Bishop Powers., Ltd.
By: Bishop Capital Corporation, its general partner
By: /s/ Robert E. Thrailkill
------------------------
Its: President
------------------------
PURCHASER:
Grease Monkey international, Inc.
By: /s/ Michael J. Brunetti
---------------------------
Its: Vice President Development
---------------------------
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AGREEMENT OF BROKER
The undersigned, as Broker hereunder, acknowledges and agrees that Section 16
of the foregoing Agreement correctly sets forth the understanding and agreement
between Broker, Seller and Purchaser relating to the payment of a commission
resulting from the sale of the Property.
BROKER:
Highland Commercial Group, LLC
By: /s/ James E. Spittler
--------------------------
Its: Listing Agent
--------------------------
Hamilton Griggs Commmercial Properties, Inc.
By: /s/ Stephen C. Mason
--------------------------
Its: Broker
--------------------------
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EXHIBIT A
to
Agreement for the Purchase and
Sale of Commercial Real Estate
Legal Description of Property
Lot 3 in The Crossing at Palmer Park, in the City of Colorado Springs, El Paso
County, Colorado
Exhibit 10.12
AGREEMENT FOR THE PURCHASE AND
SALE OF COMMERCIAL REAL ESTATE
THIS AGREEMENT FOR THE PURCHASE AND SALE OF COMMERCIAL REAL ESTATE
("Agreement") is entered into as of March 20, 1998 ("Effective Date") between
Bishop Powers, Ltd., a Colorado limited partnership ("Seller") and PCRO Limited
Liability Company, a Colorado limited liability company ("Purchaser"), upon the
basis of the following facts.
RECITALS
--------
Seller is developer of the commercial retail shopping center commonly known
as the "The Crossing at Palmer Park Center", located in Colorado Springs, El
Paso County, Colorado, and legally described on Exhibit A attached hereto and
incorporated herein by reference. A portion of the Center has been subdivided
into five lots ("Phase I"). Purchaser desires to purchase from Seller an
unplatted portion of the Center, together with a portion of an adjacent piece of
real property owned by Seller, but not currently included in the Center.
Attached hereto as Exhibit B is a map showing the approximate configuration and
location of the Property (as hereinafter defined). Purchaser proposes to use the
Property (as hereinafter defined) for a Tire World sales facility ("Purchasers
Intended Use"), and intends to develop the Property approximately as shown on
the preliminary development plan (the "Preliminary Plan") attached hereto as
Exhibit C.
Subject to the terms of this Agreement, Seller has agreed to sell the
Property (as hereinafter described), to Purchaser.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which the parties hereby acknowledge, the parties hereby agree as follows:
SECTION 1. SALE OF PROPERTY. Subject to the terms and conditions provided
in this Agreement, Seller agrees to sell and Purchaser agrees to purchase all of
Sellers right, title and interest in and to the real property approximately as
depicted in Exhibit B and incorporated herein by reference (the "Property"). The
legal description of the Property shall be included in the Survey described in
Section 3.2(c). Prior to Closing, the Property will be platted in accordance
with Section 10, and will be conveyed to Purchaser by platted legal description.
SECTION 2. PURCHASE PRICE. The purchase price to be paid by Purchaser to
Seller for the Property is $300,000.00 (the "Purchase Price"). The Purchase
Price will be paid by Purchaser in the following manner:
2.1 Earnest Money Deposit. Purchaser has deposited the sum of $5,000.00
with Lawyers Title Insurance Company, 555 East Pikes Peak, Suite 120, Colorado
Springs, Colorado 80903 (the "Title Company") as earnest money and as a deposit
towards payment of the Purchase Price (together with any additions to such
deposit, herein the "Earnest Money Deposit"). The Earnest Money Deposit shall be
credited against the Purchase Price at Closing (as defined below). The Earnest
Money Deposit shall earn interest at the highest available rate, and any
interest accrual shall belong to the party entitled to the Earnest Money Deposit
in accordance with this Agreement.
2.2 Funds at Closing. At Closing, Purchaser shall pay to Seller the balance
of the Purchase Price, which balance shall be paid in immediately available good
funds.
SECTION 3. TITLE MATTERS.
3.1 Permitted Exceptions. Seller shall transfer and convey its right, title
and interest in the Property to Purchaser, subject only to such matters as
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Purchaser may waive or consent to pursuant to Section 3.3, the Amended CC&R's
referred to in Section 11 hereinafter, and the matters shown on the Plat
referred to in Section 10.6 (the "Permitted Exceptions").
3.2 Title Documents. On or before March 27, 1998, Seller shall deliver to
Purchaser at Seller's expense the following title evidence covering the Property
(collectively, the "Title Documents"):
(a) Title Commitment. A title insurance commitment (the "Title
Commitment") issued by the Title Company showing the status of record title to
the Property, together with copies of all recorded documents referred to in the
Title Commitment. The Title Commitment must commit to insure title to the
Property in Purchaser in the full amount of the Purchase Price, subject only to
the Permitted Exceptions. The Title Commitment shall further commit to delete
the standard printed exceptions. Seller shall, at its expense and promptly after
Closing, cause the owner's policy of title insurance to be issued to Purchaser
pursuant to the Title Commitment.
(b) Tax Certificate. A certificate of taxes due covering the Property
prepared by the Treasurer of El Paso County, Colorado.
(c) Survey. A land survey plat (as defined in Section 38-51-102,
Colorado Revised Statutes) of the Property, prepared by a licensed Colorado
surveyor, which shall comply with ALTA 1992 Standards for an Urban Class survey
(the "Survey"). The Survey shall contain a legal description of the Property and
shall show the bearing and distances of all boundary lines of the Property, all
improvements to the Property, all easements and other title matters encumbering
or appurtenant to the Property, the location of all dedicated public
rights-of-way adjacent to the Property, any encroachments onto or off of the
Property, the Federal flood zone designation and any other matters that would be
disclosed by an accurate survey of the Property, including the square footage of
the Property. The Survey shall also contain the certification of the surveyor
sufficient for deletion of the standard survey exception from the Title
Commitment, and shall be certified to Purchaser and Purchasers lender.
3.3 Defects of Title. Purchaser shall have the right to object to any
defect of title which appears in the Title Documents and which renders title to
the Property unmerchantable or which makes the Property unsuitable for
Purchasers Intended Use (a "defect of title"). Any objection to a defect of
title must be in writing and must be received by Seller no later than the
expiration of the Inspection Period (as defined in Section 4.2). Purchasers
failure to provide Seller with written notice of an objection to any title
matter appearing in the Title Documents within the Inspection Period shall be
deemed to be a waiver by Purchaser of any objection it might otherwise have; and
all such title matters shall become additional "Permitted Exceptions."
Notwithstanding the foregoing, if a defect of title is not revealed in the Title
Documents and is discovered by Purchaser after the close of the Inspection
Period, Purchaser shall have until five (5) days after the date of its discovery
of the defect of title or the date of Closing, whichever is earlier, to provide
Seller with notice of its objection to the defect of title, provided, however,
that Purchaser shall be deemed to have approved and accepted any matters that
are shown on the Plat as described in Section 10.6. If Seller receives timely
written notice from Purchaser of a defect of title, Seller shall have the right,
in its sole discretion, to (a) correct or cure the defect of title, (b) obtain
title insurance over the defect of title through title policy endorsement or
otherwise, or (c) notify Purchaser that Seller does not intend to cure or insure
over the defect of title. If Seller is unable or unwilling to cure or insure
over a defect of title, Purchaser shall have the right to either (a) terminate
this Agreement and its obligations hereunder, or (b) waive its objection to the
defect of title. If Purchaser elects to terminate this Agreement, the Title
Company shall return the Earnest Money Deposit to Purchaser and neither party
shall have any further obligation hereunder. If Purchaser elects to waive its
objection to the defect of title, the title matter objected to shall thereafter
be considered a "Permitted Exception." A defect of title, regardless of its
disposition under this Section, shall not result in a reduction of the Purchase
Price.
SECTION 4. INSPECTION OF PROPERTY.
4.1 Inspection Items. Seller has, prior to the Effective Date, delivered to
Purchaser an environmental assessment, dated December 12, 1996, and prepared by
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E-Quest Corporation (the "Environmental Audit"), together with copies of all
other studies or reports in Sellers possession with respect to soils,
engineering and environmental matters.
4.2 Inspection Period. Purchaser shall have from the Effective Date through
April 26, 1998, (the "Inspection Period"), in which to determine whether or not
the Property is suitable for Purchasers Intended Use, which determination shall
be in Purchaser's sole discretion. At anytime during the Inspection Period,
Purchaser shall have the right to terminate this Agreement and all of its
obligations hereunder by providing written notice to Seller of its election to
terminate. Upon receipt of such a notice of termination by Seller, this
Agreement shall be automatically terminated without further action by either
party. Upon termination, the Title Company shall immediately return the Earnest
Money Deposit to Purchaser.
4.3 Access to Property. During the Inspection Period, Purchaser and its
agents and representatives shall have access to the Property to conduct a
physical inspection and to conduct such testing, including core drilling and
soils reports, as Purchaser deems appropriate. Until the Closing, Purchaser
shall not materially alter the existing condition of the Property. Purchaser
hereby indemnifies and holds Seller harmless from any and all losses, costs or
expenses (including lien and personal injury claims, settlement and reasonable
attorneys' fees) which arise from such entry and work, and which may be asserted
against either Seller or the Property.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5.1 Seller's Representations and Warranties. As of the Effective Date and
as of the date of Closing, Seller hereby represents and warrants to Purchaser
that:
(a) Seller is the owner and has full right, power and authority to
sell, convey and transfer the Property to Buyer as provided in this Agreement
and to carry out Seller's obligations under this Agreement. This Agreement and
all documents executed by Seller that are to be delivered prior to or at Closing
have been duly authorized and have been (or, when executed and delivered, will
be) duly executed and delivered by Seller and are (or, when executed and
delivered will be) legal, valid and binding obligations of Seller.
(b) The execution, delivery and performance of this Agreement, and the
consummation of the transaction contemplated hereby, will not result in any
breach of or constitute any default under or result in the imposition of any
lien or encumbrance against any part of the Property under any agreement or
other instrument to which Seller is a party or by which Seller or any part of
the Property might be bound.
(c) Seller is aware of the provisions of the Deficit Reduction Act of
1984, 26 U.S.C. Section 1445, et seq., and the Internal Revenue Service
regulations implementing said Act referring to the withholding tax on the
disposition of United States real property interests by foreign persons and
foreign corporations, and Seller is not a foreign person or corporation as
defined by said Act and regulations.
(d) In the event any claim is made by any party for the payment of
sums due for the furnishing of labor, materials, equipment or fuel to Seller or
to the Property at the request of Seller prior to Closing, or in the event any
lien is filed against the Property subsequent to Closing as a result of the
furnishing of such materials, labor, equipment or fuel at the request of Seller,
Seller shall immediately cause said lien to be released of record or otherwise
satisfy Buyer, to Buyer's reasonable satisfaction, that such lien will be
immediately released.
(e) Except as disclosed in the Environmental Audit, to the best of
Seller's actual knowledge, without investigation, as of the date of this
Contract and as of the date of Closing, the Property (including land, surface
water, ground water and improvements) is now and will then be free of all
contamination, including (i) any "hazardous waste", "underground storage tanks",
"petroleum", "regulated substance", or "used oil" as defined by the Resource
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Conservation and Recovery Act of 1976 (42 U.S.C. ss. 9601, et seq.) as amended,
or by any regulations promulgated thereunder, (ii) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. ss. 9601, et seq.) as amended, or by any regulations
promulgated thereunder (including, but not limited to, asbestos and radon);
(iii) any "oil, petroleum products, and their byproducts", as defined by C.R.S.
