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, 1999
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. [X]
Issuer's revenues for fiscal year ended March 31, 1999 were $594,026.
The aggregate market value of the voting stock held by non-affiliates as of June
22, 1999 was $419,459.
The number of shares outstanding of the issuer's Common Stock as of June 22,
1999 was 877,355.
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
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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").
The Company had four full-time employees as of March 31, 1999.
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.
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
partner (Powers Golf LLC). There is no affiliation between the Company and
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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.
Subsequent to March 31, 1999, the general partner of Z-H, Ltd. ("Seller")
entered into an Agreement for Sale and Purchase (the "Agreement") with an
unrelated third-party ("Purchaser") for the sale of the real property, currently
encumbered by the Lease discussed above, for $4,400,000 cash. Under terms of the
Agreement, the Purchaser has a 270 day Investigative Period to perform and/or
obtain all tests, examinations, feasibility studies and other reasonable
activities to underwrite the proposed acquisition of the property. If the
Purchaser shall have elected, at or prior to the expiration of the Investigative
Period, to proceed with the acquisition of the property, additional earnest
money deposits will be made in accordance with the terms of the Agreement. The
transaction is scheduled for closing on November 1, 2000 or such earlier date as
the parties may mutually agree. The Lease provides that, beginning with the
fourth lease year, Seller may terminate the Lease by (1) giving 90 days prior
written notice to the lessee, (2) paying the termination fee discussed above and
(3) releasing the lessee from any existing encumbrances. As discussed above, the
termination fee is subject to the Seller being released from liability on the
assumed debt within a certain time period. In the event the Lease has not been
terminated at closing, Seller and Purchaser agree to close into an escrow
account established with an escrow agent. Contemporaneously with the closing,
Seller shall give notice of termination of the Lease to the lessee. As part of
the escrow instructions, the escrow agent will pay the termination fee to the
lessee, if applicable, as well as any existing encumbrances on the real property
which currently approximate $420,000. At March 31, 1999, the net carrying value
of the Company's 19% interest in Z-H, Ltd. is $217,008.
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The Company developed 4.62 acres (comprising 5 lots with common areas) in Phase
I of the 20 acre parcel ("The Crossing at Palmer Park Center") during fiscal
year 1998. 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 in fiscal year 1998 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 in
June 1998. Lot 5 (.48 acre) is currently unsold.
In the current fiscal year, 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 in June 1998. The Company sold 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. Upon closing, $200,000 of the net proceeds
was escrowed for the payment of on-site improvements to be completed by the
Company. The Phase II development costs for grading, utilities, channel lining,
storm sewer and paving were $374,000 and all of the improvements were completed
as of March 31, 1999.
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. During the current fiscal year, the
Company replatted 12 of the remaining 14 lots into 10 lots to increase their
size. The Company sold one lot for $20,000 in the current fiscal year leaving 11
lots available for sale at March 31, 1999.
In October 1998, the Company entered into a limited partnership agreement
(Creekside Apartments, LLLP) with an unrelated third party to develop and
construct a 350 unit apartment complex (the "Project"). The Project is subject
to the successful rezoning of approximately 18 acres of undeveloped real
property owned by the Company and favorable Project financing. The rezoning
process is expected to be completed by September 1999. The estimated cost of the
Project is $20,000,000 of which $18,000,000 is anticipated to be financed by a
non-recourse loan from the U. S. Department of Housing and Urban Development or
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any other third party lender. The Company, upon successful rezoning, will
contribute the land to the partnership at an agreed upon value of $1,600,000 for
an initial 80% limited partnership interest. The unrelated third party will
contribute services with an agreed upon value of $400,000 for the remaining 20%
limited partnership interest. This unrelated third party will also be the
general partner and will earn a 20% partnership interest upon the successful
lender pre-application conference. Any distributions from the partnership will
be allocated to the partners as defined in the partnership agreement. In
addition, the limited partners may be required to loan the partnership up to
$100,000 each. As of March 31, 1999, the Company had advanced funds of $15,000
to the partnership for costs associated with the rezoning process.
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 $300,000.
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
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.
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The City of Colorado Springs, Colorado (the "City") is currently negotiating
with the Company regarding the City's proposed acquisition of a 20 foot
permanent easement for a new sewer line on undeveloped property owned by the
Company. The proposed permanent easement, of which a major portion lies on the
western boundary of the undeveloped property that borders a drainage channel,
would approximate 1.6 acres. The City and the Company each engaged an
independent real estate appraiser to complete an appraisal on the affected
property. The fee for the Company's real estate appraisal will be paid by the
City. If an agreement on the fair market value of the proposed permanent
easement cannot be reached, the City may institute a formal condemnation
proceeding against the property. In the event immediate possession is required,
the City will deposit in the Court the fair market value amount determined by
the Court. The Company may withdraw a portion or all of this amount prior to
final settlement as stipulated by the Court. No prediction can be given as to
when or how this matter will ultimately be concluded. Accordingly, no amounts
have been accrued in the accompanying financial statements. Management believes
that the fair market value of the proposed taking will be in excess of the
carrying value of the affected property.
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, 1999, the net carrying value of this
interest is $236,748. 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 66 MMCFD
(million cubic feet per day) from two completed Madison wells. The operator of
the Unit completed modification plans in September 1998 that increased the plant
capacity from 50 MMCFD to 66 MMCFD. 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
also 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.
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On December 28, 1998, the Company and twenty other royalty owners ("Plaintiffs")
filed suit against Burlington Resources Inc. ("Burlington") in the District
Court, Ninth Judicial District, Fremont County, Wyoming seeking an accounting of
the production, sales of all production and all expenses associated with royalty
payments received from the Madden Deep Unit gas processing plant. The Plaintiffs
allege that Burlington, operator of the gas processing plant, has and continues
to wrongfully deduct post-production costs, which could include indirect plant
operating costs, from their royalty payments. The Plaintiffs believe that the
royalty payments should be free of any post-production costs or, if
post-production costs are statutorily permitted, then those costs must be
limited only to those reasonable costs directly associated with the processing
of the gas. The Plaintiffs are seeking attorneys' fees and costs necessitated in
obtaining the data they are seeking and payment of amounts that were improperly
deducted for the plant operation. A trial date has not been set by the Court. No
prediction can be given as to when or how these matters will ultimately be
concluded. No assurance can be made that the Company will ultimately receive any
funds from this litigation and, accordingly, no amounts have been accrued in the
accompanying financial statements.
Item 2. Description of Property
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The Company's principal properties consist of approximately 44 acres of
developed and undeveloped real estate in Colorado and an office building, 11 lot
subdivision and natural gas royalty interest in Wyoming. None of the properties
are held subject to any encumbrance except for the office building, which is
pledged as collateral on the bank line of credit at March 31, 1999.
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 development.
The Company's major investment in real estate is "The Crossing at Palmer Park
Center" currently being developed on a 20 acre parcel and a 35 acre parcel of
undeveloped real estate in Colorado Springs, Colorado. 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.
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Phase I of the "The Crossing at Palmer Park Center" development consisted of 5
lots (approximately 5 acres) and was completed in fiscal year 1998. The Company
closed sales on three Phase I lots in fiscal year 1998 and one in the current
fiscal year. The fifth lot remains unsold. A Concept Plan for Phases II and III
and a Final Plat for one lot (1.65 acre) in Phase II were approved by the
appropriate governmental authorities in June 1998. The Company sold the one lot
platted in Phase II for $300,000 and the net proceeds were used to fund the
Phase II development costs for grading, utilities, channel lining, storm sewer
and paving of approximately $374,000. The Phase II improvements were 100%
complete as of March 31, 1999. The Company also established a $250,000 line of
credit with a bank to fund Phase II development costs and corporate overhead
costs and expenses. The line of credit is collateralized by the Company's
corporate office building. At March 31, 1999, the Company had outstanding
borrowings of $221,095 under the line of credit.
The Company's proposed 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 Company will not develop retail
pad sites on the 17 acres until it has two sales contracts to fund the estimated
costs of the off-site and on-site improvements of approximately $250,000. The
Company has not prepared any preliminary concept plan for the 17 acres.
In October 1998, the Company entered into a limited partnership agreement with
an unrelated third party to develop and construct a 350 unit apartment complex
(the "Project"). The Project is subject to the successful rezoning from PBC-2 to
R-5 of the 18 acres of undeveloped real property owned by the Company and
favorable Project financing. The rezoning process is expected to be completed by
September 1999. The estimated cost of the Project is $20,000,000 of which
$18,000,000 is anticipated to be financed by a non-recourse loan from the U. S.
Department of Housing and Urban Development or any other third party lender. The
Company, upon successful rezoning, will contribute the land to the partnership
at an agreed upon value of $1,600,000 for an initial 80% limited partnership
interest. The unrelated third party will contribute services with an agreed upon
value of $400,000 for the remaining 20% limited partnership interest. This
unrelated third party will also be the general partner and will earn a 20%
partnership interest upon the successful lender pre-application conference. Any
distributions from the partnership will be allocated to the partners as set
forth in the partnership agreement.
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.
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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, a wholly-owned subsidiary of
Burlington Resources Inc., the operator of the properties. The Company's share
of production from the royalty interest for the year ended March 31, 1999 was
59,730 mcf.
Item 3. Legal Proceedings
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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
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No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year ended March 31, 1999.
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Part II
Item 5. Market for Common Equity and Related Stockholder Matters
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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
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6/30/97 $ -- (1) $ -- (1)
9/30/97 -- (1) -- (1)
12/31/97 -- (1) -- (1)
3/31/98 .875 .125
6/30/98 .875 .625
9/30/98 .875 .563
12/31/98 .625 .375
3/31/99 .500 .375
(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, 1999, 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.
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Item 6. Management Discussion and Analysis of Financial Condition and Results of
Operations
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The following discussion and other sections of this Form 10-KSB may contain
certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and
is subject to the safe harbors created by those sections. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
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 forward-looking statements within this Form 10-KSB are
identified by words such as "believes," "anticipates," "expects," "intends,"
"may" and other similar expressions. However, these words are not the exclusive
means of identifying such statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. The following discussion and
analysis should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes included elsewhere herein.
Results of Operations
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The Company had net income of $42,200 for the fiscal year ended March 31, 1999
compared to net income of $169,800 for fiscal 1998. The decrease is primarily
attributable to a lower volume of real estate sales in the current year which
resulted in a 60% decrease in gross profit on real estate sold.
Fiscal 1999 Compared to Fiscal 1998
Gross profit on real estate sold of $211,206 in fiscal 1999 and $524,622 in
fiscal 1998 resulted primarily from the sale of improved real estate in Colorado
Springs, Colorado. The Company had real estate sales of $594,026 in fiscal 1999
compared to $1,103,553 in fiscal 1998 which were offset by costs of real estate
sold of $382,820 and $578,931, respectively.
General and administrative expenses increased $49,500 or 10% in fiscal 1999
primarily due to issuance of common stock for employee compensation and the full
balance of notes receivable being charged to operations.
