MINNESOTA
COUNTY FILINGS
T. F. JAMES COMPANY |
| Filing Number | Date of Filing | Type of UCC | Secured Party | Collateral Code |
| 101752 | 5/11/95 | UCC-3 | IDS Life Insurance Company | Continuation to Original Financing Statement #91823 Scott County IDSL Loan #694-1248 |
| 110169 | 5/30/00 | UCC-3 | IDS Life Insurance Company | Continuation to Original Financing Statement #91823 Scott County IDSL Loan #694-1248 |
| 062806 | 11/7/94 | UCC-1 | National City Bank of Minneapolis | Blanket Filing described in Exhibit B in or on real estate described in Exhibit A attached to UCC-1 Financing Statement Benton County |
| 072071 | 10/29/99 | UCC-3 | National City Bank of Minneapolis | Continuation to Original Financing Statement #062806 Benton County |
| 076049 | 6/17/96 | UCC-1 | Norwest Bank Minnesota, National Association | Blanket Filing described in or on real estate described in Exhibit A attached to UCC-1 Financing Statement LeSueur County |
16
MINNESOTA
COUNTY FILINGS
T. F. JAMES COMPANY |
| Filing Number | Date of Filing | Type of UCC | Secured Party | Collateral Code |
| 0082296 | 2/22/01 | UCC-3 | Norwest Bank Minnesota, National Association | Continuation to Original Financing Statement #076049 LeSueur County Also Attached: Fourth Amendment to Promissory Note and to Combination Mortgage, Security Agreement and Fixture Financing Statement and to Assignment of Rents and Leases |
| 0082659 | 6/4/01 | UCC-3 | Norwest Bank Minnesota, National Association | Amendment to Original Financing Statement #076049 – Secured Party Name Change to Wells Fargo Bank Iowa, National Association LeSueur County |
| 1138522 | 5/6/99 | UCC-1 | National City Bank of Minneapolis | Blanket Filing described in Exhibit A in or on real estate described in Exhibit B attached to UCC-1 Financing Statement Hennepin County |
| 1140658 | 9/9/99 | UCC-1 | National City Bank of Minneapolis | Blanket Filing described in Exhibit A in or on real estate described in Exhibit B attached to UCC-1 Financing Statement Hennepin County |
| 97201 | 8/1/00 | UCC-1 | National City Bank of Minneapolis | Blanket Filing described in Exhibit B in or on real estate described in Exhibit A attached to UCC-1 Financing Statement Carver County |
17
MINNESOTA
COUNTY FILINGS
T. F. JAMES COMPANY |
| Filing Number | Date of Filing | Type of UCC | Secured Party | Collateral Code |
| 185354 | 5/25/01 | UCC-1 | Lutheran Brotherhood | Blanket Filing described in Exhibit A in or on real estate described in Exhibit B attached to UCC-1 Financing Statement Washington County Copy of exhibits to come |
18
UCC SEARCH SUMMARY
NAME OF DEBTOR: | T. F. James Company |
JURISDICTIONS: | Iowa Secretary of State |
| EFFECTIVE DATE OF SEARCH: | July 30, 2002 – UCC/Tax Lien – Federal
March 30, 2002 – Tax Lien – County |
2 UCC filings were found at the Iowa Secretary of State's office. See chart for details.
No Federal or State Tax Liens were found.
19
| IOWASECRETARY OF STATET. F. JAMES COMPANY |
| Filing Number | Date of Filing | Type of UCC | Secured Party | Collateral Code |
| P307891 | 8/7/01 | UCC-1 | The County Bank | Blanket Filing described in Exhibit A in or on real estate described in Exhibit B attached to UCC-1 Financing Statement |
| P328026 | 10/15/01 | UCC-1 | Central Bank | Initial Financing Statement In Lieu of Continuation Statement to Original Financing Statement #2243669, filed in the State of Minnesota on 7/14/00 |
20
UCC SEARCH SUMMARY
NAME OF DEBTOR: | Westlake Liquors, Inc. |
JURISDICTIONS: | Minnesota Secretary of State
Hennepin County |
| EFFECTIVE DATE OF SEARCH: | July 29, 2002 – UCC/Federal/State Tax Lien – MN Central Index
July 5, 2002 – State/Federal Tax Lien – MN Hennepin County
July 18, 2002 – Bankruptcy
July 5, 2002 – Judgment |
No UCC filings were found at the Minnesota Secretary of State's office.
