P R O X Y PRELIMINARY PROXY
THE SOUTHSHORE CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth M. Dalton with the power to appoint
a substitute, and hereby authorizes him to represent and to vote as designated
below, all the shares of common stock of The Southshore Corporation held of
record by the undersigned on March 5, 1999, at a Special Meeting of Share-
holders to be held on April 16, 1999, or any adjournment thereof.
1. The sale of substantially all the Company's assets pursuant to
a Purchase Agreement and Escrow Instructions for $1,972,680.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The sale of substantially all of the Company's assets to a back-
up purchaser, South Suburban Park & Recreation District, in the event
there is no closing on the Real Estate Purchase and Sale Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders, Proxy Statement and Supplement.
Dated: __________________, 1999.
________________________________________
________________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
SOUTHSHORE CORPORATION. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ATTEND THE MEETING.
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PRELIMINARY PROXY STATEMENT
THE SOUTHSHORE CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of The Southshore Corporation
PLEASE TAKE NOTICE, that a Special Meeting of Shareholders of
The Southshore Corporation will be held on April 16, 1999, at 10:00
a.m. at 10750 East Briarwood, Englewood, Colorado, for the
following purposes:
1. To consider the sale of substantially all the
Company's assets pursuant to a Purchase Agreement and Escrow
Instructions.
2.To consider the sale of substantially all of the
Company's assets to a back-up purchaser, South Suburban Park
& Recreation District, in the event there is no closing on the
Contract to Buy and Sell Real Estate.
3. To transact such other business as may properly come
before the meeting.
Accompanying this notice is a Proxy and Proxy Statement with
respect to these matters.
Whether or not you expect to be present at the meeting, please
sign and date the Proxy and return it in the enclosed envelope
provided for that purpose. The Proxy may be revoked at any time
prior to the time that it is voted. Only shareholders of record at
the close of business on March 5, 1999, will be entitled to
vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth M. Dalton
President
March 12, 1999
IT IS IMPORTANT THAT YOU SIGN THE ENCLOSED PROXY AND
RETURN IT TO THE COMPANY IMMEDIATELY.
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PRELIMINARY PROXY STATEMENT
THE SOUTHSHORE CORPORATION
10750 East Briarwood
Englewood, Colorado 80112
PROXY STATEMENT
Special Meeting of Shareholders - April 16, 1999
GENERAL
A Special Meeting of the Shareholders of The Southshore
Corporation (the "Company") is scheduled for April 16, 1999, for the
purpose of considering the sale of substantially all of the
Company's assets, pursuant to a Purchase Agreement and Escrow
Instructions ("Purchase Agreement") with Bedford Property
Investors, Inc. (the "Buyer"), dated February 12, 1999.
The enclosed Proxy is solicited by the Board of Directors of
the Company. This solicitation is being made by mail, and may also
be made by directors, officers and employees of the Company. Any
Proxy given pursuant to this solicitation may be revoked by the
shareholder at any time prior to the voting of the Proxy.
Shares represented by Proxies will be voted as specified in
such Proxies. In the absence of specific instructions. Proxies
received by the Board of Directors will be voted in favor of all
the proposals.
All of the expenses involved in preparing, assembling and
mailing this Proxy Statement and the material enclosed herewith
will be paid by the Company. The Company may reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy material to
beneficial owners of stock. This Proxy Statement and accompanying
form of Proxy are being mailed to shareholders on or about
March 12, 1999.
PROPOSAL TO SELL SUBSTANTIALLY ALL THE COMPANY'S ASSETS
Recommendation of Board of Directors. The Company's Board of
Directors unanimously recommends to the shareholders that the
shareholders approve the sale of substantially all the Company's
assets to Buyers pursuant to the Purchase Agreement as described
herein, and approve a sale to a possible back-up purchaser on
similar terms. See "Possible Back-Up Purchaser" below.
The Purchase Agreement. The Company has entered into a
Purchase Agreement and Escrow Instructions dated February 12, 1999
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with the Buyer who is a non-affiliate of the Company. Bedford
Property Investors, Inc. is a Maryland real estate investment trust
with principal executive offices at 270 Lafayette Circle,
Lafayette, California 94549. Its common stock trades on the New
York Stock Exchange and Pacific Exchange. A copy of the Agreement
is attached as Appendix 1.
Sale of Assets. Pursuant to the Purchase Agreement, the
Company has agreed to sell the Company's 16 acre water park
property to Buyer which constitutes substantially all of its assets
(hereinafter "the Property").
Purchase Price. As a result of arms'-length bargaining, Buyer
has agreed to pay to the Company the sum of $1,972,680 subject to
certain conditions, including inspection of the Property. The
obtaining of satisfactory financing is not a condition. The
Company's obligation is subject to approval of shareholders of the
Company. The Purchase Agreement contains provisions standard in
typical real estate contracts for title, inspection and survey.
Net proceeds from the sale is expected to be approximately
$1,863,400 after payment of sales commission and closing costs.
Removal of Certain Structures and Improvements. The Purchase
Agreement requires the Company to remove the structures on the
Property and the water slides, catch pools, wave pool, pumps and
related equipment within 60 days after closing. The Buyer is to
retain $150,000 of the purchase price to insure such removal. The
Company estimates cost of removal at $50,000; however, it
anticipates the recovery of at least $50,000 from the sale of
equipment salvaged from the Property.
Closing. The Purchase Agreement contemplates a closing
approximately 50 days from execution of the Purchase Agreement.
Prior to and as a condition of closing, the Company must call
a special meeting of its shareholders for the purpose of seeking
approval of the sale transaction. The Company's management, Board
of Directors and certain other persons have indicated they intend
to vote for the sale of assets at the special meeting of
shareholders. See "Required Vote of Shareholders."
The Buyer. The Buyer is a Maryland real estate investment
trust with offices at Lafayette, California and is not affiliated
with the Company.
Background and Reasons for the Sale Transaction. During the
past approximate two years, management of the Company has actively
sought, without success, to refinance its debt, including its past
due property taxes and principal debt of $955,000 which is secured
by a lien on the Property which became due in mid-1997. All
Company debt, including past due property taxes, approached or
exceeded $2 million during the period and is all currently due.
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At December 31, 1998, the Company's current debt of $2,130,254,
including property taxes of $630,032 was due. Refinancing was not
available because of the history of losses from the Property,
exceeding $4,923,000 from the Company's inception in 1991. At the
same time the Company was seeking to refinance its debt, it also
tested the waters with respect to selling the 16 acre water park.
During 1997 and 1998 the Company listed the Property with local
commercial realtors, placed ads in trade publications and at water
park conventions, and initiated contacts with approximately ten
possible prospective purchasers. The Company had material
negotiations with at least six possible purchasers, including two
Colorado recreation districts. All material discussions related to
a purchase price in the $2 million range. Sale of the Property to
a recreation district requires approval by the county commissioners
in each of the counties in which the recreation district owns or
operates property.
The principal reasons why a proposed sale of the Property was
undertaken were:
(1)That refinancing of debt or obtaining of additional
financing was not available;
(2)The Company had five consecutive years of operating
losses from its water park for accumulated loss of $4,923,000
at March 31, 1998;
(3)The Property is subject to a tax lien certificate
issued by Arapahoe County, Colorado, to a New Jersey bank for
failure to pay property taxes since the 1993 tax year for an
aggregate of approximately $630,000, including accrued
interest and which permits the holder at anytime to apply for
an Arapahoe County Treasurer's Deed to the Property;
(4)Management considered the fact that no firm offers
to acquire the Property involving cash consideration exceeding
that of the Buyer and South Suburban Park & Recreation
District, Littleton, Colorado (possible Back-Up Purchaser -see
below) had been received by the Company, even though it has
publicly announced that the Company was exploring the
possibility of making a sale of the Property, and had listed
the Property for sale and made other efforts to sell the
Property;
(5)Management considered favorably the structure of the
offer by Buyer as a cash transaction because of the need to
have cash to pay liens and deliver marketable title;
(6)Management considered favorably that the Buyer did
not condition the proposed sale on the obtaining of acceptable
financing and appeared to have financing available at the time
of the execution of the Purchase Agreement;
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(7)Management believed that a possible sale to the
District was a riskier undertaking because of the approvals
required by the three affected counties and their reluctance
to permit the district to compete with a private party in any
purchase; and
(8)Management considered the fact that the terms of the
Purchase Agreement were the result of arms length
negotiations.
The foregoing are all of the material factors considered by
the Board of Directors in approving this sale transaction.
In view of the wide variety of factors considered in
connection with its evaluation of the sale of the Company's assets,
management found it impractical to and therefore did not quantify
or otherwise attempt to assign relative weights to the various
factors considered in reaching a decision to approve and recommend
to the shareholders the sale of the Company's principal asset
pursuant to the Purchase Agreement.
The Company has not obtained an independent appraisal on the
Property and does not have access to any appraisals obtained by
prospective purchasers; however, the Property currently is listed
with a commercial real estate broker, Cushman Realty Corporation,
Denver, Colorado, and the Company is advised by the broker that the
16 acre tract has an estimated fair market value of approximately
$2 million. The Company has agreed to pay a sales commission of 5%
of the purchase price to Cushman Realty Corporation.
Recent Vote on Previous Purchase Agreement. Shareholders of
the Company, on October 1, 1998, approved the sale of the Property
to an entity controlled by Jerry James of Denver, Colorado;
however, the entity failed to approve the conditions to go forward
with the sale and the agreement was terminated. South Suburban
Parks & Recreation District has not taken further steps to acquire
the Property and there is no assurance it would be in a position to
do so in view of city annexation and other political issues pending
in Arapahoe County, Colorado which may affect the status of the
Property for acquisition by South Suburban.
Required Vote of Shareholders. The Purchase Agreement is
subject to approval of the sale by the vote of the holders of the
Company's shares of common stock. In addition, pursuant to the
Colorado Business Corporation Act, Section 7-112-102, a shareholder
vote is required for the sale, transfer or other disposition of all
or substantially all of a Colorado corporation's property and
assets, including its goodwill, not in the usual and regular course
of its business. APPROVAL BY A MAJORITY OF THE SHARES ENTITLED TO
VOTE ON THIS MATTER IS REQUIRED.
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Release of Lien Securing 10% Notes. In order to sell the
Property the Company must obtain a release of a lien securing
repayment of $955,000 in 10% promissory notes. The Company had
previously obtained agreements from 27 of the 30 holders of such
notes representing nearly $900,000 and believes these noteholders
will accept a reduced payment in exchange for release of the lien.
Possible Back-Up Purchaser. Since April, 1998 South Suburban
Park & Recreation District ("District") has been interested in
acquiring the Property, has held public hearings, inspected the
Property, obtained an appraisal and environmental audit. The
District has indicated it is interested in contracting for the
purchase of the Property if there is no closing on the current
Purchase Contract and if no private party is interested in
purchasing the property because the District does not wish to
compete with private industry. See Letter from District attached
as Appendix 2. Thus, the Company is soliciting authority to sell
the Property to the District if the contract with the Buyer does
not close. The purchase price under negotiation with the District
was $2 million. The authority to sell to the District is limited
to a price of at least $2 million and County Commissioner approval
in three Colorado counties in which the District operates would be
required. Public hearings pursuant to advance notice would be
required in each county. Thus the process could easily take
several months and there is no assurance that a majority of the
Commissioners in each affected county would approve the purchase.
Company officers and directors holding directly or indirectly
the power to vote 812,592 shares, or 31.1% of the outstanding
shares, have indicated they intend to vote their shares in favor of
the sale transaction. No proxies nor agreements relating to shares
held by management have been entered into by members of management.
Officers and directors of the Company are not affiliated or
associated with the Buyer and will have no position at the water
park operation, if any, in the future. The Buyer has indicated it
intends to redevelop the Property and the Company has agreed to
remove the structures and water park features from the Property.
The eight acre parking area is to remain in tact.
RIGHTS OF DISSENTING SHAREHOLDERS
IF THE SHAREHOLDERS APPROVE THE DISSOLUTION AND LIQUIDATION OF
THE COMPANY AS PROPOSED, THEN, AS PROVIDED IN THE COLORADO BUSINESS
CORPORATION, ACT, SECTION 7-112-102, DISSENTERS' RIGHTS ARE
AVAILABLE.
Shareholders of the Company are entitled to exercise
dissenters' rights pursuant to the provisions of Sections 7-113-102
and 7-113-103 of the Colorado Business Corporation Act (the
"CBCA"), copies of which sections are included with this proxy
statement as Appendix 3. In accordance with these sections, the
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Company's shareholders have the right to dissent from the sale of
the Company's assets and to be paid the "fair value" of their
common stock. (See, CBCA Section 7-113-102) In this context, the
term "fair value" means the value of a shareholder's common stock
immediately before the Closing Date of the sale. Holders of
options to purchase Company common stock have no similar rights of
appraisal under applicable Colorado law.
Under Section 7-113-102 of the CBCA, where a sale of
substantially all the corporation's property and assets is to be
submitted for approval at a meeting of shareholders, the
corporation must notify each of its shareholders of the right to
dissent and must include in the notice a copy of Sections
7-113-101-103, 201-209 and 301-302 of the CBCA. This Proxy
Statement constitutes this notice to the shareholders of the
Company. The applicable statutory provisions of the CBCA are
attached as Appendix 3.
The following discussion is not a complete statement of the
law pertaining to a dissenting shareholder's rights under the CBCA
and is qualified in its entirety by the full text of the Sections
attached as Appendix 3. Any shareholder who wishes to exercise the
right to dissent and demand the fair value of his or her shares, or
who wishes to preserve the right to do so, should review the
following discussion and Appendix 3 carefully because failure to
timely and properly comply with the procedures will result in the
loss of a shareholder's right to dissent under the CBCA.
A shareholder of the Company wishing to exercise the right to
demand payment for his or her common stock must first file, before
the vote of shareholders is taken at the Special Meeting, a written
notice of intent to demand payment for his or her common stock and
must, in addition, not vote in favor of the sale of substantially
all the Company's assets pursuant to the Purchase Agreement.
Because a proxy which does not contain voting instructions will,
unless revoked, be voted FOR the sale of substantially all the
Company's assets, a shareholder who votes by proxy and who wishes
to exercise dissenter's rights must (i) vote AGAINST the resolution
to sell, or (ii) ABSTAIN from voting on this resolution. A vote
against the resolution, in person or by proxy, will not in and of
itself constitute a written notice of intent to demand payment for
a shareholder's common stock satisfying the requirements of Section
7-113-204 of the CBCA.
