UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended March 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to .
Commission File No. 1-4385
DUNES HOTELS AND CASINOS INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-1687244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4045 South Spencer Street, Suite 206, Las Vegas, Nevada 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 732-7474
NOT APPLICABLE
Former name, former address and former fiscal year, if changed
since last report
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at
Class May 1, 1996
Common Stock, $.50 par value 6,375,096 shares
This document consists of pages with exhibits, pages
without exhibits.
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1996
INDEX
PAGE
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Condensed Statements of Loss
for the three months ended March 31, 1996
and 1995 5
Consolidated Condensed Statements of Cash Flows
for the three months ended March 31, 1996
and 1995 6
Notes to Consolidated Condensed Financial
Statements, March 31, 1996 and 1995 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
Part II. Other Information
ITEM 1. LEGAL PROCEEDING 17
ITEM 3. DEFAULT UPON SENIOR SECURITIES 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
Signatures 18
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
March December
31, 1996 31, 1995
(Unaudited)
(Dollars in thousands)
Cash and cash equivalents $ 714 $ 495
Marketable securities 511 511
Receivables
Trade, less allowance of $23 in 1995 142 256
Related party, less allowance of $1,566
in 1996 and 1995 1,081 1,127
Real estate sales 985 813
Other 272 410
Inventory of real estate held for sale 9,353 9,512
Inventory, other 38 89
Prepaid expenses 101 142
Property and equipment, less accumulated depreciation
and amortization, 1996, $350; 1995, $325 1,731 1,754
Investments 1,049 1,566
Deferred costs and other 6 52
$ 15,983 $ 16,727
(continued)
3
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
March December
31, 1996 31, 1995
(Unaudited)
(Dollars in thousands)
Accounts payable $ 60 $ 100
Accrued expenses 114 73
Accrued preferred stock dividends 1,046 1,028
Deferred income 19 23
Income taxes 254 327
Short-term debt 30 75
Long-term debt 2,589 2,797
Shareholders' equity
Preferred stock - authorized 10,750,000 shares
($.50 par); issued 10,512 shares Series B
$7.50 cumulative preferred stock, aggregate
liquidation value $2,247 including dividends
in arrears 5 5
Common stock - authorized 25,000,000 shares
($.50 par); issued 7,799,780 shares,
outstanding 6,375,906 shares in 1996 and 1995 3,900 3,900
Capital in excess of par 25,881 25,881
Deficit (15,915) (15,482)
13,871 14,304
Treasury stock at cost; Preferred - Series B,
902 shares Common 1,424,684 shares in 1996
and 1995 2,000 2,000
Total shareholders' equity 11,871 12,304
$ 15,983 $ 16,727
4
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF LOSS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
UNAUDITED
1996 1995
(Dollars in thousands
except per share)
Operating Revenues:
Sales of real estate $ 214 $ 457
Cost of real estate sales 238 478
(24) (21)
Other operating revenue 289 177
Cost of other operating revenue 245 214
44 (37)
20 (58)
Operating expenses:
Selling, administrative and general 331 445
Bad debts 49
Depreciation 24 16
355 510
Loss before other (charges) credits (335) (568)
Other (charges) credits
Interest and dividend income 82 156
Interest expense (58) (4)
Partnership loss (85) (64)
Other (18) 27
(79) 115
Net loss $ (414) $ (453)
Net loss per common share $ (0.07) $ (0.07)
5
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
UNAUDITED
1996 1995
(Dollars in thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating
activities $ (55) $ 839
Cash flows from investing activities:
Decrease (increase) in investments 517 (1,043)
Decrease (increase) in notes receivable 12 (72)
Purchase of equipment (2)
527 (1,115)
Cash flows from financing activities:
Decrease in long-term debt (45) (8)
Decrease in short-term debt (208)
(253) (8)
Increase (decrease) in cash and cash equivalents 219 (284)
Cash and cash equivalents, beginning of period 495 874
Cash and cash equivalents, end of period $ 714 $ 590
6
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION:
The accompanying consolidated condensed financial statements
include the accounts of the Company and its wholly-owned
subsidiaries Continental California Corporation
(Continental), Dunes, Inc., Dunes Hotel and Casino of
Atlantic City, Inc. (DAC), M&R Corporation (MRC), and MRC's
subsidiary M&R Investment Company, Inc. (MRI) and MRI's
subsidiaries SHF Acquisition Corporation (SHF) and Southlake
Acquisition Corporation (Southlake).
The Company did not consolidate Pine Ridge Joint Venture
(PRJV), a joint venture in which the Company has a 51%
interest at March 31, 1996, because the Company intends to
liquidate its interest in 1996. PRJV is accounted for on
the equity method. The Company did not consolidate
Steadfast Cattle Company (Steadfast), a limited liability
company in which the Company has a 50% interest. Steadfast
is accounted for on the equity method.
DESCRIPTION OF BUSINESS:
The Company considers its principal business to be the
acquisition, development and sale of real estate, and
related financing thereof. In that connection, the Company
has invested in a number of operating entities or
properties, the most significant of which is engaged in the
retail land sales business. Other enterprises, which are
held primarily for their real estate investment potential,
include less significant operations in rice storage and
drying, cattle feeding and rentals. Because these
operations are continued primarily to minimize the carrying
costs of the underlying real estate investments, pending
their ultimate disposition, management considers the Company
to be engaged in only one business segment, real estate-related
investments.
The Company's real estate investments are concentrated in
Northern California and, to a lesser extent, near Las Vegas,
Nevada. Accordingly, ultimate realization of these
investments will be affected by changes in local conditions.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
BASIS OF PRESENTATION:
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results
of operations for the three months ended March 31, 1996, are
not necessarily indicative of the results to be expected for
the full year.
RECLASSIFICATIONS:
For the three months ended March 31, 1996, the Company has
changed the format of its balance sheet from a classified
balance sheet to a non-classified balance sheet. The format
of the December 31, 1995 balance sheet has been changed to
conform to the March 31, 1996 presentation. The Company
believes that a non-classified balance sheet, one that does
not present current assets and current liabilities, better
reflects the status of the Company's assets, liabilities and
shareholders' equity.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Estimated fair value of the Company's financial instruments
(all of which are held for nontrading purposes) are as
follows:
Carrying Fair
Amount Value
(Dollars in thousands)
Cash, cash equivalents and
marketable securities $1,225 $1,225 (a)
Notes receivable, real estate sales 985 985 (b)
Note receivable, related party 1,081 (c)
Solano County Option 1,043 1,043 (d)
Long-term debt (2,589) (e)
(a) The carrying amount approximates fair value of cash,
cash equivalents and marketable securities. For
marketable securities, fair values are estimated based
on quoted market prices as of March 31, 1996.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
(b) The fair value of the notes receivable are based on
their outstanding balances and their respective
interest rates. Notes receivable are collateralized by
first deeds of trust on the real estate sold. In the
event any purchaser were to default on the real estate
notes, the Company could institute foreclosure
proceedings and reacquire the property which serves as
the collateral for the note. The Company believes that
the fair value of the collateral is in excess of the
principal amount of the related note.
(c) It is not possible to determine the fair value of the
related party note. The related party note is more
fully described in detail in the Company's Form 10-K
for the year ended December 31, 1995. See "Item 1.
Business - Other Activities - Certain Loans - Baby
Grand Corp."
(d) The fair value of the Solano County Option is estimated
based on an appraisal of the real property to which the
option relates and the length of the option period
which enables the Company to have some flexibility as
to when and if the option should be exercisable. The
Company can only recover the fair value of the option
(i) by exercising the option and selling the property
or (ii) selling the option. However, if the fair value
of the real property should drop below the option
purchase price, the Company would not be able to
recover all of its investment in the Solano County
Option.
(e) The fair value of long-term debt is not subject to
reasonable estimation because the debt arose
principally as a result of the settlement of a dispute.
The settlement is described in detail in the Company's
Form 10-K for the year ended December 31, 1995. See
"Item 1. Business - Resolution of SASA Dispute and The
San Diego Property."
3. Inventory of real estate held for development and sale:
1996 1995
(Dollars in thousands)
The Fairways at Rancho Murieta $ 5,980 $ 6,139
53 partially developed lots,
Las Vegas, Nevada 427 427
The White Ranch, 10,000 acres
of agricultural land (1) 2,800 2,800
Sam Hamburg Farm, 150 acres of
agricultural land (1 & 2) 146 146
$ 9,353 $ 9,512
(1) The White Ranch and Sam Hamburg Farm were previously
classified as Property and Equipment. The Company owns
a 50% interest in The White Ranch.
(2) See footnote 5b of Notes to Consolidated Condensed
Financial Statements regarding the chemical cleanup at
Sam Hamburg Farm.
4. RELATED PARTY TRANSACTIONS:
John B. Anderson, the Company's controlling stockholder and
Chairman of the Board of Directors of the Company, and
entities owned or controlled by him (Anderson Entities) own
approximately 68.5% of the Company's common stock as of
April 23, 1996.
From time to time the Company has made loans to various
Anderson Entities and to Directors and Executive Officers of
the Company, details of which are more fully described in
the Company's Form 10-K for the year ended December 31,
1995.
5. CONTINGENCIES:
a. The Company is involved in various legal proceedings
which are considered to be incidental to the ordinary
course of business. The Company believes that the
impact, if any, will not materially affect the
Company's operating results or consolidated financial
position.
5. CONTINGENCIES (CONTINUED):
b. SHF was advised of possible contamination on two sites
at Hamburg Farms, a storage facility for diesel fuels
and an old airstrip which had been used for the loading
and fueling of aircraft applying agricultural chemicals
to the surrounding farm lands. The Company has
completed the cleanup related to the diesel storage
tanks at a cost of approximately $100,000. Clean up of
the airstrip has required major excavation of
contaminated earth and the treatment and disposal
thereof.
The Company has disposed of a large amount of the
contaminated earth at an approved site for the storage
of toxic wastes. However 5,000 cubic yards of
contaminated earth (previously thought to be 4,000
cubic yards) still remain to be disposed of. The
Company, through its chemical and toxic clean-up
consultant, has been working with the California State
Environmental Protection Agency, in seeking alternate
means to the disposal in toxic dump sites of chemical
and toxic-laden soil. The State has participated in
the funding of several projects by a number of chemical
treatment firms in efforts to try other detoxification
methods on the soil. If on-site remediation can be
achieved, it is estimated that the cost will be between
$90,000 and $115,000.