1973 ss. 25-17-101 et seq., as amended, or by any regulations promulgated
thereunder; (iv) any "hazardous waste" as defined by the Colorado Waste Act,
C.R.S. 1973 ss. 25-15-101, et seq., or by any regulations promulgated
thereunder; (v) any substance the presence of which on, in or under the Property
is prohibited by any law similar to those set forth above; and (vi) any other
substance which by law, regulation or ordinance requires special handling in its
collection, storage, treatment or disposal. For purposes of this subsection 5.1
(e), "to the best of Seller's knowledge" shall mean to the best of the knowledge
of Robert E. Thrailkill and John A. Alsko, who are the President and Secretary,
respectively, of Bishop Capital Corporation, the general partner of Seller.
5.2 Purchaser's Representations and Warranties. As of the Effective Date
and as of the date of Closing, Purchaser hereby represents and warrants to
Seller that:
(a) Neither the entering into of this Agreement nor the consummation
or the transaction contemplated hereby will constitute a violation or breach by
Purchaser of any contract or other instrument to which Purchaser is a party, or
to which it is subject or by which any of its assets or properties may be
affected, or of any judgment, order, writ, injunction or decree issued against
or imposed upon it, or will result in a violation of any applicable law, order,
rule or regulation of any governmental authority affecting Purchaser.
(b) To the best of Purchaser's knowledge, there is no action, suit or
proceeding pending or threatened against Purchaser which would affect Purchasers
ability to enter into or consummate this Agreement.
SECTION 6. CONDITION OF PROPERTY; DISCLAIMER OF WARRANTIES.
6.1 As Is. Except as specifically set forth in Sections 5,10, 11 and 16 of
this Agreement:
(a) Purchaser acknowledges and agrees that Seller has not made, does
not make and specifically negates and disclaims any representations, warranties,
promises, covenants, agreements or guaranties of any kind or character
whatsoever, whether express or implied, oral or written, past, present or
future, of, as to, concerning or with respect to (i) the value, nature, quality
or condition of the Property, including, without limitation, the water, soil and
geology; (ii) the income to be derived from the Property; (iii) the suitability
of the Property for any and all activities and uses which Purchaser may conduct
thereon. or, (iv) the habitability, merchantability, marketability,
profitability or fitness for a particular purpose of the Property; and Seller
specifically disclaims any representations regarding compliance with any
environmental protection, pollution or land use laws, rules, regulations, orders
or requirements, including solid waste, as defined by the U.S. Environmental
Protection Agency regulations at 40 C.F.R., Part 261, or the disposal or
existence, in or on the Property, of asbestos or any hazardous substance, as
defined by the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, and regulations promulgated thereunder.
(b) Purchaser further acknowledges and agrees that having been given
the opportunity to inspect the Property, Purchaser is relying solely on its own
investigation of the Property and not on any information provided or to be
provided by Seller or Broker other than information referred to in this
Agreement.
(c) Purchaser further acknowledges and agrees that any information
provided or to be provided by or on behalf of Seller with respect to the
Property was obtained from a variety of sources and that Seller has not made any
independent investigation or verification of such information and makes no
representations as to the accuracy or completeness of such information.
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(d) Seller is not liable or bound in any manner by any oral or written
statements, representations or information pertaining to the Property, or the
operation thereof, furnished by any real estate broker, agent, employee, servant
or other person.
(e) Purchaser further acknowledges and agrees that to the maximum
extent permitted by law, the sale of the Property as provided for herein is made
on an "AS IS" condition and basis with all faults.
It is understood and agreed that the Purchase Price has been adjusted by prior
negotiation to reflect that all of the Property is sold by Seller and purchased
by Purchaser subject to the foregoing.
6.2 Radon. The Colorado Department of Health and the United States
Environmental Protection Agency ("EPA") have detected elevated levels of
naturally occurring radon in structures in the Colorado Springs area. EPA has
raised concerns with respect to adverse effects on human health of longterm
exposure to high levels of radon. Purchaser may conduct radon tests to determine
the possible presence of radon in the Property and may conduct such other
investigations and consult such experts as Purchaser deems appropriate to
evaluate radon mitigation measures that can be employed in the design and
construction of improvements on the Property. Purchaser shall rely solely upon
such investigations and consultations and acknowledges that Seller has made no
representation, express or implied, concerning the presence or absence of radon
in the Property, the suitability of the Property for development or the design
or construction techniques, if any, that can be employed to reduce any radon
levels in improvements built on the Property; and Purchaser, for itself and its
successors and assigns, releases Seller from any liability whatsoever with
respect to the foregoing matters.
SECTION 7. CONDITIONS PRECEDENT TO PURCHASE AND SALE.
7.1 Conditions Precedent to Purchaser's Obligations. The following matters
shall constitute absolute conditions precedent to Purchaser's obligations to
purchase the Property:
(a) Seller's representations and warranties set forth in Section 5.1
of this Agreement shall be true and correct as of the closing date.
(b) The Seller has received all approvals contemplated by Section 10
of this Agreement.
(c) Purchaser has received the approval from the City of Colorado
Springs ("City") of Purchasers Development Plan.
(d) The Plat referenced in Section 10.6 has been recorded.
(e) Seller has provided Purchaser with a copy of the Letter of Credit
referenced in Section 10.3.
Purchaser shall act with due diligence in completing the conditions of this
Agreement. In the event that the conditions set forth above are not met or
satisfied on or before Closing, through no fault of Purchaser, then Purchaser
may either obtain a refund of the Earnest Money Deposit, following which neither
party shall thereafter have any further liability to the other hereunder, or
Purchaser may waive in writing the nonfulfillment of any portion of these
conditions and purchase the Property pursuant to the terms and provisions hereof
without any reduction in the Purchase Price.
7.2 Condition Precedent to Seller's Obligation. The following matters shall
constitute absolute conditions precedent to Seller's obligations to sell the
Property:
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(a) Purchasers representations and warranties set forth in Section 5.2
of this Agreement shall be true and correct as of the closing date.
(b) Seller has determined that the Development Budget referenced in
Section 10.1 does not reflect a total cost that exceeds $600,000.00.
(c) The Seller has received all approvals contemplated by Section 10
of this Agreement.
(d) The Plat referenced in Section 10.6 has been recorded.
Seller shall act with due diligence in completing the conditions of this
Agreement. In the event the conditions set forth above is not met or satisfied
on or before Closing, through no fault of Seller, then Seller may terminate this
Agreement by giving written notice of termination to Purchaser in which event
the Earnest Money Deposit shall be refunded to Purchaser following which neither
party shall thereafter have any further liability to the other hereunder, or
Seller may waive in writing the nonfulfillment of the condition and sell the
Property to the Purchaser pursuant to the terms and provisions hereof.
SECTION 8. CLOSING.
8.1 Closing Date. The closing of the purchase and sale of the Property (the
"Closing") shall occur either:
(a) Ten (10) business days following notice to Purchaser from Seller
that the City has approved Purchasers Development Plan, the Concept Plan and the
Plat (the "City Approvals"), provided, the Closing can occur in accordance with
the foregoing notice not later than June 1, 1998, and provided further that the
Plat has been recorded by Closing, or,
(b) On December 1, 1998, or at such earlier date as the parties may
agree.
The Closing shall occur at the offices of the Title Company.
8.2 Purchaser's Obligations at Closing. In addition to delivery of the
balance of the Purchase Price as described in Section 2.2., $200,000.00 of which
shall be deposited into escrow pursuant to the provisions of the Escrow
Agreement described in Section 10.2 hereinafter, Purchaser shall execute and
deliver the following to Seller at Closing:
(a) Such affidavits, instruments or agreements that may be required by
the Title Company in its issuance of the policy of title insurance pursuant to
the Title Commitment.
(b) A statement which reflects the settlements and prorations provided
for in Section 9.
(c) The Escrow Agreement.
(d) Such other documents that may be necessary to carry out the
purposes of this Agreement.
8.3 Seller's Obligations at Closing. Seller shall execute and deliver the
following to
Purchaser at Closing:
(a) A Special Warranty Deed conveying the Property to Purchaser,
subject only to the Permitted Exceptions.
(b) A FIRPTA Affidavit.
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(c) Such affidavits, instruments or agreements that may be required by
the Title Company in its issuance of the policy of title insurance pursuant to
the Title Commitment.
(d) A statement which reflects the settlements and prorations provided
for In Section 9.
(e) The Escrow Agreement.
(f) Such other documents that may be necessary to carry out the
purposes of this Agreement.
SECTION 9. SETTLEMENT AND PRORATIONS. The following items shall be prorated
or settled between Purchaser and Seller at Closing:
9.1 Taxes and Assessments. Prior to Closing, Seller shall pay the amount of
any unpaid real and personal property taxes allocable to the Property for tax
years prior to the year of Closing and any special assessments for improvements
installed prior to Closing. If Seller falls to pay the entire amount of such
taxes and assessments by Closing, Seller shall be debited on its settlement
sheets with the unpaid amount of such taxes and assessments and any resulting
penalties. Real property taxes and assessments for the Property for the year of
Closing, payable in the following calendar year, shall be apportioned between
Seller and Purchaser as of the date of Closing. Such apportionment shall be
computed on the basis of the most recent assessed valuation and mill levy
information, and shall be final.
9.2 Miscellaneous Closing Costs. Seller shall pay the costs associated with
providing Purchaser with the title insurance policy described in Section 3.2.
All real estate recording and documentary fees payable in connection with the
purchase and sale of the Property shall be paid by Purchaser. Any fee for
closing services which is charged by the Title Company shall be shared equally
by Seller and Purchaser. Except as otherwise expressly provided in this
Agreement, Purchaser and Seller shall pay their own fees and expenses incurred
in the preparation, execution and performance of their respective obligations
under this Agreement.
SECTION 10. APPROVALS, PLANNING, PLATTING AND DEVELOPMENT.
10.1 Seller's Development Obligations - Generally. The Seller shall be
responsible for subdividing and platting the Property and for the Off Site and
On Site Development Work (as hereinafter defined). Prior to the Effective Date,
Seller has furnished Purchaser with a development budget (the "Development
Budget") for all On and Off Site Development Work necessary or required in
connection with the subdivision and platting of the Property (including both
"hard" and "soft" costs). The Development Budget was prepared using the most
accurate information available to Seller at the time of its preparation. In the
event that unforeseen events occur (such as, for example, City imposed
development obligations not currently anticipated in Seller's current
Development Budget) prior to Closing that cause the total amount of the
Development Budget to increase above $600,000.00, Seller may, at its option, so
notify Purchaser, and may elect to by such notice to terminate this Agreement
and all of its obligations hereunder. Upon receipt of such a notice of
termination by Purchaser, this Agreement shall be automatically terminated
without further action by either party. Upon termination, the Title Company
shall immediately return the Earnest Money Deposit to Purchaser.
10.2 Timing of Seller's Development Obligations. On or before March
20,1998, Seller shall complete and submit to the City for its approval the
Concept Plan and the Plat (as hereinafter defined) of the Property. Seller shall
use its reasonable efforts to obtain the City's approval of the Concept Plan and
the Plat. It is anticipated that none of the Development Work will be completed
by Closing. As a consequence, and to assure the Purchaser that the On Site
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Development Work will be completed in a timely manner following the Closing, the
parties have agreed that at Closing, and out of the net proceeds payable to
Seller, Seller will place $200,000 in an escrow, the terms of which will be
substantially as set forth in the Escrow Agreement ("Escrow Agreement") attached
hereto as Exhibit D. The date to be inserted in Paragraph 3 of Exhibit D, shall
be four (4) months after the date of Closing if the Closing occurs on or prior
to June 1, 1998, otherwise, five (5) months after the date of Closing.
10.3 Off Site Development Work. For purposes of this Agreement, "Off Site
Development Work" shall mean all of the off site development work required to be
completed by the City as a condition of the City's approval of the Concept Plan
and the Plat, which the parties anticipate shall include construction of
drainage improvements in Sand Creek. In accordance with the City's procedures,
the parties acknowledge that the City, as a condition of the approval of the
Concept Plan and the Plat, will require Seller agree to complete the Off Site
Development Work, and to post with the City a letter of credit ("Letter of
Credit") to assure the City of the completion of the Off Site Development Work.