A demand for payment must be executed by or for the
shareholder pursuant to a Dissenters' Notice provided by the
Company within 10 days after the Special Meeting. If the common
stock is owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand must be executed by the
fiduciary. If the common stock is owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand must
be executed by all joint owners. An authorized agent, including an
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agent for two or more joint owners, may execute the Dissenters'
Notice for a shareholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.
A record owner who holds shares as a nominee for others, such
as a broker, may demand payment for the shares held for all, or
fewer than all, of the beneficial owners of such shares. In such
a case, the Dissenters' Notice should set forth the number of
shares to which it relates. When no number of shares is expressly
mentioned, the Dissenters' Notice will be presumed to cover all
shares standing in the name of the record owner. Beneficial owners
of common stock who are not record owners and who intend to
exercise payment rights should instruct the record owner to comply
with the statutory requirements with respect to the exercise of
payment rights before the date of the applicable Special Meeting.
Within 10 days after the Special Meeting in which the sale
pursuant to the Purchase Agreement is authorized, the Company will
cause to be mailed to each shareholder who has properly asserted
dissenter's rights a Dissenters' Notice that contains (i) the
address to which a demand for payment and stock certificates must
be sent in order to receive payment; and (ii) a form to be used by
the shareholder who dissents, and to demand payment and the date by
which such demand must be made. To receive the fair value of his
or her common stock a dissenting shareholder must demand payment
and deposit his or her certificates within 30 days after the
aforesaid notice is given.
After the Company receives a valid demand for payment, it will
cause to be remitted to each dissenting shareholder who has
properly asserted dissenter's rights the fair value of his or her
shares of Common Stock, with interest at the legal rate computed
from the Closing Date. Payment will be accompanied by (i) the
financial statements of the Company for its most recently completed
fiscal year; (ii) an estimate of the fair value of the common
shares with respect to which dissenters' rights have been exercised
and a brief description of the method used to reach the estimate;
and (iii) an statement of the dissenter's right to demand payment
if he or she is dissatisfied with the payment made as provided in
Section 7-113-209 and a copy of the dissenter's provisions in
Sections 7-113-101-103, 201-209 and 301-302 of the CBCA.
If a dissenting shareholder believes that the amount remitted
by the Company is less than the fair value of his or her common
shares plus interest, the dissenting shareholder may give written
notice to the Company of his or her own estimate of the fair value
for the common shares plus interest and demand a supplemental
payment for the difference. Any written demand for supplemental
payment must be made within 30 days after the Company mailed its
original remittance.
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Within 60 days after receiving a demand for supplemental
payment, the Company must either pay the amount of the supplemental
payment demanded (or agreed to between the dissenting shareholder
and the Company) or file a petition in the state courts of Colorado
requesting that the court determine the fair value of the common
shares plus interest. Any petition so filed must name as parties
all dissenting shareholders who have demanded supplemental payments
and who have been unable to reach an agreement with the Company
concerning the fair value of their common shares. The court may
appoint appraisers, with such power and authority as the court
deems proper, to receive evidence on and recommend the amount of
fair value of the common shares. The jurisdiction of the court is
plenary and exclusive, and the fair value as determined by the
court is binding on all shareholders, wherever located. A
dissenting shareholder, if successful, is entitled to a judgment
for the amount by which the fair value of his or her common shares
as determined by the court exceeds the amount originally remitted
by the Company.
Generally the costs and expenses associated with a court
proceeding to determine the fair value of the Company's common
stock will be borne by the Company, unless the court finds that a
dissenting shareholder has demanded supplemental payment in a
manner which is arbitrary, vexatious or not in good faith. Similar
costs and expenses may also be assessed in instances where the
Company has failed to comply with the procedures in Section
7-113-302 pertaining to dissenters' rights discussed above. The
court may award attorneys' fees to an attorney representing
dissenting shareholders out of any amount awarded to such
dissenters if the court finds such services were substantial.
Failure to follow the steps required by the CBCA for asserting
dissenters' rights may result in the loss of a shareholder's rights
to demand the fair value of his or her shares of the Company's
common stock. Shareholders considering seeking appraisal should
realize that the fair value of their shares, as determined under
the CBCA in the manner outlined above, could be more than, the same
as or less than the value of the cash and assumption of liabilities
they would be entitled to as a result of the sale if they did not
seek appraisal of their shares.
ACTIVITIES OF THE COMPANY FOLLOWING THE PROPOSED SALE
Following the proposed sale of the Property, the Company's
assets are expected to consist of refunds of prepaid deposits and
cash to the extent that such have not been utilized to pay debt and
past due and accrued property taxes without adjustment for
operating results through closing of the Purchase Agreement. In
view of the fact that the net sale price, approximately $1,863,000
net, is expected to be approximately $200,000 less than the amount
due creditors and to pay property taxes, the Company has negotiated
with its principal creditors for them to accept less than the full
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amount due them. Obviously there is no assurance that such
negotiations will be successful; however, the fact that the
issuance of an Arapahoe County Treasurer's Deed on the property
would effectively eliminate the Property as a source of funds to
pay creditors, except Arapahoe County, should likely provide
incentive to creditors to accept less than full payment for their
respective claims. At September 1, 1998, 27 of the 30 holders of
10% notes securing the $955,000 lien on the Property (representing
nearly $900,000) had agreed to accept 75% of the face amount of
each of their respective notes. Management believes all holders of
the 10% notes will agree to receive the reduced amount in full
payment of their notes.
If and when the Company completes the sale of the water park
property and eliminates all or most of its liabilities, management
intends to seek out an appropriate, operating, privately-held
entity which is seeking to become a publicly-held company and
hopefully effect a business combination with such entity. The
Company has not made any contacts in that respect, nor established
any criteria for such entity, nor engaged any agents for the
purpose of locating such an entity. No activities in that respect
are expected to occur until after closing on the Purchase
Agreement. Obviously, there is no assurance that a suitable entity
for a proposed business combination will be located or, if located,
that such business combination can be negotiated on terms
acceptable to the parties. The Company intends to pursue such
course of action in order to provide its shareholders with an
opportunity through new assets and new operations in the Company.
FEDERAL INCOME TAX CONSEQUENCES
In General. The following summary of the anticipated federal
income tax consequences to the Company of the proposed sale of
assets is not intended as tax advice and is not intended to be a
complete description of the federal income tax consequences of the
proposed transactions. This summary is based upon the Internal
Revenue Code of 1986 (the "Code"), as presently in effect, the
rules and regulations promulgated thereunder, current
administrative interpretations and court decisions. No assurance
can be given that future legislation, regulations, administrative
interpretations or court decisions will not significantly change
these authorities (possibly with retroactive effect).
No rulings have been requested or received from the Internal
Revenue Service ("IRS") as to the matters discussed and there is no
intent to seek any such ruling. Accordingly, no assurance can be
given that the IRS will not challenge the tax treatment of certain
matters discussed or, if it does challenge the tax treatment, that
it will not be successful.
The discussion of federal income tax consequences set forth
below is directed primarily toward individual taxpayers who are
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citizens or residents of the United States. However, because of
the complexities of federal, state and local income tax laws, it is
recommended that the Company's shareholders consult their own tax
advisors concerning the federal, state and local tax consequences
of the proposed transactions to them. Further, persons who are
trusts, tax-exempt entities, corporations subject to specialized
federal income tax rules (for example, insurance companies) or
non-U.S. citizens or residents are particularly cautioned to
consult their tax advisors in considering the tax consequences of
the proposed transactions.
Federal Income Tax Consequences to the Company. The sale of
substantially all of the assets of the Company pursuant to the
Purchase Agreement will be a taxable sale by the Company upon which
gain or loss may be recognized by the Company. The amount of gain
or loss recognized by the Company with respect to the sale of a
particular asset will be measured by the difference between the
amount realized by the Company on the sale of that asset and the
Company's tax basis in that asset. The amount realized by the
Company on the sale of substantially all of its assets will include
the amount of cash received, the fair market value of any other
property received. For purposes of determining the amount realized
by the Company with respect to specific assets, the total amount
realized by the Company will generally be allocated among the
assets according to the rules prescribed under the Code. The
Company's basis in its assets is generally equal to their cost, as
adjusted for certain items, such as depreciation.
The determination of whether gain or loss is recognized by the
Company will be made with respect to each of the assets to be sold.
Accordingly, the Company may recognize gain on the sale of certain
assets and loss on the sale of certain others, depending on the
amount of consideration allocated to an asset as compared with the
basis of that asset. The gains and losses may offset, except that
capital losses may be used to offset only capital gains. The
Company may recognize a net gain as a result of the sale of all its
assets. Nevertheless, the Company believes its net operating loss
carryover and its capital loss carryover to the year of sale are
sufficient to offset gain, if any. Therefore, the Company believes
it will incur no federal income tax liability as a result of the
sale of its assets.
MARKET INFORMATION ON THE COMPANY'S COMMON STOCK
The Company's common stock is traded on the NASD Electronic
Bulletin Board. The range of high and low bid prices set forth
below have been obtained from sources believed to be reliable based
on reports from the National Association of Securities Dealers.
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Calendar 1996 Calendar 1997 Calendar 1998
Quarter Low High Low High Low High
- ------- ----- ------ ----- ------ ----- ------
First .25 .50 .50 .50 .12 .21
Second .25 .50 .37 .50 .06 .37
Third .50 .50 .37 .50 .03 .03
Fourth .50 .50 .25 .50 .03 .03
On February 4, 1999 the bid price was $.03. Management is
informed that after the sale of the water park property the common
stock should continue to be eligible for includion on the Bulletin
Board.
The Company is informed there has been very little volume in
trading of its common stock during the above periods.
The Company has never paid dividends on its common stock. As
of February 4, 1999 the Company had approximately 200 shareholders
of record, and it is estimated there are approximately 180
beneficial holders of the Company's shares of common stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The common stock, par value $.01 per share, of the Company is
the only class of stock entitled to vote at the meeting. As of
February 4, 1999, the Company had issued and outstanding 2,610,475
shares of common stock. Each shareholder will be entitled to cast
one vote in person or by proxy for each share of common stock held
by him. Only shareholders of record at the close of business on
February 4, 1999 will be entitled to vote at the meeting.
Information as to the name, address and holdings of each
person known by the Company to be the beneficial owner of more than
5% of its common stock as of February 4, 1999, is set forth below.
Beneficial ownership of common stock has been determined for
purposes of this table based on Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange
Act of 1934. Under this rule, a person is, in general, deemed to
be the beneficial owner of a security if the person has or shares
voting power or investment power in respect of such security or has
the right to acquire beneficial ownership of the security within
sixty (60) days.
Members of management intend to vote all shares of common
stock held by them respectively FOR the sale of all the Company's
assets pursuant to the Contract to Buy and Sell Real Estate and FOR
such sale of all the Company's assets to South Suburban Park and
Recreation District as a back-up purchaser.
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Amount of
Name and Address Common Stock Percent
of Beneficial Owner Beneficially Owned of Class
- -------------------- ------------------ --------
Kenneth M. Dalton (1)(2) 668,419 25.6%
26 Tamarade Drive
Littleton, CO 80127
Rod K. Barksdale (1)(2) 88,007 3.3%
2921 Sopris Avenue
Glenwood Springs, CO 81601
Ren Berggren (1)(2)(3) 0 0%
1700 East 68th Avenue
Denver, CO 80229
James F. Silliman, M.D. 192,142 7.4%
7408 Greenbriar
Dallas, TX 75225
Keith A. Lowery 144,734 5.5%
7477 Singing Hills Drive
Boulder, CO 80301
Michael McCallum 254,879 9.8%
2200 Grand Avenue
Glenwood Springs, CO 81601
Officers and Directors 812,592(4) 31.1%
as a Group (3 Persons)
____________________
(1) Directors of the Company.
(2) Officers of the Company
(3) Mr. Berggren is an officer, director and shareholder of Vancol
Industries, Inc. which company owns 56,166 shares of common
stock of the Company. He disclaims personal beneficial
ownership of the shares of common stock of the Company owned
by Vancol Industries, Inc.
(4) For purposes hereof the shares held by Vancol Industries, Inc.
are included in the calculation.
-14-
<PAGE>
FINANCIAL AND OTHER INFORMATION
Pro Forma Financial Information. The following unaudited Pro
Forma Balance Sheet at December 31, 1998 gives effect to the
proposed sale of substantially all the assets of the Company, as if
the proposed April 6, 1999 transaction had occurred on December 31,
1998. No pro forma statement of operations has been presented.
Since after the sale there will be no operations, a pro forma
statement of operations would show no material revenue and no
material expenses assuming the sale of the Company's assets. The
Company's operating season with the water park property was
completed September 30, 1998. Scheduled closing on the Purchase
Contract is April 6, 1999. The Company will have no operating
revenues and limited operating expenses of the water park through
closing, except prorated property taxes for 1999. Readers are
referred to historical financial operating data included herein.
-15-
<PAGE>
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
BALANCE SHEET (Unaudited) 12/31/98 Adjustment As Adjusted
-------- -------------- -------------
CURRENT ASSETS
<S> <C> <C> <C>
Cash 92,196 1,863,400 (1) 56,406
(1,899,190)(2)
Other current assets 8,308 0 8,308
--------- ---------
Total Current Assets 100,504 64,714
--------- ---------
OTHER ASSETS
Property and Equipment,
-net of accumulated
depreciation 1,466,632 (1,466,632)(1) 0
Other assets 28,768 0 28,768
--------- ---------
1,495,400 28,769
Total Assets 1,595,904 93,482
CURRENT LIABILITIES
Notes Payable-Current 988,323 (748,508)(2) 239,815
Notes Payable-Related
Parties 97,400 (97,400)(2) 0
Payroll Tax Payable 76 (76)(2) 0
Property Taxes Payable 630,032 (630,032)(2) 0
Accrued Interest 191,509 (191,509)(2) 0
Accounts Payable-Trade 41,534 (41,534)(2) 0
Deferred Income 1,000 (1,000)(2) 0
Accrued Payroll 167,841 (167,841)(2) 0
Other Accrued Expense 12,540 (12,540)(2) 0
--------- ---------
Total Current Liabilities 2,130,254 239,815
Notes Payable
-net of current portion 8,750 (8,750)(2) 0
--------- ---------
Total Liabilities 2,139,004 239,815
--------- ---------
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET (Unaudited) 12/31/98 Adjustment As Adjusted
-------- ------------ -----------
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 Par Value
25,000,000 Shares Authorized;
None Issued and Outstanding
Common Stock, $.001 Par Value
100,000,000 Shares Authorized;
2,610,470 Issued and
Outstanding 2,611 0 2,611
Additional Paid-In Capital 4,377,574 0 4,377,574
Retained Earnings (4,923,285) (396,768)(1) (4,526,517)
---------- ---------
Total Stockholders'
(Deficit) (543,100) (146,332)
Total Liabilities and
Stockholders' (Deficit) 1,595,904 93,482
========= =========
</TABLE>
____________________
Notes to Pro Forma Financial Statements
(1) To record proposed sale of property assuming net proceeds from the
sale of $1,863,400.
