SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 (Fee Required)
For the fiscal year ended June 30, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _____ to_____.
Commission File Number 0-1937
OAKRIDGE HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
MINNESOTA 41-0843268
(State of Incorporation) (I.R.S. Employer Identification No.)
4810 120TH STREET WEST, APPLE VALLEY, MINNESOTA 55124
(Address of Principal Executive Offices)
(612) 686-5495
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(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 of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to the Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $2,767,214.
The aggregate market value of voting stock held by non-affiliates on September
25, 1998, was approximately $2,946,758 based on the average of the bid and ask
price.
The number of shares outstanding of Registrant's only class of common equity
on June 30, 1998, was 1,309,670.
Documents incorporated by reference: None.
Transitional small business disclosure format. Yes [ ] No [X]
PART I
ITEM 1: BUSINESS
Oakridge Holdings, Inc., a Minnesota corporation (the "Company") was organized
on March 6, 1961. The Company acts as a holding company for two unrelated
businesses. First, since its inception the Company has been engaged in the
ownership and operation of two cemeteries in Cook County, Illinois (referred
to herein as the "Cemetery Operations"). Second, on June 29, 1998, the
Company, through its wholly-owned subsidiary, acquired substantially all of
the assets of Stinar Corporation, a Minnesota corporation. The Company
manufactures and sells ground support equipment used by airports and military
installations.
CURRENT OPERATIONS
CEMETERY OPERATIONS. Through two wholly owned subsidiaries, Oakridge Cemetery
(Hillside), Inc. and Glen Oak Cemetery, Inc., the Company operates two
adjacent cemeteries near Hillside, Illinois, used for the internment of human
remains. The cemetery operations are discussed on a consolidated basis and
the Company makes no functional distinction between the two cemeteries, except
where noted.
The combined cemeteries comprise 176.7 total acres of real estate, of which
12.8 acres are used for interior roads and other improvements leaving 163.9
net acres with 137,000 burial plots, of which 37,850 remain in inventory. The
cemeteries have two mausoleums with 975 niches and 3,190 crypts of which 148
niches and 357 crypts remain in inventory. The Company also holds deeds to
188 unsold crypts located in Forest Home Cemetery in Forest Park, Illinois.
Cook and DuPage Counties in Illinois serve as the principal market for the
Company's services. In addition to providing internment services, burial
plots and crypts, the Company sells cremation services.
The Company estimates that it has an inventory of cemetery and mausoleum
spaces representing between a 25 to 34 year supply, based on the maintenance
of current sales and annual usage levels. This inventory is considered
adequate for the foreseeable future, and the Company is presently developing a
plan for adding more niches and crypts in the future.
STINAR CORPORATION. On June 29, 1998, the Company, through Stinar HG, Inc.,
a Minnesota corporation and wholly-owned subsidiary of the Company ("Stinar")
purchased substantially all of the assets (including the right to use the name
of the seller) (the "Assets") and assumed substantially all of the liabilities
of Stinar Corporation, a Minnesota corporation ("Seller"). Until the sale of
the assets to Stinar, Seller had been engaged in the manufacture and sale of
ground support equipment for use by commercial airports and airlines and by
miltary airbases. Stinar legally changed its name to Stinar Corporation
following the closing on the purchase of the Assets and will continue the
Seller's business under this name.
Principal products of Stinar include truck-mounted stairways for use on
aircraft, fuel and water trucks, food service and catering vehicles, vehicles
used in transporting and loading luggage and cargo, sanitary services vehicles
and other custom-built ground support vehicles used by airports, commercial
airlines and the military. Stinar also provides limited service and repairs
on vehicles it sells.
Stinar accomplished the acquisition of the Seller's assets pursuant to an
Asset Purchase Agreement between Stinar, the Seller and the shareholders of
the Seller. The aggregate purchase price for the purchase of the Assets
consisted of: (i) $2,000,000 cash paid at closing; (ii) a promissory note
issued by Stinar in the original principal amount of $200,000, payable June
30, 1999 with interest at 8.25% per annum, guaranteed by the Company; (iii) a
convertible subordinated debenture of the Company in the original principal
amount of $700,000, convertible into shares of the Company's common stock at a
conversion price equal to seventy-five percent (75%) of the mean between the
average closing "bid" and "ask" price of the Company's common stock on each of
the last five (5) full trading days immediately prior to the date the
debenture is converted, with interest payable at 9% per annum on December 31
of each year it is outstanding and principal payable in annual installments of
$200,000 commencing June 30, 2001 and on June 30, 2002 and 2003, with a final
payment of principal on June 30, 2004, guaranteed by Stinar; and (iv)
aggregate payments under two contracts for deed pursuant to which Stinar will
pay the Seller and two of its shareholders principal of $1,300,000 over seven
years from the closing date, with equal installments of principal and interest
(at the rate of 8.25%) payable monthly. In addition to the foregoing
payments, Stinar assumed debt of the Seller in the amount of approximately
$2,830,000. The source of the $2,000,000 cash paid by Stinar at the closing
was income from the Company's operations, a $3,000,000 credit facility
extended to Stinar by Riverside Bank of Minneapolis, and the sale of
convertible subordinated debentures by the Company.
In connection with the acquisition, Stinar entered into employment agreements
with Randy and Gary Stinar, shareholders and former employees of the Seller,
pursuant to which each will serve as an employee of Stinar until June 30,
2000. The terms and conditions of their employment is substantially similar
to the terms and conditions of their employment with Seller.
Stinar sells its products to airports, commercial airlines and government and
military customers in the United States, where domestic sales comprise
approximately 70% of its annual revenues. In addition, Stinar sells its
products to commercial, government and military customers internationally.
SUMMARY FINANCIAL INFORMATION
FISCAL YEARS ENDED JUNE 30
1998 1997
__________ __________
Revenues:
Cemetery $2,767,214 $2,585,443
Other 0 0
---------- ----------
Total $2,767,214 $2,585,443
========== ==========
Operating Profit (Loss) from Operations Before Other Income (Expense), Income
Taxes and Extraordinary Items:
Cemetery $506,038 $384,014
Interest (73,042) (86,338)
Other Expense (1,070) (224)
Loss on Investment in Property Rights 250,000 0
-------- --------
Total $181,926 $297,432
======== ========
GOVERNMENTAL REGULATION
The Company holds all governmental licenses necessary to carry on its each of
its businesses and all such licenses are current. Neither of the Company's
two businesses is heavily regulated, although the Cemetery Operations are
required to comply with state laws and regulations applicable to all
cemeteries and funeral homes operating in the state of Illinois. The cost of
compliance with these regulations does not have a material impact on the
financial results of the Company.
CEMETERY OPERATIONS. Under Illinois law, the Company is required to place a
portion of all sales proceeds of cemetery lots, niches, and crypts in a trust
fund for the perpetual care of the cemeteries. Pursuant to these laws, the
Company deposits 15% of the revenues from the sale of grave spaces and 10% of
revenues from the sale of crypt spaces into a perpetual care fund. Earnings
from these funds are recognized in current cemetery revenues and are intended
to defray cemetery maintenance costs. The Company's perpetual care funds
balance as of June 30, 1998, was approximately $4,106,432.
The Company has a "pre-need" trust account representing revenues received by
the Company for the purchase of vaults and internment services prior to the
death of the decedent. The market value of the pre-need trust as of June 30,
1998 was approximately $612,360. The trust is administered by Access
Financial Group, Inc., through a master trust with the Illinois Cemetery
Association.
STINAR CORPORATION. Stinar is required to comply with competitive bidding and
other requirements in cases where it sells to local, state and federal
government customers. Complying with these requirements does not have a
material impact on the financial results of the Company.
COMPETITION
CEMETERY OPERATIONS. The Cemetery Operations compete with other cemeteries in
Cook and DuPage Counties in Illinois. Competitive factors in the cemetery
business are primarily predicated on location, convenience, service, and
heritage. Decisions made by customers are only minimally influenced, if at
all, by pricing. There are virtually no new entrants in the markets served by
the Company as the cost of acquiring sufficient undeveloped land and
establishing a market presence necessary to commence operations is
prohibitive.
STINAR CORPORATION. The aircraft ground support equipment business is
extremely fragmented and diverse. The Company estimates that there are
approximately thirty-five companies operating in the United States in the
business of manufacturing vehicles and equipment similar to those manufactured
by Stinar. The purchasers of the types of equipment manufactured by Stinar
tend to be long-standing, repeat customers of the same manufacturers, with
quality and reliability being the key factors cited by customers in selecting
a ground support equipment supplier. Accordingly, while the market for Stinar
products is competitive, Stinar's reputation for quality products and its
familiarity with individuals in the industry put it on equal footing with most
of its competitors.
Based on air transportation industry statistics obtained from GSE Today, a
trade publication, the Company estimates that annual world-wide sales for the
types of vehicles and equipment manufactured by Stinar is approximately
$1,700,000,000, and no single competitor of Stinar accounts for in excess of
10% of the share of the domestic market. Competition internationally in the
market for Stinar's products is equally diffuse, and the international market
is served primarily by manufacturer's located in the United States.
OTHER BUSINESS INFLUENCES
CEMETERY OPERATIONS. The Cemetery Operations do not experience seasonal
fluctuations, nor are they dependent upon any identifiable group of customers,
the loss of which would have a material adverse effect on its business, and
discussion of backlog is not material to any understanding of Company's
business.
STINAR CORPORATION. While there is no reliable historical financial
information regarding Seller to identify specific trends, the Company believes
that its reliance on customers in the U.S. commercial aviation business
exposes Stinar to the cyclical nature of the airline industry. In the event
of a downturn or recession in the airline business, commercial air carriers
would be more likely to curtail purchases of capital equipment of the kind
manufactured by Stinar. In addition, sales to military purchasers will be
affected by budget decisions and world politics generally.
The diversity of Stinar's customer base and product lines mitigates these
risks, as does the growing importance of the international market, providing
Stinar with an additional customer base not subject to domestic economic
conditions.
MARKETING
CEMETERY OPERATIONS. Sales are made to customers utilizing the facilities
primarily on an at-need basis, that is, on the occurrence of a death in the
family when the products and services and interment space are sold to the
relatives of the deceased. The cemeteries do not actively market their
products. Rather the customers typically learn of the cemeteries from
satisfied customers who recommend the cemeteries based on superior location
and services rendered.
STINAR CORPORATION. The chief method of marketing Stinar's products is
through one-on-one customer contact made by sales representatives employed by
Stinar and manufacturer's representatives under contract with Stinar.
Stinar's customers report that Stinar has a reputation in the commercial
aviation industry for manufacturing high quality, reliable products. Stinar
intends to capitalize on this reputation in the domestic airline industry by
making frequent sales calls on customers and potential customers and by
reducing the amount of time needed to complete customer orders. Stinar has
also engaged manufacturers' representatives to assist it in increasing sales
to overseas markets.
EMPLOYEES
As of June 30, 1998, the Company had 110 full time and 10 part time or
seasonal employees. Of these, Stinar employed 90 full-time and 2 part-time
employees and the Cemetery Operations employed 20 full-time and 8 part-time or
seasonal employees. The Company considers its labor relations to be good.
COMPLIANCE WITH ENVIRONMENTAL LAWS
CEMETERY OPERATIONS
In fiscal year 1995, the Company commissioned an engineering study of the
Cemetery Operations for the purpose of determining the full extent of possible
soil contamination related to suspected leaking underground storage tanks. As
a result of this study, five underground fuel tanks were removed and the
adjoining soil was removed and disposed by an independent contractor.
During 1998, the Company did not incur any expenses for environmental
remediation and a total of approximately $228,000 has been spent in prior
years in remediating conditions at the Cemetery Operations. In fiscal year
1997 the Company was notified by the Illinois Environmental Protection Agency
("Illinois EPA") that the environmental work conducted at the Cemetery
Operations may not have been in full compliance with its guidelines. The
Company responded to the Illinois EPA with a work plan that will require the
expenditure of additional costs of approximately $28,500, with the possibility
of additional costs. The Company is awaiting a response on the work plan from
the IEPA. Additional costs beyond the $28,500 accrued for at June 30, 1998
may be incurred, however, management cannot reasonably estimate those costs.