10.4 On Site Development Work. For purposes of this Agreement, "On Site
Development Work" shall mean all of the on site development work required to be
completed by the City as a condition of the City's approval of the Concept Plan
and the Plat, and the following:
(a) Rough grading of the Property in accordance with the City approved
grading plan (the "Grading Plan").
(b) Construction of private road access to Property per Concept Plan.
(c) Stubbing all utilities to the Property pursuant to City Utility
Department specifications.
10.5 Purchaser's Development Plan. Purchaser acknowledges that the City
will require a development plan or development plans ("Purchasers Development
Plan") for the Property to be approved in accordance with applicable zoning laws
and City subdivision ordinances prior to the issuance of any building permit for
construction of improvements on the Property. On or before March 20, 1998,
Purchaser shall complete and submit to the City for its approval, Purchasers
Development Plan for the Property. Purchaser acknowledges that in accordance
with the provisions of the Amended CC&R's (as hereinafter defined), Seller will
have certain approval rights, including the right to approve development plans
prior to their submission to the City. Before submitting any Purchasers
Development Plan for the Property to the City, Purchaser shall submit
Purchaser's Development Plan to Seller for approval in accordance with the
CC&R's. Purchaser shall not permit any development plan to become final and
binding on the Property or Seller until after Closing. Purchaser shall be solely
responsible for obtaining the City's approval of Purchasers Development Plan,
and Seller will cooperate with Purchasers efforts to obtain the City's approval
of Purchasers Development Plan and any conditional use request which have been
approved by Seller.
10.6 Concept Plan and Platting. Purchaser acknowledges that the Property
must be platted and that governmental authorities will require a concept plan
("Concept Plan"), showing the proposed development on the Property, and a plat
("Plat") of the Property, to be approved in accordance with applicable zoning
laws and City subdivision ordinances. The Concept Plan must be approved by the
City, and the Plat recorded, prior to the issuance of any building permit for
construction of improvements on the Property. Purchaser acknowledges that the
Plat will have to provide for landscaping, utility and drainage easements as
required by the City. Seller shall be responsible for obtaining the City's
approval of the Concept Plan and Plat.
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10.7 Seller's Plat Responsibilities. Contingent upon Closing, Seller shall
be responsible for all improvements, fees and agreements with the City
concerning improvements or provisions for public facilities that are required
pursuant to approval and recording of the Plat affecting the Property. Purchaser
shall be responsible for all fees and charges payable in connection with
building permits or otherwise payable with respect to the Property, except for
the specific obligations of Seller identified in this Agreement
10.8 Utility Service. Seller shall be responsible for extending water,
natural gas, electric and sewer utility lines from their current locations to
the south boundary of the Property, for repairing streets damaged by such
extensions. The size or capacity of the utility lines extended to the Property
boundary shall not be less than the following:
Utility Size or Capacity
------- ----------------
Water Main eight inch (8")
Electrical Service 800 amps
Sanitary Sewer four inch (4")
Natural Gas one inch (1")
Purchaser shall be responsible for extending such utility services to the
improvements it constructs on the Property and for paying all tap, line
extension and other City imposed charges and fees in connection with the
extension of such utility services to the improvements. Purchaser acknowledges
that the City installs all electric lines and that Purchaser will be solely
responsible for making arrangements with the City's Department of Utilities to
extend electric lines and to provide electrical service to meet the particular
needs of the improvements to be constructed on the Property. Purchaser will also
be responsible for obtaining telephone and cable television lines and service
for the Property. Purchaser acknowledges that the Plat will have to provide for
utility easements as required by the City.
10.9 Streets. Access to the Property will be provided via public and
private streets. Seller shall be responsible for providing access to the
Property from the private roads in Phase I of the Center (the "Street
Easement"),* as shown on the map attached hereto as Exhibit F. Seller reserves
the right to relocate the Street Easement, provided the relocation does not
materially adversely affect the reasonable and practical access to the Property.
Further, Seller agrees that, within a period of one year following the first to
occur of (i) the sale to a third party not affiliated with Seller of any
property owned by Seller and lying between Phase I and the Property (the
"Development Property", as shown on the map attached hereto as Exhibit E), or
(ii) the platting of any of the Development Property; Seller will cause to be
constructed and installed, the private road shown on the map attached hereto as
Exhibit E. Purchaser shall be solely responsible for constructing all driveways
within the boundaries of the Property and all curbs and sidewalks on or adjacent
to the Property required by governmental authorities.
10.10 Drainage. Seller shall be responsible for installing, or causing to
be installed, all drainage facilities required by the City outside of the
Property that relate to development on the Property. Purchaser will be solely
responsible for providing all drainage facilities required within the boundaries
of the Property in accordance with the Purchaser's Development Plan, the Plat
and any applicable drainage plans approved by the City. Purchaser acknowledges
the Plat will have to provide for drainage easements as required by the City.
10.11 Park and Drainage Fees. Seller will hold Purchaser harmless from all
requirements and obligations to the City for park fees and drainage fees with
respect to the Property that are required to be paid in conjunction with the
filing and approval of the Plat under ordinances in effect at the time of this
Agreement.
*The Street Easement shall be paved and constructed within the time period set
out in paragraph 10.2 for On Site Development Work.
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10.12 Purchaser's Approval Rights. Seller shall, at its expense, prepare
and deliver to Purchaser, by the date indicated, the following:
(a) The Grading Plan, by May 1, 1998;
(b) The proposed Concept Plan, by March 20, 1998
(c) The proposed Plat, by March 20, 1998;
(d) The Visibility Easement (as defined in Section 12), by May 1,
1998;
(e) The Access Easement (as defined in Section 12), by May 1, 1998;
(f) The Amended CC&R's (as defined in Section 11. 1, by May 1, 1998.
Purchaser shall have fourteen (14) days after it receives any of the foregoing
to approve or disapprove the same by giving written notice to Seller, and if it
disapproves (a "Disapproval"), stating specifically the reasons therefor. In the
event Purchaser does not give such notice within the time period allowed, it
shall conclusively be deemed to have given its approval. If Seller receives
timely written notice from Purchaser of a Disapproval, Seller shall have the
right, in its sole discretion, to (a) correct or cure the Disapproval, or (b)
notify Purchaser that Seller does not intend to cure the Disapproval. If Seller
is unable or unwilling to cure the Disapproval, Purchaser shall have the right
to either (a) terminate this Agreement and its obligations hereunder, or (b)
waive its Disapproval. If Purchaser elects to terminate this Agreement, the
Title Company shall return the Earnest Money Deposit to Purchaser and neither
party shall have any further obligation hereunder. If Purchaser elects to waive
its Disapproval, the matter objected to shall thereafter be considered approved.
10.13 Cooperation. The Seller and Purchaser shall cooperate with one
another in a reasonable manner to the end that the Closing occurs as
contemplated by this Agreement. All approvals required to be obtained by either
party pursuant to this Agreement shall be sought in a reasonable manner and
acted upon diligently and expeditiously. Whenever the provisions of this
Agreement require one party to obtain the other party's approval, such approval
shall not be unreasonably withheld or delayed. Each party shall use its good
faith efforts to satisfy all the conditions to its performance of this
Agreement.
10.14 Center Signs. Seller will seek City approval for the construction of
a sign (in addition to the sign located at the Southern end of the Center) to be
located at the northern end of the Center (the "Center Sign-North"), which
identifies the Center and provides for additional signage for property owners
within the Center. In the event Seller is able to obtain the City's approval,
Seller shall erect the Center Sign-North, and Purchaser shall be entitled to 20%
of the total signage available on the Center Sign-North for identification of
the business operated from the Property. Purchaser shall be responsible for
reimbursing Seller for its pro-rata portion of the cost of purchasing and
erecting the Center Sign-North, and for Purchaser's pro-rata portion of the
continuing costs of lighting, maintenance and repair. For purposes of the
preceding sentence, "pro-rata portion" means the square footage of Purchasers
signage on the Center Sign-North compared to the square footage of all signage
available on said sign for owners or tenants of property within the Center.
SECTION 11. THE COVENANTS FOR THE CENTER.
11.1 Covenants. There is recorded, at Reception No. 097066132 of the
records of El Paso County, Colorado, a Declaration of Covenants, Conditions and
Restrictions for The Crossing at Palmer Park Center ("the CC&R's"). On or before
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the date set forth in Section 10.12, Seller shall deliver to Purchaser at
Seller's expense, an amendment (the "CC&R Amendment") to the CC&R's which Seller
intends to place on the Property. Purchaser acknowledges that the Property will
be conveyed subject to the CC&R's, as amended by the CC&R Amendment (the
"Amended CC&R's"). In addition to other matters, the Amended CC&R's shall:
(a) Incorporate, as part of the property covered thereunder, the
Property.
(b) Contain a prohibition that, for so long as the Property is
utilized primarily for automotive service and the retail sale of tires, no other
portion of the Center shall be used for such purposes, provided, however, that
such restriction shall not prevent other property in the Center from being used
primarily for the conduct of (i) a motor vehicle lubrication and oil change
business; or (ii) a business in which the sale of tires is an incidental part of
such business (ie., does not constitute more than 10% of the gross sales of such
business).
(c) Provide that any private roadways shall be governed by the CC&R's
and each property owner within the Center shall pay it's proportionate share of
expenses (as set forth in the CC&R's) which shall be allocated among those
property owners owning platted lots within any phase of the development that has
been incorporated in the CC&R's currently being served by the roads and
services.
(d) Contain provisions allowing the Seller to "phase" the development
of the property within the Center.
(e) Contain provisions allowing the Seller to approve all plans and
specifications for any improvements to be constructed on any property within the
Center, and development plan for or plat of any property within the Center.
(f) Amend the provisions dealing with signage for the Center signs.
Purchaser shall have the right to approve the Amended CC&R's in accordance with
the procedures set forth in Section 10.12.
11.2 Other Development. Purchaser acknowledges that Seller has made no
representations or warranties to Purchaser concerning the development of any
other property adjacent to or in the vicinity of the Property on which Purchaser
has relied.
SECTION 12. Visibility and Access Easement.
(a) At Closing, Seller shall grant Purchaser an easement (the
"Visibility Easement") that will provide for restrictions on the construction of
improvements to the South of the Property such that the signage on the
improvements Purchaser intends to construct on the Property will be more visible
to northbound traffic on Powers Boulevard. Seller shall cause the documents
creating the Visibility Easement to be prepared at its expense and present the
same for Purchaser's approval pursuant to Section 10.12.
(b) At Closing, Seller shall reserve from the conveyance of the
Property to Purchaser, an access easement (the "Access Easement") over and
across the Property to provide access from the Center to and from Seller's
property located to the North of the Property.
SECTION 13. NAME AND LOGO. Except for directional and location
identification purposes, neither the name "The Crossing at Palmer Park Center,"
any derivatives thereof, nor the logos associated with such name may be used in
any way in connection with the Property or any promotion of it, unless Seller
has given its prior written approval to such use.
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SECTION 14. CONDEMNATION. If, between the Effective Date and Closing, any
portion of the Property is taken in condemnation, Purchaser shall have the
option to terminate this Agreement and its obligations hereunder. The option to
terminate contained in this Section must be exercised by written notice to
Seller no later than ten (10) business days after Purchaser is notified by
Seller or others of the condemnation. If Purchaser exercises its option to
terminate in accordance with this Section, the Title Company shall return the
Earnest Money Deposit to Purchaser and neither party shall have any further
obligation hereunder. If Purchaser does not exercise its option to terminate as
provided in this Section, the Agreement shall continue in full force and effect.
In such event, the Purchase Price shall be paid by Purchaser at Closing without
reduction, but Seller shall remit to Purchaser all awards received by Seller as
a result of the condemnation.
