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
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-17018
STRATFORD AMERICAN CORPORATION
(Name of small business issuer 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 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 revenues for its most recent fiscal year: $1,062,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the February 29, 2000 average bid and asked prices of
$1.34 per share, is $6,361,000.
At February 29, 2000, 6,371,787 shares of the issuer's common stock and no
shares of its preferred stock were issued and outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
Certain portions of the registrant's definitive Proxy Statement, which will
be filed with the Commission on or about April 28, 2000, in connection with the
Annual Meeting of Shareholders of the registrant to be held on July 12, 2000,
are incorporated by reference into Part III of this report.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
GENERAL DEVELOPMENT OF BUSINESS. Stratford American Corporation, an Arizona
corporation incorporated on May 13, 1988 (the "Company"), has several
wholly-owned subsidiaries. Unless otherwise specified, the term "Company" as
used herein includes the Company's subsidiaries.
NARRATIVE DESCRIPTION OF BUSINESS
The Company presently has no significant operations. The Company employs 6
full-time employees.
DOLLAR RENT A CAR. On October 1, 1998, the Company's subsidiary, Stratford
American Car Rental Systems, Inc. ("SCRS"), sold the franchise rights and all
other assets of its Dollar Rent A Car operations, to Dollar Rent A Car Systems,
Inc., an Oklahoma corporation ("Dollar"). On the same day, SCRS exercised an
option to purchase the property which includes the Phoenix Dollar Rent A Car
base operation facilities located near Sky Harbor International Airport.
Simultaneously, Dollar entered into a long term lease with SCRS to utilize the
base operations. On December 29, 1999, the Company sold the real estate property
including the Phoenix Dollar Rent A Car base operation facilities for a price of
$1,440,000. The Dollar Rent A Car operations portion of SCRS has been accounted
for as a discontinued operation as discussed in Note 3 to the Consolidated
Financial Statements. The Company has no future plans to participate in car
rental related activities.
NATURAL RESOURCES. The Company owns a nominal interest in several oil and
gas wells located in Arkansas and Oklahoma. The Company has no other interest in
any oil and gas properties. Total revenues from natural resource operations were
insignificant during the year ended December 31, 1999. (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
$112,000 per year. The term of the current lease expires in September 2004. The
Company believes its office space is sufficient to meet its operational needs in
the near future.
NATURAL RESOURCE PROPERTIES - OIL AND GAS. The Company owns a nominal
interest in four oil and gas wells located in Arkansas and Oklahoma. The Company
has no other interest in any oil and gas properties.
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, 1999.
2
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EXECUTIVE OFFICERS
Name Age Office Officer Since
---- --- ------ -------------
David H. Eaton 64 Chief Executive Officer 6/88
Mel L. Shultz 49 President 5/87
Daniel E. Matthews 49 Treasurer and Secretary 12/99
Timothy A. Laos 46 Chief Financial Officer 3/95
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.
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.
DANIEL E. MATTHEWS was appointed Treasurer and Secretary of the Company on
December 1, 1999. Mr. Matthews has been the Controller of the Company since May
1997. Mr. Matthews was previously involved in accounting management positions in
private industry.
TIMOTHY A. LAOS, C.P.A., has been the Chief Financial Officer of the
Company since March 1, 1995. Mr. Laos was previously involved in public
accounting as well as various accounting management positions in private
industry.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock, $0.01 par value, is currently listed and traded
on the OTC Bulletin Board (symbol: STFA).
The high and low bid prices for each quarter during the last two years, are
as follows:
Time Period High Low
----------- ---- ---
1998: First quarter .90 .60
Second quarter .825 .675
Third quarter .7125 .375
Fourth quarter .6875 .40625
1999: First quarter .75 .375
Second quarter .90625 .375
Third quarter .875 .78125
Fourth quarter 1.3125 .65625
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. On July 20, 1998, subsequent to approval by the Company's Board of
Directors and shareholders, the Company effected a fifteen-to-one reverse split
3
<PAGE>
of the Company's common stock. All applicable bid prices above have been
adjusted to reflect this fifteen-to-one reverse split.
HOLDERS
As of February 29, 2000, 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. Arizona law
may restrict the ability of a corporation to pay 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 OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company recognized a consolidated profit from continuing operations for
the fourth quarter of 1999, primarily due to the gain on sale of certain real
estate property. Excluding the gain on sale of real estate property recognized
during the period, the Company would have recognized a consolidated loss from
continuing operations. The Company expects such losses to continue unless and
until the Company is able to make profitable acquisitions. There can be no
assurance that the Company will be able to make such acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
As previously reported, Stratford American Car Rental Systems, Inc.
("SCRS"), a subsidiary of the Company, sold its rental car business to Dollar
Rent A Car Systems, Inc. ("Dollar") on October 1, 1998. In January 1999, Dollar
and SCRS finalized all post-closing obligations between each party. As provided
by the Post-Closing Statement agreement, $75,000 from a holdback fund was
remitted to SCRS with a remaining $25,000 related to any obligations, or
indemnities, to be held by Dollar until October 1, 1999. In September 1999, SCRS
and Dollar reached an agreement whereby Dollar will retain the remaining $25,000
holdback as settlement for a $63,000 invoice from Dollar inadvertently excluded
from the final post-close settlement in January 1999, as well as any and all
other claims.
On the same day that SCRS sold the rental car business, SCRS exercised an
option to purchase the property which includes the Phoenix Dollar Rent A Car
base operation facilities located near Sky Harbor International Airport.
Simultaneously, Dollar entered into a long -term lease with SCRS to utilize such
base operation facilities. On December 29, 1999, the Company sold the real
estate property for a price of $1,440,000, recognizing a gain on sale of real
estate totaling $826,000.
On March 26, 1999, 500,000 shares of the Company's common stock were issued
to certain private investors, at $1 per share.
The Company anticipates that with its current cash position due to the sale
of the car rental business in 1998, the related sale of real estate property in
December 1999 and the sale of shares in March 1999, it should meet its
operational cash flow needs for the remainder of 2000. However, due to any
unforeseen circumstances that could occur outside the Company's control, there
can be no assurance that adequate cash flows from the Company's present cash
position and operations will be achieved.
4
<PAGE>
The Company continues to aggressively seek potential acquisitions in
establishing its future direction. There can be no assurance that it will be
able to locate suitable acquisition candidates or make any such acquisitions, or
that any acquisitions that are made will be profitable for the Company.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED
DECEMBER 31, 1998
The Company reported net income of $105,000 during 1999 in comparison to
net income of $3,701,000 in 1998. The 1999 results include a gain on sale of
real estate property of $826,000 as discussed in Note 3 to the Consolidated
Financial Statements. The 1998 results include net income of $3,884,000 from
discontinued operations as discussed in Note 3 to the Consolidated Financial
Statements. Excluding the gain on sale of real estate in 1999, revenues
increased from $112,000 in 1998 to $236,000 in 1999, primarily due to lease
income received on property leased to Dollar Rent A Car in 1999.
General and administrative expenses for the first quarter of 1999 and for
the complete year of 1998 were allocated to discontinued operations in
accordance with proportionate revenue generated and corporate resources
utilized. Management believes this allocation methodology is reasonable. The
increase in general and administrative expense from $211,000 in 1998 to $698,000
in 1999, is due to the fact that a significant portion of total general and
administrative expense was allocated to discontinued operations during the
reporting periods in 1998 due to discontinued operations being the primary
activity during that time. Total general and administrative expense for 1998,
before allocation to discontinued operations, was $645,000.
OTHER ACTIVITIES
The Company sold its remaining significant real estate property in December
1999. The Company owns a nominal interest in several oil and gas wells in
Arkansas and Oklahoma that generate insignificant revenues. The Company has no
other interest in any oil and gas properties.
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.
YEAR 2000 ISSUES
The Company is in the process of completing a review of its Year 2000
issues and has completed its review of internal systems. The majority of the
Company's application software programs are Year 2000 compliant. The Company
believes that with modifications and updates to existing software (primarily by
the software vendors), the Year 2000 problem will not pose significant
operational problems for the Company's internal systems. The Company also
believes that any remediation costs to become Year 2000 compliant will not be
material. The Company is also continuing to verify the Year 2000 readiness of
third parties and will develop a contingency plan at that point in time when the
Company believes a material vendor, customer, or other third party will not be
compliant. The Company has not experienced any Year 2000 problems to date.
5
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained in this report, including statements
containing the words "believes," "anticipates," "intends," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and are subject to the safe
harbors created thereby. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual results
to be materially different from the forward-looking statements. Such factors
include, among others, the following: the fact that the Company, following the
sale of assets to Dollar, has no significant operations; the risk that the
Company will not be able to complete any profitable acquisitions to re-establish
significant operations; the risk that the Company will continue to recognize
losses from continuing operations unless and until the Company is able to make
profitable acquisitions; the risk that all of the foregoing factors or other
factors could cause fluctuations in the Company's operating results and the
price of the Company's common stock; and other risks detailed in this report and
from time to time in the Company's other filings with the Securities and
Exchange Commission. Given these uncertainties, readers should not place undue
reliance on such forward-looking statements.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX PAGE
----- ----
Stratford American Corporation and Subsidiaries Consolidated Financial
Statements
Independent Auditors' Report 8
Consolidated Balance Sheet as of December 31, 1999 9
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998 10
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1999 and 1998 11
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998 12
Notes to Consolidated Financial Statements 13
Certain 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.
7
<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, 1999, and the related
consolidated statements of operations, shareholders' equity , and cash flows for
each of the years in the two-year period then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Stratford American
Corporation and subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for each of the years in the two-year period
then ended in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Phoenix, Arizona
February 26, 2000
8
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Cash and cash equivalents $ 2,890,000
Receivables:
Trade, less allowance for doubtful
accounts of $2,000 93,000
Mortgage 48,000
------------
141,000
Other assets 100,000
------------
$ 3,131,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 49,000
Notes payable and other debt 62,000
Accrued liabilities 42,000
Minority interest 459,000
------------
Total liabilities 612,000
Shareholders' equity:
Nonredeemable preferred stock, par value
$.01 per share; authorized 50,000,000
shares, none issued
Common stock, par value $.01 per share;
authorized 100,000,000 shares;
issued and outstanding 6,371,787 shares 64,000
Additional paid-in capital 27,313,000
Retained earnings (deficit) (24,847,000)
Treasury stock, 1,967 shares at cost (11,000)
------------
2,519,000
------------
Commitments and contingencies
$ 3,131,000
============
See accompanying notes to consolidated financial statements.
9
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
REVENUES:
Interest and other income $ 236,000 $ 112,000
Gain on sale of real estate $ 826,000
----------- -----------
$ 1,062,000 $ 112,000
EXPENSES:
General and administrative 698,000 211,000
Depreciation and amortization 31,000 25,000
Interest 32,000 50,000
Minority interest 158,000 9,000
----------- -----------
919,000 295,000
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 143,000 (183,000)
DISCONTINUED OPERATIONS:
Income (loss) from operations
of Dollar Rent A Car, net of
tax of $20,000 in 1998 (41,000) 1,018,000
Gain on sale of Dollar Rent A Car,
net of tax of $62,000 3,287,000
Minority interest 3,000 (421,000)
----------- -----------
Income (loss) from discontinued operations (38,000) 3,884,000
----------- -----------
NET INCOME $ 105,000 $ 3,701,000
=========== ===========
Basic and diluted net income per share:
Income (loss) from continuing operations $ 0.02 $ (0.03)
Income (loss) from discontinued operations $ (0.00) $ 0.66
----------- -----------
Basic and diluted net income per share $ 0.02 $ 0.63
=========== ===========
See accompanying notes to consolidated financial statements.
10
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
<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, 1997 5,871,787 $ 59,000 $26,803,000 $(28,653,000) 1,967 $(11,000) $(1,802,000)
Net income 3,701,000 3,701,000
--------- ---------- ----------- ------------ ----- -------- -----------
Balance,
December 31, 1998 5,871,787 $ 59,000 $26,803,000 $(24,952,000) 1,967 $(11,000) $1,899,000
Common Stock Issued 500,000 5,000 495,000 500,000
Stock Options Granted 15,000 15,000
Net income 105,000 105,000
--------- ---------- ----------- ------------ ----- -------- -----------
Balance,
December 31, 1999 6,371,787 $ 64,000 $27,313,000 $(24,847,000) 1,967 $(11,000) $ 2,519,000
========= ========== =========== ============ ===== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 143,000 $ (183,000)
Adjustments to reconcile income (loss) from
continuing operations to net cash used in
continuing operating activities:
Depreciation and amortization 31,000 25,000
Loss on write off of stock investment 39,000
Minority interest in consolidated subsidiary 158,000 9,000
Gain on sale of real estate (826,000)
Compensation expense for options granted 15,000
Changes in assets and liabilities:
Decrease (increase) in accounts and
mortgages receivable 91,000 (144,000)
Decrease (increase) in other assets (7,000) 5,000
Increase (decrease) in accounts payable 11,000 (70,000)
Increase (decrease) in accrued liabilities (107,000) 80,000
----------- -----------
NET CASH USED IN CONTINUING OPERATING ACTIVITIES (491,000) (239,000)
----------- -----------
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Net proceeds from sale of real estate 1,136,000
Purchase of rental property (501,000)
Purchases of property and equipment (42,000) (20,000)
----------- -----------
NET CASH PROVIDED BY (USED IN) CONTINUING
INVESTING ACTIVITIES 1,094,000 (521,000)
----------- -----------
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Payment on other debt (264,000) (147,000)
Proceeds from rental property financing 226,000
Proceeds from issuance of common stock 500,000
----------- -----------
NET CASH PROVIDED BY CONTINUING FINANCING
ACTIVITIES 236,000 79,000
NET CASH PROVIDED BY (USED IN) DISCONTINUED
OPERATIONS (60,000) 2,624,000
NET INCREASE IN CASH AND CASH EQUIVALENTS 779,000 1,943,000
CASH AND CASH EQUIVALENTS, beginning of year 2,111,000 168,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year 2,890,000 2,111,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 32,000 $ 46,000
=========== ===========
Taxes paid during the period $ 79,000
=========== ===========
See accompanying notes to consolidated financial statements.
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - NATURE OF BUSINESS
Stratford American Corporation (the "Company") presently has no significant
operations.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. On July 20, 1998, subsequent to approval by
the Company's Board of Directors and shareholders, the Company effected a
fifteen-to-one reverse stock split of the Company's common stock. All share
amounts, share prices and net income (loss) per share have been retroactively
adjusted to reflect this reverse split.
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.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. 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. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
NET INCOME (LOSS) PER COMMON SHARE
The Company calculates basic and diluted net income (loss) per share in
accordance with the provisions of Statement of Financial Accounting Standards
No. 128 "Earnings Per Share". Basic net income (loss) per share is computed
using the weighted average number of common shares outstanding during each
period. Diluted income (loss) per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the income of the Company. In calculating diluted net
income (loss) per share for 1999 and 1998, 190,000 and 100,000 common stock
equivalents consisting of stock options have been excluded because their
inclusion would have been antidilutive.
