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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
Commission file number: 0-7765
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CROWELL & CO., INC.
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(Name of small business issuer in its charter)
Georgia 58-1021933
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
432 South Belair Road, Augusta, GA 30907
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(Address of Principal executive offices) Zip Code
Issuer's telephone number including area code: (706) 855-1099
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Securities registered pursuant to Section 12 (b) of the Act: None
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, Without Par Value
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(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers under Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
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Issuer's revenues for its most recent fiscal year: $7,419,634.
The aggregate market value of the voting stock held by non-affiliates is unknown
to registrant. Registrant is unaware of any sales or purchases of its stock
during the 60 day period ending March 31, 1996.
The number of shares outstanding of issuer's common equity as of February 29,
1996, is 2,520,835.
The Index of Exhibits is on page 37.
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TABLE OF CONTENTS
PART 1 PAGE
ITEM 1 Description of Business......................................... 3
ITEM 2 Description of Properties....................................... 6
ITEM 3 Legal Procedures................................................ 9
ITEM 4 Submission of Matters to a Vote of Security
Holders......................................................... 9
PART II
ITEM 5 Market for Common Equity and Related Stockholder Matters........ 10
ITEM 6 Management's Discussion and Analysis or Plan of Operation....... 10
ITEM 7 Financial Statements............................................ 14
ITEM 8 Changes In and Disagreements With Accountants
and on Accounting Financial Disclosure.......................... 28
PART III
ITEM 9 Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act...... 29
ITEM 10 Executive Compensation.......................................... 30
ITEM 11 Security Ownership of Certain Beneficial Owners
and Management.................................................. 30
ITEM 12 Certain Relationships and Related Transactions.................. 32
ITEM 13 Exhibits and Reports on Form 8-K................................ 33
Signatures
Index of Exhibits............................................... 37
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ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Crowell & Co., Inc., is a Georgia corporation ("Crowell") which was
incorporated in 1968. The offices of Crowell & Co., Inc., are located at 432
South Belair Road, Augusta, Georgia 30907. The telephone number is (706) 855-
1099.
The principal business of Crowell and its subsidiaries (together, the
"Company") is homebuilding, the development of residential properties for
resale, and sales and support of proprietary real estate software. Crowell
primarily develops residential properties. Additionally, Crowell owns and
operates Petersburg Racquet Club, a tennis and pool facility located in
Crowell's largest development. Crowell also provides property appraisal
services. Crowell plans to acquire new properties for development in profitable
markets based on current and expected demand. Analysis and acquisition of new
properties are ongoing. On June 1, 1995, Crowell sold its residential real
estate brokerage division to Meybohm Realty, Inc. ("Meybohm"). (See Material
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Dispositions on page 4.) Crowell retained its commercial brokerage division in
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the sale.
Crowell acquires and develops land for homebuilding primarily in Columbia
County, Georgia. Columbia County is in east central Georgia and is included in
the Augusta Metropolitan Statistical Area ("MSA"). This MSA contains Richmond,
Columbia, and McDuffie Counties in Georgia and Aiken and Edgefield Counties in
South Carolina. The population of this MSA was approximately 474,000 in 1995.
Columbia County had a population of approximately 82,000 in 1995. While Columbia
County is primarily a suburban and rural community, the industrial base is
growing as local political and business leaders have made intensive efforts to
lure new industries. Columbia County is highly desirable for homebuyers for
many reasons, including the county's high quality school system and
accessibility to employment, shopping, and entertainment.
Ivey Homes, Inc. ("Ivey"), a wholly owned subsidiary of Crowell, builds
single-family and multi-family homes on a presold and speculative basis. Ivey
is the primary builder in all of Crowell's developments. Ivey is also the
primary builder in three subdivisions developed by Home Sites, Ltd. ("Home
Sites"), a Georgia limited partnership. Otis L. Crowell, President of Crowell,
is the general partner of Home Sites. Generally, Ivey does not build outside of
Crowell or Home Sites developments. The revenues of Ivey constituted 79%, 89%,
and 75% of the total revenues of the Company for the fiscal years ended December
31, 1995, 1994, and 1993, respectively. Meybohm is the exclusive listing agent
and marketer for all of Ivey's homes. Meybohm markets properties through various
forms of advertising including newspapers, magazines, and signs. Meybohm is a
member of the local Multiple Listing Service which is a cooperative marketing
effort by member brokers enabling real estate agents to easily show homes
marketed by member brokers. Meybohm has approximately 100 sales agents.
Currently, Ivey's home prices (which includes lot costs) range from
approximately $95,000 to $200,000. Square footage in these homes ranges from
1,400 to 2,800. Ivey builds single family detached, multi-family attached,
patio, and townhouse homes.
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Ivey uses either concrete slabs or flooring systems in the construction of its
homes. Exterior materials may be brick, stucco, vinyl siding, synthetic siding,
or wood. Ivey provides structural warranties of ten years and systems warranties
of two years on these homes.
Keystone Homes, Inc. ("Keystone"), a wholly owned subsidiary of Crowell which
was formed in 1995, builds single family homes on a presold and speculative
basis. Keystone enables Crowell to reach more market segments by concentrating
building efforts in a different subdivision than what Crowell currently reaches
through Ivey's building efforts. Keystone builds in one of Crowell's
developments and one of Home Sites developments. Generally, Keystone does not
build outside of Crowell or Home Sites developments. The revenues of Keystone
constituted 8% of the total revenues of the Company for the fiscal year ended
December 31, 1995.
Currently, Keystone's home prices (which includes lot costs) range from
approximately $90,000 to $155,000. Square footage in these homes ranges from
1,400 to 2,500. Keystone builds single family detached homes. Keystone uses
either concrete slabs or flooring systems in the construction of its homes and
exterior materials may be brick or vinyl siding. Keystone's homes are marketed
in the same manner as Ivey's.
Ivey's and Keystone's backlogs at December 31, 1995, were approximately
$360,000 and $97,000 respectively. Backlog represents the dollar amount of
sales pending on signed contracts where Ivey has not completed construction of
the homes under contract. Construction was approximately 48% complete on these
contracts at December 31, 1995. Management believes all backlog at December 31,
1995, will be completed during 1996.
United Data Systems, Inc. ("UDS"), a division of Crowell, sells and supports
computer software, which was developed by UDS for exclusive use in real estate
operations. Support consists of on-site and off-site training in the use of UDS
software. Customers also may purchase support contracts which allow them to
receive professional assistance by calling UDS support staff on toll free
telephone lines. UDS also sells supplies.
All operations of Crowell and its subsidiaries are domestic.
MATERIAL DISPOSITIONS
On December 22, 1993, Crowell sold Budget Storage Warehouse ("Budget"), a
warehouse facility which leases storage space to individuals and businesses.
Budget had 48,160 square feet and consisted of 363 available units for storage.
The sales price of Budget was $1,140,000 which was received in the form of
approximately $322,000 in cash, a note receivable of $185,000 which was secured
by a second mortgage on Budget, and the assumption of Crowell's existing loan on
Budget in the amount of $633,000. The net book value of Budget was
approximately $713,000 at the time of the sale. Therefore, a gain of
approximately $427,000 was recognized on the sale. The purchaser of Budget was
Sovran Strategic Investments, L.P. ("Sovran"). There was no material
relationship between Sovran and Crowell at the time of the sale. The lender,
NationsBank of Georgia, N.A., required Crowell to remain on the existing loan as
an additional debtor.
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On June 1, 1995, Crowell sold its residential real estate brokerage division
("Division") to Meybohm. Crowell sold the division in order to concentrate
managerial and financial resources on development and homebuilding. The sales
price of the Division was $100,000 in cash, plus payments based on various
percentages of former Crowell agent earnings, listings, and pending sale
contracts transferred from Crowell to Meybohm for one year from the date of
sale. In addition, the sales price included payments not to exceed $60,000 per
year for the right to exclusively market Crowell and related entities'
developments for a period of two years. The net book value of the division was
approximately $21,000 at the time of the sale. This amount is included in the
$59,050 loss from discontinued operations. The $100,000 cash payment was
recognized as gain on the sale of the Division. All other payments received
under the sales agreement are reflected in the loss from discontinued
operations. There was no material relationship between Crowell and Meybohm at
the time of the sale. No income tax was generated from the sale of the Division
because of the operating loss incurred by Crowell for 1995. Total revenue from
the residential brokerage division for the years ended December 31, 1995 and
1994, was $528,473 and $1,760,149, respectively.
COMPETITION
The Company competes with other individuals and entities involved in real
estate development and residential construction, some of which have greater
capital resources than Crowell. Such competitors may have greater diversity in
terms of both the types of properties under development and geographic locations
of properties, and therefore, are better able to avoid adverse developments in
the single family residential development and construction business in the MSA.
Crowell competes with several other developers in Columbia County. Lot
prices are determined by market conditions because Crowell does not have
sufficient market share to dictate price. Crowell competes by strategically
analyzing housing availability and demand throughout the MSA and acquiring
properties accordingly.
Because Ivey is the primary builder in several subdivisions developed by
Crowell and Homesites, Ltd., Ivey is not subject to the lot acquisition problems
that some of its competitors face. Therefore, Ivey is able to concentrate on
building efficiencies and customer needs. Ivey's home prices are determined by
market conditions. While Ivey is a major builder in the Augusta area, Ivey
cannot dictate price.
Likewise, Keystone does not face the lot acquisition problems of certain
competitors because Keystone is one of the largest builders in the Home Sites
development and can easily purchase lots. Keystone also is able to concentrate
on building efficiency and customer needs. Keystone's prices are determined by
market conditions.
UDS operates in the highly competitive field of selling computer software.
Barriers to entry into the software field are not great, and competitors with
greater financial resources than UDS may enter the market. Some competitors are
believed to be working to improve their software based on analysis of
competitors' marketing literature.
UDS sells a narrowly targeted product so the Company's marketing strategy
takes the form of advertising in selected real estate magazines, personal
selling,
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demonstrations at realtor trade shows, and sales of additional products
and services to existing customers. Because UDS's products are narrowly
targeted, price competition has not been a large factor. However the sharply
falling prices of "canned" products may inhibit UDS from maintaining its pricing
structure indefinitely.
SOURCES AND AVAILABILITY OF RAW MATERIALS
There is an adequate supply of building materials available in the Augusta,
Georgia area. Major suppliers of the Company are Howard Lumber Company, Maner
Builders Supply Company, Hutto Plumbing, Inc., Looper Cabinet Company, Inc.,
Claussen Concrete, Wickes Lumber Company, American Carpet One, Augusta Lighting
and Design Center, Smith's Landscape Nursery, and D'Antignac & Merritt.
EMPLOYEES
As of December 31, 1995, the Company and its subsidiaries had approximately
30 employees, 22 of which were full time employees. The Company has one
commercial real estate agent and one appraisal agent.
The Company leases its executive office space from the President of Crowell.
The leases are further described in Item 12.
ITEM 2. DESCRIPTION OF PROPERTIES
At December 31, 1995, the principal properties held by the Company, all of
which are located in Columbia County, Georgia, unless otherwise noted, included:
<TABLE>
<CAPTION>
Mortgage Project/ Mortgage
Description Subdivision Name Location Existing Use Planned Use Balance
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<S> <C> <C> <C> <C> <C>
29.72 acres undeveloped land None Fury's Ferry Rd None Residential $ *
50.57 acres undeveloped land Chaparral Clark Pointe None Residential *
9.4 acres undeveloped land None Fury's Ferry Rd None Commercial/ *
Shopping Ctr
1.41 acres undeveloped land None The Pass None Commercial *
42 developed lots Bakers Ferry The Pass Residential *
25 developed lots The Boulders The Pass Residential *
25.28 acres undeveloped land None The Pass None Residential *
at Petersburg Racquet Club
Petersburg Racquet Club Petersburg The Pass Recreation 330,082
Racquet Club facility
Homes under construction Bakers Ferry The Pass For sale 326,544
Homes under construction The Boulders The Pass For sale 483,544
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Homes under construction Bridlewood Fury's Ferry Rd For sale 554,246
Homes under construction Butler's Mill Aiken County, SC For sale 88,482
Homes under construction Walnut Grove Aiken County, SC For sale 216,072
Homes under construction Chaparral Clark Pointe For sale 251,320
Rental Homes None Various For sale 133,424
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Total mortgage debt $3,808,908
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</TABLE>
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* Aggregate mortgage debt was $1,425,194 at December 31, 1995.
Titles held on above properties are in fee simple. All land is properly
zoned for its listed potential use. Management believes that Crowell, Ivey, and
Keystone are in compliance with all wetlands, setback, and zoning regulations.
Management believes that all properties are adequately insured.
The interest expense for the year ended December 31, 1995, on the mortgage
debt was $456,197 (including capitalized interest). A similar payment for 1996
can be expected although the amount will vary depending on several factors
including lot sales and interest rate changes. The principal outstanding is
reduced by a certain agreed-upon amount as each lot is sold in order for the
lender to release its secured interest in the lot being sold. The interest rates
on the mortgages range from 8.6% to 10.0 %. The development loans are renewed
on an annual basis. The mortgage on Petersburg Racquet Club is amortized
monthly and will be fully amortized in 2010. (For additional information on the
Company's mortgage debt, see Item 6. Management's Discussion and Analysis on
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Plan of Operation.)