Depreciation and amortization remained comparable between fiscal 1999 and 1998.
Gas royalties, net of amortization, increased $12,300 or 20% in fiscal 1999
compared to fiscal 1998. Natural gas production increased 13% (59,730 mcf in
1999 compared to 53,000 mcf in 1998) and was offset by a 3% decrease in the
average sales price of natural gas ($1.71 per mcf in 1999 compared to $1.76 per
mcf in 1998). Gas processing costs and production taxes decreased 32% ($13,969
in 1999 compared to $20,514 in 1998) primarily due to lower gas processing
costs.
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Interest income decreased $3,900 or 16% in fiscal 1999 from fiscal 1998
primarily due to the non-accrual of interest on the full balance of notes
receivable charged to operations.
Rental income increased $3,800 or 26% in fiscal 1999 from fiscal 1998 primarily
due to a new tenant leasing an office suite in the Company's corporate office
building.
The net gain on sale of marketable securities of $18,400 in fiscal 1999 resulted
from the sale of equity securities for working capital or other investment
opportunities.
The net unrealized gain on marketable securities of $167,400 in fiscal 1999
represents the net change in the market value of the trading securities
portfolio from fiscal 1998.
Equity in limited partnership income of $6,400 in fiscal 1999 represents the
Company's share of the net rental income from the 25 year ground lease which
originated from the October 1997 sale of all improvements, buildings and
fixtures related to the operations.
Interest expense increased $5,600 or 38% in fiscal 1999 compared to fiscal 1998
primarily due to borrowings under the bank line of credit and an increase in the
margin payable to broker balance.
Financial Condition
At March 31, 1999, the Company had working capital of $503,000.
The following summary table reflects comparative cash flows for the Company for
the two years ended March 31, 1999:
Years Ended
March 31,
----------------------
1999 1998
---- ----
Net cash provided by (used in):
Operating activities $(192,000) $ 90,500
Investing activities (46,100) (50,900)
Financing activities 220,300 (50,900)
The Company had negative cash flows from operating activities of $192,000 in
fiscal 1999 compared to net cash provided by operating activities of $90,500 in
fiscal 1998. This significant decrease in operating cash flows was due primarily
to a lower sales volume of improved real estate in fiscal 1999.
13
<PAGE>
Net cash used in investing activities in fiscal 1999 resulted primarily from
funds advanced under notes receivable of $30,000 and the purchase of equipment
for $16,200. In fiscal 1998, net cash used in investing activities resulted
primarily from the purchase of vehicles and equipment.
Net cash provided by financing activities in fiscal 1999 resulted from bank
borrowings of $287,000 offset by repayment of borrowings of $65,900 and the
purchase of treasury stock for $800. 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 in fiscal 1998.
The Company's material commitments for capital expenditures in the next twelve
months will be in conjunction with (1) the Phase III development of "The
Crossing at Palmer Park Center," (2) a proposed 350 unit apartment complex and
(3) the development of retail pad sites on 17 acres of a 35 acre parcel in
Colorado Springs, Colorado.
When the Company develops Phase III of "The Crossing at Palmer Park Center," it
will incur development costs for utilities, storm sewer, paving and additional
drainage channel improvements. The Company anticipates that the estimated costs
of $300,000 for these improvements will be funded by cash proceeds from lot
sales.
In connection with the proposed apartment complex, the Company may have to loan
Creekside Apartments, LLLP, under terms of the partnership agreement, up to
$85,000 for costs associated with the rezoning process and other partnership
matters. The Company anticipates that the loan advances, if any, will be funded
from either working capital or cash proceeds from lot sales.
The Company is having preliminary discussions with two prospective purchasers of
retail pad sites on the undeveloped 17 acres. The Company will not develop the
acreage until it has closed two sales contracts to fund the estimated costs for
off-site and on-site improvements (grading, utilities, storm sewer and paving)
of approximately $250,000.
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.
14
<PAGE>
The Company is continuing the review of its computer system to assess the
potential costs and scope of the Year 2000 issue. The Company utilizes a minimal
number of computer programs (primarily accounts payable, general ledger and
payroll) in its operations. The Company is utilizing both internal and external
resources to replace its current software for Year 2000 compliant software. The
Company's goal is to complete all relevant internal software remediation and
testing by September 30, 1999. The total cost to the Company of these Year 2000
issue activities has not been and is not anticipated to be material to its
financial position or results of operations. Any hardware and/or software
purchased will be capitalized in accordance with normal policy. Personnel and
all other costs related to the project are being expensed as incurred.
In addition to the Year 2000 compliance issues we face with respect to our own
system, we face risks that our vendors' and customers' systems, which are not
directly under our control, may not become compliant prior to January 1, 2000.
In addition, if certain public infrastructure interruptions in areas such as
utilities (electricity, water or telephone), banking or government, result in a
disruption of our service, our operations could be impacted for the duration of
the disruption.
A contingency plan has not yet been developed for dealing with the most
reasonably likely worst case scenario with respect to our Year 2000 compliance,
and such scenario has not yet been clearly identified. It is impossible to fully
assess the potential consequences in the event service interruptions from
suppliers occur or in the event there are disruptions in such infrastructure
areas as utilities, communications, banking and government. Assuming no major
public infrastructure service disruption occurs, we believe that we will be able
to manage our Year 2000 transition without a material effect on our results of
operations or financial condition. We have not completed contingency plans in
the event that a disruption in the public infrastructure does occur.
The above information is based upon management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. There can be no assurance that these estimates can be achieved and
actual results could differ materially from those anticipated.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. The Company does not invest in derivative investments nor
engage in hedging activity.
15
<PAGE>
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
- --------------------------------------------------------------------------------
None
16
<PAGE>
Part III
Item 9. Directors and Executive Officers of the Registrant
- ----------------------------------------------------------
a. Identification of Directors and Executive Officers
Name Age Office
---- --- ------
Robert E. Thrailkill 67 Chairman of the Board, President
and Chief Executive Officer
John A. Alsko 58 Secretary/Treasurer and Director
Robert J. Thrailkill 40 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 34 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 held 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.
17
<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 on a timely basis.
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, 1999, 1998 and 1997. No other executive
officer had total annual salary and bonus exceeding $100,000 for the year ended
March 31, 1999.
<TABLE>
<CAPTION>
Long Term
Name Annual Compensation Compensation Awards
and ------------------------------------- --------------------------
Principal Other Annual Restricted Options
Position Year Salary Bonus Compensation Stock Award ($) SARS (#)
-------- ---- ------ ----- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Thrailkill 1999 $145,000 $ -- $ 11,200 (2) $ -- --
President, Chief 1998 145,000 -- -- -- --
Executive Officer 1997 145,000 -- 46,200 (3) -- 45,000 (4)
and Director (1)
- --------------
18
</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 20,000 restricted shares issued as additional compensation
with a fair market value of $.56 per share.
(3) 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.
(4) 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. The options were not exercised by Mr.
Thrailkill.
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, 1999.
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, 1999.
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 1999.
e. Employment Contracts and Termination of Employment and
Change-in-Control Arrangements.
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
19
<PAGE>
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, 1999, 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 153,220 17.5%
716 College View Drive
Riverton, WY 82501
Common Stock Consult & Assist (1) 68,750 7.8%
P.O. Box 9856
Rancho Santa Fe, CA 92067
Common Stock Francarep, Inc. (2) 68,750 7.8%
50 Av. des Champs-Elysees
75008 Paris, France
- ----------------
(1) All shares are beneficially owned by Georg Ligenbrink.
(2) All shares are beneficially owned by Georges Babinet.
20
<PAGE>
b. Security Ownership of Management
The following table shows, as of June 22, 1999, 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 153,220 17.5%
716 College View Drive
Riverton, WY 82501
Common Stock John A. Alsko 29,563 3.3%
716 College View Drive
Riverton, WY 82501
Common Stock Robert J. Thrailkill 23,438 2.7%
716 College View Drive
Riverton, WY 82501
Common Stock All officers and directors
as a group (three persons) 206,221 23.5%
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 1999 in an amount exceeding $60,000.
c. Transactions with Promoters
Not applicable
21
<PAGE>
Part IV
Item 13. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits
3.1 Articles of Incorporation and Bylaws (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 (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 (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 (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
(2)
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) (2)
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) (2)
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 (2)
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 (2)
22
<PAGE>
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 (2)
10.10 Construction Contract dated June 5, 1997 between Bishop
Capital Corporation as General Partner of Bishop Powers,
Ltd. and Pioneer Sand Company, Inc. (3)
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. (3)
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 (3)
10.13 Agreement for Sale and Purchase of Real Property dated June
15, 1999 between Z-H, Ltd., a Colorado limited partnership
and Centrefund Development (Colorado) Corp.
21 Subsidiaries of the Registrant (2)
27 Financial Data Schedule (submitted only in electronic
format).
- ------------------
(1) Incorporated by reference to exhibits filed with Registrant's Form
10-SB Registration Statement filed with the Commission on December 11,
1996.
(2) Incorporated by reference to exhibits filed with Registrant's Form
10-SB/A Registration Statement filed with the Commission on March 17,
1997.
(3) Incorporated by reference to exhibits filed with Registrant's annual
report on Form 10-KSB for the fiscal year ended March 31, 1998.
b. Reports on Form 8-K
None
23
<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, 1999 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, 1999 /s/ Robert E. Thrailkill
------------------------
Robert E. Thrailkill
Chairman of the Board of Directors
(Principal Executive Officer)
Date: June 22, 1999 /s/ John A. Alsko
-----------------
John A. Alsko
Treasurer/Director
(Principal Financial and Accounting
Officer)
Date: June 22, 1999 /s/ Robert J. Thrailkill
------------------------
Robert J. Thrailkill
Vice President/Director
24
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report................................................F2
Consolidated Balance Sheet - March 31, 1999.................................F3
Consolidated Statements of Operations -
For the Years Ended March 31, 1999 and 1998.............................F4
Consolidated Statements of Changes in Stockholders' Equity -
For the Years Ended March 31, 1999 and 1998.............................F5
Consolidated Statements of Cash Flows -
For the Years Ended March 31, 1999 and 1998.............................F6
Notes to Consolidated Financial Statements..................................F7
F1
<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, 1999, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended March 31, 1999 and 1998. 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, 1999, and the results of their
operations and their cash flows for the years ended March 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
May 20, 1999, except for Note 12
as to which the date is June 15, 1999
F2
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
ASSETS
------
CURRENT ASSETS:
Cash and equivalents $ 17,626
Marketable securities 852,672
Receivables:
Gas royalties 33,144
Interest and other 8,210
Prepaid expenses and other 7,507
-----------
Total current assets 919,159
PROPERTY AND EQUIPMENT:
Building 224,644
Furniture and fixtures 66,887
Vehicles and equipment 91,380
-----------
382,911
Less accumulated depreciation (170,526)
-----------
Net property and equipment 212,385
-----------
OTHER ASSETS:
Land under development 798,523
Investment in limited partnership 217,008
Gas royalty interest, net of
accumulated amortization of $830,303 236,748
Deferred income taxes 69,000
Notes receivable 42,221
Other assets, net 4,039
-----------
Total other assets 1,367,539
-----------
TOTAL ASSETS $ 2,499,083
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 105,289
Current maturities of long-term debt 11,315
Deferred income taxes 69,000
Payable to broker 230,565
-----------
Total current liabilities 416,169
LONG-TERM DEBT, less current maturities 209,780
COMMITMENTS (Notes 5 and 8)
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; 878,355 shares issued 8,784
Treasury stock, 1,000 shares (815)
Capital in excess of par value 2,217,599
Accumulated deficit (352,434)
-----------
Total stockholders' equity 1,873,134
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,499,083
===========
See accompanying notes to these consolidated financial statements.