SECTION 15. DEFAULT AND REMEDIES. In the event of default by either party
under this Agreement, Purchaser and Seller agree as follows:
15.1 Default by Purchaser. If Purchaser shall default in the performance of
its obligations hereunder, Seller's sole and only remedy shall be to terminate
this Agreement and to retain the Earnest Money Deposit as liquidated damages.
15.2 Default by Seller. If Seller shall default in the performance of its
obligations hereunder, Purchaser shall have the right to either (a) terminate
this Agreement and to obtain the return of the Earnest Money Deposit, or (b)
enforce this Agreement through an action for specific performance and damages.
Purchaser and Seller hereby agree that if Purchaser elects to recover damages
from Seller, Purchaser's damages shall not exceed $50,000, and Purchaser hereby
waives its right to recover damages from Seller in excess of such amount,
including without limitation any loss of profits, consequential damages,
punitive damages or any other damages or losses suffered by Purchaser in
connection with this Agreement.
SECTION 16. BROKERS. Seller represents and warrants to Purchaser that,
other than Highland Commercial Group, LLC, and American Spectrum Real Estate
Services (together, "Broker"), no broker or finder has been engaged by Seller in
connection with any of the transactions contemplated by this Agreement. Seller
further represents and warrants that no person or entity, other than Broker, now
claims or will claim any commission, finder's fee or other amounts by, through,
under or as a result of any relationship with Seller because of such
transactions. Seller agrees to pay Broker a commission equal to ten percent
(10%) of the Purchase Price, which commission shall not be earned or payable
until the occurrence of the Closing and Seller's receipt of the Purchase Price.
In the event of a termination of this Agreement, Broker shall have no right to
share in the Earnest Money Deposit if retained by Seller. Purchaser, represents
and warrants to Seller that no broker or finder has been engaged by Purchaser in
connection with any of the transactions contemplated by this Agreement.
Purchaser further represents that no person or entity, other than Broker, claims
or will claim any commission, finder's fee or other amounts by, through, under
or as a result of any relationship with Purchaser because of such transactions.
Each party agrees to hold the other party harmless from and against any and all
costs, expenses, claims, losses or damages, including reasonable attorneys'
fees, resulting from any breach of the representations and warranties contained
in this Section.
SECTION 17. ASSIGNMENT. Purchaser shall not have the right to assign all or
any part of its interest or rights under this Agreement without the prior
written consent of Seller, except for an assignment to an affiliate. For
purposes hereof, "affiliate" means any person or entity which controls, is
controlled by, or is under common control with, the Purchaser. A person or
entity shall be deemed to have control of another person or entity if such
person or entity directly or indirectly or acting in concert with one or more
persons and/or entities, or through one or more subsidiaries, owns, controls or
holds with power to vote more than 15 percent of the voting shares or rights of
12
<PAGE>
such other entity, or controls in any manner the election or appointment of a
majority of the directors, trustees or managers of another entity, or is the
general partner in or has contributed more than 25 percent of the capital of
such other entity.
SECTION 18. MISCELLANEOUS.
18.1 Notices. All notices required or permitted under this Agreement shall
be given by nationally recognized overnight courier, for "next day" delivery,
with all delivery costs paid, or by hand delivery, directed as follows:
If intended for Seller, to:
Bishop Powers, Ltd.
c/o Bishop Capital Corporation
716 College View Drive
Riverton, WY 82501
Attn: Robert Thrailkill
Phone: (307) 856-3800
If intended for Purchaser, to:
PCRO Limited Liability Company
4420 Centennial Boulevard
Colorado Springs, CO 80907
Attn:
-----------------------
with a copy in each case to
Flynn McKenna Wright & Karsh, Ilc
Plaza of the Rockies, Suite 202
111 South Tejon
Colorado Springs, Co 80903
Attn. R. Tim McKenna
and to
Gaddis, Kin & Herd, P.C.
118 South Wahsatch Avenue
Colorado Springs, CO 80903
Attn: James W. Kin
Any notice delivered by overnight carrier in accordance with this paragraph
shall be deemed to have been duly given when delivered. Any notice which is hand
delivered shall be effective upon receipt by the party to whom it is addressed.
Either party, by notice given as above, may change the address to which future
notices should be sent.
18.2 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, personal representatives, successors and permitted assigns.
13
<PAGE>
18.3 Entire Agreement. This Agreement, together with the exhibits attached
hereto, constitutes the entire agreement between Seller and Purchaser, and may
not be modified in any manner except by an instrument in writing signed by both
parties.
18.4 Headings. The section and subsection headings contained in this
Agreement are inserted only for convenient reference and do not define, limit or
proscribe the scope of this Agreement or any exhibit attached hereto.
18.5 Counterparts. This Agreement may be executed in any number of
counterparts which together shall constitute one and the same instrument.
18.6 Unenforceable Provisions. If any provision of this Agreement, or the
application thereof to any person or situation shall be held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to persons or situations other than those to which it shall have been
held invalid or unenforceable, shall continue to be valid and enforceable to the
fullest extent permitted by law.
18.7 Time of the Essence. Time is strictly of the essence with respect to
each and every term, condition, obligation and provision of this Agreement, and
the failure to timely perform any of the terms, conditions, obligations or
provisions hereunder by either party shall constitute a breach of and a default
under this Agreement by the party so failing to perform. In calculating any
period of time provided for n this Agreement, the number of days allowed shall
refer to calendar and not business days. If any day scheduled for performance of
any obligation hereunder shall occur on a weekend or holiday, the time, period
allowed and day for performance shall be continued to the next business day.
18.8 Waivers. No waiver by either party of any provision hereof shall be
effective unless in writing or shall be deemed to be a waiver of any other
provision hereof or of any subsequent breach by either party of the same or any
other provision.
18.9 Attorneys' Fees and Costs. In the event of litigation between Seller
and Purchaser arising out of the enforcement of or a default under this
Agreement, the prevailing party shall be entitled to judgment for court costs
and reasonable attorneys' fees in an amount to be determined by the court.
18.10 Governing Law; Construction of Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Colorado.
Seller and Purchaser and their respective counsel have reviewed, revised and
approved this Agreement. Accordingly, the normal rule of construction that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or exhibits hereto.
18.11 Duration of Offer. Purchaser has executed and submitted this
Agreement to Seller as an offer for acceptance by Seller to be evidenced by
Seller's execution of this Agreement. Purchasers offer as represented by this
Agreement shall continue in effect only until March 30, 1998. If Purchaser has
not received a copy of this Agreement executed by Seller on or before that date,
Purchasers offer and this Agreement shall immediately terminate and shall no
longer be of any force or effect.
14
<PAGE>
This Agreement for the Purchase and Sale of Commercial Real Estate has been
executed as of the date first written above.
SELLER:
Bishop Powers., Ltd.
By: Bishop Capital Corporation, its general partner
By: /s/ Robert E. Thrailkill
-------------------------------------------------
Its: President
-------------------------------------------------
PURCHASER:
PCRO Limited Liability Company
By: /s/ William Prentiss
-------------------------------------------------
Its: Manager
------------------------------------------------
15
<PAGE>
AGREEMENT OF BROKER
The undersigned, as Broker hereunder, acknowledges and agrees that Section 16
of the foregoing Agreement correctly sets forth the understanding and agreement
between Broker, Seller and Purchaser relating to the payment of a commission
resulting from the sale of the Property.
BROKER:
Highland Commercial Group, LLC
By: /s/ James E. Spittler
--------------------------
Its: Member
--------------------------
American Spectrum Real Estate Services
By: /s/ Peter Cook
--------------------------
Its: Member
--------------------------
16
<PAGE>
EXHIBITS
to
Agreement for the Purchase and
Sale of Commercial Real Estate
Exhibit A Legal Description of Center
Exhibit B Map of Property
Exhibit C Preliminary Plan
Exhibit D Escrow Agreement
Exhibit E Map Showing Development Property and Private Road
Exhibit F Map showing Street Easement
17
<PAGE>
EXHIBIT A
to
Agreement for the Purchase and
Sale of Commercial Real Estate
Legal Description of Center
(Omitted)
18
<PAGE>
EXHIBIT B
to
Agreement for the Purchase and
Sale of Commercial Real Estate
(Map of Property Graphic Omitted)
19
<PAGE>
EXHIBIT C
to
Agreement for the Purchase and
Sale of Commercial Real Estate
(Preliminary Plan Graphic Omitted)
20 (Page 1 of 2)
<PAGE>
EXHIBIT C (continued)
(Preliminary Plan Graphic Omitted)
20A (Page 2 of 2)
<PAGE>
EXHIBIT D
to
Agreement for the Purchase and
Sale of Commercial Real Estate
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is executed this ..... day of ....... 1998, by and
among Bishop Powers, Ltd., a Colorado limited partnership ("Bishop"), PCRO
Limited liability Company, a Colorado limited liability company ("PCRO") and
Lawyers Title Insurance Company ("Escrow Agent").
RECITALS
A. PCRO and Bishop entered into a certain Agreement for the Purchase and
Sale of Commercial Real Estate dated March _, 1998 (the "Contract"), whereby
Bishop agreed to sell to PCRO, and PCRO agreed to buy, certain real property
located in El Paso County, Colorado, as more particularly described on Exhibit A
attached hereto (the "Property").
B. As partial consideration for PCRO's purchase of the Property, Bishop
agreed to install certain on site improvements and off site improvements.
C. Some or all of the on site improvements ("On Sites") listed on Exhibit B
have not been completed or paid to date. However, the parties nonetheless desire
to close the transaction provided for in the Contract.
D. To ensure that the On Sites will be completed and paid for in a timely
manner, PCRO and Bishop have agreed to close on the date hereof and Bishop has
agreed to deposit with Escrow Agent, pursuant to the terms of this Escrow
Agreement, the sum of $200,000.00 (the "Funds").
E. The Closing shall be completed today, and the Escrow Agent shall hold
the Funds to disburse the Funds post-closing pursuant to the terms of this
Escrow Agreement.
NOW THEREFORE, in consideration for their mutual covenants herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows
1. Closing; The Account. The Closing shall be completed forthwith and
immediately thereafter Escrow Agent shall deposit the Funds in an interest
bearing account at a federally chartered financial institution, the deposits of
which are insured by the Federal Deposit Insurance Corporation, which should be
designated as "Lawyers Title Insurance Company on behalf of Bishop Powers, Ltd."
(the "Account"). Unless and until there is a default by Bishop pursuant to
Paragraph 3 following, interest accruing on the Account shall be paid monthly to
Bishop.
21
<PAGE>
2. Disbursements to Bishop.
a. The parties acknowledge that disbursements from the Account to
Bishop shall be made with respect to the On Site line items in Exhibit B. Thus,
Bishop will only be entitled to receive the amount set forth in Exhibit B for a
given On Site line item, subject to Subparagraph f. below, and any greater costs
incurred for that On Site line item shall be Bishop's sole responsibility;
b. Prior to any disbursements being made to Bishop, Bishop or a
development manager designated in writing by Bishop, shall submit a certificate
and demand for payment ("Certificate") to Escrow Agent at the address set forth
on the signature page of this Escrow Agreement. The Certificate shall set forth,
by line item, the type of On Sites for which work has been done, the extent to
which each has been completed, the amount of payment (based on Exhibit 13) that
is being demanded for each On Site line item, the total disbursement amount
being requested and whether the Certificate is a final disbursement request;
c. Bishop may request payment of the amount expended for any On Site
line item, provided however, that if during the term of this Escrow Agreement
the amount requested by Bishop for an On Site line item, together with all
previously advanced amounts for that On Site line item, exceeds the amount shown
on Exhibit B for such On Site line item, Escrow Agent shall only disburse to
Bishop the amount designated on Exhibit B for that On Site line item;
d. After confirming that payments for any particular On Site line item
have not exceeded the amount provided in Exhibit B, Escrow Agent shall promptly
disburse the requested amount from the Account. Each disbursement shall be in
the form of a lien waiver check from Escrow Agent and shall be made payable
jointly to the contractor performing the work and Bishop;
e. Bishop shall only submit disbursement Certificates to Escrow Agent
twice each month, but shall be permitted to submit one final Certificate at any
time to handle any previously unsubmitted On Site costs. Each Certificate shall
contain all previously unsubmitted On Site costs which have been incurred by
Bishop to date; and,
f. If Bishop installs all of the On Sites (rather than PCRO) and funds
are remaining in the Account following Bishop's final Certificate amounts,
Escrow Agent shall then disburse all remaining amounts to Bishop.