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The Company's investment in different types of real estate is not restricted
except where restricted by the Company's ability to obtain financing. See Item
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1 for a description of the Company's real estate development activities.
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POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of investment policies, financing policies and
policies with respect to certain other activities of the Company. Although the
Company has no formal written policies with respect to such activities, the
following discussion outlines the Company's objectives and informal policies
with respect to these activities, which have been determined by the Board of
Directors of the Company and may be changed from time to time at the discretion
of the Board of Directors without a vote of the shareholders of the Company.
Investment Policies. The Company's objective with regard to real estate is
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to acquire raw land in the Augusta, Georgia area for the purpose of developing
the land into separate homesites and homebuilding, which homes are built on a
presold or speculative basis. (See Description of Properties.) However, future
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development or investment activities may not be limited to this specific
geographic area. The Company's policy is to develop or acquire raw land or
developed residential lots where
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management believes that opportunities exist for acceptable investment returns.
The Company may expand or develop existing properties or sell such properties in
whole or in part as determined by management.
The Company may also participate with other entities in property ownership,
through joint ventures or other types of co-ownership. Equity investment may be
subject to existing mortgage financing and other indebtedness which would have
priority over the equity of the Company. The Company may issue securities to
persons in exchange for properties. The Company also may invest in securities
of entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities, although it
has not done so in the past several years. The Company may acquire all or
substantially all of the securities or assets of other entities where such
investments would be consistent with the Company's investment policies.
Financing Policies. The Company uses internally generated and borrowed funds
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to purchase real estate. In reaching such financing decisions, management
considers traditional conventional mortgage debt-to-asset ratios. Borrowings
may be in the form of bank borrowings, publicly and privately placed debt
instruments, or purchase money obligations to the sellers of properties, any of
which indebtedness may be unsecured or may be secured by any or all of the
assets of the Company and may have full or limited recourse to all or any
portion of the assets of the Company. The Company has not established any limit
on the number of mortgages that may be placed on any single property or on its
portfolio as a whole, but mortgage financing instruments usually limit
additional indebtedness on such properties. To the extent that the Board of
Directors of the Company determines to sell additional capital, the Company may
raise such capital through equity offerings, debt financings or any other
method.
Policies with Respect to Other Activities. The Company has authority to
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offer and sell shares of its capital stock or other securities and to repurchase
or otherwise reacquire its shares or any other securities and may engage in such
activities in the future, although it has no present intention of offering or
selling any securities (other than the shares of Crowell Common Stock offered
hereby ) or repurchasing any of the shares of Crowell Common Stock. The Company
has no material outstanding loans to other entities or persons, including
officers and directors. The Company may in the future make loans to joint
ventures in which it participates in order to meet working capital needs. The
Company has not engaged and does not intend to engage in the future in trading,
underwriting or agency distribution or sale of securities of other issuers.
Additionally, the Company has not invested in the securities of other issuers
for the purpose of exercising control in the past three years; however, the
Company may make such investments in the future. The Company intends to make
investments in such a way that it will not be treated as an investment company
under the Investment Company Act of 1940.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings except routine litigation
that is incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders for the
quarter ended December 31, 1995.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no public trading market for the securities of Crowell. As of
December 31, 1995, there were approximately 740 holders of record of Crowell's
Common Stock, without par value. No dividends have been paid on Crowell's Common
Stock for more than two years and the management of Crowell does not intend to
pay dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
OVERVIEW
The primary objective of the Company's management is to maximize shareholder
wealth. The Company plans to accomplish this by increasing total revenues
without increasing overhead dollars. Management believes that existing
corporate structure is adequate to support increased sales. In addition,
management believes revenues can be increased most rapidly by increasing
homebuilding efforts. Management believes greater effort can be expended now in
homebuilding and development because of the sale of the residential brokerage
division.
RESULTS OF OPERATION
Management continually monitors inventory levels in relation to customer
demand in order to build the needed number of homes. Management believes that
housing inventory needs are dynamic and that a specific inventory level must be
matched with consumer demand. Therefore, there is no specific amount of
inventory which will always be the optimum.
Home sales decreased by $5,906,625, or 48%, and commercial brokerage
commissions increased by $34,692, or 34% for the year ended December 31, 1995,
as compared to the year ended December 31, 1994. Management believes the 2,000
person layoff at Savannah River Site ("SRS") was primarily responsible for the
decrease in home sales. Other contributing factors were the oversupply of new
housing in Columbia County and uncertainty caused by the possibility of future
cuts at SRS and the medical profession in the MSA. Management believes home
sales will increase in 1996 and commercial brokerage commissions will remain
stable based on management's projected home and commercial property sales.
Management believes home sales will increase based on targeted marketing efforts
by Meybohm and the Company. In addition, Keystone will operate a full year in
1996 instead of only half a year as it did last year.
Computer division revenues decreased by $142,863, or 20%, because of
decreased sales of software and hardware. Management believes revenues will
remain
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stable in 1996 based on budgeted amounts. The budgeted amounts are based
on support revenue which remains stable from year to year and sales revenue
which is projected to remain stable as well.
Gross profit percent on home sales decreased to 5% in 1995 from 9% in 1994.
Management believes gross profit percent will increase in 1996 because most of
the less profitable inventory has been sold.
Gross profit percent on commercial brokerage commissions increased from 25%
in 1994 to 30% in 1995 because the agents' portion of the total commission
decreased. Management believes that gross profit percent on commissions will
remain at 1995 levels for 1996 based on management's estimate of agent
production.
Gross profit on lot sales decreased from 90% in 1994 to 36% in 1995.
Management believes gross profit on lots will increase in 1996 based on current
lot inventory.
Gross profit percent on computer division revenues increased from 68% in 1994
to 77% in 1995 because hardware was sold at low margins in 1994. Management
believes that gross profit percent will remain at 1995 levels in 1996.
Salaries decreased in 1995 as compared to 1994 by $166,827, or 16%, because
of employee attrition. Management believes salary expense will be less in 1996
than in 1995 because of the loss of several employees during 1995 even though
remaining employees received small cost of living raises. The company does not
plan to replace employees lost through attrition.
Depreciation expense decreased by $45,638 or 37% in 1995 as compared to 1994
because several assets have been fully depreciated. Management believes
depreciation expense will remain at 1995 levels for 1996 based on projected
depreciation and amortization.
Taxes and licenses increased by $34,977, or 108%, in 1995 as compared to
1994. Management believes taxes and licenses will decrease in 1996 based on the
Company's current holdings and tax status.
Building occupancy decreased by $586 in 1995 as compared to 1994. Management
believes building occupancy expenses will remain at 1995 levels for 1996 based
on budgeted amounts.
Office expense increased in 1994 by $3,482 or 2% in 1995 as compared to 1994.
Management believes that office expense for 1996 will remain at 1995 levels
based on budgeted amounts.
Advertising and promotion decreased by $6,796, or 15%, in 1995 as compared to
1994. Management believes advertising and promotion will remain stable in 1996
based on current advertising plans.
Legal and accounting expenses decreased by $93,697, or 68%, in 1995 as
compared to 1994. Management believes legal and accounting fees will remain
consistent with 1995 because the Company is not presently involved in any
lawsuits that would require significant legal services.
Communications expenses decreased by $22,196, or 27%, in 1995 as compared to
1994 because of lower long distance rates. Management believes there will be
another decrease in 1996 because of decreased rates.
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Overall operating expenses decreased by $302,784 for 1995 as compared to
1994. Management believes operating expenses will decrease for 1996 based on
budgeted expenses.
Interest income increased by $26,019 in 1995 as compared to 1994 because of
past due interest payments collected. Management believes that interest income
will be insignificant in 1996.
Interest expense from continuing operations increased by $171,982 in 1995 as
compared to 1994 because of the housing inventory carried throughout the year.
Management believes interest expense will decrease in 1996 based on projected
debt amounts.
LIQUIDITY AND CAPITAL RESOURCES
Crowell expects to sell land it presently owns to meet liquidity needs as it
has done in the past. Together with revenues from other sources, such sales
would be expected to generate sufficient cash to meet liquidity requirements. At
December 31, 1995, available cash and proceeds from land, lot, and home sales
were expected to be sufficient to meet the Company's requirements until spring
of 1996 when home sales typically improve and provide cash for operations.
The Company has obtained financing historically by borrowing from
conventional lending sources using land acquired for development as security for
loans.
Current and future liquidity needs are expected to be met by use of the
proceeds from lot and land sales and the proceeds from loans, using lands
purchased for development as collateral. Existing development loans and
commitments available to the Company have been made by various financial
institutions and are secured by the improved lots held for resale. (See Item 2.
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Description of Properties.) The interest rates on the development loans are the
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prime rates of the lenders (8.5% in December 1995) plus 1.0 to 1.5%. Payments
of interest are due monthly or quarterly and a portion of the principal is
repaid as each lot is sold. The existing loans terminate in the year ending
December 31, 1996, at which time all principal and accrued interest are payable.
There are no penalties for prepayment. Management expects to renew the
development loans at that time.
Residential home construction costs are financed through the use of
additional commitments using the improved lots as collateral. Lot acquisition
costs and home construction costs are financed by construction loans from a
number of conventional lending sources, generally lending 90-95% of the costs of
the home, secured by the lot and improvements, at rates of 8.5% to 9.5% as of
December 31, 1995. These loans are paid upon the sale of the home. These loans
are negotiated and closed on a project-by-project and lot-by-lot basis.
In addition to the development loans, the Company has a loan agreement with
an Augusta, Georgia savings and loan institution for a currently outstanding
amount of approximately $330,000 at a rate of one percent over the institution's
base lending rate (8.6% at December 31, 1995) when the interest rate of the loan
was last adjusted.
Financing arrangements for long-term needs have not been made because such
arrangements in the land development business are generally made on a project-
by-project basis. Debt service on existing loans (loan balances totaled
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$3,808,908 as of December 31, 1995) and funds for operations are expected to be
met from the proceeds of lot sales, land sales, home sales and real estate
brokerage commissions. Notes maturing in 1996 total $3,443,977. The Company
historically has renewed these notes annually although there are no assurances
that such loans will be renewed by the financial institution. The notes will
eventually be repaid from proceeds of land, lot, and home sales. (See Item 7.
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Financial Statements for additional details regarding notes payable.)
- --------------------
The Company's financial condition at December 31, 1995, has deteriorated from
that of December 31, 1994. Most notable is the decrease in stockholders' equity
from $1,458,504 to $755,024, a decrease of $703,480 or 48%. The decrease in
sales volume which resulted in a large loss was the cause of this decrease.
(See discussion of Results of Operation.)
-------------------
Properties held for resale decreased from $5,673,148 at December 31, 1994 to
$3,929,197 at December 31, 1995, a decrease of $1,743,951, or 31%, which
reflects the decrease in inventory to adjust to decreased sales. Properties
held for resale will increase and decrease as management determines and builds
the level of inventory needed to satisfy customer demand.
Cash increased by $38,232, or 17%, from December 31, 1994. (See Item 7
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Financial Statements - Consolidated Statements of Cash Flows.)
- -------------------------------------------------------------
Receivables decreased from $612,577 at December 31, 1994, to $127,076 at
December 31, 1995, a decrease of $485,501, or 79%, because of the collection of
two notes receivable. Management believes receivables will remain at 1995
levels in 1996.
Other assets decreased from $175,625 at December 31, 1994, to $53,516 at
December 31, 1995, a decrease of $122,109, or 70%, primarily because of the sale
of the residential brokerage division.
Notes payable decreased from $5,515,037 at December 31, 1994, to $3,808,908
at December 31, 1995, a decrease of $1,706,129, or 31%, because of a decrease
in inventory levels. Notes payable will increase and decrease in direct
proportion to the level of housing inventory maintained by the Company in 1996.
Accounts payable and accrued liabilities decreased from $304,373 at December
31, 1994, to $198,327 at December 31, 1995, a decrease of $106,046 or 35%,
because proceeds from home sales and collections on asset sales were used to pay
liabilities.
The Company has net operating loss carryforwards available of approximately
$2,050,000 to offset against future federal taxable income. The current value
of these carryforwards computed at maximum federal and state income tax rates is
approximately $770,000. This amount is not reflected in the financial
statements.
IMPACT OF INFLATION
Although inflationary pressures were moderate in 1995 and 1994, the Company
continues to seek ways to reduce the impact of inflation. To the extent
permitted by competition, the Company passes increased costs on to customers by
increasing sales prices of residential lots and homes.
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SEASONALITY
The Company typically sells more homes during the second and third quarters
of the year than during the remainder of the year.
ACCOUNTING REQUIREMENTS
The Financial Accounting Standards Board (FASB) has issued one accounting
standard that has not yet been adopted by the Company. A discussion of the
estimated effects, if known, on the Company's consolidated financial statements
is provided in Note 11 to the financial statements. (See the Company's
Consolidated Financial Statements and the notes thereto in Item 7.)