F3
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
MARCH 31,
----------------------
1999 1998
---- ----
REVENUES -
Gross profit on real estate sold $ 211,206 $ 524,622
COSTS AND EXPENSES:
General and administrative 538,137 488,669
Depreciation and amortization 26,310 26,411
--------- ---------
564,447 515,080
--------- ---------
INCOME (LOSS) FROM OPERATIONS (353,241) 9,542
OTHER INCOME (EXPENSE):
Gas royalties, net of amortization of $13,344 73,666 61,375
Interest income 20,272 24,175
Dividend income 11,193 10,839
Rental income 18,472 14,716
Net gain (loss) on sale of marketable securities 18,379 (31,705)
Net unrealized gain on marketable securities 167,353 199,611
Equity in limited partnership income (loss) 6,394 (3,975)
Interest expense (20,337) (14,766)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (57,849) 269,812
Provision for income taxes:
Current 58,000 (58,000)
Deferred 42,000 (42,000)
--------- ---------
NET INCOME $ 42,151 $ 169,812
========= =========
EARNINGS PER SHARE $ .05 $ .20
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 851,000 836,000
========= =========
See accompanying notes to these consolidated financial statements.
F4
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
Common Stock Treasury Stock
------------------------- ------------------------- Capital in
Number of Number of Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, April 1, 1997 885,481 $ 8,855 -- $ -- $ 2,245,995 $ (564,397) $ 1,690,453
Purchase of treasury stock -- -- 94,116 (100,677) -- -- (100,677)
Sale of treasury stock to officer -- -- (47,000) 49,820 -- -- 49,820
Retirement of treasury stock (47,116) (471) (47,116) 50,857 (50,386) -- --
Net income -- -- -- -- -- 169,812 169,812
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCES, March 31, 1998 838,365 8,384 -- -- 2,195,609 (394,585) 1,809,408
Purchase of treasury stock -- -- (1,010) (825) -- -- (825)
Retirement of treasury stock (10) -- 10 10 (10) -- --
Common stock issued to employees
for compensation 40,000 400 -- -- 22,000 -- 22,400
Net income -- -- -- -- -- 42,151 42,151
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCES, March 31, 1999 878,355 $ 8,784 (1,000) $ (815) $ 2,217,599 $ (352,434) $ 1,873,134
=========== =========== =========== =========== =========== =========== ===========
See accompanying notes to these consolidated financial statements.
F5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
MARCH 31,
----------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 42,151 $ 169,812
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 26,310 25,837
Amortization 13,344 13,916
Deferred income taxes (42,000) 42,000
Common stock issued to employees for compensation 22,400 --
Equity in limited partnership loss (income) (6,394) 3,975
Net (gain) loss on sale of marketable securities (18,379) 31,705
Net unrealized gain on marketable securities (167,353) (199,611)
Provision for uncollectible notes receivable 45,000 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash 54,310 (54,310)
Marketable securities (33,645) (15,471)
Gas royalties receivable (21,421) 3,766
Interest and other receivables 44,536 (43,760)
Receivables from AROC -- 2,055
Prepaid expenses and other 405 2,412
Land under development (126,491) (104,296)
Increase (decrease) in:
Accounts payable and accrued expenses (67,087) 129,332
Income taxes payable (33,000) 33,000
Customer deposit -- (20,000)
Payable to broker 75,282 70,177
--------- ---------
Net cash provided by (used in) operating activities (192,032) 90,539
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds advanced under notes receivable (30,000) --
Proceeds from collection of notes receivable 4,084 1,414
Purchase of property and equipment (16,212) (52,315)
Other (4,000) --
--------- ---------
Net cash used in investing activities (46,128) (50,901)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 287,000 50,000
Principal payments on borrowings (65,905) (50,000)
Treasury stock acquired (825) (100,677)
Proceeds from sale of treasury stock to officer -- 49,820
--------- ---------
Net cash provided by (used in) financing activities 220,270 (50,857)
--------- ---------
NET DECREASE IN CASH AND EQUIVALENTS (17,890) (11,219)
CASH AND EQUIVALENTS, beginning of year 35,516 46,735
--------- ---------
CASH AND EQUIVALENTS, end of year $ 17,626 $ 35,516
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 20,337 $ 14,766
========= =========
Cash received (paid) for income taxes $ 20,000 $ (25,000)
========= =========
See accompanying notes to these consolidated financial statements.
F6
</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 3 to 31 years.
F7
<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 - The gas royalty interest is being amortized
utilizing the straight-line method over an estimated life of 20 years.
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. Realized gains and losses on all securities
are based on average costs.
Investments - The Company's 19% ownership interest in a limited partnership
(Z-H, Limited), is stated at cost, adjusted for its share of income or
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.
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
F8
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. The Company has
never issued any stock options, warrants or similar instruments.
Compensation cost for stock options granted to employees will be measured
as the excess, if any, of the quoted market price of the Company'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 will be accounted for by
the fair value method as prescribed by Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. SFAS No.
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 SFAS No. 123 for employees, and will be subject only to the
disclosure requirements prescribed by SFAS No. 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 - Earnings per share is presented in accordance with the
provisions of SFAS No. 128, Earnings Per Share, which requires disclosure
of basic earnings per share (EPS) and diluted EPS. Basic EPS is computed by
dividing net income or loss by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock and resulted in the issuance
of common stock. Basic and diluted EPS are the same for all periods
presented since no potential common shares are outstanding.
F9
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. MARKETABLE SECURITIES:
The cost and estimated fair market value of trading securities at March 31,
1999, are as follows:
Fair Net
Market Unrealized
Cost Value Gains
---- ----- -----
U.S. Treasury securities $172,758 $173,678 $ 920
Redeemable preferred securities 89,500 104,500 15,000
Equity securities 249,441 574,494 325,053
-------- -------- --------
$511,699 $852,672 $340,973
======== ======== ========
At March 31, 1999, the Company had an investment in the equity securities
of a single company with a fair value of $284,000. The Company also had an
investment in redeemable preferred securities of a single issuer with an
estimated fair value of $104,500.
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,
1999, the net carrying value of this interest amounts to $236,748. 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 cash flow from the partnership and 80% of annual cash
flow in excess of $40,000. After the Company receives cumulative cash flow
of $1,050,000 plus interest at prime adjusted semi-annually, the Company
will be entitled to 60% of the annual cash flow of the partnership. Through
March 31, 1999, the minority interest's share of the partnership's profits
and cash flows has not been material.
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, 1999, the Partnership's
F10
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
activities have been focused on the development of nine commercial pad
sites on approximately 11 acres of a 20-acre parcel. Two of the pad sites
were sold during the year ended March 31, 1999 and three pad sites were
sold during the year ended March 31, 1998.
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 years ended March 31, 1999 and 1998, as follows:
1999 1998
---------- ----------
Sales of real estate $ 594,026 $1,103,553
Less cost of real estate sold 382,820 578,931
---------- ----------
Gross profit on sales of real estate $ 211,206 $ 524,622
========== ==========
At March 31, 1999, all required development work related to fiscal 1999 and
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
$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 $50,000 of which
approximately $1,000 and $4,000 was recognized using the installment method
of accounting during the years ended March 31, 1999 and 1998, respectively.
Following is a summary of condensed financial information pertaining to
this limited partnership:
Balance sheet data at March 31, 1999:
Current assets $195,000
Noncurrent assets 114,000
Current liabilities (5,000)
Deferred profit (236,000)
Notes payable - general partners (318,000)
F11
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended March 31,
----------------------
1999 1998
---- ----
Operations data:
Revenue $ 98,000 $ 100,000
Costs and expenses (54,000) (121,000)
--------- ---------
Net income (loss) $ 44,000 $ (21,000)
========= =========
Company's equity in limited partnership
income (loss) $ 6,394 $ (3,975)
========= =========
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,
1999, there is a difference of approximately $265,000 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.
6. LONG-TERM DEBT:
In December 1998, the Company obtained a $250,000 line-of-credit which is
collateralized by the Company's building. Principal and interest (at 8.25%
per annum) payments are due monthly and the line-of-credit matures in
December 2003.
The following is a schedule of future principal payments as of March 31,
1999:
Year Ending March 31,
---------------------
2000 $ 11,315
2001 12,285
2002 13,338
2003 14,481
2004 169,676
--------
$221,095
========
F12
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES:
Income tax expense differs from the amounts computed using the statutory
rate of 34% as follows:
Years Ended March 31,
----------------------
1999 1998
---- ----
Computed tax benefit (expense) at the expected
statutory rate $ 20,000 $ (92,000)
State income taxes, net of Federal benefit 1,000 (4,000)
Non-deductible expenses (1,000) (1,000)
Change in valuation allowance 92,000 (11,000)
Surtax exemption (12,000) 8,000
--------- ---------
Income tax benefit (expense) $ 100,000 $(100,000)
========= =========
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of March 31, 1999, are
presented below:
Deferred tax assets:
Gas royalty interest $ 253,000
Allowance for uncollectible notes receivable 16,000
Property and equipment 4,000
Net operating loss carryforwards 111,000
Investment in limited partnership 15,000
---------
Total deferred tax assets 399,000
Less valuation allowance (265,000)
---------
Net deferred tax asset 134,000
---------
Deferred tax liabilities:
Net unrealized gain on marketable securities (122,000)
Land under development (9,000)
Other (3,000)
---------
Total deferred tax liabilities (134,000)
---------
Net deferred tax liabilities $ --
=========
The above balances are classified in the accompanying consolidated balance
sheet as follows:
Net deferred tax asset, long-term $ 69,000
Net deferred tax liability, current (69,000)
--------
$ --
========
F13
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 1999, Bishop has a net operating loss carryforward for
Federal income tax purposes of approximately $250,000, 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 $100,000 of the loss carryforward is subject to limitations
under IRS Section 382. If not previously utilized, these carryforwards will
expire by 2019.