On April 18, 1996, the Company received a letter from
the State of California, State Board of Equalization
(SBE) wherein the SBE alleges that the Company owes a
Hazardous Waste Disposal Fee of approximately $49,700
and a Hazardous Waste Generator Fee and Waste Reporting
Surcharge Fee of approximately $43,000. The fees
relate to the toxic-laden soil that was removed from
Hamburg Farm. In addition, the Company may be liable
for a 10% penalty on both fees and interest at 11% from
January 31, 1993. As of May 1, 1996, the penalties and
interest approximate $48,000. The Company is currently
investigating the validity of the hazardous waste fees.
No assurance can be given that the Company will not
have to pay the hazardous waste fees, penalties and
interest. As of March 31, 1996, the Company has not
made an accrual for any amounts that may be due the
SBE.
5. CONTINGENCIES (CONTINUED):
b. (continued)
Because of the ongoing testing, the State has not
imposed a disposal date upon the Company. Cost of
disposal is estimated at $120 per cubic yard including
the hazardous waste fees that may be payable to the
SBE. The Company is unable to predict when the ongoing
testing will be complete or what the outcome of these
tests will be. As of March 31, 1996, the Company has
paid $448,000 and accrued $60,000 relating to the clean
up, including the $100,000 expended for the diesel
storage tanks. The Company has not made an accrual for
the cost, if any, of removing the contaminated earth
pending the results of the various ongoing test.
c. The Company has received a notice from the State of
California Franchise Tax Board (FTB) wherein the FTB
alleges that one of the Company's subsidiaries owes
California franchise tax, penalties and interest of
approximately $316,000. The FTB claims that the
Company is not permitted to file a unitary tax return
in California. The Company has retained legal counsel
to resolve the matter with the FTB. The matter is
currently being appealed to the California State Board
of Equalization.
d. The Company has been advised by the State of New
Jersey, Department of State, Division of Commercial
Recording that neither Dunes, Inc. nor DAC filed
reports required by state statutes for two consecutive
years. As a result, as of February 28, 1995, the state
of New Jersey revoked the active status of Dunes, Inc,
and DAC which can result in denial of their privilege
of doing business under their respective current names.
The Company has no plans to resume operations or pursue
business opportunities in New Jersey and does not
intend to contest the action.
5. CONTINGENCIES (CONTINUED):
e. The Company has been informed that the Federal Deposit
Insurance Corporation (FDIC) has elected to trigger a
deadline of May 15, 1996, by which date John B.
Anderson and certain of the Anderson Entities
(collectively, the Anderson Parties) must reach a
settlement with the FDIC in connection with the
Anderson Parties' obligations to the FDIC, which
obligations are described in detail in the Company's
report on Form 10-K for the year ended December
31,1995, "Item 3. Legal Proceedings - Federal Deposit
Insurance Corporation, et al. v. John B. Anderson, et
al." The failure of the Anderson Parties and the FDIC
to reach a settlement, and the resulting automatic
expansion of the court appointed receiver's powers over
Mr. Anderson's assets, may result in a change of
control of the Company and, among other things, would
adversely effect the Company's ability to collect on
that certain promissory note dated November 2, 1992,
made by Baby Grand Corp. in the original principal
amount of $2,650,000 (the BGC Note).
6. LOSS PER COMMON SHARE:
Loss per common share has been computed using the number of
shares outstanding (6,375,096) at March 31, 1996. Dividends
on the Company's Series B Preferred stock have not been paid
since the first quarter of 1982. The Company is in arrears
on such dividends in the amount of approximately $1,046,000
as of March 31, 1996.
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION. During the quarter
ended March 31, 1996, cash and cash equivalents increased by
$219,000 from $495,000 at December 31, 1995 to $714,000 at March
31, 1996. The most significant source of cash was the collection
of the loan made to William Maddocks et al. ($209,000). In
addition to the cash received from Maddocks et al, the Company
also received a 91.90% interest in a note in the principal amount
of $243,340. The most significant use of cash during the three
months ended March 31, 1996, was the payments ($256,000) made to
the Resolution Trust Corporation (the RTC) in connection with the
settlement of the Company's obligation to San Antonio Savings
Association.
The Company believes that its primary requirements for
liquidity in the coming fiscal year will be to fund ongoing
expenses at The Fairways, which include, among other things,
association dues, water and sewer fees and property taxes; to
fund the required payments due on the note to the RTC; and to
fund general and administrative expenses. Additional liquidity
requirements will be required if the Company decides to improve
and/or improve and build on the 53 lots located in North Las
Vegas, Nevada (North Las Vegas Lots) and if the Company should
decide to build a rice drying facility in Davis, California.
The Company believes that the sources of required liquidity
will be cash generated from the storage and drying facility,
anticipated lot sales at The Fairways, collection of notes
resulting from sales at The Fairways, collection of rents at the
White Ranch, Success Payments related to the WCP venture (the WCP
venture is more fully described in the Company's report on Form
10-K for the year ended December 31, 1995. See "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations."), Payments on the BGC Note and the sale
or build out of the North Las Vegas Lots. Based on known
commitments, the Company believes that the sources of cash
described will be adequate to fund known liquidity requirements.
However, if the sources of required liquidity prove to be
insufficient to cover the Company's primary liquidity
requirements, it will be necessary to sell some of the Company's
non-income producing assets. In addition, if the Company
improves or improves and builds on the North Las Vegas Lots
and/or goes forward with the construction of the rice drying
facility, it will be necessary to obtain outside financing.
There can be no assurance that the Company will be able to obtain
the financing required.
The Company has been informed that the FDIC has elected to
trigger a deadline of May 15, 1996, by which date the Anderson
Parties must reach a settlement with the FDIC in connection with
the Anderson Parties' obligations to the FDIC, which obligations
are described in detail in the Company's report on Form 10-K for
the year ended December 31,1995, "Item 3. Legal Proceedings -
Federal Deposit Insurance Corporation, et al. v. John B.
Anderson, et al." The failure of the Anderson Parties and the
FDIC to reach a settlement, and the resulting automatic expansion
of the court appointed receiver's powers over Mr. Anderson's
assets, may result in a change of control of the Company and,
among other things, may adversely effect the Company's ability to
collect on the BGC Note.
As more fully described in the Company's report on Form 10-K
for the year ended December 31, 1995, "Item 7. Managements's
Discussion and Analysis of Financial Condition and Results of
Operations," the Company has invested in a cattle feeding
operation in Gonzales, California, known as Steadfast Cattle
Company (Steadfast). As of April 23, 1996, the Company has made
cash advances to Steadfast in the approximate amount of $149,000.
In addition, the Company has invested approximately $225,000 in
equipment related to the cattle feeding operation. On April 16,
1996, the Company informed Steadfast that it would no longer fund
the cattle feeding operation. As of March 31, 1996, the Company
has fully written off the cash advances made to Steadfast.
The Company has been informed that the foreclosure sale of
the El Dorado vineyard land has been scheduled for April 25,
1996. In the event the vineyard land is sold at the foreclosure
sale for more than the demand of the first lienholder, estimated
to be $1,600,000, Mr. Marincovich is entitled to any excess
proceeds. Pursuant to a non-recourse guarantee by
Mr. Marincovich in favor of the Company, the Company asserts a
claim against such exceeds proceeds, if any. No assurance can be
given that the vineyard land will sell for an amount in excess of
the first lienholder's demand. A detailed explanation of this
transaction is contained in the Company's report on Form 10-K for
the year ended December 31, 1995, "Item 1. - Business - Other
Activities - Certain Loans - Directors."
The Company continues to have ongoing cash requirements
relating to the removal of 5,000 cubic yards (previously thought
to be 4,000 cubic yards) of contaminated earth at its Hamburg
Farm property. If the Company is required to dispose of the
contaminated earth, it is estimated that the cost will be
approximately $600,000. The Company, through its chemical and
toxic clean-up consultant, has been working with the California
State Environmental Protection Agency, in seeking alternate means
to the disposal in toxic dump sites of chemical and toxic-laden
soil. If on-site remediation can be achieved, it is estimated
that the cost will be between $90,000 and $115,000. Because of
the ongoing testing the State has not imposed a disposal date
upon the Company. The Company is unable to predict when the
ongoing testing will be completed or what the outcome of these
tests will be.
On April 18, 1996, the Company received a letter from the
SBE wherein the SBE alleges that the Company owes a Hazardous
Waste Disposal Fee of approximately $49,700 and a Hazardous Waste
Generator Fee and Waste Reporting Surcharge Fee of approximately
$43,000. The fees relate to toxic-laden soil that was removed
from Hamburg Farm. In addition, the Company may be liable for a
10% penalty and interest at 11% from January 31, 1993. As of May
1, 1996, the penalties and interest approximate $48,000. The
Company is currently investigating the validity of the hazardous
waste fees. No assurance can be given that the Company will not
have to pay the hazardous waste fees, penalties and interest. As
of March 31, 1996, the Company has not made an accrual for any
amounts that may be due the SBE.
Because the Company operates predominantly in the
Sacramento, California area and the Las Vegas, Nevada area, the
Company's land sales and other operations could be affected by
adverse changes in economic conditions in those areas.
Certain of the matters discussed above are more fully
described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
MATERIAL CHANGES IN RESULTS OF OPERATIONS
When compared to the quarter ended March 31, 1995, there
were no material changes in the results of operations for the
quarter ended March 31, 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
None, except for the discussion contained in "Part I, Item
2, Management's Discussion and Analysis of Financial Condition
and Results of Operations."
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Dividends in arrears. See Note 6 of Notes to Consolidated
Condensed Financial Statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
ITEM DESCRIPTION
10.01 Purchase and Option Agreement by and between SHF
Acquisition Corporation and Murieta Investors,
LLC., dated April 26, 1996.
27.01 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
PURSUANT TO THE REQUIREMENTS 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.
DUNES HOTELS AND CASINOS INC.
Registrant
Date: May 13, 1996 By: /s/ James H. Dale
James H. Dale
Duly Authorized Officer and
Chief Financial Officer
EXHIBIT INDEX
ITEM DESCRIPTION PAGE NO.