(2) To record payment of liabilities.
-17-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
The Southshore Corporation
Englewood, CO
We have audited the accompanying balance sheets of The Southshore
Corporation as of March 31, 1998 and 1997, and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for
the three years ended March 31, 1998. These financial statements are
the responsibility of the company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The
Southshore Corporation as of March 31, 1998 and 1997, and the results
of its operations, its cash flows and its changes in stockholders'
equity (deficit) for the three years ended March 31, 1998, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 7 to
the financial statements, the Company has suffered recurring losses from
operations and has a working capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 7. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Schumacher & Associates, Inc.
12835 East Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
May 11, 1998
-18-
<PAGE>
THE SOUTHSHORE CORPORATION
<TABLE>
<CAPTION>
BALANCE SHEETS
March 31,
1998 1997
Current Assets ----------- ----------
<S> <C> <C>
Cash $ 1,841 $ 3,035
Accounts receivable - 2,815
Prepaid expenses 6,607 6,223
-------- ---------
Total Current Assets 8,448 12,073
-------- ---------
Other Assets
Property and equipment, net of
accumulated depreciation (Note 2) 1,885,031 2,440,948
Deposits 17,245 17,245
Debt and other offering costs, net
of accumulated amortization - 8,347
Total Other Assets 1,902,276 2,466,540
--------- ---------
Total Assets $ 1,910,724 $ 2,478,613
========= =========
Current Liabilities
Notes payable, current portion (Note 3) $ 1,201,567 $ 1,432,071
Notes and advances payable,
officer 97,400 97,400
Property taxes payable (Note 8) 566,762 483,651
Accrued interest 151,176 89,390
Accounts payable and accrued expenses 18,926 37,503
Deferred income 31,845 39,156
--------- ---------
Total Current Liabilities 2,067,676 2,179,171
Notes payable, net of current portion
(Note 3) 37,864 65,377
--------- ---------
Total Liabilities 2,105,540 2,244,548
--------- ---------
Commitments and contingencies
(Notes 3, 4, 7, 8 and 9) - -
Stockholders' Equity (Deficit)
Preferred stock, $.01 par value
25,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.001 par value
100,000,000 shares authorized,
2,610,470 issued and outstanding 2,611 2,611
Additional paid-in capital 4,377,574 4,377,574
Accumulated (deficit) (4,575,001) (4,146,120)
--------- ---------
Total Stockholders' Equity (Deficit) (194,816) 234,065
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 1,910,724 $ 2,478,613
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-19-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997 1996
---------- ---------- ---------
Revenue
<S> <C> <C> <C>
Sales - gate admissions $ 767,508 $ 820,968 $ 682,165
Sales - food, beverages and
merchandise 232,202 264,497 173,453
-------- --------- --------
Total sales 999,710 1,085,465 855,618
Cost of sales - food,
beverages and merchandise
(exclusive of depreciation
shown separately below) 22,889 23,713 11,078
------- --------- -------
Gross Profit 976,821 1,061,752 844,540
------- --------- -------
Operating Expenses
Salaries 237,229 263,272 270,938
Advertising 121,595 92,953 125,425
Depreciation 558,672 559,751 560,511
Other 370,865 452,393 443,457
--------- --------- ---------
Total Operating Expenses 1,288,361 1,368,369 1,400,331
--------- --------- ---------
Net (loss) before other income
(expense) and extraordinary items (288,651) (282,904) (544,713)
Interest (expense) (140,421) (198,687) (185,251)
Amortization of debt offering
costs (9,809) (21,050) (21,050)
Other 10,000 - -
-------- -------- --------
Net (loss) before extraordinary
items (428,881) (502,641) (751,014)
Renegotiated debt and interest
expense forgiven (Note 6) - - 88,214
------- ------- --------
Net (Loss) $ (428,881) $(502,641) $(662,800)
======== ======== ========
Net (Loss) Per Share Excluding
extraordinary items $ (.16) $ (.19) $ (.32)
========= ======== ========
Net Income Per Share from
extraordinary item $ - $ - $ .04
========== ======= =======
Net (Loss) Per Share (.16) (.19) (.28)
========== ======= =======
Weighted Average Number of
Shares Outstanding 2,610,470 2,610,470 2,374,042
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-20-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
From March 31, 1995 through March 31, 1998
<TABLE>
<CAPTION>
Additional
Number of Common Paid-In
Shares Stock Capital
---------- --------- ------------
<S> <C> <C> <C>
Balance at March 31, 1995 2,137,613 $ 2,138 $ 3,903,191
Stock issued 472,857 473 474,383
(Loss) for the year ended March 31, - - -
1996
Balance at March 31, 1996 2,610,470 2,611 4,377,574
(Loss) for the year ended March 31,
1997 - - -
Balance at March 31, 1997 2,610,470 2,611 4,377,574
(Loss) for the year ended March 31,
1998 - - -
Balance at March 31, 1998 2,610,470 $2,611 $ 4,377,574
========= ====== ==========
</TABLE>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
From March 31, 1995 through March 31, 1998 (continued)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
----------- ----------
<S> <C> <C>
Balance at March 31, 1995 $ (2,980,679) $ 924,650
Stock issued - 474,856
(Loss) for the year ended March 31, 1996 (662,800) (662,800)
Balance at March 31, 1996 (3,643,479) 736,706
(Loss) for the year ended March 31, 1997 (502,641) (502,641)
Balance at March 31, 1997 (4,146,120) 234,065
(Loss) for the year ended March 31, 1998 (428,881) (428,881)
Balance at March 31, 1998 $(4,575,001) $ (194,816)
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-21-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended March 31,
1998 1997 1996
--------- -------- ----------
<S> <C> <C> <C>
Cash Flows from Operating
Activities: Net (Loss) $ (428,881) $ (502,641) $ (662,800)
Adjustments to Reconcile Net
(Loss) to Net Cash Provided by
Operating Activities:
Depreciation 558,672 559,751 560,511
Amortization debt offering cost
and bond discount 9,809 21,050 21,050
(Increase) in other current assets (384) (4,192) -
Increase (decrease) in accounts
payable, accrued expenses and
other 107,335 48,851 (140,000)
------- ------- --------
Net Cash Provided by (Used in)
Operating Activities 246,551 122,819 (221,239)
------- ------- -------
Cash Flow from Investing
Activities:
Deposits (paid) returned - 31,240 -
Land, property and equipment
acquired (disposed of) 272 (25,887) 9,941
(Decrease) in accounts payable,
construction - - (368,472)
-------
Net Cash (Used in) Investing
Activities 272 5,353 (358,531)
----- ------ --------
Cash Flows from Financing
Activities:
Advances and loans from
related parties - - 71,000
Proceeds from notes payable - 75,000 55,000
Payments made on notes payable (248,017) (201,762) (20,000)
Issuance of stock and warrants,
net of offering costs - - 474,856
-------
Net Cash Provided by Financing
Activities (248,017) (126,762) 580,856
------- ------- -------
Increase (Decrease) in Cash (1,194) 1,410 1,086
Cash, Beginning of Period 3,035 1,625 539
------ ------ ------
Cash, End of Period $ 1,841 $ 3,035 $ 1,625
======== ======= =======
Income Taxes Paid $ - $ - $ -
======== ======= =======
Interest Paid $ 78,635 $ 152,611 $ 113,101
======== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-22-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------
This summary of significant accounting policies of The Southshore
Corporation (the Company) is presented to assist in understanding
the Company's financial statements. The financial statements and
notes are representations of the Company's management who is
responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation
of the financial statements.
Organization
--------------
The Southshore Corporation (the "Company") was incorporated under
the laws of the state of Colorado on March 26, 1990. The Company
owns 16 acres of land in Arapahoe County, Colorado, upon which
it has constructed and is operating a water park. The Company
has selected March 31 as its fiscal year end.
Property and Equipment and Related Depreciation
-------------------------------------------------
Property and equipment are carried at cost. The cost of property
and equipment is depreciated on a straight-line basis over the
estimated useful lives of the related assets, which are 20 years
for buildings and 7 years for the remaining assets which consist
principally of equipment and facilities.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and
equipment is sold or otherwise disposed of, the asset and related
accumulated depreciation account is relieved, and any gain or
loss is included in operations.
Concentrations of Credit Risk
-------------------------------
The Company has no material amounts or concentrations of credit
risks.
Debt Offering Costs
---------------------
The Company incurred $105,250 in debt offering costs related to
a successful private placement of secured notes. These offering
costs were amortized on a straight-line basis over the five year
term of the notes.
Per Share Information
-----------------------
Per share information is computed based upon a weighted average
number of shares outstanding.
-23-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
---------------------------------------------------------------
Continued
---------
Geographic Area of Operations and Interest Rates
--------------------------------------------------
The Company operates a water park in Englewood, Colorado. The
potential for severe financial impact can result from negative
effects of economic conditions within the market or geographic
area. Since the Company's business is in one area, this
concentration of operations results in an associated risk and
uncertainty.
Use of Estimates in the Preparation of Financial Statements
-------------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Advertising Costs
-------------------
Advertising costs are expensed as incurred.
Revenue Recognition
---------------------
The Company recognizes revenue, principally consisting of gate
admissions and food and merchandise sales, as earned as customers
are admitted to the facility and as food and merchandise are sold
to customers.
Impairment Policy for Long-lived Assets
-----------------------------------------
The Company reviews its long-lived assets periodically, and at
least annually, to determine if there is any impairment in the
carrying values. If management determines that impairments
exist, adjustments would be made to the carrying values. As of
March 31, 1998 there were no impairment adjustments.
-24-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
2. PROPERTY AND EQUIPMENT
------------------------
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
------------ ------------
<S> <C> <C>
Buildings $ 744,332 $ 744,332
Recreational park facilities 3,673,082 3,669,486
Office furniture and equipment 9,832 9,832
Equipment 98,829 102,697
Land 435,173 435,173
--------- ---------
4,961,248 4,961,520
Less accumulated depreciation 3,076,217 2,520,572
---------- ----------
$ 1,885,031 $ 2,440,948
========== ==========
</TABLE>
3. NOTES PAYABLE
---------------
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
------------ ------------
<S> <C> <C>
Note payable to individual,
collateralized by 7 1/2 acres
of real estate, $2,957 per
month with interest at 8%,
due March 20, 2000 $ 72,841 $ 94,360
Note payable, interest at prime,
renewable annually (see below *). 136,590 356,000
Note payable, interest at 12% per
annum, collateralized by deed of
trust, due September 30, 1997 75,000 75,000
Notes payable, interest at 10%
payable semiannually, was due in
three installments, $10,000
due June 30, 1995 and 1996, and
$13,550 due June 30, 1997. - 13,550
</TABLE>
-25-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. NOTES PAYABLE, Continued
--------------------------
Notes payable, private offering
collateralized through an
indenture of trust by all of
the Company's real property
and improvements subject to
a second deed of trust on the
7 1/2 acres above, interest at
10% payable quarterly which
commenced June 30, 1993 and
four equal installments of
principal which were scheduled
to commencing June 30, 1994
net of unamortized discount of
$1,462 at March 31, 1997
(see below**) 955,000 958,538
1,239,431 1,497,448
Less current portion (1,201,567) (1,432,071)
Long-term portion $ 37,864 $ 65,377
* In April, 1994, the Company issued a $400,000 convertible
promissory note to the Company's President pursuant to an
arrangement whereby the President personally obtained a bank
line of credit, the proceeds of which were made available to
the Company. The note is convertible into up to 177,777
shares of common stock of the Company at $2.25 per share.
Maturities of notes payable after giving effect to the
default provisions are summarized as follows:
1998 $1,239,431
1999 37,864
The fair market value of notes payable is estimated to be
equivalent to the unpaid balance of the notes payable since
the interest rates and terms appear to be reasonable and
appropriate under the circumstances, based on current rates
available to the Company for comparable notes with similar
terms and maturities.
-26-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. NOTES PAYABLE, Continued
--------------------------
** The provisions of indenture relating to the 10% secured
notes contain various covenants pertaining to limitations on
restricted payments (such as dividends, aggregate officers'
compensation in excess of defined limits, etc.) based on
maintenance of working capital and tangible stockholders'
equity parameters. There are also limitations on total debt
allowed. Also, the Company failed to make required 25% per
year repayments of the $955,000 of notes payable outstanding.
A note holder with a principal balance of $100,000 has
threatened litigation against the Company. As of March 31,
1998, the entire balance of these notes payable have been
shown as a current liability in the financial statements
since the notes are in default.
4. STOCKHOLDERS' EQUITY
----------------------
Common Stock Options
----------------------
A shareholder of the Company has loaned $97,400 to the
Company with interest rates ranging from prime to 12% per
annum. As of March 31, 1998, none of the amounts loaned has
been repaid. $82,400 of the balance of the notes payable of
$97,400 is convertible at the shareholders option into common
stock of the Company since the balance was not paid when due.
The payable to the shareholders is uncollateralized.
The President was granted an option to acquire 61,250 shares
at $1.10 through December 25, 1999. The President also has
an option to purchasd 177,777 shares. See Note 3 above.
Incentive Stock Option Plan
-----------------------------
During January of 1991, the Company adopted an incentive
stock option plan for employees of the Company. The Company
reserved 200,000 shares of its common stock for this plan.
The option price shall be determined by the Company but shall
not be less than fair market value on the date of grant.
Options may be granted under the plan for terms up to January
of 2001.
5. INCOME TAXES
--------------
The Company uses the straight-line depreciation method for
financial reporting purposes over 20 and 7 year estimated
useful lives. The Company has elected to use the straight-
line method over the Modified Accelerated Cost Recovery
System ("MACRS") recovery periods of 31.5 and 7 years for
income tax reporting purposes.