In addition, the Company may not file for reimbursement from the Leaking
Underground Storage Tank Fund until the work plan has IEPA approval.
Accordingly, the Company has made no provision for reimbursements. The
Company is not aware of any other environmental issues affecting the Cemetery
Operations.
STINAR CORPORATION. The Assets purchased by Stinar from the Seller included a
43,271 square foot manufacturing facility located on approximately 7.875 acres
of land (the "Stinar Facility") located in an industrial park in Eagan,
Minnesota, a suburb of St. Paul, Minnesota. Prior to the acquisition of the
Stinar Facility, Stinar and the Company obtained a Phase I environmental
assessment of the Stinar Facility. This Phase I environmental assessment
suggested the need for additional study of the Stinar Facility. In addition,
the Phase I assessment suggested that certain structural improvements be made
to the Stinar Facility. Accordingly, two additional Phase II environmental
assessments were performed and revealed the presence of certain contaminants
in the soil around and under the building located on the Stinar Facility.
Subsequent to the completion of the Phase II environmental assessments and
completion of the structural improvements to the building, the Company and
Stinar requested and obtained a "no association" letter from the Minnesota
Pollution Control Agency ("MPCA") stating that, provided certain conditions
set forth in the no association letter are met, the Company and Stinar will
not be deemed responsible for contamination which occurred at the Stinar
Facility prior to the purchase of the Assets by Stinar. The structural
improvements recommended by the Company's environmental consulting firm were
scheduled to be completed before November, 1998, and then will be reviewed
and, the Company believes, will be approved by the MPCA.
The purchase agreement between the Seller, its shareholders and Stinar
requires the Seller and its shareholders to indemnify Stinar for costs or
expenses incurred by Stinar related to environmental conditions at the Stinar
Facility, up to an amount believed by the Company and Stinar to exceed the
reasonably anticipated potential liability associated with the Stinar
Facility. In addition, the Seller agreed to pay all costs associated with
obtaining the no association letter from the MPCA and the Seller paid for the
environmental consulting, remediation and structural improvements discussed in
the preceding paragraph. The Company does not anticipate that the operations
of Stinar and the ownership of the Assets will result in any material
liability to the Company or Stinar under existing environmental laws, and
Stinar has not included a material sum in its budget for matters related to
environmental compliance.
REAL ESTATE DEVELOPMENT
MOHAVE COUNTY, ARIZONA WATER FRONT LOTS
On December 27, 1994, the Company acquired from Mohave Shores Development,
Inc. the right to a 50 year sublease for the land leased from the Fort Mojave
Tribal Corporation for 10 residential dwelling units adjacent to the Colorado
River and an option for an additional 31 residential dwelling units in that
leased land. The Company paid Mohave Shores Development, Inc. $250,000 for
these rights and options. In 1998, the Company determined that the likelihood
of realizing a return on this investment to be remote and accordingly wrote
off the investment in property rights to zero, realizing a $250,000 loss on
this investment.
ITEM 2: PROPERTIES.
The Company's principal executive offices are located at 4810 120th Street
West, Apple Valley, Minnesota, and are leased.
As of June 30, 1998, the principal properties of the Company are the
cemeteries in Hillside, Illinois. The cemetery operations are discussed in
Business.
The cemeteries are subject to a mortgage in the principal amount of $675,767.
See Financial Statements, beginning on page F-1 for payment details.
Stinar operates out of a single 43,271 square foot manufacturing facility in
Eagan, Minnesota located on 7.875 acres of land. The land consists of two
contiguous parcels of real estate. This facility was purchased by Stinar in
connection with the purchase of the Assets. The purchase of the Stinar
Facility was financed by the Seller pursuant to contracts for deed payable in
monthly installments of $9,766 for seven years from the date of purchase, with
a balloon payment of principal of $1,207,000 due on June 29, 2005.
ITEM 3: LEGAL PROCEEDINGS
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Trading in the Company's common stock is in the over-the-counter market,
primarily through listings in the National Quotation Bureau "pink sheets",
although the market in the stock is still not well-established. The table
below sets forth the range of bid and ask prices for the two most recent
fiscal years. Prices used in the table were reported to the Company by
National Quotation Bureau, Inc. These quotations represent inter-dealer
prices, without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
FISCAL YEAR
1998 1997
First Quarter $.56 - 1.06 $.63 - 1.19
Second Quarter .81 - 1.59 .63 - 1.13
Third Quarter 1.25 - 4.00 .63 - .88
Fourth Quarter 2.00 - 2.50 .38 - .75
As of September 25, 1998, the number of holders of record of the Company's
Common Stock was 1,900.
The Company has never paid dividends on its common stock and does not
anticipate paying dividends on its common stock in the foreseeable future.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS
FISCAL 1998
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash flow from continuing cemetery and new manufacturing
operations to meet operating needs, debt and funding capital requirements.
Funeral industry businesses have provided sufficient cash during the past five
years to support day-to-day operations, current debt service, capital
expenditures, and provide cash to assist in the acquisition of the assets of a
manufacturer of aviation ground support equipment. Since 1995 cash flow from
operations has increased and liquidity has continued to improve. Cemetery and
manufacturing operations will provide sufficient cash during the next five
years to cover all debt payments and operation needs.
The Manufacturing operation has secured a $3,000,000 line of credit to fund
operations and capital expenditures and the Company has secured a line of
credit for $225,000 to meet any uncertainties that could materially affect
liquidity.
There are no expected changes in the number of full time, part-time or
seasonal employees employed by the cemetery operations, but manufacturing
operations will need to hire an additional 15 full time employees for
production, 3 engineer's, 2 salesman and a vice president of manufacturing in
fiscal year 1999.
The cemetery and manufacturing operations have a five year plan for capital
expenditures in 1998 to 2002 period of approximately $2,600,000. The cemetery
operations capital expenditures will be approximately $600,000 for cemetery
road improvements, increased inventory of niches and crypts in Mausoleum and
outdoors, groundskeeping equipment, and a new computer software and hardware
system. Manufacturing operations' capital expenditures will be approximately
$2,000,000 for improvements in the present plant, an additional manufacturing
facility, computer software and hardware, office equipment and manufacturing
equipment to meet anticipate revenue increase.
Net cash from operating activity and sale of debentures in fiscal year 1998
resulted in the company's ability to generate sufficient cash flow to finance
its operations, fund capital expenditures, pay current debt service, purchase
the assets of manufacturing operation, and continue to solve its environmental
problems.
RESULTS OF OPERATIONS
In fiscal year 1998, cemetery revenues increased 8.7% over the prior fiscal
year as a result of 9% increase in case loads, price increases of 10% on grave
liners, 6% price increase in interment fees, and a 58% increase in monument
sales due to aggressive marketing and new display area. Investment income from
the cemetery trust funds decreased 10% due to timing of interest payments.
Gross profit after operating expenses remained stable at 48%, with cost of
sales at 52% ,which is the comparable with prior years.
Selling expenses decreased 10% in comparison to prior fiscal year due to the
elimination of the sales manager position.
General and administrative expenses decreased 3% due to decreased legal fees
associated with past litigation.
Other expenses increased 74% due to the Registrant's determination that the
likelihood of realizing a return on the property rights investment to be
remote, and accordingly wrote off the investment in property rights to zero
realizing a $250,000 loss.
ACQUISITION RELATED
Immediately following the acquisition of the assets of Stinar, the Registrant
engaged its regularly retained independent certified public accounts to
conduct an audit of the acquired business. Because Stinar historically (i)
had not prepared its financial statements in accordance with generally
accepted accounting principles, (ii) had not engaged an auditor to review or
audit its financial statements, (iii) had not maintained reliable or
consistent inventory records, and (iv) had not ever instituted an inventory
cost system, the Registrant's independent public accountants concluded that
the beginning inventory of Stinar cannot be audited with any assurance of
reliability or accuracy. Alternative auditing procedures have been exhausted
coming to the same conclusion. Because of the significance of the inventory of
Stinar in relation to its financial statements as a whole, an unqualified
opinion as to the financial statements could not be rendered because of the
inability to audit the beginning inventory. Accordingly, the financial
statements required to be filed under Item 7 of Form 8-K cannot be filed
herewith. Any unaudited historical financial statements which might be
prepared could not be relied upon and could potentially be misleading.
As part of the due diligence process undertaken by the Registrant in acquiring
Stinar, the Registrant required that Stinar implement an inventory cost system
whereby inventory is valued in accordance with generally accepted accounting
principles as of June 30, 1998. This system is in place and is fully
operational.
FISCAL 1997
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash flow from continuing operations to meet cash needs
and funding capital requirements. The cemetery operations have provided
sufficient cash during the past three years to support day-to-day operations
and cover immediate debt service requirements. Since 1995 cash flow from
operations has increased, and liquidity has continued to improve. The
registrant has secured a line of credit for $225,000 to meet any uncertainties
that could materially affect liquidity.
There are no expected changes in the number of full time, part-time or
seasonal employees employed by the Company.
The Company's cemetery operations have a five year plan for capital
expenditures in the 1997 to 2001 period of approximately $600,000 for road
improvements, fencing of property, increased inventory of niches and crypts in
Mausoleum and outdoors, equipment and modernization programs for computer
software and hardware.
Net income in fiscal year 1997 resulted in the Company's ability to generate
sufficient cash flow from operations to finance its operations, fund capital
expenditures, pay immediate debt and continue to solve its environmental
problems.
RESULTS OF OPERATIONS
In fiscal year 1997, cemetery revenues remained relatively flat with cemetery
lot sales and interment fees remaining stable in comparison to prior years,
but Mausoleum sales and cremations fees decreased approximately $37,090 (or
15%). The decrease is primarily attributable to the increased competition,
change in marketing strategies and publicity surrounding the past lawsuit in
regards to indemnification of cremation remains. Investment income from the
cemetery care funds increased $3,591 or 2%, which was due primarily to the
increase in trust assets.
Gross profit before expenses decreased $2,877 or 1% over the prior fiscal
year. The decrease in attributable to decreased costs of Mausoleum sales and
related costs.
Operating expenses remained constant with a less than 1% decrease in
comparison to prior fiscal years.
Selling expenses increased $22,858 or 10% over the prior fiscal year. The
increase is attributable to the having a full-time sales manager for twelve
months. When retained by management it was anticipated that this individual
would be able to increase productivity and enhance customer service. Customer
service was improved but sales continue to remain flat.
General and administrative expenses increased $9,091 or 1% over the prior
fiscal year, primarily due to increased legal expenses of $41,230 or 44%,
which was due to prior lawsuits brought against the Company, which were either
settled for a immaterial cost or dismissed by the courts. All other costs
remained constant or decreased due to effective cost controls.
Other expenses decreased $115,863 or 43% over the prior fiscal year, primarily
due to the company recording no environmental expenditures in 1997 and $33,258
in 1996, no loss on investment in property rights in 1997 and $50,000 in 1996
and because of decreased interest expense associated with reduced debt.
ITEM 7: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements of the Company for the fiscal years ending June 30, 1998
and 1997 are included at Item 13, F-1.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors hold office for a one-year term or until their successors are duly
elected and qualify. Each director of the Company has served continuously
since the year indicated below. The age and principal occupation or
employment of all directors as set forth below.
Robert C. Harvey (47), has been a Director, Chairman of the Board, and Chief
Executive Officer of the Company since 1992. Mr. Harvey is also the CEO of
Stinar Corporation.
Robert B. Gregor, (47), Secretary and Director since 1993. Mr. Gregor has
been the Senior Account Executive of E.F. Johnson Co. since 1993. From 1977
to 1993, Mr. Gregor was a Sales Team Manager at Motorola Communications.
Hugh H. McDaniel, (58), Director since 1992. Mr. McDaniel has been a
residential real estate broker since 1973.
