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 December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file number 0-17018
STRATFORD AMERICAN CORPORATION
(Exact name of small business issuer as specified in its charter)
Arizona 86-0608035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 E. Arizona Biltmore Circle, Building 2, Suite 1270, Phoenix, Arizona 85016
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602)956-7809
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
Series "A" Preferred Stock, $.01 Par Value
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 the Regulation S-B is not contained herein, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part of III of this Form
10-KSB or any amendment to this Form 10-KSB [X]
Issuer's revenue for its most recent fiscal year: $12,425,000.
The aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the February 1996, average bid price
of $.02 per share is $1,261,000.
At February 29, 1996, 84,076,806 shares of the issuer's common
stock were issued and outstanding.
Certain portions of the registrant's definitive Proxy Statement
which will be filed with the Commission on or about April 30, 1996, in
connection with the Annual Meeting of Shareholders of the registrant to be held
on July 10, 1996, are incorporated by reference into Part III of this report.
Transitional Small Business Disclosure Format (check one) Yes No X
---- ----
Index to Exhibits is located at page 26 hereof.
<PAGE>
PART I
ITEM 1. BUSINESS
- ----------------------
General
- -------
General Development of Business. Stratford American Corporation
(the "Company"), an Arizona corporation, has several wholly-owned subsidiaries,
and two subsidiaries of which the Company owns 75% or more. Unless otherwise
specified, the term "Company" as used herein includes the Company's
subsidiaries.
In June 1994, the Company established Stratford American Car
Rental Systems, Inc. ("SCRS") to acquire the assets and franchise rights of
substantially all of the Arizona operations doing business as Dollar Rent A Car.
Financial Information about Industry Segments. Financial
information about industry segments is found in the financial statements of the
Company, Item 7 - Financial Statements and Supplementary Data.
Narrative Description of Business
- ---------------------------------
The Company, through its subsidiaries, is engaged principally in
the businesses of leisure and commercial car rental and sports industry career
education. The Company retains nominal involvement in real estate management and
natural resource exploration and development. The Company employs 110 full-time
employees.
Dollar Rent A Car. In June 1994, through the Company's 80% owned
subsidiary SCRS, the Company acquired the assets and franchise rights to
substantially all of the Arizona operations doing business as Dollar Rent A Car.
As part of the acquisition, additional funds were raised by SCRS from
subordinated notes. The noteholders also own 20% of the outstanding common stock
of SCRS not owned by the Company. See Notes 3 and 12 to the Consolidated
Financial Statements. The status of SCRS as a franchise is governed by a
franchise agreement (the "Franchise Agreement") granted by Dollar Systems, Inc.
(the "Franchisor"). The Franchise Agreement grants to SCRS certain exclusive
territories in which to operate the Dollar Rent A Car vehicle rental business.
These territories include all Arizona counties except the Counties of Coconino,
Navajo and Pima. The Franchise Agreement is in effect for a period of ten years
with an option to renew such agreement for an additional ten years provided that
SCRS has operated its business in compliance with the terms of the Franchise
Agreement. The Franchise Agreement provides the Franchisor with significant
rights regarding the business and operations of SCRS. Specifically, SCRS is
required to operate its franchise in accordance with certain standards contained
in the Franchise Agreement and a referenced Dollar Rent A Car Operations Guide.
This includes certain guidelines relating to the number of vehicles maintained
for rental, and the amount of advertising and promotion expenditures required.
The Franchisor has the right to monitor the operations of SCRS, and certain
defaults by SCRS under the Franchise Agreement would give the Franchisor the
right to terminate the franchise governed by such Franchise Agreement. Certain
license fees are required to be paid monthly based on an agreed upon percentage
structure of gross rental revenues, as provided for by the Franchise Agreement.
In May 1995, an Assistance Agreement between SCRS and Franchisor modified the
License Agreement (see Note 3 to the Consolidated Financial Statements).
SCRS rents cars, trucks, and passenger vans to business and
leisure travelers and others at 12 locations, including all three terminals at
Phoenix Sky Harbor International Airport. SCRS also generates revenue from the
sales of ancillary products such as loss damage waivers, supplemental liability
insurance, personal accident insurance and personal effects insurance. Total
revenues from the car rental operations accounted for approximately 90% of
consolidated revenue during the year ended December 31, 1995.
SCRS has opened four additional locations since its acquisition,
including rental counters at both the America West Arena and the Arizona
Biltmore Resort in Phoenix, the Radisson Resort in Scottsdale, and the Country
Suites Hotel in Tempe, Arizona.
The vehicle rental industry is very competitive and subject to the
pressures of both the rental rates and fleet sizes of competitors as well as the
availability of a reasonably priced fleet. In any given location, SCRS may
encounter competition from national, regional and local companies, many of whom,
particularly those owned by the major vehicle rental companies, have access to
greater financial resources than SCRS. SCRS's main competitors are The Hertz
Corporation, Avis Inc., Alamo Rent a Car Inc., National Car Rental System Inc.,
and Budget Rent a Car Corporation. SCRS's operations are generally the sixth
largest at its Phoenix Sky Harbor Airport locations.
Approximately 81% of SCRS's revenue is generated at its airport
facilities. Any event which disrupts air travel patterns at SCRS's airport
facilities for a continued period of time could have a material adverse effect
on SCRS's financial condition and results of operations. These events could
include labor unrest, airline bankruptcies or consolidations, the outbreak of
war or terrorist incidents and natural occurrences, such as earthquakes.
SCRS's rental business is seasonal, and historically, the stronger
revenue months occur from February through May. As a result, any occurrence that
disrupts travel patterns during this period could have a material adverse effect
on SCRS's annual performance. SCRS's weakest revenue months are generally the
months of August, September and December.
Sports Careers. In November 1989, under the Company's subsidiary
Stratford American Sports Corp. ("SASC"), the Company acquired the assets and
products marketed under the name "Sports Careers." The Company owns 75% of the
outstanding stock of SASC. See Note 12 to the Consolidated Financial Statements.
Sports Careers is an integrated system of marketing career opportunities in
sports media, athletic administration, sports marketing, education, health,
fitness and recreation, and sports entrepreneurship through regional sports
conferences, a semi-monthly newsletter, self assessment and resume kits, and
sports career research tools. "Sports Careers" is a licensed tradename of SASC.
Total revenues from Sports Careers operations accounted for approximately 9% of
consolidated revenue during the year ended December 31, 1995.
SASC sponsors regional sports conferences that bring together job
seekers with professionals in the sports interest groups identified above. The
conferences include general presentations from nationally known personalities in
each of these areas of sports interest. Smaller group encounters focus on skills
to enable job seekers to research opportunities, market themselves, and in some
cases, interview for positions within the industry. Three conferences were held
in 1995 and 1994. The next conference is scheduled for July 1996.
SASC offers a membership program, which among other benefits,
includes a self assessment kit and a semi-monthly newsletter addressing
employment opportunities in each special interest group. Included in each issue
are articles to assist the reader in finding careers within the sports industry.
The editorial format involves articles dedicated to the education of the sports
industry applicant as well as real job listings in each issue. Paid circulation
for the February 1996 issue was approximately 1,800. The primary subscribers to
the membership program are individuals.
SASC, effective January 1, 1993, also serves as the exclusive
distributor for the Sports Marketplace and the Sports Marketplace Register.
These research tools provide interested individuals with contacts and companies
throughout the sports industry. These products are sold to individuals,
libraries and companies in the industry.
The Company knows of no competition to SASC which currently
addresses the sports market on this broad basis.
Real Estate. The Company's directly owned real estate properties,
concentrated in Stratford American Properties Corporation ("SAPC"), a
wholly-owned subsidiary, were sold during 1994. In addition, property owned
through a joint venture interest was sold in March 1995. Total revenues from
real estate operations were insignificant during the year ended December 31,
1995. (See Item 2 - Properties.)
Natural Resources. The Company owns, through its subsidiaries, an
interest in an Alaskan gold mining prospect, and a nominal interest in four oil
and gas wells located in Arkansas and Oklahoma. Total revenues from natural
resource operations were insignificant during the year ended December 31, 1995.
(See Item 2 - Properties.)
ITEM 2. PROPERTIES
- ------------------------
Principal Offices. The principal offices of the Company are
located at 2400 East Arizona Biltmore Circle, Building 2, Suite 1270, Phoenix,
Arizona 85016, telephone (602) 956-7809. The premises are leased at the rate of
approximately $99,000 per year. The term of the current lease expires in
September 1999. The Company believes its office space is sufficient to meet its
operational needs in the near future.
SCRS leases a 2,500 square foot building situated on 2.4 acres of
land for use in its Dollar Rent A Car operations as a service facility and
vehicle staging area. This facility, located at 50 S. 24th Street in Phoenix,
Arizona, is leased at a current rate of approximately $79,000 per year. The
lease expires in May 1999 and contains a five year extension option. SCRS also
leases various facilities for its satellite and airport operations for Dollar
Rent A Car under leases with terms ranging from month to month through ten
years. The airport lease requires minimum annual lease payments of $1,150,000
and a maximum of 10% of specified airport revenues. This lease expires in
October 2000.
Real Estate Properties. As of March 31, 1995, the Company no
longer owns an interest in any real estate projects, and the Company currently
has no plans to invest in real estate opportunities in the foreseeable future.
Effective March 27, 1995, the Company, through its 50% joint
venture interest, sold its interest in University Center property, located in
Tempe, Arizona, consisting of three office buildings with an aggregate 175,000
rentable square feet and 8 acres of adjacent undeveloped land. As a result of
the sale, the underlying indebtedness, totaling $17,553,000, was completely
satisfied through payments and reductions based on terms of an agreement with
First Interstate Bank of Arizona, N.A.
Natural Resource Properties.
----------------------------
Alaska Gold Exploration. The Company, through Stratford American
Gold Venture Corporation, holds a 41.3% interest in the "Big Hurrah," a gold
mine prospect located near Nome, Alaska. The Company's joint venture partner
with respect to this interest is Cornwall Pacific Alaska, Inc. ("Cornwall").
On September 16, 1988, the Company and Cornwall granted to Solomon
Gold Corporation (formerly known as Thor Gold Alaska, Inc.) ("Solomon") an
option to acquire a 70% interest in the Big Hurrah prospect in consideration of
Solomon expending $3,500,000 by December 31, 1991, on exploration and
development of the prospect. If Solomon exercises the option, the interest of
the Company in the prospect will be reduced to 12.39%. In 1988, Solomon drilled
91 core samples and, in June 1989, issued a feasibility report in which it
recommended continued exploration and mining of the prospect. The feasibility
report assumed a base price of gold of $400 per ounce.
In July 1989, Solomon invoked the force majeure clause of its
option on the basis that the price of gold dropped to less than $375 per ounce
during the preceding 90 days. Operations have been suspended until the price of
gold exceeds $400 per ounce, adjusted for CPI increases, for 90 consecutive
days. The price of gold as of March 31, 1996 was $396.00 per troy ounce. The
requirement for Solomon to expend $3,500,000 by December 31, 1991 is extended by
the period the force majeure clause is in effect. The Company recorded a
write-down in 1993 for its interest in the Big Hurrah. See Note 6 of the
Consolidated Financial Statements.
Oil and Gas. The Company's oil and gas activities are
insignificant as of December 31, 1995. The Company has not served as an operator
with respect to its oil and gas properties, rather it participates through minor
working interest ownership with only limited management rights. The Company
currently has no plans in the near future to participate in additional oil and
gas activities.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------------
The Company is not currently a party to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------------
No matter was submitted to a vote of the Company's shareholders
during the fourth quarter ended December 31, 1995.
EXECUTIVE OFFICERS
- ------------------
Name Age Office Officer Since
---- --- ------ -------------
David H. Eaton 60 Chief Executive Officer 6/88
Mel L. Shultz 45 President 5/87
Timothy A. Laos 42 Vice President, Chief 3/95
Financial Officer,
Treasurer and Secretary
David H. Eaton has been the Chairman of the Board of Directors of
the Company since February 29, 1988 and its Chief Executive Officer since June
1, 1988. Mr. Eaton earned his Bachelor of Arts degree in Business Administration
and Economics from Wheaton College in 1958 and his Doctor of Jurisprudence
degree from Stanford University in 1961.
Mel L. Shultz has been a Director and the President of the Company
since May 20, 1987. Mr. Shultz was previously involved on his own behalf in real
estate development and oil and gas investment.
Timothy A. Laos, C.P.A., became a Vice President, Chief Financial
Officer, Treasurer and Secretary of the Company effective March 1, 1995. He was
involved in public accounting from 1978 to 1981 including the first two years
employed by Price Waterhouse. From 1984 through 1992, Mr. Laos was the corporate
controller for Martin Oil and Gas Company, an independent oil and gas producer.