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
EMPLOYEE STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) and related interpretations in
accounting for its employee stock options and to adopt the "disclosure only"
alternative treatment under Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123). SFAS 123 requires the use of
fair value option valuation models that were not developed for use in valuing
employee stock options. Under SFAS No. 123, deferred compensation is recorded
for the excess of the fair value of the stock on the date of the option grant,
over the exercise price of the option. The deferred compensation is amortized
over the vesting period of the option.
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.
NOTE 3 - SALE OF DISCONTINUED OPERATIONS
On October 1, 1998 (the "Closing Date"), Stratford American Car Rental Systems,
Inc. ("SCRS"), a subsidiary of the Company, sold the personal property,
equipment, improvements, fixtures, gasoline inventory, goodwill and general
intangibles used in or related to SCRS's business to Dollar Rent A Car Systems,
Inc., an Oklahoma corporation ("Dollar"), pursuant to the terms of the
Acquisition Agreement (the "Acquisition Agreement") between SCRS and Dollar.
Additionally, pursuant to the Acquisition Agreement, SCRS terminated the Master
Lease Agreement by and between SCRS and Dollar, dated June 1, 1994, under which
SCRS leased vehicles for use in its business, as well as other agreements
related to the Master Lease Agreement.
The Acquisition Agreement provided for the payment by Dollar to SCRS of the sum
of $3,835,000 as the purchase price. The purchase price consisted of the sum of
$3,635,000 paid in cash to SCRS on the Closing Date net of any obligations,
actual or estimated, owed to and by Dollar under the normal course of operations
of SCRS, and a holdback amount of $200,000 related to any obligations or
indemnities of SCRS, under the Acquisition Agreement. In December 1998, Dollar
remitted $100,000 of the holdback amount to SCRS, subsequent to the transfer of
all rental vehicles back to Dollar under the Master Lease Agreement, pursuant to
the Acquisition Agreement. In January 1999, Dollar and SCRS finalized all
post-closing obligations between each party in accordance with the Acquisition
Agreement. As provided by the Post-Closing Statement agreed to and signed by
both parties, an additional $75,000 of the holdback was remitted to SCRS with
the remaining $25,000 related to any obligations, or indemnities, to be held
until October 1, 1999. In September 1999, SCRS and Dollar reached an agreement
whereby Dollar will retain the remaining $25,000 holdback as settlement for a
$63,000 invoice from Dollar inadvertently excluded from the final post-close
settlement in January 1999, as well as any and all other claims. The assets sold
and agreements terminated pursuant to the Acquisition Agreement accounted for
over 99% of the Company's total revenues in 1998.
On the same day as the Closing Date, SCRS exercised an option to purchase the
property which includes the Phoenix Dollar Rent A Car base operation facilities
located near Sky Harbor International Airport for $502,000. Simultaneously,
Dollar entered into a long term lease with SCRS to utilize such base operation
facilities. On December 29, 1999, the Company sold the leased property at a
selling price of $1,440,000.
The vehicle rental business of SCRS has been accounted for as a discontinued
operation and, accordingly, its net liabilities, results of operations and cash
flows are segregated for all periods presented in the consolidated financial
statements.
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Following is a summary of the operating results and sale of the discontinued
operations for the years ended December 31, 1999 and 1998.
Year Ended December 31,
-------------------------
1999 1998
--------- -----------
Revenues $ $ 9,720,000
Expenses 41,000 8,702,000
--------- -----------
Income (loss) from
discontinued operations, net
net of tax of $20,000 in 1998 $ (41,000) $ 1,018,000
========= ===========
Gain on sale of discontinued
operations, net of tax of
$ 62,000 3,287,000
===========
The tax associated with the income from discontinued operations and gain on sale
of discontinued operations in 1998 resulted from alternative minimum tax
limitations on net operating loss carryforwards applied to those amounts.
NOTE 4 - MORTGAGE RECEIVABLE
The mortgage receivable, secured by a second deed of trust on residential
property, bears interest at 10.5% per annum. Total principal and interest
payments are amortized over the 30-year life of the mortgage and are payable in
equal monthly installments. The principal payments to be received on the
mortgage receivable are as follows:
Year ending December 31:
2000 $ 4,000
2001 4,000
2002 5,000
2003 5,000
2004 6,000
Thereafter 24,000
-------
$48,000
=======
15
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - NOTES PAYABLE AND OTHER DEBT
Notes payable and other debt consist of the following as of December 31, 1999:
Capital lease obligations (Note 7) 17,000
Other; interest @ 10.5%, matures 2010 45,000
-------
$62,000
=======
Under notes payable and other debt loan provisions in effect as outlined above,
principal payments due are as follows:
Year ending December 31:
2000 $ 12,000
2001 11,000
2002 3,000
2003 4,000
2004 4,000
Thereafter 28,000
--------
$ 62,000
========
NOTE 6 - 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.
The carrying amount of cash and cash equivalents, trade receivables, accounts
payable and accrued liabilities approximates fair value as they are expected to
be collected or paid within 90 days of year end. The fair value of the Company's
mortgage receivable and debt is estimated to be equal to its carrying value and
is 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, 1999, the amounts that will
actually be realized or paid at settlement or maturity of the instruments could
be significantly different.
16
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7 - OBLIGATIONS UNDER CAPITAL LEASES
The Company has telephone equipment capital lease agreements, which expire in
2000 through 2001. The combined cost of the equipment is $60,000 and is included
in other assets.
A summary of the present value of future minimum capital lease payments are as
follows:
Year ending December 31:
2000 $11,000
2001 8,000
Total minimum capital lease payments 19,000
Less amount representing interest 2,000
-------
Present value of future minimum capital lease payments $17,000
=======
NOTE 8 - MINORITY INTEREST
In June 1994, 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. In August 1998, a 2% shareholder sold its shares
back to the Company at an agreed upon price. The Company owned 82% of the
outstanding shares of SCRS as of December 31, 1998.
For the years ended December 31, 1998 and December 31, 1999, the Company
allocated certain corporate general and administrative expenses to SCRS for the
period of time that SCRS operated the Dollar franchise based on the percentage
of consolidated revenues generated by those operations. Management believes this
allocation methodology is reasonable.
On February 14, 2000, the Company paid all minority interest holders of SCRS
100% of their proportionate share of the outstanding minority interest liability
as of December 31, 1999 in exchange for 100% redemption of their stock held in
SCRS.
NOTE 9 - STOCK OPTION PLAN
In July 1998, the Company adopted a Stock Option Plan (the Plan). Common stock
reserved for grants to key employees of the Company under the Plan in each
calendar year is based on a percentage of total common stock outstanding in each
such calendar year. The aggregate number of shares of common stock for which
options may be granted or for which stock grants may be made to any one
individual participating in the Plan may not exceed 500,000 shares per year or
2,000,000 shares over the term of the Plan. Options become exercisable over a
specified period of continuous employment according to each grant awarded, but
may not be exercised more than 10 years from the Date of Grant. The options
under the Plan were granted at the fair market value of the Company's stock at
the date of grant as determined by the Company's Board of Directors.
In November 1998, the Board granted stock options to certain directors to
purchase 100,000 shares of common stock. In October 1999, the Board granted
stock options to certain directors to purchase 140,000 shares of common stock.
In October 1999, the Company granted a consultant 50,000 stock options for
services performed. The options were exercisable at $0.79 per share, fully
vested at grant date, and expire November 2002. The options were valued at
$15,000 and charged to compensation expense in 1999.
The per share weighted average fair value of stock options granted for the
periods ended December 31, 1999 and 1998 was $0.30 and $0.25, respectively,
based on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: expected dividend yield 0%, expected
volatility of 50%, risk free interest rate of 6.1% and an expected life of 5
years.
At December 31, 1999, the range of exercise prices and weighted average
remaining contractual life of options was $0.50-$0.80 and 3.6 years,
respectively.
Weighted
Average
Exercise Price
Number Per Share
------ ---------
Outstanding, December 31, 1997 -- $ --
Granted 100,000 0.50
Canceled -- --
Exercised -- --
------- -----
Outstanding, December 31, 1998 100,000 0.50
Granted 190,000 0.80
Canceled -- --
Exercised -- --
------- -----
Outstanding, December 31, 1999 290,000 $0.70
======= =====
The following table summarizes information about the stock options outstanding
at December 31, 1999:
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ---- ----- ----------- -----
$0.50 100,000 1.8 $0.50 100,000 $0.50
$0.79-$0.80 190,000 4.5 0.80 190,000 0.80
------- ----------- ----- ----------- -----
$0.50-$0.80 290,000 3.6 $0.70 290,000 $0.70
======= =========== ===== =========== =====
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been increased to the pro forma
amount indicated below:
Years ended December 31,
------------------------
1999 1998
--------- ---------
Net income:
As reported $ 105,000 3,701,000
========= =========
Pro Forma $ 63,000 3,676,000
========= =========
Diluted income per share:
As reported $ 0.02 0.63
========= =========
Pro forma $ 0.01 0.63
========= =========
NOTE 10 - INCOME TAXES
The Company incurred income tax expense of $82,000 for the year ended December
31, 1998 due to alternative minimum tax limitations on net operating loss carry
forwards applied to income from discontinued operations and the gain on sale of
discontinued operations for the year. There was no income tax associated with
net income for the year ended December 31, 1999 due to available net operating
loss carry forwards applied.
17
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The following net operating loss and investment tax credit carryforwards are
available at December 31, 1999, to offset future taxable income and income taxes
as follows:
Year
Expires Amount
------- ------
Net operating loss 2006-2013 $6,300,000
Investment tax credits 2000 81,000
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, 1999. 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,
1999 are as follows:
Allowance for mining interest impairment and stock
investment loss $ 370,000
Net operating loss carryforwards and
investment tax and AMT credits 2,700,000
-----------
3,070,000
Valuation allowance (3,070,000)
-----------
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 $105,000 in 1999, but had no effect on net income.
NOTE 11 - OPERATING LEASE COMMITMENTS
The aggregate future minimum lease commitments under noncancelable operating
leases are as follows:
Year ending December 31:
2000 $111,000
2001 $111,000
2002 $113,000
2003 $117,000
2004 $ 88,000
Total rental expense was $82,000 in 1999 and $39,000 in 1998. Rental expense for
each of the two years was reduced by income received from subleases, as well as
concessions received from landlord due to damaged tenant improvements incurred
during 1998.
NOTE 12 - NET INCOME PER SHARE
The Computation of basic and diluted net income per share follows:
Years Ended December 31,
------------------------
1999 1998
---- ----
Net income $ 105,000 3,701,000
========== =========
Weighted average common shares outstanding - basic 6,256,719 5,871,717
========== =========
Net income per share - basic $ 0.02 0.63
========== =========
Weighted average common shares outstanding - basic 6,256,719 5,871,717
Effect of dilutive securities - stock options 61,730 --
---------- ---------
Weighted average common shares outstanding - diluted 6,318,449 5,871,717
========== =========
Net income per share - diluted $ 0.02 0.63
========== =========
Stock options not included in diluted income
(loss) per share since antidilutive 190,000 100,000
========== =========
18
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not changed its accountants nor had any disagreements with
accountants on matters of accounting principles or practices, financial
disclosures, or auditing scope or procedure during its two most recent fiscal
years.
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 12, 2000 (the "2000 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 3. The 2000 Proxy Statement is being
prepared and is expected to be filed with the Securities and Exchange Commission
in definitive form on or about April 28, 2000 and is expected to be furnished to
shareholders on or about May 31, 2000.
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 January 11, 2000 with respect to the sale of the Company's
remaining real estate property effective December 29, 1999, including Press
Release dated December 29, 1999.
(c) EXHIBITS - See index beginning on page 21
(d) FINANCIAL STATEMENT SCHEDULES - See "Item 7 - Financial Statements and
Supplementary Data."
19
<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: March 30, 2000 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: March 30, 2000 By /s/ David H. Eaton
-------------------------------------
David H. Eaton, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: March 30, 2000 By /s/ Mel L. Shultz
-------------------------------------
Mel L. Shultz, President and Director
Date: March 30, 2000 By /s/ Gerald J. Colangelo
-------------------------------------
Gerald J. Colangelo, Director
Date: March 30, 2000 By /s/ Richard H. Dozer
-------------------------------------
Richard H. Dozer, Director
Date: March 30, 2000 By /s/ Dale M. Jensen
-------------------------------------
Dale M. Jensen, Director
Date: March 30, 2000 By /s/ Mitchell S. Vance
-------------------------------------
Mitchell S. Vance, Director
Date: March 30, 2000 By /s/ Timothy A. Laos
-------------------------------------
Timothy A. Laos, Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
20
<PAGE>
EXHIBITS INDEX
Exhibits 10.11, 10.12, 10.13 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, 10.9,
10.10 and 21.1) 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 10.9
was filed as Exhibit 2.1 to the Company's Form 8-K which was filed with the
Securities and Exchange Commission on October 28, 1998. Exhibit 10.10 was filed
as Exhibit 10.39 to the Company's Form 10-KSB for the year ended December 31,
1998, which was filed with the Securities and Exchange Commission on March 31,
1999. Exhibit 21.1 was filed with Form 10-KSB for the year ended December 31,
1996, which was filed with the Securities and Exchange Commission on March 31,
1997.
Number Description Page
- ------ ----------- ----
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 Indemnification Agreement, dated as of May 19, 1988,
between the Company and Mel L. Shultz N/A
10.2 Schedule of Omitted Indemnification Agreements N/A
10.3 Indemnification Agreement, dated as of February 19, 1988,
relating to guarantees N/A
10.4 Indemnification Agreement, dated as of May 10, 1988,
relating to guarantees N/A
10.5 Registration Agreement, dated as of February 19, 1988, N/A
10.6 Agreement, dated as of February 18, 1988, relating to
restrictions against preferred shares N/A
10.7 Trust Agreement, dated as of June 18, 1987 N/A
10.8 Share Sale and Registration Agreement, dated January 31, 1989 N/A
10.9 Acquisition Agreement between Stratford American Car Rental
Systems, Inc. and Dollar Rent A Car Systems, Inc. dated
September 24, 1998. N/A
10.10 Net Lease Agreement between Stratford American Car Rental N/A
Systems, Inc. and Dollar Rent A Car Systems, Inc. dated
October 1, 1998.
21
<PAGE>
10.11 Post-Closing Statement between Dollar Rent A Car Systems, Inc. 23
and Stratford American Car Rental Systems, Inc. dated
January 27, 1999
10.12 Settlement Agreement between Stratford American Resource
Corporation, Energy Investment Advisors, Inc., Oil & Gas
Advisors, Inc., Petroleum Advisors & Co., Samuel B. Davis, and
American Hugh J. Davis, dated October 6, 1999 28
10.13 Purchase Agreement by and between Foot Creek Corporation
of Arizona and Grandilla (Arizona), Inc. and Stratford
Car Rental Systems, Inc. dated December 29, 1999 44
21.1 Subsidiaries N/A
27.1 Financial Data Schedule for December 31, 1999 74
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.