ITEM 10: EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
__________________________________________ ___________
Name and Other Annual Awards
Principal Position Year Salary(1) Bonus Compensation Options
Robert C. Harvey(2)
Chairman of the Board
and Chief Executive
Officer 1998 $90,000 $65,000
1997 $90,000
(1) Includes amounts accrued by the Company to Mr. Harvey of $15,000 in 1997.
(2) Mr. Harvey was employed by the Company as Chairman of the Board and Chief
Executive Officer in November 1992.
OPTION GRANTS AND EXERCISES
The following table summarizes options granted to named executive officer
during 1998, 1997, and 1996.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of
Securities % of Total Exercise
Underlying Options Granted or Base
Options to Employees Price Expiration
Name (1)Granted in Fiscal Year ($/SH) Date
___________________________________________________________________
Robert C. Harvey
1998 40,000(2) 100% $0.38 06/30/01
1997 - - -
___________________________________________________________________
(1) All the options granted to Mr. Harvey were granted pursuant to his
employment contract. See "Executive Compensation and Other Benefits --
Employment Agreement". Options are exercisable so long as Mr. Harvey remains
in the employ of the Company.
(2) These options were granted on September 30, 1998 and are fully vested.
EMPLOYMENT AGREEMENT
The Company has an employment contract with Mr. Harvey, the Chairman of the
Board and Chief Executive Officer of the Company. Under the agreement, Mr.
Harvey is to receive annual compensation of $90,000 and a bonus equal to 10%
of the Company's net income over $300,000 and 15% of the Company's net income
over $500,000. Under this agreement, in addition to his salary and bonus, Mr.
Harvey will receive options to purchase an additional 10,000 shares at
beginning of year fair market value for each $100,000 of net income the
Company achieves over $300,000 and options to purchase 40,000 shares based on
the performance of the Company's stock in the public market. Mr. Harvey was
granted options to purchase 40,000 shares in June, 1998 under the terms of his
employment agreement with the Company.
COMPENSATION OF DIRECTORS
Directors who are not salaried employees of the Company are paid $500 as an
annual director's fee plus a fee of $200 per meeting attended. Directors are
also reimbursed for travel and lodging expenses as appropriate. There was one
board of directors meeting and two meetings by telephone and directors
received $1,000 for these meetings.
On May 18, 1990, the Board of Directors approved a nonqualified stock option
plan for outside directors. Under the plan, each outside director received
options to purchase 3,500 shares of the Company s common stock at an exercise
price per share equal to the market price at the grant date. These stock
options are exercisable for a period of ten years from the grant date for
active board members or for a period of twelve months from the date of
termination for former board members. The Company reserved 21,000 shares of
common stock for issuance under the plan, of which 3,500 shares have been
issued, an option for 3,500 shares is outstanding and 14,000 shares are
available for issuance.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table contains information as of June 30, 1998, concerning the
beneficial ownership of the Company's common shares by Mr. Robert C. Harvey,
each director, by all directors and officers as a group, and by each person
known to the Company to "beneficially own" more than 5% of its common shares.
Name of Individual
or Persons in Group Number of Shares(a) % of Class
_________________________________________________________________
Robert C. Harvey 379,329(b) 23.6%
4810 120th Street West
Apple Valley, MN 55124
Robert B. Gregor 161,189(c) 10.0%
844 Oriole Lane
Chaska, MN 55318
Hugh McDaniel 5,100(d) .3%
4090 Mission Blvd.
San Diego, CA 92109
All Officers and Directors 545,618 33.9%
as a Group (3 persons)
(a) Unless otherwise noted, all shares shown are held by persons possessing
sole voting and investment power with respect to such shares.
(b) Includes 50,370 held by Mr. Harvey's wife and children to which Mr. Harvey
may be deemed to share voting and investment power, but as to which he
disclaims beneficial ownership. In addition, 165,000 of the 379,329 share
total listed in the table are shares that could be acquired upon exercise of
an option and the conversion of a convertible subordinated debenture. In
addition, 10,000 are held jointly by Mr. Harvey and his wife.
(c) Includes 7,375 held by Mr. Gregor's wife and children to which Mr. Gregor
may be deemed to share voting and investment power, but as to which he
disclaims beneficial ownership. In addition 112,564 are held jointly by Mr.
Gregor and his wife.
(d) Includes 3,500 of the 5,100 share total listed in the table are shares
that could be acquired upon exercise of options as a board member.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the years ended June 30, 1998 and 1997, amounts paid for compliance
services to entities related to the chief executive officer were $20,214 and
$12,192 respectively. In addition, to fund the purchase of substantially all
of the assets and liabilities of Stinar Corporation, a member of the board of
directors advanced cash of $30,000 and the chief executive officer purchased
purchased $170,000 of convertible subordinated debentures. In fiscal year
1999, the director was repaid the $30,000 and sold 40,000 shares of common
stock out of treasury for $80,000.
ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed or incorporated by reference as part of
this Form 10-KSB.
(1) The following consolidated financial statements of Oakridge Holdings, Inc.
and Subsidiaries, together with the Independent Auditors Report are filed in
this report at Item 13, F-1:
Independent Auditor's Report
Consolidated Balance Sheets as of June 30, 1998, and 1997
Consolidated Statements of Operations for Years Ended June 30, 1998
and 1997
Consolidated Statements of Stockholders' Equity for Years Ended
June 30, 1998 and 1997
Consolidated Statements of Cash Flows for Years Ended June 30, 1998
and 1997
Notes to Consolidated Financial Statements
(2) The schedule of exhibits required to be furnished by Item 601 of
Regulations S-B is as follows:
3(i)Amended and Restated Articles of Incorporation as amended. (1)
3(ii)Amended and Superseding By-Laws as amended. (1)
10(a)Outside Directors Non-qualified Stock Option Plan. (1)
10(b)Robert C. Harvey Employment Agreement. (1)
10(c)Stock purchase agreement. (1)
10(d) Loan documents for Line of Credit. (2)
10(e) Subordinated Debenture Agreement. (1)
10(f) Loan documents for Mortgage Note Payable. (2)
21 Subsidiaries of Registrant.
(1) Filed as exhibit to Form 10-KSB for fiscal year ended June 30,
1997 or 1996.
(2) Filed as exhibit to Form 10-KSB for fiscal year ended June 30,
1998 and 1997.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report. An 8-K and 8-K/A were filed during the first quarter
of fiscal year 1999.
F-1
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 1
Consolidated Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
{Letterhead of Independent Auditors}
To The Board of Directors and Stockholders
Oakridge Holdings, Inc. and Subsidiaries
Apple Valley, Minnesota
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Oakridge
Holdings, Inc. and Subsidiaries as of June 30, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 Oakridge
Holdings, Inc. and Subsidiaries as of June 30, 1998 and 1997, and the results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Stirtz Bernards Boyden Surdel & Larter, P.A.
Edina, Minnesota
August 19, 1998
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
______________________
1998 1997
__________ __________
ASSETS
Current assets:
Cash and cash equivalents $ 823,458 $ 382,287
Receivables:
Trade, less allowance for doubtful accounts
of $11,000 in 1998 and $15,500 in 1997 2,547,042 476,443
Trust income (Note 12) 20,350 106,855
Inventories:
Production 2,829,142 -
Cemetery and mausoleum space available for sale 663,791 682,108
Markers, urns and flowers 24,388 15,924
Deferred income taxes 245,000 256,000
Other current assets 10,731 26,783
---------- ----------
Total current assets 7,163,902 1,946,400
---------- ----------
Property and equipment:
Property and equipment 3,632,908 1,760,528
Less accumulated depreciation (1,347,698) (1,286,611)
---------- ----------
Total property and equipment, net 2,285,210 473,917
---------- ----------
Other assets 60,191 12,601
---------- ----------
Investment in property rights-
Mohave Shores Development Inc. - 250,000
---------- ----------
$9,509,303 $2,682,918
========== ==========
June 30,
______________________
1998 1997
__________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $2,065,000 $ 75,000
Notes Payable - other 230,000 -
Accounts payable - trade 950,791 42,418
Accrued liabilities:
Accrued salaries and payroll taxes 469,980 124,971
Perpetual care trust funds 226,858 227,087
Deferred revenue 452,661 389,609
Customer deposits 329,914 -
Accrued warranty 138,883 -
Accrued marker and inscription costs 98,676 77,976
Accrued environmental costs 28,500 28,500
Current maturities of long-term debt 83,250 17,075
Other current liabilities 112,444 7,167
---------- ----------
Total current liabilities 5,186,957 989,803
---------- ----------
Long-term debt 3,123,833 689,528
---------- ----------
Commitments and contingencies - -
---------- ----------
Total liabilities 8,310,790 1,679,331
---------- ----------
Stockholders' equity:
Preferred stock, $.10 par value; 1,000,000
shares authorized; none issued - -
Common stock, $.10 par value; 5,000,000 shares
authorized; 1,309,670 shares issued and
outstanding in 1998 and 1997 130,968 130,968
Additional paid-in capital 1,940,500 1,875,500
Accumulated deficit (872,955) (1,002,881)
---------- ----------
Total stockholders' equity 1,198,513 1,003,587
---------- ----------
$9,509,303 $2,682,918
========== ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30,
______________________
1998 1997
__________ __________
Revenue:
Cemetery $2,550,709 $2,344,988
Trust and interest income 216,505 240,455
---------- ----------
Total revenue 2,767,214 2,585,443
---------- ----------
Operating expenses:
Cemetery 1,306,614 1,210,979
Selling 237,484 247,800
General and administrative 717,078 742,650
---------- ----------
Total operating expenses 2,261,176 2,201,429
---------- ----------
Income from operations 506,038 384,014
---------- ----------
Other income (expense):
Interest expense (73,042) (86,338)
Loss on investment in property rights (250,000) -
Other (1,070) (244)
---------- ----------
Total other income (expense) (324,112) (86,582)
---------- ----------
Income before income taxes 181,926 297,432
Income taxes 52,000 83,000
---------- ----------
Net income $ 129,926 $ 214,432
========== ==========
Basic net income per share $ .10 $ .16
========== ==========
Diluted net income per share $ .09 $ .16
========== ==========
See Notes to Consolidated Financial Statements
<TABLE>
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998 AND 1997
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
___________________ __________ ___________ __________
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1996 1,309,670 $130,968 $1,875,500 $(1,217,313) $789,155
Net income - - - 214,432 214,432
--------- -------- ---------- ----------- ----------
Balance, June 30, 1997 1,309,670 $130,968 $1,875,500 $(1,002,881) $1,003,587
Paid-in capital - stock
options, June 30, 1998 - - 65,000 - 65,000
Net income - - - 129,926 129,926
--------- -------- ---------- ----------- ----------
Balance, June 30, 1998 1,309,670 $130,968 $1,940,500 $ (872,955) $1,198,513
========= ======== ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Years Ended June 30,
______________________
1998 1997
__________ __________
Cash flows from operating activities:
Net income $ 129,926 $ 214,432
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation 77,226 69,301
Deferred income taxes 50,000 81,429
Loss on investment in property rights 250,000 -
Compensation expense - stock options 65,000 -
Receivables 75,845 (69,657)
Inventories 9,853 19,133
Other assets 18,520 6,947
Accounts payable - trade (61,397) (27,781)
Accrued liabilities 72,753 90,292
---------- ----------
Net cash flows from operating activities 687,726 384,096
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (150,289) (59,038)
Acquisition, net of cash acquired of $355,810 (1,687,140) -
---------- ----------
Net cash flows from investing activities (1,837,429) (59,038)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (19,520) (282,462)
Increase in note payable-bank 1,060,394 75,000
Proceeds from issuance of debentures
and other notes payable 550,000 -
---------- ----------
Net cash flows from financing activities 1,590,874 (207,462)
---------- ----------
Net change in cash and cash equivalents 441,171 117,596
Cash and cash equivalents, beginning of year 382,287 264,691
---------- ----------
Cash and cash equivalents, end of year $ 823,458 $ 382,287
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Years Ended June 30,
______________________
1998 1997
__________ __________
Cash paid during the years for:
Interest $ 73,042 $ 86,338
========== ==========
Income taxes $ 1,011 $ 560
========== ==========
Details of acquisition:
Fair value of assets $7,072,179 $ -
Liabilities 5,029,229 -
---------- ----------
Cash paid 2,042,950 -
Less cash acquired 355,810 -
---------- ----------
Net cash paid for acquisition $1,687,140 $ -
========== ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIRES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is a Minnesota corporation organized on March 6, 1961. The
Company operates two cemeteries in Illinois. The cemetery operations
routinely grant credit to pre-need customers, substantially all of whom are in
the Chicago area. On June 29, 1998 the Company acquired the net assets of an
airline ground equipment business (see Note 2). The business designs,
engineers and manufactures airline ground equipment and serves customers on a
worldwide basis.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, each of which is wholly owned. All material intercompany
balances and transactions have been eliminated in consolidation.