8. COMMITMENTS:
In October 1998, the Company entered into a limited partnership agreement
with an unrelated third party to develop and construct a 350 unit apartment
complex (the "Project"). The Company contributed $4,000 towards the project
during the year ended March 31, 1999. The Project is subject to the
successful rezoning of approximately 18 acres of undeveloped real property
owned by the Company in Colorado Springs, Colorado and favorable Project
financing. The rezoning process is expected to be completed by September
1999. The estimated cost for the Project is $20,000,000 of which
$18,000,000 is anticipated to be financed by a non-recourse loan from the
U.S. Department of Housing and Urban Development or any other third party
lender. The Company, upon successful rezoning, will be required to
contribute the land valued at $1,600,000 (costing approximately $38,000)
for an 80% limited partner interest. The unrelated third party will be
required to contribute $400,000 of services for the remaining 20% limited
partner interest and will also be the general partner. In addition, the
limited partners may be required to loan the partnership up to $100,000
each. In January 1999, the Company and the other limited partner each
loaned $15,000 to the partnership for costs associated with the rezoning
process.
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.
F14
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. FINANCIAL INSTRUMENTS:
SFAS No. 107 requires the Company to disclose the fair value of certain
financial instruments in its financial statements. Accordingly, at March
31, 1999, 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.
10. RELATED PARTY TRANSACTIONS:
During the year ended March 31, 1998, an officer traded a plot of land
valued at $15,000 plus a $20,000 deposit made in 1996 for a different plot
of land. This plot of land was sold for $16,000 to an unrelated party
during the year ended March 31, 1999.
The Company had notes receivable for a total of $25,000 from two officers
of the Company at March 31, 1998. These notes provided for interest at
6.25% and were due in April 1999. The officers pledged 25,000 shares of
AROC common stock as collateral for the notes. The full balance of the
notes was charged to operations during the year ended March 31, 1999.
11. STOCK-BASED COMPENSATION:
During the year ended March 31, 1999, the Company issued 40,000 shares of
its common stock to 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 $22,400 for the year ended March 31,
1999. Of these shares, 37,500 were issued to three officers of the Company.
12. SUBSEQUENT EVENT:
On June 15, 1999, the general partner of Z-H, Ltd. (Seller) entered into an
Agreement for Sale and Purchase (the "Agreement") with an unrelated third
party (Purchaser) for the sale of the real property, currently subject to
the Ground Lease (the "Lease") discussed in Note 5 for $4,400,000 cash.
Under terms of the Agreement, the Purchaser has a 270-day investigative
period to perform due diligence and arrange financing. If the Purchaser
elects to proceed with the acquisition of the property, additional earnest
money deposits will be made in accordance with the terms of the Agreement.
The transaction is scheduled for closing by November 1, 2000.
At March 31, 1999, the net carrying value of the Company's 19% interest in
Z-H, Ltd. is $217,008. Assuming that this transaction is completed,
management believes the fair value of its investment in Z-H, Ltd. is
approximately $500,000 as of March 31, 1999.
F15
Exhibit 10.13 Arizona/Colorado/New Mexico/Texas
- ------------- ---------------------------------
Vacant Land Acquisitions
AGREEMENT FOR SALE AND PURCHASE
(the "Agreement")
PURCHASER, CENTREFUND DEVELOPMENT (COLORADO) CORP., a Florida corporation,
hereby agrees to purchase and acquire from SELLER, Z-H, Ltd., a(n) Colorado
Limited Partnership, and SELLER hereby agrees to sell and convey to PURCHASER,
the real property located at the Southwest corner of the intersection of Palmer
Park Boulevard and Powers Boulevard, in the City of Colorado Springs, County of
El Paso, State of Colorado, and being more particularly described on Schedule
"A" attached to this Agreement, together with the improvements, if any, located
thereon and the other items referred to in Paragraph 19 below and in Schedule
"B" hereto (collectively, the "Property"), at the Purchase Price of Four Million
Four Hundred Thousand AND NO/100 DOLLARS ($4,400,000.00), and upon the following
terms:
1. The Purchase Price shall be payable in the following manner:
(a) $25,000.00 by check in that amount to be deposited by Purchaser with
the Title Company (as defined below) within three (3) business days
following execution of this Agreement by both parties, said sum to be
held by the Title Company (as escrow agent) as an earnest money
deposit pending completion or other termination of this Agreement and
to be applied towards the Purchase Price on Closing (as defined
below). The deposit shall be invested in an interest bearing account
or other investment vehicle directed by the Purchaser and interest
will be credited to Purchaser and applied against the Purchase Price
on Closing. Both the Seller and the Purchaser irrevocably direct the
Title Company to return the deposit and accrued interest to the
Purchaser immediately upon being notified by the Purchaser that this
Agreement has been terminated on or before the expiration of the
Investigation Period.
(b) $25,000.00 by check in that amount to be deposited by Purchaser with
Escrow Agent within three (3) business days following the expiration
of the Investigation Period, provided, however, that Purchaser shall
have elected, at or prior to the expiration of the Investigation
Period, to proceed forward with the acquisition of the Property in
accordance with the terms of this Agreement. The sum to be posted by
Purchaser with Escrow Agent in accordance with this Subparagraph 1(b)
shall be held by Escrow Agent as an earnest money deposit pending
completion or other termination of this Agreement and shall be applied
towards the Purchase Price on Closing. The deposit referred to in this
Subparagraph 1(b) shall be invested in an interest bearing account or
other investment vehicle directed by the Purchaser and interest will
be credited to Purchaser and applied against the Purchase Price on
Closing.
(c) $25,000.00 by check in that amount to be deposited by Purchaser with
Escrow Agent on the 450th day following the Effective Date of this
Agreement, provided, however, that Purchaser shall have elected, at or
prior to the expiration of the Investigation Period, to proceed
forward with the acquisition of the Property in accordance with the
terms of this Agreement. The sum to be posted by Purchaser with Escrow
Agent in accordance with this Subparagraph 1(c) shall be held by
Escrow Agent as an earnest money deposit pending completion or other
termination of this Agreement and shall be applied towards the
Purchase Price on Closing. The deposit referred to in this
Subparagraph 1(c) shall be invested in an interest bearing account or
other investment vehicle directed by the Purchaser and interest will
be credited to Purchaser and applied against the Purchase Price on
Closing.
(d) Intentionally Deleted.
(e) The balance of the Purchase Price will be payable at Closing either in
cash or in other immediate funds to Seller (or to the Title Company
for further delivery to the Seller), subject to the usual and
customary closing adjustments.
2. The Seller covenants to discharge and remove, at its own cost and expense,
on or before Closing, all mortgages, liens (except taxes for the current
year not yet due and payable and current installments of any special
assessments not yet due and payable, together hereinafter referred to as
"Current Taxes"), charges (except any obligations for the installation of
drainage improvements, hereinafter the "Drainage Obligations"), or
encumbrances whatsoever affecting the Property.
<PAGE>
3. Unless an original or duplicate original of this Agreement, duly
countersigned by Seller, shall have been delivered to Purchaser prior to
5:00 p.m. on the 17th day of June, 1999 , this offer shall, at Purchaser's
option, be of no further force or effect (and any and all deposit[s]
theretofore posted by Purchaser in connection with this Agreement shall be
immediately refunded to Purchaser, together with accrued interest thereon,
if any). The "Effective Date" of this Agreement shall be the date upon
which Purchaser and the Title Company shall receive an original or
duplicate original of this Agreement which has been duly countersigned by
the Seller.
4. This transaction shall be completed at a closing (the "Closing") in the
office of the Title Company commencing at 10:00A.M. on the closing date
(the "Closing Date") specified in Schedule "B" hereto. Upon Closing, Seller
shall execute and deliver to Purchaser (or to the Title Company, if so
directed by Purchaser) a special warranty deed in proper recordable form,
conveying to Purchaser good and marketable title to the Property subject
only to such matters as may be permitted herein. Seller shall also execute
and deliver to Purchaser (or to the Title Company, if so directed by
Purchaser) a Non-Foreign Affidavit, in customary form, an Affidavit of
Value (if applicable) in form and content satisfactory to the Title Company
and sufficient to enable the special warranty deed to be duly registered on
title so as to effectively transfer and convey title to the Property to
Purchaser as herein required and such other documents, instruments and
agreements as are customarily required in the state in which the Property
is located in order to consummate and complete this transaction and to more
fully carry out the intent of the parties as contemplated herein. All
transfer, sales and other taxes payable in respect of the transaction
contemplated herein and/or in connection with the ownership and/or
operation of the Property prior to Closing shall be the responsibility of
and shall be payable by Seller. Upon Closing, vacant possession of the
Property (subject to existing tenancies, if any, disclosed to Purchaser
during the Investigation Period) shall be given to Purchaser. If the
Closing is scheduled for a day other than a business day (i.e., if such day
shall be a Saturday, Sunday or a statutory holiday in the state in which
the Property is located), Closing will take place on the next business day.
5. As more particularly set forth on Schedule "B" hereto, Purchaser shall have
the right to inspect the Property during the period (the "Investigation
Period") beginning on the Effective Date and ending Two Hundred Seventy
(270) days following the Delivery Date, as defined below, provided,
however, that if the last day of the Investigation Period shall be other
than a business day, the Investigation Period shall be extended until 11:59
p.m. on the next business day.
6. Within five (5) business days following the Effective Date, Seller shall
deliver to Purchaser, or cause to be delivered, an ALTA Form B or ALTA
Extended Coverage or Texas Form T-1 (as applicable) Title Insurance
Commitment as to the Property (providing, in each case, marketability
coverage), together with a true, complete and legible copy of all documents
and instruments listed as title exceptions therein (said commitment and
copies being hereinafter sometimes collectively referred to as the " Title
Commitment") issued by Chicago Title of Colorado, Inc. ("Title Company") in
the full amount of the Purchase Price. The date when Purchaser receives the
following, namely, the Title Commitment and "Documents" (as defined in
Schedule "B" hereto) shall be the "Delivery Date."
7. If within the time allowed in Paragraph 5 hereof Purchaser shall make
objection in writing to the condition of Seller's title, then Seller may
either (i) endeavor to cure or remedy same within thirty (30) days
thereafter, or (ii) notify Purchaser that Seller is unwilling to cure or
remedy same. If, unless required as set forth below, Seller shall be
unwilling to cure or remedy all objections to title, or if Seller shall be
unable to cure or remedy all such objections within said thirty (30) day
period, then, unless Purchaser shall agree to waive such uncured or
unremedied objections, this Agreement, notwithstanding any intermediate
acts or negotiations in respect of such objections, shall be at an end and
all deposit monies posted by Purchaser hereunder, together with all accrued
interest thereon shall be promptly refunded to Purchaser without deduction,
whereupon this Agreement shall terminate and neither party shall have any
further liability for any costs or damages. Anything in the foregoing to
the contrary notwithstanding, Seller shall be obligated to cure or
eliminate all title defects which are susceptible of discharge by the
payment of money which is fixed, definite or readily ascertainable in
amount (e.g., mortgages, liens, judgments, delinquent taxes, etc., but
excepting Current Taxes and the Drainage Obligations). Any exceptions to
title set forth in the Title Commitment as to which Purchaser shall not
have made written objection within the time period noted above, or which
are waived by Purchaser , shall be conclusively deemed to be "Permitted
Exceptions" which have been accepted by Purchaser. At Closing, Seller shall
pay for, and caused to be delivered to Purchaser, an ALTA Form B or ALTA
Extended Coverage or Texas Form T-1 (as applicable) Title Insurance Policy
(providing, in each case, [if applicable] marketability coverage) in the
amount of the Purchase Price, issued by the Title Company, insuring fee
simple title to the Property in the name of Purchaser subject only to the
Permitted Exceptions (and with the standard preprinted exceptions deleted,
provided that a current survey of the Property sufficient for such purpose
shall have been furnished to the Title Company and Purchaser pays any
additional premium for such deletions), and containing such endorsements as
Purchaser may reasonably request, it being understood and agree that
Purchaser shall be obligated to pay the cost of any additional endorsements
i.e., if Purchaser shall elect to obtain same.