POST-CLOSING STATEMENT
1/27/99 5:01 PM
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SUBTOTAL AMOUNT TO BE PAID BY DOLLAR
AT 10/1/98 CLOSING: $4,360,254.86
LESS DISPUTED 1999 PPA 17,000.00
-------------
TOTAL AMOUNT PAID BY DOLLAR AT 10/1/98 CLOSING $4,343,254.86
PURCHASE PRICE AND OTHER ACTUAL, NON-FRANCHISE
AND NON-FLEET AMOUNTS OWED BY DOLLAR INVOICE NO. AMOUNT:
AT 10/1/98 CLOSING TO STRATFORD:
Purchase Price:
Goodwill and intangibles (Sec. 2.1(i)) $3,500,000.00
Personal Property, Fixtures & Equipment (Sec. 2.1(ii)) 335,000.00
Postage deposit - postage machine lease (Sec. 2.3) 50.00
Curtis key machine lease deposit (Section 2.3) 138.14
Yellow pages proration (Sec. 2.3) 16,225.00
City of Phoenix bond proration ($506 = 12 x 9 mos.) 126.50
Net Lease - October 1998 lease payment 10,416.00
1998 Real Property Taxes - prorated 5,900.00
1998 Business Property Taxes - prorated 1,400.00
Postalia meter lease - 11 mos. (annual payment in Sept.) 352.44
AT&T Credit Corp. - October 1998 payment 109.34
-------------
Subtotal 3,869,717.42 3,869,717.42
-------------
EXCESS PAID FOR ESTIMATES AND OTHER CHARGES: $ 473,537.44
OTHER CREDITS TO STRATFORD:
Adjustments 16809024 515.53
Adjustments 17809006 417.87
Condition costs L1809024 10,748.00
Condition costs L2809024 143.16
Incentive credits 12809502 9,184.19
Deficiency FPRIOOO1112 48.96
Deficiency FPRI0001112 93.50
Deficiency FPRIOOOI119 89.76
Goodwill certificate GWF18698 65.98
Intercity ICFC0001186 268.73
Intercity ICFC0001206 83.89
Intercity ICFC0001219 102.45
Intercity ICFC0001172 128.59
Adjustments 15810023 1,241.41
Fleet adjustments 16810019 126.93
Fleet adjustments 17810008 73.47
Fleet adjustments 19810023 162.80
TRFR credit FPGC2159 50.10
Condition costs L1810024 1,704.55
Condition costs L2810024 5,284.09
</TABLE>
Page 1
<PAGE>
POST-CLOSING STATEMENT
1/27/99 5:01 PM
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Incentive credits 12810503 1,167.77
1998 PPA credit PPFC087-690 11,398.00
Hospitality credit AHFC422 70.00
Adjustments 15811023 535.70
TRFR credit FPG2184 4,711.77
Condition costs L1811024 5,414.80
Incentive credits FPGC2201 331.16
Incentive credits 12811502 458.55
Intercity ICFC0001239 29.80
Intercity ICFC0001253 120.39
Volume Fleet Bonus FVBJ21 46,600.00
Payment PYFP0028784 193.13
Adjustments 15812023 367.56
Adjustments 16812020 13.43
TRFR credit FPGC2237 161.20
TRFR credit FPGC2239 889.33
TRFR credit FPGC2268 66.67
TRFR credit FPGC2278 117.33
Condition costs L1812025 1,838.59
Debit memo FPRI1160 2,09128
Net Fleet Calculation (see attached schedule) 13,338.00
Cent. bill credit (Dollar Card) CBFC1023 5,019.57
Europcar credits EDFC209 10,643.23
Europcar credits EDFC210 27,554.79
Fleet large volume bonus FBVJ22 150.00
Burlingame MSF10002557 175.00
Misc. FRLA0006474 1,115.07
Chrysler warranty check (see agreement below) 5,140.77
Chrysler warranty check (see agreement below) 1,875.48
Credit for VIN WT278975 FPRI1162 5,991.28
Lease charge credit for VIN WT278975 826.00
-------------
Subtotal 178,939.61 $ 178,939.61
-------------
OTHER AMOUNTS PAYABLE TO STRATFORD:
1998 PPA 51,036.00
1999 PPA 8,500.00
In-Service Retention Bonus 30,000.00
Volume fleet discounts 37,950.00
Vehicle tag and taxes proration 110,988.53
Uniform inventory (invoice 1) 3,914.34
UST gasoline and maintenance inventory (Invoice 2) 13,604.18
Counter supplies (Invoice 3) 1,515.06
Office supplies (Invoice 4) 13,527.41
Misc. (Invoice 5) 3,421.56
Telephone line charges (Invoice s) 9,768.06
Tour billings 12,884.21
Tour billings 1,829.00
Europcar 10,575.05
Dollarcard 877.58
</TABLE>
Page 2
<PAGE>
POST-CLOSING STATEMENT
1/27/99 5:01 PM
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sprint bill 406.46
-------------
Subtotal 310,797.44 310,797.44
-------------
SUBTOTAL OF CREDITS AND OTHER AMOUNTS
PAYABLE TO STRATFORD: 489,737.05
SUBTOTAL OF AMOUNT OWED BY DOLLAR TO STRATFORD: $ 16,199.61
-------------
TOTAL AMOUNT PAID BY STRATFORD AT 10/1/98 CLOSING,
EXCLUDING HOLDBACK AMOUNTS: $ 531,291.79
AMOUNTS TO BE PAID BY STRATFORD TO DOLLAR:
Fleet lease program - September 1998 I4809026 $ 337,637.29
Adjustments FTTA0203 2,000.00
Tag billing K2809001 6,947.54
Reject FPRIO001119 9,653.00
Reservation fees RCFI00 32,945.85
System fees - September 1998 L09612 48,225.13
TA commissions 23,866.49
Revenue management fee RMFI00005 1,000.00
Frequent flyer charge AAF10003679 63.00
Frequent flyer charge CFF10003404 220.50
Frequent flyer charge ATF10004086 621.00
Frequent flyer charge DEF10003239 441.00
Frequent flyer charge TWFlOO03453 103.50
Frequent flyer charge UAF10006552 837.00
Goodwill certificate GWFI8553 15.00
Goodwill certificate GWFI8578 50.00
Goodwill certificate GWFI8645 30.00
Goodwill certificate GWFI0008757 37.00
Customer adjustment 126.61
Customer adjustment 10.02
Yellow pages ADF10000762 311.86
AZ baseball film ADF10000766 174.83
Frequent flyer charge NWFlOO00249 76.50
Dollar Supply 830709 1,458.30
Dollar Supply 830141 72.73
Dollar Supply 830721 203.68
Dollar Supply 860104 16.75
Dollar Supply 830736 121.48
Dollar Supply 860160 55.25
Dollar Supply 80022617 493.80
Dollar Supply 80060296 98.15
Dollar Supply 80060407 94.45
Dollar Supply 80060408 105.30
Dollar Supply 80060409 333.17
Dollar Supply 80060410 11.48
Dollar Supply B0060542 8.73
Dollar Supply 80060544 264.28
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
POST-CLOSING STATEMENT
1/27/99 5:01 PM
Dollar Supply 80060308 295.85
Tag billing K2810001 75.57
Deficiency billings FPRI1130 29,438.76
Deficiency WD606247 56.00
Systems fees - October 1998 L09612 11,911.11
Airport concession fees - October 1998 L09612 16,504.74
TA commissions 3,504.11
TA commissions 70.16
TA commissions 34.06
TA commissions 55.89
Goodwill certificate GWFI0008845 70.00
Advertising ADF10000787 174.83
Advertising ADF10001775 745.47
Fleet lease program - October 1998 14811027 9,208.42
Condition costs L2811025 538.81
Tag billing K2811001 75.57
Deficiency billings FPRI1137 4,672.50
Deficiency billings FPRI1144 7,262.98
Deficiency billings FPRI1147 3,341.50
Airport concession fees - November 1998 L09612 404.51
Fleet lease program - November 1998 14812027 583.26
Condition costs L2812025 1,522.91
Incentive credits 128120503 5.13
Tag billing K2812001 242.61
Deficiency billings FPRI1152 13,464.22
Debit memo FPRI1162 10,881.80
Misc. FPGDO001114 1,656.70
-------------
Subtotal $ 585,528.14 $ 585,528.14
-------------
SUBTOTAL OWED BY STRATFORD: $ 54,236.35
RECAP:
SUBTOTAL AMOUNT OWED BY DOLLAR TO STRAFFORD $ 16,199.61
SALES TAX HOLDBACK REIMBURSEMENT 9,000.00
GENERAL HOLDBACK REIMBURSEMENT 75,000.00
-------------
SUBTOTAL OWED BY DOLLAR $ 100,199.61
LESS SUBTOTAL OWED BY STRATFORD 54,236.35
-------------
TOTAL AMOUNT OWED BY DOLLAR $ 45,963.26
</TABLE>
(remainder of page left blank]
Page 4
<PAGE>
POST-CLOSING STATEMENT
1/27/99 5:01 PM
The undersigned agree and accept the foregoing as of January 27, 1999, in full
and complete settlement and reconciliation pursuant to section 7.1.1 of the
Acquisition (Agreement . The undersigned further agree that Dollar shall release
$75,000 of the x$100,000 Holdback Amount held pursuant to Section 2.5 of the
Acquisition Agreement (as evidenced in the recap summary) and shall retain the
balance of Holdback Amount in the amount of $25,000 pursuant to the
aforementioned section. Upon the written request of Dollar, Stratford agrees to
immediately reimburse Dollar in the amounts of $5,140.77 and $1,875.48 for
Chrylser warranty checks allegedly received by Dollar, in lieu of Stratford, I
should Dollar be unable to locate or otherwise trace such payments to Dollar.
References herein to sections of the Acquisition Agreement are for ease of
review and convenience only. Nothing herein shall be construed as a waiver or
release of any rights under the Acquisition Agreement.
DOLLAR RENT A CAR SYSTEMS, INC.
By: /s/ John J. Foley
John J. Foley
Executive Vice President
Stratford American Car Rental Systems, Inc.
By: /s/ Mel L. Shultz
Mel L. Shultz
President
Page 5
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is entered into as of October
6, 1999, by and between: STRATFORD AMERICAN RESOURCE CORPORATION ("SARC"), a
Texas corporation; STRATFORD AMERICAN CORPORATION ("SAC"), an Arizona
corporation; ENERGY INVESTMENT ADVISORS, INC. ("EIA"), a dissolved Colorado
corporation; OIL & GAS ADVISORS, INC. ("OGA"), a Delaware corporation; PETROLEUM
ADVISORS & CO. ("PAC"), a New York partnership; SAMUEL B. DAVIS ("S. Davis");
and HUGH J. DAVIS ("H. Davis"). Each of the foregoing parties are sometimes
referred to as a "Party" or collectively as the "Parties."
RECITALS
A. On or about February 21, 1999, SARC and SAC initiated a lawsuit against
EIA, OGA, PAC, S. Davis and H. Davis captioned: Stratford American Resource
Corporation et al. v. Energy Investment Advisors, Inc., Case No. 99-CV-1069,
Courtroom 18 (District Court, City and County of Denver, Colorado) (the
"Lawsuit"). In the Lawsuit, SARC and SAC sought a declaratory judgment and
alleged breach of contract relating to a Settlement Agreement (the "Prior
Settlement Agreement") and Assignment (the "Assignment"), both dated July 18,
1988, entered into by and between and among the Parties.
B. In the Lawsuit, EIA, OGA, PAC, S. Davis and H. Davis asserted
counterclaims against SARC, SAC alleging breach of contract, unjust enrichment
and accounting relating to the Prior Settlement Agreement and Assignment. EIA,
OGA, PAC, S. Davis and H. Davis have denied liability to SARC and SAC. SARC and
SAC have denied liability to EIA, OGA, PAC, S. Davis and H. Davis.
C. The Parties wish to enter into this Agreement to resolve all claims,
counterclaims, allegations and defenses which they had against each other in the
Lawsuit and arising out of all other transactions, communications and other
dealings between the Parties to the date of this Agreement regardless of whether
the factual basis of such claims is fully known or appreciated.
AGREEMENT
NOW, THEREFOR, in consideration of the foregoing recitals, the mutual
promises, covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. SETTLEMENT PAYMENT. Contemporaneously with the full execution of this
Agreement by all Parties, SARC shall make a single payment of US $87,500.00 (the
"Payment") for the benefit of EIA, OGA, PAC, S. Davis and H. Davis. The payment
shall be made by wire transfer to the "Davis, Graham & Stubbs LLP Client Trust
Fund Account" (the "Account") in accordance with the wire transfer instructions
attached hereto as EXHIBIT A. Upon receipt of the Payment, Counsel for EIA, OGA,
PAC, S. Davis and H. Davis agrees to verify receipt of the Payment by sending an
email to counsel for SARC (at [email protected]) acknowledging receipt of the
Payment.
<PAGE>
2. REASSIGNMENT OF PAC INTERESTS. Contemporaneously with the full execution
of this Agreement by all the Parties, PAC shall transfer all of its remaining
interests in the Acquired Interests (as defined in the Assignment) and any and
all other interests under the Assignment pertaining to the Acquired Interests,
if any, to SARC, by execution and delivery of the form attached hereto as
EXHIBIT B (the "Transfer of Interests"). The Transfer of Interests shall be free
of any representations or warranties of any type or description whatsoever,
including but not limited to representations or warranties of title.
3. GENERAL RELEASE BY SARC AND SAC. Effective upon the later of the receipt
of Payment into the Account or the delivery of the Transfer of Interests to
SARC, then SARC and SAC, for themselves and for their successors, heirs,
assigns, agents, representatives, officers, directors and employees, completely,
unconditionally and forever release, acquit and discharge EIA, OGA, PAC, S.
Davis and H. Davis, together with their respective successors, heirs, assigns,
representatives, agents, affiliated entities, employees, attorneys, officers,
directors, and partners, of and from any and all actions, causes of action,
claims, contracts, debts, demands, liabilities, losses and damages of every kind
and nature whatsoever, whether known or unknown, including but not limited to,
those which were made, may have been made or could have been made in the
Lawsuit, or which in any manner relate to any and all other transactions,
communications and other dealings between the Parties prior to the date of this
Agreement. This release shall be a full and final general release.
Notwithstanding the foregoing, nothing contained in this Paragraph No. 3 shall
constitute a release of EIA, OGA, PAC, S. Davis and H. Davis from complying with
the terms and conditions of this Agreement.
4. GENERAL RELEASE BY EIA, OGA, PAC, S. DAVIS AND H. DAVIS. Effective upon
the later of the receipt of Payment into the Account or delivery of the Transfer
of Interests to SARC, then EIA, OGA, PAC, S. Davis and H. Davis, for themselves
and for their successors, heirs, assigns, agents, representatives, officers,
directors, and employees, completely, unconditionally and forever RELEASE,
ACQUIT AND DISCHARGE SARC AND SAC, together with their respective successors,
heirs, assigns, representatives, agents, affiliated entities, employees,
attorneys, officers, directors, and partners, of and from any and all actions,
causes of action, claims, contracts, debts, demands, liabilities, losses and
damages of every kind and nature whatsoever, whether known or unknown, including
but not limited to, those which were made, may have been made or could have been
made in the Lawsuit, or which in any manner relate to any and all other
transactions, communications and other dealings between the Parties prior to the
date of this Agreement. This release shall be a full general release.
Notwithstanding the foregoing, nothing contained in this Paragraph No. 4 shall
constitute a release of SARC and SAC from complying with the terms and
conditions of this Agreement.