From 1992 through 1995, he was the corporate controller for the Haworth
Corporation, a local real estate developer. Mr. Laos earned a Bachelor of
Business Administration degree in accounting from the University of Arizona in
1978.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ----------------------------------------------------------------------
Market Information
- ------------------
As of December 31, 1995, the Company's common stock, $0.01 par
value, was listed and traded on the OTC Bulletin Board (symbol: STFA).
The high and low sales prices for each quarter since January 2,
1994, are as follows:
Time Period High Low
----------- ---- ---
1995: First quarter .06 .0025
Second quarter .08 .02
Third quarter .07 .01
Fourth quarter .04 .01
1994: First quarter .04 .005
Second quarter .05 .01
Third quarter .04 .02
Fourth quarter .035 .01
The above information is based on the bid price as furnished by
the National Quotation Bureau. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.
Holders
- -------
As of March 31, 1996, the common stock of the Company is estimated
to be held beneficially by approximately 2,000 shareholders. No preferred stock
is outstanding.
Dividends
- ---------
The Company has never paid cash dividends on its common equity.
Under Arizona law, there are restrictions on the ability of a corporation to pay
dividends. These state law restrictions materially limit the Company's ability
to pay dividends and are likely to materially limit the future payment of
dividends. The Company does not expect to pay dividends in the foreseeable
future, but rather expects to use any cash otherwise available for distribution
to satisfy debt obligations and build business operations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- -----------------------------------------------------------------------
Liquidity and Capital Resources.
- -------------------------------
The Company was successful in its efforts to dispose of its real
estate holdings and eliminate all related indebtedness with the sale of its
interest in University Center in March 1995. The Company received $1,300,000 in
net cash proceeds from the sale. See Note 14 to the Consolidated Financial
Statements for additional information.
In May 1995, the Company successfully renegotiated the purchase of
its Dollar Rent A Car franchise pursuant to an Assistance Agreement which
included the elimination of $1,858,000 in debt and an interim reduction in
franchise fees during 1995 and 1996. See Note 3 to the Consolidated Financial
Statements regarding the 1994 acquisition of the Dollar Rent A Car franchise and
additional information regarding the 1995 renegotiation. The Company was able to
expand its fleet acquisition alternatives by securing vehicle financing from
three major sources. As a result, over 20% of its leased fleet was replaced with
purchased units during the latter part of the year. It is anticipated that this
increased fleet flexibility can assist in reducing overall vehicle costs.
SCRS was able to generate a small profit from its Dollar Rent A
Car operations during 1995, before corporate overhead expenses. The Company
anticipates that with improved Dollar Rent A Car operations as discussed above,
it should meet its operational cash flow needs for the remainder of 1996.
However, the vehicle rental business is highly competitive and subject to the
pressures of both rental rates and fleet sizes of competitors as well as the
availability of a reasonably priced fleet. As such, these various factors are
outside the Company's control and, accordingly, there are no guarantees that
either profitability or adequate cash flows from operations will be achieved.
Results of Operations - Year Ended December 31, 1995, Compared with Year Ended
- --------------------------------------------------------------------------------
December 31, 1994
- -----------------
The Company reported net income of $2,826,000 during 1995 in
comparison to a net loss of $840,000 in 1994. The 1995 and 1994 results include
extraordinary gains of $3,402,000, and $477,000, respectively, as a result of
debt reductions as discussed in Note 14 to the Consolidated Financial
Statements. The increase in consolidated interest expense is attributable to the
newly acquired debt to finance revenue earning vehicles offset by the
elimination of the Dollar Systems, Inc. note originally obtained in connection
with the acquisition of Dollar Rent A Car.
Vehicle Rental Activities. Revenues from rental car activities
accounted for 90% of total revenues in 1995. Dollar Rent A Car operations
recognized its first full year of revenues compared to only seven months in
1994, the year of acquisition, resulting in a 112% increase in vehicle rental
activity income from 1994 to 1995. The 84% increase in vehicle rental operations
expense is also due to the inclusion of the Company's first complete year of
operations. SCRS recognized a small net operating profit before corporate
overhead expenses for 1995 compared to a net operating loss in 1994. As
previously discussed, the 1994 results did not include the first five months of
the year which typically include the stronger revenue months.
Sports Activities. Sports Careers accounted for 9% of total
revenues in 1995 and 17% of total revenues for the year ended December 31, 1994.
Sports Careers revenues of $1,066,000 in 1995 represented only a small decrease
from 1994. 1995 membership revenues account for 43% of Sports Careers revenue,
while conferences and sales of Sports Marketplace and related products
represented 19% and 38% of 1995 Sports Careers revenues, respectively. Expenses
for these activities decreased by $155,000 primarily due to negotiated lower
telecommunication costs and reduced seminar activity during 1995.
Real Estate Activities. Real estate revenues decreased by
$92,000 from 1994 to 1995 primarily due to the elimination of University Center
management fees subsequent to its sale in March 1995. Additionally, the net loss
from the Company's unconsolidated joint venture was eliminated in 1995 due to
the sale of the University Center property. Ongoing management fee revenue in
1996 will be immaterial.
Capital Requirements
- --------------------
The Company does not have any material plans for future capital
expenditures at the present time.
Impact of Inflation
- -------------------
Inflation has not had a significant impact on the Company's
results of operations. Due to competitive pressures, the Company is not always
able to pass through modest increases in rental rates or Sports Careers product
prices. Inflation has not been significant in the last few years although future
inflationary increases, if any, is a factor of which the Company must be
cognizant.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------------
Index
-----
Page
----
Stratford American Corporation and Subsidiaries Consolidated Financial
Statements December 31, 1995
Independent Auditors' Reports 9, 10
Consolidated Balance Sheet as of December 31, 1995 11
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1994 12
Consolidated Statements of Changes in Shareholders' Equity
(Deficiency) for the years ended December 31, 1995 and 1994 13
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994 14
Notes to Consolidated Financial Statements 15
All schedules are omitted as the required information is inapplicable or not
present in amounts sufficient to require submission of the schedule, or because
the required information is presented in the consolidated financial statements
or notes thereto.
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Stratford American Corporation
We have audited the accompanying consolidated balance sheet of Stratford
American Corporation and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity (deficiency), and
cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Stratford American
Corporation and subsidiaries as of December 31, 1995, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
March 28, 1996
<PAGE>
[PRICE WATERHOUSE LETTERHEAD]
Price Waterhouse LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Stratford American Corporation
In our opinion, the accompanying consolidated statements of operations, of
changes in shareholders' equity and of cash flows present fairly, in all
material respects, the results of operations and cash flows of Stratford
American Corporation and its subsidiaries for the year ended December 31, 1994,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion of these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Stratford
American Corporation for any period subsequent to December 31, 1994.
Price Waterhouse LLP
Phoenix, Arizona
April 13, 1995
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 381,000
Receivables:
Trade, less allowance for doubtful accounts of $9,000 352,000
Mortgages 132,000
------------
484,000
------------
Restricted cash 739,000
Revenue earning vehicles, net 4,275,000
Property and equipment, net 363,000
Mining interests 375,000
Other assets 365,000
Franchise rights, less accumulated amortization of $85,000 296,000
------------
$ 7,278,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable, secured by revenue earning vehicles $ 4,228,000
Accounts payable 910,000
Notes payable and other debt 2,075,000
Accrued interest 326,000
Accrued liabilities 310,000
------------
Total liabilities 7,849,000
------------
Minority interest in consolidated subsidiaries 5,000
Shareholders' equity:
Nonredeemable preferred stock, par value $.01 per share;
authorized 50,000,000 shares
Common stock, par value $.01 per share; authorized 100,000,000 shares;
issued and outstanding 84,076,806 shares 841,000
Additional paid-in capital 25,780,000
Retained earnings (deficit) (27,186,000)
Treasury stock, 29,500 shares at cost (11,000)
------------
(576,000)
------------
Commitments and contingencies
------------
$ 7,278,000
============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Vehicle rental activities $ 11,186,000 $ 5,252,000
Sports activities 1,066,000 1,126,000
Rental property activities 59,000 151,000
Oil and gas production 27,000 105,000
Interest and other income 87,000 72,000
------------ ------------
12,425,000 6,706,000
------------ ------------
EXPENSES:
Vehicle rental operations 10,723,000 5,813,000
Sports operations 1,050,000 1,205,000
Rental property operations 43,000
Production costs and taxes 5,000 47,000
General and administrative 641,000 469,000
Depreciation, depletion and amortization 279,000 123,000
Interest 305,000 255,000
Equity in net loss of unconsolidated joint venture 268,000
Minority interest in consolidated subsidiaries (2,000) (200,000)
------------ ------------
13,001,000 8,023,000
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (576,000) (1,317,000)
EXTRAORDINARY ITEM-GAIN ON EARLY EXTINGUISHMENT OF DEBT
3,402,000 477,000
------------ ------------
NET INCOME (LOSS) $ 2,826,000 $ (840,000)
============ ============
Income (loss) per common share:
Loss before extraordinary item $ (0.01) $ (0.02)
Extraordinary item 0.04 0.01
------------ ------------
Net income (loss) per common share $ 0.03 $ (0.01)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Total
Common Stock Additional Retained Treasury Stock shareholders'
------------ paid-in earnings -------------- equity
Shares Amount capital (deficit) Shares Amount (deficiency)
------ ------ ------- --------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 80,713,734 $ 807,000 $ 25,780,000 $(29,172,000) 29,500 $ (11,000) $ (2,596,000)
Net loss (840,000) (840,000)
Issuance of common shares 3,363,072 34,000 34,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance,
December 31, 1994 84,076,806 $ 841,000 $ 25,780,000 $(30,012,000) 29,500 $ (11,000) $ (3,402,000)
Net income 2,826,000 2,826,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance,
December 31, 1995 84,076,806 $ 841,000 $ 25,780,000 $(27,186,000) 29,500 $ (11,000) $ (576,000)
============ ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,826,000 $ (840,000)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation, depletion, and amortization 279,000 123,000
Equity in net loss of unconsolidated joint venture 268,000
Minority interest in consolidated subsidiaries (2,000) (200,000)
Extraordinary item (3,402,000) (477,000)
Other 17,000
Changes in assets and liabilities:
Decrease in accounts and mortgages receivable 43,000 137,000
Increase in other assets (172,000) (21,000)
Increase (decrease) in accounts payable (378,000) 222,000
Increase (decrease) in accrued liabilities (90,000) 314,000
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (896,000) (457,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Addition to restricted cash (138,000) (601,000)
Proceeds from sale of rental property 465,000
Proceeds from sale of joint venture property 1,311,000
Purchases of property and equipment (212,000) (105,000)
Purchases of revenue earning vehicles (4,457,000)
Acquisition costs (121,000)
Net cash acquired in connection with Dollar Rent A Car purchase 292,000
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (3,496,000) (70,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revenue earning vehicle financing 4,412,000
Payments on revenue earning vehicle financing (185,000)
Proceeds from other debt 161,000 1,433,000
Payments on other debt (120,000) (483,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,268,000 950,000
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (124,000) 423,000
CASH AND CASH EQUIVALENTS, beginning of year 505,000 82,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 381,000 $ 505,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year $ 132,000 $ 126,000
=========== ===========
Equipment acquired in exchange for long-term debt $ 161,000 $ 28,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 1 - NATURE OF BUSINESS:
- ---------------------------
Stratford American Corporation (the "Company") is engaged principally in the
businesses of leisure and commercial car rentals in the state of Arizona,
nationwide sports industry career education, and minimal activity in real estate
management and natural resource exploration and development. The car rental
business was acquired on June 1, 1994, therefore the accompanying financial
statements include rental operations from the date of acquisition.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
- ----------------------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with original maturities of
3 months or less to be cash equivalents. The carrying amount approximates fair
value because of the short maturity of the financial instruments.
Restricted Cash
- ---------------
Restricted cash consists of a bank certificate of deposit and a vehicle loan
deposit account. The carrying amount of restricted cash approximates fair value,
as interest on the instruments are at current market rates.
Revenue Earning Vehicles
- ------------------------
Revenue earning vehicles are stated at cost less accumulated depreciation. The
straight-line method is used to depreciate revenue earning vehicles to their
estimated residual values over the anticipated periods of use based on the
Company's fleet plan, typically ranging from 6 to 14 months.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Depreciation is recorded based on
the straight-line method over the estimated useful lives of the related assets
ranging from 3 to 7 years.