3. Default by Bishop - PCRO's Completion. If all On Sites have not been
completed by..........., 199.., PCRO may notify Escrow Agent, and following the
giving of such notice, may itself complete the On Site improvements, and draw on
the remaining Funds held by the Escrow Agent in accordance with the procedures
set forth in Section 2 hereinabove.
4. Termination of Escrow. This Escrow shall terminate upon completion of
all the On Site Improvements, or by written agreement of Bishop and PCRO.
5. Amendments. No changes or modifications shall be effected in the terms
of this Escrow Agreement except by written instrument signed by Bishop and PCRO.
Escrow Agent shall not be obligated to honor or act upon any communications or
notices received from Bishop or PCRO unless such communications are In writing.
6. Governing Law. This Escrow Agreement shall be construed and interpreted
in accordance with the laws of the State of Colorado.
22
<PAGE>
7. Escrow Protection. If, at any time, Escrow Agent shall be uncertain as
to any performance required of Escrow Agent hereunder, Escrow Agent shall
attempt to obtain the written understanding of Bishop and PCRO as to such
performance. If Escrow Agent is unable to obtain such understanding, it may
bring an interpleader or declaratory judgment action in the District Court of El
Paso County to resolve the questions as to which it is uncertain. Bishop and
PCRO hereby agree for themselves to the jurisdiction of the District Court of El
Paso County, for the purposes of such an action.
8. Indemnification. PCRO and Bishop shall defend, indemnify and hold Escrow
Agent harmless from and against all claims brought against Escrow Agent as a
consequence of its actions hereunder, provided that Escrow Agent has acted in
good faith and in compliance with the terms of this Escrow Agreement. The
indemnification includes reasonable attorneys' fees, together with ail
additional costs incurred by Escrow Agent in defending against any such claim.
9. Notices. All notices required or permitted to be given or delivered
hereunder shall be in writing and be hand delivered or sent by a nationally
recognized overnight courier for "next day" delivery, with all delivery costs
paid, addressed to the party intended at its address as set forth in the Escrow
Agreement or such other address as it may designate by notice given to the other
party in the manner aforesaid. All such notices shall be deemed to have been
given and delivered when hand delivered, or when delivered by Federal Express,
UPS, Airborne or any other overnight delivery service.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on the
date first set forth above.
BISHOP POWERS, LTD.
c/o Bishop Capital Corporation
716 College View Drive
Riverton, WY 82501
By: Bishop Capital Corporation, its General Partner
By: /s/ Robert E. Thraillkill
----------------------------------------------
PCRO Limited Liability Company
4420 Centennial Boulevard
Colorado Springs, CO 80907
By: /s/ William Prentiss
----------------------------------------------
LAWYERS TITLE INSURANCE COMPANY
555 East Pikes Peak Avenue
Colorado Springs, CO 80903
By: /s/ Dixie Power
-----------------------------------------------
24
<PAGE>
EXHIBIT A
to
Escrow Agreement
LEGAL DESCRIPTION
Lot .... in the Crossing at Palmer Park, Filing No. ...., in the City of
Colorado Springs, El Paso County, Colorado
25
<PAGE>
EXHIBIT B
to
Escrow Agreement
ON SITE IMPROVEMENTS
(omitted)
26
<PAGE>
EXHIBIT E
to
Agreement for the Purchase and
Sale of commercial Real Estate
(Map Graphic Omitted)
27
<PAGE>
EXHIBIT F
to
Agreement for the Purchase and
Sale of Commercial Real Estate
(Map of Street Easement Graphic Omitted)
28
Exhibit 10.13
AGREEMENT FOR THE PURCHASE AND
SALE OF COMMERCIAL REAL ESTATE
THIS AGREEMENT FOR THE PURCHASE AND SALE OF COMMERCIAL REAL ESTATE
("Agreement") is entered into as of June 10, 1998 ("Effective Date") between
Bishop Powers, Ltd., a Colorado limited partnership ("Seller") and Sam Khanfar
("Purchaser"), upon the basis of the following facts:
RECITALS
--------
Seller is developer of the commercial retail shopping center commonly known
as the "The Crossing at Palmer Park Center", located in Colorado Springs, El
Paso County, Colorado, and legally described on Exhibit A attached hereto and
incorporated herein by reference. A portion of the Center has been subdivided
into five lots ("Phase I"). Purchaser desires to purchase from Seller an
unplatted portion of the Center. Attached hereto as Exhibit B is a Concept Plan
showing the approximate configuration and location of the Property (as
hereinafter defined). Purchaser proposes to use the Property (as hereinafter
defined) for a Country Kitchen restaurant ("Purchasers Intended Use"); and
intends to develop the Property substantially as shown on the Concept Plan.
Subject to the terms of this Agreement, Seller has agreed to sell the
Property (as hereinafter described), To Purchaser.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which the parties hereby acknowledge, the parties hereby agree as follows:
SECTION 1. SALE OF PROPERTY. Subject to the terms and conditions provided
in this Agreement, Seller agrees to sell and Purchaser agrees to purchase all of
Sellers right, title and interest in and to the real property approximately as
depicted in Exhibit B and incorporated herein by reference (the "Property"). The
legal description of the Property shall be included in the Survey described in
Section 3.21c). Prior to Closing, the Property will be platted in accordance
with Section 10, and will be conveyed to Purchaser by platted legal description.
SECTION 2. PURCHASE PRICE. The purchase price to be paid by Purchaser to
Seller for the Property is $400,000.00 (the "Purchase Price"), adjusted as
provided in Section 3.2(c). The Purchase Price will be paid by Purchaser in the
following manner:
2.1 Earnest Money Deposit. Purchaser has deposited the sum of $5,000.00
with Lawyers Title Insurance Company, 555 East Pikes Peak, Suite 120, Colorado
Springs, Colorado 80903 (the "Title Company") as earnest money and as a deposit
towards payment of the Purchase Price (together with any additions to such
deposit, herein the "Earnest Money Deposit"). On or before July 10, 1998,
Purchaser shall deposit an additional $5,000.00 as earnest money with the Title
Company. The Earnest Money Deposit shall be credited against the Purchase Price
at Closing (as defined below). The Earnest Money Deposit shall earn interest at
the highest available rate, and any interest accrual shall belong to the party
entitled to the Earnest Money Deposit in accordance with this Agreement.
2.2 Funds at Closing. At Closing, Purchaser shall pay to Seller the balance
of the Purchase Price, which balance shall be paid in immediately available good
funds.
SECTION 3. TITLE MATTERS.
3.1 Permitted Exceptions. Seller shall transfer and convey its right, title
and interest in the Property to Purchaser, subject only to such matters as
Purchaser may waive or consent to pursuant to Section 3.3, the Amended CC&R's
referred to in Section 11 hereinafter, and the matters shown on the Plat
referred to in Section 10.6 (the "Permitted Exceptions").
<PAGE>
3.2 Title Documents. On or before July 10, 1998, Seller shall deliver to
Purchaser at Sellers expense the following title evidence covering the Property
(collectively, the "Title Documents"):
(a) Title Commitment. A title insurance commitment (the "Title
Commitment") issued by the Title Company showing the status of record title to
the Property, together with copies of all recorded documents referred to in the
Title Commitment. The Title Commitment must commit to insure title to the
Property in Purchaser in the full amount of the Purchase Price, subject only to
the Permitted Exceptions. The Title Commitment shall further commit to delete
the standard printed exceptions. Seller shall, at its expense and promptly after
Closing, cause the owners policy of title insurance to be issued to Purchaser
pursuant to the Title Commitment.
(b) Tax Certificate. A certificate of taxes due covering the Property
prepared by the Treasurer of El Paso County, Colorado.
(c) Survey. A land survey plat (as defined in Section 38-51-102,
Colorado Revised Statutes) of the Property, prepared by a licensed Colorado
surveyor, which shall comply with ALTA 1992 Standards for an Urban Class survey
(the "Survey"). The Survey shall contain a legal description of the Property and
shall show the bearing and distances of all boundary lines of the Property, all
improvements to the Property, all easements and other title matters encumbering
or appurtenant to the Property, the location of all dedicated public
rights-of-way adjacent to the Property, any encroachments onto or off of the
Property, the Federal flood zone designation and any other matters that would be
disclosed by an accurate survey of the Property, - including - t1he square
footage of the Property. The Survey shall also contain the certification of the
surveyor sufficient for deletion of the standard survey exception from the Title
Commitment, and shall be certified to Purchaser and Purchaser's lender. If the
square footage of the Property as determined by the Survey is different than
43,580 square feet, then the Purchase Price shall be increased or decreased at
the rate of $9.18 per square foot for every square foot by which the area of the
Property exceeds or is less than 43,580 square feet.
3.3 Defects of Title. Purchaser shall have the right to object to any
defect of title which appears in the Title Documents and which renders title to
the Property unmerchantable or which makes the Property unsuitable for
Purchaser's Intended Use (a "defect of title"). Any objection to a defect of
title must be in writing and must be received by Seller no later than the
expiration of the Inspection Period (as defined in Section 4.2). Purchasers
failure to provide Seller with written notice of an objection to any title
matter appearing in the Title Documents within the Inspection Period shall be
deemed to be a waiver by Purchaser of any objection it might otherwise have; and
all such title matters shall become additional "Permitted Exceptions."
Notwithstanding the foregoing, if a defect of title is not revealed in the Title
Documents and is discovered by Purchaser after the close of the Inspection
Period, Purchaser shall have until five (5) days after the date of its discovery
of the defect of title or the date of Closing, whichever is earlier, to provide
Seller with notice of its objection to the defect of title, provided, however,
that Purchaser shall be deemed to have approved and accepted any matters that
are shown on the Plat as described in Section 10.6. If Seller receives timely
written notice from Purchaser of a defect of title, Seller shall have the right,
in its sole discretion, to (a) correct or cure the defect of title, (b) obtain
title insurance over the defect of title through title policy endorsement or
otherwise, or (c) notify Purchaser that Seller does not intend to cure or insure
over the defect of title. If Seller is unable or unwilling to cure or insure
over a defect of title, Purchaser shall have the right to either (a) terminate
this Agreement and its obligations hereunder, or (b) waive its objection to the
defect of title. If Purchaser elects to terminate this Agreement, the Title
Company shall return the Earnest Money Deposit to Purchaser and neither party
shall have any further obligation hereunder. If Purchaser elects to waive its
objection to the defect of title, the title matter objected to shall thereafter
be considered a "Permitted Exception." A defect of title, regardless of its
disposition under this Section, shall not result in a reduction of the Purchase
Price.
2
<PAGE>
SECTION 4. INSPECTION OF PROPERTY.
4.1 Inspection Items. Seller has, prior to the Effective Date, delivered to
Purchaser an environmental assessment, dated December 12, 1996, and prepared by
E-Quest Corporation (the "Environmental Audit"), together with copies of all
other studies or reports in Seller's possession with respect to soils,
engineering and environmental matters.
4.2 Inspection Period. Purchaser shall have from the Effective Date through
August 10, 1998 (the "Inspection Period"), in which to determine whether or not
the Property is suitable for Purchaser's Intended Use, which determination shall
be in Purchaser's sole discretion. At anytime during the Inspection Period,
Purchaser shall have the right to terminate this Agreement and all of its
obligations hereunder by providing written notice to Seller of its election to
terminate. Upon receipt of such a notice of termination by Seller, this
Agreement shall be automatically terminated without further action by either
party. Upon termination, the Title Company shall immediately return the Earnest
Money Deposit to Purchaser. In the event Purchaser completes its inspection
prior to August 10, 1998, and is satisfied with the results thereof, Purchaser
may so notify Seller, and upon receipt of such notice by Seller, the Purchaser's
right of termination set forth in this Section 4.2 shall end and be of no
further force or effect.