10.01 Purchase and Option Agreement
by and between SHF Acquisition
Corporation and Murieta
Investors, LLC., undated.
27.01 Financial Data Schedule
PURCHASE AND OPTION AGREEMENT
by and between
SHF ACQUISITION CORPORATION
and
MURIETA INVESTORS, LLC
dated _____________, 1996
TABLE OF CONTENTS
Page No.
1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . 2
2. Option to Purchase . . . . . . . . . . . . . . . . . . . . 2
2.1 Option Consideration . . . . . . . . . . . . . . . . . 2
2.2 Term of Option . . . . . . . . . . . . . . . . . . . . 2
2.3 Exercise of Option . . . . . . . . . . . . . . . . . . 2
3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Purchase Price for Phase I Lots . . . . . . . . . . . 3
3.1.1 Deposit . . . . . . . . . . . . . . . . . . . . 3
3.1.2 Remainder of Phase I Closing Amount . . . . . . 3
3.1.3 Phase I Success Payments . . . . . . . . . . . . 3
3.2 Purchase Price for Phase II Lots . . . . . . . . . . . 3
3.3 Buyer's Obligation to Build Homes on Lots . . . . . . 4
3.3.1 Phase II Closing Amount . . . . . . . . . . . . 4
3.3.2 Phase II Success Payments . . . . . . . . . . . 4
4. LIQUIDATED DAMAGES . . . . . . . . . . . . . . . . . . . . 4
5. Title . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Condition of Title . . . . . . . . . . . . . . . . . 5
5.2 Phase I Title Policy . . . . . . . . . . . . . . . . . 5
5.3 Phase II Title Policy . . . . . . . . . . . . . . . . . 5
6. Escrow and Closing . . . . . . . . . . . . . . . . . . . . 6
6.1 Opening of Escrow . . . . . . . . . . . . . . . . . . . 6
6.2 Phase I Closing Date . . . . . . . . . . . . . . . . . 6
6.3 Phase II Closing Date . . . . . . . . . . . . . . . . . 6
6.4 Seller's Deposits . . . . . . . . . . . . . . . . . . . 6
6.5 Buyer's Deposits . . . . . . . . . . . . . . . . . . . 6
6.6 Closing Costs . . . . . . . . . . . . . . . . . . . . . 7
6.7 Prorations . . . . . . . . . . . . . . . . . . . . . . 7
6.8 Possession . . . . . . . . . . . . . . . . . . . . . . 7
7. Feasibility Study . . . . . . . . . . . . . . . . . . . . . 7
8. Investigation of the Property . . . . . . . . . . . . . . . 8
8.1 Delivery of Documents . . . . . . . . . . . . . . . . . 8
8.2 Access and Processing . . . . . . . . . . . . . . . . . 8
8.2.1 Access . . . . . . . . . . . . . . . . . . . . . 8
8.2.2 Processing . . . . . . . . . . . . . . . . . . . 8
i
9. Buyer's Condition to Close . . . . . . . . . . . . . . . . 9
10. Seller's Condition to Close. . . . . . . . . . . . . . . . 10
11. Representations Warranties and Covenants . . . . . . . . . 10
11.1 Seller's Representations Warranties and Covenants . . 10
11.2 Buyer's Representations and Warranties . . . . . . . 13
12. Condemnation . . . . . . . . . . . . . . . . . . . . . . . 14
13. Sale of Seller's Remaining Property . . . . . . . . . . . 14
14. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 15
15. General Provisions . . . . . . . . . . . . . . . . . . . . 15
15.1 Counterparts . . . . . . . . . . . . . . . . . . . . 15
15.2 Entire Agreement . . . . . . . . . . . . . . . . . . 15
15.3 Partial Invalidity . . . . . . . . . . . . . . . . . 15
15.4 Choice of Law . . . . . . . . . . . . . . . . . . . 15
15.5 Waiver of Covenants, Conditions or Remedies . . . . 16
15.6 Legal Advice . . . . . . . . . . . . . . . . . . . . 16
15.7 Time of the Essence . . . . . . . . . . . . . . . . 16
15.8 Attorneys' Fees . . . . . . . . . . . . . . . . . . 16
15.9 Assignment . . . . . . . . . . . . . . . . . . . . . 16
15.10 Notices . . . . . . . . . . . . . . . . . . . . . . 16
15.11 Confidentiality . . . . . . . . . . . . . . . . . . 17
15.12 Exclusivity . . . . . . . . . . . . . . . . . . . . 18
15.13 Memorandum of Agreement . . . . . . . . . . . . . . 18
EXHIBIT A LEGAL DESCRIPTION OF SELLER'S PROPERTY . . . . . . . 20
EXHIBIT B LEGAL DESCRIPTION OF THE PHASE I LOTS . . . . . . . . 21
EXHIBIT C LEGAL DESCRIPTION OF THE PHASE II LOTS . . . . . . . 22
EXHIBIT D FIRPTA AFFIDAVIT . . . . . . . . . . . . . . . . . . 23
EXHIBIT E BLANKET ASSIGNMENT AND BILL OF SALE . . . . . . . . . 24
EXHIBIT F DEFINITION OF HAZARDOUS SUBSTANCE . . . . . . . . . . 25
EXHIBIT G MEMORANDUM OF AGREEMENT . . . . . . . . . . . . . . . 27
ii
PURCHASE AND OPTION AGREEMENT
This PURCHASE AND OPTION AGREEMENT (this "Agreement") is
made and entered into as of _____________, 1996 (the "Effective
Date"), by and between SHF ACQUISITION CORPORATION, a Nevada
corporation ("Seller"), and MURIETA INVESTORS, LLC, a California
limited liability company ("Buyer").
RECITALS
A. Seller is the owner of certain real property ("Seller's
Property") located in the development commonly known as Unit 6 of
Rancho Murieta (the "Development"), County of Sacramento
("County"), State of California ("State"), as more particularly
described on Exhibit "A" attached hereto.
B. Seller desires to sell to Buyer twenty (20) legally
subdivided and finished residential lots (the "Phase I Lots") located
within Seller's Property, as more particularly described in Exhibit "B"
attached hereto, and Buyer desires to purchase the Phase I Lots,
in accordance with terms and conditions contained in this
Agreement.
C. Seller further desires to grant an option to Buyer to
purchase an additional twenty (20) legally subdivided and finished
residential lots (the "Phase II Lots") located within Seller's
Property, as more particularly described in Exhibit "C" attached
hereto, and Buyer desires to obtain an option to purchase the
Phase II Lots, in accordance with terms and conditions contained
in this Agreement. The Phase I Lots and the Phase II Lots shall
be collectively referred to herein as the "Property."
D. The remaining portion of Seller's Property after
deducting the Phase I Lots and the Phase II Lots shall be referred
to herein as "Sellers Remaining Property."
E. As used herein, the Property shall include the real
property described above and all of Seller's right, title and interest
in and to all entitlements, easements, rights, mineral rights, oil
and gas rights, water, water rights, air rights, development
rights and privileges appurtenant to such real property and all
improvements located on such real property. Notwithstanding the
foregoing, neither the Property, nor any other rights transferred
pursuant to this Agreement or the Blanket assignment and Bill of
Sale attached hereto as Exhibit E, shall include any rights or
obligations of Seller under that certain Reimbursement Agreement
between Seller and Rancho Murietta Community Services District,
dated August 18, 1995 (the "Reimbursement Agreement").
1
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereby agree as follows:
1. PURCHASE AND SALE. Seller agrees to sell the Phase I Lots
to Buyer, and Buyer agrees to purchase the Phase I Lots from
Seller, subject to the terms and conditions of this Agreement.
2. OPTION TO PURCHASE. Seller hereby grants to Buyer, within
the time period and upon the terms and conditions of this
Agreement, the exclusive right and option (the "Option") to
purchase the Phase II Lots. If Buyer fails to exercise the Option
pursuant to the terms and conditions of this Agreement, then all
rights and obligations relating to the Phase II Lots shall
automatically terminate and be of no further force or effect.
2.1 OPTION CONSIDERATION. The Option is granted for the
Option Term (as defined below in Section 2.2) in consideration of
Buyer's payment to Seller of One Dollar ($1.00) and other
valuable consideration, the receipt and adequacy of which are
hereby acknowledged by Seller. Regardless of whether the Option
is exercised pursuant to the terms of this Agreement, the One
Dollar ($1.00) consideration paid by Buyer to Seller pursuant to
this Section 2.1 shall not be applied to the Purchase Price for
the Phase I Lots (as defined below in Section 3.1) or the
Purchase Price for the Phase II Lots (as defined below in Section
3.2), and shall be retained by Seller as earned consideration for
the granting of the Option.
2.2 TERM OF OPTION. The term of the Option (the "Option
Term") shall commence upon Buyer's sale of an aggregate of any
fifteen (15) of the Phase I Lots with completed single-family
residences located on such lots and Seller's receipt of the Phase
I Success Payments (as defined below in Section 3.1) on the sale
of each of such fifteen (15) lots, and the Option Term shall
expire on August 30, 1997, unless extended by a written agreement
executed by both Seller and Buyer.
2.3 EXERCISE OF OPTION. The Option shall be exercised by
Buyer's delivery, during the Option Term, of written notice of
exercise of the Option (the "Option Exercise Notice") to Seller
and Buyer's deposit into the Escrow (as defined below in Section
6.1) of the sum of Twenty-Five Thousand Dollars ($25,000) (the
Option Deposit") in cash (or in the form of a wire transfer or
other immediately available funds). Upon Buyer's deposit of the
Option Deposit into the Escrow, the Option Deposit shall be
non-refundable, except as expressly set forth in this Agreement.
The Option Deposit shall be credited to the Phase II Closing
Amount (as defined below in Section 3.2) at the Phase II Close of
Escrow (as defined below in Section 6.3). The Option Exercise
Notice shall set forth the date (the "Phase II Closing Date") of
the closing on the Phase II Lots which shall not be sooner than
ten (10) days following the date of the Option Exercise Notice
and not later than thirty (30) days following the date of the
Option Exercise Notice.