Mining Interests
- ----------------
The Company capitalizes the acquisition costs and related exploration costs
until such time as the property to which they relate is brought into production,
is abandoned, or impairment in value occurs. The costs incurred to date relate
to acquisition and exploration activities and will be amortized on a unit of
production basis following commencement of production, written off if the
property is abandoned, or written down to impaired value if impairment occurs.
Franchise Rights
- ----------------
Franchise rights are recorded at cost. Amortization is recorded using the
straight-line method over the term and renewal option period of the franchise
agreement (20 years).
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
Income Taxes
- ------------
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." This asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the carrying amounts and the tax basis of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.
Income (Loss) Per Common Share
- ------------------------------
Income (loss) per common share is computed using the weighted average number of
common shares of stock outstanding during the years presented excluding common
shares of stock acquired by the Company. Common stock equivalents (options) have
been excluded from the earnings per share computation as the effect of their
inclusion would be anti-dilutive in 1994. In 1995, common stock equivalents have
been included using the treasury stock method. The weighted average number of
common shares outstanding during the years ended December 31, 1995 and 1994 are
85,127,306 and 82,656,008, respectively.
Recent Accounting Pronouncements
- --------------------------------
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" . SFAS No. 121 becomes effective for fiscal years beginning
after December 15, 1995. The Company is currently assessing the impact of SFAS
No. 121 on its consolidated financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for the Stock-Based Compensation". SFAS No. 123 is effective for
transactions entered into in fiscal years beginning after December 15, 1995. The
Company is currently assessing the impact of SFAS No. 123 on its consolidated
financial statements.
Use of Estimates
- ----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Reclassifications
- -----------------
Certain amounts in the accompanying 1994 financial statements have been
reclassified to conform with the 1995 presentation.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 3 - ACQUISITION OF DOLLAR RENT A CAR FRANCHISE
- ---------------------------------------------------
Effective June 1, 1994, Stratford American Corporation, through an 80% owned
subsidiary, acquired the franchise rights to substantially all of the Arizona
operations of Dollar Rent A Car. This transaction was consummated in accordance
with a May 19, 1994 Sale and Purchase Agreement between Stratford American Car
Rental Systems, Inc. ("SCRS") and The John Douglas Corporation ("JDC"), Douglas
F. and Bette Jane Mitchell and John Rector, Jr. In addition to the franchise
rights, the acquisition included cash, accounts receivable, equipment and other
assets relating to the Arizona operations of JDC as of May 31, 1994. SCRS also
assumed the May 31, 1994 JDC accounts payable, accrued expenses and other
current liabilities. As such, the adjusted fair value of the related assets and
liabilities, are as follows:
Accounts receivable $ 389,000
Other current assets 19,000
Equipment 108,000
Other assets 70,000
Franchise rights 381,000
Accounts payable (965,000)
Other accrued liabilities (252,000)
Note payable - Dollar Systems, Inc. (42,000)
-------------
Net Cash Acquired $ 292,000
============
Separately, a License Agreement dated May 31, 1994 was also entered into between
SCRS and Dollar Systems, Inc., the Dollar Rent A Car franchisor. A $1,900,000
note payable to Dollar Systems, Inc. was executed by SCRS which required monthly
payments of $18,000 including principal and interest at 8% and matured in June
2000. On May 16, 1995, an agreement between SCRS and Dollar Systems, Inc. was
executed which served to adjust the previously set cost of the license
agreement. Along with other license concessions, the remaining note payable
balance to Dollar Systems, Inc., totaling $1,858,000, was eliminated, provided
that the Company does not default on any obligations due to Dollar Systems, Inc.
through the end of 1996, in which case half of the balance would become due in
June 2000.
During 1994, $1,275,000 in proceeds from 12% subordinated notes were received to
provide working capital, to pay for closing costs and to provide cash, reflected
as restricted cash in the accompanying Consolidated Balance Sheet, to secure a
$750,000 letter of credit issued on behalf of Dollar Systems, Inc. These notes
require quarterly payments of interest only and mature on May 31, 1997. In 1995,
a principal payment of $50,000 was made to a note holder. The note holders own
20% of the outstanding common stock of SCRS.
The accompanying Consolidated Statement of Operations incorporates Dollar Rent A
Car revenue and expenses for the months of June through December 1994, and for
the twelve month period ended December 31, 1995.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 4 - REVENUE EARNING VEHICLES:
- ---------------------------------
Revenue earning vehicles consist of the following as of December 31, 1995:
Revenue earning vehicles $4,457,000
Less accumulated depreciation 182,000
----------
$4,275,000
==========
The Company also leases vehicles under operating lease agreements which require
the Company to provide normal maintenance and liability coverage. The agreements
have initial terms of 6 to 9 months. The vehicles are returned to the lessor at
the end of the lease term. Total vehicle lease expense was $4,649,000 and
$2,663,000 for 1995 and 1994, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT:
- -------------------------------
Property and equipment consist of the following as of December 31, 1995:
Service equipment $ 151,000
Computer software and equipment 215,000
Furniture and fixtures 180,000
Leasehold improvements 78,000
---------
624,000
Accumulated depreciation and amortization (261,000)
---------
$ 363,000
=========
NOTE 6 - MINING INTERESTS:
- -------------------------
In 1985, the Company acquired the right to conduct mineral exploration and
development pursuant to a mining lease in Alaska through the issuance of 105,000
common shares. In February 1990, an additional 200,000 shares of the Company's
common stock were issued in connection with this acquisition. Pursuant to an
agreement dated September 16, 1988, the Company assigned its 41.3% interest in
the joint venture to a wholly-owned subsidiary, Stratford American Gold Venture
Corporation (SAGVC). Under the terms of an agreement of September 16, 1988, the
Company and its joint venture partner granted to a third party an option to
acquire a 70% interest in the property. Upon the third party exercising such
option, SAGVC will hold a 12.39% interest in the property.
This third party has not conducted exploration activities since July 1989, as
permitted by the agreement. Activity is not required until the price of gold
exceeds a price in excess of $400 for a period of ninety consecutive days. The
Company recorded a write-down of $551,000 in 1993 as a result of the length of
time without exploration activities and the inability of the price of gold to
exceed $400 per ounce since those activities ceased.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 7 - MORTGAGES RECEIVABLE:
- -----------------------------
Mortgages receivable, secured by a second deed of trust on residential property,
bear interest at 10.5% per annum. Total principal and interest payments are
amortized over the 30-year life of the mortgages and are payable in equal
monthly installments. The principal payments to be received on the mortgages
receivable are as follows:
Year ending December 31,
1996 $ 4,000
1997 5,000
1998 5,000
1999 6,000
2000 6,000
Thereafter 106,000
---------
$ 132,000
=========
NOTE 8 - NOTES PAYABLE AND LINES OF CREDIT SECURED BY REVENUE EARNING VEHICLES:
- -------------------------------------------------------------------------------
Notes payables and lines of credit secured by revenue earning vehicles consist
of the following as of December 31, 1995:
Notes payable to General Motors Corporation with
various termination dates during 1996; secured
by certain revenue earning vehicles; 2.5% of
principal due monthly; interest at 11.25% due
monthly. $1,691,000
Notes payable to Ford Motor Credit with various
termination dates during 1997; secured by
certain revenue earning vehicles; 2.25% of
principal due monthly; interest at 30-day
Federal Reserve rate plus 3.25% (8.93% at
December 31, 1995) due monthly. 1,237,000
Amounts under $1.5 million line of credit to Nissan
Motors Acceptance Corporation with various
termination dates during 1997; secured by
certain revenue earning vehicles; 2.25% of
principal due monthly; interest at prime plus 2% 1,300,000
(10.75% at December 31, 1995) due monthly. -----------
$ 4,228,000
===========
Unused revenue earning vehicle lines of credit as of December 31, 1995 were
approximately $2,300,000.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 9 - NOTES PAYABLE AND OTHER DEBT:
- -------------------------------------
Notes payable and other debt consist of the following as of December 31, 1995:
Subordinated notes payable; due May 31, 1997,
interest due quarterly at 12%. $1,225,000
Note payable; due April 1997, interest due
quarterly commencing August 1994 at lender's
reference rate (8.5% at December 31, 1995);
guaranteed by certain directors of the Company;
outstanding balance includes estimated future
interest payments totaling $22,000. 322,000
132,000
Capital lease obligations. (See Note 11.)
Other; interest rates ranging from 10% to 15%,
maturing between December 1996 and 2010 (see
below). 396,000
----------
$2,075,000
==========
Included in other is a $214,000 convertible debenture note payable to an officer
of the Company which is due on demand. Interest accrues at the rate of 12%.
Accrued interest at December 31, 1995 amounts to $118,000. The note can be
converted, at the holder's election, into 1,367,629 shares of $0.01 par value
common stock, based on the market value of the common stock on the date the note
was executed.
Under notes payable and other debt loan provisions in effect as outlined above,
principal payments due are as follows:
Year ending December 31:
1996 $ 337,000
1997 1,592,000
1998 34,000
1999 16,000
2000 7,000
Thereafter 89,000
----------
$2,075,000
==========
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
- ---------------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires that the Company disclose estimated
fair values for its financial instruments.
Notes Payable and Other Debt
The fair value of the Company's debt is estimated based on quoted market prices
for the same or similar issues or on the current rates offered to the Company
for debt of the same remaining maturities.
Limitations
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1995, the amounts that will
actually be realized or paid at settlement or maturity of the instruments could
be significantly different.
The estimated fair values of the Company's financial instruments are as follows:
December 31, 1995
-----------------
Carrying Fair Value
Amount (unaudited)
------ -----------
Cash and restricted cash $1,120,000 $1,120,000
Mortgages receivable 132,000 132,000
Notes payable and other debt:
Vehicle finance notes 4,228,000 4,228,000
Subordinated notes 1,225,000 1,225,000
Other debt 850,000 850,000
---------- ----------
Total notes payable and other debt $6,303,000 $6,303,000
========== ==========
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 11 - OBLIGATIONS UNDER CAPITAL LEASES:
- -------------------------------------------
The Company has computer equipment, and vehicle service and maintenance
equipment under capital lease agreements, which expire in 1998 through 2000. The
combined cost of the equipment is $161,000 and is included in computer and
service equipment (Note 5).
Accumulated amortization totaled $23,000 as of December 31, 1995.
A summary of the present value of future minimum capital lease payments are as
follows:
Year ending December 31:
1996 $ 60,000
1997 60,000
1998 30,000
1999 8,000
2000 2,000
---------
Total minimum capital lease payments 160,000
Less amount representing interest 28,000
---------
Present value of future minimum capital lease payments $ 132,000
=========
NOTE 12 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES:
- --------------------------------------------------------
In May 1992, Stratford American Sports Corp. ("SASC") issued common stock equal
to 30% of the outstanding shares for $125,000. In November 1992, an additional
20% of the outstanding shares were issued upon maturity of a $125,000
convertible note payable. In October 1994, the Company acquired 25% of the
outstanding shares of SASC in exchange for the retirement of a $95,000 note
receivable from a former 50% shareholder in SASC.
In June 1994, Stratford American Car Rental Systems, Inc. ("SCRS") issued common
stock equal to 20% of the outstanding shares as consideration due under certain
loans obtained for use in the acquisition of the Dollar Rent A Car operations.
NOTE 13 - COMMON STOCK OPTIONS:
- ------------------------------
As of December 31, 1995, options to purchase 6,500,000 shares of the Company's
common stock are outstanding. An option to purchase 3,000,000 shares was granted
to an officer of the Company in 1994. Options to purchase 3,500,000 shares were
granted to certain Advisory Committee members in 1992, originally expiring in
September 1995, with an extension of time to purchase granted to September 1997.
Exercise Date of
price expiration
----- ----------
Options granted - 1994 3,000,000 $.01 March 1997
Options granted - 1992 3,500,000 $.05 September 1997
---------
6,500,000
=========
The exercise price was greater than or equal to the market price when the
options were granted or extended. All options are exercisable.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 14 - EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF DEBT:
- ------------------------------------------------------------
Effective March 27, 1995, the Company, through a 50% owned joint venture, sold
its interest in the University Center property, located in Tempe, Arizona. As a
result of the sale, the underlying indebtedness, totaling $17,553,000 in
principal and accrued interest, was completely retired through payments and
reductions based on terms of a debt extinguishment agreement with a bank. The
net effect of the above resulted in a gain of $3,402,000 which has been recorded
as an extraordinary item in the accompanying Consolidated Statement of
Operations.