4.3 Access to Property. During the Inspection Period, Purchaser and its
agents arid representatives shall have access to the Property to conduct a
physical inspection and to conduct such testing, including core drilling and
soils reports, as Purchaser deems appropriate. Until the Closing. Purchaser
shall not materially alter the existing condition of the Property. Purchaser
hereby indemnifies and holds Seller harmless from any and all losses, costs or
expenses (including lien and personal injury claims, settlement and reasonable
attorneys' fees) which arise from such entry and work, and which may be asserted
against either Seller or the Property.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5.1 Seller's Representations and Warranties. As of the Effective Date and
as of the date of Closing, Seller hereby represents and warrants to Purchaser
that:
(a) Seller is the owner and has full right, power and authority to
sell, convey and transfer the Property to Buyer as provided in this Agreement
and to carry out Seller's obligations under this Agreement. This Agreement and
all documents executed by Seller that are to be delivered prior to or at Closing
have been duly authorized and have been (or, when executed and delivered, will
be) duly executed and delivered by Seller and are (or, when executed and
delivered will be) legal, valid and binding obligations of Seller.
(b) The execution, delivery and performance of this Agreement, and the
consummation of the transaction contemplated hereby, will not result in any
breach of or constitute any default under or result in the imposition of any
lien or encumbrance against any part of the Property under any agreement or
other instrument to which Seller is a party or by which Seller or any part of
the Property might be bound.
(c) Seller is aware of the provisions of the Deficit Reduction Act of
1984, 26 U.S.C. Section 1445, et seq., and the Internal Revenue Service
regulations implementing said Act referring to the withholding tax on the
disposition of United States real property interests by foreign persons and
foreign corporations, and Seller is not a foreign person or corporation as
defined by said Act and regulations.
(d) In the event any claim is made by any party for the payment of
sums due for the furnishing of labor, materials, equipment or fuel to Seller or
to the Property at the request of Seller prior to Closing, or in the event any
lien is filed against the Property subsequent to Closing as a result of the
furnishing of such materials, labor, equipment or fuel at the request of Seller,
Seller shall immediately cause said lien to be released of record or otherwise
satisfy Buyer, to Buyer's reasonable satisfaction, that such lien will be
immediately released.
3
<PAGE>
5.2 Purchaser's Representations and Warranties. As of the Effective Date
and as of the date of Closing, Purchaser hereby represents and warrants to
Seller that:
(a) Neither the entering into of this Agreement nor the consummation
or the transaction contemplated hereby will constitute a violation or breach by
Purchaser of any contract or other instrument to which Purchaser is a party, or
to which it is subject or by which any of its assets or properties may be
affected, or of any judgment, order, writ, injunction or decree issued against
or imposed upon it, or will result in a violation of any applicable law, order,
rule or regulation of any governmental authority affecting Purchaser.
(b) To the best of Purchaser's knowledge, there is no action, suit or
proceeding pending or threatened against Purchaser which would affect
Purchaser's ability to enter into or consummate this Agreement.
SECTION 6. CONDITION OF PROPERTY; DISCLAIMER OF WARRANTIES.
6.1 As Is. Except as specifically set forth in Sections 5,10, 11 and 16 of
this Agreement:
(a) Purchaser acknowledges and agrees Seller has not made, does not
make and specifically negates and disclaims any representations, warranties,
promises, covenants, agreements or guaranties of any kind or character
whatsoever, whether express or implied, oral or written, past, present or
future, of, as to, concerning or with respect to (i) the value, nature, quality
or condition of the Property, including, without limitation, the water, soil and
geology; (ii) the income to be derived from the Property; (iii) the suitability
of the Property for any and all activities and uses which Purchaser may conduct
thereon; or, (iv) the habitability, merchantability, marketability,
profitability or fitness for a particular purpose of the Property; and Seller
specifically disclaims any representations regarding compliance with any
environmental protection, pollution or land use laws, rules, regulations, orders
or requirements, including solid waste, as defined by the U.S. Environmental
Protection Agency regulations at 40 C.F.R., Part 261, or the disposal or
existence, in or on the Property, of asbestos or any hazardous substance, as
defined by the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, and regulations promulgated thereunder.
(b) Purchaser further acknowledges and agrees that having been given
the opportunity to inspect the Property, Purchaser is relying solely on its own
investigation of the Property and not on any information provided or to be
provided by Seller or Broker other than information referred to in this
Agreement.
(c) Purchaser further acknowledges and agrees that any information
provided or to be provided by or on behalf of Seller with respect to the
Property was obtained from a variety of sources and that Seller has not made any
independent investigation or verification of such information and makes no
representations as to the accuracy or completeness of such information.
(d) Seller is not liable or bound in any manner by any oral or written
statements, representations or information pertaining to the Property, or the
operation thereof, furnished by any real estate broker, agent, employee, servant
or other person.
(e) Purchaser further acknowledges and agrees that to the maximum
extent permitted by law, the sale of the Property as provided for herein is made
on an "AS IS" condition and basis with all faults.
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It is understood and agreed that the Purchase Price has been adjusted by prior
negotiation to reflect that all of the Property is sold by Seller and purchased
by Purchaser subject to the foregoing.
6.2 Radon. The Colorado Department of Health and the United States
Environmental Protection Agency ("EPA") have detected elevated levels of
naturally occurring radon in structures in the Colorado Springs area. EPA has
raised concerns with respect to adverse effects on human health of longterm
exposure to high levels of radon. Purchaser may conduct radon tests to determine
the possible presence of radon in the Property and may conduct such other
investigations and consult such experts as Purchaser deems appropriate to
evaluate radon mitigation measures that can be employed in the design and
construction of improvements on the Property. Purchaser shall rely solely upon
such investigations and consultations and acknowledges that Seller has made no
representation, express or implied, concerning the presence or absence of radon
in the Property, the suitability of the Property for development or the design
or construction techniques, if any, that can be employed to reduce any radon
levels in improvements built on the Property; and Purchaser, for itself and its
successors and assigns, releases Seller from any liability whatsoever with
respect to the foregoing matters.
SECTION 7. CONDITIONS PRECEDENT TO PURCHASE AND SALE.
7.1 Conditions Precedent to Purchaser's Obligations. The following matters
shall constitute absolute conditions precedent to Purchaser's obligations to
purchase the Property:
(a) Seller's representations and warranties set forth in Section 5. ".
of this Agreement shall be true and correct as of the closing date.
(b) The Seller has received all approvals contemplated by Section 10
of this Agreement.
(c) The Plat referenced in Section 10.6 has been recorded.
(d) Seller has provided Purchaser with a copy of the Letter of Credit
referenced in Section 10.3.
(e) Purchaser shall have obtained, on or before August 10, 1998, each
of the following: (i) financing for the purchase of the Property, the completion
of on-site development work and the construction of the improvements on the
Property, in such amounts and on such terms as Purchaser deems reasonable; (ii)
a franchise for the operation of a Country Kitchen restaurant on such terms as
Purchaser deems reasonable, and approval by the franchisor of the Property as a
site for a Country Kitchen; and (iii) bids satisfactory to Purchaser for the
completion of Purchaser's on-site development work. In the event Purchaser has
not obtained any of the foregoing, Purchaser may, at its option, terminate this
Agreement and all of its obligations hereunder by written notice to Seller given
on or before August 10, 1998, and upon termination the Title Company shall
immediately return the Earnest Money Deposit to Purchaser. In the event
Purchaser fails to give notice to Seller of its election to terminate on or
before August 10, 1998, the conditions set forth in this Section 7.1(e) shall be
deemed satisfied and waived by Purchaser. If the foregoing conditions are
satisfied on or before August 10, 1998, or Purchaser elects to waive such
conditions, Purchaser may so notify Seller in writing.
Insofar as Purchaser has direction and control over any of the foregoing,
Purchaser shall act with due diligence in completing the conditions of this
Agreement. In the event that the conditions set forth above are not met or
satisfied on or before the date specified, or if no date is specified, on or
before Closing, through no fault of Purchaser, then Purchaser may either obtain
a refund of the Earnest Money Deposit, following which neither party shall
thereafter have any further liability to the other hereunder, or Purchaser may
waive in writing the nonfulfillment of any portion of these conditions and
purchase the Property pursuant to the terms and provisions hereof without any
reduction in the Purchase Price.
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7.2 Condition Precedent to Seller's Obligation. The following matters shall
constitute absolute conditions precedent to Seller's obligations to sell the
Property:
(a) Purchaser's representations and warranties set forth in Section
5.2 of this Agreement shall be true and correct as of the closing date.
(b) Seller has determined that the Development Budget referenced in
Section 10.1 does not reflect a total cost that exceeds $600,000.00.
(c) The Seller has received all approvals contemplated by Section 10
of this Agreement.
(d) The Plat referenced in Section 10.6 has been recorded.
Insofar as Seller has direction and control over any of the foregoing,
Seller shall act with due diligence in completing the conditions of this
Agreement. In the event the conditions set forth above is not met or satisfied
on or before Closing, through no fault of Seller, then Seller may terminate this
Agreement by giving written notice of termination to Purchaser in which event
the Earnest Money Deposit shall be refunded to Purchaser following which
neither, party shall thereafter have, any further liability to the other
hereunder, or Seller may waive in writing the nonfulfillment of the condition
and sell the Property to the Purchaser pursuant to the terms and provisions
hereof.
SECT110N 8, CLOSING.
8.1 Closing Date. The closing of the purchase and sale of the Property (the
"Closing") shall occur ten (10)business days following notice to Purchaser from
Seller that the City has approved the Plat (the "City Approvals"), provided that
the Plat has been recorded by Closing. The Closing shall occur at the offices of
the Title Company. In the event Closing has not occurred on or before September
10, 1998, then either party may (provided it is not in default hereunder), by
written notice to the other, elect to terminate this Agreement. Upon receipt of
such notice of termination by the party to whom it is directed, this Agreement
shall terminate, and upon such termination the Title Company shall return the
Earnest Money Deposit to Purchaser.
8.2 Purchaser's Obligations at Closing. In addition to delivery of the
balance of the Purchase Price as described in Section 2.2., Purchaser shall
execute and deliver the following to Seller at Closing:
(a) Such affidavits, instruments or agreements that may be required by
the Title Company in its issuance of the policy of title insurance pursuant to
the Title Commitment.
(b) A statement which reflects the settlements and prorations provided
for in Section 9.
(c) Such other documents that may be necessary to carry out the
purposes of this Agreement.
8.3 Seller's Obligations at Closing. Seller shall execute and deliver the
following to Purchaser at Closing:
(a) A Special Warranty Deed conveying the Property to Purchaser,
subject only to the Permitted Exceptions.
(b) A FIRPTA Affidavit.
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(c) Such affidavits, instruments or agreements that may be required by
the Title Company in its issuance of the policy of title insurance pursuant to
the Title Commitment.
(d) A statement which reflects the settlements and prorations provided
for in Section 9.
(e) Such other documents that may be necessary to carry out the
purposes of this Agreement.
SECTION 9. SETTLEMENT AND PRORATIONS. The following items shall be prorated
or settled between Purchaser and Seller at Closing:
9.1 Taxes and Assessments. Prior to Closing, Seller shall pay the amount of
any unpaid real and personal property taxes allocable to the Property for tax
years prior to the year of Closing and any special assessments for improvements
installed prior to Closing. If Seller fails to pay the entire amount of such
taxes and assessments by Closing, Seller shall be debited on its settlement
sheets with the unpaid amount of such taxes and assessments and any resulting
penalties. Real property taxes and assessments for the Property for the year of
Closing, payable in the following calendar year, shall be apportioned between
Seller and Purchaser as of the date of Closing. Such apportionment shall be
computed on the basis of the most recent assessed valuation and mill levy
information, and shall be final.