5. DISMISSAL OF THE LAWSUIT. After the later of receipt of Payment into the
Account or delivery of the Transfer to SARC, then the Parties shall promptly
dismiss the Lawsuit, with prejudice. Counsel for the Parties shall execute and
file with the District Court for the City and County of Denver, Colorado a
Stipulation for Dismissal With Prejudice in the form attached hereto as EXHIBIT
C.
6. COVENANT NOT TO SUE. Each Party covenants that it will not initiate any
lawsuit or proceeding or otherwise assert any claims which have been released
under this Agreement.
-2-
<PAGE>
7. SOLE SURVIVING AGREEMENT. SARC and SAC on the one hand and EIA, OGA,
PAC, S. Davis and H. Davis on the other hand acknowledge that this Agreement
evidences the sole surviving contractual relationship between and among them and
supersedes all prior and contemporaneous agreements, representations, warranties
and understandings of the Parties. Notwithstanding the foregoing, Paragraph No.
7 (Right to Compete) in the Prior Settlement Agreement shall remain in effect.
8. ALLOCATION OF PAYMENT. The Parties agree that SARC may internally
allocate the payment as follows: (a) $37,500.00 toward acquisition of the
Transfer Interests; and (b) $50,000 toward settlement of the Lawsuit. The
Payment and Transfer are made in satisfaction and settlement of the claims,
counterclaims and defenses asserted in the Lawsuit and the Reassignment of the
PAC Interests as specified in Paragraph No. 2, above, and the Transfer of
Interests.
9. ATTORNEYS' FEES. Each Party shall be responsible for its own attorneys'
fees, costs and expenses incurred in connection with the Lawsuit and the
preparation of this Agreement.
10. NO ADMISSION OF LIABILITY. The Parties' agreement to the terms of this
Agreement shall in no manner be deemed to be, and is not, an admission, express
or implied, of: (a) liability by any Party to any other person or entity; (b)
any fact, other than the facts set forth in the Recitals to this Agreement; or
(c) the merits of the position taken by any Party with respect to any matter.
11. FUTURE COOPERATION. Each Party agrees to execute any and all documents
and to do and perform any and all acts and things reasonably necessary or proper
to effectuate or further evidence the terms and provisions of this Agreement.
12. NO ASSIGNMENT OF CLAIMS. Each Party represents and warrants to the
other that it has not heretofore assigned or transferred, or purported to assign
or transfer to any person or entity any of the claims that it might have against
the other which are released in Paragraph Nos. 3 and 4, above, and has not
encumbered the interests transferred pursuant to paragraph 2, above.
13. NO THIRD-PARTY BENEFICIARIES. Except as otherwise provided in this
Agreement, nothing in this Agreement is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
Parties, nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third person to any Party, nor shall any
provision of this Agreement give any third person any right of subrogation or
action over or against any Party.
14. CONFIDENTIALITY. Except as may be required by any regulatory agency
having authority over any party or excepts pursuant to a SUBPOENA DUCES TECUM or
other proper order for production of information in any subsequent judicial
proceeding or as required by applicable law or to effectuate the purpose and
terms of this Agreement, each Party agrees to keep the terms and conditions of
this Agreement confidential.
15. [Intentionally deleted].
-3-
<PAGE>
16. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all Parties. No
waiver of any of the provisions of this Agreement shall be deemed or constitute
a waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the Party making the waiver.
17. REVIEW; REPRESENTATION BY COUNSEL; ETC. Each Party acknowledges and
represents that:
(1) It has fully and carefully read and considered this Agreement
prior to its execution;
(2) It has consulted with or has had the opportunity to consult with
its attorneys regarding the legal effect and meaning of this Agreement and all
terms and conditions hereof, and that it is fully aware of the contents of this
Agreement and its legal effect;
(3) It has had the opportunity to make whatever investigation or
inquiry it deems necessary or appropriate in connection with the subject matter
of this Agreement;
(4) It is executing this Agreement voluntarily and free from any undue
influence, coercion, duress or fraud of any kind; and
(5) It is knowingly and voluntarily waiving and releasing all claims
against the other Party, regardless of whether such claims are known or fully
appreciated, except as provided in this Agreement.
18. Miscellaneous Provisions.
(1) This Agreement shall be binding upon and shall inure to the
benefit of the Parties and the Parties' respective heirs, legal representatives,
successors and assigns;
(2) If either Party is required to take any action to enforce this
Agreement, the prevailing Party shall be entitled to recover all reasonable
attorneys' fees and costs from the non-prevailing Party;
(3) If either Party is required to take any action to enforce or
interpret this Agreement, such action shall be brought only the state courts in
Denver County, Colorado;
(4) The paragraph headings used in this Agreement are for purposes of
identification only and shall not be considered in construing this Agreement.
Furthermore, this Agreement shall be deemed to have been prepared with the full
and equal participation of all the Parties and their respective counsel and
shall not be construed by one Party against the other;
(5) This Agreement shall be construed and enforced in accordance with
the laws of the State of Colorado;
-4-
<PAGE>
(6) By executing this Agreement, each of the undersigned represents
and warrants to the other that each of the undersigned has the full power and
authority to enter into and perform this Agreement in accordance with its terms;
and
(7) This Agreement may be executed in multiple counterparts, each of
which shall constitute an original, and both of which together shall constitute
one and the same document. The parties shall accept facsimile signatures as
original signatures.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
STRATFORD AMERICAN RESOURCE CORPORATION
---------------------------------------
By: Mel Shultz
Its: President
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Mel Shultz, as President of Stratford American Resources
Corporation, a Texas corporation.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
-5-
<PAGE>
STRATFORD AMERICAN RESOURCE CORPORATION
---------------------------------------
By: Mel Shultz
Its: President
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Mel Schultz, as President of Stratford American Corporation, a
Delaware corporation.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
-6-
<PAGE>
PETROLEUM ADVISORS & CO.
By Oil & Gas Advisors, & Inc., Partner
---------------------------------------
By: Samuel B. Davis
Its: President
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Samuel B. Davis, as President of Oil & Gas Advisors, Inc., a
Partner in Petroleum Advisors & Co., a New York Partnership.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
OIL & GAS ADVISORS, INC.
---------------------------------------
By: Samuel B. Davis
Its: President
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Samuel B. Davis, as President of Oil & Gas Advisors, Inc., a
Delaware corporation.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
-7-
<PAGE>
SAMUEL B. DAVIS
---------------------------------------
Samuel B. Davis, Individually
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Samuel B. Davis, Individually.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
-8-
<PAGE>
PETROLEUM ADVISORS & CO.
By Energy Investment Advisors, Inc.,
Partner
---------------------------------------
By: Hugh J. Davis
Its: President
STATE OF COLORADO )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Hugh J. Davis, as President of Energy Investment Advisors,
Inc., Partner in Petroleum Advisors & Co., a New York partnership.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
ENERGY INVESTMENT ADVISORS, INC.
---------------------------------------
By: Hugh J. Davis
Its: President
STATE OF COLORADO )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Hugh Davis, as President of Energy Investment Advisors, Inc., a
dissolved Colorado corporation. Witness my hand and official seal.
My commission expires: _______________________________
Notary Public
-9-
<PAGE>
HUGH J. DAVIS
---------------------------------------
Hugh J. Davis, Individually
STATE OF COLORADO )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this _____ day of
October, 1999 by Hugh J. Davis, Individually.
Witness my hand and official seal.
My commission expires: _______________________________
---------------------------------------
Notary Public
-10-
<PAGE>
APPROVED AS TO FORM:
CLANAHAN TANNER DOWNING & KNOWLTON, P.C.
By:
---------------------------------------
Peter T. Moore
The Equitable Building
730 17th Street, Suite 500
Denver, Colorado 80202
Attorneys for Plaintiffs and Counterclaim-Defendants SARC and SAC
DAVIS, GRAHAM & STUBBS LLP
By:
---------------------------------------
Tom McNamara
370 17th Street, Suite 4700
Denver, Colorado 80202
Attorneys for Defendants and Counterclaim-Plaintiffs EIA, OGA, PAC, S. Davis and
H. Davis
<PAGE>
EXHIBIT A
DAVIS, GRAHAM & STUBBS LLP -
WIRE TRANSFER INSTRUCTIONS
REVISED: OCTOBER 1, 1999
In order to have funds wire transferred into the Davis, Graham & Stubbs LLP
Agency Trust Account, please comply with the following instructions:
RECEIVING BANK:
Name: Bank One, Colorado, NA
ABA ROUTING NUMBER: 102001017
Branch: Downtown Branch
1125 17 th Street
Denver, CO 80202
Telephone: (303) 244-4082
Specific Identifiers: Energy Investment Advisors, Inc.
CREDIT ACCOUNT:
Name: Davis, Graham & Stubbs LLP
Agency Trust Account
Address: 370 17th Street, Suite 4700
Denver, CO 80202
ACCOUNT NUMBER: 1192610507
FIRM CONTACT:
Name: Carl Cox - Controller
Telephone: (303) 892-7445
<PAGE>
EXHIBIT B
ASSIGNMENT OF OIL AND GAS INTERESTS
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, PETROLEUM ADVISORS & CO., a New York partnership,
hereinafter called "Assignor", for and in consideration of Ten Dollars ($10.00),
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, does hereby sell, assign, transfer, quitclaim and convey
unto STRATFORD AMERICAN RESOURCE CORPORATION, with an address of 2400 E. Arizona
Biltmore Circle, Building 2, Suite 1270, Phoenix, Arizona 85016, hereinafter
called "Assignee", all of Assignor's right, title and interest, of every kind
and character, in and to the oil and gas leases, lands and wells described on
Exhibit 1, attached hereto and made a part hereof, including all of assignor's
associated rights and properties, both real and personal (the "Oil and Gas
Interests"). It is the intent of Assignor to convey to Assignee all of the
right, title and interest of Assignor in the Oil and Gas Interests previously
conveyed by Assignee to Assignor in that certain Assignment dated July 18, 1988.
This assignment is made without warranty of any kind, express, implied or
statutory, general or special.
This assignment shall be governed by and construed under the law of the
State of Colorado.
The terms and conditions contained in this assignment shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
EXECUTED this _____ day of October 1999, but effective October 1, 1999.
PETROLEUM ADVISORS & CO.
A New York general partnership
By: Energy Investment Advisors, Inc,
Partner
By:_______________________________
Hugh J. Davis, President
This instrument was prepared by:
Gary J. Younger
Clanahan, Tanner, Downing & Knowlton, P.C.
730 17th Street, Suite 500
Denver, CO 80202-3580
<PAGE>
STATE OF ______________________ )
)ss.
COUNTY OF _____________________ )
The foregoing instrument was acknowledged before me this ___ day of
October, 1999, by Hugh J. Davis, as President of Energy Investment Advisors,
Inc., a Partner of Petroleum Advisors
Witness my hand and official seal this ______ day of October, 1999.
My commission expires:
----------------------- -------------------------------
Notary Public
<PAGE>
EXHIBIT 1
TO
ASSIGNMENT OF OIL AND GAS INTERESTS
1. The Lysander Resources Hunt #1-31 Well, and all oil and gas leases and
interests insofar as they cover Section 31, T9N, R24W, Johnson County,
Arkansas.
2. The Lysander Resources Newman #1-27 Well, and all oil and gas leases and
interests insofar as they cover Section 27, T7N, R32W, Sebastian County,
Arkansas.
3. The Lysander Resources Bradfield #1-9 Well; and all oil and gas leases and
interests insofar as they cover Section 9, T8N, R18W, Pope County,
Arkansas.
4. The Lysander Resources Rye #1-23 Well; and all oil and gas leases and
interests insofar as they cover Section 23, T7N, R32W, Sebastian County,
Arkansas.
5. The Lysander Resources Gage #1-10 Well; and all oil and gas leases and
interests insofar as they cover Section 10, T10N, R27W, Franklin County,
Arkansas.
6. The Lysander Resources Burris #1-8 Well; and all oil and gas leases and
interests insofar as they cover Section 8, T8N, R18W, Pope County,
Arkansas, including but not limited to Assignments of Oil and Gas Leases
from Lysander Resources, Inc. to Night Hawk Resource Corporation dated
December 1, 1987, recorded in Book 23C, Pages 391-95, Pope County, Arkansas
real property records.
7. The Lysander Resources Hallum #2-4 Well; and all oil and gas leases and
interests insofar as they cover Section 4, T10N, R26E, Sequoyah County,
Oklahoma.
8. The Lysander Resources Daniels #1-26 Well; and all oil and gas leases and
interests insofar as they cover Section 26, T7N, R32W, Sebastian County,
Arkansas.
9. The Alexander Energy Barrett #1-36 Well; and all oil and gas leases and
interests insofar as they cover Section 36, T8N, R18W, Pope County,
Arkansas.
10. The Lysander Resources Daisy Bird Cochran #1-10 Well; and all oil and gas
leases and interests insofar as they cover Section 10, T5N, R29W, Logan
County, Arkansas.
<PAGE>
EXHIBIT C
DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO
Case No. 99-CV-1069, Courtroom 18
- --------------------------------------------------------------------------------
STIPULATION OF DISMISSAL WITH PREJUDICE
- --------------------------------------------------------------------------------
STRATFORD AMERICAN RESOURCE CORPORATION, a Texas corporation; and
STRATFORD AMERICAN CORPORATION, an Arizona corporation,
Plaintiffs and Counterclaim-Defendants,
v.
ENERGY INVESTMENT ADVISORS, INC., a dissolved Colorado corporation;
OIL & GAS ADVISORS, INC., a Delaware corporation;
PETROLEUM ADVISORS & CO., a New York general partnership;
SAMUEL B. DAVIS; and HUGH J. DAVIS,
Defendants and Counterclaim-Plaintiffs.
- --------------------------------------------------------------------------------
Pursuant to Colo. R. Civ. Pro. Rule 41(a)(1), Plaintiffs and
Counterclaim-Defendants, Stratford American Resource Corporation and Stratford
American Corporation, and Defendants and Counterclaim-Plaintiffs, Energy
Investment Advisors, Inc., Oil & Gas Advisors, Inc., Petroleum Advisors & Co.,
Samuel B. Davis and Hugh J. Davis, by and through their respective undersigned
counsel, stipulate that this action shall be dismissed with prejudice. In
accordance with Colo. R. Civ. Pro. Rule 41(a)(1), this Stipulation has been
signed by the attorneys for all parties who have appeared in this action. Each
Party has agreed to bear such party's own costs and attorneys' fees.
Dated: October __, 1999.