-27-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
5. INCOME TAXES, CONTINUED
-------------------------
As of March 31, 1998, there are no current or deferred income
taxes payable. As of March 31, 1998, the Company has total
deferred tax assets of approximately $1,600,000 due to
operating loss carryforwards and the depreciation timing
differences described above. However, because of the
uncertainty of potential realization of these tax assets, the
Company has provided a valuation allowance for the entire
$1,600,000. Thus, no tax assets have been recorded in the
financial statements as of March 31, 1998.
The Company has available at March 31, 1998 certain unused
net operating loss carryforwards which may be applied against
future taxable income expiring in various years through 2012.
The amount which may be carried forward varies resulting from
past and possible future changes in stock ownership,
including warrant and stock options outstanding. The Company
estimates that it has carryforwards of approximately
$2,500,000 currently available.
6. RENEGOTIATED DEBT AND INTEREST
--------------------------------
During the year ended March 31, 1996 the Company renegotiated
the balance of a debt and accrued interest to a creditor
downward from $278,214 to $190,000, an adjustment of $88,214.
Of this amount $30,674 was principal and $57,540 of accrued
interest. The $88,214 renegotiated debt and interest expense
was accounted for as an extraordinary item in the statement
of operations and amounted to a reduction of the net loss per
share of $.04. The source of the repayment of the
renegotiated debt was principally from proceeds of notes
payable to shareholders and others.
-28-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
7. CONTINGENCIES, GOING CONCERN
------------------------------
As of March 31, 1998, the Company has accumulated losses
aggregating $4,575,001 and had a working capital deficiency
of $2,059,228. The Company is attempting to sell
substantially all of its assets to pay its current debt and
delinquent taxes. Management is hopeful such a sale will
materialize and allow the Company to continue as a going
concern. The Company's ability to continue as a going
concern depends upon its success in obtaining additional
funding, increasing its debt financing and/or improving its
operating results, or the sale of its assets. There is no
assurance that the Company will be successful in these
efforts. Thus, there is substantial doubt about the
Company's ability to continue as a going concern. The
financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
8. DELINQUENT PROPERTY TAXES
---------------------------
As of March 31, 1998 the Company had $566,762 property taxes
payable, the majority of which are delinquent. In addition,
included with other accrued interest in the financial
statements is $140,120 of accrued interest on delinquent
property taxes. Failure to pay these taxes and accrued
interest could eventually result in loss of ownership of the
property.
9. SUBSEQUENT EVENT
------------------
A special meeting of the shareholders of the Company is
scheduled for September, 1998 for the purpose of considering
the sale of substantially all the Company's assets for
$2,000,000.
-29-
<PAGE>
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
THE SOUTHSHORE CORPORATION
BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
1998 1998
-------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash 1,841 92,196
Acounts Receivable 0 8,308
Notes Receivable 0 0
Inventory 0 0
___________ _____________
Total Current Assets 1,841 100,504
OTHER ASSETS
Land 435,173 435,173
Property and Equipment,
-net of accum depr. of
$3,076,217 and $3,497,511 Respect. 1,449,858 1,031,459
Deposits 17,245 17,045
Prepaids 6,607 11,723
Other Assets 0 0
Debt Offering Costs,
-net of accum amort 0 0
___________ _____________
Total Assets 1,910,724 1,595,904
CURRENT LIABILITIES
Notes Payable -Current 1,068,852 988,323
Notes Payable -Related Parties 233,990 97,400
Payroll Taxes Payable 1,649 76
Property Taxes Payable 566,762 630,032
Accrued Interest 151,176 191,509
Accounts Payable -Trade 17,048 41,534
Deferred Income 31,845 1,000
Accrued Payroll 227 167,841
Other Accrued Expenses 0 12,540
__________ ______________
Total Current Liabilities 2,071,550 2,130,254
Notes Payable
-net of current portion 33,989 8,750
Notes Payable -Related Parties
-net of current portion 0 0
___________ _____________
Total Liabilities 2,105,539 2,139,004
STCOCKHOLDERS' EQUITY
Preferred Stock, $.01 Par Value
25,000,000 Shares Authorized
None Issued and Outstanding
Common Stock, $.001 Par Value
100,000,000 Shares Authorized;
2,610,470 issued and outstanding
respectively 2,611 2,611
Additional Paid-In Capital 4,377,574 4,377,574
Retained Earnings (4,575,000) (4,923,285)
_____________ _____________
Total Stockholders' Equity (194,815) (543,100)
Total Liabilities and
Stockholders' Equity 1,910,724 1,595,904
</TABLE>
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Dec 31, Ended Dec 31,
1998 1997
------------- -------------
<S> <C> <C>
Revenue
Sales -Admissions 1,540 1,973
Sales -Food, Merchandise 0 0
Sales -Other 0 0
Corporate Sponsorships 0 0
__________ ____________
Total Sales 1,540 1,973
Cost of Sales 0 0
__________ ____________
Gross Profit 1,540 1,973
Operating Expenses
Salaries & Bonuses 7,833 18,804
Payroll Taxes 6,649 1,514
Operating Supplies 343 698
Chemicals 0 0
Repairs & Maintenance 162 627
Advertising 0 2,346
Outside Services 2,367 2,961
Utilities 5,314 4,947
Insurance 8,244 10,156
Depreciation & Amort 140,539 139,847
Property Taxes 24,374 13,151
Other 6,288 2,912
__________ ____________
Total Operating Exp 202,113 197,964
Excess of Expense Over
Revenue (Before Other
Income/Expense) (200,573) (195,991)
Other Income 0 0
Interest Expense (Net) (18,034) (46,456)
Amort. of Debt Offering 0 (1,462)
----------- ----------
Net Profit(Loss) (218,607) (243,909)
Net Profit (Loss) Per Share (0.08) (0.09)
</TABLE>
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Dec 31, Ended Dec 31,
1998 1997
------------ ------------
<S> <C> <C>
Revenue
Sales -Admissions 777,847 767,508
Sales -Food, Merchandise 207,778 203,882
Sales -Other 4,195 4,730
Corporate Sponsorships 10,500 17,750
____________ __________
Total Sales 1,000,320 993,870
Cost of Sales 24,284 22,889
____________ __________
Gross Profit 976,036 970,982
Operating Expenses
Salaries & Bonuses 464,158 217,979
Payroll Taxes 40,565 28,932
Operating Supplies 9,771 9,798
Chemicals 12,229 10,784
Repairs & Maintenance 18,560 16,148
Advertising 65,803 120,999
Outside Services 33,289 21,463
Utilities 85,047 90,008
Insurance 28,121 30,201
Depreciation & Amort 421,294 419,486
Property Taxes 73,017 69,658
Other 26,558 6,066
___________ ___________
Total Operating Exp 1,278,411 1,041,523
Excess of Revenue over Expense
(Before Other Income/Expense) (302,375) (70,542)
Other Income 9,257 5,668
Interest Expense (Net) (55,167) (143,329)
Amort. of Debt Offering 0 (9,809)
____________ __________
Net Profit(Loss) (348,285) (218,011)
Gain (Loss) Per Share (0.13) (0.09)
</TABLE>
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, through December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Number Additional Retained
of Common Paid-In Earnings
Date Shares Stock Capital (Deficit) Total
- ------------------------- --------- ----- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1998 2,610,470 2,611 4,377,574 (4,575,000) (194,815)
Net Profit(Loss) 9 Months
Ended December 31, 1998 (348,285) (348,285)
Balance at Sept. 30, 1998 2,610,470 2,611 4,377,574 (4,923,285) (543,100)
</TABLE>
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
Nine Months Nine Months
Ending Dec 31 Ending Dec 31
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from Operating Activities
Net Profit(Loss) (348,285) (218,011)
Adjustments to Reconcile Net(Loss)
to Net Cash (Used In) Operating Activities
Amortization and Depreciation 421,294 429,295
(Increase) in Accounts Receivable (8,308) 2,815
(Increase) in Inventory 0 (3,767)
Increase in Accounts Payable
and Accrued Expenses 275,825 99,511
Other, net (5,116) (33,103)
__________ __________
Net Cash (Used In) Operating Activities 335,409 276,738
Cash flows from Investing Activities
Deposits 200 (240)
Land, Property, Equipment (2,895) (5,779)
__________ __________
Net Cash (Used In) Investing Activities (2,695) (6,019)
Cash flows from Financing Activities
Increase(Decrease) Debt (242,359) (273,908)
Issuance of Stock, Net of Offering Costs 0 0
_________ ___________
Net Cash Provided by Financing Activities (242,359) (273,908)
__________ __________
Increase(Decrease) in Cash 90,355 (3,188)
Cash, Beginning of Period 1,841 3,035
Cash, End of Period 92,196 (153)
_________ ___________
Income Taxes Paid 0 0
Interest Paid 6,069 72,175
</TABLE>
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(Unaudited)
(1) Summary of Accounting Policies
- ------------------------------------
A summary of significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
(a) General
-------
The Southshore Corporation ("Company") was incorporated under the
laws of Colorado on March 26, 1990 for the purpose of engaging in any
lawful business. The company operates a waterpark in southeast Denver
metro area.
(b) Unaudited Financial Statements
------------------------------
The accompanying financial statements have been prepared by the
registrant without audit and are the responsibility of the Company's
management. Management is of the opinion that all adjustments that
should be made to the accompanying financial statements in order for
them to present fairly the financial position, results of operations and
cash flows for the periods presented have been made.
Management has elected to omit substantially all the footnote
disclosures required by generally accepted accounting principles.
The accompanying financial statements should be read in conjunction with
the Company's audited financial statements as of March 31, 1998. The results
of operation for the period ended December 31, 1998 are not indicative
of the operating results for the full year.
(c) Property and Equipment
----------------------
Property and equipment are stated at cost. The original park water
features are depreciated using a straight line method based on a 7 year
estimated useful life. A 20 year estimated useful life on a straight line
basis is utilized on the buildings. Park improvements since 1994 have been
depreciated using a modified accelerated cost recovery method over 31.5
years for buildings and 7 years for equipment.
Page 6
<PAGE>
(2) Liquidity and Capital Resources
- ------------------------------------
See Management's Discussion for disclosure related to liquidity and
capital and the related contingencies and commitments.
(3) Net Profit and Loss Per Common Share
- -----------------------------------------
Net profit and loss per common share for the three month period ended
December 31, 1998 and 1997 has been computed based on the weighted number
of shares outstanding during the respective periods.
(4) Bank Line of Credit - Note to President
- --------------------------------------------
On April 25, 1994, the Company issued a five year promissory note in the
amount of $400,000 to its President. The note was issued pursuant to an
arrangement whereby the President became personally obligated and personally
secured a $400,000 bank line of credit, the proceeds of which were made
available to the Company. The Company is required to pay interest on the
line at the bank's prime rate. The Company's President has the right to
purchase common stock at $2.25 per share in an amount equal to what he is at
risk on the bank line of credit. On default of the note he may convert the
outstanding balance to common stock at $1.00 per share. At December 31,
1998, the balance was $0.00.
(5) 10% Secured Notes -$970,000
- --------------------------------
The Company was required to pay down the principal balance of its
outstanding 10% Secured Notes by 25% on September 30, 1994, June 30, 1995,
June 30, 1996 and June 30, 1997 respectively. The Company failed to make
most of these payments, however it has obtained deferrals from holders of
$735,000 in these notes as to payments of principal through September 30,
1997. The Company failed to make these payments due September 30, 1997.
Additionally, the trustee under the Indenture relating to these notes
resigned as trustee effective November 4, 1994.
(6) Property Tax Lien
- ----------------------
First Union National Bank (New Jersey) holds a property tax certificate
from Arapahoe County, Colorado in the amount of $532,537 plus interest of
$189,687, at December 31, 1998, on the Company's 16-acre water park property.
The tax certificate draws interest at 13% per annum and may be converted
into a tax deed at the request of First Union. The Company would have the
right to redeem the certificate for a period of approximately three to five
months from the time First Union requests a deed by paying the full amount
of the property tax certificate plus accrued interest (a total of $722,224
at December 31, 1998). As of the date of this report First Union has not
requested Arapahoe County to issue a tax deed.
<PAGE>
SELECTED FINANCIAL DATA
Following is a summary of selected financial data. See the
financial statements included herein for more complete information.
Summary Balance Sheet Data:
As of As of As of
3/31/98 3/31/97 3/31/96
Total Assets.......... $ 1,910,724 $ 2,478,613 $ 3,028,190
Total Liabilities..... $ 2,105,540 $ 2,244,548 $ 2,322,158
Long Term Obligations. $ 37,864 $ 65,377 $ 953,098
Working Capital....... $(2,059,228) $(2,167,098) $(1,362,589)
Stockholders' Equity.. $ (194,816) $ 203,391 $ 706,032
Summary Balance Sheet Data: (continued)
As of As of
3/31/95 3/31/94
Total Assets.......... $ 3,649,607 $ 3,991,676
Total Liabilities..... $ 2,724,957 $ 2,545,949
Long Term Obligations. $ 145,632 $ 129,058
Working Capital....... $(2,556,580) $(2,306,874
Stockholders' Equity.. $ 924,650 $ 1,447,727
Summary Operating Data:
Year Year Year
Ended Ended Ended
3/31/98 3/31/97 3/31/96
Sales................ $ 999,710 $1,085,465 $ 855,618
Net Loss............. $ (428,881) $ (502,641) $ (693,474)
Net loss Per Share... $ (.16) $ (.19) $ (.28)
Net Loss Per Share
Before Extraordinary
Items............... $ (428,881) $ (502,641) $ (751,014)
Net Loss Before
Extraordinary Items. $ (.16) $ (.19) $ (.32)
Summary Operating Data: (continued)
Year Year
Ended Ended
3/31/95 3/31/94
Sales................ $ 1,021,747 $ 838,098
Net Loss............. $(1,023,077) $(1,334,382)
Net loss Per Share... $ (.57) $ (.79)
Net Loss Per Share
Before Extraordinary
Items............... $ (1,023,077)$(1,334,382)
Net Loss Before
Extraordinary Items. $ (.57) $ (.79)
Summary Balance Sheet
Data as of
12/31/98 12/31/97
Total Assets $ 1,595,904 $ 2,033,021
Total Liabilities $ 2,139,004 $ 2,047,775
Long Term Obligations $ 8,750 $ 42,073
Working Capital $(2,029,750) $(1,881,236)
Stockholders' Equity $ (543,100) $ (14,654)
Summary Operating Data
For Nine Months Ending
12/31/98 12/31/97
Sales $1,000,320 $ 970,982
Net Loss $ (348,285) $(218,011)
Net Loss Per Share $ (.13) $ (.09)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - YEAR ENDED MARCH 31, 1998
Financial Condition
At March 31, 1998, working capital was a negative $2,059,228
as compared to a negative $2,167,098 at March 31, 1997, a decrease
of approximately $108,000.