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ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of Crowell & Co., Inc., and
subsidiaries are included herein:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations - Years ended December 31, 1995 and
1994
Consolidated Statements of Changes in Stockholders' Equity - Years ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1995 and
1994
Notes to Consolidated Financial Statements - Years ended December 31,
1995 and 1994
14
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Crowell & Co., Inc., and Subsidiaries
Augusta, Georgia
We have audited the accompanying consolidated balance sheets of
Crowell & Co., Inc., and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Crowell & Co., Inc., and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
CHERRY, BEKAERT & HOLLAND
Augusta, Georgia
March 25, 1996
15
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1994
---------- ----------
<S> <C> <C>
PROPERTIES HELD FOR RESALE
Homes under construction and for sale $2,445,971 $4,057,902
Developed residential 1,103,676 1,205,464
Land held for future development 379,550 409,782
---------- ----------
3,929,197 5,673,148
========== ==========
CASH, including escrow funds of $25,689 and $90,075
in 1995 and 1994, respectively 268,564 230,332
---------- ----------
RECEIVABLES
Notes 30,766 536,289
Accounts 57,910 68,772
Other 38,400 7,516
---------- ----------
127,076 612,577
---------- ----------
PROPERTY AND EQUIPMENT
Office building - 111,162
Rental homes 124,000 158,000
Petersburg Racquet Club 706,547 706,547
Computer equipment and software 153,269 369,860
Furniture, fixtures and equipment 206,268 372,451
---------- ----------
1,190,084 1,718,020
Less accumulated depreciation 806,178 1,131,788
---------- ----------
383,906 586,232
---------- ----------
OTHER ASSETS 53,516 175,625
---------- ----------
$4,762,259 $7,277,914
========== ==========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
NOTES PAYABLE TO BANKS $3,808,908 $5,515,037
---------- ----------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable 78,083 72,972
Accrued expenses 89,874 126,375
Customer deposits 30,370 105,026
---------- ----------
198,327 304,373
---------- ----------
TOTAL LIABILITIES 4,007,235 5,819,410
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Capital stock:
Preferred, voting and nonparticipating, without par value;
10,000,000 shares authorized, 1,011,899 designated to
Series A and Series B
Series A preferred, 8% cumulative, stated value $1 per share;
on or after December 1, 1992
callable at $1 per share plus
accumulated dividends, on or after October 1, 1992 convertible
into common stock at the rate of 1 share for 4 preferred shares;
authorized 2,000,000 shares; issued and outstanding 525,000
shares; accumulated dividends $63,000 ($0.08 per share) 525,000 525,000
Series B preferred, 8% cumulative, stated value $1 per share;
on or after December 1, 1992 callable at $1 per share plus
accumulated dividends, on or after October 1, 1992 convertible
into common stock at the rate of 1 share for 4 preferred shares;
authorized 486,899 shares; issued and outstanding 486,899 shares;
accumulated dividends $77,904 ($0.08 per share) 486,899 486,899
Common, without par value; 50,000,000 shares authorized;
2,520,835 shares issued and outstanding at December 31, 1995
and 1994. 696,776 696,776
Additional paid-in capital Preferred stock - Series A 33,648 33,648
Accumulated deficit (987,299) (283,819)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 755,024 1,458,504
---------- ----------
$4,762,259 $7,277,914
========== ==========
</TABLE>
17
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
REVENUES
Home sales $6,409,027 $12,315,652
Brokerage commissions 137,350 102,658
Computer division 562,713 705,576
Other income 238,944 283,837
Lot sales 71,600 168,619
Land sales - 200,000
---------- -----------
7,419,634 13,776,342
---------- -----------
COST OF REVENUES
Homes 6,073,514 11,212,948
Agent commissions 95,778 76,775
Computer division 130,783 227,549
Other 37,477 43,289
Lots 45,700 16,753
Land - 61,540
---------- -----------
6,383,252 11,638,854
---------- -----------
OPERATING EXPENSES
Salaries 846,085 1,012,912
Depreciation and amortization 74,526 120,164
Taxes and license 67,195 32,218
Building occupancy 134,371 134,957
Advertising and promotion 38,458 45,254
Office expense 166,154 162,672
Legal and accounting 43,147 136,844
Communications 58,576 80,772
---------- -----------
1,428,512 1,725,793
---------- -----------
OPERATING INCOME(LOSS) (392,130) 411,695
---------- -----------
FINANCIAL INCOME (EXPENSE)
Interest income 45,709 19,690
Interest expense (398,009) (226,027)
---------- -----------
(352,300) (206,337)
---------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (744,430) 205,358
INCOME TAX BENEFIT 0 61,499
---------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (744,430) 266,857
DISCONTINUED OPERATIONS
Income (loss) from residential brokerage division (59,050) 140,854
Gain on disposal of residential brokerage division 100,000 -
---------- -----------
NET INCOME (LOSS) (703,480) 407,711
PREFERRED STOCK DIVIDENDS 80,952 80,952
---------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ (784,432) $ 326,759
========== ===========
EARNINGS PER COMMON SHARE:
Weighted average number of common shares outstanding 2,520,835 2,520,835
Primary earnings per share
Income (loss) from continuing operations $ (.33) $ .07
Income from discontinued operations .02 .06
---------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ (0.31) $ 0.13
========== ===========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Capital Stock Issued
--------------------- Additional Paid-In Capital
Preferred Preferred Preferred Accumulated
Series A Series B Common Series A Deficit
--------- --------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 525,000 486,899 696,805 33,648 $(610,578)
Preferred dividends paid
Series A - - - - (42,000)
Series B - - - - (38,952)
Payment for quarter shares - - (29) - -
Net income - - - - 407,711
-------- -------- -------- ------- ---------
BALANCE, DECEMBER 31, 1994 $525,000 $486,899 $696,776 $33,648 $(283,819)
Net loss - - - - (703,480)
-------- -------- -------- ------- ---------
BALANCE, DECEMBER 31, 1995 $525,000 $486,899 $696,776 $33,648 $(987,299)
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (703,480) $ 407,711
Adjustments to reconcile net income to net cash provided by
operating activities:
Income tax benefit (61,499)
Depreciation and amortization 74,526 129,045
Loss on sale of assets 45,065 6,757
Changes in assets and liabilities:
(Increase) decrease in:
Properties held for resale 1,743,951 999,738
Accounts receivable 10,862 (4,051)
Other receivables (30,884) 13,163
Home sale notes receivable 53,301 (72,480)
Other assets 122,109 (49,388)
Increase (decrease) in:
Accounts payable 5,111 (128,008)
Accrued expenses (36,501) 26,205
Customer deposits (74,656) 5,697
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,209,404 1,272,890
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 100,000 22,376
Purchase of property and equipment (17,265) (28,755)
Collections on notes receivable 452,222 11,988
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 534,957 5,609
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of preferred stock dividends - (80,952)
Proceeds from bank loans 4,294,615 8,226,726
Payments of bank loans and other debt (6,000,744) (9,622,462)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (1,706,129) (1,476,688)
----------- -----------
NET INCREASE (DECREASE) IN CASH 38,232 (198,189)
CASH AT BEGINNING OF YEAR 230,332 428,521
----------- -----------
CASH AT END OF YEAR $ 268,564 $ 230,332
=========== ===========
SUPPLEMENTARY DISCLOSURES
Interest paid (net of amount capitalized) $ 384,119 $ 237,319
Income taxes paid 5,503 3,784
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - DESCRIPTION OF BUSINESS
The principal operations of Crowell & Co., Inc., and its subsidiaries (the
"Company") are development of residential properties for resale, homebuilding,
providing commercial real estate brokerage services, and computer product
development and sales.
Crowell & Co., Inc. ("Crowell"), the parent company, primarily develops
residential properties in the Augusta, Georgia, metropolitan statistical area.
Additionally Crowell owns and operates Petersburg Racquet Club, a tennis and
pool facility located in Crowell's largest development. Crowell also provides
property appraisal services and commercial real estate brokerage services.
United Data Systems, Inc. ("UDS"), a division of Crowell, sells and supports
computer software throughout the United States. The software was developed by
UDS for exclusive use in real estate operations. UDS also sells computer
supplies.
Ivey Homes, Inc., ("Ivey") and Keystone Homes, Inc. ("Keystone"), wholly
owned subsidiaries of Crowell, build single-family and multi-family homes on a
presold and speculative basis in the Augusta, Georgia, metropolitan statistical
area.
All operations of Crowell and its subsidiaries are domestic.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany accounts and transactions are
eliminated in consolidation.
ACCOUNTING ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECEIVABLES
The Company uses the allowance method for recording bad debt. At December
31, 1995 and 1994, all receivables are considered collectible.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Maintenance and repairs are
charged to expense. Improvements that significantly increase the lives of
assets are capitalized and depreciated or amortized over their estimated useful
lives. Gains or losses on disposals are credited or charged to operations.
21
<PAGE>
DEPRECIATION AND AMORTIZATION
Depreciation on property and equipment is computed on the straight-line and
declining-balance methods for both financial reporting and income tax purposes.
Computer software costs, purchased software and intangibles are stated at cost
and amortized to expenses on a straight-line method over their estimated useful
lives.
PROPERTIES HELD FOR RESALE
Properties held for resale are stated at the lower of cost or market using
the specific identification method.
CUSTOMER DEPOSITS
A portion of the Company's cash is reserved for the repayment of security
deposits, excess cash owed to property owners on property management accounts
and earnest money received on pending real estate sales contracts.
CAPITALIZED INTEREST
The Company capitalizes the portion of interest incurred during the
construction period for funds borrowed to develop properties and construct
residential homes. Such interest is charged to properties and expensed as a
cost of sale as properties are sold.
REVENUE RECOGNITION
The Company recognizes revenues on sales of residential lots, land, and homes
at the time of closing and receipt of cash. Revenue recognition in the computer
division is at the time a system is installed or the product is sold.
The Company uses the completed contract method on Company-constructed homes.
This method is used because the typical home is completed in six months or less
and the financial position and results of operations do not vary significantly
from those which would result from the use of the percentage of completion
method. A contract is considered complete at the time of closing and receipt of
cash.
Contract costs include all direct materials and labor costs, allocated common
cost of land and development and those indirect costs related to contract
performance, including interest on borrowings. General and administrative costs
are charged to expense as incurred.
The Company recognizes commissions earned on real estate brokerage
transactions at the time of closing.
CONCENTRATION OF CREDIT RISK
As of December 31, 1995, the Company had approximately $65,803 on deposit in
a single financial institution in excess of federally insured limits.
RECLASSIFICATIONS
Certain 1994 amounts have been reclassified to conform with the financial
statement presentation used in 1995. These reclassifications had no effect on
net income.
22
<PAGE>
NOTE 3 - NOTES RECEIVABLE
December 31, December 31,
-------------------
1995 1994
--------- --------
10% note, due in monthly installments of
$4,700, including interest, secured by insurance
renewal contracts and personal guarantees. - $260,747
Various second mortgage notes receivable on
homes sold by Ivey at interest rates of 9.0%
to 11.0%, due at various dates. $30,766 84,067
7% note, due December 21, 1998, interest
payable monthly. Secured by real estate. - 191,475
------- --------
$30,766 $536,289
======= ========
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company leases its office space from the majority stockholder. On June
1, 1989, the Company entered into three (3) operating lease agreements each with
a term of twenty (20) years. The leases provide that the Company pay all
property taxes, insurance and maintenance plus an annual rental. The total
minimum rental commitment at December 31, 1995, under these leases is
$1,959,600, which is due as follows:
Year ending December 31,
- ------------------------
1996 $ 122,400
1997 127,200
1998 127,200
1999 130,800
2000 133,200
Thereafter 1,318,800
----------
$1,959,600
==========
The total rental expense for these leases included in the consolidated
statements of income for each year ended December 31, 1995 and 1994, is
$120,000.
NOTE 5 - NOTES PAYABLE
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
To banks
Secured by residential properties held for resale, maturing at
various dates through 1996, at interest rates from prime plus
1.0% to 1.5% (9.0% to 10.0% at December 31, 1995 and 1994). $3,345,402 $4,834,590
Secured by Petersburg Racquet Club property, maturing 2010, at
interest rate of 8.6% and 7.5% at December 31, 1995 and 1994,
respectively. The interest rate adjusts every thirteenth month with
an 18.5% maximum. 330,082 345,330
Secured by office building, at an interest rate of prime plus 1.5% (7.0%
at December 31, 1994) - 89,250
Secured by single-family homes held for resale and rental, maturing
at various dates after 2018, at interest rate of 9.0% to 11.0%. 133,424 107,643
Secured by note receivable, due in monthly installments of $4,700,
including interest at the rate of 10.0%, due March, 1995. - 138,224
---------- ----------
$3,808,908 $5,515,037
========== ==========
</TABLE>
23
<PAGE>
Under provisions of financing arrangements outstanding at December 31, 1995,
the Company has unused commitments for financing of approximately $400,000.