2
3. PURCHASE PRICE.
3.1 PURCHASE PRICE FOR PHASE I LOTS. The purchase
price for the Phase I Lots (the "Purchase Price for the Phase I
Lots") shall be the sum of (a) Eight Hundred Thousand Dollars
($800,000), (b) Thirty-Three Thousand One Hundred Seventy-Two
and 40/100 Dollars ($33,172.40) for park fees payable to Rancho
Murietta Association, and (c) twenty percent (20%) of the Gross
Sales Price (as hereinafter defined) of each of the Phase I Lots,
as improved with a fully completed single-family home, resold by
Buyer, less Forty Thousand Dollars ($40,000) for each such lot
(the "Phase I Success Payments"). The term "Gross Sales Price" as
used herein shall mean the gross proceeds of cash and other
consideration received by Buyer (whether through escrow or
outside of escrow) from the sale of any relevant lot hereunder,
(including the cost of all improvements, extras, upgrades or
additional items), less any rebates, credits, discounts or other
forms of price reduction. The Purchase Price for the Phase I
Lots, less the Phase I Success Payments shall be referred to
herein as the "Phase I Closing Amount." The Purchase Price for
the Phase I Lots shall be payable by Buyer to Seller as follows:
3.1.1 DEPOSIT. Within five (5) days of the Effective
Date, Buyer shall deposit in the Escrow the sum of Twenty-Five
Thousand Dollars ($25,000) (the "Deposit") in cash (or in the
form of a wire transfer or other immediately available funds). If
Buyer does not terminate this Agreement prior to the expiration
of the Feasibility Period (as defined below in Section 7), then
upon the expiration of the Feasibility Period, the Deposit shall
be non-refundable, except as expressly set forth in this
Agreement. The Deposit and the Option Deposit (if such deposit
has been made by Buyer pursuant to Section 2.3 hereof) shall be
held by the Escrow Agent (as defined below in Section 6.1) in an
insured interest-bearing account with an institutional lender
acceptable to Buyer and Seller, with interest accruing for the
benefit of Buyer. The Deposit shall be credited to the Phase I
Closing Amount at the Phase I Close of Escrow (as defined below
in Section 6.2).
3.1.2 REMAINDER OF PHASE I CLOSING AMOUNT. Prior to
the Phase I Close of Escrow, Buyer shall deposit in the Escrow
the remaining portion of the Phase I Closing Amount, in cash (or
in the form of a wire transfer or other immediately available
funds), for payment to Seller at the Phase I Close of Escrow.
3.1.3 PHASE I SUCCESS PAYMENTS. Upon the closing of
the resale of each of the Phase I Lots by Buyer, Buyer shall
arrange for the Phase I Success Payments, in cash (or in the form
of a wire transfer or other immediately available funds), to be
paid directly from the closing on such lots to Seller.
3.2 PURCHASE PRICE FOR PHASE II LOTS. The purchase price
for the Phase II Lots (the "Purchase Price for the Phase II
Lots") shall be the sum of (a) Nine Hundred Thousand Dollars
3
($900,000.00) (the "Phase II Closing Amount"), (b) the amount
allocable for park fees to such lots which is outstanding to the
Rancho Murietta Association as of the date of Buyer's purchase of
such lots, such amount to be paid to the Rancho Murietta
Association. (The aggregate park fees amount presently payable as
to all such lots is $33,172.40, but the amount is adjusted
annually at the end of each calendar year), and (c) twenty
percent (20%) of the Gross Sales Price of each of the Phase II
Lots, as improved with a fully completed single family home,
resold by Buyer, less Forty-Five Thousand Dollars ($45,000) for
each such lot (the "Phase II Success Payments"). The Purchase
Price for the Phase I Lots and the Purchase Price for the Phase
II Lots shall be collectively referred to herein as the "Purchase
Price." The Purchase Price for the Phase II Lots shall be payable
by Buyer to Seller as follows:
3.2.1 PHASE II CLOSING AMOUNT. Prior to the Phase II
Close of Escrow, Buyer shall deposit in the Escrow the Phase II
Closing Amount, less the Option Deposit, in cash (or in the form
of a wire transfer or other immediately available funds), for
payment to Seller at the Phase II Close of Escrow.
3.2.2 PHASE II SUCCESS PAYMENTS. Upon the closing of
the resale of each of the Phase II Lots by Buyer, Buyer shall
arrange for the Phase II Success Payments, in cash (or in the
form of a wire transfer or other immediately available funds), to
be paid directly from the closing on each of such lots to Seller.
3.3 BUYER'S OBLIGATION TO BUILD HOMES ON LOTS. Buyer
agrees to sell each of the Phase I Lots and Phase II Lots
improved with a single family residence thereon, except (i) in
circumstances where Seller has consented in writing to the sale
of a bare lot, or (ii) Seller has transferred all of its interest
in Seller's Remaining Property. In either of such circumstances,
a success fee (the "Bare Lot Success Fee") shall be payable by
Buyer to Seller for each such lot, in the amount of therefor,
twenty percent (20%) of the Gross Purchase Price, but with no
reduction of the Forty Thousand Dollars ($40,000) credit (in the
case of the Phase I Lots) or Forty-Five Thousand Dollars $45,000
(in the case of the Phase II Lots), as the case may be to which
Buyer would otherwise be entitled hereunder where an improved lot
is being resold by Buyer.
4. LIQUIDATED DAMAGES. BUYER AND SELLER AGREE THAT SHOULD
BUYER FAIL TO COMPLETE THE PURCHASE AS HEREIN PROVIDED BY REASON
OF DEFAULT OF BUYER, THE PARTIES HERETO, BY INITIALING THIS
AGREEMENT AT THE END OF THIS PARAGRAPH, AGREE THAT IT WOULD BE
IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IN CASE
OF BUYER'S FAILURE TO COMPLETE THE PURCHASE DUE TO BUYER'S
DEFAULT, THAT THE AMOUNT OF THE DEPOSIT PROVIDED FOR IN PARAGRAPH
2.1 IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES, AND THAT AS
SELLER'S SOLE REMEDY FOR BUYER'S BREACH OF THIS AGREEMENT, IN LAW
4
OR IN EQUITY, SELLER MAY RETAIN THE AMOUNT OF THE DEPOSIT.
Buyer's Initials __________ Seller's Initials __________
5. TITLE.
5.1 CONDITION OF TITLE. Seller shall have the Escrow
Agent prepare and deliver to Buyer a preliminary title report
(the "Title Report") with respect to the Property (with legible
copies of all documents referenced therein as exceptions to
title) on or prior to five (5) days following the Effective Date.
The Title Report shall specify which exceptions apply to the
Phase I Lots and which apply to the Phase II Lots. Within fifteen
(15) days of Buyer's receipt of the Title Report, Buyer shall
notify Seller in writing which exceptions contained in the Title
Report, if any, Buyer disapproves; all other exceptions in the
Title Report shall be referred to as "Permitted Exceptions."
Seller shall have ten (10) days after receipt of such notice to
advise Buyer in writing of any disapproved exceptions which will
not be removed by Seller from record title to the Property at or
prior to each of the Phase I Close of Escrow and the Phase II
Close of Escrow (collectively, the "Close of Escrow"); provided,
if Seller does not respond in such ten (10) day period, Seller
shall remove all such disapproved exceptions from record title to
the Property at or prior to each Close of Escrow. If Seller gives
Buyer notice prior to expiration of such ten (10) day period of
disapproved exceptions that Seller is unable or unwilling to
remove from record title to the Property, Buyer may elect to
terminate this Agreement at any time prior to the Phase I Close of
Escrow; or, alternatively, Buyer may elect to waive its
objections to such disapproved exceptions and to classify the
exceptions contained in Seller's notice as Permitted Exceptions.
Following Seller's receipt of Buyer's written notice approving
the Feasibility Matters (as defined below in Section 7.1), Seller
shall not, without Buyer's prior written consent, permit any new
exceptions to title to be placed on the Phase I lots. At any time
prior to the expiration of the Option, Seller agrees not to
permit or to cause exceptions to title to the Property to occur
with respect to the Phase II Lots which pose a material risk to
Seller's ability to convey good title to the Property to Seller
in accordance with the terms of this Agreement.
5.2 PHASE I TITLE POLICY. At the Phase I Close of Escrow,
Seller shall convey fee title to the Phase I Lots to Buyer by
grant deed (the "Phase I Grant Deed"). At the Phase I Close of
Escrow, the Escrow Agent shall issue a CLTA owner's policy (or an
ALTA owner's policy, if Buyer so elects) of title insurance, (the
"Phase I Title Policy") to Buyer in the amount of the estimate
Purchase Price for Phase I Lots, subject only to the Permitted
Exceptions applicable to the Phase I Lots.
5.3 PHASE II TITLE POLICY. At the Phase II Close of
Escrow, Seller shall convey fee title to the Phase II Lots to
Buyer by grant deed (the "Phase II Grant Deed"). At the Phase II
Close of Escrow, the Escrow Agent shall issue a CLTA owner's
policy (or an ALTA owner's policy, if Buyer so elects) of title
5
insurance, (the "Phase II Title Policy") to Buyer in the amount of
the estimate Purchase Price for Phase II Lots, subject only to
the Permitted Exceptions applicable to the Phase II Lots.
6. ESCROW AND CLOSING.
6.1 OPENING OF ESCROW. Within three (3) business days
after the Effective Date, Buyer or Seller shall open an escrow
(the "Escrow") with Old Republic Title Company, Sacramento,
California (the "Escrow Agent"), by depositing with Escrow Agent
a copy of the fully executed Agreement, or executed counterparts
hereof.
6.2 PHASE I CLOSING DATE. The closing on the Phase I Lots
shall occur on or before the date that is forty-five (45) days
following the Effective Date (the "Phase I Closing Date"). The
"Phase I Close of Escrow" shall be deemed to occur at the moment
the Phase I Grant Deed is recorded in the County Recorder's
Office (the "Official Records").
6.3 PHASE II CLOSING DATE. Pursuant to Section 2.3
hereof, the Phase II Closing Date shall be the date set forth in
the Option Exercise Notice. The "Phase II Close of Escrow" shall
be deemed to occur at the moment the Phase II Grant Deed is
recorded in the Official Records.