9.2 Miscellaneous Closing Costs. -Seller shall pay the costs associated
with providing Purchaser with the title insurance policy described in Section
3.2. A real estate recording and documentary fees payable in connection with the
purchase and sale of the Property shall be paid by Purchaser. Any fee for
closing services which is charged by the Title Company shall be shared equally
by Seller and Purchaser. Except as otherwise expressly provided in this
Agreement, Purchaser and Seller .shall pay their own fees and expenses incurred
in the preparation, execution and performance of their respective obligations
under this Agreement.
SECTION 10. APPROVALS, PLANNING, PLATTING AND DEVELOPMENT.
10.1 Seller's Development Obligations - Generally. The Seller shall be
responsible for subdividing and platting the Property and for the Off Site and
On Site Development Work (as hereinafter defined). Prior to the Effective Date,
Seller has furnished Purchaser with a development budget (the "Development
Budget") for all On and Off Site Development Work necessary or required in
connection with the subdivision and platting of the Property (including both
"hard" and "soft" costs). The Development Budget was prepared using the most
accurate information available to Seller at the time of its preparation. In the
event that unforeseen events occur (such as, for example, City imposed
development obligations not currently anticipated in Seller's current
Development Budget) prior to Closing that cause the total amount of the
Development Budget to increase above $600,000.00, Seller may, at its option, so
notify Purchaser, and may elect to by such notice to terminate this Agreement
and all of its obligations hereunder. Upon receipt of such a notice of
termination by Purchaser, this Agreement shall be automatically terminated
without further action by either party. Upon termination, the Title Company
shall immediately return the Earnest Money Deposit to Purchaser.
10.2 Timing of Seller's Obligations. On or before the earlier to occur of
(i) 30 days following the date on which Seller has received notice that
Purchaser has ended its inspection rights pursuant to Section 4.2 and has
satisfied or waived the conditions pursuant to Section 7.1(e), or (ii) August
10, 1998 (the "Plat Submittal Deadline"), Seller shall complete and submit to
the City for its approval the Plat (as hereinafter defined) of the Property.
Seller shall use its reasonable efforts to obtain the City's approval of the
Plat. It is anticipated that none of the Development Work will be completed by
Closing. Should Closing occur, Seller shall substantially complete all On-Site
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Development Work and all Off-Site Development Work (with the exclusion of any
required improvements to the Sand Creek Drainage channel, which Seller shall
complete as promptly as reasonably possible) within ninety (90) days following
Closing, provided, however, that if completion of the Work is delayed as a
result of any cause or causes which Seller is, despite it best commercial
efforts, unable to prevent or overcome, including but not limited to acts of
God, strikes, walkouts or other labor disputes, shortages of labor or materials,
riots, civil strife, war, or acts of a public enemy ("Force Majeure"), such
period to be extended by any periods of delay caused by the Force Majeure events
(the "Completion Date"). In the event Seller has not completed the foregoing
Work on or before the Completion Date, Seller shall be subject to a delay
penalty of $750 per day for each day beyond the Completion Date that the Work is
not substantially complete, provided, however, that such delay penalties shall
not exceed $10,000. Any delay penalties shall be paid to Purchaser within 10
days following Purchaser's written demand for such payment.
10.3 Off Site Development Work. For purposes of this Agreement, "Off Site
Development Work" shall mean all of the off site development work required by
the City to be completed as a condition of the City's approval of the Concept
Plan and the Plat, which the parties anticipate shall include construction of
drainage improvements in Sand Creek. In accordance with the City's procedures,
the parties acknowledge that the City, as a condition of the approval of the
Concept Plan and the Plat, will require Seller agree to complete the Off Site
Development Work, and to post with the City a letter of credit ("Letter of
Credit") to assure the City of the completion of the Off Site Development Work.
10.4 On Site Development Work. For purposes of this Agreement, "On Site
Development Work"; shall mean all of the on site development work, required to
be completed by the City as a Condition of the City's approval of the Concept
Plan and the Plat, and the following:
(a) Rough grading of the Property in accordance with the City approved
grading plan (the "Grading Plan").
(b) Construction of private road access to Property as shown on the
Concept Plan.
(c) Stubbing all utilities to the Property pursuant to City Utility
Department specifications.
10.5 Purchaser's Development Plan. Purchaser acknowledges that the City
will require a development plan or development plans ("Purchasers Development
Plan") for the Property to be approved in accordance with applicable zoning laws
and City subdivision ordinances prior to the issuance of any building permit for
construction of improvements on the Property. It shall be Purchaser's sole
responsibility to complete and submit to the City for its approval, Purchaser's
Development Plan for the Property. Purchaser acknowledges that in accordance
with the provisions of the Amended CC&R's (as hereinafter defined), Seller will
have certain approval rights, including the right to approve development plans
prior to their submission to the City. Before submitting any Purchaser's
Development Plan for the Property to the City, Purchaser shall submit
Purchaser's Development Plan to Seller for approval in accordance with the
CC&R's. Purchaser shall not permit any development plan to become final and
binding on the Property or Seller until after Closing. Purchaser shall be solely
responsible for obtaining the City's approval of Purchasers Development Plan,
and Seller will cooperate with Purchaser's efforts to obtain the City's approval
of Purchaser's Development Plan.
10.6 Concept Plan and Platting. Purchaser has received a copy of the
Concept Plan approved by the City, and hereby acknowledges it has approved the
same. Purchaser acknowledges that the Property must be platted and that
governmental authorities will require a plat ("Plat") of the Property, to be
approved in accordance with applicable zoning laws and City subdivision
ordinances. The Plat must be approved by the City and recorded, prior to the
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issuance of any building permit for construction of improvements on the
Property. Purchaser acknowledges that the Plat will have to provide for
landscaping, utility and drainage easements as required by the City. Seller
shall be responsible for obtaining the City's approval of the Plat.
10.7 Seller's Plat Responsibilities. Contingent upon Closing, Seller shall
be responsible for all improvements, fees and agreements with the City
concerning either installation of improvements or provisions for public
facilities that are required pursuant to approval and recording of the Plat
affecting the Property. Purchaser shall be responsible for all fees and charges
payable in connection with building permits or otherwise payable with respect to
the Property, except for the specific obligations of Seller identified in this
Agreement.
10.8 Utility Service. Seller shall be responsible for extending water,
natural gas, electric and sewer utility lines from their current locations to
the boundary of the Property, for repairing streets damaged by such extensions.
Purchaser shall be responsible for extending such utility services to the
improvements it constructs on the Property and for paying all tap, line
extension and other City imposed charges and fees in connection with the
extension of such utility services to the improvements. Purchaser acknowledges
that the City installs all electric lines and that Purchaser will be solely
responsible for making arrangements with the City's Department of Utilities to
extend electric lines and to provide electrical service to meet the particular
needs of the improvements to be constructed or. the Property. Purchaser will
also be responsible for obtaining telephone and cable television lines and
service for the Property. Purchaser acknowledges that the Plat will have to
provide for utility easements as required by the City.
10.9 Streets. Access to the Property will be provided via public and
private streets. Seller shall be responsible for providing access to the
Property from the private roads in Phase I of the Center (the "Street
Easement"), as shown on Concept Plan. Purchaser shall be solely responsible for
constructing all driveways within the boundaries of the Property and all curbs
and sidewalks on or adjacent to the Property required by governmental
authorities.
10.10 Drainage. Seller shall be responsible for installing, or causing to
be installed, all drainage outside of the Property that relate to development on
the Property. Purchaser facilities required by the City will be solely
responsible for providing all drainage facilities required within the boundaries
of the Property in accordance with the Purchaser's Development Plan, the Plat
and any applicable drainage plans approved by the City. Purchaser acknowledges
the Plat will have to provide for drainage easements as required by the City.
10.11 Park and Drainage Fees. Seller will hold Purchaser harmless from all
requirements and obligations to the City for any fees with respect to the
Property that are required to be paid in conjunction with the filing and
approval of the Plat under ordinances in effect at the time of this Agreement,
including without limitation park and drainage fees.
10.12 Purchaser's Approval Rights. Seller shall, on or before fifteen (15)
days prior to the Plat Submittal Deadline described in paragraph 10.2, at its
expense, prepare and deliver to Purchaser the following:
(a) The Grading Plan;
(b) The proposed Plat;
(c) The Amended CC&R's (as defined in Section 11. 1).
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Purchaser shall have five (5) days after it receives any of the foregoing to
approve or disapprove the same by giving written notice to Seller, and if it
disapproves (a "Disapproval"), stating specifically the reasons therefor. In the
event Purchaser does not give such notice within the time period allowed, it
shall conclusively be deemed to have given its approval. If Seller receives
timely written notice from Purchaser of a Disapproval, Seller shall have the
right, in its sole discretion, to (a) correct or cure the Disapproval, or (b)
notify Purchaser that Seller does not intend to cure the Disapproval. If Seller
is unable or unwilling to cure the Disapproval, Purchaser shall have the right
to either (a) terminate this Agreement and its obligations hereunder, or (b)
waive its Disapproval. If Purchaser elects to terminate this Agreement, the
Title Company shall return the Earnest Money Deposit to Purchaser and neither
party shall have any further obligation hereunder. If Purchaser elects to waive
its Disapproval, the matter objected to shall thereafter be considered approved.
10.13 Cooperation. The Seller and Purchaser shall cooperate with one
another in a reasonable manner to the end that the Closing occurs as
contemplated by this Agreement. All approvals required to be obtained by either
party pursuant to this Agreement shall be sought in a reasonable manner and
acted upon diligently and expeditiously. Whenever the provisions of this
Agreement require one party to obtain the other party's approval, such approval
shall not be unreasonably withheld or delayed. Each party shall use its good
faith efforts to satisfy all the conditions to its performance of this
Agreement.
10.14 Center Signs. Seller will seek City approval for "the construction of
a sign (in addition to the sign to be located at the Southern end of the Center)
to be located at 'the northern end of the Center (the "Center Sign - North"),
which may identify the Center and provide for additiona1 signage for property
owners within the Center. In the event Seller is able to obtain the City's
approval, Seller shall erect the Center Sign-North, and Purchaser shall be
entitled, if Purchaser so elects, to 16.67% of the total signage available on
the Center Sign-North for identification of the business operated from the
Property. Purchaser shall make its election to participate in the Center Sign -
North, within ten (10) days following notice from Seller that the City has
approved such sign. If Purchaser elects to participate, Purchaser shall be
responsible for reimbursing Seller for its pro-rata portion of the cost of
purchasing and erecting the Center Sign-North, and for Purchaser's pro-rata
portion of the continuing costs of lighting, maintenance and repair. For
purposes of the preceding sentence, "pro-rata portion" means the square footage
of Purchaser's signage on the Center Sign-North compared to the square footage
of all signage available on said sign for owners or tenants of property within
the Center.
SECTION 11. THE COVENANTS FOR THE CENTER.
11.1 Covenants. There is recorded, at Reception No. 097066132 of the
records of El Paso County, Colorado, a Declaration of Covenants, Conditions and
Restrictions for The Crossing at Palmer Park Center ("the CC&R's"). On or before
the date set forth in Section 10.12, Seller shall deliver to Purchaser at
Seller's expense, an amendment (the "CC&R Amendment") to the CC&R's which Seller
intends to place on the Property. Purchaser acknowledges that the Property will
be conveyed subject to the CC&R's, as amended by the CC&R Amendment (the
"Amended CC&R's"). In addition to other matters, the Amended CC&R's shall:
(a) Incorporate, as part of the property covered thereunder, the
Property.