These additional amounts are available upon request and approval of development
progress and are subject to the
same terms and obligations as those existing on December 31, 1995. The majority
stockholder has personally guaranteed all bank loans. In addition, the
president of Ivey has personally guaranteed all of Ivey's bank loans, which
amounts to additional guarantees of $2,053,632 as of December 31, 1995. The
president of Keystone has personally guaranteed all of Keystone's bank loans
which amounts to additional guarantees of $244,700.
Maturities of debt are as follows:
Year ending December 31,
- ------------------------
1996 $3,443,977
1997 17,553
1998 19,120
1999 208,828
2000 22,688
Thereafter 284,742
----------
$3,808,908
==========
Capitalized interest (see Note 2) was approximately $58,000 and
------
$250,000 for the years ended December 31, 1995 and 1994, respectively. All
other interest incurred was recognized as financial expense in the consolidated
statements of income.
NOTE 6 - STOCK OPTIONS AND STOCK INCENTIVE PROGRAM
At December 31, 1995 and 1994, Crowell had one stock option plan
pursuant to which an option, exercisable for 12,500 shares, was outstanding.
The plan specifies that no more than 50% of the granted shares be exercised
prior to two years after creation of the plan. After a three-year period and
for the following four years, the option may be exercised. The option was
granted at an exercise price of $1 per share. The option expired seven years
after the date of grant.
The option discussed in the preceding paragraph was not included in
the computation of the earnings (loss) per common share because the common stock
is not traded on any stock exchange and, therefore, a market value for the
common stock has not been established that would enable the Company to measure
the likelihood of the exercise of the options. Nevertheless, the earnings
(loss) per common share, assuming full dilution, would not be materially
different from primary earnings (loss) per common share.
24
<PAGE>
NOTE 7 - INCOME (LOSS) PER SHARE
The income (loss) per common share is computed using the weighted
average of the number of shares outstanding during the years ended December 31,
1995 and 1994. Because inclusion of convertible preferred stock would have an
antidilutive effect on the income or loss per common share, the convertible
preferred stock is excluded from the computation of the income or loss per
common share assuming full dilution.
NOTE 8 - INCOME TAX MATTERS
For the year ended December 31, 1995, Crowell filed consolidated
income tax returns with its subsidiaries, Ivey and Budget Storage Warehouse,
Inc. For the year ended December 31, 1995, Crowell filed consolidated income tax
returns with its subsidiaries Ivey, Keystone, and Budget Storage Warehouse, Inc.
For the years ended December 31, 1995 and 1994, the components of the
federal and state income tax provision included in the accompanying financial
statements are as follows:
Year ended December 31,
-----------------------
1995 1994
------ --------
Current (including $128,000 from
discontinued operations in 1994) $ 0 $ 3,784
Deferred income taxes relating
to timing differences:
Note receivable using the
installment method for tax
purposes $ 0 (65,283)
----- --------
$ 0 $(61,499)
===== ========
Income tax eliminated by net operating losses amounted to approximately
$113,000 for the year ended December 31, 1994.
A reconciliation of income (loss) before income taxes to regular federal
taxable income is as follows:
Year ended December 31,
------------------------
1995 1994
------------ ----------
Income (loss) before income taxes $( 697,977) $ 346,212
State income tax - (3,784)
Installment sale - 11,988
Entertainment exclusion 3,524 5,951
Nondeductible contributions 2,430 -
Cash value of life insurance - (35,454)
Officers life insurance 8,521 6,815
----------- ---------
Regular federal taxable income (683,502) 331,728
Net operating loss used 683,502 (331,728)
----------- ---------
Regular federal taxable income $ 0 $ 0
=========== =========
25
<PAGE>
The Company adopted SFAS No. 109 as of January 1, 1994. Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are recognized
for temporary differences between the financial reporting basis of assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The adoption of SFAS No. 109 had no significant effect on income
for the year ended December 31, 1995.
Deferred tax assets and liabilities at December 31, 1995 and 1994, consist of
the following:
Years ended December 31,
------------------------
1995 1994
--------- ---------
Deferred tax assets
Federal and state net operating loss carryforwards
$ 770,000 $ 530,000
Less valuation allowance (770,000) (530,000)
--------- ---------
Net deferred tax asset $ 0 $ 0
========= =========
During 1994 the Company used $331,728 of its net operating loss carryforward
against taxable income, which resulted in eliminating any current regular
federal tax liabilities. The tax benefits of prior period net operating loss
carryforwards were calculated using the Company's effective tax rate.
Remaining net operating loss carryforwards of $2,050,806 expire in varying
amounts between December 31, 2002, and December 31, 2010, and are subject to
Internal Revenue Code Section 382 limitations relating to a corporation's
ability to use net operating loss carryforwards subsequent to a change in
ownership. An expiration schedule is as follows:
Year ending December 31
- -----------------------
2002 $ 320,346
2003 597,531
2004 154,945
2005 294,482
2010 683,502
----------
$2,050,806
==========
NOTE 9 - INDUSTRY SEGMENT DATA
The Company conducts its operations in the principal industries of real
estate development and homebuilding and computer product development and sales.
The real estate development segment consists principally of the development
of residential properties for resale and construction of single-family and
multi-family housing. In addition, the real estate development segment operates
a tennis and pool facility.
The real estate brokerage segment consists of commission revenue and related
expenses for primarily commercial real estate sales.
26
<PAGE>
The computer products segment consists of the sale of computer hardware,
software and related supplies to real estate firms. In addition, the Company
charges user support fees to firms purchasing its software.
Any significant intersegment revenues for the periods presented have been
eliminated. Various industry segment data is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
Net sales
Real estate development $6,719,571 $12,968,108
Real estate brokerage 137,350 102,658
Computer product sales 562,713 705,576
---------- -----------
Net sales $7,419,634 $13,776,342
========== ===========
Operating income (loss)
Real estate development ($461,238) $ 528,102
Real estate brokerage 4,399 (90,528)
Computer product sales 64,709 (25,879)
---------- -----------
Operating income (loss) $ (392,130) $ 411,695
========== ===========
Capital expenditures
Real estate development $ 5,741 $ 5,751
Real estate brokerage - 17,873
Computer product sales 11,524 5,131
---------- -----------
Net capital expenditures $ 17,265 $ 28,755
========== ===========
Depreciation and amortization
Real estate development $ 65,308 $ 80,370
Real estate brokerage - 360
Computer product sales 9,218 39,434
---------- -----------
Net depreciation and amortization $ 74,526 $ 120,164
========== ===========
Assets employed
Real estate development $4,661,515 $ 7,230,429
Real estate brokerage - 25,305
Computer product sales 100,744 22,180
---------- -----------
$4,762,259 $ 7,277,914
========== ===========
</TABLE>
NOTE 10 - RELATED PARTY TRANSACTIONS
Ivey and Keystone purchase developed lots for home construction from
Home Sites, Ltd. ("Home Sites"), an entity related by common control. For the
years ended December 31, 1995 and 1994, such purchases amounted to $292,700 and
$435,350, respectively. Crowell also provides management services to Home
Sites. For the years ended December 31, 1995 and 1994, management fees earned
by the Company amounted to $35,522 and $33,981, respectively.
An officer of the company also received real estate commissions on Home
Sites property sold by Crowell in the amounts of $34,457 and $12,000 for the
years ended December 31, 1995 and 1994.
27
<PAGE>
NOTE 11 - FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
The Financial Accounting Standards Board (FASB) has issued an accounting
standard that has not yet been adopted by the Company. The following is a brief
description of this standard.
On December 16, 1991, the FASB issued Statement No. 107 requiring all
entities to disclose the fair value of financial instruments in the notes to
financial statements. The final standard applies to both assets and
liabilities, either on or off the balance sheet, and is effective for the
Company beginning in 1996. Under the standard, fair value is defined as the
amount at which a financial instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
If it is not practicable to estimate the fair value of some instruments,
disclosure of descriptive information about those instruments is nonetheless
required. The impact on investor perceptions of the effect of market value
disclosures on the ongoing value of the Company cannot be predicted at this
time.
NOTE 12 - DISCONTINUED OPERATIONS
On June 1, 1995, Crowell sold its residential real estate brokerage division
("Division") to Meybohm Realty, Inc. ("Meybohm), another real estate brokerage
firm located in the Augusta area, with an effective closing date of June 1,
1995. The sales price of the Division was $100,000 in cash, plus payments based
on various percentages of former Crowell agent earnings, listings, and pending
sale contracts transferred from Crowell to Meybohm for one year from the date of
sale. In addition, the sales price included payments not to exceed $60,000 per
year for the right to exclusively market Crowell and related entities'
developments for a period of two years. The net book value of the division was
approximately $21,000 at the time of the sale. This amount is included in the
$59,050 loss from discontinued operations. The $100,000 cash payment was
recognized as gain on the sale of the Division. All other payments received
under the sales agreement are reflected in the loss from discontinued
operations. There was no material relationship between Crowell and Meybohm at
the time of the sale. No income tax was generated from the sale of the Division
because of the operating loss incurred by Crowell for 1995. Total revenue from
the residential brokerage division for the years ended December 31, 1995 and
1994, was $528,473 and $1,760,149, respectively.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Within the two year period ended December 31, 1995, there have been no
changes in independent certified public accountants or disagreements with
accountants on matters of accounting or financial disclosure.
28
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Set forth below is certain information as of February 29, 1995, about each of
the directors and executive officers of Crowell.
<TABLE>
<CAPTION>
Name Age Office
- -------------------- ------- ---------------------------------------------
<S> <C> <C>
Otis L. Crowell 61 Director, President and Chairman
James W. Ivey, Jr. 51 Director and Vice President
Mark L. Gilliam 34 Director, Vice President, Secretary and Chief
Financial Officer
</TABLE>
Mr. Crowell has served as President and as a Director of Crowell or its
predecessor since 1969, and Chairman of the Board of Crowell since March 1988.
Mr. Ivey has served as Vice President and as a Director of Crowell since July
1988. Mr. Ivey has served as President of Ivey Homes since February 1984.
Mr. Gilliam has served as Vice President, Secretary and Chief Financial
Officer of Crowell since October 1992. From December 1987 to October 1992, Mr.
Gilliam practiced public accounting with the firms of Cherry, Bekaert & Holland
and Cleveland, Anderson & Company for three and two years, respectively. Mr.
Gilliam was appointed Director of Crowell on August 9, 1995, to fill a vacancy
on the Board of Directors. Mr. Gilliam has served as Manager of the United Data
Systems division since October, 1994.
The term of each officer and director is for one year and expires on the
third Wednesday in June; however, the term of each officer and director
continues until his successor is elected and qualified. There is no agreement
or understanding between any officer and director and any other person pursuant
to which any officer or director was selected as an officer or director. There
are no family relationships among any of the directors and executive officers.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the SEC thereunder require Crowell's executive officers and
directors and persons who own more than 10% of Crowell's Common Stock, as well
as certain affiliates of such persons, to file initial reports of ownership and
reports of changes in ownership with the SEC. Executive officers, directors
and persons owning more than 10% of Crowell's Common Stock are required by SEC
regulation to furnish Crowell with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it and
written representations that no other reports were required for those persons,
Crowell believes that during the fiscal year ended December 31, 1995, Crowell's
executive officers, directors and owners of more than 10% of its Common Stock
complied with all filing requirements.
29
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table summarizes by category, for the fiscal years ended
December 31, 1995, 1994, and 1993, the total compensation paid to the Chief
Executive Officer of the Company. No other executive officer of the Company
received salary and bonus for the fiscal year ended December 31, 1995, in an
amount in excess of $100,000:
<TABLE>
<CAPTION>
Name and Year Ended
Principal Position December 31, Salary
- -----------------------------------------------------
<S> <C> <C>
Otis L. Crowell 1995 $120,000
President and 1994 120,000
Chief Executive Officer 1993 120,000
</TABLE>
The directors of the Company are not compensated for services rendered
in such capacities.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of February 29, 1996, information
with respect to the beneficial ownership of shares of Common and Preferred Stock
of the Company by each person known to be the beneficial owner of more than 5%
of the outstanding shares of Common and Preferred stock and the holdings of
directors and executive officers individually and as a group. Beneficial
ownership as reported in the table has been determined in accordance with SEC
regulations and includes shares of Common Stock which may be acquired within 60
days upon the exercise of outstanding stock options and the conversion of shares
of Preferred Stock of the Company. The named persons have sole voting and
investment power with regard to the shares shown as owned by such persons.
Pursuant to SEC regulations, all shares not currently outstanding which are
subject to options or conversion privileges exercisable within 60 days are
deemed to be outstanding for the purpose of computing the "Percent of Class"
held by the holder thereof but are not deemed to be outstanding for the purpose
of computing the "Percent of Class" held by any other shareholder of the
Company.