The principal items contributing to the working capital
shortfall are operating losses, currently due promissory notes and
currently due property taxes.
At March 31, 1998, the Company's shareholders' equity was a
negative $(194,816), down from $234,065 at March 31, 1997, due
primarily to operating losses for fiscal 1997.
-35-
<PAGE>
Results of Operations - Fiscal 1998 Compared to Fiscal 1997
Revenues for 1998 were down slightly over 1997 with decreases
in both gate admissions and food and beverage due primarily to the
affect of an unseasonably cold June 1997 on park attendance. The
Company contracts out its food and beverage service for a
percentage of the sales. Expense amounts for 1998 by items were
slightly less than in 1997. Elimination of depreciation of
$558,672, a non-cash item, would result in profitable operations
for fiscal 1998. As a percentage of gross profit, operating
expenses, exclusive of depreciation and interest, declined from 98%
in fiscal 1996 to 74% in fiscal 1997 to 72% in fiscal 1998.
Interest expense for fiscal 1998 was $58,266 less than fiscal
1997 due to reduction in outstanding indebtedness of approximately
$340,000 and lower interest rates on one note to the Company's
president. Amortization of debt offering costs was only $9,809 for
fiscal 1998 because it was the last period in which such expense
was allocable and the $9,809 was all that remained.
Results of Operations - Fiscal 1997 Compared to Fiscal 1996
Revenues for 1997 were up 27% over 1996 with increases in both
gate admissions and food and beverage. The Company continued to
contract out its food and beverage service for a percentage of the
sales. Expense amounts for 1997 by items were approximately the
same as 1996 except for professional and consulting fees which
showed further reduction as the Company's requirements for legal
and other services declined 76% and advertising expenses were 27%
lower. Elimination of depreciation of $559,751, a non-cash item,
would result in profitable operations for fiscal 1997. As a
percentage of gross profit, operating expenses, exclusive of
depreciation and interest, declined from 98% in fiscal 1996 to 74%
in fiscal 1997.
Results of Operations - Fiscal 1996 Compared to Fiscal 1995
Revenues for fiscal 1996 were lower than fiscal 1995 by
$166,129 largely because the Company contracted its food service
for 1996 with an outside vendor and merely received a fee for the
sale of food of $173,453, compared to $353,709 for food sales by
the Company for 1995. However, substantial savings on the cost of
sales ($11,078 for 1996 vs. $78,181 for 1995) and salaries
($270,938 for 1996 vs. $348,318 for 1995) justifies the decision
which resulted in lower total revenues. Gross profits for 1996
were approximately $100,000 less than 1995 and total operating
expenses for 1996 were nearly $300,000 less than 1995. Thus, net
loss for 1996 was approximately $330,000 less than the loss for
1995. Of the loss of $693,474 for 1996, $560,511 represents a non-
cash item, depreciation. Most of the Company's current park
facilities will be fully depreciated in 1998.
-36-
<PAGE>
The month of June, 1995, which is approximately one-third of
the water park's operating period, was one of the coldest, rainiest
Junes ever recorded for the Denver area. This was devastating to
park revenues. For June, 1996, the Denver area experienced more
typical June weather, with highs usually in the 80's and low 90's.
Consulting and professional fees have shown a steady decline
from fiscal 1994 through fiscal 1996 as the Company's use of
lawyers and other professionals has been reduced following the
finalization of work-out arrangements with the Company's creditors.
Interest expense reduction and interest expense forgiven for
1996 reflect results of settlements and pay-offs of construction
creditors.
Liquidity and Capital Resources
At March 31, 1998, the Company had $2,067,676 in current
obligations and $8,448 in current assets. Obligations include
notes payable of $1,239,431 and property taxes of $566,762.
The Company has been able to continue, notwithstanding past
financial difficulties, only as a result of sales of 920,000 shares
of common stock at $1.00 and $482,000 in loans during fiscal 1995
and 1996. The Company's President purchased 500,000 shares of such
stock and was the source of $400,000 in loans. Vancol Industries,
Inc., a major shareholder, purchased 25,000 shares of stock and
loaned the Company $82,400. Rod Barksdale, a director, purchased
25,000 shares of stock. Arthur T. Biddle, a former director, and
a Biddle family partnership purchased 40,000 shares of common
stock.
As indicated by the Statement of Cash Flows (page 19), the
Company has not obtained funding in the past two years from the
sale of its common stock. Rather it has relied primarily upon
revenues from operations and a bank line of credit of its president
to provide funds for operations. Operating expenses have been
reduced each of the past three years; however the Company is yet
unable to achieve profitable operations.
Although the Company has made substantial inroads toward
establishing financial stability, it has not yet achieved it. 1998
was the second consecutive year the Company was able to achieve
positive cash flow except for payment of real estate taxes. For
fiscal 1998 its objectives were to eliminate, restructure or reduce
its debt, pay its property taxes and strive to produce profitable
operations. These objectives were not achieved. The failure to
pay its taxes or restructure or pay its debt could result in loss
of the Company's water park property.
The Company's plan recently has been to sell its water park
property for sufficient funds to retire its debt. On June 16,
-37-
<PAGE>
1998, the Company signed a contract for sale of the property for $2
million. The Company believes the sale proceeds would be
sufficient to pay all of the Company's obligations. The Company
also has engaged in lengthy negotiations with a local recreation
district which has interest in acquiring the property in event the
current contract does not close. See Item 1. Business and Proposed
Sale of the Company's Water Park. See also Note 7 to financial
statements.
Trends
The industry in which the Company operates depends
considerably on disposable income of potential park patrons and is
thus more affected by the condition of the local and, to a very
limited extent the national economy. The economy in the Denver
area is currently relatively strong, which means that more
disposable monies would be available for recreational activities
such as those available at the Company's facilities. Based on this
economic indication, management is hopeful the local economy will
provide a good environment for the Company to operate.
Year 2000
Since the Company expects to sell its water park property soon
and attempt to locate another business opportunity, of which there
is none under consideration, the Company is not able to
meaningfully make any plans or disclosures about how Year 2000
issues may affect the Company or its operations, if any.
-38-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
At December 31, 1998, working capital was a negative $2,029,750 as
compared to a negative $2,069,709 at March 31, 1998. The principal reasons
for the working capital shortfalls are unpaid and accrued property taxes of
$630,032, accrued interest on property taxes, trade payables, and $955,000
in notes currently in default. See "Liquidity and Capital Resources"
below.
At December 31, 1998, the Company's shareholders' equity was negative
$543,100 down from a negative $194,815 at March 31, 1998, due entirely to
operating losses.
Results of Operations -Nine Months Ended December 31, 1998 Compared to
Nine Months Ended December 31, 1997.
Revenues for the current nine months were up slightly as compared to
the same period in 1997. The weather for both summers were comparable as
monsoonal trends resulting in rain and thunderstorms were prevalent.
Total operating expenses were up 23% as compared to the comparable
period in 1997. Salaries increased 113% as this category reflects
non-operational bonuses accrued for key personnel payable mostly upon sale
of the waterpark property. Advertising expenditures decreased 45% as
management of advertising were brought in-house to save on agency fees and
production costs for the season. The cost of operating supplies, chemicals,
utilities and repairs and maintenance remained basically the same for the
two periods. Outside services expense increased 55% as the need for legal
and accounting services has increased due to the pending sale of the
property. Depreciation and amortization remained basically the same for
the two periods. The interest expense for current period reflects
suspension of interest payments to some of its creditors as work-out
arrangements are made with debtors, subject to sale of the Company's
waterpark property and satisfaction of these obligations. (see Liquidity
and Capital Resources)
Results of Operations -Three Months Ended December 31, 1998 Compared to
Three Months Ended December 31, 1997.
Revenues for the current three months were basically the same for both
periods, as these revenue are residual from the previous summer season.
Total operating expenses were down 2% as compared to the comparable
period in 1997. This decrease in expenses is due to the layoff of the
Operations Manager and the President and CFO reduced to half salary in
anticipation of the permanent closing of the waterpark operations
and sale of the property. Depreciation and amortization remained basically
the same for the two periods. The interest expense for the current period
reflects suspension of interest payments to some of its creditors as
Page 8
<PAGE>
work-out arrangements are made with debtors, subject to sale of the
Company's waterpark property and satisfaction of these obligations.
Liquidity and Capital Resources
At December 31, 1998, the Company had $2,130,254 in current obligations,
primarily composed of notes payables and accrued and past due property taxes.
Notes payable of $220,000 due June 30, 1997 and $735,000 due September 30,
1997 are currently in default. These notes are secured by a first mortgage
on portions of the waterpark property. The Company's waterpark property is
subject to a property tax lien that was issued to a banking institution in
New Jersey. The Company could be in a position in the near future where it
would have to pay the full amount of this lien or lose title to the property.
Although the Company has made substantial inroads toward financial
stability, it has not yet achieved it. The Company has been attempting to
sell its water park property for sufficient funds to retire its debt. The
Company has signed contracts with several buyers representing interest and
financial ability to close on the property since July 1998. In each case
the contracts were subsequently terminated. Management is currently
pursuing buyers and has engaged a commercial real estate broker in the
Denver area in hopes of facilitating a sale transaction.
As of December 31, 1998, the company has accumulated losses aggregating
$4,923,285. The company is attempting to sell substantially all of its
assets to pay its current debt and delinquent taxes. Management is hopeful
such a sale will materialize and allow the Company to continue as a going
concern. The Company's ability to continue as a going concern depends
upon the sale of its assets and the successful merger of the corporation
with another entity. Management now believes that pending any new
developments the Company's waterpark will not open for the 1999 summer
season and the waterpark equipment will most likely be salvaged and sold
separate from the real property.
Therefore, there is substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
<PAGE>
LEGAL PROCEEDINGS
Currently there are no material legal proceedings pending or
threatened against the Company or its assets other than a threat of
litigation by a holder of $100,000 in secured notes, however this
noteholder has indicated he will settle his claim on the same basis
offered other noteholders. Any action against the Company on the
secured notes would need to be initiated by a trustee under the
indenture lien. Currently there is no trustee. Further, there is
a tax lien and a note holder lien on the Company's principal asset
which could result in proceedings involving title to the property.
DESCRIPTION OF BUSINESS
The Company is engaged in one business only, that is the
ownership and operation of one water park located in the southeast
part of the Denver Metro Area. The park is on 16 acres, has
various water features, including a wave pool, kiddie pool and
various water slides. It also has volleyball courts and offers
food and beverages through concession facilities. The facility is
open only from Memorial Day through Labor Day, weather permitting.
The property is encumbered with a tax lien certificate and two
liens securing indebtedness which are currently in default. The
auditor's report dated May 11, 1998 raises substantial doubt about
the Company's ability to continue as a going concern. See
Financial Statements and Management's Discussion and Analysis of
Results of Operations for the year ended March 31, 1998 for further
details.
DESCRIPTION OF PROPERTY
The Company owns 16 acres of real estate at approximately East
Arapahoe Road and South Havana in the Southeast Denver metro area.
The Company's water park, adjacent parking area and administrative
offices are located on this property.
AUDITORS
Schumacher & Associates, Inc. served as independent auditors
of the Company during the fiscal year ended March 31, 1998. A
representative of Schumacher & Associates, Inc., who will have an
opportunity to make a statement if he so desires, will be present
at the meeting and will be available to respond to appropriate
questions.
-41-
<PAGE>
OTHER MATTERS
The Board of Directors does not intend to bring before the
meeting any business other than as set forth in this Proxy
Statement, and has not been informed that any other business is to
be presented to the meeting. However, if any matters other than
those referred to above should properly come before the meeting, it
is the intention of the persons named in the enclosed Proxy to vote
such proxy in accordance with their best judgment.
Please sign and return promptly the enclosed Proxy in the
envelope provided. The signing of a Proxy will not prevent your
attending the meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth M. Dalton
President
Dated: March 1, 1999
-42-
<PAGE>
APPENDIXES
Appendix 1 Purchase Agreement and Escrow Instructions -
Bedford Property Investors, Inc.
Appendix 2 Letter from South Suburban Park & Recreation
District
Appendix 3 Sections 7-113-101-103, 301-209 and 301-302 of the
Colorado Business Corporation Act
(C\southsho\bedford\proxy.pre)
-43-
<PAGE>
APPENDIX 1
PURCHASE AGREEMENT
AND ESCROW INSTRUCTIONS
THIS PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS ("Agreement") is
entered
into as of February 12, 1999, by and between, The Southshore Corporation, a
Colorado corporation ("Seller"), and Bedford Property Investors, Inc., a
Maryland corporation ("Buyer"), for the sale to Buyer of the Property (defined
in Section 1.2.8) located in the City of Englewood (the "City"), County of
Arapahoe (the "County"), and State of Colorado (the "State"). In
consideration of the mutual covenants and agreements set forth in this
Agreement Buyer and Seller agree as follows.
ARTICLE 1
DEFINITIONS AND EXHIBITS
1.1 Defined Business Terms. Each of the following business terms,
when used herein with an initial capital letter, shall have the meaning
ascribed to it as follows:
1.1.1 "Agreement Date" is the date first set forth above.
1.1.2 "Closing" and "Closing Date" shall be five business days
after the later of (i) the end of the Inspection Period (defined in Section
1.1.5), including any extension thereof under the terms of this Agreement or
(ii) the date that Seller obtains shareholder approval of the sale as set
forth in Section 9.2.1, and shall be the date upon which the Deed (defined in
Section 1.2.3) is recorded in the Official Records of the County.
1.1.3 "Deposit" is Sixty Thousand Dollars ($60,000.00).
1.1.4 "Extension Deposit" is Forty Thousand Dollars ($40,000.00).
1.1.5 "Inspection Period" means the period expiring at 6:00 p.m.
San Francisco time forty five days after Buyer's receipt of the Due Diligence
Materials (defined in Section 6.1).
1.1.6 "Inspection Period Extension" is fourteen days.