In September 1994, the Company exchanged its oil and gas interests located in
Freestone County, Texas in full satisfaction of an outstanding $586,000 note
payable, which matured in May 1994, and accrued interest. In addition, the note
holder relinquished their rights to 1,000,000 shares of the Company's common
stock. This transaction resulted in a gain of $477,000 which has been recorded
as an extraordinary item in the accompanying Consolidated Statement of
Operations.
NOTE 15 - INCOME TAXES:
- ----------------------
There was no income tax benefit associated with the loss before extraordinary
item or the extraordinary item for the years ended December 31, 1995 and 1994.
The extraordinary gains in those same years served to reduce net operating loss
carryforwards.
The following net operating loss and investment tax credit carryforwards are
available at December 31, 1995, to offset future taxable income and income taxes
as follows:
Year
expires Amount
------- ------
Net operating loss 2003-2009 $12,000,000
Investment tax credits 1997-2000 210,000
If certain substantial changes in the Company's ownership should occur, there
would be an annual limitation on the amount of the carryforwards which can be
utilized, which could potentially impair the ability to utilize the full amount
of the carryforward.
There are no deferred tax assets or liabilities reflected in the accompanying
Consolidated Balance Sheet as of December 31, 1995. The tax effect associated
with the types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that exist as of December 31,
1995 are as follows:
Property and equipment, due to differences
in depreciation $ (60,000)
Allowance for mining interest impairment 220,000
Net operating loss carryforwards 4,802,000
-----------
4,962,000
Valuation allowance (4,962,000)
-----------
Net deferred tax asset $ 0
===========
The valuation allowance offsets the deferred tax asset due to the taxable losses
the Company has experienced in recent years. The valuation allowance decreased
by $1,715,000 in 1995.
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 16 - LEASE COMMITMENTS:
- ---------------------------
Stratford American Car Rental Systems, Inc., an 80% owned subsidiary of the
Company ("SCRS"), leases various facilities for its satellite and airport
operations for Dollar Rent A Car pursuant to operating leases with terms ranging
from month to month through ten years. The Phoenix Sky Harbor Airport location
is subject to the most significant lease which requires minimum annual lease
payments of $1,150,000 and a maximum of 10% of specified airport revenues. SCRS
also leases its Dollar Rent A Car service facility pursuant to an operating
lease with an option to purchase. The lease expires in May 1999 and contains a
five year extension option. Total rental expense on all facilities was
$1,512,000 in 1995 and $854,000 in 1994.
The aggregate future minimum lease commitments under operating leases with
noncancelable terms in excess of one year are as follows:
Year ending December 31:
1996 $1,365,000
1997 1,347,000
1998 1,331,000
1999 1,258,000
2000 958,000
----------
Total: $6,259,000
==========
NOTE 17 - SEGMENTS OF BUSINESS:
- ------------------------------
The following summarizes information about the Company's operations, in
thousands, by segment of business for the years ended December 31, 1995 and
1994:
<TABLE>
<CAPTION>
(In thousands)
Vehicle Sports Real
December 31, 1995 Rental Careers Estate Other(1) Total
- ----------------- -------- ------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Total revenue $11,186 $1,066 $ 59 $114 $12,425
Operating profit (loss) 254 4 71 (600) (271)
Identifiable assets 6,495 54 143 586 7,278
Depreciation, depletion and
amortization expense 255 16 8 279
Capital expenditures 4,626 1 42 4,669
Vehicle Sports Real
December 31, 1994 Rental Careers Estate Other Total
- ----------------- -------- ------- ------ ----- -----
Total revenue $5,272 $1,127 $ 171 $ 136 $6,706
Operating profit (loss) (460) (52) 126 (407) (793)
Equity in net loss of
unconsolidated joint ventures (2,091) (2,091)
Identifiable assets 3,753 91 154 529 4,527
Depreciation, depletion and
amortization expense 78 14 3 28 123
Capital expenditures 76 29 105
</TABLE>
(1) Corporate general and administrative expenses, which have not been
allocated, are included in "other."
<PAGE>
For the years ended December 31, 1995 and 1994, the Company did not have any
foreign operations.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- --------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
(a) Previous independent accountants
(i) On February 14, 1996, Stratford American Corporation dismissed Price
Waterhouse LLP as its independent accountants.
(ii) The report of Price Waterhouse LLP on the financial statements for the
fiscal year ended December 31, 1994 contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principle. The report of Price
Waterhouse LLP on the financial statements for the fiscal year ended
December 31, 1993 contained no adverse opinion or disclaimer of opinion
but did contain an explanatory paragraph as to uncertainty, stating
that the Registrant had a net capital deficiency, raising substantial
doubt about the Registrant's ability to continue as a going concern.
(iii) The Board of Directors, as a whole, serves as the Audit Committee. In
that capacity, the Board of Directors participated in and approved the
decision to change independent accountants.
(iv) In connection with its audits for the two most recent fiscal years and
through February 14, 1996, there have been no disagreements with Price
Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Price Waterhouse
LLP would have caused them to make reference thereto in their report on
the financial statements for such years.
(v) The Registrant has received from Price Waterhouse LLP a letter
addressed to the SEC stating whether or not it agrees with the above
statements. A copy of such letter, dated February 15, 1996, is filed as
Exhibit 16 to this Form 8-K.
(b) New independent accountants
(i) The Registrant engaged KPMG Peat Marwick LLP as its new independent
accountants as of February 14, 1996. During the two most recent fiscal
years and through February 14, 1996, the Registrant has not consulted
with KPMG Peat Marwick LLP on items which (1) were or should have been
subject to SAS 50 or (2) concerned the subject matter of a disagreement
or reportable event with the former auditor, (as described in
Regulation S-K Item 304(a)(2)).
<PAGE>
PART III
ITEMS 9, 10, 11 AND 12
- ----------------------
The information called for by Part III (Items 9, 10, 11 and 12) is
incorporated herein by reference from the material included under the captions
"Elections of Directors," "Principal Shareholders," and "Executive Compensation"
in Stratford American Corporation's definitive proxy statement (to be filed
pursuant to Regulation 14A) for its Annual Meeting of Shareholders to be held
July 10, 1996 (the "1996 Proxy Statement"), except that the information
regarding executive officers called for by Item 401 of Regulation S-B is
included in Part I of this report on page 5. The 1996 Proxy Statement is being
prepared and will be filed with the Securities and Exchange Commission in
definitive form on or about April 30, 1996 and will be furnished to shareholders
on or about June 1, 1996.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
- ----------------------------------------------------
(a) Financial Statements and Financial Statement Schedules - See "Item 7 -
Financial Statements and Supplementary Data" above.
(b) Reports on Form 8-K
Report dated March 27, 1995 with respect to the March 27, 1995
sale of the University Center property through the Company's 50%
owned joint venture, University Center Developers, report
including Sale and Purchase Agreement, and Registrant's Press
Release.
Report dated February 14, 1996 with respect to the change in
independent auditors from Price Waterhouse LLP to KPMG Peat
Marwick LLP, report including a letter from Price Waterhouse LLP.
(c) Exhibit - See index beginning on page 28
(d) Financial Statement Schedules - See "Item 7 - Financial Statements and
Supplementary Data."
<PAGE>
Signatures
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STRATFORD AMERICAN CORPORATION
Registrant
Date: April 15, 1996 By /s/ David H. Eaton
-----------------------------------
David H. Eaton, Chairman of the Board
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date: April 15, 1996 By /s/ David H. Eaton
-----------------------------------
David H. Eaton, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: April 15, 1996 By /s/ Mel L. Shultz
-----------------------------------
Mel L. Shultz, President and Director
Date: April 15, 1996 By /s/ William G. Was, Jr.
-----------------------------------
William G. Was, Jr., Director
Date: April 15, 1996 By /s/ Gerald J. Colangelo
-----------------------------------
Gerald J. Colangelo, Director
Date: April 15, 1996 By /s/ Timothy A. Laos
-----------------------------------
Timothy A. Laos, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBITS INDEX
Exhibits 10.51 through 10.54 and 27.1 are the only exhibits originally filed
with this report. The Company hereby incorporates all other exhibits by
reference pursuant to Rule 12b-32, each of which (except Exhibits 3.3, 10.12,
10.17 through 10.43 and 22.1) was filed as an exhibit to the Company's
Registration on Form 10 which was filed July 22, 1988, and amended on October 7,
1988, and December 8, 1988. Exhibit 3.3 was filed with the Company's
Registration Statement on Form S-1 on June 12, 1989, with the Securities and
Exchange Commission. Exhibit 10.12 was filed as Exhibit 10.30 to the 10-K for
the four months ended December 31, 1988, which was filed with the Securities and
Exchange Commission on April 11, 1989. Exhibits 10.17 and 10.18 were filed as
Exhibits 10.1 and 10.2 to the Company's Form 10-Q for the Quarterly Period Ended
June 30, 1990, which was filed on August 14, 1990, with the Securities and
Exchange Commission. Exhibits 10.19 and 10.20 were filed as Exhibits 10.44 and
10.46 to the Company's Registration on Form S-1 which was filed with the
Securities and Exchange Commission on October 1, 1990, and amended on November
8, 1990. Exhibit 10.21 was filed as Exhibit 10.3 to the Company's Form 10-Q for
the Quarterly Period Ended June 30, 1991, which was filed with the Securities
and Exchange Commission on August 14, 1991. Exhibit 10.22 was filed as Exhibit
10.44 to the Company's Form 10-K for the year ended December 31, 1991, which was
filed with the Securities and Exchange Commission on April 14, 1992. Exhibits
10.23 through 10.34 were filed as Exhibits 10.1 through 10.8 and 10.12 through
10.15 to the Company's Form 10-Q for the Quarterly Period Ended June 30, 1992,
which was filed with the Securities and Exchange Commission on August 14, 1992.
Exhibits 10.35 and 10.36 were filed as Exhibits 10.60 and 10.61 to the Company's
Form 10-K for the year ended December 31, 1992, which was filed with the
Securities and Exchange Commission on April 15, 1993. Exhibit 10.37 was filed as
Exhibit 10.1 to the Company's Form 10-QSB for the Quarterly Period Ended
September 30, 1993, which was filed with the Securities and Exchange Commission
on November 11, 1993. Exhibits 10.38 through 10.41 were filed as Exhibits 1
through 4 to the Company's Form 8-K which was filed with the Securities and
Exchange Commission on June 14, 1994 and amended on August 9, 1994. Exhibit 22.1
references the June 30, 1994 Form 10-QSB, which was filed with the Securities
and Exchange Commission on August 12, 1994. Exhibit 10.39 was refiled as Exhibit
10.2 to the Company's Form 10-QSB for the Quarterly Period Ended September 30,
1994, which was filed with the Securities and Exchange Commission on November
15, 1994. Exhibits 10.42 and 10.43 were filed as Exhibits 1 and 2 to the
Company's Form 8-K which was filed with the Securities and Exchange Commission
on April 11, 1995. Exhibits 10.44 through 10.48 were originally filed with Form
10-KSB for the year ended December 31, 1994, which was filed with the Securities
and Exchange Commission on April 14, 1995. Exhibit 10.49 was filed as Exhibit
10.1 to the Company's Form 10-QSB for the Quarterly Period Ended June 30, 1995,
which was filed with the Securities and Exchange Commission on August 14, 1995.
Exhibit 10.50 was filed as Exhibit 16.1 to the Company's Form 8-K which was
filed with the Securities and Exchange Commission on February 22, 1996.