(b) Contain a prohibition that, for so long as the Property is
utilized primarily for a full service, family-style, sit-down, breakfast
restaurant, no other portion of the Center shall be used primarily for a
full-service, family-style, sit-down, breakfast restaurant, provided, however,
that such restriction shall not prevent other property in the Center from being
used primarily for the conduct of restaurant operations that are different than
those described above such as, by way of example and not limitation, restaurants
that offer liquor services, emphasize other than breakfast menus, or are open
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primarily for dinner or evening meals. Examples of restaurant operations that
would be prohibited by the foregoing restriction are Dennys, Village Inn, IHOP,
COCO's, Perkins and Gunther Toody's. Examples of the types of restaurant not
falling within the above restriction are Texas Steakhouse, TGI Friday's,
Chicago's, Applebee's, Outback, Macaroni Grill and any "fast food" establishment
such as McDonald's , Wendy's, Burger King, and Taco Bell.
(c) Provide that any private roadways shall be governed by the CC&R's
and each property owner within the Center shall pay its proportionate share of
expenses (as set forth in the CC&R's) which shall be allocated among those
property owners owning platted lots within any phase of the development that has
been incorporated in the CC&R's currently being served by the roads and
services.
(d) Contain provisions allowing the Seller to "phase" the development
of the property within the Center.
(e) Contain provisions allowing the Seller to approve all plans and
specifications for any improvements to be constructed on any property within the
Center, and development plan for or plat of any property within the Center.
(f) Amend the provisions dealing with signage for the Center signs.
Purchaser shall have the right 'to approve the Amended CC&R's in accordance with
the procedures set forth in section 10.12.
11.2 Other Development. Purchaser acknowledges that Seller has made no
representations or warranties to Purchaser concerning the development of any
other property adjacent to or in the vicinity of the Property on which Purchaser
has relied.
SECTION 12. Reserved.
SECTION 13. NAME AND LOGO. Except for directional and location
identification purposes, neither the name "The Crossing at Palmer Park Center,"
any derivatives thereof, nor the logos associated with such name may be used in
any way in connection with the Property or any promotion of it, unless Seller
has given its prior written approval to such use.
SECTION 14. CONDEMNATION. If, between the Effective Date and Closing, any
portion of the Property is taken in condemnation, Purchaser shall have the
option to terminate this Agreement and its obligations hereunder. The option to
terminate contained in this Section must be exercised by written notice to
Seller no later than ten (10) business days after Purchaser is notified by
Seller or others of the condemnation. If Purchaser exercises its option to
terminate in accordance with this Section, the Title Company shall return the
Earnest Money Deposit to Purchaser and neither party shall have any further
obligation hereunder. If Purchaser does not exercise its option to terminate as
provided in this Section, the Agreement shall continue in full force and effect.
In such event, the Purchase Price shall be paid by Purchaser at Closing without
reduction, but Seller shall remit to Purchaser all awards received by Seller as
a result of the condemnation.
SECTION 15. DEFAULT AND REMEDIES. In the event of default by either party
under this Agreement, Purchaser and Seller agree as follows:
15.1 Default by Purchaser. If Purchaser shall default in the performance of
its obligations hereunder, Seller shall have the right to either (a) terminate
this Agreement and retain the Earnest Money Deposit, or (b) enforce this
Agreement through an action for specific performance and damages.
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Purchaser and Seller hereby agree that if Seller elects to recover damages from
Purchaser, Seller's damages shall not exceed $50,000, and Seller hereby waives
its right to recover damages from Purchaser in excess of such amount, including
without limitation any loss of profits, consequential damages, punitive damages
or any other damages or losses suffered by Seller in connection with this
Agreement.
15.2 Default by Seller. If Seller shall default in the performance of its
obligations hereunder, Purchaser shall have the right to either (a) terminate
this Agreement and to obtain the return of the Earnest Money Deposit, or (b)
enforce this Agreement through an action for specific performance and damages.
Purchaser and Seller hereby agree that if Purchaser elects to recover damages
from Seller, Purchaser's damages shall not exceed $50,000, and Purchaser hereby
waives its right to recover damages from Seller in excess of such amount,
including without limitation any loss of profits, consequential damages,
punitive damages or any other damages or losses suffered by Purchaser in
connection with this Agreement.
SECTION 16. BROKERS. Seller represents and warrants to Purchaser that,
other than Highland Commercial Group, LLC, and Coldwell Banker Commercial/Walker
& Co. (together, "Broker"), no broker or finder has been engaged by Seller in
connection with any of the transactions contemplated by this Agreement. Seller
further represents and warrants that no person or entity, other than Broker, now
claims or will claim any commission, finders fee or other amounts by, through,
under or as a result of any,relationship with Seller because of such
transactions. Seller agrees to pay Broker a commission equal to ten percent
(10%) of the Purchase Price, which commission shall not be earned or payable
until the current Of the Closing and Seller's receipt of the Purchase Price. In
the event of a termination of 'this Agreement, Broker. shall have no right to
share in the Earnest Money Deposit if retained by Seller. Purchaser represents
and warrants to Seller that no broker or finder has been engaged by Purchaser in
connection with any of the transactions contemplated by this Agreement.
Purchaser further represents that no person or entity, other than Broker, claims
or will claim any commission, finder's fee or other amounts by, through, under
or as a result of any relationship with Purchaser because of such transactions.
Each party agrees to hold the other party harmless from and against any and all
costs, expenses, claims, losses or damages, including reasonable attorneys'
fees, resulting from any breach of the representations and warranties contained
in this Section.
SECTION 17. ASSIGNMENT. Purchaser shall not have the right to assign all or
any part of its interest or rights under this Agreement without the prior
written consent of Seller, except for an assignment to an affiliate. For
purposes hereof, "affiliate" means any person or entity which controls, is
controlled by, or is under common control with, the Purchaser. A person or
entity shall be deemed to have control of another person or entity if such
person or entity directly or indirectly or acting in concert with one or more
persons and/or entities, or through one or more subsidiaries, owns, controls or
holds with power to vote more than 50 percent of the voting shares or rights of
such other entity, or controls in any manner the election or appointment of a
majority of the directors, trustees or managers of another entity, or is the
general partner in or has contributed more than 25 percent of the capital of
such other entity.
SECTION 18. MISCELLANEOUS.
18.1 Notices. All notices required or permitted under this Agreement shall
be given by nationally recognized overnight courier, for "next day" delivery,
with all delivery costs paid, or by hand delivery, directed as follows:
If intended for Seller, to:
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Bishop Powers, Ltd
c/o Bishop Capital Corporation
716 College View Drive
Riverton, WY 82501
Attn: Robert Thrailkil
Phone: (307) 856-3800
If intended for Purchaser, to:
Sam Khanfar
8065 Hwy 83
Colorado Springs, CO 80920
with a copy in each case to:
Flynn McKenna Wright & Karsh, 11c
Plaza of the Rockies, Suite 202
111 South Tejon
Colorado Springs, Co 80903
Attn: R. Tim McKenna
and to:
Law, Offices of Gary F. Dailey
526 South Nevada Avenue
Colorado Springs, CO 80903
Attn: Erika M. Kaiser
Any notice delivered by overnight carrier in accordance with this paragraph
shall be deemed to have been duly given when delivered. Any notice which is hand
delivered shall be effective upon receipt by the party to whom it is addressed.
Either party, by notice given as above, may change the address to which future
notices should be sent.
18.2 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, personal representatives, successors and permitted assigns.
18.3 Entire Agreement. This Agreement, together with the exhibits attached
hereto, constitutes the entire agreement between Seller and Purchaser, and may
not be modified in any manner except by an instrument in writing signed by both
parties.
18.4 Headings. The section and subsection headings contained in this
Agreement are inserted only for convenient reference and do not define, limit or
proscribe the scope of this Agreement or any exhibit attached hereto.
18.5 Counterparts, This Agreement, may be executed in any number of
counterparts together shall constitute one and the same instrument.
18.6 Unenforceable Provisions. If any provision of this Agreement, or the
application thereof to any person or situation shall be held invalid or
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unenforceable, the remainder of this Agreement, and the application of such
provision to persons or situations other than those to which it shall have been
held invalid or unenforceable, shall continue to be valid and enforceable to the
fullest extent permitted by law.
18.7 Time of the Essence. Time is strictly of the essence with respect to
each and every term, condition, obligation and provision of this Agreement, and
the failure to timely perform any of the terms, conditions, obligations or
provisions hereunder by either party shall constitute a breach of and a default
under this Agreement by the party so failing to perform. In calculating any
period of time provided for in this Agreement, the number of days allowed shall
refer to calendar and not business days. If any day scheduled for performance of
any obligation hereunder shall occur on a weekend or holiday, the time period
allowed and day for performance shall be continued to the next business day.
18.8 Waivers. No waiver by either party of any provision hereof shall be
effective unless in writing or shall be deemed to be a waiver of any other
provision hereof or of any subsequent breach by either party of the same or any
other provision.
18.9 Attorneys' Fees and Costs. In the event of litigation between Seller
and Purchaser arising out of the enforcement of or a default under this
Agreement, the prevailing party shall be entitled to judgment for court costs
and reasonable attorneys' fees in an amount to be determined by the court.
18.10 Governing Law; Construction of Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Colorado.
Seller and Purchaser and their respective counsel have reviewed,. revised and
approved this Agreement. Accordingly, the normal rule of construction that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or exhibits hereto.
18.11 Survival of Representations and Warranties. All covenants,
agreements, representations and warranties made hereunder or pursuant hereto or
in consideration of the transactions contemplated hereby shall survive Closing.
18.12 Duration of Offer. Purchaser has executed and submitted this
Agreement to Seller as an offer for acceptance by Seller to be evidenced by
Seller's execution of this Agreement. Purchaser's offer as represented by this
Agreement shall continue in effect only until June 15, 1998. If Purchaser has
not received a copy of this Agreement executed by Seller on or before that date,
Purchaser's offer and this Agreement shall immediately terminate and shall no
longer be of any force or effect.
This Agreement for the Purchase and Sale of Commercial Real Estate has been
executed as of the date first written above.
SELLER:
Bishop Powers, Ltd.
By: Bishop Capital Corporation, its general partner
By: /s/ Robert E. Thrailkill
-----------------------------------------------
Its: President
----------------------------------------------
PURCHASER:
/s/ Sam Khanfar
---------------------------------------------------
Sam Khanfar
14
<PAGE>
AGREEMENT OF BROKER
The undersigned, as Broker hereunder, acknowledges and agrees that Section 16
of the foregoing Agreement correctly sets forth the understanding and agreement
between Broker, Seller and Purchaser relating to the payment of a commission
resulting from the sale of the Property.
BROKER:
Highland Commercial Group, LLC
By: /s/ Bennett F. Tuck
----------------------------
Its:
----------------------------
Coldwell Banker Commercial/Walker & Co.
By: /s/ Paul Kuyper
-----------------------------
Its: Agent
-----------------------------
15
<PAGE>
EXHIBITS
to
Agreement for the Purchase and
Sale of Commercial Real Estate
Exhibit A Legal Description of Center
Exhibit B Concept Plan
16
<PAGE>
EXHIBIT A
to
Agreement for the Purchase and
Sale of commercial Real Estate
(Legal Description of Center Omitted)
17
<PAGE>
EXHIBIT B
to
Agreement for the Purchase and
Sale of commercial Real Estate
(Concept Plan Omitted)
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 89,826
<SECURITIES> 633,294
<RECEIVABLES> 64,468
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 795,501
<PP&E> 366,699
<DEPRECIATION> 144,494
<TOTAL-ASSETS> 2,235,067
<CURRENT-LIABILITIES> 425,659
<BONDS> 0
0
0
<COMMON> 8,384
<OTHER-SE> 1,801,024
<TOTAL-LIABILITY-AND-EQUITY> 2,235,067
<SALES> 1,103,553
<TOTAL-REVENUES> 1,103,553
<CGS> 578,931
<TOTAL-COSTS> 578,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,766
<INCOME-PRETAX> 269,812
<INCOME-TAX> 100,000
<INCOME-CONTINUING> 169,812
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,812
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