ESTIMATES AND ASSUMPTIONS
The preparation of consolidated 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
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.
INVENTORIES
Production inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) method.
The cemetery and mausoleum space available for sale is stated at the lower of
cost (determined by an allocation of the total purchase and development costs
of each of the properties to the number of spaces available) or market.
Included in cemetery space available for sale is land held in a land trust in
which a wholly owned subsidiary of the Company is the sole beneficiary.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.
When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is recognized in income for the period. The cost of maintenance and
repairs is charged to operations as incurred and significant renewals and
betterments are capitalized.
CEMETERY AND MAUSOLEUM SPACE REVENUE
Under the Cemetery Care Act of the State of Illinois, the Company is required
to transfer a portion of the proceeds of each sale of cemetery and mausoleum
space to perpetual care trust funds. The reported net revenue has been reduced
by the portion of the sales price that is required to be remitted to the
perpetual care trusts.
Income on the perpetual care trust funds is recorded as cemetery revenue in
the accompanying consolidated financial statements as earned. Distributions
from the perpetual care trusts are used for care and maintenance of the
cemetery. Expenses are recognized as incurred.
DEFERRED REVENUE
Deferred revenue consists of pre-need contracts that include charges for
services to be performed at a later date. Revenue on these services is
deferred to the period in which the services are performed.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due plus
deferred income taxes. Deferred income taxes relate to differences between the
financial and tax bases of certain assets and liabilities. The significant
temporary differences relate to fixed assets, valuation allowances, certain
accruals and operating loss carryforwards that are available to offset future
taxable income. Deferred income tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
ENVIRONMENTAL COSTS
Environmental expenditures that pertain to current operations or relate to
future revenue are expensed or capitalized consistent with the Company's
capitalization policy. Expenditures that result from the remediation of an
existing condition caused by past operations that do not contribute to current
or future revenue are expensed. Liabilities are recognized for remedial
activities when the clean-up is probable and the cost can be reasonably
estimated.
CONCENTRATIONS OF CREDIT RISK
The Company's cash deposits from time to time exceed federally insured limits.
The Company has not experienced any losses on its cash deposits in the past.
Financial instruments which potentially subject the Company to a concentration
of credit risk consist principally of accounts receivable. The Company
generally does not require collateral for its trade accounts receivable. The
credit risk is limited due to the large number of entities comprising the
Company's customer base. At June 30, 1998, the Company had no significant
concentrations of credit risk.
INCOME PER SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128
establishes accounting standards for computing and presenting earnings per
share. Basic earnings per common share are computed by dividing net income
by the weighted average number of shares of common stock outstanding during
the period. No dilution for potentially dilutive securities is included.
Diluted earnings per share are computed under the treasury stock method and
are calculated to compute the dilutive effect of outstanding options, warrants
and other securities. The adoption had no effect on previously reported
income per share.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130)
in June 1997. SFAS No. 130 requires the disclosure of other comprehensive
income in the Company's financial statements and is effective for reporting
periods beginning after December 15, 1997. The adoption of SFAS No. 130 is
not expected to have a material impact on the Company's financial statements
or the disclosures contained therein.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131) in June 1997. SFAS No. 131 establishes
accounting standards for segment reporting and is effective for fiscal years
beginning after December 15, 1997. The adoption of SFAS No. 131 is not
expected to have a material impact on the Company's financial statements or
the disclosures therein.
2. ACQUISITION
On June 29, 1998, the Company acquired certain assets and liabilities of
Stinar Corporation (Stinar) for $4,242,950 including acquisition costs. Stinar
designs, engineers and manufactures airline ground equipment. The purchase
price included $2,000,000 in cash, the issuance of $1,300,000 of contracts for
deed, a $200,000 short-term note and $700,000 of convertible subordinated
debentures. The transaction was accounted for using the purchase method.
Accordingly, the purchase price was allocated to net assets acquired based on
their estimated fair values. The excess of the purchase price over the fair
value of net assets acquired of approximately $50,100 is being amortized on a
straight-line basis over 30 years. The results of operations of the acquired
business from the date of acquisition to June 30, 1998 are not significant and
will be reflected in the Company's operations beginning July 1, 1998.
The following summarized unaudited pro forma results of operations for the
years ended June 30, 1998 and 1997 assumes the Stinar acquisition occurred on
July 1 of each year:
PRO FORMA INFORMATION
1998 1997
__________ __________
Net sales $15,483,743 $12,473,303
Net earnings $ 220,299 $ 153,371
Earnings per share $ .17 $ .12
Pro forma results reflect adjustments for the incremental interest expense on
debt incurred to finance the acquisition, depreciation and amortization of
assets based on purchase price allocation and estimated income tax expense.
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been completed as of the beginning of
each year presented, nor are they necessarily indicative of future
consolidated results.
3. INVENTORIES
Production inventories consist of the following:
1998 1997
__________ __________
Finished goods $ 230,066 $ -
Work in progress 1,146,295 -
Raw materials and trucks in stock 1,452,781 -
---------- ----------
$2,829,142 $ -
========== ==========
Inventories of cemetery and mausoleum space available for sale consist of the
following:
1998 1997
__________ __________
Cemetery space $ 539,940 $ 556,265
Mausoleum space 123,851 125,843
---------- ----------
$ 663,791 $ 682,108
========== ==========
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
1998 1997
__________ __________
Land $ 450,000 $ 50,000
Land improvements 288,092 252,373
Building and improvements 1,422,881 522,881
Vehicles 250,114 198,617
Equipment 1,221,821 736,657
---------- ----------
$3,632,908 $1,760,528
========== ==========
Depreciation charged to operations was $77,226 in 1998 and $69,301 in 1997.
5. INVESTMENT IN PROPERTY RIGHTS
In December 1994, the Company purchased the right to develop 10 dwelling units
for $250,000 from Mohave Shore Development Inc. (MSD), a Nevada corporation.
MSD has a master lease agreement with the Fort Mohave Tribal Corporation
located in Arizona. The right has a term of 50 years. In addition, the Company
has the right to purchase 31 additional development units in increments with
each increment requiring additional fees to a total aggregate of $1,300,000.
In 1998, the Company determined that the likelihood of realizing a return on
this investment to be remote and accordingly wrote off the investment in
property rights to $-0- realizing a $250,000 loss.
6. NOTE PAYABLE - BANK
The Company has a $225,000 line-of-credit of which $160,000 was unused and
available at June 30, 1998. Interest is payable monthly at the prime rate
(8.5% at June 30, 1998). The note is secured by the assets of a wholly owned
subsidiary and matures November 1, 1998.
The Company has a $3,000,000 line-of-credit of which $2,000,000 was
outstanding at June 30, 1998. At June 30, 1998, approximately $889,000 of the
line-of-credit was unused and available with approximately $111,000 used for
open letters of credit. Advances on the line-of-credit are based on 80% of
eligible accounts receivable plus 75% of the eligible truck, work-in-process
and finished goods inventory plus 50% of the eligible raw materials
inventory. Interest is payable monthly at the banks reference rate plus .75%
(9.25% at June 30, 1998.) The note is secured by the assets of the Company's
wholly owned subsidiary, Stinar HG, Inc., and by assignment of life insurance
policies.
7. NOTES PAYABLE - OTHER
Notes payable - other consisted of the following:
1998 1997
__________ __________
Note payable to individuals - due June 1999
plus interest at 8.25%, secured by a second
priority lien on certain inventories, accounts,
equipment, and general intangibles. $ 200,000 $ -
Unsecured note payable to an officer, interest
at 9%, repaid July 1998. 30,000 -
---------- ----------
$ 230,000 $ -
========== ==========
8. LONG-TERM DEBT
Long-term debt consisted of the following:
1998 1997
__________ __________
Mortgage note payable - bank, payable in
monthly installments of $9,350 including
interest at 8.625%, maturing January 2002,
secured by real estate and the assets of
the Company. $ 675,767 $ 685,190
Other notes payable, payable in monthly
installments including interest at 8.75%,
maturing through November 1999, secured
by equipment. 11,316 21,413
Contracts for deed, Payable in monthly
installments of $8,264 and $1,503 including
interest at 8.25%, maturing in June 2005
secured by certain property. 1,300,000 -
---------- ----------
Long-term debt payable before debentures 1,987,083 706,603
Convertible subordinated debentures - 9%
interest, due annually each December 31,
convertible into one common share at a
conversion price equal to 75% of the mean
between the average closing "bid" and "ask"
price on each of the five trading days prior
to the conversion date, issued to owners of
the business acquired, payable in annual
installments of $200,000 commencing June 2001
and in June 2002 and 2003, with the final
$100,000 payment due in June 2004, unsecured,
redeemable by the company with ten days
written notice. 700,000 -
Convertible subordinated debentures - 9%
interest due annually each December 31,
convertible into one common share for each
$2.00 of the principal amount, maturing in
July 2006, unsecured, $270,000 of the
debentures were issued to an officer and
employee of the Company. 520,000 -
---------- ----------
3,207,083 706,603
Less current maturities (83,250) (17,075)
---------- ----------
$3,123,833 $ 689,528
========== ==========
Subsequent maturities as of June 30, 1998 are as follows:
Years Ending June 30:
1999 $ 83,250
2000 76,622
2001 279,635
2002 706,050
2003 215,343
Thereafter 1,846,183
----------
$3,207,083
==========
9. ENVIRONMENTAL COSTS
In 1995, the Company commissioned an engineering study of its property for the
purpose of determining the full extent of possible soil contamination. Five
underground fuel tanks were found to require removal and the adjoining soil to
undergo remediation. Environmental costs expensed to operations were $-0- in
1998 and 1997 and approximately $228,000 in years prior to those presented.
Furthermore, the Company was notified by the Illinois Environmental Protection
Agency (IEPA) that the clean-up plan may not be in full compliance with IEPA
guidelines. The Company has responded to the IEPA with a work plan that calls
for additional costs of approximately $28,500 with the possibility of
additional costs. The Company is awaiting a response on the work plan from the
IEPA. Additional costs beyond the $28,500 accrued for at June 30, 1998 may be
incurred, however, management cannot reasonably estimate those costs. In
addition, the Company may not file for reimbursement from the Leaking
Underground Storage Tank Fund until the work plan has IEPA approval.
Accordingly, the Company has made no provision for reimbursements.
10. INCOME TAXES
The provision for income taxes consisted on the following:
1998 1997
__________ __________
Current:
Federal $ - $ -
State 2,000 1,571
---------- ----------
2,000 1,571
---------- ----------
Deferred:
Federal 44,000 70,000
State 6,000 11,429
---------- ----------
50,000 81,429
---------- ----------
$ 52,000 $ 83,000
========== ==========
Principal reasons for variations between the statutory federal tax rate and
the effective tax rate were as follows:
1998 1997
__________ __________
Statutory U.S. federal tax rate 34% 34%
State taxes, net of federal benefit 3 3
Federal surtax exemption (4) (3)
Utilization of deferred income tax assets at
rates different than originally capitalized (4) (6)
---------- ----------
29% 28%
========== ==========
The net deferred income tax assets in the accompanying consolidated balance
sheets included the following components as of June 30, 1998 and 1997:
1998 1997
__________ __________
Deferred income tax liabilities $ (10,000) $ (6,000)
Deferred income tax assets:
Net operating loss carryforwards 156,000 218,600
Environmental liability 8,000 8,000
Accrued vacation 51,800 10,200
Other 56,100 44,100
Valuation allowance (16,900) (18,900)
---------- ----------
Net deferred income tax assets $ 245,000 $ 256,000
========== ==========
The Company has operating loss carryforwards of approximately $559,000, which
expire in 2008, that may be offset against future taxable income and
investment tax credits totaling approximately $16,900 that may be offset
against future federal income taxes. If not used, the investment tax credits
will expire as follows:
1999 $ 3,100
2000 3,200
2001 10,600
----------
$ 16,900
==========
11. OTHER RELATED PARTY TRANSACTIONS
During the years ended June 30, 1998 and 1997 amounts paid for compliance
services to entities related to the chief executive officer were $20,124 and
$12,192, respectively.