CLANAHAN TANNER DOWNING & KNOWLTON, P.C. DAVIS, GRAHAM & STUBBS LLP
By: By:
------------------------------------- ------------------------------
Peter T. Moore Tom McNamara
Gary J. Younger 370 17th Street, Suite 4700
730 17th Street, Suite 500 Denver, Colorado 80202
Denver, Colorado 80202
Attorneys for Plaintiffs and Attorneys for Defendants and
Counterclaim-Defendants SARC and SAC Counterclaim-Plaintiffs EIA, OGA,
PAC, S. Davis and H. Davis
PURCHASE AGREEMENT AND
ESCROW INSTRUCTIONS
BETWEEN
FOOT CREEK CORPORATION OF ARIZONA,
AND
GRANDILLA (ARIZONA), INC.,
BOTH ARIZONA CORPORATIONS,
COLLECTIVELY AS BUYER,
AND
STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC.,
AN ARIZONA CORPORATION
AS SELLER
N.W.C. 24TH AND JEFFERSON STREET
PHOENIX, ARIZONA
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS.................................................................... 1
AGREEMENTS.................................................................. 1
1. AGREEMENT TO BUY AND SELL.......................................... 1
2. INCLUSIONS IN PROPERTY............................................. 1
3. ACCEPTANCE; OPENING OF ESCROW...................................... 2
3.1 ACCEPTANCE................................................ 2
3.2 OPENING OF ESCROW......................................... 2
4. PURCHASE PRICE..................................................... 2
4.1 PAYMENT OF PURCHASE PRICE...................................... 2
4.1.1 EARNEST MONEY................................... 2
4.1.2 ADDITIONAL FUNDS................................ 2
5. EARNEST MONEY...................................................... 3
5.1 CANCELLATION BY BUYER; DEFAULT BY SELLER.................. 3
5.2 DEFAULT BY BUYER.......................................... 3
5.3 CLOSE OF ESCROW........................................... 3
6. CLOSE OF ESCROW; CONVEYANCE OF TITLE; TITLE INSURANCE.............. 3
6.1 CLOSE OF ESCROW........................................... 3
6.2 CLOSING COSTS............................................. 3
6.3 DEED AND ASSIGNMENT OF LEASE.............................. 4
6.4 AFFIDAVIT OF PROPERTY VALUE............................... 4
6.5 TITLE INSURANCE........................................... 4
6.6 IRS SECTION 1445.......................................... 5
7. BUYER'S CONTINGENCIES.............................................. 5
7.1 STATUS OF TITLE........................................... 5
7.2 THE STUDY PERIOD.......................................... 5
7.3 THE SURVEY................................................ 6
7.4 SUPPLEMENTAL TITLE REPORT AND OBJECTIONS.................. 6
7.5 EXISTING LEASE DOCUMENTS; ESTOPPEL CERTIFICATE............ 7
7.6 ENVIRONMENTAL SURVEY...................................... 7
7.7 FAILURE OF CONDITION PRECEDENT............................ 7
ii
<PAGE>
8. DELIVERY OF STUDIES................................................ 7
9. DELIVERY OF POSSESSION............................................. 8
10. SELLER'S REPRESENTATIONS AND WARRANTIES............................ 8
10.1 AUTHORITY................................................. 8
10.2 LITIGATION................................................ 8
10.3 TITLE..................................................... 8
10.4 CONDEMNATION.............................................. 8
10.5 NO VIOLATION OF LAWS...................................... 8
10.6 ADVERSE POSSESSION........................................ 9
10.7 INSOLVENCY................................................ 9
10.8 ABSENCE OF DEFAULTS....................................... 9
10.9 WATER RIGHTS.............................................. 9
10.10 HAZARDOUS MATERIALS....................................... 9
10.11 EXISTING LEASE............................................ 10
10.12 NO MODIFICATIONS OR DEFAULTS.............................. 10
10.13 NO FUTURE ALTERATIONS..................................... 10
10.14 CONCERNING REPRESENTATIONS................................ 10
10.15 MATERIALITY............................................... 12
11. BUYER'S WARRANTIES................................................. 12
11.1 AUTHORITY................................................. 12
11.2 LITIGATION................................................ 12
11.3 ABSENCE OF DEFAULTS....................................... 12
11.4 CONTINUING NOTIFICATION OBLIGATIONS....................... 12
12. SURVIVAL........................................................... 12
13. BROKER'S COMMISSION................................................ 12
13.1 BROKERS................................................... 12
13.2 INDEMNIFICATION FOR COMMISSION............................ 13
13.3 SURVIVAL.................................................. 13
14. Water Rights....................................................... 13
15. Nominee and Right of Transfer; 1031 Exchange....................... 13
16. RISK OF LOSS....................................................... 14
17. [RESERVED]......................................................... 14
iii
<PAGE>
18. REMEDIES........................................................... 14
18.1 SELLER'S BREACH........................................... 14
18.2 BUYER'S BREACH............................................ 15
19. GENERAL PROVISIONS................................................. 15
19.1 ATTORNEYS' FEES........................................... 15
19.2 NOTICES................................................... 15
19.2.1 ADDRESSES.......................................... 15
19.2.2 EFFECTIVE DATE OF NOTICES......................... 16
19.3 ESCROW INSTRUCTIONS....................................... 16
19.4 ESCROW CANCELLATION CHARGES............................... 16
19.5 APPROVALS................................................. 17
19.6 FURTHER INSTRUMENTS AND DOCUMENTS......................... 17
19.7 GOVERNING LAW; CHOICE OF FORUM............................ 17
19.8 CONSTRUCTION.............................................. 17
19.9 TIME OF ESSENCE........................................... 17
19.10 INTERPRETATION............................................ 17
19.11 HEADINGS AND COUNTERPARTS................................. 18
19.12 SUCCESSORS AND ASSIGNS.................................... 18
19.13 SEVERABILITY.............................................. 18
19.14 EXHIBITS; RECITALS........................................ 18
19.15 RELATIONSHIP.............................................. 18
19.16 INTEGRATION CLAUSE; NO ORAL MODIFICATION.................. 18
19.17 NO ASSUMPTION OF SELLER'S LIABILITIES..................... 18
19.18 WAIVER.................................................... 18
19.19 BINDING AGREEMENT......................................... 19
EXHIBITS
Exhibit A - Legal Description of the Property
Exhibit B - Deed
Exhibit C - Non-Foreign Affidavit
Exhibit D - Escrow Instructions
iv
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
THIS PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (this "Agreement") is
entered into effective as of _________________, 1999 (the "Effective Date") by
and between FOOT CREEK CORPORATION OF ARIZONA, and GRANDILLA (ARIZONA), INC.,
both Arizona corporations, or their respective nominee(s) (collectively,
"Buyer"), and STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC., an Arizona
corporation ("Seller").
RECITALS:
A. The real property which is the subject of this Agreement is that certain
improved property located at the northwest corner of 24th and Jefferson Streets,
Phoenix, Arizona which is legally described on EXHIBIT A and is more thoroughly
described below (the "Property"). The Property is approximately 2.45 acres or
approximately 106,722 Net Surveyed Square Feet (as defined below).
B. The Property is presently affected by a Net Lease (the "Lease"), dated
October 1, 1998, wherein Dollar Rent A Car Systems, Inc., an Oklahoma
corporation, is tenant ("Tenant"), and Seller is Landlord.
C. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, the Property, all upon the terms and conditions set forth in this
Agreement. D. It is presently contemplated that the two entities constituting
"Buyer" shall receive their interests in the Property in equal shares, but such
parties shall be responsible, if they wish to obtain unequal shares, to so
inform Seller a reasonable time prior to Closing so that the Closing documents
may be drawn accordingly.
AGREEMENTS:
NOW THEREFORE, in consideration of the promises set forth in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by Seller and Buyer (collectively the "Parties" or
each individually a "Party"), hereby agree as follows:
1. AGREEMENT TO BUY AND SELL. Subject to the terms set forth below, Buyer
agrees to purchase the Property from Seller and Seller agrees to sell the
Property to Buyer.
2. INCLUSIONS IN PROPERTY. The term "Property" shall also include the
following:
A. All improvements, if any, located on the Property;
B. The Lease and all rights, deposits, rents and other charges
thereunder, such rents and other charges being pro-rated to Closing;
<PAGE>
C. All tenements, hereditaments and appurtenances, if any, pertaining
to the Property;
D. All mineral, water and irrigation rights (the "Water Rights"), if
any, running with or otherwise pertaining to the Property;
E. All interest, if any, of Seller in any road adjoining the Property,
to the center line of such road; and
F. All interest, if any, of Seller in any award made or to be made or
settlement in lieu of such an award for damage to the Property by reason of
condemnation, eminent domain or exercise of police power.
3. ACCEPTANCE; OPENING OF ESCROW.
3.1.ACCEPTANCE. The offer represented by this Agreement shall be
deemed accepted upon Seller's execution and delivery of one or more
counterparts of this Agreement to Escrow Agent (as defined below) on or
before November 10, 1999 (the "Acceptance Date").
3.2. OPENING OF ESCROW. The Escrow (herein so called), shall be opened
when one or more fully executed counterparts of this Agreement executed by
Seller and Buyer, respectively, have been delivered to Fidelity National
Title Insurance Company, Attn: Ms. Bonnie McCoid, 3131 E. Camelback Road,
Suite 115, Phoenix, Arizona 85016, Telephone (602) 224-1105, Fax (602)
224-6112 (the "Escrow Agent"), on or before the Acceptance Date (the
"Opening of Escrow"). Escrow Agent shall advise Seller and Buyer, in
writing, of the Opening of Escrow and the date thereof. Escrow Agent shall
provide the Parties with an uninsured closing protection and agency
authority letter as soon as possible after the Opening of Escrow.
4. PURCHASE PRICE.
4.1 PAYMENT OF PURCHASE PRICE. The Purchase Price (herein so called)
to be paid by Buyer to Seller for the Property shall be $1,450,000.00,
payable as follows:
4.1.1 EARNEST MONEY. $50,000.00 Earnest Money (herein so called),
by check, shall be deposited in Escrow within 5 days of the Opening of
Escrow. The Earnest Money is to be held by Escrow Agent until
cancellation as provided below or paid to Seller at Close of Escrow.
4.1.2. ADDITIONAL FUNDS. The balance of the Purchase Price shall
be paid in cash, by check or other immediately available funds, to be
deposited in Escrow on or before Close of Escrow (the "Additional
Funds"), which is to be held by Escrow Agent until cancellation of
this Agreement as provided below or paid to Seller at Close of Escrow.
5. EARNEST MONEY. Seller and Buyer hereby instruct Escrow Agent to put the
Earnest Money in a federally insured daily interest-bearing passbook account on
behalf of Seller and Buyer. The Earnest Money, and all interest accrued thereon,
shall be applied as follows:
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5.1. CANCELLATION BY BUYER; DEFAULT BY SELLER. If Buyer cancels this
Agreement, as Buyer is entitled so to do as provided in this Agreement, or
Seller breaches this Agreement, the Earnest Money and any and all interest
earned to the effective date of withdrawal shall be paid immediately to
Buyer.
5.2. DEFAULT BY BUYER. If Buyer breaches this Agreement, the Earnest
Money and any and all interest earned to the date of withdrawal shall be
paid to Seller as liquidated damages, as Seller's only remedy, it being
acknowledged and agreed that it would be difficult or impossible to
determine Seller's exact damages in case of a default by Buyer, and that
the amount of the Earnest Money is a reasonable estimate of Seller's
damages caused by Buyer's default.
5.3. CLOSE OF ESCROW. If the Escrow closes, the Earnest Money and any
and all interest earned to Close of Escrow shall be credited to Buyer,
automatically applied against the Purchase Price and paid to Seller at
Close of Escrow.
6. CLOSE OF ESCROW; CONVEYANCE OF TITLE; TITLE INSURANCE.
6.1. CLOSE OF ESCROW. Consummation of the purchase of the Property
(the "Close of Escrow" or "Closing") and recordation of the Deed (as
defined below) shall take place on or before the 15th day following the
satisfaction (or the written waiver by Buyer) of all of the conditions
precedent set forth in Section 7 below, or such later date mutually agreed
to in writing by and between Buyer and Seller (the "Closing Date"). At or
before Closing, each Party shall execute and deliver such documents and
perform such acts as are provided for in this Agreement.
6.2. CLOSING COSTS. All recording fees, escrow service fees and other
escrow closing costs shall be charged by Escrow Agent to, and paid by, the
respective Parties in accordance with local custom as determined by Escrow
Agent unless payment of such costs is specifically provided for in this
Agreement. To the extent not directly billed through to, or paid directly
by, Tenant under the Lease, real property taxes, improvement liens and
other assessments, if any, shall be prorated to the Close of Escrow, which
taxes shall be prorated as of Close of Escrow on the basis of the latest
available tax statement; provided, however, that if, after Closing, the
actual tax bill for the Property varies from Escrow Agent's pro-ration
figures and a Party notifies the other within 12 months of Closing, a new
pro-ration shall be completed and the Party in whose favor any difference
exists after pro-ration shall be entitled to recover such difference from
the other Party. Except as provided in this Section, Seller and Buyer shall
each bear their own costs in regard to the sale and purchase of the
Property (the "Purchase Transaction"). Seller agrees that all closing costs
payable by Seller shall be deducted from Seller's proceeds otherwise
payable to Seller at Close of Escrow. Buyer shall deposit with Escrow Agent
sufficient cash to pay all of Buyer's closing costs.
6.3. DEED AND ASSIGNMENT OF LEASE. On or prior to the Close of Escrow,
Seller shall duly execute, acknowledge and deliver to Escrow Agent for
recordation, if appropriate, and delivery to Buyer upon Close of Escrow a
special warranty deed, in form and content identical to EXHIBIT B (the
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"Deed"), conveying title to the Property to Buyer and warranting fee title
to the Property subject only to the matters of record.
Seller shall also execute, acknowledge and deliver to Escrow Agent for
recordation, in form and content satisfactory to Buyer and Seller in their
respective reasonable discretions, a form of assignment of lease ("Assignment of
Lease"), conveying and transferring the leasehold interest under the Lease to
Buyer.
All components of the Property shall be deemed transferred and conveyed by
execution and delivery of the Deed and the Assignment of Lease.
6.4. AFFIDAVIT OF PROPERTY VALUE. On or prior to the Close of Escrow,
Seller and Buyer shall duly execute, acknowledge and deliver to Escrow
Agent an affidavit of real property value ("Affidavit of Property Value")
pursuant to A.R.S. ss. 11-1133.
6.5. TITLE INSURANCE. Escrow Agent shall issue or cause to be issued
an extended coverage owner's policy of title insurance in the amount of the
Purchase Price (as defined below), it being agreed that Seller shall pay
only the premium for a standard owner's policy in the amount of the
Purchase Price (the "Owner's Policy") and Buyer shall pay any additional
cost. The Owner's Policy is to include, among other things, the following
endorsements which are also to be delivered to Buyer: (i) a combined ALTA
endorsement No. 3R and 5 referring to the Survey and modified as applicable
to the Owner's Policy to the effect that the insured legal and the Survey
legal describe one and the same Property; (ii) a patent endorsement if the
Property is subject to any restrictions or other matters set forth in any
federal or state patent with respect to Property; (iii) a water rights
endorsement; (iv) a creditor's rights endorsement; (v) if necessary, an
endorsement insuring against archaic deed restrictions; and (vi) such other
endorsements as Buyer shall reasonably deem necessary. The cost of all such
endorsements shall be paid by Buyer.
6.6. IRS SECTION 1445. Seller shall furnish to Buyer in Escrow by
Close of Escrow a sworn affidavit, in the form of EXHIBIT C (the
"Non-Foreign Affidavit") stating under penalty of perjury that Seller is
not a "foreign person" as such term is defined in Section 1445(f)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"). If Seller does not
timely furnish the Non-Foreign Affidavit, Buyer may withhold (or direct
Escrow Agent to withhold) from the Purchase Price an amount equal to the
amount required to be so withheld pursuant to Section 1445(a) of the Code,
and such withheld funds shall be deposited with the Internal Revenue
Service as required by Section 1445(a) and the regulations promulgated
thereunder. The amount withheld, if any, shall nevertheless be deemed to be
part of the Purchase Price paid to Seller.