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation N/A
3.2 By-laws N/A
3.3 Articles of Amendment to Articles of Incorporation N/A
4.1 Form of Common Stock Certificate N/A
4.2 Form of Series "A" Preferred Stock Certificate N/A
4.3 Article IV of the Articles of Incorporation N/A
4.4 Article III of the Bylaws N/A
10.1 Joint Venture Agreement for University Center Developers,
date as of February 19, 1987 N/A
10.2 Indemnification Agreement, dated as of May 19, 1988,
between the Company and Mel L. Shultz N/A
10.3 Schedule of Omitted Indemnification Agreements N/A
10.4 Indemnification Agreement, dated as of February 19, 1988,
relating to guarantees N/A
10.5 Indemnification Agreement, dated as of May 10, 1988,
relating to guarantees N/A
10.6 Registration Agreement, dated as of February 19, 1988, N/A
10.7 Agreement, dated as of February 18, 1988, relating to
restrictions against preferred shares N/A
10.8 Trust Agreement, dated as of June 18, 1987 N/A
10.9 Joint Venture Agreement, dated as of July 2, 1985,
between Night Hawk Resources Corporation and
Cornwall Pacific Alaska, Inc. N/A
10.10 Settlement Agreement and Release, effective July 1, 1988 N/A
10.11 Settlement Agreement, dated as of July 18, 1988 N/A
10.12 Judgment in Action No. CB72760, dated September 13, 1988 N/A
10.13 Assignment of Joint Venture Interest N/A
10.14 Agreement made September 13, 1988, among Golden Zone
Zone, Inc., Cornwall Pacific Alaska, Inc., Stratford American
Resource Corporation, and Thor Gold Alaska, Inc. N/A
10.15 Share Sale and Registration Agreement, dated January 31, 1989 N/A
10.16 Purchase Agreement with Mark A. Tudi, dated November 3, 1989 N/A
10.17 Joint Operating Agreement, dated February 1, 1988 N/A
10.18 Promissory Note, dated March 15, 1990 N/A
10.19 Stratford American Corporation Convertible Debenture
Note dated March 15, 1990 N/A
10.20 Agreement, dated as of July 24, 1990, with Minco American
Corporation N/A
10.21 Guaranty dated June 28, 1991, from Stratford American
Corporation to NBB Oil and Gas Partners (U.S.A.) N/A
10.22 Assignment and Assumption Agreement, dated as of November 19,
1991, between Stratford American Oil and Gas Corporation and
SA Oil and Gas Corporation N/A
10.23 Convertible Note Agreement dated April 27, 1992 between
Stratford American Sports Corp. and Arthur J. Martori N/A
10.24 Pledge Agreement dated April 27, 1992 by Stratford American
Corporation to Arthur J. Martori N/A
10.25 Stockholders' Agreement dated April 27, 1992 among Stratford
American Sports Corp., Stratford American Corporation, and
Arthur J. Martori N/A
10.26 Convertible Note dated April 27, 1992 by Stratford American
Sports Corp. and Arthur J. Martori N/A
10.27 Restructure Agreement dated May 19, 1992 between Stratford
American Properties Corporation and Security Pacific Bank Arizona N/A
10.28 Promissory Notes dated May 19, 1992 from Stratford American
Properties Corporation to Security Pacific Bank Arizona
10.29 Deed of Trust, Assignment of Rents, Security Agreement and
Financing Statement dated May 19, 1992 by Stratford American
Properties Corporation to Security Pacific Bank Arizona N/A
10.30 Continuing Guaranty dated May 19, 1992 by certain officers and
directors of Stratford American Properties Corporation to Security
Pacific Bank Arizona N/A
10.31 Debt Restructuring Agreement dated July 1, 1992 between First
Interstate Bank of Arizona, N.A., University Center Developers,
Stratford American Properties Corporation and Stratford American
Corporation N/A
10.32 Replacement Promissory Notes A, B and C dated July 1,
1992 by University Center Developers to First
Interstate Bank
of Arizona, N.A. N/A
10.33 Replacement Unconditional Guarantee of Payment dated July 7,
1992 from Stratford American Properties Corporation to First
Interstate Bank of Arizona, N.A. N/A
10.34 Replacement Unconditional Guarantee of Payment dated July 7,
1992 from Stratford American Corporation to First Interstate
Bank of Arizona, N.A. N/A
10.35 Settlement Agreement effective April 16, 1993 between Greyhound
Real Estate Finance Company and Stratford American Properties
Corporation N/A
10.36 Settlement Agreement dated April 13, 1993 among Fairfield
Acceptance Corporation, Fairfield Communities, Inc., Stratford
American Corporation and Stratford American Properties Corporation N/A
10.37 Master Loan Modification and Extension Agreement dated
September 28, 1993 N/A
10.38 Sale and Purchase Agreement between Stratford American Car
Rental Systems, Inc. and The John Douglas Corporation, Douglas
F. and Bette Jane Mitchell and John Rector, Jr. dated May 19, 1994 N/A
10.39 License Agreement between Dollar Systems, Inc. and Stratford
American Car Rental Systems, Inc. effective June 1, 1994 N/A
10.40 Promissory Note between Dollar Systems, Inc. and Stratford
American Car Rental Systems, Inc. effective June 1, 1994 N/A
10.41 Registrant's Press Release dated June 2, 1994 N/A
10.42 Sale and Purchase Agreement between University Center
Developers and St. Paul Properties, Inc. dated March 8, 1995 N/A
10.43 Registrant's Press Release dated March 30, 1995 N/A
10.44 Agreement and Release dated September 1, 1994 among F. R.
Hill, Jr., as Trustee, Stratford American Resource Corporation
And Stratford American Corporation N/A
10.45 Assignment dated September 1, 1994 from Stratford American
Resource Corporation to F. R. Hill, Jr., as Trustee N/A
10.46 Assignment dated September 1, 1994 from Stratford American
Energy Corporation to Tenison Oil Company N/A
10.47 Clarification to Joint Venture Agreement for University Center
Developers, dated as of March 10, 1995 N/A
10.48 Clarification and First Amendment to Joint Venture Agreement
for University Center Developers, dated as of March 10, 1995 N/A
10.49 Assistance Agreement between Stratford American Car Rental
Systems, Inc. and Dollar Systems, Inc. dated May 16, 1995 N/A
10.50 Letter of Price Waterhouse LLP dated February 15, 1996 N/A
10.51 Guaranty from Stratford American Corporation to
General Motors Acceptance Corporation dated August 9, 1995 33
10.52 Continuing Guaranty from Stratford American Corporation
to Ford Motor Credit Company dated July 14, 1995 34
10.53 Guaranty Agreement from Stratford American Corporation
to Nissan Motor Acceptance Corporation dated August 9, 1995 35
10.54 Lease Plan Financing and Security Agreement between Stratford
American Car Rental Systems, Inc. and Nissan Motor Acceptance
Corporation dated August 9, 1995 39
11.1 Statement regarding computation of per share earnings N/A
22.1 Subsidiaries N/A
27.1 Financial Data Schedule 46
</TABLE>
Note: Shareholders may obtain copies of Exhibits by making written request to
the Secretary of the Corporation and paying copying costs of $0.10 per page,
plus postage.
City Phoenix State Arizona Date August 9 ,1995
------------------------- --------------------- ---------- ---
To induce General Motors Acceptance Corporation, hereinafter called GMAC, to
extend or continue credit to
Stratford American
Car Rental Systems, Inc. hereinafter called Dealer, the undersigned person or
- ---------------------------
persons does hereby unconditionally guarantee the payment of all indebtedness of
Dealer to GMAC, including indebtedness assigned to GMAC arising in connection
with the GM Instalment Sales Finance Plan, together with all costs, expenses and
attorneys' fees incurred by GMAC in connection with any default of Dealer.
Any liability for the undersigned hereunder shall not be affected by, nor shall
it be necessary to procure the consent of the undersigned or give any notice in
reference to, any settlement, or variation of terms of any obligation of the
Dealer, or of a guarantor or any other interested person, by operation of law or
otherwise; nor by failure to file, record or register any security document. The
undersigned recognizes that GMAC may utilize various means of attempting to
verify Dealer's compliance with its credit terms, including periodic collateral
checks and examinations of books and records, and hereby expressly agrees that
such steps are for the sole benefit of GMAC and the adequacy of performance of
such checks and examinations shall not be considered as a defense to or
mitigation of liability hereunder.
The undersigned does hereby expressly waive and dispense with notice of
acceptance of this guaranty, notices of non-payment or non-performance, notice
of amount of indebtedness outstanding at any time, protests, demands and
prosecution of collection, foreclosure and possessory remedies. The undersigned
hereby waives any right to require GMAC to (i) proceed against other persons or
Dealer, (ii) advise the undersigned of the results of any collateral checks or
examinations, (iii) require Dealer to comply with its agreement with GMAC,
or(iv) proceed against Dealer or proceed against or exhaust any security.
This is a continuing guaranty and shall remain in full force and effect until
forty-eight (48) hours after receipt by GMAC, at its office designated below, of
written notice by the undersigned terminating or modifying same; provided,
however, that such notice shall not operate to release the undersigned from
liability hereunder with respect to any obligations incurred prior to the
effective date of such notice.
Except as noted hereon, GMAC has made no promises to Dealer or the undersigned
to induce execution of this Guaranty and there are no other agreements or
understandings, either oral or in writing, between GMAC and the undersigned
affecting this Guaranty.
The obligation of all parties signing this guaranty, where more than one, shall
be joint and several.
This guaranty may not be changed orally and shall bind and inure to the benefit
of the heirs, administrators, successors and assigns of the undersigned and
GMAC, respecively. If any part of this guaranty is not valid or enforceable
according to applicable law, all other parts will remain enforceable.
Notwithstanding the generality of the above, if it is intended that this
guaranty apply only to a specific loan(s) or advance(s) so indicate below and
execute as indicated; if not, line out the space, initial the line out and
execute as indicated:
THIS GUARANTY AND THE PERFORMANCE HEREUNDER SHALL BE SONSTRUED AND DETERMINED
ACCORDING TO THE LAW OF THE STATE OF NEW YORK.
Stratford American Corporation
Witness /s/ Patricia [?] Guarantor by /s/ David H. Eaton CEO L.S.
-------------------------------- ----------------------------
Address Address 2400 East Biltmore Circle
-------------------------------- Building 2, Suite 1270
Phoenix, AZ 85016
---------------------------
Witness Guarantor L.S.
-------------------------------- ---------------------------
Address Address
-------------------------------- ---------------------------
STATE OF ARIZONA
------------------
COUNTY OF MARICOPA
------------------
On this 9th day of August, 1995, before me personally came and appeared David H.
Eaton to me known and known by me to be (one of) the person(s) described in and
who executed this instrument and acknowledged that (t)he(y) executed the same as
guarantor(s).
Accepted:
GENERAL MOTORS ACCEPANCE CORPORATION /s/ Patrica [?]
Notary Public in and for
/s/ Manuel A. Mirele Phx. Az Maricopa Commission Expires: 3/24/97
- ------------------------------------ ----------------------------------------
(Branch Office Location) (County)
By _________________________________
CONTINUING GUARANTY
To Ford Motor Credit Company: Date July 14, 1995
For and in consideration of $1.00 and other good and valuable considerations
paid by you to each of us, the receipt and sufficiency of which is each hereby
acknowledged, and to induce you to make loans to and/or make advances under your
Wholesale Plan to, and to purchase or otherwise acquire retail installment sale
contracts, conditional sale contracts, chattel mortgages or other security
instruments, or to otherwise extend credit to or do business with:
Stratford American Car Rental Systems, Inc. of
- --------------------------------------------------------------------------------
(DEALER'S NAME)
2400 E. Arizona Biltmore Circle Ste. 1270 Phoenix, Arizona 85016
- -------------------------------------------------------------------------------,
(DEALER'S ADDRESS)
hereinafter called the "Dealer", each of the undersigned Guarantors hereby,
jointly and severally, and unconditionally, guaranties to you, your successors
or assigns that the Dealer will fully, promptly and faithfully perform, pay and
discharge all Dealer's present and future obligations to you; and agrees,
without your first having to proceed against Dealer or to liquidate paper or any
security therefor, to pay on demand all sums due and to become due to you from
Dealer and all losses, costs, attorney's fees or expenses which you may suffer
by reason of Dealer's default; and agrees to be bound by and on demand to pay
any deficiency established by a sale of paper or security held with or without
notice to us; together with a reasonable attorney's fee (l5% if permitted by
law) if placed with an attorney for collection from us. Each of us hereby
subordinates any sums now or hereafter due to him from Dealer to the payment of
any sums now or hereafter due you from Dealer (Subordinated Indebtedness), and
agrees that the undersigned will not, without your prior written consent,
demand, take steps for the collection of, or assign, transfer or otherwise
dispose of the Subordinated Indebtedness or any part thereof or realize upon or
enforce any collateral securing the Subordinated Indebtedness or any part
thereof and will not demand or accept any property of the Dealer as security for
the Subordinated Indebtedness or any part thereof for so long as the Dealer
shall be indebted to you; provided that the following types of payments in
reasonable amounts shall not be subject to this Subordination Agreement and may
be paid by the Dealer to the undersigned without your prior written consent: (a)
regular wage and salary payments for sevices rendered by the undersigned, (b)
reimbursement for ordinary business expenses advanced on behalf of Dealer by the
undersigned or (c) payments for materials or property furnished by the
undersigned in the ordinary course of business dealings between the undersigned
and Dealer.
Each of the undersigned hereby assigns, transfers and sets over unto you all of
his right, title and interest in and to the Subordinated Indebtedness and agrees
to execute any additional assignments and instruments you may deem necessary or
desirable to effectuate complete, perfect or further confirm such assignment and
transfer; and agrees to hold in trust for and promptly remit to you for
application upon any indebtedness now or hereafter owing by the Dealer to you
any amount received from the Dealer or any other person on account of the
Subordinated Indebtedness.