No Federal or State Tax Liens, Bankruptcy's or Judgment's were found.
21
T. F. JAMES COMPANY
SCHEDULE 3.6
Condition of Assets
None 22
T. F. JAMES COMPANY
SCHEDULE 3.7
Litigation1. | Janet Gale and Alan Gale, wife and husband v. Hollywood Entertainment Corporation, d/b/a Hollywood Video and T.F. James Company; Hennepin County District Court File No. PI 02006330. This action involves a claim filed on March 6, 2002, by Janet Gale and Alan Gale, wife and husband, against the Company for a "slip and fall" injury sustained by Mrs. Gale at the Company's retail center in Chanhassen, Minnesota. Both Plaintiffs are individually seeking to recover damages in an amount greater than Fifty Thousand ($50,000) Dollars. On January 20, 2002, the Company settled this claim in the amount of $25,000 to be paid by the Company's insurance company, Cincinnati Insurance Company. This claim is currently being handled by Cincinnati Insurance Company and is represented by Terhaar, Archibald, Pfefferle & Griebel, LLP, 300 First Avenue North, Suite 220, Minneapolis, MN 55401, (612) 573-3000; see also Schedule 3.13(5). |
2. | Good Fortune Properties, LLC v. The Order of St. Benedict, First American Title Insurance Company and T.F. James Company, Dakota County District Court File No. 19-C7-02-10591. This action involves a claim filed on October 22, 2002, by the Plaintiff, a prospective purchaser of the land adjacent to the Company's Burnsville, Minnesota retail center. The Plaintiff wants to ensure that the Company's easement will give it access to the property it wants to buy. The easement is in place and there should be no monetary damages in this regard. This claim against the Company is currently being handled by Thorfinnson & Thorfinnson, P.A., P.O. Box 44326, Eden Prairie, MN 55344, (952) 974-0454; see also Schedule 3.13(5). |
23
T. F. JAMES COMPANY
SCHEDULE 3.8
Labor Matters None 24
T. F. JAMES COMPANY
SCHEDULE 3.9(a)
Tax ReturnsTax returns filed by the Company:
1. Tax year ended April 30, 1999:
(a) Federal
(b) Minnesota
(c) Arizona
(d) Iowa
(e) Kansas
(f) Montana
(g) North Dakota
(h) Tennessee
(i) Wisconsin
2. Tax year ended April 30, 2000:
(a) Federal
(b) Minnesota
(c) Arizona
(d) Iowa
(e) Kansas
(f) Montana
(g) North Dakota
(h) Tennessee
(i) Wisconsin
3. Tax year ended April 30, 2001:
(a) Federal
(b) Minnesota
(c) Arizona
(d) Iowa
(e) Kansas
(f) Montana
(g) North Dakota
(h) Tennessee
(i) Wisconsin
25
3. Tax year ended September 30, 2001 :
(a) Federal
(b) Minnesota
(c) North Dakota
(d) Wisconsin
(e) Montana
(f) Tennessee
S Election:
The Company made the S election with the IRS on June 26, 2001, effective as of May 1, 2001.
Built-In-Gains Tax:
In connection with the May 1, 2001 Company's Subchapter S election under the Code, the Company became subject to the so-call "Built-In-Gains Tax" under Section 1374 of the Code. Under Code Section 1374, the Company became subject to a potential corporate level tax that is imposed on any appreciation that existed in the Company's assets held by the Company on May 1, 2001, the date of the Company's S election, as those assets are disposed of during the next ten (10) year period. The Build-in-Gain affects each parcel of the Owned Real Property of the Company. This Built-in-Gain Tax will be unaffected by the Merger, except that the Shareholders will not be liable for any Built-in-Gain Tax after the Closing. The amount of the Built-in-Gain subject the Built-in-Gain Tax is approximately $34.845 million.