6.4 SELLER'S DEPOSITS. Prior to each Close of Escrow,
Seller shall deposit into the Escrow all of the following:
6.4.1 The Phase I Grant Deed or the Phase II
Grant Deed, as the case may be, duly executed and acknowledged by
Seller conveying fee title to Buyer;
6.4.2 A FIRPTA Affidavit in the form attached
hereto as Exhibit "D", duly executed by Seller certifying that
Seller is not a foreign person within the meaning of Section 1445
of Internal Revenue Code;
6.4.3 A California state tax withholding
certificate satisfying the requirements of California Revenue and
Taxation Code Section 18662 and 18668 (the "California Tax
Certificate");
6.4.4 An assignment and bill of sale of all of
Seller's right, title and interest in and to any and all
entitlements and plans pertaining to the Phase I Lots or the
Phase II Lots, as the case may be, and any personal property
comprising the applicable portion of such real property, in the
form of Exhibit "E" attached hereto (the "Assignment"); and
6.4.5 Such escrow instructions and additional
documents and instruments as may be reasonably necessary to close
the Escrow pursuant to this Agreement.
6
6.5 BUYER'S DEPOSITS. Prior to each Close of Escrow, Buyer
shall deposit into the Escrow:
6.5.1 Cash or wired funds in the amount
sufficient to pay the balance of the Phase I Closing Amount or
the Phase II Closing Amount, as the case may be, plus Buyer's
share of closing costs; and
6.5.2 Such escrow instructions and additional
documents and instruments as may be reasonably necessary to close
the Escrow pursuant to this Agreement.
6.6 CLOSING COSTS. Seller shall pay such portion of the
premium(s) for Buyer's Phase I Title Policy and Phase II Title
Policy, if applicable, equal to standard CLTA owner's coverage
and Buyer shall pay any portion of such premium(s) above the
standard CLTA owner's coverage. In connection with each Close of
Escrow, Buyer and Seller shall pay all other costs related to the
transaction in the manner consistent with common practice in
residential bulk lot transactions in the County. Each party shall
be responsible for paying their own legal costs relating to this
transaction.
6.7 PRORATIONS. Seller shall pay at each Close of Escrow
any delinquent real property taxes and the prorated amount of all
assessments encumbering the Phase I Lots or the Phase II Lots, as
the case may be, or any portion thereof, including the County
Improvement Assessment "1915 Bond Act" for the Rancho Murietta
Community Services District No. 1 (the "Improvement Act Bonds"),
and the Elk Grove Unified School District Community Facilities
District No. 1, in accordance with the "Mello-Roos Community
Faculty Facilities Act of 1982" (the "Mello-Roos Bonds"). All
current, non-delinquent real property taxes and assessments for
the Phase I Lots or the Phase II Lots, as the case may be, shall
be prorated at each Close of Escrow on the basis of the most
recent tax information. Said prorations shall be based on a
thirty (30) day month.
6.8 POSSESSION. Upon each Close of Escrow, exclusive
possession of and title to the Phase I Lots or the Phase II Lots,
as the case may be, shall be conveyed to the Buyer, subject only
to the applicable Permitted Exceptions.
7. FEASIBILITY STUDY. Buyer shall have the period from the
Effective Date until 5 p.m. on the date which is thirty (30)
calendar days following the Effective Date (the "Feasibility
Period") to:
7.1 Review, in its sole and absolute discretion, the
suitability of the Property for Buyer's use and development,
including, without limitation, any governmental land regulations,
zoning ordinances, architectural and design approvals,
development costs, financial and market feasibility, the status
of the entitlements of the Property (including, without
limitation, the subdivision map status of the Phase I Lots), the
presence of "Hazardous Substances" (as defined in Exhibit "F"
7
attached hereto), existing or potential assessments imposed on
the Property and the physical condition of the Property (the
"Feasibility Matters");
7.2 Approve or disapprove of the Feasibility Matters;
and
7.3 Deliver to Seller and Escrow Agent written notice
of Buyer's approval, conditional approval or disapproval of the
Feasibility Matters or any of them. If Buyer disapproves of any
of the Feasibility Matters, then this Agreement shall terminate,
Escrow Agent shall immediately return the Deposit to Buyer
without any additional instructions from Seller, Buyer and Seller
shall share equally any Escrow and title cancellation charges,
the Escrow shall be terminated, and the parties shall have no
further rights or obligations under this Agreement.
8. INVESTIGATION OF THE PROPERTY.
8.1 DELIVERY OF DOCUMENTS. Within five (5) days after the
Effective Date, Seller shall provide Buyer with complete copies
of all of the following documents and materials in Seller's
possession, or readily obtainable by Seller, concerning the
Property and its improvement, development and operation
(collectively, the "Reports"): studies; reports; correspondence;
agreements; documents; affordable housing agreements and
materials; plans; maps; CC&Rs; home owners' association formation
documents, budgets, correspondence or other materials; permits;
and entitlements. The Reports shall include, without limitation,
the Environmental Report (as hereinafter defined), and copies of
any and all other environmental reports and materials, if any,
relating to the Property that are in Seller's possession.
Additionally, Seller shall immediately provide Buyer with any
additional Reports on the Property that arise at any time after
the Effective Date and prior to (a) the Phase II Close of Escrow,
if Buyer has exercised the option, or (b) the expiration of the
Option Term, if Buyer has failed to exercise the Option prior to
the expiration of the Option Term.
8.2 ACCESS AND PROCESSING.
8.2.1 ACCESS. From and after the Effective Date
through each Close of Escrow, Buyer, its agents, employees and
contractors shall have the right to enter the Property for the
purposes of conducting such investigations, inspections and tests
of the Property as Buyer deems necessary in order to determine
the condition and suitability of the Property including, but not
limited to, the Feasibility Matters. Buyer hereby agrees to
indemnify and hold Seller harmless from and against any and all
loss, expense, claim, damage and injury to person or property
resulting from any acts of Buyer, its employees, consultants,
engineers, authorized agents and contractors on the Property in
connection with the performance of any investigation of the
Property as contemplated herein.
8.2.2 PROCESSING. From and after the Effective Date
through each Close of Escrow, Buyer shall have the right to
8
process all applications, plans, maps, agreements, documents, and
other instruments or entitlements necessary or appropriate for
the development of the Property as contemplated by Buyer,
including, without limitation, to the extent deemed necessary or
advisable by Buyer, home designs and floor plans. Buyer shall
proceed with such processing in a diligent manner at its sole
cost and expense and, upon written request from Seller, shall
advise Seller of the status of any entitlement processing it
performs. Seller shall, at no cost or expense to Seller, other
than general overhead costs and expenses, cooperate with and
assist Buyer in the processing of such items, including without
limitation attending meetings with governmental authorities
relating to the same, and to the extent necessary or appropriate,
executing all such items and materials.
9. BUYER'S CONDITION TO CLOSE.
9.1 Buyer's obligation hereunder to complete the purchase
of each phase of the Property is subject to satisfaction of the
following conditions at or prior to the applicable Closing Date,
each of which is for the sole benefit of Buyer, unless waived by
the Buyer in writing:
9.1.1 Seller shall have timely performed each and
every one of Seller's obligations set forth in this Agreement;
9.1.2 All of the warranties and representations
of Seller set forth in this Agreement shall be true and correct
at the Effective Date and the applicable Close of Escrow;
9.1.3 The Escrow Agent shall issue or provide an
irrevocable commitment to issue the Title Policy to Buyer at the
applicable Close of Escrow;
9.1.4 Seller shall have executed and delivered to
the Escrow Agent the FIRPTA Certificate and the California Tax
Certificate; and
9.1.5 No development, building, construction,
water, sewer, utility or other moratorium shall be in existence
on the applicable Closing Date that would prevent or limit the
City, County or any other public agency from issuing building,
grading, sewer or other permits or certificates of occupancy for
any single-family residential unit to be constructed on the
Property by Buyer.
9.2 In the event any of the conditions set forth in
Section 9.1 hereof are not satisfied or waived by Buyer in
writing, as and when required, then this Agreement and the Escrow
established hereunder shall terminate upon written notice by
Buyer to Seller, all documents deposited into Escrow shall be
returned to the party who deposited the same without further
instructions by either party to the Escrow Agent, and the Deposit
and Option Deposit (if such deposit has been made by Buyer
pursuant to Section 2.3 hereof) shall be promptly returned to
Buyer. In such event, Buyer shall retain all rights and remedies
against Seller to the extent Seller has failed to perform any of
its obligations hereunder.
9
10. SELLER'S CONDITION TO CLOSE.
10.1 Seller's obligation hereunder to complete the sale
of each phase of the Property is subject to satisfaction of the
following conditions at or prior to the Closing Date, each of
which is for the sole benefit of Seller, unless waived by the
Seller in writing.
10.1.1 Buyer shall have timely performed each
and every one of Buyer's obligations set forth in this Agreement;
10.1.2 All of the warranties and representations
of Buyer set forth in this Agreement shall be true and correct
at the Effective Date and the applicable Close of Escrow;
10.2 In the event any of the conditions set forth in
Section 10.1 hereof are not satisfied or waived by Seller in
writing, as and when required, then this Agreement and the Escrow
established hereunder shall terminate upon written notice by
Seller to Buyer, all documents deposited into Escrow shall be
returned to the party the same further instructions by either
party to the Escrow Agent, and Seller shall retain all rights and
remedies against Buyer to the extent Buyer has failed to perform
any of its obligations hereunder, as limited by the provisions of
Section 4 hereof. In such event, the Deposit shall be returned to
Buyer, unless Buyer is in default hereunder.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS.
11.1 SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
In addition to the representations, warranties and covenants of
Seller contained in other sections of this Agreement, Seller
hereby represents, warrants and covenants to Buyer as follows,
all of which shall survive each Close of Escrow and any
investigation or knowledge of Buyer prior to each Close of
Escrow:
11.1.1 Seller is a corporation duly organized,
validly existing and in good standing in the State of Nevada, and
has the full right, capacity, power and authority as the sole
owner in fee simple of the Property to enter into and carry out
the terms of this Agreement. Seller has not alienated,
encumbered, transferred, leased, assigned or otherwise conveyed
its interest in the Property or any portion thereof except as set
forth in the Title Report, nor entered into any Agreement to do
so, nor shall Seller do so prior to each Close of Escrow. The
entering into and performance by Seller of the transactions
contemplated by this Agreement will not violate or breach any
agreement, covenant or obligation binding on Seller. This
Agreement has been duly authorized and executed by Seller and the
parties signing on behalf of Seller, and upon delivery to and
execution by Buyer shall be a valid and binding agreement of
Seller.