12. PENSION PLAN
Certain subsidiaries of the Company participate in a multi-employer union
administered defined benefit pension plan that covers the cemetery employees.
Pension expense under this plan was $14,950 in 1998 and $15,113 in 1997.
13. EMPLOYMENT CONTRACTS AND STOCK OPTIONS
The Company is committed under an employment contract with its chief executive
officer (CEO) to pay annual compensation and bonus payments for three years
ending December 31, 1998. Under this agreement, the Company is committed to
pay a bonus of 10% of the Company net income over $300,000 and 15% of the
Company net income over $500,000. The Company accrued $-0- under these terms
of the agreement for the years ended June 30, 1998, and 1997. The annual
compensation expense under the employment contract is $90,000.
In addition, the contract provides for stock options subject to certain
performance levels:
a) 10,000 shares at beginning of year fair market value for each $100,000
of net income over a base income amount of $300,000.
b) 40,000 shares at beginning of year fair market value based on
the performance of the Company's stock in the public market.
The employment agreement expires December 31, 1998, and the exercise date of
the stock options must be between three years of their grant or 90 days after
the termination of the CEO's employment, whichever is first.
Under the agreement, stock options for 40,000 shares of common stock at $.38
per share were earned in 1998. Compensation expense of $65,000 was recognized
with these stock options. No stock options were issued in 1997.
On May 18, 1990, the Board of Directors approved a nonqualified stock option
plan for outside directors. Under the plan, each outside director received
options to purchase 3,500 shares of the Company's common stock at an exercise
price per share equal to the market price at the grant date. These stock
options are exercisable for a period of ten years from the grant date for
active board members or for a period of twelve months from the date of
termination for former board members. The Company reserved 21,000 shares of
common stock for issuance under the plan, of which 3,500 shares have been
issued, an option for 3,500 shares is outstanding and 14,000 shares are
available for issuance.
Shares subject to option are summarized as follows:
1990 Stock Employment Weighted Average
Option Plan Contract Options Exercise Price
___________ ________________ ________________
Balance, June 30, 1996 and 1997 3,500 40,000 $ .25
Options granted - 40,000 .38
----- ------ ---
3,500 80,000 $ .31
===== ====== ===
Options exercisable at:
June 30, 1997 3,500 40,000 $ .25
June 30, 1998 3,500 80,000 $ .32
Information regarding options outstanding at June 30, 1998 is as follows:
Weighted Average
Number of Exercise Weighted Average Remaining
Type of Option Options Price Range Exercise Price Contractual Life
______________ _________ ___________ ________________ ________________
1990 Stock Option Plan 3,500 $ .25 $ .25 4.0 Years
Employment Contract 80,000 $ .25-.38 $ .32 2.0 Years
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its options. Had compensation cost been recognized based on the provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net
income would have been decreased to the following pro forma amounts:
1998 1997
__________ __________
NET INCOME
As reported $ 129,926 $ 214,432
Pro forma $ 128,426 $ 214,432
The weighted average fair value of options granted was $1.68 in 1998. The
fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model. The weighted average assumptions used for
grants in 1998 were as follows:
1998
__________
Risk free interest rate 5.5%
Expected life of options 3 years
Expected volatility 35.85%
Expected dividend yield -
14. CEMETERY AND MAUSOLEUM TRUST FUNDS
Two of the Company's wholly-owned subsidiaries are beneficiaries of perpetual
care trust funds established under the Cemetery Care Act of the State of
Illinois. Earnings on these perpetual care trust funds are to be used for the
care, preservation and ornamentation of the Company's cemetery and mausoleum
properties.
Earnings on these perpetual care trust funds totaled $202,014 in 1998 and
$226,973 in 1997.
Perpetual care trust fund assets totaled approximately $4,100,000 and
$3,850,000 at June 30, 1998 and 1997, respectively.
15. EARNINGS PER SHARE OF COMMON STOCK DISCLOSURES
The following table reconciles the income and shares of the basic and diluted
earnings per share computations:
<TABLE>
1998 1997
___________________________________ ___________________________________
Income Shares Per-share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
___________ _____________ _________ ___________ _____________ _________
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to
common shareholders $129,926 1,309,670 $ .10 $214,432 1,309,670 $ .16
===== =====
EFFECT OF DILUTIVE SECURITIES
Employee Contract - 60,863 - 27,807
1990 Option plan - 2,830 - 2,433
Convertible debentures - 320 - -
-------- --------- -------- ---------
DILUTED EPS
Income available to common
stockholders plus assumed
conversions $129,926 1,373,683 $ .09 $214,432 1,339,910 $ .16
======== ========= ===== ======== ========= =====
</TABLE>
16. SEGMENT INFORMATION
The Company's operations are classified into two principal industry segments:
cemeteries and airline ground equipment. The following is a summary of the
identifiable assets by segment:
1998 1997
__________ __________
Cemeteries $2,437,124 $2,682,218
Airline ground equipment 7,072,179 -
---------- ----------
$9,509,303 $2,682,218
========== ==========
The results of operations of the airline ground equipment business will be
reflected in the company's operations beginning July 1, 1998 (see Note 2).
17. FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at June 30,
1998, and the methods and assumptions used to estimate such fair values, were
as follows:
CASH AND CASH EQUIVALENTS - the fair value approximates the carrying amount
because of the short maturity of those financial instruments.
LONG-TERM DEBT AND OTHER NOTES PAYABLE - the fair value approximates the
carrying amount, as the interest rates on the debt approximate current
interest rates.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the Company
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OAKRIDGE HOLDINGS, INC.
Dated: September 28, 1998 By /s/ Robert C. Harvey
Robert C. Harvey
Chairman of the Board of Directors
In accordance with the Exchange Act, this report has also been signed below by
the following persons on behalf of the Company and in the capacities and on
the dates indicated.
Dated: September 28, 1998 By /s/ Robert C. Harvey
Robert C. Harvey
Chief Executive Officer
Chief Financial Officer
Dated: September 28, 1998 By /s/ Robert B. Gregor
Robert B. Gregor
Secretary
Director
{Letterhead of Riverside Bank}
June 24, 1998
Stinar HG, Inc.
Robert Harvey, President
3255 Sibley Memorial Highway
Eagan, MN 55121
Dear: Mr. Harvey
Riverside Bank (the "Bank") is pleased to commit to make loans to Stinar HG.
Inc.(the "Borrower") in an amount not to exceed $3,000,000.00 (the
"Commitment"), subject to this satisfaction of the conditions set forth in
this letter.
The loans shall be made to you pursuant to loan agreements and related
agreements and documents (the "Loan Documents") which will contain the
following terms:
Three Million Dollar revolving line of credit at the variable interest rate of
.75 % over the Wall Street Journal Rate. Payments will be interest only
payable monthly. Term of the loan will be for one year beginning the date of
consummation.
All advances will be governed by the following borrowing base:
Receivables will be advanced at a rate of 80% excluding all receivables over
90 days, and excluding all foreign receivables not secured by approved letters
of credit.
Inventories will be advanced at a rate of 50%.
Work in Progress will be advanced 75%.
Finished goods will be advanced 75%.
Machinery and Equipment will be advanced at a rate of 50%.
All outbound letters of credit will be deducted from eligible borrowing base.
Stinar HG, Inc., will provide company prepared monthly financial statements,
annually audited financial statements, and an audited statement as of the
control date of Stinar HG, Inc.
Use of loan proceeds are for the purchase of Stinar Corporation, and working
capital.
Stinar HG, Inc., will provide Riverside Bank a Non-Association Letter
pertaining to environmental issues of the property occupied by Stinar HG, Inc.
All types of upstream payments from Stinar HG, Inc. to Oakridge Holdings, Inc.
including but not limited to loans, dividends, and fees to holding company,
are prohibited with prior Riverside Bank approval. Excluding $125,000
annually to pay related expenses.
Riverside Bank must be notified in advance of any changes to, or additions of
officers to the corporation.
Riverside Bank will have a perfected first security interest in all corporate
assets and all claims of current creditors must be satisfied upon consummation
of the loan, and all security interests must be terminated and all
appropriated documents filed.
All claims of current creditors must satisfied upon consummation of the loan,
and all security interests must terminated and all appropriate documents
filed.
Insurance policy's of one million dollars and five hundred thousand dollars
will be purchased for Mr. Harvey and Mr. Jordan respectively naming Riverside
Bank as beneficiary.
Stinar HG, Inc. will verify all sources of debt and equity used to finance the
acquisition of the company. Copies of all executed documents will be
delivered to Riverside Bank.
Stinar Corporation, will provide Riverside Bank with an estoppel agreement.
Stinar HG, Inc. will provide Riverside bank with an opinion of counsel letter
stating all documents prepared by counsel comply with all applicable laws, and
that Stinar HG, Inc., is a legal entity with proper authority to enter into
this transaction.
Stinar HG, Inc., will be required to maintain it primary deposit relationship
with Riverside Bank.
Stinar HG, Inc. will provide documents verifying the legal existence of the
corporations including Articles of Incorporation of Oakridge Holding, Inc.,
and Stinar HG, Inc., Corporate resolutions of Oakridge Holding, Inc., and
Stinar HG, Inc. to include parties authorized to act on behalf of the
Corporation, Oakridge Holding, Inc., and the subsidiary Stinar HG, Inc.
Minutes of the Board of Directors meeting of Oakridge Holding, Inc.
authorizing the acquisition of Stinar Corporation, Inc.
COVENANTS:The Loan Documents will contain covenants customary in similar
transactions, including, without limitation, requirements for periodic financial
reports, restrictions on indebtedness, liens, operations, payments,
dividends, sales of assets, acquisition, and affiliate transactions, and
financial test covenants acceptable to the Bank. Without limiting the
generality of the foregoing, the Loan Documents will contain the following
covenants:
Stinar HG, Inc. will attain a Debt to Tangible Net Worth ratio of no greater
than 3:1 by June 30, 1999. Debt to Tangible Net Worth will be no greater than
2.5:1 at fiscal year ends following 1999.
Stinar HG, Inc. will maintain minimum equity of one million dollars at the
time of consummation of this line of credit, and increasing the equity by a
minimum of two hundred thousand dollars per quarterly.
OTHER TERMS This commitment letter is an outline only and does not contain all
of the terms that will be included in the Loan Documents. Without limiting
the generality of the foregoing, the Loan Documents will contain standard
representations, warranties, covenants, conditions to lending and events of
default.
The Bank will not be obligated to make any loan under this Commitment unless
and until all of the following conditions have been met to its satisfaction:
(a) The loans will be made pursuant to Loan Documents prepared by the Bank
and/or its counsel, which shall in all respects be in form and substance
satisfactory to the Bank.
(b) The Bank and/or its agents shall have completed all due diligence
procedures, and the results of such due diligence shall be satisfactory to the
Bank. Without limiting the generality of the foregoing, the Bank shall have:
the right to conduct quarterly site inspections and collateral review.
(c) The Bank shall have received such certificates, legal opinions and
other evidence of the legal status of the Borrower and the Loan Documents as
it may request, and such certificates, opinions and other evidence shall be
satisfactory to the Bank.