8. Within five (5) business days following the Effective Date of this
Agreement, Seller shall deliver to the Purchaser and the Title Company, a
copy of all existing surveys of the Property which are within Seller's
possession or control. Prior to the expiration of the Investigation Period,
Purchaser, at its option and expense, may obtain a currently dated ALTA (or
other) survey of the Property (the "Survey"), certified to the Purchaser
and to other parties designated by Purchaser, showing thereon, at
Purchaser's option, the location of all buildings, improvements, easements,
rights-of-way and other similar entitlements, and, if requested by
Purchaser at its option, containing, at Purchaser's option (and to the
extent applicable) the information described in Items 1-16 of Table A of
the ALTA/ACSM (1997) requirements. Any encroachment by or onto adjoining
properties, overlap and/or other condition disclosed by such Survey which
may affect marketability of the title to the Property shall be deemed to
constitute a title defect which shall be handled in the manner set forth in
Paragraph 7 above, provided that any notice of title defect is given within
the period allowed by Paragraph 7. Prior to the expiration of the
Investigation Period, Purchaser, at its option and expense, may obtain a
currently dated Phase One Environmental Audit Report relating to the
Property, such report to be certified to Purchaser and to other parties
designated by Purchaser.
9. The current installment of any and all special assessments and/or local
improvement charges levied or assessed by any county, municipality or
quasi-governmental entity shall be apportioned at Closing. Until the
Closing, Seller shall cause the tenant pursuant to the Lease (as
hereinafter defined) to maintain all insurance coverages required by the
Lease, and if the Lease terminates, Seller shall maintain in full force and
effect casualty and liability insurance in respect of the Property
(casualty insurance to provide full replacement value coverage for all
buildings and other improvements upon the Property). Property taxes for the
year of the Closing shall be prorated through the day before the Closing
Date. If the actual property tax and/or assessment bill for the year of
Closing is not available at Closing, the proration for property taxes
and/or assessments shall be based upon the most recent years' tax and/or
assessment bills and shall be readjusted by Seller and Purchaser within
thirty (30) days following the receipt of the actual tax and/or assessment
bills for the year of Closing. This obligation shall survive the Closing
and the delivery of the deed hereunder.
10. Purchaser may at any time prior to Closing assign this Agreement to another
entity in which Purchaser's parent company holds a majority interest and
upon such assignment, this Agreement shall in all respects be construed as
if made in the first instance by the assignee and the Purchaser herein
shall have no further obligations whatsoever.
11. In the event of default by Purchaser hereunder, Seller acknowledges and
agrees that its sole remedy shall be to receive the earnest money deposit
as liquidated damages, and not as a penalty, in full satisfaction of any
and all duties, liabilities and/or obligations on the part of Purchaser
hereunder, the parties hereby agreeing that said amount is a reasonable
forecast of just compensation for the harm that may be caused Seller as a
result of Purchaser's failure to consummate the transaction contemplated
hereby and that Seller's harm in the event of Purchaser's failure to
consummate the transaction contemplated hereby would be incapable of
accurate estimation or very difficult to accurately estimate.
12. [Intentionally Deleted].
13. Any condition herein which is intended to be for the benefit of the
Purchaser may be waived by the Purchaser in part or in full.
14. Seller and Purchaser agree that this Agreement, including the annexed
Schedules (and exhibits, if any), constitutes the entire agreement between
them and that there is no condition, collateral agreement, or
representation or warranty of any kind, express or implied, except as may
be specifically stipulated hereunder. All covenants, representations and
warranties herein shall survive Closing. All Schedules and exhibits
attached to this Agreement shall have the same force and effect as if the
information contained therein was contained in the body of this Agreement.
15. Any notice hereunder shall be in writing, delivered either personally or by
prepaid registered mail or by facsimile by or to the other party, at its
last known mailing address or facsimile number, as the case may be.
16. This Agreement shall be read with all changes of gender or number required
by the context. The words "herein", "hereunder" or similar expressions used
in any paragraph of this Agreement relate to the whole of this Agreement,
including the annexed Schedules (and exhibits, if any) unless otherwise
provided.
<PAGE>
17. Seller shall be solely responsible for the payment of any and all brokerage
commissions and/or finder's fees which may be due Highland Commercial
Group, LLC and its representative, Jim Spittler in connection with the
purchase and sale of the Property. Seller and Purchaser shall indemnify and
hold each other harmless from any other claims for brokerage commissions
and/or finder's fees in connection with the purchase and sale of the
Property to the extent claimed to be due and owing as a result of the acts
of, or dealings with, the indemnifying party.
18. During the pendency of this Agreement, and except as may be required in
connection with the creation of the roadway to be located in the westerly
portion of the Property (as contemplated in Paragraph 4 of the Second
Addendum to this Agreement) or in connection with the pending Condemnation
proceeding (as described in Paragraph 3 of the Second Addendum), Seller
shall not grant or enter into any easement, right of way, lien, lease or
license or any instrument or agreement which encumbers or otherwise affects
title to the Property, or the use, possession or enjoyment thereof, without
the prior written consent of Purchaser, which consent may be granted or
withheld by Purchaser in its reasonable discretion.
19. The term "Property" as used herein shall include all rights and all
appurtenances to or used in connection with the real property described on
Schedule A attached hereto, including without limitation, all rights, title
and interests of Seller, if any, in: (a) all minerals, oil, gas and other
hydrocarbon substances on and under the real property, if any; (b) all
development rights, air rights, water, water rights and water stock
relating to the real property, if any; (c) all rights to any land lying in
the bed of any existing dedicated street, road or alley adjoining the real
property, if any; (d) all strips and gores adjoining the real property, if
any; (e) all other easements, rights of way or appurtenances used in
connection with the beneficial use and enjoyment of the real property, if
any; and (f) all improvements, located on, appurtenant to or used in
connection with the real property.
20. Seller and Purchaser agree that this Agreement and transaction contemplated
herein shall remain confidential and that no public announcement will be
made in respect thereof, prior to closing, except as may be required by
applicable laws, without the agreement of both parties. Seller further
agrees that Seller will not, at any time prior to the termination of this
Agreement, accept an offer to purchase from (conditional or unconditional)
nor otherwise negotiate with any third party relating to the sale or
acquisition of the Property, whether or not same is contingent upon the
completion of this transaction by the Seller and Purchaser.
21. In the event of any litigation arising out of or in connection with this
Agreement, the prevailing party shall be awarded reasonable attorneys fees,
costs and expenses. This Agreement shall be governed and construed in
accordance with the laws of the state in which the Property is located.
22. This Agreement shall constitute Seller's and Purchaser's escrow
instructions to the Title Company.
(The remainder of this page intentionally left blank)
<PAGE>
SCHEDULE "A" (legal description) and SCHEDULE "B" (Additional Provisions)
attached hereto form part of this Agreement .
DATED at Greenwood Village, Colorado this 15th day of June, 1999.
Purchaser
CENTREFUND DEVELOPMENT (COLORADO) CORP.
By: /s/ Perry A. Villanueba
Its: Director of Development & Acquisitions
THE UNDERSIGNED accepts the above offer and agrees to sell and convey the
Property upon the terms and conditions set forth herein.
DATED at Greenwood Village this 15th day of June, 1999.
Seller
Z-H, Ltd., a Colorado Limited Partnership
By: /s/ Scott A. Hart
Its: General Partner
By: /s/ Michael J. Zaremba
Its: General Partner
Chicago Title of Colorado, Inc. (the "Title Company") hereby accepts the
foregoing Agreement for Sale and Purchase, hereby agrees to act as Escrow Agent
hereunder, and hereby agrees to comply with the provisions of Section 6045 of
the Internal Revenue Code with respect to the transactions contemplated hereby.
Chicago Title of Colorado, Inc.
By: /s/ B. H. Bretz
Its: Account Rep.
<TABLE>
<CAPTION>
ADDRESSES AND FACSIMILE NUMBERS FOR NOTICES
-------------------------------------------
<S> <C>
Seller's Address and Facsimile Number Purchaser's Addresses and Facsimile Numbers
- ------------------------------------- -------------------------------------------
Z-H, Ltd., a Colorado Limited Partnership Centrefund Development (Colorado) Corp.
c/o Walking Stick Golf Course Suite 100, 3838 Calgary Trail North
4301 Walking Stick Blvd., Pueblo, CO 81001 Edmonton Alberta, Canada T6J7A9
Telephone No.: (719) 584-3400 Telephone No.: (780) 435-1444
Fax No.: Fax No.: (780) 434-9333
Attention: Mr. Mike Zaremba Attention: Mr. Henry Bereznicki
With a copy to: with copies to:
Tim McKenna, Esq. Centrefund Development (Colorado) Corp.
Flynn, McKenna, Wright and Karsh 7000 East Belleview Avenue, Suite 203
111 South Tejon, Suite 202 Greenwood Village, Colorado 80111
Colorado Springs, CO 80903 Telephone No.: (303) 221-1444
Telephone No.: (719) 578-8444 Fax No.: (303) 221-1119
Fax No.: (719) 578-8836
Attention: Mr. Perry A. Villanueba
And
Robert E. Thrailkill
Bishop Capital Corporation
716 College View Drive
Riverton, WY 82501
Fax No.: (307) 856-1851
Telephone No.: (307) 856-3800
and
Title Company's Address and Facsimile Number David J. Wiener, Esq.
Chicago Title of Colorado, Inc. 2401 PGA Boulevard, Suite 280
1875 Lawrence Street, Suite 1200 Palm Beach Gardens, Florida 33410
Denver, Colorado 80202 Telephone No.: (561) 624-2988
Telephone No.: (303) 291-9951 Fax No.: (561) 624-9507
Fax No.: (303) -
and
Centrefund Development (Colorado) Corp.
2851 John Street, Suite One
Markham, Ontario, Canada L3R 5R7
Telephone No.: (905) 477-9200
Fax No.: (905) 477-7390
Attention: Mr. Robert S. Green
</TABLE>
<PAGE>
EXHIBIT "A"
Legal Description of Property
Lot 1, Hitters Haven Subdivision, City of Colorado Springs, County of El
Paso, Colorado.