7. BUYER'S CONTINGENCIES. Buyer's obligation to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of all of the
following conditions precedent (any or all of which may be waived by Buyer, but,
except as otherwise provided in this Agreement, only in a writing signed by
Buyer or its duly authorized agent):
7.1. STATUS OF TITLE. Buyer, in Buyer's sole and absolute discretion,
shall have approved the condition of title to the Property. In this regard,
with reasonable promptness after the Opening of Escrow, Seller shall cause
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Escrow Agent to issue and deliver to Seller and Buyer a commitment for
title insurance concerning the Property, together with legible copies of
all instruments referred to therein (collectively the "Report"). The Report
is to be preliminary to the issuance of the Owner's Policy. Buyer shall
have until 5:00 p.m. Arizona time on the 20th day after Buyer's receipt of
the Report and the Survey in which to advise Seller and Escrow Agent, in
writing, either: (i) that the condition of title to the Property as
reflected in the Report and the Survey is acceptable to Buyer; or (ii) to
object to any easements, liens, encumbrances or other items, exceptions or
requirements in the Report and/or the Survey (the "Title Objections"). If
the Title Objections are made within the time specified, Seller may attempt
to cure the Title Objections by 5:00 p.m. Arizona time on the 5th day after
the delivery of the Title Objections by Buyer (the "Title Cure Deadline").
If Seller should be unable or unwilling to cure the Title Objections by the
Title Cure Deadline, then Buyer, by written notice to Seller and Escrow
Agent to be given by 5:00 p.m. Arizona time on the 5th day after the Title
Cure Deadline, shall either: (i) waive the curing of the portion of the
Title Objections that Seller shall have been unable or unwilling to cure
and proceed to close the Escrow; or (ii) Buyer shall cancel this Agreement.
If, for any reason, Buyer fails to notify Seller and Escrow Agent of
Buyer's approval of the condition of title to the Property or of Buyer's
election to proceed or cancel within the time periods specified above,
Buyer shall be deemed to have approved the condition of title to the
Property as shown by the Report and the Survey or to have elected to
proceed to close the Escrow, as applicable. Any provision of this Section 7
to the contrary notwithstanding, Seller, at Seller's sole cost, shall cause
to be released of record by Close of Escrow any monetary lien or assessment
constituting an encumbrance upon the title of the Property as disclosed in
the Report, excepting only inchoate liens for taxes and assessments not yet
due and payable.
7.2. THE STUDY PERIOD. Buyer, in Buyer's sole and absolute discretion,
shall have approved the condition of the Property. Buyer shall have until
5:00 p.m. Arizona time on the 30th day after the Opening of Escrow (the
"Study Period"), at Buyer's sole cost, within which to conduct and/or
approve any investigations, studies or tests deemed necessary by Buyer, in
Buyer's sole discretion, to determine the feasibility of acquiring and
developing the Property, including, but not limited to, environmental, soil
and engineering studies and the investigation of zoning, title, land, water
management, wetlands, construction and permit and access issues (the
"Studies"). Seller hereby grants to Buyer and Buyer's agents, employees or
contractors the right to enter upon the Property at any time or times
during the Study Period to conduct the Studies. In consideration of Seller
granting Buyer the right of entry to the Property, Buyer shall and does
hereby agree to indemnify and hold Seller harmless from any and all
liabilities, claims, losses or damages, including, but not limited to,
court costs and attorneys' fees, which may be incurred by Seller because of
the Studies or any activities by Buyer or its consultants related to the
Studies, and to restore the Property to the condition existing immediately
prior to any such Study, if any. Buyer's obligations as provided in the
preceding sentence shall survive the cancellation of this Agreement. If,
for any reason whatsoever, in Buyer's sole discretion the results of any of
the Studies are not acceptable to Buyer and Buyer so notifies Seller and
Escrow Agent in writing on or before the end of the Study Period (the
"Cancellation Notice"), this Agreement shall be canceled. Buyer's failure,
for any reason, to give the Cancellation Notice before the expiration of
the Study Period automatically shall be deemed to be Buyer's election to
close the Escrow.
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7.3. THE SURVEY. Buyer, in Buyer's sole and absolute discretion, shall
have approved the condition of the Property as reflected in the Survey. In
this regard, Seller, within two (2) days after the Opening of Escrow, shall
deliver to Buyer and Escrow Agent Seller's existing survey of the Property
(the "Survey). If Buyer wishes, Buyer may have the Survey updated at
Buyer's cost and expense. If Buyer does so decide, such updated Survey
shall become the Survey described herein and the date that Buyer receives
such updated Survey shall be the date to begin Buyer's objection period set
forth immediately below. If Buyer does not decide to update the Survey,
then the existing Survey shall constitute the Survey hereunder. Buyer shall
have until 5:00 p.m. Arizona time on the 20th day after Buyer's receipt of
the Report and the Survey (either the existing Survey, if Buyer does not
decide to update same, or the updated Survey, if Buyer does so decide) in
which to advise Seller and Escrow Agent, in writing, either: (i) that title
to the Property as reflected in the Report and the Survey is acceptable to
Buyer; or (ii) give notice of any Title Objections pursuant to the terms of
Section 7.1 above, whereupon the provisions in Section 7.1 above regarding
cure and cancellation shall apply. If Buyer waives its feasibility
contingency set forth in Section 7.2 above, Seller shall, at Seller's sole
cost and expense, cause the Survey to be recertified to Buyer, Buyer's
successors and assigns and Buyer's lender prior to Closing.
7.4. SUPPLEMENTAL TITLE REPORT AND OBJECTIONS. Escrow Agent shall
immediately issue and deliver to the Parties any supplemental title
report(s) deemed necessary by Escrow Agent (the "Supplemental Report").
Buyer shall have until 5:00 p.m. Arizona time on the 5th day after Buyer's
receipt of any Supplemental Report in which to advise Seller and Escrow
Agent, in writing, of any objections Buyer may have to any item set forth
in the Supplemental Report(s) which was not set forth in the Report or a
previous Supplemental Report (the "Supplemental Objections"), whereupon the
provisions in Section 7.1 above regarding cure and cancellation shall
apply.
7.5. EXISTING LEASE DOCUMENTS; ESTOPPEL CERTIFICATE. Buyer, in Buyer's
sole and absolute discretion, shall have approved the Lease, the financial
capability of Tenant, and any other items associated therewith. In that
regard, within thirty (30) days prior to Closing and a condition to Buyer's
obligations hereunder and to the forfietability of the Earnest Money,
Seller shall deliver to Buyer an Estoppel Certificate (herein so called) in
form and substance as agreed upon by the parties during the Study Period
and in a form generally described in the Lease. It shall be incumbent upon
Seller to draft and present to Buyer for approval a form of Estoppel
Certificate reasonably promptly after Opening of Escrow. If the Estoppel
Certificate indicates either a breach or default under the Lease or is
otherwise not acceptable to Buyer in its sole discretion, Buyer, in its
sole discretion, may either: 1) cancel the transaction, receive a return of
its Earnest Money and neither party shall have further liability together
hereunder; 2) waive the condition and proceed to Closing; or 3) extend the
Closing from time to time to endeavor to either receive an acceptable
Estoppel Certificate or to cure any defaults described in an Estoppel
Certificate which has been received.
7.6. ENVIRONMENTAL SURVEY. Within ten (10) days after Opening of
Escrow, Seller shall provide to Buyer Seller's existing Phase I
Environmental Survey of the Property (the "Environmental Survey"). Buyer
shall have until the expiration of the Study Period in which to review and
approve the Environmental Survey. Buyer understands that there are two
former underground storage tanks located on the Property which have been
removed according to a closure letter from the Arizona Department of
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Environmental Quality which Seller will supply to Buyer with the
Environmental Survey. In addition, Buyer understands that the Property is
located in an area formerly denominated as the so-called "WQARF East
Washington" litigation area (the "East Washington Issues"). Both of the
foregoing are described in the Environmental Survey. If Buyer waives its
feasibility contingency set forth in Section 7.2 above, Seller shall cause
the original Environmental Survey to be updated to a date within thirty
(30) days prior to the close of the Study Period and recertified to Buyer,
Buyer's successors and assigns and Buyer's lender. If this revised
Environmental Survey sets forth any items which were not originally
reflected in the Environmental Survey, Buyer shall have five (5) business
days within which to object to this revised Environmental Survey based on
these new conditions. If Buyer does so object, Seller shall have the right,
but not the obligation, to endeavor to cure such matters, in which case
Closing shall be extended for a reasonable period of time not to exceed
January 31, 2000, in which to cure such items, or Seller may indicate to
Buyer within five (5) business days after receipt of Buyer's objections
that Seller will not endeavor to cure same. In that event, Buyer may either
waive its objections and close Escrow or cancel this transaction, whereupon
the Earnest Money shall be returned to Buyer and neither party shall have
further liability to the other hereunder, except for Buyer's obligations of
restoration and indemnity which shall survive any such termination.
7.7. FAILURE OF CONDITION PRECEDENT. If Buyer elects to cancel this
Agreement pursuant to the foregoing provisions of this Section 7 or due to
failure to occur of any condition precedent to Closing set forth in this
Agreement other than a condition which results solely on account of Buyer's
breach hereunder or Buyer's actions hereunder, the Earnest Money plus any
and all interest accrued thereon shall be refunded immediately by Escrow
Agent to Buyer and, except as otherwise provided in this Agreement, neither
Seller nor Buyer shall have any further liability or obligation under this
Agreement.
8. DELIVERY OF STUDIES. Within 5 days following the Opening of Escrow and
thereafter until the Closing, Seller agrees to provide Buyer with access to any
and all pertinent information in Seller's possession or control relating to the
operation, maintenance, construction or repair of the Property, including, but
not limited to, any CC&R's, site history, environmental and entitlement
material, zoning, platting, engineering, soil tests, water tests, plans and
specifications relating to Property improvements, any and all information
regarding Lease documents, Tenant's financial statements and financial history,
environmental tests, construction, master planning, architectural drawings,
correspondence with public entities and like matters regarding the Property.
9. DELIVERY OF POSSESSION. Seller, at Seller's cost, shall vacate and
deliver possession of the Property to Buyer at Close of Escrow, free and clear
of all tenants or occupants, except under the Lease.
10. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants to Buyer, as of the Effective Date and again as of Close of Escrow, and
agrees (with the understanding that Buyer is relying on these warranties,
representations, and covenants) as follows:
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10.1. AUTHORITY. Seller has full power and authority to execute,
deliver and perform under this Agreement as well as the documents,
specimens of which are attached as Exhibits to this Agreement.
10.2. LITIGATION. Except for the East Washington Issues described in
Section 7.6 above, to Seller's actual knowledge, there are no claims,
actions, suits or other proceedings pending or threatened by any
governmental department or agency or any other corporation, partnership,
entity, or person whomsoever, nor any voluntary actions or proceedings
contemplated by Seller, which in any manner or to any extent may
detrimentally affect Buyer's right, title or interest in and to the
Property or the value of the Property or Seller's ability to perform
Seller's obligations under this Agreement and there is no circumstance
which should or could reasonably form the basis for any such action or
proceeding.
10.3. TITLE. Seller owns the Property in fee simple absolute. Seller
has not authorized work to be performed at the Property and to Seller's
actual knowledge no such work has been performed or is in progress and no
materials have been furnished to the Property which might give rise to
mechanic's, materialman's or other liens against any part of the Property.
Seller has not entered into any, and, to Seller's actual knowledge, there
are not any, contracts or other obligations outstanding for the sale,
exchange or transfer of all or any part of the Property. Seller will not at
any time prior to Close of Escrow grant to any third party an interest in
the Property; and there are no unrecorded leases, liens or encumbrances
which may affect title to the Property except the Lease. All bills or other
charges, costs or expenses arising out of or in connection with or
resulting from Seller's use, ownership or operation of the Property up to
Close of Escrow shall be paid in full by Seller.
10.4. CONDEMNATION. To Seller's actual knowledge, there is no pending
or threatened condemnation or similar proceeding affecting all or any part
of the Property, and Seller has not received any notice of any such
proceeding and has no actual knowledge that any such proceeding is
contemplated.
10.5. NO VIOLATION OF LAWS. Seller is not prohibited from consummating
the transactions contemplated by this Agreement by any law, regulation,
agreement, instrument, restriction, order or judgment. To Seller's actual
knowledge there are no violations of laws, rules, regulations, ordinances,
codes, covenants, conditions, restrictions, instructions, requirements or
agreements applicable to the Property. Seller has not received notices from
any insurance companies, governmental agencies or any other corporation,
partnership, entity or person having jurisdiction with respect to
violations and if any such notices of violations are received prior to
Close of Escrow, Seller shall immediately submit copies to Buyer and
Buyer's review and acceptance shall be a condition precedent to Close of
Escrow.
10.6. ADVERSE POSSESSION. To Seller's actual knowledge and except as
set forth in the Report and the Lease: (i) there are no persons in adverse
possession of the Property; (ii) there are no persons in possession of the
Property except Seller; and (iii) no person has been granted any license,
lease or other right relating to the use or possession of the Property.
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10.7. INSOLVENCY. There are no attachments, executions, assignments
for the benefit of creditors, receiverships, conservatorships or voluntary
or involuntary proceedings in bankruptcy or pursuant to any other laws for
relief of debtors contemplated or filed by Seller or pending against Seller
or affecting or involving the Property. To Seller's actual knowledge, there
is no special assessment pending against the Property by any governmental
agency.
10.8. ABSENCE OF DEFAULTS. To Seller's actual knowledge, there is no
default, nor has any event occurred which, with the passage of time or the
giving of notice or both, would constitute a default, in any contract,
mortgage, deed of trust, lease or other instrument which relates to the
Property, or which affects the Property in any manner whatsoever. No
consent of any third party is required in order for Seller to enter into,
or for Seller to have authority to perform Seller's obligations under, this
Agreement.
10.9. WATER RIGHTS. Seller will take all actions reasonably necessary
to transfer any water rights with respect to the Property, if any, at
Closing.
10.10. HAZARDOUS MATERIALS. Neither Seller nor, to Seller's actual
knowledge and except for any matter disclosed in any Environmental Study
either delivered pursuant to the terms hereof or generated in connection
with the transactions contemplated hereby, any other person, has ever
caused or permitted any Hazardous Material (as defined below) to be placed,
held, located, or disposed of on, under or at all or any part of the
Property or from all or any part of the Property into the atmosphere or any
watercourse, body of water or wetlands and neither all nor any part of the
Property nor any adjoining real property has ever been used (whether by
Seller or, to the best of Seller's knowledge, by any other person) as a
treatment, storage or disposal (whether permanent or temporary) site for
any Hazardous Material in violation of applicable law. For purposes of this
Agreement, "Hazardous Material" means and includes any petroleum product
and any hazardous substance or any pollutant or contaminant defined as such
in (or for purposes of) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"); any
so-called "Superfund" or "Superlien" law; the Resource Conservation and
Decay Act of 1976, as amended; or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order, or decree
regulating, relating to or imposing a liability or standards of conduct
concerning petroleum products or any hazardous, toxic, or dangerous waste
petroleum products, substance or material, as now or at any time hereafter
in effect; or asbestos or any substance or compound containing asbestos,
PCB's or any other hazardous, toxic or dangerous waste, substance or
material. To Seller's actual knowledge, the Property does not now contain
any underground tanks.