Each of the undersigned Guarantors shall furnish to you such balance sheets,
statements of income, expenditure and surplus and other financial statements as
you may reasonably require from time to time
This guaranty may be terminated only by notice sent to you by registered mail,
stating an effective date after the receipt of such notice by you; but shall
continue thereafter as to each of us who has not given such notice, and shali
continue as to each of us giving such notice with respect to any transaction
with and any obligation of the Dealer incurred prior to the effective date of
termination. No termination hereof shall be effected by the death of any of us.
Each of us waives notice of acceptance hereof and of presentment, demand,
protest and notice of non-payment or protest as to any note or obligation
signed, accepted, endorsed or assigned to you by Dealer, and all exemptions,
rights of dower and homestead laws and any other demands and notices required by
law, and we waive all set-offs and counterclaims. You may renew, extend, modify
or transfer any obligations of Dealer or of its customer or of co-guarantors,
may accept partial payments thereon or settle, release, compound, compromise,
collect or otherwise liquidate any obligation or security therefor in any manner
and bid and purchase at any sale without affecting or impairing the obligation
of any of us hereunder.
It is contemplated that this is and is intended to be the personal guaranty of
payment and performance of each individual who signs this instrument, and any
language in connection with any signature indicating a capacity other than
personal shall be deemed stricken from and shall not be part of the signature;
but this provision shall not apply to the signature of a person who signs as an
officer of a corporation which is not the Dealer, and which executes this
instrument as its Corporate guaranty.
This instrument shall bind our respective heirs, administrators, personal
representatives, successors and assigns, and shall inure to your successors and
assigns. All of your rights are cumulative and not alternative. Witness our
hand(s) and seal(s) the day and year first above written.
(_________________(Seal)_____________________Address
(_________________(Seal)_____________________Address
(_________________(Seal)_____________________Address
For (_________________(Seal)_____________________Address
Individual
Guarantors (_________________(Seal)_____________________Address
(_________________(Seal)_____________________Address
Witness_______________________Address__________________________________
(Stratford American Corporation /s/ Timothy Loas
(------------------------------ Attest ------------------------
(By /s/ Mel L. Schultz SECRETARY
(------------------------------- (CORPORATE SEAL)
For ( Mel L. Schultz President
Corporate (
Guarantors (_______________________________
(_______________________________
( Attest ________________________
(By ____________________________ SECRETARY
(CORPORATE SEAL)
GUARANTY AGREEMENT
TO: NISSAN MOTOR ACCEPTANCE CORPORATION DATE: August 9, 1995
COUNTY OF Maricopa
STATE OF Ariz one
To induce NISSAN MOTOR ACCEPTANCE CORPORATION (hereinafter referred to as
"NMAC"), to extend or continue to extend credit to Stratford AMERICAN CAR RENTAL
SYSTEMS, INC.2400 L. Arizona Biltmore Cir. Bld. 2, Suite 1270, Phoenrx, AZ 850I6
(hereinafter referred to as the "DEALER"),and for and in consideration of good
and valuable consideration, the receipt of which is hereby acknowledged, the
Undersigned (which term refers both to each of the Undersigned individually and
to all or any two or more jointly) hereby jointly and severally unconditionally
and irrevocably deliver this Guaranty to NMAC and here by jointly and severally,
unconditionally and irrevocably guarantee to MAC, and any transferee of this
Guaranty or of any liability guaranteed hereby, the full and prompt payment of
all present and future liabilities of the DEALER to NMAC irrespective of its
nature or the time it arises. If any liability guaranteed hereby is not paid
when due, the Undersigned hereby agree to and will immediately pay same, without
resort by the holder thereof to any other person or party.
The liabilities covered by this Guaranty and hereby guaranteed by the
Undersigned (herein referred to collectively and individually as the
"liabilities") include all obligations and liabilities of the DEALER to NMAC
(whether individually or jointly with others, and whether direct, indirect,
absolute or contingent as maker, endorser, guarantor, surety or otherwise) now
existing or hereafter coming into existence and renewals or extensions in whole
or in part of any of said liabilities and include any and all damages, losses,
costs, interest, charges, attorney's fees and expenses of every kind, nature and
description suffered or incurred by NMAC, arising in any manner out of or in any
way connected with, or growing out of, said liabilities. As used herein, the
term person includes natural persons, partnerships, and incorporated and
unincorporated entities and associations of every kind.
Any payment of the Undersigned hereunder may be applied to any of the
liabilities which NMAC may choose. The obligation of the Undersigned hereunder
is an addition to and shall not prejudice or be prejudiced by any other
agreement, instrument, surety or guaranty (including any agreement, instrument,
surety or guaranty signed by the Undersigned) which NMAC may now or hereafter
hold relative to any of the liabilities. The obligation of the Undersigned to
NMAC hereunder is primary, absolute and unconditional.
Tho Undersigned acknowledges that there may be future advances by NMAC to the
DEALER (although NMAC is under no obligation to make such advances) and that the
number and amountof the liabilities are unlimited and may fluctuate from time to
time hereafter. The Undersigned expressly agree that the Undersigned's
obligation hereunder shall remain absolute, primary and conditional
notwithstanding such future advances and fluctuations, if any, and agree that,
in any event, this agreement is a continuing Guaranty and shall remain in force
at all times hereafter, whether there are any liabilities outstanding or not
until a written notice of termination from the Undersigned is received and
acknowledged by NMAC stating an effective date of no less than two (2) business
days following receipt of such notice by NMAC, but such termination shall not be
effective as to any Undersigned who has failed to give such notice, and shall
not release the Undersigned from liability for payment of (I) any and all
liabilities (as herein before defined) then in existence, (ii) any renewals or
extensions thereat in whole or in part of, whether such renewals or extensions
are made before or after such termination, and (iii) any damages, losses, costs,
interest, charges, attorney's fees or expenses then or thereafter incurred in
connection with said liabilities or any renewals or extensions thereof.
The Undersigned hereby consent and agree that, at any time or times, with out
notice to or further approval of the Undersigned or the DEALER, and without in
any way affecting the obligation of the Undersigned hereunder, NMAC may, with or
without consideration, (I) release, compromise, or agree not to sue, in whole or
in part, the DEALER, any of the Undersigned or any other obliger, guarantor,
endorser or surety upon any of the liabilities (ii) waive, rescind, renew,
extend, modify, increase, decrease, delete, terminate, amend, or accelerate in
accordance with its terms, either in whole or in part, any of the liabilities,
any of the terms thereat or any agreement, covenant, condition, or obligation of
or with the DEALER, any of the Undersigned or any other obliger, guarantor,
endorser or surety upon any of the liabilities to any of liabilities which NMAC
may choose.
The Undersigned hereby consent and agree that NMAC may at any time, either
with or without consideration, surrender, release or receive any property or
other security of any kind or nature whatsoever held by it or any person on its
behalf or for its account securing any indebtedness of the DEALER or any
liability, or substitute any collateral so held by NMAC for other collateral of
like kind, or any kind, without notice to or further consent from the
Undersigned, and such surrender, receipt, release or substitution shall not in
any way affect the obligation of the Undersigned hereunder. NMAC shall have full
authority to adjust, compromise and receive less than the amount due upon any
such collateral, and may enter into any accord and satisfaction agreement with
respect to the same as may seem advisable to NMAC without affecting the
obligation of the Undersigned hereunder, which shall remain absolute, primary
and unconditional. NMAC shall be under no duty to undertake to collect upon such
collateral or any part thereat and shall not be liable for any negligence or
mistake in judgment in handling, disposing AL obtaining, or failing to collect
upon, or perfecting a security interest in, any such collateral. NMAC may
collect or otherwise liquidate any collateral in any manner and bid and purchase
at any sale without affecting or impairing the obligation of the Undersigned.
This Guaranty covers all liabilities to NMAC purporting to be made on behalf of
the DEALER by any officer, agent or partner of said DEALER, without regard to
the actual authority of such of fleer, agent or partner to bind the DEALER, and
without regard to the capacity of the DEALER or whether the organization or
charter of the dealer is in any way defective.
The Undersigned hereby waive notice of acceptance of this agreement and of the
creation, extension or renewal of any liability of the DEALER to which it
related and of any default by the DEALER. The Undersigned hereby waive
presentment, demand, protest and notice of dishonor of any of the liabilities,
and hereby waive any failure to promptly commence suit against any party thereto
or liable thereon and give any notice to or make any claim or demand upon the
Undersigned or the DEALER. No act, failure to act or omission of any kind on the
part of the undersigned, the DEALER, NMAC or any other person shall be a legal
or equitable discharge or release of the undersigned from their obligation
hereunder. This Guaranty shall not be affected by any change which may arise by
reason of the death of the Undersigned, or of any partnered) of the Undersigned,
or of the DEALER, or of the accession to any such partnership of any one of more
new partners.
This agreement shall bind and inure to the benefit of NMAC, its successors and
assigns, and likewise shall bind and inure to the bereft of the Undersigned,
their heirs, executors, administrators, estates, successors and assigns.
If any legal action or actions are instituted by NMAC to enforce any of its
rights against the Undersigned hereunder, then the Undersigned, jointly and
severally, agree to pay NMAC all expenses incurred by NMAC relative to such
legal action or actions, including, but not limited to, court costs plus 15% of
the total amount of principal and accrued interest then due NMAC hereunder as
attorney's fees. Each party hereby waives trial by jury in any such action or
proceeding.
The obligation of the Undersigned hereby created is joint and several, and
NMAC is authorized and empowered to proceed against the Undersigned or any of
them, without joining the DEALER of any of the others of the undersigned. All of
said parties may be sued together, or any of them may be sued separately without
first or contemporaneously suing the others. There shall be no duty or
obligations upon NMAC, whether by notice under any applicable stature or
otherwise, (I) to proceed against the DEALER or any of the Undersigned, (ii) to
initiate any proceeding or exhaust any remedy against the DEALER or any of the
Undersigned, or (iii) to give any notice to the Undersigned or the DEALER,
whatsoever, before bringing suit, exercising any right to any collateral to
security, or instituting proceedings of any kind against the DEALER, the
Undersigned or any of them.
The Undersigned hereby ratify, confirm, and adopt all the terms conditions,
agreements and stipulations of all notes and other evidences of the liabilities
heretofore or hereafter executed. Without in any way limiting the generally of
the foregoing, the Undersigned, and each of them, waive and renounce, each for
himself and family, any and all homestead or exemption rights any of them may
have under or by virtue of the constitution or laws of any state, or the United
States, as against the obligation hereby created, and the Undersigned do hereby
each transfer, convey and assign, and direct any Trustee in Bankruptcy or
receiver to deliver to NMAC or holder hereof, a sufficient amount of property or
money in any homestead or exemption that may be allowed to the Undersigned, or
any of them to pay any liability guaranteed hereby in full and all costs of
collection. The undersigned also waive and renounce for themselves any defenses
to any of the liabilities which may be available to or could be asserted by the
DEALER, except for payment, and further waive any setoffs and counterclaims.
The undersigned further agree that if at any time all or any part of any
payment theretofore applied by NMAC to any of the liabilities is or must be
rescinded or retained by NMAC for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the DEALER), such
liabilities shall, for the purposes of the Guaranty, to the extent that such
payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by NMAC, and this Guaranty shall
continue to be effective or be reinstated, as the case may be, as to such
liabilities, all as though such application by NMAC had not been continue to be
effective or be reinstated, as the case may be, as to such liabilities, all as
though such application by NMAC has not been made.
All NMAC's rights and remedies are cumulative and those granted hereunder are
in addition to any rights remedies available to NMAC under law. If any provision
of this agreement or the application thereof to any person circumstances shall
to any extent be invalid or unenforceable, the remainder of this agreement or
the application of such provision to person or circumstances other than those as
to which it is held invalid or unenforceable shall not be affected thereby, and
each provision of this agreement shall be valid and enforceable to the full
extent permitted by law. The failure or forbearance of NMAC to exercise any
right hereunder, or otherwise granted to it bylaw or another agreement, shall
not affect the obligation of the Undersigned hereunder and shall not constitute
a waiver of said right. This Guaranty contains the entire agreement between the
parties, and not provision hereof may be waived, modified, or altered except by
a writing executed by the Undersigned and NMAC. There is no understanding that
any person other than or in addition to the Undersigned shall execute this
Guaranty.