<PAGE>
SCHEDULE "B"
------------
Additional Provisions (For Vacant Land Acquisitions)
----------------------------------------------------
ADDENDUM
THIS ADDENDUM IS ANNEXED TO AND FORMS A PART OF THAT CERTAIN AGREEMENT FOR SALE
AND PURCHASE DATED AS OF THE 15th DAY OF JUNE, 1999 BY AND BETWEEN Z-H, LTD., A
COLORADO LIMITED PARTNERSHIP, AS SELLER, AND CENTREFUND DEVELOPMENT (COLORADO)
CORP., AS PURCHASER.
1. Addendum takes precedence. In the event of any conflict between the
terms and provisions of this Addendum and the terms and provisions of the
Agreement for Sale and Purchase to which this Addendum is annexed, the terms and
provisions of this Addendum shall take precedence and control. As used herein,
the term "Agreement" shall be deemed to mean and refer to the aforementioned
Agreement for Sale and Purchase, as modified and supplemented by this Addendum.
Unless otherwise indicated, capitalized terms used herein shall have the
meanings, respectively, ascribed to them in said Agreement for Sale and
Purchase.
2. Investigation Period.
A. Subject to the approval by the Tenant (the "Tenant's Approval")
pursuant to the Lease (as hereinafter defined), which approval Seller will
diligently and with its good faith efforts pursue, Purchaser shall have the
right during the Investigation Period to conduct all requisite (as determined by
Purchaser) investigations as to the Property and all factors concerning same and
to perform, conduct and/or obtain all tests, studies, feasibility studies,
examinations and other reasonable activities as Purchaser may deem necessary or
desirable in order to underwrite Purchaser's proposed acquisition of the
Property and to determine, among other things, the suitability of the Property
for development and use in the manner contemplated by Purchaser, the economic
feasibility of such development and use, and the availability of all necessary
governmental and other permits, approvals, consents and licenses. [The foregoing
activities, etc. are hereinafter sometimes collectively referred to as
"Purchaser's Permitted Activities"]. For the purpose of conducting and
performing Purchaser's Permitted Activities, Purchaser and its employees,
agents, and independent contractors shall have the right and license, both
during and after the Investigation Period (but subject to the Tenant's Approval
to enter onto the Property and to discuss the Property and Purchaser's proposed
acquisition, development and use thereof with any and all persons and/or
entities (including any and all governmental and/or quasi-governmental agencies,
bodies and officials) deemed appropriate by Purchaser. Purchaser shall carry out
Purchaser's Permitted Activities at its sole expense and shall repair any
physical damage to the Property that may be caused as a result thereof.
Additionally, Purchaser shall indemnify, defend and save and hold Seller
harmless of, from and against any and all losses, costs, expenses (including
reasonable attorneys fees and court costs at all levels of proceedings) and
liabilities which arise from any such entry or work upon the Property. In the
event that, within 90 days following the Effective Date, Seller is unable to
secure any Tenant's Approval that may be required pursuant the Lease to permit
Purchaser's Permitted Activities, it shall so notify the Purchaser, and
Purchaser may within 30 days after receipt of such notice, elect to terminate
this Agreement by written notice to Seller. In the event Purchaser elects to
terminate this Agreement, its Earnest Money Deposit, together with any interest
earned thereon, shall be returned to it and this Agreement shall thereafter be
null and void.
B. This Agreement shall be deemed to have been automatically
terminated, and Purchaser shall be entitled to receive an immediate refund of
all sums deposited by it hereunder, together with all accrued interest thereon,
and each party hereto shall be relieved of and from all liability and obligation
to the other hereunder, unless Purchaser shall have notified Seller in writing
at or prior to the expiration of the Investigation Period, that Purchaser is
satisfied with the results of its investigations as to the Property and that
Purchaser has elected to proceed forward with the acquisition of the Property.
C. Seller agrees to cooperate fully with Purchaser, at no cost to
Seller, in connection with the conduct by Purchaser of Purchaser's Permitted
Activities and in connection with the efforts of Purchaser to satisfy the
Special Conditions referred to in Paragraph 3 below. To this end, Seller agrees
that it shall (i) within not more than five (5) business days following request
therefor execute and deliver to Purchaser any and all documents, instruments,
applications or the like as may be required by Purchaser in connection
therewith, and (ii) use its good faith to assist Purchaser in securing all
consents, permits, approvals, and the like as shall be necessary or desirable in
connection with the proposed development and use of the Property in the manner
contemplated by Purchaser, provided, however, that no consents, permits,
approvals or the like shall become final and binding upon the Property until
Closing shall have occurred and title to the Property is vested in Purchaser.
D. Within five (5) business days following the execution of this
Agreement by the parties, Seller shall deliver to Purchaser full and complete
copies of the following items (the "Documents"): all surveys, studies, test
reports, permits, approvals, licenses and other data, documentation and
information relating to the Property which are in Seller's possession or control
or which are in the possession or control of Seller's agents, employees and/or
professionals.
3. Special Conditions. Purchaser's obligations in respect of the
transaction contemplated herein are and shall also be subject to and contingent
upon the satisfaction (or written waiver by Purchaser) of the following special
condition(s):
A. that within Two Hundred Forty ( 240 ) days following the expiration
of the Investigation Period, Purchaser shall have entered into satisfactory (as
determined by Purchaser in its absolute discretion) leasing or other
arrangements with at least one tenant or other occupant of Purchaser's proposed
development.
B. that within Two Hundred Forty ( 240 ) days following the expiration
of the Investigation Period, Purchaser shall have received final site plan and
development plan approval and all access and other permits (other than building
permits for vertical construction), consents, licenses, authorizations,
approvals and the like from all applicable governmental and quasi-governmental
agencies, bodies, and officials having jurisdiction over the Property which
Purchaser shall deem necessary and/or appropriate (hereinafter the "Governmental
Approvals") in order to enable Purchaser, immediately following the closing of
title to the Property, to commence full development and use of the Property in
the manner described contemplated by Purchaser, to wit: as a retail shopping
center containing not less than 307,200 square feet of gross leasable floor
space, together with all related appurtenances and amenities. Anything in the
foregoing to the contrary notwithstanding, no Governmental Approval shall become
final and binding upon the Property until Closing shall have occurred and title
to the Property is vested in Purchaser.
4. Closing Date. If this Agreement shall not previously have been
terminated pursuant to any other provision hereof, then the transaction
contemplated herein shall be closed and the Deed and other closing papers shall
be delivered on the date (the "Closing Date") which shall be the 1st day of
November, 2000, or such earlier date as the parties may mutually agree. If any
of the general conditions precedent set forth in Paragraph 6 below shall not
have been satisfied by the Closing Date determined in accordance with the
preceding sentence, then Purchaser shall be entitled to elect, by written notice
delivered to Seller prior to the such date, either: (i) [intentionally deleted];
or (ii) to terminate this Agreement, in which event, all sums deposited by
Purchaser hereunder, together with all interest accrued thereon, shall be
immediately refunded to Purchaser; or (iii) to waive the requirement of
satisfaction of the outstanding condition(s) precedent and proceed to close this
transaction in accordance with the other terms of this Agreement; and/or (iv) in
the event that the failure of any general condition precedent set forth in
Paragraph 6 below shall also constitute a default by Seller under this
Agreement, to treat the same as a default and pursue all legal and equitable
remedies available to Purchaser, provided, however, that in no event shall
Seller be liable for damages in an amount in excess of $75,000.00, and in the
event that Seller is ordered to disgorge the net proceeds from a sale or
transfer of the Property, such additional sums as may be required to effect such
order.
5. Representations and Warranties of Seller. Seller hereby represents and
warrants to Purchaser as follows:
A. Authority of Seller. Seller is the owner of the Property subject to
the provisions of the Lease and has the right, power and authority to enter into
this Agreement and to sell and convey the Property to Purchaser in accordance
with the terms and conditions hereof.
B. [Intentionally Deleted]
C. No Moratorium. Except as is otherwise set forth in this Agreement,
Seller has received no notice and has no actual knowledge of any existing or
threatened moratorium or of any other fact which would or might adversely affect
or prohibit the Property from being developed and used in the manner
contemplated by Purchaser or which would or might increase, in any material
respect, the costs associated with such development and/or use of the Property.
D. No Violations. Seller has received no notice and has no actual
knowledge of any violation of any law, regulation, ordinance or deed restriction
which relates to the Property.
E. No Contracts or Commitments. Except as is otherwise set forth in
this Agreement or disclosed in the Title Commitment, there are no outstanding
contracts, agreements, commitments or obligations of any nature between Seller
and any federal, state, regional, local or other governmental, administrative or
quasi-governmental body or agency or between Seller and any other person or
entity which do or may affect or bind the Property, the development and/or use
thereof, or any subsequent owner or developer of the Property, nor does Seller
have any knowledge of any such contract, agreement, commitment or obligation
which may have been entered into or undertaken by others.
F. No Hazardous Waste. To Seller's actual knowledge, no toxic and/or
hazardous wastes, as defined by Federal and/or by the laws of state in which the
Property is located, have been used or stored in, on, under or about the
Property, and, to Seller's knowledge, neither the Property nor any lands
adjacent thereto is contaminated by any such toxic or hazardous materials. The
Property is not presently being used, and to Seller's actual knowledge, neither
the Property nor any lands adjacent thereto has in the past been used, for the
handling, storage, manufacturing, refining, transportation or disposal of "Toxic
Material", "Hazardous Substances" and "Hazardous Waste", including, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials,
defined in the Comprehensive Environmental Response, Compensation, Liability Act
of 1980, as amended (42 U.S.C. ss.960 et seq.) the Hazardous Materials
Transportation Act, as amended (42 U.S.C. ss.1801 et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. ss.9601 et seq.), the
regulations adopted and publications promulgated pursuant to the foregoing and
any other federal, state or local environmental law, ordinance, rule or
regulation.
Seller has not received any summons, citation, directive, letter or
other communication, written or oral, from any Governmental Authority (a)
indicating that the Property is or has been the site of any oil, hazardous
waste, or other toxic substance activity or storage, or (b) concerning any
intentional or unintentional action or omission on Seller's part which has
resulted in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping of "Toxic Material", "Hazardous Substances" or "Hazardous
Waste" into waters or onto lands of the state in which the Property is located
or into waters outside the jurisdiction of such state where damage may have
resulted in the lands, waters, fish, shellfish, wildlife, air and other
resources owned, managed, held in trust or otherwise controlled by such state.
G. No Litigation, Etc. Except as otherwise set forth in this Agreement
or in the Title Commitment, no action, litigation, proceeding (including,
without limiting the generality of the foregoing, any condemnation or eminent
domain proceedings or any plan or action to widen, close or otherwise materially
modify any means of access to, or public street adjacent to, the Property) or
investigation is pending or, to the knowledge of Seller, threatened against or
relating to the Property or any part thereof.
H. No Assessments, Etc. Except as otherwise set forth in this
Agreement or in the Title Commitment or as may be levied or assessed by the
special districts currently in place, Seller has received no notice and has no
actual knowledge that any governmental or quasi-governmental agency or authority
intends to impose or has imposed any special or other assessment against the
Property or any part thereof in connection with any special or off-site
improvement which might affect the Property or the use or development thereof or
otherwise.