1.1.7 "Purchase Price" is One Million Nine Hundred Seventy Two
Thousand Six Hundred Eighty Dollars ($1,972,680.00)
1.2 Other Defined Terms. In addition to the terms defined in Section
1.1 and elsewhere throughout this Agreement, each of the following terms, when
used herein with an initial capital letter, shall have the meaning ascribed to
it as follows:
1.2.1 "Broker" means Cushman Realty Corporation.
1.2.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.2.3 "Deed" means the Special Warranty Deed conveying to Buyer
title to the Real Property as provided in Section 7.3.1.
1.2.4 "Environmental Laws" mean any federal, state, local or
administrative agency ordinance, law, rule, regulation, order or requirement
relating to environmental conditions, Hazardous Materials or medical waste.
1
<PAGE>
1.2.5 "Escrow" that certain Escrow to be opened with the Escrow
Holder (defined in Section 1.2.6) with respect to this Agreement and the
Closing of the sale of the Property.
1.2.6 "Escrow Holder" means First American Title Guaranty Company
located at 1850 Mt. Diablo Blvd., Suite 300, Walnut Creek, CA 94596;
Attention: Pam Nicolini; FAX: (925) 927-2190.
1.2.7 "Hazardous Materials" means any substance, chemical, waste
or other material which is listed, defined or otherwise identified as
"hazardous" or "toxic" under any of the Environmental Laws, including, without
limitation, formaldehyde, urea, polychlorinated biphenyls, petroleum,
petroleum products or by-products, crude oil, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel or mixture
thereof, radon, asbestos or any by-product of same.
1.2.8 "Property" means all that certain real property consisting
of approximately 15.89 acres of land located in Arapahoe County, Colorado, all
as more particularly described in Exhibit A attached hereto (the "Real
Property") and all rights, permits, appurtenances approvals and other
interests associated therewith.
1.2.9 "Survey" means a survey or updated survey of the Real
Property, Appurtenances and Improvements to be obtained by Buyer not later
than ten business days after Seller provides Buyer with its 1998 ALTA survey
of the Property.
1.2.10 "Survey Matters" mean any matters affecting title to
the Property that are disclosed on the Survey.
1.2.11 "Title Company" means the title insurance division or
affiliate of the Escrow Holder.
1.2.12 "Title Exceptions" means all of the exceptions to
title (excluding the Title Company's preprinted standard exceptions) listed on
the Title Commitment (defined in Section 4.1) plus the Survey Matters.
1.3 Exhibits. Attached hereto and forming an integral part of this
Agreement are the following exhibits, all of which are incorporated into this
Agreement as fully as if the contents thereof were set out in full herein at
each point of reference thereto:
Exhibit A - Legal Description
Exhibit B - Special Warranty Deed
Exhibit C - License
ARTICLE 2
PURCHASE AND SALE
-----------------
Seller agrees to sell the Property to Buyer, and Buyer agrees to
purchase the Property from Seller, on all of the terms and conditions
hereinafter set forth.
ARTICLE 3
FINANCIAL TERMS
---------------
3.1 Purchase Price. The total Purchase Price for the Property shall
be paid in cash to Seller at the Close of Escrow.
3.2 Terms of Payment. Buyer shall pay the Purchase Price to Seller as
follows:
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3.2.1 Deposit. Within five business days after the complete
execution and delivery of this Agreement by the parties, Buyer shall deliver
to Escrow Holder the amount of the Deposit in the form of a check payable to
Escrow Holder or by wire transfer of same day funds.
3.2.2 Investment of the Deposit. Buyer may instruct the Escrow
Holder to invest the Deposit in such short-term, high-grade securities,
interest bearing bank account, bank certificates of deposit or bank repurchase
agreements. All income thereon shall belong to Buyer and shall be remitted to
Buyer as and when received by Escrow Holder, irrespective of the disposition
of the Deposit itself.
3.2.3 Extension Deposit. If Buyer elects to extend the
Inspection Period, as provided in Section 6.3, Buyer shall deposit the
Extension Deposit into Escrow prior to the expiration of the original
Inspection Period. The Extension Deposit shall be immediately released to
Seller and shall not be refundable except as expressly provided in this
Agreement. The Extension Deposit shall be credited against the Purchase
Price.
3.2.4 Application of the Deposit. The Deposit shall be non-
refundable and the property of Seller if and when Buyer delivers to Seller and
Escrow Holder all of the following: (i) the Title Notice (defined in Section
4.4), and (ii) the Inspection Approval Notice (defined in Section 6.4). If
either the Title Notice or the Inspection Approval Notice is not timely
delivered, this Agreement shall be terminated according to its terms, and the
Deposit returned to Buyer. If the sale of the Property is consummated, the
Deposit shall be applied toward the Purchase Price and the Extension Deposit,
if paid to Seller, shall be credited against the Purchase Price.
3.2.5 Payment of the Purchase Price. On or before the Closing
Date, Buyer shall deposit the balance of the Purchase Price with Escrow
Holder. The amount required to be deposited hereunder shall be reduced by the
amount of the Deposit and by all credits due Buyer under this Agreement, and
increased by all items chargeable to Buyer under this Agreement. Any interest
earned on said funds prior to the Closing Date shall be paid to Buyer.
ARTICLE 4
APPROVAL OF TITLE
-----------------
4.1 Title Commitment. Within five business days after the Agreement
Date, if not previously provided to Buyer, Seller shall arrange for delivery
to Buyer, a preliminary title report or commitment for an ALTA owner's policy
of title insurance, covering the Property, issued by the Title Company,
together with legible copies of all exceptions and matters of record referred
to therein (said preliminary report or commitment, together with the materials
referred to above shall be referred to as the "Title Commitment"). The Title
Commitment shall show that Seller has marketable and insurable fee simple
title to the Property.
4.2 Survey. Within five business days after the Agreement Date, if
not previously provided to Buyer, Seller shall deliver to Buyer its August
1998 ALTA survey of the Property. Buyer shall obtain an updated Survey of the
Property, as set forth in Section 1.2.9.
4.3 Title and Survey Review. Buyer shall have until the later of (i)
five business days after receipt of the Title Commitment or (ii) five business
days after receipt of the Survey, or (iii) five business days after the date
hereof, to notify Seller of any Title Exceptions that are not acceptable to
Buyer (all such items shall be referred to as "Title Objections"). The
failure of Buyer to provide written notice of Title Objections shall be deemed
a notice that all Title Exceptions are Title Objections.
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4.4 Seller's Right to Cure. Within five business days after receipt
of Buyer's notice of Title Objections, Seller shall provide written notice to
Buyer and Escrow Holder as to which, if any, of the Title Objections Seller
shall cause to be removed of record or otherwise cured to the satisfaction of
Buyer in its reasonable discretion by the Closing Date (the exceptions which
Seller agrees to cause to be removed are the "Approved Title Objections").
Seller must cure all exceptions relating to deeds of trust, mortgages, liens
or other encumbrances representing monetary liens (other than non-delinquent
real property taxes) which can be removed by the payment of money ("Monetary
Liens"). If Seller elects not to cure all Title Objections, then Buyer shall
have the right, upon written notice to Seller, to acquire the Property subject
to the Title Objections, except for the Monetary Liens, without any abatement
in the Purchase Price. Within three business days of receipt of Seller's
notice of the Approved Title Objections, Buyer shall provide Seller and Escrow
Holder notice (the "Title Notice") of whether Buyer is electing to terminate
the Agreement or acquire the Property subject to the terms noted above.
If Seller does not remove an Approved Title Objection or Monetary Lien
by the Closing Date, Seller shall be in default under this Agreement, in which
case, Buyer, as Buyer's sole and exclusive remedies, shall have the right, but
not the obligation, upon written notice to Seller, to either (1) cancel this
Agreement and receive a refund of its Deposit, together with all interest
thereon, or (2) acquire title to the Property subject to such Approved Title
Objection or Monetary Lien and reduce the Purchase Price by the amount
reasonably estimated by Buyer to remove or cure such Approved Title Objection
or Monetary Lien. In exercising its rights under the preceding sentence,
Buyer shall have the right, but not the obligation, to adjourn the Closing
Date for thirty days before making such an election.
4.5 Permitted Exceptions. The Title Exceptions except for (i) any
Approved Title Objections and (ii) the Monetary Liens are referred to herein
as the "Permitted Exceptions."
4.6 Owner's Policy. At Closing, Seller shall cause the Title Company
to issue to Buyer an ALTA Owner's Policy of Title Insurance (Form B, revised
10/17/70), with extended coverage, insuring fee simple title to the Real
Property in Buyer, subject only to the Permitted Exceptions, together with
such endorsements required by Buyer at Buyer's cost and expense, unless
provided at Seller's request to cure a Title Objection, with liability in the
amount of the Purchase Price, and with the standard exceptions or provisions
for mechanic's liens, coinsurance, creditor's rights, and mandatory
arbitration omitted or modified in a manner reasonably requested by Buyer,
without additional cost and expense to Seller, with such reinsurance and
coinsurance as Buyer may elect, at its cost and expense, ("Title Policy").
Indemnification of the Title Company by Seller or any other party, in order to
induce the Title Company to insure over any Title Objections, or to obtain any
endorsement required by Buyer, shall not be allowed except with the prior
written consent of Buyer after full disclosure to Buyer of the nature and
substance of the indemnity and the matter to be indemnified against, exclusive
of Title Company's standard proforma indemnity pertaining to deletion of
standard exception for mechanic's liens and similar standard printed
exceptions.
ARTICLE 5
ACCESS
------
From and after the date of this Agreement, Seller, upon reasonable
notice from Buyer, shall allow Buyer and its agents and consultants,
continuing access during business hours to the Property, including, without
limitation, the right to drill test wells and take soil borings at Buyer's
sole costs and expense. Any such entry or tests conducted by Buyer shall not
damage, destroy or harm the Property or any improvements thereon or Buyer
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shall repair and restore the Property to its original condition. Buyer agrees
to indemnify and hold Seller harmless from any damage or injury to persons or
property caused by Buyer or its authorized representatives during their entry
and investigations prior to Closing, but Buyer shall not be responsible for
any defects or contamination discovered as a result. This indemnity shall
survive the termination of this Agreement or the Closing, as applicable,
provided that Seller must give notice of any claim it may have against Buyer
under such indemnity within three months of such termination or the Closing
Date, as applicable, if the claim involves damage to Seller's Property.
ARTICLE 6
INSPECTION AND CONTINGENCIES
----------------------------
6.1 Due Diligence Materials. Except as otherwise set forth below, not
later than five days after the Agreement Date, Seller shall deliver to Buyer
true and correct copies of all of the "Due Diligence Materials" listed below
for review and approval in Buyer's sole discretion. Seller shall notify Buyer
in writing when all such items have been so provided to Buyer, and Buyer shall
notify Seller within five business days after the date of receipt of such
notice of any missing items of which Buyer is aware. Buyer shall promptly
notify Seller if after the aforesaid five business day period, Buyer discovers
that an item has not been furnished by Seller which was required to be
furnished under this section, and Seller shall promptly furnish such items to
Buyer; provided, however, that the same shall not delay the commencement of
the Inspection Period. The Due Diligence Materials to be provided by Seller
are as follows:
6.1.1 Entitlement Documents. To the extent in Seller's possession
or control, copies of the preliminary development plan, final development
plan, site plan, subdivision improvement agreement and any other documents
issued by Arapahoe County in conjunction with approval of the development of
the Property, including any requirements or conditions to developmental
approvals.
6.1.2 Environmental. Copies of any existing Phase I, Phase II or
other environmental reports relating to the Property in Seller's possession or
control, including, without limitation, any lab tests and communications from
and with any governmental agency regarding any environmental matter or
remediation work at the Property, without warranty or representation. In
addition to the foregoing, within thirty days after the Agreement Date,
Seller, at its sole expense, shall provide Buyer with an recertification of
the most current Phase I environmental assessment of the Property prepared by
Techlaw Inc. ("Recertified Phase I") for a third party prior purchaser under
contract for the Property; provided, however, that the delivery of said
Recertified Phase I shall not delay the commencement of the Inspection Period.
6.1.3 Survey. The existing pinned and monumented ALTA survey of
the Property completed in August of 1998, which Seller shall not be under
obligation to have recertified to Buyer.
6.1.4 Reports. To the extent in Seller's possession or control,
copies of soils reports, geologic reports, archeological reports, wetlands
studies or other engineering reports or studies relating to the Property.
6.1.5 Plans. To the extent is Seller's possession or control,
copies of any construction drawings or "as built" plans for utility services
installed on the Property; provided, however, that Seller shall not be
required to deliver such plans, but they shall be made available to Buyer for
its review and copying as hereinafter provided in Section 6.2.
6.2 Inspection Period. As a condition to Buyer's obligation to
purchase hereunder, Buyer shall be entitled to examine the Property, the Due
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Diligence Materials, and other economic, governmental, development and
marketing feasibility, and physical studies and analyses as Buyer may require
(the "Inspection Matters"). During normal business hours and on not less than
24 hours advance notice, Buyer shall have the right to inspect and copy
Seller's documents in Seller's possession relating to the Property which are
not included in the Due Diligence Materials. The examination, analyses and
studies shall be completed during the Inspection Period. Buyer may disapprove
any Inspection Matters in its sole and subjective discretion. Subject to the
provisions of Article 15 below, Buyer agrees to accept the Property in its "as
is" condition.
6.3 Extension of Inspection Period. If Buyer is unable to satisfy the
contingency for review of any of the Inspection Matters within the Inspection
Period, Buyer may extend the Inspection Period by depositing the Extension
Deposit into Escrow prior to end of the original Inspection Period. The
extension shall be for the period of time described in Section 1.1.6. The
Extension Deposit shall be immediately released to Seller, shall be non-
refundable except in the event of Seller's default, and shall be applied to
the Purchase Price.
6.4 Notice. Buyer shall provide written notice of approval of the
Inspection Matters to Seller and Escrow Holder prior to the expiration of the
Inspection Period or the Inspection Period Extension, if applicable (the
"Inspection Approval Notice"). If Buyer does not provide written notice of
approval of the Inspection Matters to Seller and Escrow Holder, this Agreement
shall be terminated on the expiration of the Inspection Period or the
Inspection Period Extension, if applicable. On such termination the Deposit
shall be returned to Buyer, and there shall be no further obligation on the
part of either party. The Extension Deposit shall not be refundable in such
event.
ARTICLE 7
ESCROW AND CLOSING
------------------
7.1 Closing. The Closing shall occur on the Closing Date set forth in
Section 1.1.2.