30
<PAGE>
<TABLE>
<CAPTION>
Series A Series B Combined Voting
Common Stock Preferred Stock Preferred Stock Power (Common
Beneficially Beneficially Beneficially and Preferred
Name and Owned (Percent Owned (Percent Owned (Percent Considered as a
Address of Class)/(1)/ of Class)/(2)/ of Class)/(3)/ Single Class)/(4)/
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florice Clark/(5)/ 121,725 - 486,899 4.4%
3554 Old Ferry Road (4.6%) (100%)
Martinez, GA 30907
Otis L. Crowell*/(5)/ 1,876,622 87,500 - 67.7%
3750 Evans to Locks Road (73.8%) (16.7%)
Augusta, GA 30907
Mark L. Gilliam/*/ 1250 - - /+/
3696 El Cordero Road /+/
Martinez, GA 30907
Robert M. Hunter/(5)/ 70,000 280,000 - 2.5%
3801 High Hampton Drive (2.7%) (53.3%)
Martinez, GA 30907
James W. Ivey, Jr./*(6)/ 32,500 - - 1.2%
733 Summerfield Abbey Court (1.3%)
Martinez, GA 30907
Dennis Stanfield 161,436 - - 5.8%
P.O. Box 4501 (6.0%)
Martinez, GA 30907
Robert M. Hunter, Jr. 13,125 52,500 - /+/
3 Beech Lane /+/ (10.0%)
Morristown, NJ 07960
Beverly H. Taylor 13,125 52,500 - /+/
688 Woodhall Abbey Court /+/ (10.0%)
Martinez, GA 30907
Ben W. Hunter 13,125 52,500 - /+/
3109 West Road /+/ (10.0%)
Martinez, GA 30907
All executive officers 1,910,372 - - 68.7%
and directors as a group (74.7%)
(3 persons)
</TABLE>
- -------------------
/+/ Less than 1.0%/
/*/ Executive officer or director
31
<PAGE>
/(1)/ Based on 2,520,835 shares of Common Stock outstanding on February 29,
1996.
/(2)/ Based on 525,000 shares of Series A Preferred Stock outstanding on
February 29, 1996. Holders of the Series A Preferred Stock vote on the
basis of one vote for each four shares of Series A Preferred Stock held
with holders of Common Stock and holders of Series B Preferred Stock, all
voting as a single class. The Series A Preferred Stock is not registered
under Section 12 of the Securities Exchange Act of 1934, and in providing
ownership information the Company has relied on its stock transfer
records, which may not correspond to beneficial ownership. To the extent
that the Company is aware of beneficial ownership that is different from
ownership as reflected by the stock transfer records, such beneficial
ownership information has been provided.
/(3)/ Based on 486,899 shares of Series B Preferred Stock outstanding on
February 29, 1996. Holders of the Series A Preferred Stock vote on a one
vote for each four shares of Series B Preferred Stock held with holders of
Common Stock and holders of Series A Preferred Stock, all voting as a
single class. The Series B Preferred Stock is not registered under Section
12 of the Securities Exchange Act of 1934, and in providing ownership
information the Company has relied on its stock transfer records, which
may not correspond to beneficial ownership. To the extent that the Company
is aware of beneficial ownership that is different from ownership as
reflected by the stock transfer records, such beneficial ownership
information has been provided.
/(4)/ Based on one vote per share for Common Stock and one vote per four shares
for Series A and B Preferred Stock.
/(5)/ The shares of Common Stock beneficially owned by the indicated persons
include shares which may be acquired upon the conversion of outstanding
shares of Series A or B Preferred Stock, as the case may be, as follows:
Ms. Clark - 121,725 shares; Mr. Crowell - 21,875 shares; and Mr. Robert M.
Hunter - 70,000 shares; Mr. Robert M. Hunter, Jr. - 13,125 shares; Ms.
Beverly H. Taylor - 13,125 shares; and Mr. Ben W. Hunter - 13,125 shares.
/(6)/ The shares of Common Stock beneficially owned by the indicated person
include shares which may be acquired upon the exercise of an outstanding
option as follows: Mr. Ivey - 12,500 shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its office space from Otis L. Crowell, who serves as
the President of Crowell. On June 1, 1989, Crowell entered into three (3)
operating lease agreements each with a term of twenty (20) years. The leases
provide that the Company will pay all property taxes, insurance and maintenance
plus an annual rental fee. The total minimum rental commitment at December 31,
1995, under these leases is $1,959,600, which is due as follows:
1996 $ 122,400
1997 127,200
1998 127,200
1999 130,800
2000 133,200
2001-2009 1,318,800
----------
$1,959,600
==========
32
<PAGE>
The total rental expense for these leases included in the consolidated
statements of income for each year ended December 31, 1995 and 1994, was
$120,000.
Ivey and Keystone purchase developed lots for home construction from
Home Sites, Ltd., a Georgia limited partnership of which Otis L Crowell,
President of Crowell, is the general partner. For the years ended December 31,
1995 and 1994, such purchases amounted to $292,700 and $435,350, respectively.
Crowell also provides management services to Homesites. For the years ended
December 31, 1995 and 1994, management fees earned by the Company amounted to
$35,522 and $33,981, respectively.
The President of Crowell, Otis L. Crowell, received real estate
commissions on Home Sites property sold by Crowell in the amounts of $34,457 and
$12,000 for the years ended December 31, 1995 and 1994, respectively.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed below are filed as part of or incorporated by
reference in this report. Where such filing is made by incorporation by
reference to a previously filed report or registration statement, such report or
registration statement is identified in parenthesis. (See the Index of Exhibits
---------------------
included with the exhibits filed as part of this report.)
3(i) Restated Articles of Incorporation of the Company dated October 7,
1994, (Exhibit 3(i) to the Company's Registration Statement on Form S-4, No. 33-
70282, as declared effective by the SEC on January 14, 1995)
3(ii) Bylaws of the Company, as amended through March 15, 1994 (Exhibit
3.7 to the Company's Annual Report on Form 10-KSB for the year ended December
31, 1992, as amended by Form 8 dated April 14, 1994)
4.1 Specimen form of the Company's Common Stock Certificate (Exhibit 4.1 to the
Company's Registration Statement on Form S-4, No. 33-70282, as declared
effective by the SEC on January 14, 1994)
33
<PAGE>
4.2 Appendix A to the Company's Restated Articles of Incorporation setting
forth the rights, preferences, and limitations of holders of the Company's Class
A Preferred Stock (included in Exhibit 3(i))
4.3 Appendix B to the Company's Restated Articles of Incorporation setting
forth the rights, preferences, and limitations of holders of the Company's Class
B Preferred Stock (included in Exhibit 3(i))
10.1 Management Compensation Agreements
(a) Stock Option Agreement dated February 21, 1989, by and between the
Company (as successor to The Mid-South Corporation) and J. W. Ivey, Jr. (Exhibit
10.2 to the Company's Annual Report on Form 10-KSB for the year ended December
31, 1992, as amended by Form 8 dated April 14, 1994)
10.2 Lease Agreement dated June 1, 1989, by and between Otis L. Crowell and
the Company regarding the premises located at 2848 Washington Road, Augusta,
Georgia (Exhibit 10.13 to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1992, as amended by Form 8 dated April 14, 1994)
10.3 Lease Agreement dated June 1, 1989, by and between Otis L. Crowell and
the Company regarding the premises located at 432 South Belair Road, Martinez,
Georgia (Exhibit 10.4 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1992, as amended by Form 8 dated April 14, 1994)
10.4 Lease Agreement dated June 1, 1989, by and between Otis L. Crowell and
the Company regarding the premises located at 454 West Martintown Road, North
Augusta, South Carolina (Exhibit 10.5 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1992, as amended by Form 8 dated April
14, 1994)
10.5 Agreement for Purchase and Sale of Real Property dated October 21, 1994,
between the Company and Sovran Strategic Investments, L.P. (Exhibit 10.5 to the
Company's Registration Statement on Form S-4, No. 33-70282, as declared
effective by the SEC on January 14, 1994)
10.6 Agreement to purchase business dated May 9, 1995, between the Company
and Meybohm Realty, Inc.
10.7 Post Closing Agreement between the Company and Meybohm Realty, Inc.
10.8 Sub-Lease Agreement dated May 24, 1995, between the Company and Meybohm
Realty, Inc.
10.9 Sub-Lease Agreement dated June 29, 1995, between the Company and
Healthmaster Home Health Care, Inc.
34
<PAGE>
11 Computation of earnings per share
12 Subsidiaries
23.1 Consent of Cherry, Bekaert & Holland, Independent Certified Public
Accountants
27 Financial Data Schedule
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the Quarter ended December
31, 1995.
35
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CROWELL & CO., INC.
DATE March 28, 1996 /s/ Otis L. Crowell
-------------- ------------------------------
Otis L. Crowell,
President
and Chairman of the Board
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
DATE March 28, 1996 /s/ Otis L. Crowell
-------------- -------------------------
Otis L. Crowell, President
and Chairman of the Board
DATE March 28, 1996 /s/ Mark L. Gilliam
-------------- -------------------------
Mark L. Gilliam, Director, Vice
President, Secretary and Chief
Financial Officer
DATE March 28, 1996 /s/ James W. Ivey, Jr.
-------------- -------------------------
James W. Ivey, Jr., Director
36
<PAGE>
INDEX OF EXHIBITS
10.6 Agreement to purchase business dated May 9, 1995, between the Company
and Meybohm Realty, Inc.
10.7 Post Closing Agreement between the Company and Meybohm Realty, Inc.
10.8 Sub-Lease Agreement dated May 24, 1995, between the Company and Meybohm
Realty, Inc.
10.9 Sub-Lease Agreement dated June 29, 1995, between the Company and
Healthmaster Home Health Care, Inc.
11 Computation of earnings per share
12 Subsidiaries
23.1 Consent of Cherry, Bekaert & Holland, Independent Certified Public
Accountants
27 Financial Data Schedule
37
<PAGE>
EXHIBIT 10.6
AGREEMENT TO PURCHASE BUSINESS DATED MAY 9, 1995,
BETWEEN THE COMPANY AND MEYBOHM REALTY, INC.
CROWELL & CO., INC.
AGREEMENT TO PURCHASE BUSINESS
This Agreement made 9th day of May 1995, between Crowell & Co., Inc., a
corporation organized and existing under the laws of the State of Georgia,
hereinafter referred to as "Seller," and Meybohm Realty, Inc., a corporation
organized and existing under the laws of the State of Georgia, hereinafter
referred to as "Buyer."
The parties recite and declare:
WHEREAS, The Seller owns and conducts a Residential Real Estate Brokerage
business under the firm name of Crowell & Co., Inc., in the Central Savannah
River Area, which encompasses Aiken and Edgefield Counties, South Carolina, as
well as Richmond, Columbia, and Burke Counties, Georgia.
WHEREAS, Crowell & Co., Inc., also maintains a commercial real estate
brokerage business and a land development business which is not involved or
contemplated by this agreement.
WHEREAS, That the agreement is specifically limited to the sale of the
Residential Real Estate Brokerage business of Crowell & Co., Inc.
WHEREAS, Seller previously used his Residential Real Estate Brokerage
business to market properties developed by it's land development division; and;
38
<PAGE>
WHEREAS, Seller desires in the future to utilize exclusively the services of
Meybohm Realty to sell and market land developed by Crowell & Co., Inc.;
The following is the agreement of the parties.
SECTION ONE
DEFINITIONS
As used herein the following terms are defined as follows:
Crowell & Co., Inc., Agents: Any and all Residential Real Estate Agents whose
---------------------------
Independent Contract Agreements are assigned to Meybohm Realty, Inc., at the
time of closing.
Net Company Dollar: Money earned by Meybohm Realty, Inc., after deduction of
------------------
either selling or listing agents commission plus applicable bonus, if any and or
any applicable referral fees and any and all monies paid to Crowell & Co., Inc.,
pursuant to Section Four, paragraph b, supra. For clarity purposes examples are
-----
attached hereto and integrated into this agreement.
Gross Company Dollar: Money earned by Meybohm Realty, Inc., from the closing
---------------------
of a real estate transaction, through the direct effort of a Crowell & Co.,
Inc., agent after payment of either a selling and/or listing agents commission,
any applicable bonus and any referral fees. For clarity purposes examples are
attached hereto and integrated into this agreement.
Effective Date of Closing: June 1, 1995.
--------------------------
Listing: Shall include a re-listing agreement of a listing agreement
-------
transferred to Meybohm Realty for which the listing agreement does not expire
for a period of more than thirty [30] days, and the re-listing agreement is with
a Crowell & Co., Inc., agent.
39
<PAGE>
SECTION TWO
SALE OF BUSINESS
That Crowell & Co., Inc., desires to sell and Meybohm Realty desires to buy
the Seller's Residential Real Estate business for the price and on the terms and
conditions hereinafter set forth.
Crowell & Co., Inc., will sell to Buyer free and clear of all liabilities and
encumbrances Seller's Residential Real Estate Brokerage business, and its
Institute of Real Estate, along with all furniture, fixtures, and equipment
(including any software and licenses on the computers and marketed and sold by
Untied Data Systems, Inc.), located in the Seller's offices at 2448 Washington
Road, Augusta, Richmond County, Georgia, and 454 West Martintown Road, North
Augusta, Aiken County, South Carolina. Seller agrees to assign for the benefit
of Meybohm Realty, Inc., any and all contract rights related to its residential
real estate business except for rights to proceeds of residential real estate
sales contracts which are entered into prior to the effective date of the
closing. There shall be no assumption of liabilities by the Buyer.