(d) No material adverse change in the business, assets, financial
condition or prospects of the Borrower shall have occurred since March 31,
1998 and no action, suit, proceeding, inquiry or investigation shall be
pending or threatened with respect to the Borrower that could have a material
adverse effect on the Borrower.
(e) The Bank shall have received all fees, costs and expenses that the
borrower is responsible for under the terms of this Commitment as of the date
the loans are made.
Nominal attorney's fees not to exceed $1,000.00
The Borrower shall be responsible for all reasonable costs and expenses
incurred by the Bank in connection with the transactions contemplated by this
letter, including, without limitation, the costs and expenses of the Bank [and
the fee, costs and expenses of the Bank's counsel in preparing the loan
documents and in satisfying all conditions. The Borrower shall be liable for
the foregoing amounts whether or not the loans contemplated by this Commitment
are made by the Bank.
The Borrower agrees to indemnify and hold the Bank and each of its directors,
officers, employees, agents and affiliates (the "Indemnified Parties")
harmless from and against all losses (including costs of settlement), claims,
damages, expenses or liabilities to which any Indemnified Party may be subject
in connection with the transactions contemplated by this Commitment, and
reimburse each Indemnified Party for any reasonable legal or other expense
incurred in connection with investigating, preparing to defend or defending
any such loss, claim, dainage or liability; provided, however, that the
borrower shall not be responsible for any such losses, claims, damages,
expenses or liabilities resulting solely from the gross negligence or willful
misconduct of an Indemnified Party.
This Commitment will become effective upon your delivery to the Bank of
executed counterparts of this letter. This Commitment shall terminate of (i)
this letter is not accepted by you on or prior to 5:00 P.M. on June 26, 1998
or (ii) if the loans contemplated by this Commitment have not been made on or
prior to July 1, 1998.
This Commitment may be executed in counterparts, which, taken together, shall
constitute a single agreement. This Commitment may not be amended, modified
or otherwise altered except in a written instrument executed by the Bank.
This Commitment will be governed by and construed in accordance with the laws
of the state of Minnesota, without regard to the conflict of laws principles
thereof.
If you have any questions regarding these terms and conditions, please contact
me. We look forward to working together and maintaining a mutually satisfying
relationship.
Very truly Yours,
Riverside Bank
By /s/ Kevin Whelan
Its Vice President
Accepted and Agreed to this 24th day of June, 1998
Stinar HG, Inc.,
By /s/ RC Harvey
Its President
Form No. 54-M CONTRACT FOR DEED Minnesota Uniform Conveyancing Blanks
(1978)
Individual Seller
No delinquent taxes and transfer entered; Certificate
of real Estate Value( )filed( )not required
____________________________,19____
___________________________________ County Auditor
By_________________________________ Deputy
Date: June 29, 1998
THIS CONTRACT FOR DEED is made on the above date by Gary F. Stinar and Gene G.
Stinar Joint tenants (martial status) Seller (whether one or more), and STINAR
HG. INC., a Minnesota corporation, Purchaser (whether one or more).
Seller and Purchaser agree to the following terms:
I . PROPERTY DESCRIPTION. Seller hereby sells, and Purchaser hereby buys,
real property in Dakota County, Minnesota, described as follows:
See attached Rider A
together with all hereditaments and appurtenances belonging thereto (the
Property).
2. TITLE. Seller warrants that title to the Property is, on the date of
this contract, subject only to the following exceptions:
(a) Covenants, conditions, restrictions declarations and easements of
record, if any;
(b) Reservations of minerals or mineral rights by the State of Minnesota,
if any;
(c) Building, zoning and subdivision laws and regulations;
(d) The lien of real estate taxes and installments of special assessments
which are payable by Purchaser pursuant to paragraph 6 of this contract; and
(e) The following liens or encumbrances: See attached Rider B
3. DELIVERY OF DEED AND EVIDENCE OF TITLE. Upon Purchasers prompt and
full performance of this contract, Seller shall:
(a) Execute, acknowledge and deliver to Purchaser a general Warranty
Deed, in recordable form, conveying marketable title to the Property to
Purchaser, subject only to the following exceptions:
(i) Those exceptions referred to in paragraph 2(a), (b), (c) and (d) of
this contract;
(ii) Liens, encumbrances, adverse claims or other matters which Purchaser
has created, suffered or permitted to accrue after the date of this contract;
and
(iii)The following liens or encumbrances: Those Identified In section 2(c)
above
(b) (Deliver to Purchaser the abstract of title to the Property or, if the
title is registered, the owners duplicate certificate of title.
4. PURCHASE PRICE. Purchaser shall pay to Seller, at Eagan, Minnesota,
the sum of Two Hundred Thousand Dollars ($200,000), as and for the purchase
price for the Property, payable as follows:
See Rider A
5. PREPAYMENT. Unless otherwise provided in this contract, Purchaser
shall have the right to fully or partially prepay this contract at any time
without penalty. Any partial prepayment shall be applied first to payment of
amounts then due under this contract, including unpaid accrued interest, and
the balance shall be applied to tile principal installments to be paid in the
inverse order of their maturity. Partial prepayment shall not postpone the
due date of the installments to be paid pursuant to this contract or change
the amount of such installments.
6. REAL ESTATE TAX@ AND ASSESSMENTS. Purchaser shall pay, before penalty
accrues, all real estate taxes and installments of special assessments
assessed against the Property which are due and payable in the year 1999 and
in all subsequent years. Real estate taxes and installments of special
assessments which are due and payable in the year in which this contract is
dated shall be prorated to the date of this contract. Seller warrants that the
real estate taxes and. installments of special assessments which were due and
payable in the years preceding the year in which this contract is dated are
paid in full.
7. PROPERTY INSURANCE.
(a) INSURED RISKS AND AMOUNT. Purchaser shall keep all buildings,
improvements and fixtures now or later located on or a part of the Property
insured against loss by fire, extended coverage perils, vandalism, malicious
mischief and, if applicable, steam boiler explosion for at least the amount of
the replacement cost of improvements on the Property. If any of the
buildings, improvements or fixtures are located in a federally designated
flood prone area, and if flood insurance is available for that area, Purchaser
shall procure and maintain flood insurance in amounts reasonably satisfactory
to Seller.
(b) OTHER TERMS. The insurance policy shall contain a loss payable clause
in favor of Seller which provides Sellers right to recover under the insurance
shall not be impaired by any acts or omissions of Purchaser or Seller, and
that Seller shall otherwise be afforded all rights and privileges customarily
provided a mortgagee under the so-called standard mortgage clause.
(c) NOTICE OF DAMAGE. In the event of damage to the Property by fire or
other casualty, Purchaser shall promptly give notice of such damage to Seller
and the insurance company.
8. DAMAGE TO THE PROPERTY.
(a) APPLICATION OF INSURANCE PROCEEDS. If the Property is damaged by fire
or other casualty, the insurance proceeds paid on account of such damage shall
be applied to payment of the amounts payable by Purchaser under this contract,
even if such amounts are not then due to be paid, unless Purchaser makes a
permitted election described in the next paragraph. Such amounts shall be
first applied to unpaid accrued interest and next to the installments to be
paid as provided in this contract in the inverse order of their maturity.
Such payment shall not postpone the due date of the installments to be paid
pursuant to this contract or change the amount of such installments. The
balance of insurance proceeds, if any, shall be the property of Purchaser.
(b) PURCHASER'S ELECTION TO REBUILD. If Purchaser is not in default under
this contract, or after curing any such default, and if the mortgagees in any
prior mortgages and sellers in any prior contracts for deed do not require
otherwise, Purchaser may elect to have that portion of such insurance proceeds
necessary to repair, replace or restore the damaged Property (the repair work)
deposited in escrow with a bank or title insurance company qualified to do
business in the State of Minnesota, or such other party as may be mutually
agreeable to Seller and Purchaser. The election may only be made by written
notice to Seller within sixty days after the damage occurs. Also, the
election will only be permitted if the plans and specifications and contracts
for the repair work are approved by Seller, which approval Seller shall not
unreasonably withhold or delay. If such a permitted election is made by
Purchaser, Seller and Purchaser shall jointly deposit, when paid, such
insurance proceeds into such escrow. If such insurance proceeds are
insufficient for the repair work, Purchaser shall, before the commencement of
the repair work, deposit into such escrow sufficient additional money to
insure the full payment for the repair work. Even if the insurance
proceeds are unavailable or the insufficient to pay the cost of the repair
work, Purchaser shall at all times be responsible to pay the full cost of the
repair work. All escrowed funds shall be disbursed by the escrowee in
accordance with generally accepted sound construction disbursement procedures.
The costs incurred or to be incurred on account of such escrow shall be
deposited by Purchaser into such escrow before the commencement of the repair
work. Purchaser shall complete the repair work as soon as reasonably possible
and in a good and workmanlike manner, and in any event the repair work shall
be completed by Purchaser within one year after the damage occurs. If,
following the completion of and payment for the repair work, there remain any
undisbursed escrow funds, such funds shall be applied to payment of the
amounts payable by Purchaser under this contract in accordance with paragraph
8(a) above.
9. INJURY OR DAMAGE OCCURRING ON THE PROPERTY.
(a) LIABILITY. Seller shall be free from liability and claims for damages
by reason of injuries occurring on or after the date of this contract to any
person or persons or property while on or about the Property. Purchaser shall
defend and indemnify Seller from all liability, loss, costs and obligations,
including reasonable attorneys'
fees, on account of or arising out of any such injuries. However, Purchaser
shall have no liability or obligation to Seller for such injuries which are
caused by the negligence or intentional wrongful act or omissions of seller.
(b) LIABILITY INSURANCE. Purchaser shall, at Purchaser's own expense,
procure and maintain liability insurance against claims for bodily injury,
death and property damage occurring on or about the Property in amounts
reasonably satisfactory to Seller and naming Seller as an additional insured.
10. INSURANCE, GENERALLY. The insurance which Purchaser is required to
procure and maintain pursuant to paragraphs 7 and 9 of this contract shall be
issued by an insurance company or companies licensed to do business in the
State of Minnesota and acceptable to Seller. The insurance shall be
maintained by Purchaser at all times while any amount remains unpaid under
this contract. The insurance policies shall provide for not less than ten
days written notice to Seller before cancellation, non-renewal, termination or
change in coverage, and Purchaser shall deliver to Seller a duplicate original
or certificate of such insurance policy or policies.
11. CONDEMNATION. If all or any part of the Property is taken in
condemnation proceedings instituted under power of eminent domain or is
conveyed in lieu thereof under threat of condemnation, the money paid pursuant
to such condemnation or conveyance in lieu thereof shall be applied to payment
of the amounts payable by Purchaser under this contract, even if such amounts
are not then due to be paid. Such amounts shall be applied first to unpaid
accrued interest and next to the installments to be paid as provided in the,
contract in the inverse order of their maturity. Such payment shall not
postpone the due date of the installments to be paid pursuant to this contract
or change the amount of such installments. The balance, if any, shall be the
property of Purchaser.
12. WASTE, REPAIR AND LIENS. Purchaser shall not remove or demolish any
buildings, improvements or fixtures now or later located on or a part of the
Property, nor shall Purchaser commit or allow waste of the Property.
Purchaser shall maintain the Property in good condition and repair. Purchaser
shall not create or permit to accrue liens or adverse claims against the
Property which constitute a lien or claim against Seller's interest in the
Property. Purchaser shall pay to Seller all amounts, costs and expenses,
including reasonable attorneys' fees, incurred by Seller to remove any such
liens or adverse claims.
13. DEED TAX. Seller shall, upon Purchasees full performance of this
contract, pay the deed tax due upon the recording or filing of the deed to be
delivered by Seller to Purchaser.
14. NOTICE OF ASSIGNMENT. If either Seller or Purchaser assigns their
interest in the Property, a copy of such assignment shall promptly be
furnished to the non-assigning party.
15. PROTECTION OF INTERESTS. If Purchaser fails to pay any sum of money
required under the terms of this contract or fails to perform any of
Purchaser's obligations as set forth in this contract, Seller may, at Seller's
option, pay the same or cause the same to be performed, or both, and the
amounts so paid by Seller and the cost of such performance shall be payable at
once, with interest at the rate stated in paragraph 4 of this contract, as an
additional amount due Seller under this contract.