7.2 Escrow. Within two business days after the complete execution and
delivery of this Agreement by Buyer and Seller, the parties shall deliver a
fully executed copy of this Agreement to Escrow Holder. This Agreement shall
constitute the joint escrow instructions of Buyer and Seller to Escrow Holder,
and upon the opening of escrow, Escrow Holder is authorized to act in
accordance with the terms of this Agreement. Upon Escrow Holder's request,
the parties shall execute such additional and supplementary escrow
instructions as may be appropriate or required by Escrow Holder to enable the
Escrow Holder to comply with the terms of Agreement; provided, however, that
if there is any conflict or inconsistency between such general provisions and
this Agreement, this Agreement shall control.
7.3 Seller Deliveries in Escrow. Prior to the Closing, Seller shall
deliver to Escrow Holder for delivery to Buyer the following:
7.3.1 Deed. The Deed, in the form attached hereto as Exhibit B.
7.3.2 FIRPTA Affidavit. Either (i) an affidavit from Seller, in
form, scope and substance reasonably satisfactory to Buyer and Escrow Holder,
reaffirming Seller's representation and warranty that it is not a foreign
person under Section 1445 of the Code, or (ii) a withholding certificate
issued by the Internal Revenue Service, pursuant to Section 1445(a)(4) of the
Code and the regulations promulgated thereunder, which excuses Buyer from any
withholding obligations under Section 1445 of the Code, or (iii) if Seller
fails to deliver the affidavit described in clause (i) above or the
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withholding certificate described in clause (ii) above, a certificate,
affidavit or other written evidence sufficient to establish that Buyer is not
otherwise required to deduct and withhold a portion of the Purchase Price
pursuant to the Code and the regulations promulgated thereunder in connection
with the transactions contemplated herein.
7.3.3 Owner's Affidavit. Such affidavits, other evidence of
title, partnership agreements, certificates of partnership, corporate
articles, by-laws, certificates of good standing, resolutions, consents and
the like from Seller and/or other third parties as may be required by the
Title Company, on or in forms required by the Title Company in order to issue
the Title Policy (hereinafter defined) as specified in this Agreement.
7.3.4 Closing Statement. Seller's approval of the closing
statement prepared by the Escrow Holder.
7.4 Seller Deliveries to Buyer. Concurrently with the Closing, or as
soon thereafter as possible, Seller shall deliver to Buyer the following
(which at the request of Buyer shall be delivered to Buyer's on-site property
manager):
7.4.1 Plans. To the extent existent and in Seller's possession
and control, the final as-built plans and specifications for any utilities or
infrastructure improvements, certified by the architect and engineer for the
design and construction of the utilities or infrastructure improvements, if
available without cost or expense to Seller, or any uncertified plans;
7.4.2 Survey Assignment. An assignment of Seller's rights under
its contract with the surveyor for the preparation of the Survey.
7.5 Buyer Deliveries in Escrow. At or prior to the Closing Date,
Buyer shall deliver to Escrow Holder for delivery to Seller the following:
7.5.1 Funds. The funds required of Buyer under the terms of this
Agreement;
7.5.2 Closing Statement. Buyer's approval of the closing
statement prepared by the Escrow Holder; and
7.5.3 Authority. Evidence reasonably satisfactory to the Title
Company of the power and authority of Buyer to enter into and consummate this
Agreement.
7.5.4 License. The License Agreement attached as Exhibit C if
applicable pursuant to the terms of Section 15.1 hereinbelow.
7.6 Other Documents. Seller and Buyer shall, prior to the Closing
Date, execute any and all documents and perform any and all acts reasonably
necessary or appropriate to consummate the purchase and sale pursuant to the
terms of the transaction set forth in this Agreement. Such documents may
include a closing statement reflecting all prorations, adjustments and closing
costs, and escrow instructions for Closing, an agreement designating the
Escrow Holder as the "Reporting Person" for the transaction pursuant to
Section 6045(e) of the Code and the regulations promulgated thereunder, or
such other documentation as the Title Company may reasonably require for the
issuance of the Title Policy.
7.7 Closing Costs. All closing costs or expenses of escrow shall be
paid as follows:
7.7.1 Title Insurance. Seller shall pay the title insurance
premium for the Title Policy with coverage in the amount of the Purchase
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Price. Buyer shall pay the premium for such endorsements as Buyer may
request.
7.7.2 Recording Fees. Seller shall pay the cost of recording the
Deed and any other documents.
7.7.3 Transfer Taxes. Seller shall pay all state, county and city
transfer taxes to convey the Property to Buyer from Seller.
7.7.4 Other. Buyer and Seller shall each pay one-half of the
escrow fees charged by the Escrow Holder. Each party shall be responsible for
its own attorneys' fees. Seller shall pay the cost to satisfy all Approved
Title Objections and Monetary Liens, including any prepayment charges. If
Buyer terminates this Agreement during the Inspection Period, Buyer shall pay
for any title and escrow cancellation fees.
7.8 Prorations. All prorations for general real estate taxes and
assessments payable for the current tax year for the Property shall be made as
of the Closing Date (the "Adjustment Date"). If the prorations and
adjustments are found to be incorrect within twelve months after the Closing
Date, Seller and Buyer agree to re-prorate or readjust the same accordingly
and promptly pay any sum owed by one party to the other on account of such
proration.
ARTICLE 8
CONDEMNATION
------------
If any portion of the Property is taken by condemnation prior to the Closing
Date, Buyer shall have the right, upon written notice to Seller within thirty
days after receipt of notice of such taking, to terminate this Agreement and
receive its Deposit, together with all interest thereon, and the Extension
Deposit. The failure of Buyer to provide such written notice shall be deemed
an election to terminate. Buyer shall have the right to extend the Closing
Date for thirty days to evaluate the scope of the taking and available
condemnation proceeds. If Buyer does not elect to terminate this Agreement as
provided above, the parties shall proceed to close under the terms of this
Agreement and Seller shall assign to Buyer at the Closing Date the proceeds of
the condemnation award.
ARTICLE 9
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
9.1 Buyer's Conditions. Anything in this Agreement to the contrary
notwithstanding, Buyer's obligation to acquire the Property and to perform
other covenants and obligations prior to Closing shall be subject to and
contingent upon the satisfaction of the following conditions precedent:
9.1.1 Approval of the Property. By the end of the Inspection
Period Inspection Period or Extension, if applicable, Buyer shall provide the
Inspection Approval Notice. The failure of Buyer to provide the Inspection
Approval Notice within said time period shall be deemed a disapproval and the
Agreement shall be terminated, and the Deposit (but not the Extension Deposit)
returned to Buyer.
9.1.2 Title Policy. Buyer's review and approval of the proforma
Title Policy, containing only the Permitted Exceptions and containing the
endorsements required by Buyer, Buyer's timely delivery of the Title Notice,
and the commitment by the Title Company to issue the Title Policy on the
Closing Date, together with all endorsements, in the form of the proforma
Title Policy approved by Buyer.
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9.1.3 No Changes. The physical condition of the Property shall be
substantially the same on the Closing Date as on the Agreement Date except
that Seller may have begun or completed the Removal defined in Section 15. As
of the Closing Date there shall be no litigation or administrative agency or
other governmental proceeding of any kind whatsoever, pending or threatened,
which after Closing Date would materially adversely affect the value of the
Property. As of the Closing Date no proceedings shall be pending or
threatened which could cause any adverse modification of the zoning
classification applicable to the Property, or any portion thereof, or which
would result in any moratorium on development or the availability of utility
or other services necessary to any development of the Property.
9.1.4 Representations and Warranties and Full Performance. All
representations and warranties of Seller shall be true, accurate and compete
as of the Closing Date, and all covenants and agreements of Seller to be
complied with or performed prior to or at Closing shall have been complied
with and/or performed.
9.1.5 Board Approval. Buyer shall have obtained the approval of
this Agreement and the transaction herein contemplated from Buyer's Board of
Directors. Buyer shall obtain such approval, if at all, and communicate it to
Seller in writing, not later than fourteen days after the Agreement Date or
this Agreement shall be terminated and the Deposit returned to Buyer.
9.2. Failure of Satisfaction of Buyer's Conditions. If any one or more
of the matters referred to in each of the subsections of Section 9.1 has not
been reviewed and approved or waived in writing by Buyer on or before the date
set forth therein for each condition precedent, then such condition precedent
shall be deemed unsatisfied, the Deposit, together with all interest, shall be
returned to Buyer, this Agreement hereby terminated, and neither party shall
have any further liability or obligation hereunder, unless the failure of such
condition precedent also constitutes a default under or breach of the terms of
this Agreement on the part of Seller.
9.3 Seller's Conditions. Anything in this Agreement to the contrary
notwithstanding, Seller's obligation to sell the Property and to perform other
covenants and obligations prior to Closing shall be subject to and contingent
upon the satisfaction of the following condition precedent:
9.3.1 Shareholder Approval. Seller shall have obtained the
approval of this Agreement and the transaction herein contemplated from
Seller's shareholders. Seller shall obtain such approval, if at all, and
communicate it to Buyer in writing, not later than sixty days after the
Agreement Date unless Buyer agrees to extend the time period for obtaining
such approval. On full execution of this Agreement, Seller shall promptly
begin the necessary work to obtain the stockholders vote on this sale and
diligently attempt to obtain said vote.
9.3.2 Representations and Warranties and Full Performance. All
representations and warranties of Buyer shall be true, accurate and complete
as of the Closing Date, and all covenants and agreements of Buyer to be
complied with or performed prior to or at Closing shall have been complied
with and/or performed.
9.4 Failure of Satisfaction of Seller's Conditions. If any one or
more of the matters referred to in each of the subsections of Section 9.3 has
not been reviewed and approved or waived in writing by Seller on or before the
date set forth therein for each condition precedent, then such condition
precedent shall be deemed unsatisfied, and if the matters set forth in Section
9.3.2 are deemed unsatisfied, the Deposit, together will all interest, shall
be retained by Seller (along with the Extension Deposit and accrued interest,
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if applicable), this Agreement hereby terminated, and neither party shall have
any further liability or obligation hereunder.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
------------------------------
10.1 Seller Warranties. Seller hereby represents and warrants to Buyer
as follows (each of which representations and warranties is true and correct
on the date hereof and will be true and correct on (and restated as of) the
Closing Date, and each of which shall survive the Closing Date).
10.1.1 Entity. With respect to Seller and its business:
(i) Authority. Except as set forth in Section 9.2.1 above,
Seller has all necessary power and authority to own, use and transfer its
properties (including the Property) and to transact the business in which it
is engaged, and holds all licenses and permits necessary and required
therefore, and has full power and authority to enter into this Agreement, to
execute and deliver the documents required of Seller herein, and to perform
its obligations hereunder.
(ii) Approvals. Except as set forth in Section 9.2.1
above, Seller is duly authorized to execute and deliver and perform this
Agreement and all documents and instruments and the transaction contemplated
hereby or incidental hereto without any other approval or consent from any
other party (except as set forth in Section 9.2.1) and this Agreement and the
other documents required of Seller hereunder shall be binding on and
enforceable against Seller.
(iii) FIRPTA. Seller is not a foreign person or entity
under Section 1445 of the Code.
10.1.2 Title. Seller is the owner of indefeasible fee simple
title to the Property.
10.1.3 Contracts. There are no written or oral: (i) leases or
other agreements giving any possessory interest in the Property to a third
party; (ii) conditional sales agreements; (iii) sign agreements or licenses;
(iv) service contracts, or (v) other commitments or agreements incidental to
the operation, development or ownership of the Property.
10.1.4 Due Diligence Materials. Copies of the Due Diligence
Materials to be delivered to Buyer as provided in this Agreement are, to the
best of Seller's knowledge true, accurate and complete copies of all
documents comprising the Due Diligence Materials, with all supplements,
amendments and exhibits thereto. To the best of Seller's knowledge, there are
no modifications or other agreements, written or oral, affecting the Due
Diligence Materials other than as expressly set forth in the copies delivered
to Buyer.
10.1.5 Litigation. There is no litigation, claim, audit, action,
or proceeding pending affecting the Property in any manner except for property
tax liens and matters reflected in the proxy filed by Seller dated September
1, 1998 (the "Proxy"). To the best of Seller's knowledge, there is no
threatened litigation, claim, audit, action, or proceeding by any public board
or body, any governmental or administrative agency or instrumentality, or by
any other person or entity affecting the Property in any manner except as
disclosed in the Proxy.
10.1.6 Condemnation. There is no pending or, to the best of
Seller's knowledge, threatened condemnation, environmental, zoning or other
land-use regulation proceeding against the Property or any portion thereof.
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Seller has no knowledge or notice of any public request, plans or proposals
for changes in access or other municipal improvements that may affect the
Property or result in a tax, levy or assessment against the Property or
otherwise detrimentally affect the use, operation or value of the Property.
10.1.7 Environmental. With respect to environmental matters
affecting the Property:
(i) To the best of Seller's knowledge, the Property is not
in violation of any of the Environmental Laws. Neither Seller, nor to the
best of Seller's knowledge any third party, has engaged in any operations or
activities upon, or any use or occupancy of the Property, or any portion
thereof, for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal of any Hazardous Materials on, under or in the Property, or
transported any Hazardous Materials to, from or across the Property in
violation of the Environmental Laws.
(ii) Other than products typically utilized in the
operation of a water park, such as chlorine and other pool chemicals no
Hazardous Materials have been constructed, deposited, stored, or otherwise
located on, under or in the Property by Seller or, to the best of Seller's
knowledge, by any third party.
(iii) Seller has not received notice nor to the best of
Seller's knowledge have any Hazardous Materials migrated from other properties
upon or beneath the Property.
(iv) To the best of Seller's knowledge, there are no
underground storage tanks at the Property.
10.1.9 Taxes and Assessments. To the best of Seller's knowledge,
there is no (i) proposed increase in the assessed valuation of the Property
(except pursuant to the transaction contemplated hereby and semi-annual
assessed valuation adjustments and annual increases in real property taxes as
each are permitted under applicable law), or (ii) except as disclosed in the
Title Commitment or the Proxy, any existing or proposed assessment that has or
may become a lien on the Property. As used hereinabove the term "to the best
of Seller's knowledge" shall mean the actual knowledge of Ken Dalton and Eric
Nelson, without duty of investigation or inquiry. Seller's representations
and warranties hereunder shall expire on the date which is 240 days following
the Closing Date.