In addition, the "Northfield" property was subject to a condemnation proceeding (a §1033 exchange) during the calendar year 2002. The tax on this condemnation is deferred under section 1033 of the Code. The Northfield property must be replaced within three (3) years after the year (2002) of the condemnation (estimated as September 30, 2005) or the gain and the Built-in-Gain will become payable. The Built-in-Gain subject to the Built-in-Gains Tax on the Northfield property is $215,648. see also Schedule 3.17(h)(2).
See attached Built-in-Gain Calculation's as of April 30, 2002.
26
Built-in-Gain Calculation - - April 30, 2002
Updated for Disposals Through 1/31/03
| Property | FMV | Land | Bldgs &
Other | Accum Depr | Total Tax Basis | Built In
Gain |
| Andover - Tom Thumb | 150,000 | 30,000 | 77,951 | (60,978) | 46,973 | 103,027 |
| Anoka | 700,000 | 75,000 | 301,583 | (157,491) | 219,092 | 480,908 |
| Bethel | 310,000 | 32,552 | 235,819 | (219,688) | 48,683 | 261,317 |
| Blaine | 490,000 | 30,349 | 250,774 | (192,264) | 88,859 | 401,141 |
| Buffalo | 460,000 | 31,000 | 193,050 | (149,743) | 74,307 | 385,693 |
| Burnsville | 1,100,000 | 81,561 | 615,036 | (496,610) | 199,987 | 900,013 |
| Burnsville II | 700,000 | 81,560 | 503,241 | (378,190) | 206,611 | 493,389 |
| Centerville | 300,000 | 15,213 | 173,449 | (173,449) | 15,213 | 284,787 |
| Chanhassen | 18,500,000 | 1,796,596 | 12,720,509 | (1,495,937) | 13,021,168 | 5,478,832 |
| Eagan | 500,000 | 16,542 | 332,866 | (269,894) | 79,514 | 420,486 |
| Eagan - Phase II | 1,100,000 | 34,196 | 562,497 | (559,872) | 36,821 | 1,063,179 |
| Eagan - PDQ | 675,000 | 15,000 | 290,512 | (96,320) | 209,192 | 465,808 |
| Eden Prairie | 5,000,000 | 84,781 | 3,983,676 | (3,302,857) | 765,600 | 4,234,400 |
| Excelsior | 740,000 | 50,000 | 220,171 | (215,844) | 54,327 | 685,673 |
| Faribault | 380,000 | 35,000 | 84,887 | (58,776) | 61,111 | 318,889 |
| Forest Lake - Crown Auto | 500,000 | 107,294 | 280,503 | (258,891) | 128,906 | 371,094 |
| Forest Lake - Retail | 6,500,000 | 138,583 | 4,310,986 | (1,199,223) | 3,250,346 | 3,249,654 |
| Glencoe | 300,000 | 55,697 | 210,739 | (194,369) | 72,067 | 227,933 |
| Greenwood | 1,000,000 | 232,107 | 1,184,227 | (145,934) | 1,270,400 | (270,400) |
| Ham Lake | 275,000 | 43,000 | 166,807 | (147,691) | 62,116 | 212,884 |
| Howard Lake | 265,000 | 20,879 | 158,810 | (158,810) | 20,879 | 244,121 |
| Inver Grove Center | 850,000 | 87,061 | 454,359 | (449,477) | 91,943 | 758,057 |
| Inver Grove - Undeveloped | 600,000 | 231,541 | | | 231,541 | 368,459 |
| Lakeland | 280,000 | 11,402 | 217,378 | (217,378) | 11,402 | 268,598 |
| Lakeville | 530,000 | 29,798 | 274,014 | (195,977) | 107,835 | 422,165 |
| Lindstrom | 130,000 | 18,500 | 94,445 | (70,102) | 42,843 | 87,157 |
| Lino Lakes | 400,000 | 22,000 | 276,194 | (197,118) | 101,076 | 298,924 |
| Monticello | 228,000 | 58,685 | 107,024 | (77,206) | 88,503 | 139,497 |