If any listing agreement, independent contract agreement, or any other
contractual right contemplated by the parties to be assigned by Seller to the
Buyer is not assignable without the specific written consent of the third party,
Seller will use its best efforts to obtain the consent of the other party to
such assignment.
SECTION THREE
EXCLUSIVE MARKETING AGREEMENT FOR RESIDENTIAL DEVELOPMENT
Crowell & Co., Inc., agrees that Meybohm Realty, Inc., will be its exclusive
marketing agent for any residential developments which it may undertake. The
exclusive marketing agreement may be re-evaluated by either party after July 1,
1997.
40
<PAGE>
SECTION FOUR
CONSIDERATION
In consideration for the transfer of the above residential real estate
brokerage business and the Exclusive Marketing agreement Meybohm Realty agrees
to pay Crowell & Co., as follows:
a) The sum of One Hundred Thousand Dollars [$100,000.00] on or before June
1, 1995.
B) Thirteen and thirty-three hundredths [13.33%] percent of Crowell & Co.,
agents earnings for contracts entered into within twelve [12] months from the
effective date of closing and closed.
C) i) Twenty percent [20%] of Net Company Dollar earned by Meybohm
Realty, Inc., on all listings transferred from Crowell & Co., to Meybohm Realty
on the effective date of closing for which contracts are entered into within
twelve [12] months from the effective date of closing, and Meybohm Realty
pursuant to Section Four, paragraph b) supra pays a fee to Crowell & Co., Inc.,
-----
on both the listing and sales side of a transaction; or
ii) Twenty percent [20%] of the Gross Company Dollar earned by Meybohm
Realty, Inc., on all listings transferred from Crowell & Co. to Meybohm Realty,
Inc., on all listings transferred from Crowell & Co. to Meybohm Realty on the
effective date of closing for which contracts are entered into within twelve
[12] months from the effective date of closing, and Meybohm Realty pursuant to
Section Four, paragraph b) supra pays a fee to Crowell & Co., Inc. on only the
-----
listing side of a transaction.
41
<PAGE>
Payments due to seller from production by Crowell & Co., Inc., agents and
closing of listings will be payable on the tenth [10th] day of each month
following the month for which said earnings are earned.
E) Meybohm Realty on July 1, 1996, will pay Seller the total sum of Sixty
Thousand Dollars [$60,000.00] as long as Crowell and Co., Inc., and its related
entities have sold and closed, with Meybohm Realty as its agent, at least
seventy five [75] lots in the preceding thirteen [13] months. Meybohm Realty on
July 1, 1997 will pay Seller the total sum of Sixty Thousand Dollars
[$60,000.00] as long as Crowell & Co., Inc., and its related entities have sold
and closed, with Meybohm Realty as its agent, at least seventy five [75] lots in
the preceding twelve [12] months. Should Crowell & Co., Inc., or any related
entity fail to close at least seventy five [75] lots in any of the preceding
twelve [12] or thirteen [13] month periods as outlined above, a pro-rata penalty
of $800.00 per lot shall be assessed from the $60,000.00 payment. There will be
no increase in the $60,000.00 payment if more than 75 lots are sold. [Example:
If seventy [70] lots are sold and closed from June 1, 1995 to May 31, 1996, a
payment of $56,000.00 is due; comparatively, if eighty lots are sold and closed
during the same period of time, a payment of $60,000.00 is due].
SECTION FIVE
ALLOCATION OF PURCHASE PRICE
The purchase price as stated in the above Section Four will be allocated to
the various assets of the business at closing.
42
<PAGE>
SECTION SIX
CLOSING
This agreement will close on or before May 31, 1995, at the office of Scott
J. Klosinski, P.C., drafter of the documents, at 3525-B Walton Way Extension,
Augusta, Georgia. At such time the Seller will deliver to the Buyer a Bill of
Sale and all other instruments as is required for the proper consummation of
this transaction. On such closing date, adjustments will be made for premiums
on insurance, taxes and any other items which require adjustment. The date of
closing shall not effect the effective date of the closing.
SECTION SEVEN
COVENANT NOT TO COMPETE
Seller and its President, Otis L. Crowell, agree to execute a Covenant Not to
Compete, in form and substance satisfactory to the Buyer, at closing, which will
prohibit both the Seller and Otis L. Crowell from participating in any way
directly or indirectly in any Residential Real Estate Brokerage business within
Aiken and Edgefield Counties of South Carolina, and Richmond, Columbia, and
Burke Counties of the State of Georgia for a term of three [3] years from the
date of closing. This agreement shall not affect either present and or future
commercial agents of Crowell & Co., Inc.
SECTION EIGHT
RENTAL OF BUILDING
The building located at the Washington Road address and owned by Otis L.
Crowell will be sublet by Crowell & Co., Inc., to Meybohm Realty for a three [3]
year period beginning June 1, 1995. The sublease agreement will be a
Net/Net/Net lease
43
<PAGE>
with annual rent as more specifically stated in that certain
June 1, 1989, lease agreement between Otis L. Crowell and Crowell & Co., Inc.
Attached hereto is the lease agreement. Meybohm Realty agrees to abide by the
terms of said Lease. Meybohm Realty, Inc., shall have the right to terminate
said sublease agreement by giving written notice to Crowell & Co., Inc., but
said notice must be given prior to March 1 of the year Meybohm Realty seeks to
cancel the Sublease Agreement.
SECTION NINE
RECORDS AND THE LIKE
All records, customers' lists, correspondence, all files and advertising
materials, and data relating to the residential real estate brokerage business
are included in the sale. Crowell & Co., Inc., shall retain its escrow account.
SECTION TEN
CONTINUATION OF BUSINESS RELATIONSHIP BEYOND AGREEMENTS
The parties recognize that in making this agreement the compatibility of the
organizations. It is the intent of both organizations that the business
relationship as formally outlined in the above agreement will continue beyond
the expiration of any agreements.
SECTION ELEVEN
BINDING EFFECT
This agreement is the result of negotiations between the two parties and
construction of the agreement be in accordance with Georgia law.
Crowell & Co., Inc., shall have the right upon reasonable notification, to
review records material to performance under this agreement.
44
<PAGE>
E. G. Meybohm, President of Meybohm Realty, Inc., shall execute at closing a
personal guaranty of the yearly sixty thousand dollar [$60,000.00] payments to
Crowell & Co., Inc.
In witness whereof, the parties have executed this agreement on the 9th day
of May, 1995.
Buyer: Seller:
MEYBOHM REALTY, INC. CROWELL & CO., INC.
E.G. Meybohm Otis L. Crowell
By It's: President By It's: President
I consent to the terms of this agreement as they concern me as landlord and as
subject to the covenant not to compete.
Otis L. Crowell, Individually
45
<PAGE>
EXAMPLE
ASSUMPTIONS:
A 50/50 split by the sale and listing agents.
A 50/50 split between the agent and Meybohm Realty.
1. A contract is entered into and a closing takes
place which generates a total commission of $7,000.00. The listing agreement
was transferred to Meybohm Realty by Crowell & Co., Inc., and the property was
sold by a Meybohm Realty Agent.
$7,000 paid to Meybohm Realty, Inc.
$3,500 allocated to sales. $3,500 allocated to listing.
$1,750 paid to sales agent $1,750 paid to listing agent.
------ ------
$1,750 Company Dollar $1,750 Gross Company Dollar
13.333% of $1,750 or $233.33 is payable to Crowell & Co., Inc., for
efforts of the Crowell Agent who listed the property. An additional 20% or
$350.00 is paid to Crowell & Co. for the listing. No money is payable on the
sales side since this was Company Dollar generated exclusively by Meybohm
Realty. Total payable $588.33.Here Mark thinks that the Company dollar for
which a commission is paid is $3,500.
2. A contract is entered into and a closing takes place which generates a total
commission of $7,000.00. The listing agreement was transferred to Meybohm Realty
by Crowell & Co., Inc., and the property was sold by a Crowell & Co. agent.
$7,000 paid to Meybohm Realty, Inc.
$3,500 allocated to sales. $3,500 allocated to listing.
$1,750 paid to sales agent $1,750 paid to listing agent.
------ ------
$1,750 Gross Company Dollar $1,750 Gross Company Dollar
13.33% of $1,750 or $233.33 is payable to Crowell & Co.,
Inc., for efforts of the Crowell Agent who listed the property, and an
additional 13.33% of $1,750 or $233.33 is payable to Crowell & Co. for efforts
of the Crowell & Co. agent who sold the property. The Gross Company Dollar is
$3500.00 and a deduction of $466.66 [the summation of the monies paid to Crowell
& Co., Inc., based on Agents earnings] leaves a Net Company dollar of $3033.34.
On the Net Company Dollar 20% or $606.67 is paid to Crowell & Co. for the
listing. Total payable $1073.33.
3. A contract is entered into and a closing takes place which generates a total
commission of $7,000.00. The listing agreement was Meybohm Realty listing, and
the property was sold by a Crowell & Co. agent.
$7,000 paid to Meybohm Realty, Inc.
$3,500 allocated to sales. $3,500 allocated to listing.
$1,750 paid to sales agent $1,750 paid to listing agent.
------ ------
$1,750 Company Dollar $1,750 Company Dollar
13.33% of $1,750 or 233.33 is payable to Crowell & Co. for efforts of the
Crowell & Co. agent who sold the property. No money is payable on the listing
side. Total payable to Crowell & Co. is $233.33.
46
<PAGE>
EXHIBIT 10.7
POST CLOSING AGREEMENT BETWEEN
THE COMPANY AND MEYBOHM REALTY, INC.
CROWELL & CO., INC.
POST-CLOSING AGREEMENT
This Agreement made 24th day of May 1995, between Crowell & Co., Inc., a
corporation organized and existing under the laws of the State of Georgia,
hereinafter referred to as "Seller," and Meybohm Realty, Inc., a corporation
organized and existing under the laws of the State of Georgia, hereinafter
referred to as "Buyer or Meybohm Realty" and Otis L. Crowell, an individual
hereinafter referred to as "Broker".
The parties recite and declare:
WHEREAS, The Seller owns and conducts a Residential Real Estate Brokerage
business under the firm name of Crowell & Co., Inc., in the Central Savannah
River Area, which encompasses Aiken and Edgefield Counties, South Carolina as
well as Richmond, Columbia, and Burke Counties, Georgia; and
WHEREAS, Crowell & Co., Inc., among other business units, also maintains a
commercial real estate brokerage business and a land development business which
is not involved or contemplated to be transferred by this agreement; and
WHEREAS, That the agreement for sale of a business between the parties is
specifically limited to the sale of the Residential Real Estate Brokerage
business of Crowell & Co., Inc.; and
WHEREAS, Seller previously used its Residential Real Estate Brokerage
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business to market properties developed by it's land development division; and
WHEREAS, Seller desires in the future to utilize exclusively the services of
Meybohm Realty to sell and market land developed by the Crowell & Co., Inc.;
The following is the post-closing agreement of the parties.
SECTION ONE
DEFINITIONS
As used hereunder the terms are defined as follows:
1. Crowell & Co., Inc., Agents: Any and all Residential Real Estate Agents
---------------------------
who are presently with Crowell & Co., Inc., and join Meybohm Realty, Inc., as of
the effective date of closing.
2. Net Company Dollar: Money earned by Meybohm Realty, Inc., from
------------------
the closing of a real estate transaction through the direct effort of a Crowell
& Co., Inc., agent, after payment of both the listing and selling agents
commission, any applicable bonus, any referral fees and any and all monies paid
to Crowell & Co., Inc., pursuant to Section Five, paragraph a, infra. For
------
clarity purposes examples are attached hereto and integrated into this
agreement.
3. Gross Company Dollar: Money earned by Meybohm Realty, Inc.,
--------------------
from the closing of a real estate transaction, through the direct effort of a
Crowell & Co., Inc., agent after payment of either a selling and/or listing
agents commission, any applicable bonus and any referral fees. For clarity
purposes examples are attached hereto and integrated into this agreement.
4. Effective Date of Closing: June 1, 1995.
--------------------------
48
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5. Listing: Shall include not only listings transferred to Meybohm
--------
Realty, Inc., on the effective date of the agreement, but also any re-listing
agreement of a listing agreement transferred to Meybohm Realty for which the
listing agreement does not expire for a period of more than thirty [30] days,
and the re-listing agreement is with a Crowell & Co., Inc., agent.
SECTION TWO
NO ASSUMPTION OF LIABILITIES AND INDEMNITY
1. The Buyer assumes no responsibility for any other debts or liabilities
of Seller or of the Business.
2. Meybohm Realty, Inc., promises and agrees, that in consideration of the
mutual covenants, representations and warranties contained herein and in further
consideration of the receipt of assets and contractual rights from the seller
will indemnify, hold harmless and repay Crowell & Co., Inc., its officers and/or
directors, including but specifically not limited to Otis L. Crowell both in his
representative and individual capacity and/or his executors, administrators,
successors and assigns, for all claims, damages, costs and expenses that such
they may hereafter be required by law to pay because of any and all injury,
loss, damage or expense sustained by the them, arising out of this sale and
which arise from this post-closing agreement.