If there now exists, or if Seller hereafter creates, suffers or permits to
accrue, any mortgage, contract for deed, lien or encumbrance against the
Property which is not herein expressly assumed by Purchaser, and provided
Purchaser is not in default under this contract, Seller shall timely pay all
amounts due thereon, and if Seller fails to do so, Purchaser may, at
Purchaser's option, pay any such delinquent amounts and deduct the amounts
paid from the installment(s) next coming due under this contract.
16. DEFAULT. The time of performance by Purchaser of the terms of this
contract is an essential part of this contract. Should Purchaser fail to
timely perform any of the terms of this contract, Seller may, at Seller's
option, elect to declare this contract canceled and terminated by notice to
Purchaser in accordance with applicable law. All rights, title and interest
acquired under this contract by Purchaser shall then cease and terminate, and
all improvements made upon the Property and all payments made by Purchaser
pursuant to this contract shall belong to Seller as liquidated damages for
breach of this contract. Neither the extension of the time for payment of any
sum of money to be paid hereunder nor any waiver by Seller of Seller's rights
to declare this contract forfeited by reason of any breach shall in any manner
affect Seller's right to cancel this contract because of defaults subsequently
occurring, and no extension of time shall be valid unless agreed to in
writing. After service of notice of default and failure to cure such default
within the period allowed by law, Purchaser shall, upon demand, surrender
possession of tile Properly to Seller, but Purchaser shall be entitled to
possession of the Property until the expiration of such period.
17. BINDING EFFECT. The terms of this contract shall run with the land
and bind the parties hereto and their successors in interest.
18. HEADINGS. Headings of the paragraphs of this contract are for
convenience only and do not define, limit or construe the contents of such
paragraphs.
19. ASSESSMENTS BY OWNERS' ASSOCIATION. If the Property is subject to a
recorded declaration providing for assessments to be levied against the
Property by any owners' association, which assessments may become alien
against the Property if not paid, then:
(a) Purchaser shall promptly pay, when due, all assessments imposed by the
owners' association or other governing body as required by the provisions of
the declaration or other related documents; and
(b) So long as the owners' association maintains a master or blanket
policy of insurance against fire, extended coverage perils and such other
hazards and in such amounts as are required by this contract, then:
(i) Purchaser's obligation in this contract to maintain hazard insurance
coverage on the Property is satisfied; and
(ii)The provisions in paragraph 8 of this contract regarding application of
insurance proceeds shall be superseded by the provisions of the declaration or
other related documents; and
(iii)In the event of a distribution of insurance proceeds in lieu of
restoration or repair following all insured casualty loss to the Property, any
such proceeds payable to Purchaser are hereby assigned and shall be paid to
Seller for application to the sum secured by this contract, with the excess,
if any, paid to Purchaser.
20. ADDITIONAL TERMS.
See Rider A
SELLER(S)PURCHASER(S)
/s/ Gary F. Stinar STINAR HG, INC
Gary F. Stinar By: /s/ RC Harvey
Robert Harvey, President
/s/ Gene G. Stinar
Gene G. Stinar
STATE OF MINNESOTA)
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this 29th day of June,
1998, by Gary F. Stinar and Gene G. Stinar,individuals, Grantor.
Notarial Stamp or Seal (or Other Title or Rank)
STATE OF MINNESOTA)
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this 29th day of June,
1998, by Robert Harvey, the President of Stinar HG. Inc., on behalf of the
corporation, Grantee.
Notarial Stamp or Seal (or Other Title or Rank)
Title Instrument Was Drafted By (Name and Address)
OPPENHEIMER WOLFF & DONNELLY LLP (TGR)
3400 Plaza VII
45 South Seventh Street
Minneapolis, MN 55402
FAILURE TO RECORD OR FILE THIS CONTRACT FOR DEED MAY GIVE OTHER PARTIES
PRIORITY OVER PURCHASER'S INTEREST IN THE PROPERTY.
RIDER A to CONTRACT FOR DEED
1. Legal Description
The Property conveyed in the foregoing Contract for Deed of which this Rider A
forms a part is legally described as follows:
Lot Five (5) Block Two (2) in Sibley Terminal Industrial Park, according to
the plat thereof now on file and of record in the office of the Registrar of
Deeds of Dakota County, Minnesota.
The Seller certifies that it has no knowledge of any wells located on the
above-described real property.
2. Title Insurance
Seller shall procure at its own cost a commitment for title insurance and
Purchaser shall pay all premiums for title insurance in an amount not less
than the Contract for Deed insuring marketable title to the Property,
exclusive of all liens, encumbrances, restrictions, defects and other items
except those named in the foregoing Contract for Deed.
3. Purchase Price
The Purchase Price for the Property shall be the sum of Two Hundred Thousand
Dollars ($200,000). Interest shall accrue on the unpaid balance of the
Purchase Price from June 29, 1998, at the rate of eight and one-quarter
percent (8 1/4%), with monthly payments of principal and interest based on an
amortization over an assumed term of three hundred and sixty months.
Principal and interest shall be paid in eighty-four equal monthly installments
of principal and interest each in the amount of One Thousand Five Hundred Two
and 53/100 Dollars ($1,502.53) commencing on July 1, 1998 and continuing on
the first day of each month thereafter, with the entire remaining balance due
and payable on the June 29, 2005.
4. Environmental Matters
Seller and Purchaser acknowledge the Seller's obligations under the Asset
Purchase Agreement dated March 31, 1998 among Purchaser, Seller, Stinar
Corporation and the other shareholders of Stinar Corporation ("Purchase
Agreement") to remediate certain environmental releases and contamination with
respect to the Property and to escrow certain amounts payable hereunder to
provide for the payment of costs incurred in such remediation. Seller and
Purchaser agree that Paragraph 9 of the Purchase Agreement is incorporated
herein by this reference.
Initial:
STINAR HG, INC. /s/ RCH GARY F. STINAR /s/ GFS
GENE G. STINAR /s/ GGS
RIDER B to CONTRACT FOR DEED
Liens or Encumbrances
Right of access to Highway 13 as taken by the State of Minnesota in Final
Certificate recorded in Book 62 of Miscellaneous Records, page 19.
Storm Sewer easement over the Southwesterly 25 feet of the Northwesterly 25
feet in favor of the City of Eagan as created in Document No. 97745.
Initial:
STINAR HG, INC. /s/ RCH GARY F. STINAR /s/ GFS
GENE G. STINAR /s/ GGS
Form No. 54-M CONTRACT FOR DEED Minnesota Uniform Conveyancing Blanks
(1978)
Individual Seller
No delinquent taxes and transfer entered; Certificate
of real Estate Value( )filed( )not required
____________________________,19____
___________________________________ County Auditor
By_________________________________ Deputy
Date: June 29, 1998
THIS CONTRACT FOR DEED is made on the above date by GGS LLC, a limited
liability company under the laws of Minnesota, Seller, and STINAR HG. INC., a
Minnesota corporation, Purchaser (whether one or more).
Seller and Purchaser agree to the following terms:
I . PROPERTY DESCRIPTION. Seller hereby sells, and Purchaser hereby buys,
real property in Dakota County, Minnesota, described as follows:
See attached Rider A
together with all hereditaments and appurtenances belonging thereto (the
Property).
2. TITLE. Seller warrants that title to the Property is, on the date of
this contract, subject only to the following exceptions:
(a) Covenants, conditions, restrictions declarations and easements of
record, if any;
(b) Reservations of minerals or mineral rights by the State of Minnesota,
if any;
(c) Building, zoning and subdivision laws and regulations;
(d) The lien of real estate taxes and installments of special assessments
which are payable by Purchaser pursuant to paragraph 6 of this contract; and
(e) The following liens or encumbrances: See attached Rider B
3. DELIVERY OF DEED AND EVIDENCE OF TITLE. Upon Purchasers prompt and
full performance of this contract, Seller shall:
(a) Execute, acknowledge and deliver to Purchaser a general Warranty
Deed, in recordable form, conveying marketable title to the Property to
Purchaser, subject only to the following exceptions:
(i) Those exceptions referred to in paragraph 2(a), (b), (c) and (d) of
this contract;
(ii) Liens, encumbrances, adverse claims or other matters which Purchaser
has created, suffered or permitted to accrue after the date of this contract;
and
(iii)The following liens or encumbrances: Those Identified In section 2(e)
above
(b) (Deliver to Purchaser the abstract of title to the Property or, if the
title is registered, the owners duplicate certificate of title.
4. PURCHASE PRICE. Purchaser shall pay to Seller, at Eagan, Minnesota,
the sum of One Million One Hundred Thousand Dollars ($1,100,000), as and for
the purchase price for the Property, payable as follows:
See Rider A
5. PREPAYMENT. Unless otherwise provided in this contract, Purchaser
shall have the right to fully or partially prepay this contract at any time
without penalty. Any partial prepayment shall be applied first to payment of
amounts then due under this contract, including unpaid accrued interest, and
the balance shall be applied to tile principal installments to be paid in the
inverse order of their maturity. Partial prepayment shall not postpone the
due date of the installments to be paid pursuant to this contract or change
the amount of such installments.
6. REAL ESTATE TAX AND ASSESSMENTS. Purchaser shall pay, before penalty
accrues, all real estate taxes and installments of special assessments
assessed against the Property which are due and payable in the year 1999 and
in all subsequent years. Real estate taxes and installments of special
assessments which are due and payable in the year in which this contract is
dated shall be prorated to the date of this contract. Seller warrants that the
real estate taxes and. installments of special assessments which were due and
payable in the years preceding the year in which this contract is dated are
paid in full.
7. PROPERTY INSURANCE.
(a) INSURED RISKS AND AMOUNT. Purchaser shall keep all buildings,
improvements and fixtures now or later located on or a part of the Property
insured against loss by fire, extended coverage perils, vandalism, malicious
mischief and, if applicable, steam boiler explosion for at least the amount of
the replacement cost of improvements on the Property. If any of the
buildings, improvements or fixtures are located in a federally designated
flood prone area, and if flood insurance is available for that area, Purchaser
shall procure and maintain flood insurance in amounts reasonably satisfactory
to Seller.
(b) OTHER TERMS. The insurance policy shall contain a loss payable clause
in favor of Seller which provides Sellers right to recover under the insurance
shall not be impaired by any acts or omissions of Purchaser or Seller, and
that Seller shall otherwise be afforded all rights and privileges customarily
provided a mortgagee under the so-called standard mortgage clause.
(c) NOTICE OF DAMAGE. In the event of damage to the Property by fire or
other casualty, Purchaser shall promptly give notice of such damage to Seller
and the insurance company.
8. DAMAGE TO THE PROPERTY.
(a) APPLICATION OF INSURANCE PROCEEDS. If the Property is damaged by fire
or other casualty, the insurance proceeds paid on account of such damage shall
be applied to payment of the amounts payable by Purchaser under this contract,
even if such amounts are not then due to be paid, unless Purchaser makes a
permitted election described in the next paragraph. Such amounts shall be
first applied to unpaid accrued interest and next to the installments to be
paid as provided in this contract in the inverse order of their maturity.
Such payment shall not postpone the due date of the installments to be paid
pursuant to this contract or change the amount of such installments. The
balance of insurance proceeds, if any, shall be the property of Purchaser.