It is contemplated that this is and is intended to be the personal guaranty of
payment and performance of each individual who signs this instrument, and any
language in connection with any signature indicating a capacity other than
personal shall be deemed stricken from and shall not be part of the signature,
but this provision shall not apply to the signature of a person who signs as an
officer of a corporation which is not the DEALER, and which executes this
instrument as its corporate guaranty.
THE UNDERSIGNED'S EXECUTION OP THIS GUARANTY WAS NOT BASED UPON ANY FACTS OR
MATERIALS PROVIDED BY NMAC NOR WAS THE UNDERSIGNED INDUCED TO EXECUTE HIS
GUARANTY BY ANY REPRESENTATION, STATEMENT OR ANALYSIS MADE BY NMAC. THE
UNDERSIGNED ACKNOWLEDGE AND AGREE THAT THE UNDERSIGNED ASSUME SOLE
RESPONSIBILITY FOR INDEPENDENTLY OBTAINING ANY INFORMATION OR REPORTS DEEMED
ADVISABLE BY THE UNDERSIGNED WITH REGARD TO THE DEALER OR ANY OF THE
UNDERSIGNED, AND THE UNDERSIGNED AGREE TO RELY SOLELY ON THE INFORMATION OR
REPORTS SO OBTAINED IN REACHING ANY DECISION TO EXECUTE OR NOT TO TERMINATE THIS
GUARANTY. INFORMATION OR REPORTS SO OBTAINED IN REACHING ANY DECISION TO EXECUTE
OR NOT TO TERMINATE THIS GUARANTY. THE UNDERSIGNED Acknowledge AND AGREE THAT
NMAC IS AND SHALL BE UNDER NO OBLIGATION NOW OR IN THE FUTURE TO FURNISH ANY
INFORMATION TO THE UNDERSIGNED CONCERNING THE DEALER, THE LIABILITIES OR ANY OF
THE OTHER UNDERSIGNED, AND THAT NMAC DOES NOT AND SHALL NOT BE DEEMED IN THE
FUTURE TO WARRANT THE ACCURACY OF ANY INFORMATION OR REPRESENTATION CONCERNING
THE DEALER, THE UNDERSIGNED OR NAY OTHER PERSON WHICH MAY INDUCE THE UNDERSIGNED
TO EXECUTE OR NOT TO TERMINATE THIS GUARANTY.
This agreement and its performance, interpretation and enforcement shall in all
respects be governed by the laws of the State where the dealership is located.
IN W WITNESS HEREOF, and in agreement hereto the undersigned individuals) have
affixed their signatures and seals and the undersigned corporations) have caused
their seals to be affixed by their duty authorized of officers this 9th day of
August , 1995
FOR CORPORATE GUARANTORS:
/s/ Mel Shultz
- ----------------------------------- ----------------------------------------
Stratford American Corporation Address
BY: Mel Shultz Attest: /s/ Timothy A. Laos
----------------------------- ----------------------------------------
Name Secretary
President
------------------------------
Title
(CORPORATE SEAL)
NISSAN MOTOR ACCEPTANCE CORPORATION
LEASE PLAN FINANCING
AND SECURITY AGREEMENT
This Lease Plan Financing and Security Agreement thereinafter referred to as the
Agreement") is entered into by and between Nissan Motor Acceptance Corporation,
990 W. 190th Street, Torrance, California 90502 (hereinafter referred to as
(degree)NMAC) and the Debtor whose name and address are set forth below
(hereinafter referred to as the"Debtor"). The parties agree to the following
terms:
1. Financing. Debtor agrees to borrow from NMAC the sum of $1,500,000.00 for a
line of credit renewable from time to time by one or more Schedules for the
purpose of financing, in whole or in part, the purchase price of the motor
vehicles and other property (hereinafter referred to as the property") described
in the Schedulers).The amount of all loans and advances made and to be made by
NMAC to Debtor and the period of time during which they are to remain
outstanding shall at all times be in the sole discretion of NMAC. NMAC may from
time to time, without responsibility or liability to Debtor, establish, rescind
or change the limits or the extent to which accommodations under this Agreement
will be made available to Dealer. NMAC may pay to any manufacturer, distributor,
or other seller of merchandise, the invoice amount thereof, and NMAC shall be
fully protected in relying in good faith upon any invoice or statement from any
manufacturer, distributor, or seller that the property described therein has
been ordered by or shipped to Debtor and the invoice amount therefor is
correctly stated. Any such payment made by NMAC to any such manufacturer,
distributor or seller shall be an advance made by NMAC to or on behalf of Debtor
pursuant hereto and shall be repayable by Debtor in accordance with the terms
hereof. In addition, NMAC may revise any limit placed by NMAC on loans and
advances. The term "Schedule(s)", as used in this Agreement, shall mean each
Schedule A to Lease Plan Financing and Security Agreement, whether now existing
or hereafter created, that indicates on the face thereof that it pertains to
this Agreement. All Schedules are hereby incorporated into and made a part of
this Agreement. The term indebtedness", as used in this Agreement shall mean the
aggregate of the figures set forth as the "Total Amount Financed" on the final
page of each Schedule. Debtor hereby agrees to pay to NMAC or its order the
Amount Financed set forth in each Schedule with respect to each respective item
of Property in successive monthly installments in the number and amount set
forth in Column A of the Schedule s), not to exceed eighteen (18) together with
interest on the unpaid principal balance of each Total Amount Financed at the
rate of NMAC Prime Rate plus 2.0% ( hereinafter referred to as the "Rate.")
"NMAC Prime Rate" shall mean the per annum interest rate from time to time
announced by a majority of the following New York City Banks : Bankers Trust,
Chase Manhattan, N.A. Chemical Bank, Citibank, N.A., Morgan Guaranty Trust Co.
of New York, as their respective prime rate provided that if less than three of
such banks have the same rate in effect, the median of the five rates shall be
the NMAC Prime Rate. Payments hereunder shall include curtailments of each
Amount Financed at the rate of 2.5% per month to the last installment. The
unpaid balance of each Amount Financed with respect to each item of the
Property, if any, shall be due and payable on the date the last installment with
respect thereto shall be due, together with interest thereon at the Rate set
forth on the Schedule.
Payments made by the Debtor will be first applied to unpaid interest charges and
then to the purchase price of each item of inventory. The items of inventory hat
are test sold by the Debtor shall be deemed by NMAC under the terms of this
Agreement to be test paid for by the Debtor. To the extent that the payments
made by the Debtor. To NMAC exceed the cost of units of inventory sold by the
Debtor, then such payments will be applied to the remaining inventory in the
same proportion or ratio as original cash sales prices of the various purchases
bear to one another.
2. Security Interest. As security for (i) payment of the Indebtedness, interest
thereon and all other amounts due or to become due under this agreement, (ii)
any other indebtedness of Debtor to NMAC now in existence or hereafter arising
and (iii) the strict observance and performance of all other obligations of
Debtor to NMAC, whether under this Agreement or other agreements, Debtor hereby
grants to NMAC, its successors and assigns a security interest in (a) the
Property, whether now or hereafter existing or acquired, whether or not
inventory and whether or not in Debtor's possession including all attachments,
accessories and accessions thereto, whether now or here after installed thereon,
and all cash or non-cash proceeds thereof (b) all monies or credits relating to
the Property due or to become due to Debtor from, and all claims against, any
manufacturer, dealer or distributor of the Property; (C) without limitation, all
leases of the Property entered into by Debtor, all rentals due or to become due
under Any lease of any item of the Property, all other rentals, proceeds of
sale, exchange or other disposition of any item of the Property (whether or not
such sale, exchange or other disposition is authorized under this agreement) and
the proceeds of any insurance covering the Property or any part thereof and (of)
all accounts receivable, chattel paper, security agreements, instruments,
contract rights, policies and certificates of insurance, manufacturer's
certificates or statements of origin, or certificates of title or ownership
relating to vehicles, bills of sale, receipts, journals, records, files, book
and ledger sheets, documents and general intangibles now held or hereafter
acquired by Debtor, relative to the Property, including all monies and credits
now due or to become due to Debtor from, and all claims against, manufacturers
or distributors of inventory or other lending institutions, relative to the
Property, and the proceeds of all of the foregoing. Such identifiable proceeds
as stated above shall be accounted for to NMAC upon request, and payment shall
be made upon demand by NMAC. Failure to pay NMAC upon demand will result in
Debtor placing all proceeds in trust for NMAC and promptly turning over said
funds to NMAC. A full accounting of the trust will be made to NMAC upon request.
Any subsequent lease or rental agreement relating to any item of the Property
shall contain provisions satisfactory to NMAC which protect NMAC's rights under
this section. All rental and/or lease agreements must be approved by NMAC.
3. Prepayment. Debtor may prepay the principal balance in whole or in part at
any time, together with all interest accrued to the date of prepayment on the
principal amount being prepaid; provided, however, that (a) if the lessee under
any lease of the Property prepays such lease in whole or in part, or exercise
any option included in such lease to purchase any of the Property, Debtor may
prepay the principal balance hereof in a corresponding amount without prepayment
premium (b) if the financing of all of the Property is for the purpose of daily
rental, there shall be no prepayment premium if all amounts due and to become
due hereunder are prepaid in full 12 months or more after the date hereof or if
prepayment is a result of a vehicle(s) removal from rental service; and (c)
there shall be no prepayment premium on any amounts required to be prepaid under
paragraph 10 of this Agreement.
4. Purpose of Financing. Debtor's possession of the Property shall be for the
purpose of lease-rental in the ordinary course of Debtor's business, or, as
authorized by NMAC and only upon execution by Debtor of appropriate floor plan
agreements and documentation, for the disposition of the Property in a used
condition upon its return to Debtor by Debtor's customers.
5. Representations and Warranties of Debtor. Debtor hereby represents and
warrants to NMAC that (I) if Debtor is a corporation, the execution and delivery
of this Agreement and the performance of all of Debtor's obligations here under
have been duly approved by all requisite corporate actions of Debtor; (ii)
Debtor has good and marketable title to the Property free and clear of all
claims, liens, encumbrances, security interests and rights of third parties,
with the exception of those created by or as contemplated under this Agreement;
(iii) no financing statement covering any of the Property or any proceeds
thereof is on file in any public office in any state or jurisdiction; (iv) any
lease or other agreement of rental of any item of the Property is or will be
genuine, legally valid and enforceable, and each such item has been or promptly
will be delivered to the Lessee thereunder; and (v) no lease or other agreement
of rental or any item of property has been or will be placed in the hands of any
other party as security for the payment of any monies alleged to be due to such
party; and (vi) a certificate of title to each item of the Property evidencing
the security interest of NMAC hereunder has been or immediately will be applied
for by Debtor if permitted by law; and (vii) Debtor agrees to indemnify NMAC for
any legal action regarding the use or rental agreement presently in effect.
6. Covenants of Debtor. Debtor hereby covenants and agrees with NMAC that (I)
Debtor shall promptly notify NMAC when any of the Property is Leased or rental
to a third person, such notification to include the Lessee's name and address
provided, however, that if such item is subject to daily rental by different
persons, it will be described as a "daily rental"; (ii) Debtor shall promptly
pay or cause to be paid all taxes due in connection with the Property and its
use or operation and shall keep the Property and the proceeds thereof free from
all liens and encumbrances, except as expressly contemplated under this
Agreement, and Debtor shall pay on demand as an additional obligation secured
under this agreement any amounts that in the sole discretion of NMAC may be paid
by NMAC in written consent of NMAC, Debtor shall not sell, transfer or otherwise
dispose of any of the Property or any interest therein until Debtor has fully
paid the Indebtedness and all other amounts due or to become due under this
Agreement; (iv) Debtor shall not remove or permit the removal of any item of the
Property from its stateof garaging for more than thirty (30) days without the
prior written approval of NMAC. Debtor will not use or permit the use of any
item of the Property illegally or for any purpose in conflict with the terms of
this Agreement; (v) Debtor shall furnish to NMAC such balance sheets, statements
of profit or loss, such other statements of Debtor's financing condition and
such other information conceding Debtor as NMAC may from time to time request;
(vi) Debtor shall maintain adequate records for the purpose of identifying any
of the Property in the possession of third persons under lease or rental,
together with the names and addresses of such persons and the respective periods
of such leases or rentals and, upon request by NMAC, furnish such information to
it; (vii) if NMAC exercises its right to retake any item of the Property upon
Debtor's default under this Agreement, Debtor's right to possession of any such
item upon the subsequent expiration of any lease or rental thereof shall be
subordinate and subject to NMAC's rights to retake such item, and Debtor
accordingly hereby authorizes and empowers NMAC in its own name or in the name
of Debtor to take any and all action and to do any and all things necessary and
property to effectuate such right to retake such Property upon the expiration of
any such lease or rental. Any direct and indirect costs relating to the
repossession of said Property by NMAC will be paid be Debtor; (viii) Debtor
shall from time to time, and immediately on request, sign and execute alone or
with NMAC any financing statement or other document and procure any document
deemed necessary or appropriate by NMAC to fully carry out the terms of this
Agreement and to protect and perfect the security interest granted under this
Agreement against the rights and interests of third persons; and (ix) Debtor
shall strictly perform all of it's obligations and agreements related to NMAC
and shall pay without set-off all amounts due from Debtor to NMAC when due.