Seller hereby indemnifies Buyer and agrees to pay, defend and hold
Buyer harmless for, from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims, of any and every kind
whatsoever, including reasonable attorneys' fee paid, incurred or suffered
by, or asserted against, Buyer for, with respect to, or as a direct or
indirect result of the breach by Seller of the foregoing representation and
warranty.
10.11. EXISTING LEASE. To Seller's actual knowledge, there is no
breach or default under nor does there exist any event or condition which,
after the passage of time, the giving of notice or both, would constitute
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such a breach or default under any of the Lease. To Seller's actual
knowledge the Lease is a legal, valid and binding obligation of Seller and
Tenant, enforceable in accordance with its terms. Seller and, to Seller's
actual knowledge, Tenant have legal capacity to enter into the transactions
contemplated thereby and to execute and deliver any existing Lease
Documents, all of which have been duly and properly executed by such
parties. Payments under the Lease have been made current through November,
1999 with the next monthly payment in the amount called for by the Lease
due on December 1, 1999. All payments and other obligations due under the
Lease on or prior to the Closing shall be timely paid and performed by
Seller and Tenant.
10.12 NO MODIFICATIONS OR DEFAULTS. The terms of the Lease has not
been, and will not be prior to the Closing, impaired, waived, altered or
modified by Seller in any respect.
10.13. NO FUTURE ALTERATIONS. Except as may be undertaken by Tenant
pursuant to the terms of the Lease, between the Effective Date and the
Closing Date, Seller shall not make or authorize to be made any major or
substantial modifications of, or alterations to, all or any portion of the
Property and shall maintain the Property in substantially the same
condition it is in as of the Effective Date.
10.14. CONCERNING REPRESENTATIONS. Notwithstanding the foregoing
provisions of this Article 10: (i) if Purchaser learns of any actual or
alleged inaccuracy in Seller's representations or warranties after the
Effective Date and prior to the Closing Date, Purchaser shall promptly
notify Seller of such inaccuracy; and (ii) if Seller learns of any actual
or alleged inaccuracy in such representations or warranties, Seller shall
advise Purchaser of such inaccuracy. Seller shall, on or before the date 10
days after receiving such written notice from Purchaser or of learning of
such actual or alleged material inaccuracy make commercially reasonable
efforts, without cost or expense to Seller, to cure such inaccuracy and if
the Closing Date is scheduled before the expiration of such 10 day period,
the Closing Date shall be extended accordingly. Failing such cure by
Seller, Seller shall, within the period described in the preceding
sentence, notify Purchaser in writing of such failure to cure, and
Purchaser's sole and exclusive remedy in such event shall be to elect, on
or before the date 5 business days after receiving such written notice from
Seller, to either: (y) waive such breach and proceed to consummate the
Closing of the Property as contemplated by this Agreement without reduction
of the Purchase Price; or (z) terminate this Agreement, whereupon the
Escrow Agent shall return to Purchaser the Deposit and all interest accrued
thereon, and neither Party will have any further rights or obligations
regarding this Agreement or the Property except for any obligations which
are to expressly survive the termination of this Agreement. If Purchaser
proceeds to Closing, without exercising the right of termination set froth
above, each Seller's Representative shall be deemed automatically amended
to conform with the knowledge of Purchaser as of the Closing Date, and
Seller shall have no liability whatsoever for such previously inaccurate
Seller's Representation. For the purposes of this Agreement, Purchaser
shall be deemed to have knowledge of any fact or circumstance set forth in
the Estoppel Certificate delivered to Purchaser and in any environmental
assessment or other report received by Purchaser, and Seller's
Representations shall be deemed automatically modified to the extent
information contained in the Estoppel Certificate or in any environmental
assessment or other report received by Purchaser prior to the Closing is
inconsistent with the matters covered in this Agreement.
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Except as expressly represented or warranted by Seller in this
Agreement or in the documents executed and delivered by Seller at the
Closing (collectively, the "Seller's Representations"), Purchaser
acknowledges that neither Seller nor any agent, officer, employee, servant
or representative of Seller has made any statement or representation
(whether oral or in writing) regarding the subject matter or any fact of
this transaction, including, without limiting the generality of the
foregoing, any statement or representation as to the physical nature or
condition of the Property, soil and subsoil conditions, surface water,
underground water, the Property's feasibility for any particular purpose,
development, use, improvement or operation, or any other matter or thing
affecting or related to the Property or any future use implementation,
development, enjoyment or operation of the Property. Purchaser agrees that
Purchaser, in executing, delivering and/or performing this Agreement, has
not and does not rely upon, and that Seller is not liable or bound in any
manner by, any express or implied warranty (including any warranty as to
the Property's condition and fitness for a particular use or purpose),
guaranty, promise, statement, representation, assurance, proposal or
information pertaining to the Property or the Property's zoning, potential
use or development, made or furnished by Seller or by any agent, officer,
employee, servant or other person representing or purporting to represent
Seller, except as expressly stated in Seller's Representations, to
whomsoever made or given, directly or indirectly, verbally or in writing.
Except as expressly stated in Seller's Representations, Purchaser accepts
the Property in "as is, where is" condition "with all faults".
Purchaser has requested that Seller furnish Purchaser with certain
studies, reports and other information in Seller's possession with respect
to the Property, including environmental studies and surveys. As an
accommodation to Purchaser, Seller has agreed to furnish to Purchaser such
information; provided, however, Purchaser hereby acknowledges and agrees
that Seller is making absolutely no representations or warranty whatsoever
with respect to any such studies, reports or information provided by Seller
to Purchaser, except as expressly stated in Seller's Representations, but
Seller hereby represents and warrants to Purchaser that Seller has no
knowledge of any inaccuracy in or misrepresentation created by any such
studies, reports or information which would make any of them misleading.
Purchaser acknowledges and agrees that, subject to the terms of this
Agreement, Purchaser shall be required to verify the accuracy and details
of all such studies, reports and information so provided by Seller to
Purchaser in such manner as Purchaser deems appropriate.
The benefits, waivers and releases accruing to Seller under this
Section 10.14 shall accrue not only to Seller, but also to its
shareholders, officers, directors, employees, affiliates and agents.
10.15. MATERIALITY. The provisions of this Section are material and
included as a material portion of the consideration given to Buyer by
Seller in exchange for Buyer's performance under this Agreement.
11. BUYER'S WARRANTIES. Buyer hereby represents to Seller as of the
Effective Date and again as of Close of Escrow that:
11
<PAGE>
11.1. AUTHORITY. Buyer has full power and authority to execute,
deliver and perform under this Agreement as well as the documents that are
to be executed by Buyer and are attached as Exhibits to this Agreement.
11.2. LITIGATION. There are no claims, actions, suits or proceedings
pending or, to Buyer's knowledge, overtly threatened against Buyer which
may in any manner whatsoever affect the validity or enforceability of this
Agreement or any of the documents attached as Exhibits that are to be
executed by Buyer.
11.3. ABSENCE OF DEFAULTS. The execution, delivery and performance of
this Agreement and the other documents, specimens of which are attached as
Exhibits to this Agreement, have not and will not constitute a breach or
default under any other agreement, law or court order under which Buyer is
a Party or may be bound.
11.4. CONTINUING NOTIFICATION OBLIGATIONS. Should Buyer receive notice
or knowledge of any information regarding any of the matters set forth in
this Section 11 after the Effective Date and prior to Close of Escrow,
Buyer will immediately notify Seller of the same in writing.
12. SURVIVAL. All representations, warranties and indemnifications made in
this Agreement by Seller or Buyer shall survive the cancellation of this
Agreement or the Close of Escrow during the period of the applicable statute of
limitations.
13. BROKER'S COMMISSION. Concerning any brokerage commission, the Parties
agree as follows:
13.1. BROKERS. The Parties warrant to one another that they have not
dealt with any finder, broker or realtor in connection with this Agreement,
except Grubb & Ellis, Attention: Brian Lee ("Broker"). The parties
understand that Broker has represented both of their interests. Seller
shall pay to Broker an 8% commission due Broker. If Broker is to be paid
through Escrow at Close of Escrow such agreements shall be deposited in
Escrow on or before Close of Escrow. If, but only if, Escrow closes, Seller
shall pay from Seller's proceeds the commission to Broker and Escrow Agent
is hereby directed to make payment to Broker, at Close of Escrow, on behalf
of Seller. If Escrow does not close for any reason, Broker (including any
broker, finder, agent or person claiming by or through Broker) shall not be
entitled to any commission, fee or deposit. Broker shall have no claim to
forfeited Earnest Money, if any. By execution of this Agreement, Broker
agrees to and shall be bound by the terms of this Section, and the
commissions shall be the only compensation to which Broker is entitled for
services rendered in connection with the sale of the Property. Buyer is to
have no obligation to the Broker for any amounts now or hereafter alleged
to be due the Broker in regard to any matters arising under this Agreement.
Seller acknowledges that Mr. Lee, a licensed real estate broker/salesperson
in the State of Arizona, is also an Officer/Director of one or both of the
entities constituting "Buyer" hereunder, but that Mr. Lee does not have a
pecuniary interest in the transaction, except for his interest in and to
the brokerage commission described above.
12
<PAGE>
13.2. INDEMNIFICATION FOR COMMISSION. If any person shall assert a
claim to a finder's fee or brokerage commission on account of alleged
employment as a finder or broker in connection with the Purchase
Transaction, the Party under whom the finder or broker is claiming shall
indemnify and hold the other Parties harmless from and against any such
claim and all costs, expenses and liabilities incurred in connection with
such claim or any action or proceeding brought on such claim, including,
but not limited to, counsel and witness fees and court costs in defending
against such claims.
13.3. SURVIVAL. The provisions of this Section 13 shall survive
cancellation of this Agreement or Close of Escrow.
14. WATER RIGHTS. At Close of Escrow, Seller shall, by execution and
delivery of the Deed and without further act, be deemed to have assigned,
transferred, conveyed and set over unto Buyer the grandfathered water rights, if
any, with respect to the Property, and Seller agrees, if so requested by Buyer,
to make, execute and deliver an assignment of or deed to such rights in such
form as Buyer may reasonably require at or after Close of Escrow to evidence the
same.
15. NOMINEE AND RIGHT OF TRANSFER; 1031 EXCHANGE. Buyer shall have the
right to substitute another person ("Substituted Buyer") in lieu of Buyer by
giving written notice prior to Closing to Seller and Escrow Agent of the name,
address and telephone number of the Substituted Buyer. Such Substituted Buyer
shall also have an unlimited right of nomination and renomination under this
Section. Upon nomination of a Substituted Buyer in accordance with this Section,
all of the rights and obligations of the Buyer (or any prior Substituted Buyer)
in and under this Agreement shall become the rights and obligations of the
Substituted Buyer, however, Buyer (or the prior Substituted Buyer) shall not be
released from any of its obligations under this Agreement. All references in
this Agreement to "Buyer" shall mean and refer to the last Substituted Buyer.
The Substituted Buyer shall be bound by all of the time limits set forth in this
Agreement and no such substitution shall constitute cause for any extension of
any time limit set forth in this Agreement. However, Seller shall not be obliged
to take title to any other real property, Seller makes no representations as to
the tax effects of any such transaction, if any, Buyer shall indemnify and hold
harmless Seller from any cost, claim or damage arising out of said transaction
and said transaction shall not otherwise delay Closing.
Without limiting the generality of the foregoing, Seller understands that
Buyer is acquiring the Property as its replacement property pursuant to a
tax-deferred exchange in accordance with the provisions of ss. 1031 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder
("Section 1031"). Seller agrees to fully cooperate with Buyer in connection with
such exchange. In this regard, Buyer shall have the right to substitute any
person designated by Buyer as a Substituted Buyer in lieu of Buyer by giving
written notice prior to Closing to Seller and Escrow Agent of the name, address
and telephone number of the Substituted Buyer. Such Substituted Buyer shall also
have an unlimited right of nomination and renomination under this Section.
Seller agrees to cooperate with Buyer and to sign all documents necessary for
Buyer to acquire the Property as its replacement property under Section 1031 and
will accept an assignment of this Agreement to the exchange intermediary for
such purpose. Seller's compliance with this Section shall be at no additional
cost, liability or delay to Seller.
13
<PAGE>
16. RISK OF LOSS. Seller shall bear all risk of loss, damage or taking (by
condemnation or sale in lieu of condemnation) of all or any part of the Property
which may occur prior to Close of Escrow. In the event of any loss, damage or
taking prior to Close of Escrow, Buyer may, at Buyer's sole option, by written
notice to Seller and Escrow Agent, cancel this Agreement whereupon the Earnest
Money plus all interest accrued thereon shall be paid immediately by Escrow
Agent to Buyer and, except as otherwise provided in this Agreement, none of the
Parties shall have any further liability or obligation under this Agreement. In
the alternative Buyer may attempt to negotiate an appropriate downward
adjustment of the Purchase Price. If Seller and Buyer cannot agree upon such a
downward adjustment within a reasonable period (not to exceed 10 days from the
date Buyer receives notice of the loss and the Closing Date shall be extended to
the extent necessary if the Closing Date is scheduled prior to the expiration of
such 10 day period) Buyer may cancel this Agreement as provided above. If Buyer
waives any such loss or damage to the Property and closes Escrow, Seller shall
at Close of Escrow and as a condition precedent to the Closing, pay Buyer or
credit Buyer against the Additional Funds the amount of any insurance or
condemnation proceeds, in an amount which shall not exceed the Purchase Price,
or assign to Buyer, as of Close of Escrow and in a form acceptable to Buyer, all
rights or claims for relief to the same. If Buyer does not cancel this Agreement
in the case of a condemnation, Seller shall not do or forebear to do any acts in
any condemnation action which will materially and adversely affect the outcome
of such action without consulting with, and obtaining the written consent of,
Buyer prior to Close of Escrow. For purposes of this Agreement, the Property
shall be deemed the subject of a condemnation action as of the date of issuance
of a summons in connection with the filing of a complaint in eminent domain (or
similar filing) by any condemning authority or statutorily authorized
non-governmental condemnor.
17. [RESERVED]
18. REMEDIES.
18.1. SELLER'S BREACH. If Seller breached this Agreement, Buyer, at
Buyer's sole option, may either: (i) by written notice to Seller, and
Escrow Agent, cancel this Agreement whereupon the Earnest Money plus all
interest accrued thereon shall be paid immediately by Escrow Agent to Buyer
and, except as otherwise provided in this Agreement, neither of the Parties
shall have any further liability or obligation under this Agreement; (ii)
seek specific performance against Seller in which event Close of Escrow
shall be automatically extended as necessary, or (iii) if and only if
specific performance is not otherwise available, pursue an action for
damages against Seller, but in no event shall Buyer's damages exceed
$50,000.00 unless Seller's breach is willful or intentional. In no event
shall the foregoing effect Buyer's right to obtain attorneys' fees in any
such action if Buyer is the prevailing party therein.
18.2. BUYER'S BREACH. If Buyer breaches this Agreement, as Seller's
sole remedy, Seller shall be entitled to retain the Earnest Money in
accordance with Section 5.2 above as Seller's agreed and total liquidated
damages. Seller hereby waives any right to seek any equitable or legal
remedies against Buyer.