(b) PURCHASER'S ELECTION TO REBUILD. If Purchaser is not in default under
this contract, or after curing any such default, and if the mortgagees in any
prior mortgages and sellers in any prior contracts for deed do not require
otherwise, Purchaser may elect to have that portion of such insurance proceeds
necessary to repair, replace or restore the damaged Property (the repair work)
deposited in escrow with a bank or title insurance company qualified to do
business in the State of Minnesota, or such other party as may be mutually
agreeable to Seller and Purchaser. The election may only be made by written
notice to Seller within sixty days after the damage occurs. Also, the
election will only be permitted if the plans and specifications and contracts
for the repair work are approved by Seller, which approval Seller shall not
unreasonably withhold or delay. If such a permitted election is made by
Purchaser, Seller and Purchaser shall jointly deposit, when paid, such
insurance proceeds into such escrow. If such insurance proceeds are
insufficient for the repair work, Purchaser shall, before the commencement of
the repair work, deposit into such escrow sufficient additional money to
insure the full payment for the repair work. Even if the insurance proceeds
are unavailable or the insufficient to pay the cost of the repair work,
Purchaser shall at all times be responsible to pay the full cost of the repair
work. All escrowed funds shall be disbursed by the escrowee in accordance
with generally accepted sound construction disbursement procedures. The costs
incurred or to be incurred on account of such escrow shall be deposited by
Purchaser into such escrow before the commencement of the repair work.
Purchaser shall complete the repair work as soon as reasonably possible and in
a good and workmanlike manner, and in any event the repair work shall be
completed by Purchaser within one year after the damage occurs. If, following
the completion of and payment for the repair work, there remain any
undisbursed escrow funds, such funds shall be applied to payment of the
amounts payable by Purchaser under this contract in accordance with paragraph
8(a) above.
9. INJURY OR DAMAGE OCCURRING ON THE PROPERTY.
(a) LIABILITY. Seller shall be free from liability and claims for damages
by reason of injuries occurring on or after the date of this contract to any
person or persons or property while on or about the Property. Purchaser shall
defend and indemnify Seller from all liability, loss, costs and obligations,
including reasonable attorneys'
fees, on account of or arising out of any such injuries. However, Purchaser
shall have no liability or obligation to Seller for such injuries which are
caused by the negligence or intentional wrongful act or omissions of seller.
(b) LIABILITY INSURANCE. Purchaser shall, at Purchaser's own expense,
procure and maintain liability insurance against claims for bodily injury,
death and property damage occurring on or about the Property in amounts
reasonably satisfactory to Seller and naming Seller as an additional insured.
10. INSURANCE, GENERALLY. The insurance which Purchaser is required to
procure and maintain pursuant to paragraphs 7 and 9 of this contract shall be
issued by an insurance company or companies licensed to do business in the
State of Minnesota and acceptable to Seller. The insurance shall be
maintained by Purchaser at all times while any amount remains unpaid under
this contract. The insurance policies shall provide for not less than ten
days written notice to Seller before cancellation, non-renewal, termination or
change in coverage, and Purchaser shall deliver to Seller a duplicate original
or certificate of such insurance policy or policies.
11. CONDEMNATION. If all or any part of the Property is taken in
condemnation proceedings instituted under power of eminent domain or is
conveyed in lieu thereof under threat of condemnation, the money paid pursuant
to such condemnation or conveyance in lieu thereof shall be applied to payment
of the amounts payable by Purchaser under this contract, even if such amounts
are not then due to be paid. Such amounts shall be applied first to unpaid
accrued interest and next to the installments to be paid as provided in the,
contract in the inverse order of their maturity. Such payment shall not
postpone the due date of the installments to be paid pursuant to this contract
or change the amount of such installments. The balance, if any, shall be the
property of Purchaser.
12. WASTE, REPAIR AND LIENS. Purchaser shall not remove or demolish any
buildings, improvements or fixtures now or later located on or a part of the
Property, nor shall Purchaser commit or allow waste of the Property.
Purchaser shall maintain the Property in good condition and repair. Purchaser
shall not create or permit to accrue liens or adverse claims against the
Property which constitute a lien or claim against Seller's interest in the
Property. Purchaser shall pay to Seller all amounts, costs and expenses,
including reasonable attorneys' fees, incurred by Seller to remove any such
liens or adverse claims.
13. DEED TAX. Seller shall, upon Purchasees full performance of this
contract, pay the deed tax due upon the recording or filing of the deed to be
delivered by Seller to Purchaser.
14. NOTICE OF ASSIGNMENT. If either Seller or Purchaser assigns their
interest in the Property, a copy of such assignment shall promptly be furnished
to the non-assigning party.
15. PROTECTION OF INTERESTS. If Purchaser fails to pay any sum of money
required under the terms of this contract or fails to perform any of
Purchaser's obligations as set forth in this contract, Seller may, at Seller's
option, pay the same or cause the same to be performed, or both, and the
amounts so paid by Seller and the cost of such performance shall be payable at
once, with interest at the rate stated in paragraph 4 of this contract, as an
additional amount due Seller under this contract.
If there now exists, or if Seller hereafter creates, suffers or permits to
accrue, any mortgage, contract for deed, lien or encumbrance against the
Property which is not herein expressly assumed by Purchaser, and provided
Purchaser is not in default under this contract, Seller shall timely pay all
amounts due thereon, and if Seller fails to do so, Purchaser may, at
Purchaser's option, pay any such delinquent amounts and deduct the amounts
paid from the installment(s) next coming due under this contract.
16. DEFAULT. The time of performance by Purchaser of the terms of this
contract is an essential part of this contract. Should Purchaser fail to
timely perform any of the terms of this contract, Seller may, at Seller's
option, elect to declare this contract canceled and terminated by notice to
Purchaser in accordance with applicable law. All rights, title and interest
acquired under this contract by Purchaser shall then cease and terminate, and
all improvements made upon the Property and all payments made by Purchaser
pursuant to this contract shall belong to Seller as liquidated damages for
breach of this contract. Neither the extension of the time for payment of any
sum of money to be paid hereunder nor any waiver by Seller of Seller's rights
to declare this contract forfeited by reason of any breach shall in any manner
affect Seller's right to cancel this contract because of defaults subsequently
occurring, and no extension of time shall be valid unless agreed to in
writing. After service of notice of default and failure to cure such default
within the period allowed by law, Purchaser shall, upon demand, surrender
possession of tile Properly to Seller, but Purchaser shall be entitled to
possession of the Property until the expiration of such period.
17. BINDING EFFECT. The terms of this contract shall run with the land
and bind the parties hereto and their successors in interest.
18. HEADINGS. Headings of the paragraphs of this contract are for
convenience only and do not define, limit or construe the contents of such
paragraphs.
19. ASSESSMENTS BY OWNERS' ASSOCIATION. If the Property is subject to a
recorded declaration providing for assessments to be levied against the
Property by any owners' association, which assessments may become alien
against the Property if not paid, then:
(a) Purchaser shall promptly pay, when due, all assessments imposed by the
owners' association or other governing body as required by the provisions of
the declaration or other related documents; and
(b) So long as the owners' association maintains a master or blanket
policy of insurance against fire, extended coverage perils and such other
hazards and in such amounts as are required by this contract, then:
(i) Purchaser's obligation in this contract to maintain hazard insurance
coverage on the Property is satisfied; and
(ii)The provisions in paragraph 8 of this contract regarding application of
insurance proceeds shall be superseded by the provisions of the declaration or
other related documents; and
(iii)In the event of a distribution of insurance proceeds in lieu of
restoration or repair following all insured casualty loss to the Property, any
such proceeds payable to Purchaser are hereby assigned and shall be paid to
Seller for application to the sum secured by this contract, with the excess,
if any, paid to Purchaser.
20.ADDITIONAL TERMS.
See Rider A
SELLER(S) PURCHASER(S)
GGS LLC STINAR HG, INC
/s/ Gary F. Stinar By: /s/ RC Harvey
Robert Harvey, President
/s/ Gene G. Stinar
STATE OF MINNESOTA)
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this 29th day of June,
1998, by Gene Stinar and Gary Stinar, the president and secretary, of GGS LLC,
a limited liability company under hte laws of Minnesota, on behalf of the
limited liability company, Grantor.
Notarial Stamp or Seal (or Other Title or Rank)
STATE OF MINNESOTA)
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this 29th day of June,
1998, by Robert Harvey, the President of Stinar HG. Inc., on behalf of the
corporation, Grantee.
Notarial Stamp or Seal (or Other Title or Rank)
Title Instrument Was Drafted By (Name and Address)
OPPENHEIMER WOLFF & DONNELLY LLP (TGR)
3400 Plaza VII
45 South Seventh Street
Minneapolis, MN 55402
FAILURE TO RECORD OR FILE THIS CONTRACT FOR DEED MAY GIVE OTHER PARTIES
PRIORITY OVER PURCHASER'S INTEREST IN THE PROPERTY.
RIDER A to CONTRACT FOR DEED
1. Legal Description
The Property conveyed in the foregoing Contract for Deed of which this Rider A
forms a part is legally described as follows:
Lot Four (4) Block Two (2) in Sibley Terminal Industrial Park, according to
the plat thereof now on file and of record in the office of the Registrar of
Deeds of Dakota County, Minnesota.
The Seller certifies that it has no knowledge of any wells located on the
above-described real property.
2. Title Insurance
Seller shall procure at its own cost a commitment for title insurance and
Purchaser shall pay all premiums for title insurance in an amount not less
than the Contract for Deed insuring marketable title to the Property,
exclusive of all liens, encumbrances, restrictions, defects and other items
except those named in the foregoing Contract for Deed.
3. Purchase Price
The Purchase Price for the Property shall be the sum of One Million One
Hundred Thousand Dollars ($1,100,000). Interest shall accrue on the unpaid
balance of the Purchase Price from June 29, 1998, at the rate of eight and
one-quarter percent (8 1/4%), with monthly payments of principal and interest
based on an amortization over an assumed term of three hundred and sixty
months. Principal and interest shall be paid in eighty-four equal monthly
installments of principal and interest each in the amount of Eight Thousand
Two Hundred Sixty-three and 93/100 Dollars ($8,263.93) commencing on July 1,
1998 and continuing on the first day of each month thereafter, with the entire
remaining balance due and payable on the June 29, 2005.
4. Environmental Matters
Seller and Purchaser acknowledge the Seller's obligations under the Asset
Purchase Agreement dated March 31, 1998 among Purchaser, Seller, Stinar
Corporation and the other shareholders of Stinar Corporation ("Purchase
Agreement") to remediate certain environmental releases and contamination with
respect to the Property and to escrow certain amounts payable hereunder to
provide for the payment of costs incurred in such remediation. Seller and
Purchaser agree that Paragraph 9 of the Purchase Agreement is incorporated
herein by this reference.
Initial:
STINAR HG, INC. /s/ RCH GGS LLC /s/ GGS
RIDER B to CONTRACT FOR DEED
Liens or Encumbrances
All right of access to Highway 13, except across the Northeasterly 30 feet has
been taken by State of Minnesota as evidenced by final Certificate recorded in
Book 62 of Miscellaneous Records, page 19, conveyance of access filed as
Document No. 127294 and Quit Claim Deed filed as Document No. 128609.
Initial:
STINAR HG, INC. /s/ RCH GGS LLC /s/ GGS
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
__________________________
SUBSIDIARY STATE IN WHICH ORGANIZED
Lain and Son, Inc. Illinois
Glen Oak Cemetery Company Illinois
(a wholly owned subsidiary
of Lain and Son, Inc.)
Oakridge Cemetery (Hillside), Inc. Illinois
(a wholly owned subsidiary
of Lain and Son, Inc.)
Stinar Corporation Minnesota
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 823,458
<SECURITIES> 0
<RECEIVABLES> 2,578,392
<ALLOWANCES> 11,000
<INVENTORY> 3,517,321
<CURRENT-ASSETS> 7,163,902
<PP&E> 3,632,908
<DEPRECIATION> 1,347,698
<TOTAL-ASSETS> 9,509,303
<CURRENT-LIABILITIES> 5,186,957
<BONDS> 0
0
0
<COMMON> 130,968
<OTHER-SE> 1,940,500
<TOTAL-LIABILITY-AND-EQUITY> 9,509,303
<SALES> 2,767,214
<TOTAL-REVENUES> 2,767,214
<CGS> 1,306,614
<TOTAL-COSTS> 2,261,176
<OTHER-EXPENSES> 251,070
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<INTEREST-EXPENSE> 73,042
<INCOME-PRETAX> 181,926
<INCOME-TAX> 52,000
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<NET-INCOME> 129,926
<EPS-PRIMARY> .10
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