7. Risk Loss. Debtor shall have the sole risk of any damage to or loss or
destruction of any of the Property,and no damage to or loss or destruction of
the property shall release Debtor from its obligations under this Agreement.
8. Insurance and Indemnification. Debtor shall procure and maintain insurance
protecting the respective interests of debtor and NMAC against all damage to or
loss or destruction of the Property, in such form and amounts as NMAC may
require and approve from time to time. Debtor shall indemnify NMAC against and
hold NMAC harmless from all claims for injury or damage to persons or property
arising in connection with the ownership, use or operation of the Property,
including without limitation costs and attorneys' fees, and Debtor shall procure
and maintain insurance against all such liability protecting the interest of
Debtor and including NMAC as an additional named insured, in such form and
amounts as NMAC may require and approve of from time to time.All such insurance
under this section shall provide that it shall not be cancelable except on ten
(10) days prior written notice to NMAC. If Debtor does not procure and maintain
any such insurance, NMAC shall have the rightto procure such insurance at
Debtor's expense.
9. Debtor's Default. Debtor shall be in default under tbis Agreement if any of
the following occurs:
9.1 Failure to Pay. Debtor does not make when due any payment to NMAC which it
is obligated to make, whether such payment is due under this Agreement or any
other agreement.
9.2 Default or Breach. Debtor defaults in the performance of or breaches any of
the terms, conditions, covenants or obligations of Debtor under this Agreement
or any other agreement between NMAC and Debtor, or Debtor attempts to make any
assignment or transfer prohibited under paragraph 12.1 hereof.
9.3 Inaccuracy of Any Representation or Warranty. Any representation, warranty
or statement made or caused to be made by lessor in connection with this
Agreement or any other agreement between NMAC and Debtor is untrue, inaccurate
or breached in any material respect.
9.4 Material Loss of Property. The loss, theft, destruction, sale or encumbrance
of or damage to any of the Property without immediate replacement or repair
thereof by Debtor which is acceptable to NMAC, except aspermitted under
paragraph B of this Agreement the making of any levy, seizure or attachments
thereof or thereon.
9.5 Bankruptcy, Insolvency, Etc. The commencement of any proceeding under any
bankruptcy, reorganization or insolvency law of the United States, any state or
any political subdivision thereof by or against, insolvency of or inability to
pay debts as they mature of, Debtor or any guarantor or surety for Debtor;
appointment of a receiver, trustee or custodian for Debtor or all or a
substantial part of Debtor's property, an assignment by Debtor for the benefit
of creditors, or levy of am order of attachment, execution, sequestration or
other order in the nature of a writ on any of the Property.
9.6 Death. Dissolution. Etc. Death of Debtor if Debtor is a natural person;
death of any partner of Debtor if Debtor is a partnership; dissolution,
termination of existence, any sale or assignment of the assets, any sale,
assignment or other transfer of the stock, merger or consolidation with or into
other entity (whether or not Debtor is the surviving entity) of any Debtor which
is a corporation or a partnership; or business failure, cessation of business or
a transfer of all or any substantial part of the property of any Debtor.
9.7 Acceleration Under Any Agreement. Any event which results in acceleration of
the indebtedness owed by Debtor to any creditor or entity.
10. NMAC's Rirthts and Remedies.
10.1 NMAC's Rights. NMAC may enter upon Debtor's premises at any reasonable time
and from time to time to inspect the Property and Debtor's books and records
pertaining to the Property or its proceeds, and Debtor agrees to assist NMAC in
whatever way necessary to make any such inspection.
10.2 NMAC's Additional Rights and Remedies Upon Debtor's Default. If Debtor is
at any time in default, then:
(i) NMAC may, at its election and without notice, declare the entire
unpaid amount then due to NMAC from Debtor to be immediately due and payable
(and any amounts which did not theretofore bear interestshall thereafter bear
interest, to the extent permitted by law, at the Rate);
(ii) NMAC shall have all of the rights and remedies of a secured party
under the Uniform Commercial Code. Without limitation, upon its default Debtor
agrees to immediately assemble the Property and to make it available to NMAC at
a place to be designated by NMAC which is reasonably convenient to both parties;
and
(iii) Without limiting the generality of any of the rights and remedies
conferred upon NMAC under this Agreement or under the Uniform Commercial Code,
NMAC may enter upon the premises of Debtor and take immediate possession of the
Property, either personally or by means of a receiver appointed by a court
therefor, provided that such can be done without a breach of the peace.
(iv) NMAC may at any time notify any lessee under any lease or other
agreement or rental of any of the property, or without limitation any account
debtor or obliger on an instrument in connection with the Property or the
proceeds thereof, to make payment directly to NMAC whether or not Debtor was
theretofore making collections on such lease, rental agreement or other
collateral, and NMAC also may take control of any proceeds to which NMAC is
entitled under the Uniform Commercial Code; and
(v) Debtor does hereby nominate, designate and appoint NMAC and/or any
employee or employees designated by NMAC as Debtor's true and lawful
attorney-in-fact with full authority in the place and stead of Debtor to
execute, sign, endorse, transfer or deliver in the name of Debtor notes, checks,
drafts or other instruments for the payment of money and receipts, certificates
of origin, applications for certificates of titles or any other documents or
instmments appropriate to evidence, perfect and realize upon the security
interest granted by Debtor and the other obligations of Debtor under this
Agreement.
10.3 Collation Rights of NMAC. Any exercise of NMAC's rights under this
paragraph 10 or the public or private sale or, without limitation, other
disposition or use of the Property or any portion of the proceeds thereof by
NMAC shall not impair, constitute a waiver of or otherwise defeat NMAC's rights
to charge back to Debtor any uncollected collateral and to full recourse against
Debtor for any remaining amounts due to NMAC, whether or not in respect of the
Property sold or otherwise disposed of, or to receive a deficiency in respect
thereto.
11. WAIVER OF NOTICES BY DEBTOR. DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED
BY LAW, ALL RIGHTS TO NOTICE, PRESENTMENT AND MANNER OF PROCEDURE.
12. General
12.1 Assignment (Successors). No part of this Agreement, any interest herein nor
any rights hereunder may under any circumstances be directly or indirectly
assigned or transferred by Debtor without the prior written consentof NMAC. This
agreement shall be binding upon and shall inure to the benefit of the permitted
successors, licensees, assignees and transferee of the parties hereto whether by
license, sale, merger, reverse merger, consolidation, sale of stock or assets,
will or other testamentary disposition, operation of law or, without
limitation,otherwise. No transfer, renewal, extension or assignment of this
Agreement or any interest hereunder (whether or not permitted hereunder) will
relieve Debtor of its obligations and liabilities under this Agreement.
12.2 Waivers. NMAC may waive any of its rights or any breach or default of
Debtor under this Agreement, provided that such waiver will not be effective
unless it is in writing, is signed by a duly authorized officer of NMAC and
specifically refers to this Agreement. Waivers may be made in advance or after
the right waived has arisen or the breach of default waived has occurred. Any
waiver may be conditional. Any waiver of a condition of this Agreement is not a
waiver of the remaining portions of the Agreement. Waiver by NMAC of any default
of Debtor or any other act or omission of Debtor shall not operate as a waiver
by NMAC of any other or future default or act or omission by Debtor, whether or
not of the same kind.
12.3 Modifications: Amendment: Sole Discretion. Except as otherwise provided
herein, provisions of this Agreement may be modified, amended or waived only by
a written document specifically identifying this Agreement and signed by a duly
authorized officer of NMAC.
12.4 No Accord and Satisfaction. No receipt or acceptance by NMAC of any payment
of any amount in respect of any of Debtor's indebtedness hereunder which is less
than the amount due shall be deemed to be other than on account of the amount
due before such receipt, acceptance or payment, and no endorsement or statement
accompanying or in respect of any receipt, acceptance or payment shall be deemed
in accord and satisfaction. Without limitation, NMAC may accept any payment
without prejudice to any right it would have but for such acceptance .
12.5 Remedies of NMAC Cumulative. The rights and remedies of NMAC set forth in
this agreement are cumulative with one another and with any other rights or
remedies which NMAC may have at law, in equity, under any agreements of any type
or otherwise, and the exercise or failure to exercise any remedy shall not
preclude the exercise of that remedy at another time or of any other remedy at
any time.
12.6 Severability. Any portion or provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining portions or provisions hereof in such
jurisdiction or, to the extent permitted by law, rendering that or any other
portion or porvision of this Agreement invalid, illegal or unenforceable in any
other jurisdiction.
12.7 No Set-Offs. All amounts due from Debtor to NMAC shall be paid without any
set-off, counterclaim or deduction whatsoever.
12.8 No Third Party Beneficiaries. There are no third party beneficiaries of
this Agreement.
12.9 Entire Agreement. This Agreement and the Schedules attached hereto
constitute the entire agreement of the parties and supersede all prior written
or oral and all contemporaneous oral agreements, understandings and negotiations
between the parties with respect to the subject matter hereof.
12.10 Governing Law. This Agreement shall be governed by the laws of the state
where the Debtor is located; provided, however, that procedural issues of
foreclosure or enforcement of the security interests that directly affect the
collateral shall be governed by the laws of state in which the foreclosure takes
place.
12.11 Attorneys Fees. If any litigation or other proceeding in connection with
or related to this Agreement is commenced, the losing party shall pay the
expenses, including without limitation the costs, attorney fees, and expenses of
investigation, of the prevailing party.
12.12 Article and Section Headings. The paragraph headings included in this
Agreement are for the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.
12.13 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be an original (as against any party who signed it) and all of
which shall constitute one and the same document.
12.14 Time of the Essence. Time is of the essence to all of Debtor's obligations
under this Agreement.
12.15 Gender and Number. In this Agreement (unless the context requires
otherwise), the masculine, feminine and neuter genders and the singular and
plural include one another.
12.16 Notices. All notices, requests, waivers and other communications made
pursuant to this Agreement shall specifically refer to this Agreement, be in
writing and be personally delivered or mailed first-class, postage prepaid, to
the addresses set forth below or such other address as a party may from time to
times specify in writing to each of the other parties:
STRATFORD AMERICA CAR NISSAN MOTOR ACCEPTANCE CORPORATION
RENTAL SYSTEMS, INC. 990 W. 190th Street
2400 E. Arizona Biltmore Cir. Torrance, California 90502
Bld. 2, Suite 1270 Manager, Commercial Credit Department
Phoenix, AZ 85016
All such communications to the Debtor shall conclusively be deemed to have been
received on the business day next occurring 72 hours after mailing. No such
communication to NMAC shall be deemed given or received until it is actually
received.
12.17 Warranties. Although the manufacturers may have made certain warranties as
to the Property, none of the manufacturer's warranties are in any way connected
with this Agreement.
Dated as of August 9, 1995
--------------
Stratford American Car Rental NISSAN MOTOR ACCEPTANCE CORPORATION
Systems, Inc. 990 W. 190th Street
2400 E. Arizona Biltmore Cir. Bld. 2, Torrance, CA 90502
Suite 1270
Phoenix, AZ 85016
By /s/ Mel Shultz By /s/ Mark Doi
----------------------- --------------------------------
Mel Shultz, President Mark Doi, Commerciai Credit Manager
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT
DECEMBER 31, 1995 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE
YEAR ENDED DECEMBER 31, 1995 OF STRATFORD AMERICAN
CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,121,000
<SECURITIES> 0
<RECEIVABLES> 352,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 809,000
<PP&E> 471,000
<DEPRECIATION> 109,000
<TOTAL-ASSETS> 7,278,000
<CURRENT-LIABILITIES> 4,299,000
<BONDS> 0
0
0
<COMMON> 841,000
<OTHER-SE> (1,401,000)
<TOTAL-LIABILITY-AND-EQUITY> 7,278,000
<SALES> 890,000
<TOTAL-REVENUES> 12,425,000
<CGS> 687,000
<TOTAL-COSTS> 12,037,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 305,000
<INCOME-PRETAX> (576,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (576,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,402,000
<CHANGES> 0
<NET-INCOME> 2,826,000
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