3. Crowell & Co., Inc., promises and agrees that, in consideration
of the mutual covenants, representations and warranties contained herein and in
further consideration of the receipt of the payments made and to be made as
outlined herein and in the bill of sale will indemnify, hold harmless and repay
Meybohm Realty, Inc., its officers, directors, agents, or
otherwise, employees, directors, and shareholders,
49
<PAGE>
including but specifically
not limited to E. G. Meybohm both in his representative and individual capacity
and/or his executors, administrators, successors and assigns, for all claims,
damages, costs and expenses that such they may hereafter be required by law to
pay because of any and all injury, loss, damage or expense sustained by the
them, arising out of this sale and which arise from this post-closing agreement.
SECTION THREE
COVENANT NOT TO COMPETE
1. [a] Seller and Broker each agree that they will not, directly or
indirectly as corporation, individual, partner, shareholder, director, officer,
executor, administrator, trustee, or employee, participate in the residential
real estate brokerage business in Aiken and Edgefield Counties of the State of
South Carolina, and Richmond, Columbia, and Burke Counties of the State of
Georgia for a period of three [3] years from the date of this Agreement.
[b] Seller and Broker each further agree, recognize and acknowledge that the
Buyer's business is a specialized business, requiring special skill and training
and such knowledge is a very valuable part of such Buyer's business whether such
knowledge is held by the Seller and Broker, its business and in the event of a
breach of any part of this Agreement by the Seller or Buyer and each
acknowledge that the remedy at law for any violation or threatened violation of
this Agreement would be inadequate and the Corporation shall be entitled to
injunctive or other equitable relief without the necessity of proving actual
damages should the Seller or Buyer breach or threaten breach of this Agreement.
Nothing herein shall be construed as prohibiting the Corporation from pursuing
any other remedies available to the Corporation for such breach or threatened
breach, including recovery of damages from the Seller or Buyer, jointly and
severally.
50
<PAGE>
2. If any portion of this section is held to be unreasonable, arbitrary, or
against public policy, this paragraph shall be considered divisible as to time,
geographic area, or prohibited activities, and it is furthered agreed that at
such time period, geographic area or activities which are determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
Seller and Broker.
SECTION FOUR
EXCLUSIVE MARKETING AGREEMENT FOR RESIDENTIAL DEVELOPMENT
Crowell & Co., Inc., agrees that Meybohm Realty, Inc., will be its exclusive
marketing agent for any Residential developments which it may undertake. The
exclusive marketing agreement may be re-evaluated by either party after July 1,
1997.
SECTION FIVE
CONSIDERATION
In consideration for the transfer of the above residential real estate
brokerage business and the Exclusive Marketing agreement Meybohm Realty agrees
to pay Crowell & Co. as follows:
a) Thirteen and thirty-three hundredths [13.33%] percent of Crowell & Co.
agents earnings for contracts entered into within twelve [12] months from the
effective date of closing and closed.
b) i) Twenty percent [20%] of Net Company Dollar earned by Meybohm
51
<PAGE>
Realty, Inc. on all listings transferred from Crowell & Co. to Meybohm Realty on
the effective date of closing for which contracts are entered into within twelve
[12] months from the effective date of closing, and Meybohm Realty pursuant to
Section Five, paragraph a), supra, pays a fee to Crowell & Co., Inc., on both
-----
the listing and sales side of a transaction; or
ii) Twenty percent [20%] of the Gross Company Dollar earned by Meybohm
Realty, Inc. on all listings transferred from Crowell & Co. to Meybohm Realty on
the effective date of closing for which contracts are entered into within twelve
[12] months from the effective date of closing, and Meybohm Realty pursuant to
Section Five, paragraph a), supra, pays a fee to Crowell & Co., Inc., on only
-----
the listing side of a transaction.
Payments due to seller from production by Crowell & Co., Inc., agents and
closing of listings will be payable on the tenth day of each month following the
month for which said earnings are earned.
e) Meybohm Realty as the exclusive marketing agent for residential development
of the Seller will pay, on July 1, 1996, to Crowell & Co., Inc., eight hundred
dollars ($800.00) per lot sold and closed from June 1, 1995, to June 31, 1996,
by or on behalf of Crowell & Co., Inc., or its related entities, up to the total
sum of Sixty Thousand Dollars [$60,000.00]. Also, Meybohm Realty as the
exclusive marketing agent for residential development of the Seller will pay on
July 1, 1997, to Crowell & Co., Inc., eight hundred dollars ($800.00) per lot
sold and closed from July 1, 1996, to June 31, 1997, by or on behalf of Crowell
& Co., Inc., or its related entities, up to the total sum of Sixty Thousand
Dollars [$60,000.00]. Meybohm Realty, Inc.'s, liability shall not exceed sixty
thousand dollars ($60,000) per year.
SECTION SIX
SURVIVAL OF THIS AGREEMENT
All representations, warranties and agreements contained in this Agreement
or in any certificate delivered pursuant to this Agreement shall survive the
Closing.
SECTION SEVEN
ARBITRATION
All disputes arising under this Agreement or related to this sale [other
than claims in equity] shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by the Indemnitor Representative and Purchaser in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in such place in Augusta, Georgia, as may be specified
by the arbitrator [or any place agreed to by the Indemnitor Representative, the
Purchaser and the arbitrator]. The decision of the
arbitrator shall be final and binding as to any matters submitted under this
Agreement; provided, however, if necessary, such decision and satisfaction
procedure may be enforced by either the Indemnitor Representative or the
Purchaser in any court of record having jurisdiction over the subject matter or
over any of the parties to this Agreement. All costs and expenses incurred in
connection with any such arbitration proceeding [including reasonable attorneys
fees] shall be borne by the party against
52
<PAGE>
which the decision is rendered, or, if no decision is rendered, such costs and
expenses shall be borne equally by the Indemnitor as one party and the
Indemnitee as the other party. If the arbitrator's decision is a compromise, the
determination of which party or parties bears the costs and expenses incurred in
connection with any such arbitration proceeding shall be made by the arbitrator
on the basis of the arbitrator's assessment of the relative merits of the
parties' positions.
SECTION EIGHT
RECORDS AND THE LIKE
All records, customer' lists, correspondence, all files and advertising
materials, and data relating to the residential real estate brokerage business
are included in the sale.
SECTION NINE
CONTINUATION OF BUSINESS RELATIONSHIP BEYOND AGREEMENTS
The parties recognize that in making this agreement the compatibility of the
organizations. It is the intent of both organizations that the business
relationship as formally outlined in the above agreement will continue beyond
the expiration of any written agreements.
SECTION TEN
MISCELLANEOUS
1. This agreement is the result of negotiations between the two parties and
interpretation, construction, and enforcement of this Agreement shall be
governed by the laws of the State of Georgia.
53
<PAGE>
2. Crowell & Co., Inc., shall have the right upon reasonable notification, to
review records material to performance under this agreement.
3. This Post-Closing Agreement, the bill of sale, the sub-lease agreement,
the settlement statement shall constitute the sole, entire agreement between the
parties, and no modification of the documents shall be binding unless signed by
all effected parties.
4. The parties to this agreement hereby further represent, covenant and
warrant that the signatures hereinafter appearing is that of someone authorized
to execute this Agreement and is genuine.
In witness whereof, the parties have executed this agreement on the 24th day
of May, 1995.
Buyer: Seller:
MEYBOHM REALTY, INC. CROWELL & CO., INC.
By: E.G. Meybohm By: Otis L. Crowell
AS: President AS: President
Otis L. Crowell, Individually
54
<PAGE>
EXHIBIT 10.8
SUB-LEASE AGREEMENT DATED MAY 24, 1995, BETWEEN
THE COMPANY AND MEYBOHM REALTY, INC.
CROWELL & CO., INC.
STATE OF GEORGIA )
) SUB-LEASE AGREEMENT
COUNTY OF RICHMOND )
This Sub-Lease Agreement, made and entered into this 24th day of May 1995,
between Crowell & Co., Inc., a Georgia Corporation, hereinafter referred to as
Sub-Lessor, under a lease [the Primary Lease], entered into by and between Otis
L. Crowell and Crowell & Co., Inc., on June 1, 1989, (attached hereto and by
reference incorporated herein as Exhibit "A"), and Meybohm Realty, Inc., a
Georgia Corporation, hereinafter referred to as Sub-Lessee.
W I T N E S S E T H:
That, in consideration of the mutual promises and obligations herein
contained, and contained in a Post-Closing Agreement the parties hereby agree as
follows:
1. DEMISE, DESCRIPTION AND USE OF PREMISES.
1.1 In consideration of the rents and conditions herein stipulated to
be paid and performed, Lessor hereby rents and leases to Lessee for the purpose
of conducting thereon a residential real estate business that certain parcel of
land,
55
<PAGE>
together with all improvements thereon, situate in Richmond County,
Georgia, and more particularly known as 2848 Washington Road, Augusta, Georgia.
2. TERM.
2.1 The Term of this Lease shall commence on the 1st day of June 1995
at 12:01 A.M. and shall continue until Twelve (12:00) o'clock midnight on the
31st of May 1998. Sub-Lessee will take possession June 1, 1995.
2.2 Sub-lessee shall have the right to cancel or terminate the
remaining term of the sub-lease agreement on each annual anniversary (June 1) of
the agreement, without penalty, by giving written notice to Sub-lessor prior to
March 1, of the year sub-Lessee seeks to cancel the agreement.
3. RENT.
3.1 Sub-Lessee agrees to pay to Sub-Lessor a monthly rental as more
particularly stated in the Exhibit A attached to the Lease. That is $3,900 for
the remainder or 1995, $4,100 for 1996, $4,100 for the 1997, and $4,100 for the
remainder of 1998.
4. ASSIGNMENT BY LESSEE.
4.1 Sub-Lessee agrees to use the leased premises herein described for
the purpose hereinafter stated, and for no other; and there shall be no
subletting of the whole or any part thereof, except by the written consent of
the Sub-Lessor. Should any part or all of said leased premises by sublet, the
acceptance of any rent or any part thereof by Sub-Lessor from any sub-tenant
shall not be construed as a waiver by the Sub-Lessor of any of the Sub-Lessor's
rights or remedies hereunder against the Sub-Lessee.
56
<PAGE>
5. TAXES.
5.1 Sub-Lessee agrees to pay its pro-rata share of all City, State, and
County school taxes assessed against said leased property, including all
improvements and equipment located thereon, as and when the same shall fall due.
5.2 Sub-Lessee agrees to pay its pro-rata share of such other taxes,
fees for licenses and permits as may be required of it during the term.
6. INDEMNIFICATION AND INSURANCE.
6.1 Sub-Lessor and Otis L. Crowell shall in no way be liable to any
person, firm or corporation for any damages arising out of Sub-Lessee's use of
the leased premises. Sub-Lessee shall indemnify and hold harmless Sub-Lessor,
Otis L. Crowell against any liability or loss arising out of any injury to
(including death of) and person or damage to any property belonging to Sub-
Lessee or to any other person occurring in or about the leased premises, or
occurring as a result, directly or indirectly, of any use of this lease, and any
renewal thereof. Sub-Lessee shall provide property, casualty and liability
insurance to protect both itself, Sub-Lessor, and Otis L. Crowell.
57
<PAGE>
7. UTILITIES.
7.1 Sub-Lessee agrees to pay promptly when due all charges for
electricity, gas, water, telephone service and any other utilities furnished to
the leased premises and prior to vacating said premises will furnish to Sub-
Lessor evidence that it is not in arrears in the payments of such charges.
8. MAINTENANCE AND REPAIRS.
8.1 All repairs, maintenance and replacement of any equipment during
the term of this Lease or any extension hereof shall be the sole expense and
responsibility of Sub-Lessee at no cost to Sub-Lessor.
9. CASUALTY.
9.1 If all or substantially all of leased premises, including
improvements thereon is damaged or destroyed by any casualty, Sub-Lessee shall
have the option to rescind, cancel, terminate and void the lease upon delivery
to Sub-Lessor and/or Otis L. Crowell, the insurance proceeds for such damage.
10. DEFAULT BY SUB-LESSEE'S AND SUB-LESSOR'S REMEDIES.
10.1 In the event that:
(a) Sub-Lessee shall default in the payment promptly when due of any
rental, and such rental payment shall remain unpaid for ten (10) days after it
shall become due;
58
<PAGE>
(b) Sub-Lessee shall default in the performance of any one or more of
the obligations of Lessee under the Lease, and if such default is not cured
within the fifteen (15) days from the date written notice of such default is
deposited in the United States Mail, registered or certified, properly addressed
to Lessee; or
(c) Sub-Lessee shall make any general assignment for the benefit of
creditors or Sub-Lessee shall file any debt or relief proceedings in any Court,
whether State or Federal, or Sub-Lessee shall be adjudicated bankrupt or
insolvent, whether such adjudication be
voluntary or involuntary; then in any one or more of the foregoing events, Sub-
Lessor may, in addition to and not in limitation of such other remedies as are
now or may hereafter be provided by law, pursue either of the following courses
of actions at the option of the Sub-Lessor.