| Mora | 158,000 | 32,000 | 101,184 | (78,458) | 54,726 | 103,274 |
| Mound | 250,000 | 47,788 | 150,234 | (116,475) | 81,547 | 168,453 |
| Mounds View | 310,000 | 22,424 | 123,567 | (75,596) | 70,395 | 239,605 |
| Northfield (Condemnation Sec. 1033 Exchange) | 290,000 | 30,000 | 161,303 | (116,951) | 74,352 | 215,648 |
| Oakdale | 480,000 | 34,325 | 449,248 | (156,122) | 327,451 | 152,549 |
| Paynesville | 280,000 | 27,375 | 213,172 | (198,538) | 42,009 | 237,991 |
| Pine City - Tom Thumb | 330,000 | 50,000 | 282,029 | (259,833) | 72,196 | 257,804 |
| Pine City - Pamida Center | 3,150,000 | 132,099 | 2,460,892 | (902,172) | 1,690,819 | 1,459,181 |
| Prior Lake - PDQ | 700,000 | 39,218 | 393,833 | (393,833) | 39,218 | 660,782 |
| Prior Lake - Undeveloped | 150,000 | 30,235 | | | 30,235 | 119,765 |
| Rochester | 350,000 | 44,000 | 148,653 | (94,123) | 98,530 | 251,470 |
| St. Louis Park | 300,000 | 35,000 | 73,825 | (63,986) | 44,839 | 255,161 |
| Sauk Rapids | 148,000 | 13,500 | 115,354 | (83,383) | 45,471 | 102,529 |
| Shoreview | 159,000 | 24,000 | 132,049 | (96,452) | 59,597 | 99,403 |
| St. Paul - West 7th Street | 375,000 | 55,000 | 96,373 | (77,761) | 73,612 | 301,388 |
27
| Willmar | 450,000 | 36,610 | 250,803 | (121,689) | 165,724 | 284,276 |
| Winsted | 278,000 | 34,152 | 180,713 | (180,713) | 34,152 | 243,848 |
| Libby - Undeveloped | 98,000 | 97,677 |
|
| 97,677 | 323 |
| Kalispell - Pamida Center | 2,800,000 | 389,000 | 1,483,220 | (515,313) | 1,356,907 | 1,443,093 |
| Kalispell - Undeveloped | 770,000 | 610,217 |
|
| 610,217 | 159,783 |
| Livingston | 1,961,000 | 195,693 | 1,378,792 | (480,598) | 1,093,887 | 867,113 |
| | | | | | | |
| Fargo | 2,100,000 | 369,889 | 1,245,454 | (626,826) | 988,517 | 1,111,483 |
| Jamestown | 2,280,000 | 325,224 | 3,406,390 | (1,887,373) | 1,844,241 | 435,759 |
| | | | | | | |
| Ripley | 600,000 | 193,996 | 902,974 | (815,176) | 281,794 | 318,206 |
| Ripley - Bank of Ripley | 200,000 | | 123,520 | (95,786) | 27,734 | 172,266 |
| Ripley - Pizza Hut | 200,000 | | 68,082 | (68,082) | 0 | 200,000 |
| | | | | | |
| Berlin | 145,000 | 32,000 | 76,888 | (76,888) | 32,000 | 113,000 |
| Ladysmith | 1,790,000 | 95,046 | 1,453,672 | (523,486) | 1,025,232 | 764,768 |
| Schofield | 1,900,000 | 149,000 | 1,138,820 | (814,243) | 473,577 | 1,426,423 |
|
|
|
|
|
|
|
| TOTALS | 65,965,000 | 6,611,365 | 44,892,551 | (20,059,945) | 31,443,971 | 34,521,029 |
|
|
|
|
|
|
|
| Inventory | 139,706 |
|
|
| 139,706 | 0 |
| Investment in Liquor Store | 300,000 |
|
|
| (24,131) | 324,131 |
| Subtotal |
|
|
|
|
| 34,845,160 |
| | | | | | | |
| Cash Surrender Value of Life Insurance | 493,962 | | | | 395,868 | 98,094 |
| TOTAL BUILT IN GAIN | | | | | | 34,943,254 |
28
29
T. F. JAMES COMPANY
SCHEDULE 3.9(c)
Other Tax Matters
None. 30
T. F. JAMES COMPANY
SCHEDULE 3.9(c)(i)
Audits or Other Examinations None 31