10
11.1.2 For each of the forty (40) lots
comprising the Property, Seller has, to the best of Seller's
knowledge, (a) graded in accordance with all grading plans by the
City, County, State and any other applicable governmental or
quasi-governmental agency, body or authority (and any private
group, if applicable) (individually an "Authority", and
collectively, the "Authorities") having jurisdiction over the
Property, and certified to Buyer with respect to compaction by a
soils engineer licensed and in good standing in the State and
reasonably acceptable to Buyer, and certified by any required
Authority (such engineer's and Authorities' certificates being
referred to herein collectively as the "Engineers'
Certificates"), and suitable for the construction of Buyer's
product; (b) caused all water and sewer services to be installed
and stubbed to the lot, with each respective service including
water meter boxes, meter setter and/or curb stop and sewer
clean-outs set to grade and marked with a protective barrier; (c)
caused all electricity, telephone, and cable television conduit
to be installed and stubbed to the lot lines and capable of being
energized for immediate service upon completion of a
single-family residence on the lot; (d) caused all storm drain,
water, sewer, curb, gutter, sidewalk and pavement frontage
improvements to be constructed and installed; (e) caused all
street signs and striping installed and street lights to be
installed and energized; (f) caused all property corners to be
surveyed and marked and all monumentation, perimeter walls and/or
perimeter landscaping required by the Authorities or the
improvement plans and specifications to be installed; (g) caused
all fees (other than ordinary building permit fees and those
certain park fees payable pursuant to that certain Park
Development Agreement dated February 20, 1991, as amended by that
certain Settlement Agreement Regarding Payment of Park Fees
executed in August, 1994), exactions and assessments (except for
the Improvement Act Bonds and the Mello-Roos Bonds, both of which
shall be paid current by Seller, and prorated) to be paid in full
by Seller; and (h) completed any and all off-site improvements,
park area, open space or other public amenities required by the
conditions of approval to the tentative subdivision map(s) and
final map for the Property (the "Final Map") or by applicable
Authorities that are necessary for construction and occupancy of
residential units.
11.1.3 There are no mechanic's or materialman's
liens or similar claims or liens now asserted against the
Property for work performed or commenced prior to the date hereof
other than as described in the Title Report.
11.1.4 Neither Seller nor, to the best of
Seller's knowledge, any third party has used, generated,
manufactured, stored or disposed any Hazardous Substance in, at,
on, under or about the Property or transported any Hazardous
Substance to or from the Property. To the best of Seller's
knowledge, the Property is not in violation, nor has been or is
currently under investigation for violation of any federal, state
or local law, ordinance or regulation relating to industrial
hygiene, worker health and safety, or to the environmental
conditions in, at, on, under or about the Property including, but
not limited to, soil and groundwater conditions, except as
expressly set forth in that certain Level I Hazardous Materials
Site Assessment Rancho Murieta Unit No. 6, dated March, 1992,
prepared by W.E.S. Technology (the "Environmental Report"). To
11
the best of Seller's knowledge, the Property has not, except as
set forth in the Environmental Report, been subject to, and is
not within 2,000 feet of, a deposit of any Hazardous Substance.
To the best of Seller's knowledge, except as set forth in the
Environmental Report, there has been no discharge, migration or
release of any Hazardous Substance from, into, on, under or about
the Property, and there is not now, nor has there ever been on or
in the Property underground storage tanks or surface or
below-grade impoundments, any asbestos-containing materials or
any polychlorinated biphenyls used in hydraulic oils, electrical
transformers or other equipment. Seller hereby assigns to Buyer
as of each Close of Escrow all claims, counterclaims, defenses or
actions, whether at common law, or pursuant to any other
applicable federal or state or other laws which Seller may have
against any third parties relating to the existence of any
Hazardous Substance in, at, on, under or about the Property.
Moreover, Seller shall defend, indemnify and hold harmless
Buyer and its officers, directors, employees, agents,
shareholders, attorneys and their respective representatives and
successors in interest (collectively, the "Indemnitee") from any
liability, loss, cost, damage or expense, including, without
limitation, court costs, expert witness' fees and attorneys'
fees, that Indemnitee may suffer or incur as a result of any
claim, demand, action, cost or judgment made or obtained by any
individual, partnership, cooperation, entity, governmental agency
or person which arises out of or results from the presence or
existence of Hazardous Substances above, below or on the Property
to the extent that such Hazardous Substances are or were located
in such locations prior to the applicable Close of Escrow.
11.1.5 To the best of Seller's knowledge, there
are no endangered species or protected natural habitat, flora or
fauna located on the Property (other than the requirement that
any oak trees removed from the Property must be replaced pursuant
to that certain Sacramento County Ordinance amending Ordinance
No. 77-8D-10G regarding a Planned Unit Development known as Rancho
Murieta), nor are there any areas of the Property that are or
could be designated as wetlands.
11.1.6 There is no pending or threatened suit,
action or arbitration, or legal, administrative, or other
proceeding or governmental investigation, formal or informal,
including but not limited to eminent domain, condemnation,
assessment district or zoning change proceeding, or any judgment,
moratorium or other government policy or practice which affects
the Property or Buyer's anticipated development of the Property.
11.1.7 The Final Map has been approved by all
applicable Authorities, subject only to the conditions indicated
on the face thereof, and provides for the forty (40) lots
comprising the Property.
11.1.8 To the best of Seller's knowledge, all
grading and work of improvement performed by or on behalf of
Seller on the Property has been performed in a good and
workmanlike manner, strictly in accordance with applicable plans
12
therefor approved by the Authorities, and neither such plans nor
the grading and other work of improvement contain any error,
omission or defect in design, material or workmanship.
11.1.9 Except as set forth on the face of the
Final Map, Seller has not made any commitment or representation
to any government authority, or any adjoining or surrounding
property owner, which would in any way be binding on Buyer or
would interfere with Buyer's ability to develop and improve the
Property as a residential development, and will not make any such
commitment or representation which would affect the Property or
any portion thereof prior to each Close of Escrow, without Buyer's
written consent, which consent Buyer may grant or withhold in its
sole and absolute discretion.
11.1.10 To the best of Seller's knowledge, no
seismic safety problem relating to the Property would prevent or
impair residential development of the Property.
11.1.11 To the best of Seller's knowledge,
Seller is unaware of any other fact that would preclude Buyer
from developing the Property as a single-family residential
subdivision.
Each of the representations and warranties made by Seller in
this Agreement, or in any exhibit or on any document or
instrument delivered pursuant hereto, shall be true and correct
in all material respects on the Effective Date, and shall be
deemed to be made again as of each Close of Escrow, and shall
then be true and correct in all material respects. The truth and
accuracy of each of the representations and warranties, and the
performance of all covenants of Seller contained in this
Agreement, are conditions precedent to the release of the Deposit
to Seller and to each Close of Escrow. Seller shall notify Buyer
immediately of any facts or circumstances which are contrary to
the foregoing representations and warranties contained in this
Section 11.1.
11.2 BUYER'S REPRESENTATIONS AND WARRANTIES. In addition to
the representations, warranties and covenants of Buyer contained
in other sections of this Agreement, Buyer hereby represents,
warrants and covenants to Seller as follows, all of which shall
survive each Close of Escrow:
11.2.1 Buyer is a limited liability company
duly organized, validly existing and in good standing in the
State of California, and has the capacity and full power and
authority to enter into and carry out the agreements contained
in, and the transactions contemplated by, this Agreement, and
that this Agreement has been duly authorized and executed by
Buyer and, upon delivery to and execution by Seller, shall be a
valid and binding Agreement of Buyer. Buyer's entering into and
performance by Buyer of the transactions contemplated by this
Agreement will not violate or breach any agreement, covenant or
obligation binding on Buyer.
13
11.2.2 Buyer and any entity or person that owns
or controls Buyer are not bankrupt or insolvent under any
applicable federal or state standard, have not filed for
protection or relief under any applicable bankruptcy or creditor
protection statute and have not been threatened by creditors with
an involuntary application of any applicable bankruptcy or
creditor protection statute.
11.2.3 Prior to Seller transferring all its
interest in Seller's Remaining Property or Seller giving its
written consent, Buyer shall not resell any of the lots
comprising the Property without a single-family residence being
first constructed on each of such lots.
12. CONDEMNATION. If, prior to either Close of Escrow, any
portion of the Property is taken by any entity by condemnation or
with the power of eminent domain, or if the access thereto is
reduced or restricted thereby (or is the subject of a pending
taking which has not yet been consummated), Seller shall
immediately notify Buyer of such fact. In such event, Buyer shall
have the right, in Buyer's sole discretion, to terminate this
Agreement to all or any portion of the Property upon written
notice to Seller and Escrow Agent not later than seven (7) days
after receipt of Seller's notice thereof. If this Agreement to
any portion of the Property is so terminated, all documents and
funds, relating to such portion of the Property, including the
Deposit, shall be returned by Escrow Agent to each party who so
deposited the same, and neither party shall have any further
rights or obligations under this Agreement relating to such
portion of the Property, except for payment of escrow
cancellation fees which shall be borne equally by Buyer and
Seller. Alternatively, Buyer may proceed to consummate the
transaction provided for herein at Buyer's sole election, in
which event Seller shall assign and turn over, and Buyer shall be
entitled to receive and keep, any and all awards made or to be
made in connection with such condemnation or eminent domain, and
the parties shall proceed to such Close of Escrow pursuant to the
terms hereof, without any reduction in the applicable Purchase
Price. Provided that Seller shall be entitled to recover from
Buyer, out of such condemnation proceeds, Seller's reasonable and
necessary attorneys' fees which were directly and solely relative
to such condemnation and which were incurred prior to Buyer's
notice of intention to proceed with consummation of the sale
transaction, and PROVIDED FURTHER that Buyer shall be limited in
recovery rights for condemnation proceeds to making claim against
the condemning governmental agency.