14
<PAGE>
19. GENERAL PROVISIONS.
19.1. ATTORNEYS' FEES. If there is any litigation to enforce any
provisions or rights arising under this Agreement in accordance with
Section 18.1 above, the unsuccessful Party in such litigation, as
determined by the court, agrees to pay the successful Party, as determined
by the court, all costs and expenses, including, but not limited to,
reasonable attorneys' fees incurred by the successful Party, such fees to
be determined by the court.
19.2.NOTICES.
19.2.1 ADDRESSES. Except as otherwise required by law, any notice
required or permitted hereunder shall be in writing and shall be given by
personal delivery, or by deposit in the United States mail, certified or
registered, return receipt requested, postage prepaid, addressed to the
Parties at the addresses set forth below, or at such other address as a
Party may designate in writing pursuant to the terms of this Section, or
tested telex, or telegram, or telecopies, or any express or overnight
delivery service [E.G. Federal Express], delivery charges prepaid:
If to Buyer: Foot Creek Corporation of Arizona
Grandilla (Arizona), Inc.
c/o Brian Lee
Grubb & Ellis
2390 E. Camelback, Suite 100
Phoenix, Arizona 85016
Telephone No.: (602) 224-4424
Fax No.: (602) 468-8588
With a copy to: Mariscal, Weeks, McIntyre & Friedlander, P.A.
2901 North Central Avenue, Suite 200
Phoenix, Arizona 85012
Attn: Fred C. Fathe, Esq.
Telephone No.: (602) 285-5000
Fax No.: (602) 285-5100
If to Seller: Stratford American Car Rental Systems, Inc.
Attn: Messrs. David Eaton & Mel Shultz
2400 E. Arizona Biltmore Circle
Building 2, Ste. 1270
Phoenix, Arizona 85012
Telephone No.: (602) 956-7809
Fax No.: (602) 955-3441
15
<PAGE>
With a copy to: Ronald Ballard, Esq.
Fennemore Craig PC
3003 N. Central Ave.
Suite 2600
Phoenix, Arizona 85012-2913
Telephone (602) 916-5312
Fax (602) 916-5512
If to Escrow Agent: Fidelity National Title Insurance Company
Attention: Bonnie McCoid
3131 E. Camelback Road, Suite 115
Phoenix, Arizona 85016
Telephone (602) 224-1105
Fax (602) 224-6112
19.2.2 EFFECTIVE DATE OF NOTICES. Notice shall be deemed to have been
given on the date on which notice is delivered, if notice is given by
personal delivery, telegrams or telecopies, and on the date of deposit in
the mail, if mailed or deposited with the overnight carrier, if used.
Notice shall be deemed to have been received on the date on which the
notice is received, if notice is given by personal delivery telegram or
telecopy, and on the 2nd day following deposit in the mail, if notice is
mailed. If Escrow has opened, a copy of any notice given to a Party shall
also be given to Escrow Agent by regular mail or by any other method
provided for in this Section.
19.3. ESCROW INSTRUCTIONS. This Agreement, when deposited with Escrow
Agent, shall constitute instructions to Escrow Agent, as escrow agent, for
the consummation of the Purchase Transaction. Attached as EXHIBIT D is
Escrow Agent's printed form conditions of escrow which, together with this
Agreement, shall constitute all of the instructions to Escrow Agent with
respect to the Purchase Transaction. It is provided, however, that in the
event of a conflict between Escrow Agent's printed form conditions of
Escrow and the terms and conditions of this Agreement, the terms and
conditions of this Agreement shall prevail. Without limiting the generality
of the foregoing, in no event shall Escrow Agent be indemnified or held
harmless for any liability or claim arising from its own negligence or its
own intentional misconduct or act of malfeasance and the so-called "13-day
notice" provision, if any, in the Escrow Instructions is hereby deleted.
19.4. ESCROW CANCELLATION CHARGES. If Escrow fails to close because of
Seller's default, Seller shall be liable for any cancellation of Escrow
Agent charges. If Escrow fails to close because of Buyer's default, Buyer
shall be liable for any cancellation charges of Escrow Agent. If Escrow
fails to close for any other reason, Seller and Buyer shall each be liable
for one-half of any cancellation charges of Escrow Agent.
19.5. APPROVALS. Concerning all matters in this Agreement requiring
the consent or approval of any Party or as a condition precedent to action
by any of the Parties, the Parties agree that any such consent to each
approval shall not be unreasonably withheld unless otherwise provided in
this Agreement.
16
<PAGE>
19.6. FURTHER INSTRUMENTS AND DOCUMENTS. Each Party shall, promptly
upon the request of the other Party or Escrow Agent, execute, acknowledge
and deliver to the other Party or Escrow Agent any and all further
documents, instruments, instructions and assurances reasonably requested or
appropriate to evidence or give effect to the provisions of this Agreement,
to consummate the transactions contemplated by this Agreement or to satisfy
Escrow Agent's requirements.
19.7. GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be deemed
to be made under, shall be construed in accordance with, and shall be
governed by the internal, substantive laws of the State of Arizona (without
reference to choice of law principles). Any action brought to interpret,
enforce or construe any provision of this Agreement shall be commenced and
maintained in the Superior Court of the State of Arizona in and for the
County of Maricopa. The Parties irrevocably consent to jurisdiction and
venue in such courts for such purposes and agree not to seek transfer or
removal of any action commenced in accordance with the terms of this
Section 19.7.
19.8. CONSTRUCTION. The terms and provisions of this Agreement
represent the results of negotiations among the Parties, each of which has
been or has had the opportunity to be represented by counsel of its own
choosing, and neither of which has acted under any duress or compulsion,
whether legal, economic or otherwise. Consequently, the terms and
provisions of this Agreement shall be interpreted and construed in
accordance with their usual and customary meanings, and the Parties each
hereby waive the application of any rule of law which would otherwise be
applicable in connection with the interpretation and construction of this
Agreement that ambiguous or conflicting terms or provisions contained in
this Agreement shall be interpreted or construed against the Party whose
attorney prepared the executed Agreement or any earlier draft of the same.
19.9. TIME OF ESSENCE. Time is of the essence of this Agreement.
However, if this Agreement requires any act to be done or action to be
taken on a date which is a Saturday, Sunday or legal holiday, such act or
action shall be deemed to have been validly done or taken if done or taken
on the next succeeding day which is not a Saturday, Sunday or legal
holiday.
19.10. INTERPRETATION. If there is any specific and direct conflict
between, or any ambiguity resulting from, the terms and provisions of this
Agreement and the terms and provisions of any document, instrument or other
agreement executed in connection with, or in furtherance of the Purchase
Transaction, including any Exhibits to this Agreement, the same shall be
consistently interpreted in such manner as to give effect to the general
purposes and intention as expressed in this Agreement which shall be deemed
to prevail and control.
19.11. HEADINGS AND COUNTERPARTS; FACSIMILE SIGNATURES. The headings
of this Agreement are for reference only and shall not limit or define the
meaning of any provision of this Agreement. This Agreement may be executed
in any number of counterparts and by facsimile signature, all the
counterparts (original or facsimile) shall be deemed to constitute one
instrument and each counterpart shall be deemed an original. If
counterparts (original or facsimile) are employed then, upon Close of
Escrow, Escrow Agent shall assemble all counterpart signature pages into a
17
<PAGE>
single document containing all original or facsimile signatures, and this
document shall be delivered to Buyer's counsel with copies of the document
(including all signatures) to be delivered contemporaneously, by Escrow
Agent, to Seller, Seller's counsel and Buyer.
19.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors in
interest and permitted assigns.
19.13. SEVERABILITY. If any provision of this Agreement is declared
void or unenforceable, such provision shall be deemed severed from this
Agreement, and this Agreement shall otherwise remain in full force and
effect.
19.14. EXHIBITS; RECITALS. All Exhibits and Recitals referenced in
this Agreement are incorporated by reference in, and shall constitute a
part of, this Agreement.
19.15. RELATIONSHIP. This Agreement shall not be construed as creating
a joint venture, partnership or any other cooperative or joint arrangement
between Buyer and Seller, and it shall be construed strictly in accordance
with its terms.
19.16. INTEGRATION CLAUSE; NO ORAL MODIFICATION. This Agreement and
the Escrow Instructions represent the entire agreement of the Parties with
respect to its subject matter, and all agreements, oral or written, entered
into prior to this Agreement are revoked and superseded by this Agreement.
This Agreement may not be changed, modified or rescinded, except in
writing, signed by all Parties and any attempt at oral modification of this
Agreement shall be void and of no effect.
19.17. NO ASSUMPTION OF SELLER'S LIABILITIES. Buyer is acquiring only
the Property from Seller and Buyer is not the successor in interest of
Seller. Buyer does not assume, agree to pay, perform or indemnify Seller or
any other person against any liability, obligation or expense of Seller or
relating in any way to the Property except to the extent, if any, expressly
and specifically provided for in this Agreement.
19.18. WAIVER. Buyer is acquiring only the Property from Seller and
Buyer is not the successor in interest of Seller. Failure of any Party to
exercise any right, remedy or option arising out of a breach of this
Agreement shall not be deemed a waiver of any right, remedy or option with
respect to any subsequent or different breach, or the continuance of any
existing breach.
19.19. BINDING AGREEMENT. This Agreement constitutes a binding
agreement between Seller and Buyer for this Purchase Transaction and shall
bind and inure to the benefit of the parties and their respective
successors and assigns. This Agreement supersedes all other written or
verbal agreements between the Parties concerning this Purchase Transaction.
18
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Purchase Agreement
as of the Effective Date.
BUYER: FOOT CREEK CORPORATION OF ARIZONA,
an Arizona corporation
By:
-----------------------------------------
Its:
----------------------------------------
GRANDILLA (ARIZONA), INC., an Arizona
Corporation
By:
-----------------------------------------
Its:
----------------------------------------
SELLER: STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC.,
an Arizona corporation
By:
-----------------------------------------
Its:
----------------------------------------
19
<PAGE>
ESCROW AGENT'S ACCEPTANCE
This Agreement is accepted as of this _____ day of ____________ 1999, by
Escrow Agent, which date is deemed to be the date of Opening of Escrow for the
purposes of this Agreement, and Escrow Agent agrees to perform the acts
applicable to Escrow Agent in accordance with the terms of this Agreement.
Escrow Agent acknowledges its receipt of a fully executed original of this
Agreement as of the date set forth above.
FIDELITY NATIONAL TITLE INSURANCE COMPANY
By:
-----------------------------------------
Escrow Officer
The undersigned hereby execute this Agreement for the sole purpose of
acknowledging and agreeing to be bound by the terms of Section 13 of the
Agreement.
SELLER'S BROKER:
By:
-----------------------------------------
Its:
----------------------------------------
BUYER'S BROKER: GRUBB & ELLIS
By:
-----------------------------------------
Its:
----------------------------------------
20
<PAGE>
LEGAL DESCRIPTION OF THE PROPERTY
EXHIBIT A TO
PURCHASE AGREEMENT
<PAGE>
When recorded, return to:
Attn: Brian P. Lee
c/o Grubb & Ellis
2390 E. Camelback Road
Suite 100
Phoenix, Arizona 85016
Escrow No.
- --------------------------------------------------------------------------------
SPECIAL WARRANTY DEED
For the consideration of Ten Dollars, and other valuable consideration,
STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC., an Arizona corporation ("Grantor"),
conveys to FOOT CREEK CORPORATION OF ARIZONA and GRANDILLA (ARIZONA), INC., both
Arizona corporations (collectively, "Grantee"), as equal co-tenants, the
following described real property:
See EXHIBIT A attached to and incorporated in this Special Warranty Deed
by this reference (the "Property").
SUBJECT TO: all taxes and other matters of record, or which an accurate
ALTA/ACSM survey would disclose.
And Grantor hereby binds itself and its successors to warrant and defend
the title, as against all acts of Grantor and no other, subject to the matters
above set forth.
Dated to be effective as of _______________, 1999.
GRANTOR: STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC.,
an Arizona corporation
By:
-----------------------------------------
Its:
----------------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this _____ day of
_______________, 1999, by _________________________, as _______________ of
STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC., an Arizona corporation, on behalf
of the corporation, for the purposes set forth herein.
---------------------------------------------
Notary Public
My Commission Expires:
<PAGE>
LEGAL DESCRIPTION
EXHIBIT A TO
SPECIAL WARRANTY DEED
NON-FOREIGN AFFIDAVIT
The undersigned, _______________, ___________ of STRATFORD AMERICAN CAR
RENTAL SYSTEMS, INC., an Arizona corporation("Transferor"), after being duly
sworn upon his oath, deposes and says:
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform FOOT CREEK CORPORATION OF ARIZONA and GRANDILLA (ARIZONA),
INC., both Arizona corporations (collectively, "Transferee"), that withholding
of the tax is not required upon the disposition of Transferor's interest in the
real property described on EXHIBIT A attached hereto and by this reference
included herein (the "Property"), the undersigned hereby certifies the
following:
1. Transferor is not a non-resident alien, or a foreign corporation,
foreign partnership, foreign trust, foreign estate or other foreign person
within the meaning of Sections 1445 and 7701 of the Internal Revenue Code and
the treasury regulations promulgated thereunder;
2. Transferor's U.S. taxpayer identification numbers is:
__________________.
3. Transferor's address is: 2400 E. Arizona Biltmore Circle, Building 2,
Ste. 1270 Phoenix, Arizona 85012.
4. There are no other persons or entities who have an ownership interest in
the Property.
The undersigned understands that this certification may be disclosed to the
Internal Revenue Service by Transferee in connection with the United States
Foreign Investment in Property Tax Act and that any false statement contained in
this Affidavit could be punished by fine, imprisonment or both.
Under penalty of perjury, the undersigned declares that he has examined
this certification and to the best of his knowledge and belief, it is true,
correct and complete.
TRANSFEROR: STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC.,
an Arizona corporation
By:
-----------------------------------------
Its:
----------------------------------------
STATE OF _____________ )
) ss.
County of ______________ )
The foregoing instrument was acknowledged before me this _____ day of
______________, 199___, by _________________, as __________________ of STRATFORD
AMERICAN CAR RENTAL SYSTEMS, INC., an Arizona corporation, on behalf of the
corporation for the purposes set forth herein.
---------------------------------------------
Notary Public
My Commission Expires:
<PAGE>
LEGAL DESCRIPTION
[TO BE SUPPLIED PRIOR TO EXECUTION]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 OF
STRATFORD AMERICAN CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,890,000
<SECURITIES> 0
<RECEIVABLES> 143,000
<ALLOWANCES> 2,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,920,000
<PP&E> 127,000
<DEPRECIATION> 92,000
<TOTAL-ASSETS> 3,131,000
<CURRENT-LIABILITIES> 102,000
<BONDS> 0
0
0
<COMMON> 64,000
<OTHER-SE> 2,455,000
<TOTAL-LIABILITY-AND-EQUITY> 3,131,000
<SALES> 2,000
<TOTAL-REVENUES> 1,062,000
<CGS> 0
<TOTAL-COSTS> 31,000
<OTHER-EXPENSES> 856,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,000
<INCOME-PRETAX> 143,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 143,000
<DISCONTINUED> (38,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,000
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