I. Condition of Property; Disclaimer of Warranties. Purchaser
acknowledges and agrees that, except as set forth in this Agreement, 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 (a) the value,
nature, quality or condition of the Property, including, without limitation, the
water, soil and geology; (b) the income to be derived from the Property; (c) the
suitability of the Property for any and all activities and uses which Purchaser
may conduct thereon; or, (d) 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.
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
Addendum, or as set forth elsewhere in the Agreement
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, other
than that Seller has no actual knowledge that any of such information is false,
incomplete or misleading.
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.
Purchaser further acknowledges and agrees that to the maximum extent
permitted by law, and except as otherwise provided herein, the sale of the
Property as provided for herein is made on an "AS IS" condition and basis with
all faults.
The Colorado Department of Health and the U. S. 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.
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.
Unless Seller shall give prior written notice to Purchaser of the
occurrence of an event subsequent to the date this Agreement is signed by
Seller, that makes any of the foregoing representations untrue or incorrect (an
"Event Notice"), the foregoing representations of Seller shall be true and
correct in all material respects as of the Closing Date as if restated on that
date and shall survive the closing of the transaction contemplated herein for a
period of 12 months. Should the Seller give Purchaser an Event Notice, Purchaser
shall have a period of thirty (30) days thereafter to conduct an investigation
(the "Event Investigation") of the impact of the occurrence of such event on its
purchase and intended use of the Property, and should it determine, in its sole
discretion, that such event has a material adverse effect, Purchaser may elect
to terminate this Agreement by giving written notice to Seller within seven (7)
days following the end of such thirty (30) day period. In the event Purchaser
elects to terminate this Agreement, its Earnest Money Deposit, together with any
interest earned thereon, shall be returned to it and this Agreement shall
thereafter be null and void. If necessary, the Closing shall be automatically
extended to accommodate the time periods provided for in this paragraph.
6. General Conditions Precedent to Purchaser's Obligations. Purchaser's
obligations in respect of the transaction contemplated herein are and shall be
subject to and contingent upon the satisfaction (or written waiver by Purchaser)
at or prior to the closing of title to the Property of each and all of the
following general conditions:
A. The representations of Seller as set forth above shall be true and
correct in all material respects as of the date of the closing as if restated on
that date.
B. Seller shall have duly performed all of the obligations on its part
to be performed hereunder.
C. There shall be no existing or threatened moratorium or other fact
or circumstance (e.g., restrictions, hazardous waste, absence of utilities,
etc.) which might prohibit, postpone, interfere with or otherwise adversely
affect the development and/or use of the Property in the manner contemplated by
Purchaser or which might increase, in any material respect, the costs associated
with such development and/or use.
D. There shall be no violation of any law, regulation, ordinance or
deed restriction affecting or relating to the Property which would or might
adversely affect the development or use of the Property in the manner
contemplated by Purchaser or which would or might increase, in any material
respect, the costs associated with such development and/or use.
E. Except for the Lease and its termination as is contemplated by
Paragraph 6 of the Second Addendum, Seller shall be in full and exclusive
possession of all of the Property, and no other person, firm or entity shall
have any right to acquire, lease, occupy or otherwise have or be in possession
of any portion thereof.
F. [Intentionally Deleted].
G. Between the Effective Date of this Agreement and the date of the
Closing, there shall have been no changes in the requirements of the applicable
planning, zoning, land development and/or building codes which would postpone,
prevent, impair or otherwise interfere with the development and/or use of the
Subject Project as contemplated by Purchaser or which might render such
development and/or use more expensive than would be the case absent such
change(s).
7. Signage. At any time following the Effective Date of this Agreement, but
subject to the approval of the Tenant pursuant to the Lease (which approval the
Seller shall use diligence and its good faith efforts to obtain not later than
90 days following the Effective Date), Purchaser shall be entitled, at
Purchaser's expense, and subject to receipt by Purchaser of all necessary
permits, to place development and/or leasing signs on the Property at
location(s) to be designated by Purchaser.
8. Intentionally Deleted.
9. Intentionally Deleted.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have executed this Addendum as of
the day and year first above written.
Signed, sealed and delivered SELLER:
in the presence of:
Z-H, LTD., A COLORADO LIMITED PARTNERSHIP
By: /s/ Scott A. Hart
PRINT NAME OF WITNESS BELOW: Its General Partner
- - - - - - - - - - - - - - - - -
And By: /s/ Michael J. Zaremba
PRINT NAME OF WITNESS BELOW: Its General Partner
- - - - - - - - - - - - - - - - -
Date: June 15, 1999
PURCHASER:
CENTREFUND DEVELOPMENT (COLORADO) CORP.,
PRINT NAME OF WITNESS BELOW: By: /s/ Perry A. Villanueba
Perry A. Villanueba,
- - - - - - - - - - - - - - - - - Director of Development & Acquisitions
Date: June 15, 1999
PRINT NAME OF WITNESS BELOW:
- - - - - - - - - - - - - - - - -
<PAGE>
Second Addendum
This Second Addendum is annexed to and forms a part of that certain
Agreement for Sale and Purchase between Z-H, Ltd., a Colorado Limited
Partnership ("Seller") and Centrefund Development (Colorado) Corp. ("Purchaser")
1. Second Addendum Takes Precedence. In the event of any conflict between
the terms and provisions of this Second Addendum and the terms and provisions of
the Agreement for Sale and Purchase referred to above (as heretofore
supplemented and amended), the terms and provisions of this Second Addendum
shall take precedence and control. Unless the context requires otherwise, the
term "Agreement" as used herein shall be deemed to mean and refer to the
aforementioned Agreement for Sale and Purchase, as heretofore supplemented and
amended, and as further supplemented, modified and amended pursuant to the terms
and provisions of this Second Addendum.
2. General Statement of Facts.
A. When Seller originally caused the Property to be platted as a
single lot in accordance with the ordinances of the City of Colorado
Springs, Colorado ("City"), the City imposed on the Property the obligation
to install drainage improvements (the "Drainage Improvements") to the Sand
Creek drainage channel that is located within the Property, on its west
side. To assure the City that the Drainage Improvements would be installed,
Seller posted and has maintained with the City a standby letter of credit
(the "Letter of Credit"), the current amount of which is $261,747.20.
B. The Property is encumbered by a Deed of Trust recorded at Book 6670
at Page 1361 of the Records of the Clerk and Recorder of El Paso County,
Colorado (the "Deed of Trust"). The Deed of Trust secures a promissory note
in the original face amount of $466,000, the present holder of which is the
Small Business Administration.
C. The Property is leased pursuant to a "Ground Lease" (the "Lease")
dated October 21, 1997, in which Seller is the "Landlord" and Metrogolf
Incorporated is the original "Tenant", Metrogolf Incorporated's rights
pursuant to the Lease having been assigned to Family Golf Centers, Inc.
Purchaser has been provided with a copy of the Lease to review prior to its
execution of this Agreement.
D. Seller is related to an entity, Bishop Powers, Ltd., a Colorado
limited partnership ("Bishop Powers"), which owns both the adjacent tract
of land from the south of the Property to Galley Road (the "Southern
Tract"), and other property to the north of the Property across Palmer Park
Boulevard (the "Northern Tract"). The Seller and Bishop Powers are both
involved in a condemnation proceeding (the "Condemnation") instituted by
the City of Colorado Springs, Colorado ("City"), in which the City seeks to
condemn a permanent easement for a sewer line approximately 20 foot wide,
and during the course of construction, an additional construction easement
(together, the "Easement"), from Galley Road on the south end of the
Southern Tract through the Southern Tract, the Property and the Northern
Tract to the north end of the Northern Tract. Seller has fully advised
Purchaser of the Condemnation, and the location of Easement on the
Property. Because the City has the power of eminent domain in the
Condemnation, the likely outcome is that the City will acquire the Easement
and either pay monetary compensation to the owners of the property affected
by the taking of the Easement or in lieu of monetary compensation, agree to
install drainage or road improvements that would otherwise be the
obligations of the owners.
E. In order to provide access to the Southern Tract from Palmer Park
Boulevard and access to the Property from Galley Road, a road (the "City
Street") must be constructed, the proposed location of which is generally
along the western side of both the Property and the Southern Tract,
adjacent to the Easement. The parties contemplate that the proposed City
Street shall be dedicated or conveyed to the City, and will therefore be
required to be constructed in a manner that will meet all City ordinances
and requirements.
3. Condemnation.
A. Definitions: For purposes of this Agreement, the following
definitions shall apply:
"Taking" shall mean the transfer of any easement affecting the
Property to the City as a result of the Condemnation.
"Monetary Payment" shall mean the amount of the funds payable as
compensation for the Taking.
"Improvements Agreement" shall mean any agreement reached with the
City as a negotiated settlement of the Condemnation in which the City
agrees, in lieu of all or any part of a Monetary Payment, to install
improvements on the Property as compensation for the Taking. Any
Improvements Agreement shall describe the improvements to be installed on
the Property by the City, and the time by which such improvements must be
completed.
"Attributed Value" shall mean (a) the value of the improvements to be
installed by the City as set forth in the Improvements Agreement, or, if no
such value is established in the Improvements Agreement, then (b) the value
of such improvements as established by a bid for the construction of such
improvements made by a contractor mutually selected by Seller and
Purchaser.
B. Prior to End of Investigation Period. Prior to the end of the
Investigation Period, the Seller shall be solely responsible for all the
negotiations with the City with respect to the Condemnation, and if
litigation arises out to the Condemnation, for prosecution of the
Condemnation proceeding as it may affect the Property. If, during the
Investigation Period, the Condemnation is concluded, whether by negotiated
settlement or litigation, Purchaser may review the results and if it is
dissatisfied (in its own unfettered discretion) with such results,
Purchaser may elect to terminate this Agreement by written notice to
Seller, and upon such notice being given, the Title Company shall return to
Purchaser its Earnest Money Deposit and any interest accrued thereon, and
this Agreement shall thereafter be null and void.
C. Prior to Closing. If the Condemnation proceeding is not concluded
prior to the end of the Investigation Period, and if Purchaser has not
elected to terminate this Agreement, then Purchaser shall be entitled to
participate, at Purchaser's cost, in the proceedings associated with such
Condemnation and taking and in any negotiations relating to any possible
settlement thereof. Seller agrees not to enter into any settlement of such
proceedings without Purchaser's prior written consent, such consent not to
be unreasonably withheld. The parties acknowledge that the SBA, pursuant to
the Deed of Trust, and the Tenant, pursuant to the Lease, have certain
approval rights with respect to any resolution of the Condemnation, and
agree to cooperate fully with one another to secure to approval of the SBA
and Tenant to any resolution of the Condemnation which the parties have
agreed upon.