10.2 Buyer Warranties. Buyer hereby represents and warrants to Seller
as follows (each of which representations and warranties is true and correct
on the date hereof and will be true and correct on (and related as of) the
Closing Date, and each of which shall survive the Closing Date):
10.2.1 Authority. Except as set forth in Section 9.1.5, Buyer
has full power and authority to enter into this Agreement, to execute and
deliver the documents required of Buyer herein and to perform its obligations
hereunder.
10.2.2 Approvals. Buyer is duly authorized to execute and
deliver this Agreement and all documents and instruments and the transaction
contemplated hereby or incidental hereto without approval or consent from any
party other than Buyer's Board of Directors, which approval shall conclusively
be deemed to have been obtained by Buyer's delivery of the Inspection Notice.
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ARTICLE 11
INDEMNITY
11.1 Seller's Indemnification. Buyer hereby agrees to hold harmless,
protect, defend and indemnify Seller from any claims arising out of, in
connection with or incidental to any inaccuracy in or breach of any
representation or warranty of Buyer or resulting from any breach or default by
Buyer under this Agreement or from any claims relating to or arising out of
the period of time Seller owned the Property.
11.13 Survival. Notwithstanding the foregoing or anything else herein
to the contrary, the foregoing obligations shall survive the Closing for a
period of 240 days.
11.2 Buyer's Indemnification. Seller hereby agrees to hold harmless,
protect, defend and indemnify Buyer from any claims arising out of, in
connection with or incidental to any inaccuracy or breach of any
representation or warranty of Seller or resulting from any breach or default
by Seller under this Agreement or from any claims relating to or arising out
of the period of time Seller owned the Property.
ARTICLE 12
LIQUIDATED DAMAGES
------------------
12.1 BUYER'S LIQUIDATED DAMAGES. THE PARTIES HAVE DISCUSSED AND
NEGOTIATED IN GOOD FAITH UPON THE QUESTIONS OF DAMAGES TO BE
SUFFERED BY
SELLER IN THE EVENT BUYER DEFAULTS UNDER THIS AGREEMENT AND THE
CLOSING DOES
NOT OCCUR AS A RESULT, AND THEY HEREBY AGREE THAT SELLER'S ACTUAL
DAMAGES IN
THE EVENT OF SUCH A BREACH WOULD BE IMPRACTICAL OR EXTREMELY
DIFFICULT TO
DETERMINE. ACCORDINGLY, THE PARTIES AGREE THAT LIQUIDATED DAMAGES
IN THE
AMOUNT OF THE DEPOSIT THEN MADE UNDER THIS AGREEMENT (INCLUDING
ANY EXTENSION
DEPOSIT RELEASED TO SELLER), ARE AND WILL BE REASONABLE. IN THE EVENT
OF SUCH
DEFAULT AND FAILURE TO CLOSE, SELLER'S SOLE RECOURSE SHALL BE TO
RECEIVE SUCH
LIQUIDATED DAMAGES, AND BUYER SHALL HAVE NO ADDITIONAL LIABILITY
WHATSOEVER.
INITIALS: Seller: ___________ Buyer: ___________
12.2 Seller's Default. If the sale of the Property is not consummated
because of a default under this Agreement on the part of Seller or if a
condition precedent cannot be fulfilled because Seller frustrated such
fulfillment by some affirmative act or negligent omission, Buyer may either
(1) terminate this Agreement by delivery of notice of termination to Seller,
at which time (a) Buyer's Deposit plus all interest accrued thereon and the
Extension Deposit shall be immediately returned to Buyer, and (b) Seller shall
pay to Buyer any title, escrow, and inspection fees actually incurred by Buyer
and any other out-of-pocket expenses actually incurred by Buyer in connection
with the performance of its due diligence review of the Property, including,
without limitation, environmental and engineering consultants' fees and
expenses, and neither party shall have any further rights or obligations
hereunder; provided, however that all such actual expenses shall not exceed
$30,000.00, or (2) continue this Agreement pending Buyer's action for specific
performance and/or actual damages (and not consequential or punitive damages)
hereunder, including Buyer's reasonable costs and expenses incurred hereunder.
ARTICLE 13
BROKER'S COMMISSION
-------------------
Seller and Buyer each represents and warrants to the other that it has
not used any broker, agent, finder or other person in connection with the
transaction contemplated hereby to whom a brokerage or other commission or fee
may be payable, other than the Broker. Seller shall pay a commission to the
Broker in accordance with the terms of a separate agreement if, and only if,
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escrow actually closes and regardless of whether the failure to close was
caused by Seller's default. Each party indemnifies and agrees to defend,
protect and hold the other harmless from any claims resulting from the breach
by the indemnifying party of the warranties and representations in this
Section.
ARTICLE 14
GENERAL PROVISIONS
------------------
14.1 Notice. Any notice, request, demand, consent, approval or other
communication (any of which is hereinafter called "Notice") provided or
permitted under this Agreement shall be in writing, signed by the party giving
such Notice, and shall be deemed to have been given: (a) upon hand delivery,
(b) one day after being deposited with Fed Ex or another reliable overnight
courier service, (c) upon delivery if transmitted by facsimile, or (d) two
days after being deposited in the United States mail, registered or certified
mail, postage prepaid, return receipt required, and addressed as follows:
If to Buyer: Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, CA 94549
Attn.: Anne Hoffman
Fax: (925) 283-8480
And a copy to: Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, CA 94549
Attn.: Dennis Klimmek
Fax: (925) 283-8480
If to Seller: The Southshore Corporation
10750 E. Briarwood Avenue
Englewood, CO 80112
Attn.: Ken Dalton
Fax: (303) 904-6085
And a copy to: Cushman Realty, Inc.
1999 Broadway, Suite 2500
Denver, CO 80202
Attn.: Bill Trinen
Fax: (303) 292-3595
And a copy to: Isaacson, Rosenbaum, Woods & Levy
633 17th Street, Suite 2200
Denver, CO 80202
Attn.: Teresa England
Fax: (303) 292-3152
And a copy to: Krys, Boyle, Freedman & Sawyer
600 17th Street
Suite 2700, South Tower
Denver, CO 80202
Attn.: Thomas Boyle, Esq.
Fax: (303) 893-2882
If to Escrow Holder: To the address set forth in Section 1.2.6.
Any party, by notice to the other party, given as set forth above, may
change its address for purpose of receipt of any such Notice.
14.2 Headings. The titles and headings of the various Articles and
sections hereof are intended solely for means of reference and are not
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intended for any purpose whatsoever to modify, explain or place any
construction on any of the provisions of this Agreement.
14.3 Severability. If any of the provisions of the Agreement or the
application thereof to any persons or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement by the application
of such provision or provisions to persons or circumstances other than those
as to whom or which it is held invalid or unenforceable shall not be affected
thereby, and every provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
14.4 Attorneys' Fees. If a dispute arises between the parties hereto
concerning the meaning or interpretation of any provision of this Agreement,
then the party not prevailing in such dispute shall pay any and all reasonable
costs and expenses incurred by the other party on account of such default
and/or in enforcing or establishing its rights hereunder, including, without
limitation, court costs, reasonable attorneys' fees and disbursements.
Attorneys' fees and other expenses incurred by either party in enforcing a
judgment in its favor under this Agreement shall be recoverable separately
from and in addition to any other amount included in such judgment. Such
attorneys' fees obligation is intended to be severable from the other
provision of this Agreement and to survive and not be merged into any such
judgment.
14.5 Integration. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may
not be modified, amended or otherwise changed in any manner except by a
writing executed by the party against whom enforcement is sought. All
exhibits attached hereto are incorporated herein by reference. This Agreement
shall be governed by and construed in accordance with the laws of the State in
which the Property is located.
14.6 Successors and Assigns. This Agreement and all covenants, terms
and provisions contained herein shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assignees.
14.7 Assignment. Seller may not assign its rights hereunder without
the prior written consent of Buyer. Buyer may assign its rights hereunder so
long as Buyer covenants to remain jointly and severally responsible with said
assignee for full performance hereof through the Close of Escrow.
14.8 Time of the Essence. Time is of the essence of every provision
of this Agreement.
14.9 Possession. Possession of the Property shall be delivered to
Buyer on the Closing Date.
14.10 Construction. The parties acknowledge that with respect to the
transactions contemplated herein: (a) each party and its counsel have
reviewed and revised this Agreement and that the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
amendments or exhibits thereto; (b) neither party has received from the other
any accounting, tax, legal or other advice; and (c) each party has relied
solely upon the advice of its own accounting, tax, legal and other advisor.
14.11 Exclusivity. Seller agrees not to market the Property or show
the Property to any other prospective purchasers or to negotiate for the
placement of mortgage financing on the Property during the term of this
Agreement.
14.12 Survival. Subject to the terms hereof, all representations and
warranties by the respective parties contained herein or made in writing
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pursuant to this Agreement are intended to and shall remain true and correct
as of the time of Closing, shall be deemed to be material, and shall survive
the Closing Date and the recordation of the Deed. All statements contained in
any certificate or other instrument delivered at any time by Seller in
conjunction with the transaction contemplated hereby shall constitute
representations and warranties hereunder. All obligations of Seller and Buyer
stated in this Agreement, including the indemnifications set forth in Article
11, shall survive the Closing Date.
14.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is deemed an original, but all of which when taken
together shall constitute one agreement. A signature on this executed
Agreement transmitted by facsimile is as binding on the signatory
transmitting such facsimile signature as an original signature.
14.14 No Offer. The submittal of a draft of this Agreement, or the
execution of this Agreement by either party, shall not constitute an offer.
Neither party to this Agreement shall be bound to any of its terms until both
parties have executed this Agreement and each party has received an original
signature copy.
ARTICLE 15
REMOVAL OF EXISTING STRUCTURES
------------------------------
15.1 Removal. The Property is currently an operating water park with
structures and equipment associated therewith. Not later than 90 days after
the Closing Date, Seller shall have completed the Removal, as hereinafter
defined. The term "Removal" shall mean the removal of all landscape,
walkways, structures, and equipment including pools, ponds, slides, and
accessories. Further, at Buyer's election after review of utility plans
provided by Seller, Seller shall, as part of the Removal, remove underground
utilities or a portion of these utilities to be designated by Buyer. The site
shall be left in a clean, tidy and in a reasonably level graded condition free
of debris, rubble, or depressions that would create ponding; provided,
however, that as to pool and pond areas, Seller shall only be required to
level the terrain surrounding any remaining depressions to minimize any runoff
ponding in said depression areas, but shall not be required to import fill or
compact said areas. All cost associated with the Removal shall be the
expense of Seller and shall be paid as set forth herein. In connection with
entry onto the Property after the Closing Date to perform the Removal, Seller
will execute a License in the form of Exhibit C attached hereto with a
starting date of the Closing Date and a termination date 120 days thereafter.
15.2 Holdback. At the Close of Escrow the Escrow Holder shall hold
back in the Escrow One Hundred Fifty Thousand Dollars ($150,000.00) of the
Purchase Price that would otherwise be deliverable to Seller. All of such
funds held by Escrow Holder shall be referred to herein as the "Holdback
Funds" and shall be disbursed to Seller, pursuant to the terms and provisions
of this Article 15. The Holdback Funds shall be held in an interest-bearing
account for the benefit of Seller except if Buyer completes the Removal as
provided in Section 15.5 of this Agreement. If at any time Seller submits a
copy of an executed contract for the removal, with a guaranteed maximum price,
the amount of the Holdback Funds shall be reduced to 125% of the maximum
amount of the contract. Pursuant to this Article 15, the Holdback Funds are
intended to be released to Seller and applied toward payment by Seller of
costs incurred by Seller in the Removal.
15.3 Disbursement of Holdback Funds. The Holdback Funds shall be
disbursed to Seller upon reasonable approval by Buyer, as follows:
15.3.1 First Disbursement. Upon completion of the Removal,
Seller shall submit a "Request for Disbursement" of one-half of the Holdback
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Funds to Escrow Holder, with a copy to Buyer. If Escrow Holder does not
receive written objections to the Request for Disbursement from Buyer (with
reasons for the objections specified) within five business days after receipt
of the Request for Disbursement, then Escrow Holder shall distribute the sums
set forth in the Request for Disbursement to Seller. If Buyer objects to a
Request for Disbursement, Buyer shall set forth in writing the nature and
extent of the dispute, and unless the parties can resolve their differences
within ten days of such notice, the matter shall be settled by arbitration in
accordance with the local Denver rules of the American Arbitration
Association.
15.3.2 Final Disbursement. Any remaining Holdback Funds shall be
delivered to Seller thirty days after the completion, except as set forth
herein. During the thirty-day period Buyer will test the Property to make
certain that there is no contamination of the Property by Hazardous Materials
as a result of the Removal effort and give Escrow Holder written notice of
whether to release the Holdback Funds to Seller or to hold them on account of
contamination. In the event there is contamination, the Holdback will not be
released until the parties agree as to the cause of and responsibility for the
contamination.
15.3.3 Payment if Buyer Performs Removal. In the event Buyer
assumes responsibility for completion of the Removal in accordance with
Section 15.5 of the Agreement, Buyer shall have the right to receive
disbursements from the Holdback Funds for payment of construction invoices and
upon completion of all the work (as confirmed by Seller and Buyer). Any
balance in the Holdback Funds after payment of the costs of the Removal shall
be released to Seller as set forth in Section 15.3.2.
15.3.4 Escrow Fees. Any Escrow Holder's fees and costs
associated with the Holdback shall be borne by Seller.
15.4 Escrow Exculpation. Escrow Holder is not responsible for the
validity, sufficiency or accuracy of any Request for Disbursement and may rely
thereon. If any dispute arises between Seller and Buyer or if conflicting
demands shall be made upon Escrow Holder regarding the Holdback Funds, Escrow
Holder shall not be required to determine the same or take any action with
respect thereto.
15.5 In the event that Seller defaults in its obligations to perform
the Removal, or fails to timely complete the Removal, for any reason other
than a cause reasonably outside the control of Seller, then Buyer may cause
the Removal to be completed. In such event Seller shall assign any contracts
for the Removal to Buyer at Buyer's request. Buyer shall submit Requests for
Disbursement, subject to Seller's approval, for payment by Escrow Holder, all
as set forth in Section 15.3.1, above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
BUYER:
Bedford Property Investors, Inc., a
Maryland corporation
By: /s/ Anne Hoffman
Anne Hoffman, Sr. Vice
President
SELLER:
The Southshore Corporation, a
Colorado corporation
By: /s/ Kenneth M. Dalton
Name: Kenneth M. Dalton
Its: President