13. SALE OF SELLER'S REMAINING PROPERTY. Seller is currently
engaged in the process of selling Seller's Remaining Property. In
the event that Buyer identifies in writing to Seller a potential
purchaser of a lot within Seller's Remaining Property who
subsequently consummates a sale of such lot from Seller, Buyer
shall be entitled to receive a six percent (6%) commission (less
any commission payable to a participating broker in any such
transaction) from Seller based on the purchase price of such lot,
which shall be immediately payable to Buyer on the closing on
such lot. If a potential purchaser identified in writing by Buyer
desires to purchase a single-family residence from Buyer for
construction on a lot within Seller's Remaining Property, Buyer
14
shall have the right to exchange a lot within the Property for a
Comparable Lot (as defined in the following sentence) within
Seller's Remaining Property. A COMPARABLE LOT shall be defined
as a lot reasonably similar in size, configuration and location
(as to location, a lot shall be deemed to be either a lot located
on the fairway to the golf course, or an interior lot) to the lot
within the Property being exchanged. Prior to Seller's receipt of
the Option Exercise Notice, Seller shall have the right to sell
any Phase II Lot, provided Seller substitutes a Comparable Lot
from Seller's Remaining Property for any such Phase II Lot.
Seller shall provide Buyer with prior written notice of any
substitution of a Phase II Lot pursuant to the preceding sentence
and Seller agrees to execute and record any document reasonably
requested by Buyer to evidence such substitution of a lot from
Seller's Remaining Property for a Phase II Lot. Notwithstanding
anything to the contrary in this Section 13 or elsewhere in this
Agreement, Seller shall be free to sell lots within Seller's
Remaining Property on an individual basis at any time.
14. BROKERS. Each party shall be responsible to pay any sales
or brokerage commission each has incurred in connection with this
transaction. Each party hereto hereby agrees to indemnify, defend
and hold the other harmless from any real estate brokerage
commission, finders fee, and all costs and expenses (including
reasonable attorneys' fees) of investigating and defending any
such claims, payable to any realtor or finder, which such party
may engage or is claimed to have engaged in connection with this
transaction.
15. GENERAL PROVISIONS.
15.1 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which, taken together, shall constitute one and the same
instrument.
15.2 ENTIRE AGREEMENT. This Agreement, together with all
exhibits hereto and documents referred to herein, if any,
constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, and supersede all prior
understandings or agreements, including the January 11, 1996
letter agreement between the parties. This Agreement may be
modified only by a writing signed by both parties. All exhibits
to which reference is made in this Agreement are deemed
incorporated in this Agreement whether or not actually attached.
15.3 PARTIAL INVALIDITY. If any provision of this
Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of the Agreement shall
continue in full force and effect and shall in no way be impaired
or invalidated, and the parties agree to substitute for the
invalid or unenforceable provision a valid and enforceable
provision that most closely approximates the intent and economic
effect of the invalid or unenforceable provision.
15
15.4 CHOICE OF LAW. This Agreement and each and every
related document are to be governed by, and construed in
accordance with, the laws of the State of California.
15.5 WAIVER OF COVENANTS, CONDITIONS OR REMEDIES. The
waiver by one party of the performance of any covenant, condition
or promise, or of the time for performing any act, under this
Agreement shall not invalidate this Agreement nor shall it be
considered a waiver by such party of any other covenant,
condition or promise, or of the time for performing any other act
required, under this Agreement. The exercise of any remedy
provided in this Agreement shall not be a waiver of any
consistent remedy provided by law, and the provisions of this
Agreement for any remedy shall not exclude any other consistent
remedies unless they are expressly excluded.
15.6 LEGAL ADVICE. Each party has received independent
legal advice from its attorneys with respect to the advisability
of executing this Agreement and the meaning of the provisions
hereof. The provisions of this Agreement shall be construed as to
the fair meaning and not for or against any party based upon any
attribution of such party as the sole source of the language in
question.
15.7 TIME OF THE ESSENCE. Time shall be of the essence as
to all dates and times of performance, whether they are contained
herein or contained in any escrow instructions to be executed
pursuant to this Agreement.
15.8 ATTORNEYS' FEES. In the event that any party hereto
institutes an action or proceeding for a declaration of the
rights of the parties under this Agreement, for injunctive
relief, for an alleged breach or default of, or any other action
arising out of, this Agreement, or the transactions contemplated
hereby, or in the event any party is in default of its
obligations pursuant thereto, whether or not suit is filed or
prosecuted to final judgment, the non-defaulting party or
prevailing party shall be entitled to its actual attorneys' fees
and to any court costs incurred, in addition to any other damages
or relief awarded.
15.9 ASSIGNMENT. Buyer may not assign this Agreement or
any of its rights and obligations hereunder without the written
consent of Seller, except for transfer to any entity which is
wholly or commonly owned by Buyer. If Seller gives its written
consent to any such assignment by Buyer and such assignee
expressly assumes all of Buyer's obligations under this
Agreement, Buyer shall be fully relieved from any further
liability hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the successors and permitted
assigns of the parties to this Agreement.
15.10 NOTICES. All notices and demands which either party
is required or desires to give to the other shall be given in
writing by certified mail, return receipt requested with
appropriate postage paid, by personal delivery, or by private
overnight courier service to the address set forth below for the
respective party, provided that if any party gives notice of a
16
change of name or address, notices to that party shall thereafter
be given as demanded in that notice. All notices and demands so
given shall be effective only upon receipt or refusal of delivery
by the party to whom notice or demand is being given.
If to Seller: SHF Acquisition Corporation
4045 S. Spencer Street
Suite 206
Las Vegas, NV 89119
Attn: James H. Dale
Telephone Number: (702) 732-7474
Fax Number: (702) 737-1065
With a copy to: Calfee & Young
611 North Street
Woodland, CA 95695
Attn: Christopher J. Konwinski, Esq.
Telephone Number: (916) 666-2185
Fax Number: (916) 666-3123
If to Buyer: West Coast Properties, LLC
c/o Leveraged Equity Management, Inc.
One Market, Suite 2801
San Francisco, California 94105
Attn: Mr. Eric P. Von der Porten
Telephone Number: (415) 284-0778
Fax Number: (415) 284-0784
With a Copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Attn: Thomas M. French, Esq.
Telephone Number: (415) 833-2028
Fax Number: (415) 327-3699
15.11 CONFIDENTIALITY. Buyer and Seller acknowledge that
the terms, conditions and contents of this Agreement are
confidential, and Buyer and Seller each hereby agrees that Buyer
and Seller, and their respective directors, officers, employees,
agents, legal counsel, consultants and independent contractors
(collectively, "Agents") shall keep the terms, conditions and
contents of this Agreement strictly confidential except as
otherwise permitted in this Section 15.11. Accordingly, Buyer and
Seller agree that they shall not, without the prior written
consent of the other, release, publish or otherwise distribute,
and shall not authorize or permit any of its Agents to release,
publish or otherwise distribute, the terms, conditions and
contents of the Agreement to any person other than such party and
its Agents for this transaction, but then only to the extent that
any such Agent needs to know the terms, conditions and contents
17
of the Agreement to evaluate the Property. Notwithstanding
anything to the contrary herein, neither Buyer nor Seller shall
be in breach of its obligations hereunder if it or its Agents:
(a) disclose the existence and terms of this Agreement to the
City and/or any lenders of Seller or Buyer to the extent
reasonably necessary to cause the Close of Escrow to occur as
contemplated herein, provided any such disclosure shall be made
expressly subject to the terms of this Section 15.11; (b) are
required by law to disclose any such matters; (c) disclose the
information contained in the Memorandum of Agreement (as defined
below in Section 15.13).
15.12 EXCLUSIVITY. Seller agrees not to solicit, discuss,
or entertain other offers or proposals relating to the Property
prior to the earlier of: (a) Buyer's termination of this
Agreement pursuant to Section 7 hereof, or (b) the expiration of
the Option Term.
15.3 MEMORANDUM OF AGREEMENT. Buyer shall have the right
to record a memorandum of agreement in the form of Exhibit "G"
attached hereto in the Official Records upon Buyer's written
approval of the Feasibility Matters.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the Effective Date.
SELLER
SHE ACQUISITION CORPORATION,
a Nevada corporation
By: /s/ James H. Dale
Its: President
BUYER:
MURIETA INVESTORS, LLC,
a California limited liability
company
By: /s/ Eric P. Von der Porten
Its: Member
18
ACCEPTANCE BY ESCROW AGENT:
Escrow Agent hereby acknowledges that it has received a fully
executed counterpart of the foregoing Agreement and agrees to act
as Escrow Agent thereunder and to be bound by and perform the terms
thereof as such terms apply to Escrow Agent.
Dated: By:
Name:
Its:
19
EXHIBIT A
LEGAL DESCRIPTION OF SELLER'S PROPERTY
20
EXHIBIT B
LEGAL DESCRIPTION OF THE PHASE I LOTS
21
EXHIBIT C
LEGAL DESCRIPTION OF THE PHASE II LOTS
22
EXHIBIT D
FIRPTA AFFIDAVIT
DATE: _____________________
Murieta Investors, LLC
c/o Leveraged Equity Management, Inc.
One Market, Suite 2801
San Francisco, California 94105
Attn: Mr. Eric P. Von der Porten
Re: Internal Revenue Code Section 1445
Dear :
Section 1445 of the Internal Revenue Code provides
that a transferee of a U.S. real property interest must withhold
tax if the transferor is a foreign person. To inform the transferee
that withholding of tax is not required upon the disposition of a
U.S. real property interest by the undersigned hereby certifies
the following on behalf of SHF ACQUISITION CORPORATION, a Nevada
corporation ("Seller").
1. Seller is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations):
2. Seller's U.S. employer identification number is ;
3. Seller's office address is ; and
4. Seller understands that this certification may be disclosed
to the Internal Revenue Service by transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true,
correct and complete, and I further declare that I have authority
to sign this document on behalf of Seller.
SELLER
SHF ACQUISITION CORPORATION,
a Nevada corporation
By:
Its:
23
EXHIBIT E
BLANKET ASSIGNMENT AND BILL OF SALE
Reference is hereby made to (a) that certain property located
in The development commonly known as Village 6 of Rancho Murietta,
County of , State of California as more particularly
described on Exhibit "A" attached hereto, (b) to The improvements
located thereon, and (c) to the rights, privileges and enticements
incident Thereto (collectively, the "Property").