D. Following Closing. If an award or settlement in the Condemnation
proceeding shall not have been fixed or agreed upon prior to Closing, then
Seller shall, at Closing, assign to Purchaser all of its rights, title and
interest in and to the award and/or settlement payable in respect of the
Property, and Purchaser shall thereupon be entitled to pursue its own
separate claim in such proceedings, provided, however, that out of any
award or settlement Purchaser may obtain, Purchaser shall reimburse Seller
for any costs and expenses it incurred with respect to the Condemnation
proceeding, not to exceed twenty-five percent (25%) of the amount of such
award or settlement.
E. Allocation of Award Among Owners. Any Monetary Payment which shall
be disbursed prior to Closing or which shall be fixed or agreed upon prior
to Closing, but payable thereafter, or any Attributed Value that shall have
been fixed prior to Closing, shall, if not already allocated specifically
to the Property by the award or settlement, be allocated among the then
owners of the Southern Tract, the Property and the Northern Tract on an
equitable basis, taking into account the relative values of the affected
properties, as determined by independent appraisal.
F. Credit to Purchaser. If the Condemnation has been resolved prior to
Closing, Purchaser shall be entitled to a net credit at Closing (i.e.,
amount of Monetary Payment or Attributed Value, less reasonable attorneys
fees and other direct costs incurred by Seller in connection with the
condemnation proceedings - such attorneys fees and direct costs to be
limited to a maximum of 25% of the Monetary Payment or Attributed Value)
for its share of such award or settlement.
4. Construction of Roadway. Within seven (7) days following Seller's
receipt of each of the items noted below, but not less than forty-five (45) days
prior to the end of the Investigation Period, Seller shall deliver to Purchaser
the following (the "Road Documentation): (a) information with respect to the
location, width, curb cuts and associated easements for that portion of the City
Street that is to be located on the Property (the "Road"), all of which shall be
in accordance with applicable City ordinances and rules and shall reflect a
location described in Paragraph 2E of this Second Addendum, and, (b) if Seller
is to install the Road, (y) the identity and qualifications of the contractor
Seller proposes to engage to perform the work of construction of the Road (the
"Road Work"), and (z) a construction budget for the Road Work, prepared by
Seller acting in good faith and based on a preliminary bid from such contractor
(the "Road Work Budget"). In the event that Purchaser shall have any reasonable
objection to any of the Road Documentation, it shall so notify Seller in writing
within Thirty (30) days after its receipt of the Road Documentation (the
"Objection Period"), specifying its objections and its suggested remedy.
Purchaser shall be deemed to have waived any objection it may have unless a
written notice thereof is given within the Objection Period. If such notice is
received by Seller as set forth above, and if Seller and Purchaser have not
agreed in writing to a settlement thereof on or before five (5) days prior to
the end of the Investigation Period, this Agreement shall terminate on the last
day of the Investigation Period, unless, prior to the end of the Investigation
Period Seller receives notice from Purchaser waiving its objections. In the
event this Agreement is terminated in accordance with the provisions of this
paragraph, the Title Company shall return to Purchaser its Earnest Money Deposit
and any interest accrued thereon, and this Agreement shall thereafter be null
and void.
Seller and Purchaser shall share, on an equal 50/50 basis, all reasonable
and necessary costs (including both "hard" and "soft" costs paid to unrelated
third parties) incurred by Seller in planning and constructing the Road (the
"Road Costs"), provided, however, that the Road Costs shall be substantially in
keeping with the Road Work Budget, and, provided further, that if the City shall
perform any part of the Road Work as a consequence of an Improvements Agreement,
the Seller shall be deemed to have incurred and paid for Road Costs equal to the
Attributed Value for such Road Work performed by the City.
Unless the City shall be responsible for the Road Work pursuant to an
Improvements Agreement, then not later than the date upon which Purchaser shall
commence construction of the first phase of the shopping center proposed to be
developed by Purchaser upon the Property, Seller shall contract for and cause to
be commenced, and thereafter diligently pursued to completion, the Road. To the
extent available on the Property without detracting from the amount of on-site
fill, if any, which Purchaser may need for such project, fill required for the
Road may come, where feasible, from other areas of the Property designated by
Purchaser. Unless the Road is constructed by the City, Seller shall supervise
the construction of the Road Work in order to ensure that the same shall be
constructed and completed in a good and workmanlike manner and in accordance
with the approved (i.e., by Purchaser and all applicable governmental and
quasi-governmental agencies) plans and specifications therefor and in accordance
with all applicable governmental regulations.
In the event that either (a) the Road Work has been completed at the time
Closing occurs, or, (b) the City is responsible for the Road Work pursuant to an
Improvements Agreement (and out of the credit granted to Purchaser in Paragraph
3F of this Second Addendum), Purchaser shall, at Closing, pay to Seller its
share of the Road Costs.
If the Road Work has not been commenced or completed at the time of
Closing, and the City is not responsible for the Road Work pursuant to an
Improvements Agreement, then in order to secure payment by Seller and Purchaser
of their respective shares of the Road Cost: (x) a sum sufficient to cover one
hundred ten percent (110%) of Seller's aforesaid share of the Road Work Budget
shall be deducted from the sums otherwise payable to Seller at closing and
placed in escrow with the Escrow Agent referred to in the Agreement; and (y)
Purchaser shall simultaneously deposit with such Escrow Agent a sum sufficient
to cover one hundred ten percent (110%) of Purchaser's aforesaid share of the
Road Work Budget. At the option of either party, such party shall be entitled to
post, in lieu of the cash deposit referred to above, an irrevocable letter of
credit in that amount, issued by a reputable, financially responsible local
bank. However, upon commencement of construction, any party having posted any
letter of credit shall be obligated to replace such letter of credit with the
required cash deposit, failing which the Escrow Agent shall, upon demand by the
other party, and after having given not less than ten (10) days prior written
notice to the party who posted the letter of credit, call any letter(s) of
credit which has (have) not been so replaced. Seller shall be entitled to draw
funds from such escrowed sum not more frequently than once each month to pay for
bona fide Road Costs incurred by Seller for properly constructed, lien-free work
in place as a part of the required improvements, as certified by the consulting
engineer supervising the Road Work, and as verified and approved by Purchaser,
acting reasonably. A copy of each draw request, together with necessary
supporting documentation, shall be delivered to Purchaser for its review and
approval (not to be unreasonably withheld or delayed) at least five (5) days
prior to the date upon which the requested draw is to be funded. Unless
Purchaser, acting reasonably, shall have objected thereto in writing, the Escrow
Agent shall be entitled to fund Seller's draw request upon the expiration of the
fifth (5th) day following Purchaser's receipt of the documentation relating to
that draw request. Should Purchaser object to the funding of any draw request,
the matter shall be submitted to arbitration by a panel consisting of Seller's
consulting engineer, Purchaser's consulting engineer, and a third engineer
selected by mutual agreement of the first two engineers (or, if such first two
engineers shall be unable to agree upon the choice of a third engineer, a third
engineer selected by the president or any vice president or other executive
officer of the El Paso County Board of Realtors (or the equivalent
organization). In the event that Seller shall fail to commence, as above
provided, and thereafter complete all of the Road Work within one hundred twenty
(120) days following the date of commencement thereof, then, in such event,
Purchaser shall have the right, but not the obligation, upon written notice to
Seller, to assume control of the Road Work and to complete same utilizing
Seller's contractors or, at Purchaser's option, utilizing other contractors
selected by Purchaser, and Purchaser shall be entitled to draw funds from the
escrowed sum in accordance with procedures outlined above, to reimburse
Purchaser for its costs of construction of such portion of the Road Work.
Upon completion of the Road Work, or if otherwise specified in an
Improvements Agreement, at the time required by such Improvement Agreement, the
party who is then the owner of the Property shall convey the Road to the City.
The obligation to convey the Road to the City shall survive Closing.
5. Sand Creek Drainage and Erosion Control. The parties acknowledge that
the City has imposed upon the owner of the Property the requirement to install
the Drainage Improvements. Seller has represented to Purchaser that the City has
required Seller to post with the City the Letter of Credit in the amount of
$261,747.20 in order to secure performance of Seller's obligations in this
regard. Seller further represents that, unless the Drainage Improvements have
been completed or the City becomes responsible for the installation of the
Drainage Improvements pursuant to an Improvements Agreement, the Letter of
Credit will be renewed when it comes due on October 23, 1999 in an amount to be
determined by the City.
At Closing, unless the City has released the Letter of Credit, Purchaser
shall post with the City a replacement letter of credit in such amount as the
City may require and Purchaser shall assist Seller (at no additional cost to
Purchaser) in Seller's efforts to secure the release of the Letter of Credit
previously posted by Seller (although Purchaser shall have no liability or
obligation if the City shall refuse to release Seller's letter of credit).
If, at Closing, either (a) the Drainage Improvements have been installed,
or (b) the City is obligated to install the Drainage Improvements pursuant to an
Improvements Agreement, Purchaser shall pay to Seller an amount equal to either
(y) the cost (both "hard" and "soft" costs paid to unrelated third parties)
incurred by Seller in installing the Drainage Improvements , or (z) if the City
has installed or is obligated to install the Drainage Improvements pursuant to
an Improvements Agreement, the Attributed Value of such Drainage Improvements.
If, at Closing, the Drainage Improvements have not been installed and the City
is not obligated to install the Drainage Improvements pursuant to an
Improvements Agreement, the Purchaser shall be obligated to install, at its
cost, the Drainage Improvements if required by the City.
6. Termination of Driving Range Lease. The parties acknowledge that the
Property (or a portion thereof) is encumbered by the Lease, and that the Lease
provides that, beginning with the fourth lease year, Seller may terminate the
Lease by giving the Tenant ninety days prior written notice and paying the
Tenant the "Termination Fee" specified in the Lease. In the event the Lease has
not been terminated at Closing, the parties agree that the they will close into
an escrow established with the Escrow Agent. Contemporaneously with the Closing,
Seller shall give notice of termination of the Lease to Tenant. As part of the
escrow instructions, the parties will instruct the Escrow Agent to pay to the
Tenant, out of the sums held in escrow, the amount of the Termination Fee
required to terminate the Lease in accordance with the Lease provisions. The
parties shall also instruct the Escrow Agent to pay, following the termination
of the Lease, any "Existing Encumbrances" (as that term is defined in the
Lease).
The balance of the Closing proceeds shall be held in escrow by the Title
Company until the Lease has been duly terminated, possession of the premises
demised pursuant to the terms of the Lease has been surrendered by the Tenant
with all machinery, equipment, fixtures and other items of personalty removed,
all Existing Encumbrances have been fully discharged, all documents necessary to
evidence the foregoing have been duly recorded and filed, and the Title Company
has insured Purchaser's title to the Property free and clear of the Lease and
all rights of the Tenant thereunder, and free and clear of all Existing
Encumbrances and the rights of the holders thereof.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Second Addendum
to be executed by their duly authorized officers this 15th day of June, 1999.
Seller:
Z-H, Ltd., a Colorado Limited Partnership
By: /s/ Scott A. Hart
Its General Partner
And by: /s/ Michael J. Zaremba
Its General Partner
Purchaser:
Centrefund Development (Colorado) Corp.
By: /s/ Perry A. Villanueba
Its: Director of Development & Acquistions
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