Sub-Lessor shall:
(d) Should Sub-Lessee be in default and fail to cure as provided in
paragraph 11.1(b), Sub-Lessor has the option to declare the entire balance of
the cancelable lease term due and payable, without further notice to the Sub-
Lessee.
In either event, Sub-Lessor shall also recover all expenses reasonably
incurred by reason of the breach, including reasonable attorney fees.
Upon the occurrence of any one or more of the events specified in sub-
paragraphs (a) or (c) above, Sub-Lessor may, after ten (10) days written notice
to Sub-Lessee, unless otherwise provided, resume possession of the leased
premises and remove all persons thereupon, without being liable to indictment,
prosecution or damages. Sub-Lessor shall have a reasonable time after resuming
possession of the leased premises to elect whether such possession be deemed for
Sub-Lessor's own account, or for the account of Sub-Lessee.
59
<PAGE>
11. NOTICES.
11.1 It is agreed that whenever notice is required to be given hereunder
that written notice be mailed or delivered to Sub-Lessor at 432 S. Belair Road,
Martinez, Georgia, 30907, or such other address as Sub-Lessor shall furnish in
writing, shall constitute sufficient notice to the Sub-Lessor. Written notice
mailed or delivered to the Sub-Lessee at 3525 Walton Way, Suite B, Augusta,
Georgia, 30909, or such other place as may be designated by the Sub-Lessee in
writing, shall constitute notice to the Sub-Lessee.
12. BINDING EFFECT.
12.1 All of the covenants, conditions and obligations contained in this
Lease shall be binding upon and inure to the benefit of the respective heirs,
administrators, executors, successors and assigns, of Sub-Lessor and Sub-Lessee
to the same extent as if such heirs, administrators, executors, successors and
assigns were in each case named a party of this Lease. This Lease may not be
modified, changed or discharged except by a writing signed by Lessor and Lessee
or their assigns.
60
<PAGE>
13. GOVERNING LAW.
13.1 This Lease shall be governed by and interpreted under the laws of
the State of Georgia.
SIGNATURE PAGE ATTACHED
61
<PAGE>
IN WITNESS WHEREOF, the Sub-Lessor has caused these presents to be
executed by its proper officers and affixed its corporate seal and the Sub-
Lessee has caused these presents to be executed by its proper officers and
affixed its corporate seal as of the day and year first above written.
MEYBOHM REALTY, INC. CROWELL & CO., INC.
BY: E. G. Meybohm BY: Otis L. Crowell
------------- ---------------
AS: PRESIDENT AS: PRESIDENT
BY: Laura Bompart Sprowls
---------------------
AS: ASSISTANT SECRETARY
[SEAL] [SEAL]
WRITTEN CONSENT OF OTIS L. CROWELL IS ATTACHED.
62
<PAGE>
FOR AND IN CONSIDERATION OF the payment of one ($1.00) dollar and other good
and valuable consideration, hereby acknowledged by Otis L. Crowell, does hereby
consent to the sub-lease of the within described premises by Crowell & Co.,
Inc., to Meybohm Realty, Inc., as herein-above provided. This sub-lease is
subject to the primary lease which shall remain in full force and effect until
its termination as provided for in the primary lease.
This 24th day of May 1995.
/s/ Otis L. Crowell
------------------------------
Otis L. Crowell
63
<PAGE>
EXHIBIT 10.9
SUB-LEASE AGREEMENT DATED JUNE 29, 1995, BETWEEN
THE COMPANY AND HEALTHMASTER HOME HEALTH CARE, INC.
CROWELL & CO., INC.
STATE OF GEORGIA )
) R E N T L E A S E
COUNTY OF RICHMOND )
This agreement, made this 29th day of June, 1995, between Crowell & Co.,
Inc., hereinafter called the Lessor and Healthmaster Home Health Care, Inc.,
(Washington Division) hereinafter called the Lessee.
WITNESSETH:
The Lessor has this day rented and leased to the Lessee, and the Lessee has
rented and leased from the Lessor the following described premises:
Approximately 3300 square feet of office space located at:
454 West Martintown Road
North Augusta, SC 29841
to be occupied only as a home health care agency.
The term of this lease begins on the 1st day of August, 1995, at 12:01 A.M.,
and ends on the 31st day of July, 1996, at 12:00 P.M. midnight.
1. TERMS: The Lessee agrees to pay the Lessor a monthly rental of Two
Thousand, Three Hundred and 00/100 ($2,300.00) Dollars, payable in advance, on
the first day of each month, beginning on the first day of the term of this
Lease. Rent for any portion of a month shall be pro-rated. Lessee shall pay to
Lessor a late charge equal to five percent (5%) of any monthly installment of
rent sent by Lessee after the 10th day of each month during the term.
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<PAGE>
2. PAYMENT OF RENT: Lessee covenants to pay said rent to
Lessor at 432 S. Belair Road, Martinez, GA 30907, or at such other place as
Lessor may from time to time designate in writing.
3. UTILITIES: Lessee shall be responsible for the payment of
all utilities. Lessor shall be responsible for insuring that all utilities used
by Lessee are separately metered. There will be no pro-ration of utility charges
based upon square footage, number of tenants, etc.
4. LAWN CARE: Lessee shall be responsible for upkeep and maintenance of the
lawn.
5. USE: The Lessee agrees to use the premises herein for the purpose herein
stated, and for no other.
6. REPAIRS: The Lessor agrees to keep in good repair the roof, the exterior
walls, and any party walls of the building on the premises, the underground
utility and sewer pipes outside of the exterior walls of the said premises, the
heating and air conditioning units, and the electrical systems; provided,
however, that Lessor shall not be responsible for any all repairs rendered
necessary by the negligence of Lessee, its agents, employees, or invitees.
Lessee shall be responsible for all minor repairs due to Lessee's use and
occupancy of the premises, not to exceed $250.00 per lease year. Overages shall
be the responsibility of the Lessor.
7. CONDITION OF THE PREMISES: The Lessee agrees that the leased premises are
in a condition satisfactory for the purpose herein contemplated, and that the
same are accepted without warranty or representation as to condition on the part
of the Lessor.
8. QUIET ENJOYMENT: Subject to the other terms and provisions of this
Agreement, Lessee shall be entitled to quiet and peaceable possession of the
premises during the term without warranty or representation as to condition on
the part of the Lessor.
9. DAMAGES: Lessee agrees to surrender said premises at the expiration of
this Lease in as good order and repair as the same are on the first day of the
term of said lease, natural wear and tear excepted.
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10. DEFAULT: The Lessee hereby waives and renounces for itself any and all
homestead and exemption rights which it may have under the laws of this or any
other state as against any liability that may accrue under this contract. If
any legal action is brought by either party to enforce the terms hereof, the
prevailing party shall be entitled to all costs incurred in connection with such
action, including fifteen percent attorney's fees.
Upon proven breach of this contract by Lessee, the Lessor, or his Agent, may
card for rent and sublet the premises at the best price obtainable by reasonable
effort, under private negotiations, and charge the balance, if any, between said
price of subletting and the contract price to Lessee and hold it therefor. Such
subletting on the part of the Lessor will not in any sense by a breach of the
contract on the part of the Lessor, but Lessor will be acting merely as an agent
for the Lessee to minimize the damage. These rights of the lessor are
cumulative and are not restrictive of any other rights under the laws, and the
failure on the part of Lessor to avail himself of these privileges at any
particular time shall not constitute a waiver of these rights.
11. SALE OF PREMISES: The Lessor shall be privileged during the last
thirty (30) days of this contract to post said premises for rent or sale and to
attach sign or signs for that purpose upon any portion of the building. The
Lessee also agrees to exhibit said premises at any time during there term of
this lease on week days and during reasonable hours to prospective purchasers
when requested to do so, by being at least twenty-four (24) hours notice in
advance of that time that is desired to show said premises.
12. FIRE CLAUSE: Should the premises leased be partially damaged by fire
or by reason thereof, at any time during the term hereof, the Lessee shall give
immediate notice thereof to the Lessor, who shall thereupon cause the same to
by promptly repaired. A reduction of rent, proportionate to interface to
occupancy shall be allowed the Lessee during the time necessary to restore said
premises or make the necessary repairs, as the case may be.
In case the premises hereby demised or the building in which the same are
located, or in case any one or more or all of the stores, offices, buildings or
premises constituting the entire improvements shall be so damaged by fire or
otherwise that the Lessor shall decide not to restore the same as at the time of
the beginning of this Lease, then, and in any such event, the term of this Lease
shall cease and rent shall be paid up to the time of such damage or of such
termination and no longer.
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13. INDEMNITY: The Lessee agrees to indemnify and save harmless the
Lessor against all claims for damages to persons or property by reason of the
Lessee's use or occupancy of the leased premises and due to any action or
inaction of the Lessee which is a causal factor of such damage to persons or
property.
14. NOTICES: Any notices contemplated by this lease shall be deemed
effectively given when mailed by U.S. registered or certified mail with the
required postage pre-paid, addressed as follows:
If to the Lessor:
CROWELL & CO., INC.
432 S. BELAIR ROAD
MARTINEZ, GA 30907
If to the Lessee:
HEALTHMASTER HOME HEALTH CARE, INC.
P.O. BOX 60038
AUGUSTA, GA 30909-2136
ATTN: NOEL O. INGRAM, ESQ.
Or to such other address or addresses as the parties hereto may hereafter
specify by written notice to the other party.
15. TAXES: Lessor shall pay, bear and discharge all city, state, and
county ad valorem taxes upon personal property owned by Lessee situate in, upon
or attached to the premises. Lessor agrees to furnish Lessee, upon execution of
this agreement, a Tax Identification Number so that rent remitted by Lessee may
properly by reported pursuant to Federal Law.
16. SUBLEASE: Lessee may sublease portions of the leased premises to others
provided such sublessee's operation is a part of the general operation of Lessee
and under the supervision and control of Lessee, and provided such operation is
within the purposes for which said premises shall be use. Except as provided in
the preceding sentence, Lessee shall not, without the prior written consent of
the Lessor endorsed hereon, which shall not be unreasonably withheld, transfer
or assign this lease or any interest hereunder, or sublet premises or any part
thereof or permit the use of premises by any party other than Lessee. Consent
to any assignment or sublease shall not destroy this provision, and all later
assignments or subleases shall be made likewise only on the prior consent of the
Lessor. Assignee of Lessee, at option of Lessor, shall not relieve Lessee of
any liability hereunder.
17. SIGNS: Lessor hereby gives Lessee permission to display an exterior
sign similar in appearance to signs already displayed by other tenants of the
building, if applicable, or any sign which is well maintained and reasonably
aesthetically pleasing.
18. GOVERNING LAW: This agreement shall be construed in accordance with
and governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the said Lessor and Lessee have hereunto set their hands
and seals the day and year first above written.
CROWELL & CO., INC. HEALTHMASTER HOME HEALTH CARE, INC.
Lessor Lessee
Otis L. Crowell Mittie Pedraza
- --------------- --------------
AS: President AS: Executive Vice President
Tax ID 58-1021933
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EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
CROWELL & CO., INC.
<TABLE>
<CAPTION>
Year ended December 31,
------------------------
1995 1994
<S> <C> <C>
NET INCOME (LOSS) $(703,480) $ 407,711)
PREFERRED STOCK DIVIDENDS 80,952 80,952
---------- ----------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS $(784,432) $ 326,759
========== ==========
EARNINGS PER COMMON SHARE:
Weighted average number of common shares
outstanding 2,520,835 2,520,835
Primary earnings per share
Income (loss) from continuing operations ($ .33) $ .07
Income from discontinued operations .02 .06
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE ($ .31) $ .13
========== ==========
</TABLE>
68
<PAGE>
EXHIBIT 12
SUBSIDIARIES
CROWELL & CO., INC.
Ivey Homes, Inc., a Georgia Corporation
Budget Storage Warehouse, Inc., a Georgia Corporation
Keystone Homes, Inc., a Georgia Corporation
69
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
CROWELL & CO., INC.
We hereby consent to the use in the Form 10-KSB of our report dated March
25, 1996, relating to the financial statements of Crowell & Co., Inc., as of
December 31, 1995 and 1994, and for the years then ended.
CHERRY, BEKAERT & HOLLAND
Augusta, Georgia
March 25, 1996
70
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 268,564
<SECURITIES> 0
<RECEIVABLES> 127,076
<ALLOWANCES> 0
<INVENTORY> 3,929,197
<CURRENT-ASSETS> 0
<PP&E> 383,906
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,762,259
<CURRENT-LIABILITIES> 0
<BONDS> 3,808,908
0
1,011,899
<COMMON> 696,776
<OTHER-SE> (953,651)
<TOTAL-LIABILITY-AND-EQUITY> 4,762,259
<SALES> 6,409,027
<TOTAL-REVENUES> 7,419,634
<CGS> 6,073,514
<TOTAL-COSTS> 6,383,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 398,009
<INCOME-PRETAX> (744,430)
<INCOME-TAX> 0
<INCOME-CONTINUING> (744,430)
<DISCONTINUED> 40,950
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (703,480)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