For good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned, SHF Acquisition Corporation, a Nevada
corporation ("Seller"), does hereby, give, grant, bargain, sell,
transfer, assign, convey and deliver to Murieta Investors, LLC, a
California limited liability company ("Buyer"), all of Seller's
right, title and interest in all assets, rights, materials and/or
claims used, owned or held in connection with the use, management,
development or enjoyment of the Property, including, without limitation:
(a) all entitlements, subdivision agreements and other agreements
relating to the development of The Property; (b) all plans,
specifications, maps, drawings and other renderings relating to the
Property; (c) all warranties, claims and any similar rights relating
to and benefiting the Property or the assets transferred hereby;
(d) all intangible rights, goodwill and rights benefiting the
Property; (e) all development rights benefiting the Property;
(f) all rights, claims or awards benefiting the Property; (g) all
personal property located on or about the Property; and (h) all
rights to receive a reimbursement, credit or refund from the
applicable agency or entity of any deposits or fees paid in
connection with the development of the Property. Notwithstanding
the foregoing, it is acknowledged that none of Seller's rights and
obligations under the Reimbursement Agreement (as defined in that
certain Purchase and Option Agreement between Seller and Buyer
dated , 1996) are being assigned to Buyer.
Seller hereby covenants that it will, at any time and from
time to time upon written request therefor, execute and deliver
to Buyer, its nominees, successor and/or assigns, any new or
confirmatory instruments and do and perform any other acts which
Buyer, its nominees, successors and/or assigns, may request in
order to fully transfer possession and control of, and protect
the rights of Buyer, its nominees, successors and/or assigns in,
all the assets of Seller intended to be transferred and assigned
hereby.
SELLER
SHF ACQUISITION CORPORATION,
a Nevada corporation
By:
Its:
24
EXHIBIT F
DEFINITION OF HAZARDOUS SUBSTANCE
The term "Hazardous Substance" as used in this Agreement shall
mean any toxic or hazardous substance, material or waste or any
pollutant or contaminant or infectious or radioactive material,
including but not limited to those substances, materials or wastes
regulated now or in the future under any of the statutes or
regulations listed below and any and all of those substances
included within the definitions of "hazardous substances",
"hazardous materials", "hazardous waste", "hazardous chemical
substance or mixture", "imminently hazardous chemical substance
or mixture", "toxic substances", "hazardous air pollutant", "toxic
pollutant" or "solid waste" in the statues or regulations listed below.
Hazardous Substances shall also mean any and all other similar terms
defined in other federal state and local laws, statutes, regulations,
orders or rules and materials and wastes which are, or in the future
become, regulated under applicable local, state or federal law for
the protection of health or the environment or which are classified
as hazardous or toxic substances, materials or waste, pollutants or
contaminants, as defined, listed or regulated by any federal, state
or local law, regulation or order or by common law decision,
including, without limitation, (a) trichloroethylene,
tetrachloroethylene, perchloroethylene and other chlorinated
solvents, (b) any petroleum products or fractions thereof,
(c) asbestos, (d) polychlorinated biphenyls, (e) flammable
explosives, (f) urea formaldehyde, and (g) radioactive materials
and waste. In addition, a Hazardous Substance shall include:
(1) A "Hazardous Substance", "Hazardous Material", "Hazardous
Waste", or "Toxic Substance" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections
9601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801, et seq., or the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901, et seq.;
(2) An "Extremely Hazardous Waste", a "Hazardous Waste", or a
"Restricted Hazardous Waste", under Sections 25115, 25117 or 25122.7
of the California Health and Safety Code, or is listed or identified
pursuant to Sections 25140 or 44321 of the California Health and
Safety Code;
(3) A "Hazardous Material", "Hazardous Substance", "Hazardous
Waste", "Toxic Air Contaminant", or "Medical Waste" under Sections
25281, 25316, 25501, 25501.1, 25023.2 or 39655 of the California
Health and Safety Code;
(4) "Oil" or a "Hazardous Substance" listed or identified pursuant
to Section 311 of the Federal Water Pollution Control Act, 33 U.S.C.
Section 1321, as well as any other hydrocarbon substance or by-product;
(5) A "Hazardous Waste", "Extremely Hazardous Waste", or an
"Acutely Hazardous Waste" listed or defined pursuant to Chapter 11 of
Title 22 of the California Code of Regulations;
25
(6) A chemical listed by the State of California as known to cause
cancer or reproductive toxicity pursuant to Section 25249.8(a) of the
California Health and Safety Code;
(7) A material which due to its characteristics or interaction with
one or more other substances, chemical compounds, or mixtures, damages
or threatens to damage, health, safety, or the environment, or is
required by any law or public agency to be remediated, including
remediation which such law or public agency requires in order for the
property to be put to any lawful purpose;
(8) Any material the presence of which would require remediation
pursuant to the guidelines set forth in the State of California Leaking
Underground Fuel Tank Field Manual, whether or not the presence of such
material resulted from a leaking underground fuel tank;
(9) Pesticides regulated under the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. Sections 136 et seq.;
(10) Asbestos, PCBs, and other substances regulated under the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 et seq.;
(11) Any radioactive material including, without limitation, any
"source material", "special nuclear material", "by-product material",
"low-level wastes", "high level radioactive waste", "spent nuclear fuel"
or "transuranic waste", and any other radioactive materials or
radioactive wastes, however produced, regulated under the Atomic Energy
Act, 42 U.S.C. Sections 2011 et seq., the Nuclear Waste Policy Act,
42 U.S.C. Sections 10101 et seq., or pursuant to the California Radiation
Control Law, California Health and Safety Code Sections 25800 et seq.;
(12) Industrial process and pollution control wastes, whether or
not "hazardous" within the meaning of the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901 et seq.;
(13) Any material regulated under the Occupational Safety and
Health Act, 29 U.S.C. Sections 651 et seq., or the California
Occupational Safety and Health Act, California Labor Code Sections
6300 et seq.; and/or
(14) Any material regulated under the Clean Air Act, 42 U.S.C.
Sections 7401 et seq. or pursuant to Division 26 of the California
Health and Safety Code.
All other laws, ordinances, codes, statutes, regulations,
administrative rules, policies and orders, promulgated pursuant to
said foregoing statutes and regulations or any amendments or
replacement thereof, provided such amendments or replacements
shall in no way limit the original scope and/or definition of
Hazardous Substance defined herein.
26
EXHIBIT G
MEMORANDUM OF AGREEMENT
Recording requested by and when
recorded return to:
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Attn: Thomas M. French, Esq.
(Space above this line for recorder's use.)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement (this "Memorandum") is made and
entered into as of __________________, 1996 (the "Effective Date"),
by and between SHF ACQUISITION CORPORATION, a Nevada corporation
("Seller"), and MURIETA INVESTORS, LLC, a California limited liability
company ("Buyer"), pursuant to a certain unrecorded Purchase and
Option Agreement between the same parties dated ____________ ,1996
(the "Agreement').
1. PURCHASE AND SALE. In accordance with and subject to and the
terms and conditions of the Agreement, Seller agrees to sell that
certain real property more particularly described on Exhibit "A"
attached hereto (the "Phase I Lots") to Buyer, and Buyer agrees to
purchase the Phase I Lots from Seller.
2. GRANT OF OPTION. In accordance with and subject to and the
terms and conditions of the Agreement, Seller hereby grants to Buyer
the exclusive right and option (the "Option") to purchase that certain
real property more particularly described on Exhibit "B" attached hereto
(the "Phase II Lots"). Under the Agreement, the Option may be
exercised only if Buyer has resold fifteen (15) of the Phase I Lots
pursuant to the terms of the Agreement and must be exercised, if at all,
during the Option Period (as defined in the Agreement), which Option
Period shall in no event continue beyond 5:00 p.m. on June 30, 1997,
unless extended by a written agreement executed by both Seller and Buyer.
3. PROCEEDS FROM RESALE OF PHASE I LOTS AND PHASE II LOTS. Upon
Buyer's resale of any of the Phase I Lots or Phase II Lots acquired
by Buyer pursuant to the Agreement, Seller shall be entitled to certain
additional payments from Buyer as are more specifically set forth in the
Agreement.
27
4. OBLIGATION TO BUILD HOMES ON LOTS. Prior to resale thereof
by Buyer, Buyer is obligated to build homes on the lots which are
the subject of the Agreement, subject to certain limitations more
particularly set forth in the Agreement.
5. AGREEMENT CONTROLLING. This Memorandum is qualified in its
entirety by reference to the Agreement, the terms and provisions
of which shall be controlling in all respects. In the event of any
conflict or inconsistency between the Agreement and this Memorandum,
the terms and provisions of the Agreement shall be controlling.
6. PURPOSE. This Memorandum is prepared for the purpose of
recordation and providing notice of the Agreement to third parties.
IN WITNESS WHEREOF, the parties have executed this Memorandum
as of the date first above written.
SELLER:
SHF ACQUISITION CORPORATION,
a Nevada corporation
By: _____________________________
Its: ____________________________
BUYER:
MURIETA INVESTORS, LLC,
a California limited liability company
By: _____________________________
Its: ____________________________
28
STATE OF
COUNTY OF
On ____________________ before me, ___________________, Notary
Public, personally appeared [___________________], personally known to me
(or proved to me on the basis of satisfactory evidence) to be the
person[s] whose name[s] [is] [are] subscribed to the within instrument
and acknowledged to me that [he] [she] [they] executed the same in [his]
[her] [their] authorized capacity[ies], and that by [his] [her] [their]
signature[s] on the instrument the person[s], or the entity upon behalf
of which the person[s] acted, executed the instrument.
Witness my hand and official seal.
________________________________________
Notary Public
STATE OF
COUNTY OF
On ____________________ before me, _________________________, Notary
Public, personally appeared [______________________], personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person[s] whose name[s] [is] [are] subscribed to the within instrument
and acknowledged to me that [he] [she] [they] executed the same in [his]
[her] [their] authorized capacity[ies], and that by [his] [her] [their]
signature[s] on the instrument the person[s], or the entity upon behalf
of which the person[s] acted, executed the instrument.
Witness my hand and official seal.
________________________________________
Notary Public
29
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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