T. F. JAMES COMPANY
SCHEDULE 3.10
Employee BenefitsLife Insurance Policies:
1. Policy on Thomas F. James
New York Life Insurance Company
Policy #25 448 610
Policy Amount: $50,000
Net Cash Value: Approximately $21,963.03
Sold to James Family Properties in January 2003; see also Schedule 3.13(9)
2. Policy on Thomas F. James
CUNA Mutual Life Insurance Company
Policy #00758065
Policy Amount: $200,000
Net Cash Value: Approximately $65,632.9
�� Sold to James Family Properties in January 2003; see also Schedule 3.13(9)
Term Life Policies on Present Shareholders:
The following Term Life Policies were transferred by the company to each shareholder individually in January, 2003; see also Schedule 3.13(10):
1. Douglas M. James
Northwestern Mutual
Policy #14404613
$1,000,000
2. Charles Wm. James
Northwestern Mutual
Policy #12524265
$1,000,000
3. Thomas J. Legierski
Northwestern Mutual
Policy #8132207
$1,000,000
4. Judith J. Scherer
First Colony Life Insurance
Policy #0205384
$1,000,000
32
5. Robert R. James
First Colony Life Insurance
Policy #0205384
$1,000,000
6. Thomas M. James
National Life Insurance
Policy #1702123
$1,000,000
Annuities/Pensions to Former Employees:
1. Elaine Engels
10 year annuity paying $9,796.32 per year, beginning on October 1996
The Company paid-in-full the balance of $31,964.26, on January 27, 2003; see also Schedule 3.13(11)
2. James B. O'Rourke
Lifetime annuity paying $10,400 per year, beginning in 1985
The Company paid-in-full the balance of $58,977, on January 27, 2003; see also Schedule 3.13(11)
3. Thomas F. James, Sr.
Lifetime annuity paying $141,432 per year, beginning in 1984
Balance of Company pay off by January 31, 2003, is approximately $575,115; see also Schedule 3.26(1).
Employee Group Insurance:
1. Life/AD&D Insurance, Health Insurance and Dental Insurance, is provided by the Company to
all employees by the Principal Life Insurance Company, Account #P53572-1.
2. The Company carries disability insurance for all employees from Unum Insurance Co.,
Policy #0332403.
33
T. F. JAMES COMPANY
SCHEDULE 3.11
GuarantiesGuarantees by Shareholders on Debts of the Company
Each of the Company Shareholders have personally guaranteed the following Indebtedness of the Company; see also Schedules 3.26(3) and 5.14:
| Lender | Purpose/Security | Original
Amount |
Central Bank | Line of Credit | $750,000.00 |
Marshall & Ilsley Bank | Unsecured Note | 300,000.00 |
Marshall & Ilsley Bank | Schofield, WI | 271,153.90 |
Marshall & Ilsley Bank | Kalispell, MT | 2,200,000.00 |
Twin City Federal | Excelsior, MN | 205,239.68 |
Premier Bank | St. Paul, MN | 100,000.00 |
Oakley National Bank | Buffalo, MN | 140,701.00 |
Marshall & Ilsley Bank | Chanhassen #2, MN | 3,100,000.00 |
Wells Fargo Bank | Inver Grove, MN (Land) | 250,000.00 |
Marshall & Ilsley Bank | Lakeville, MN | 225,000.00 |
Lake Country Bank | Long Prairie, MN | 470,692.73 |
Marshall & Ilsley Bank | Jamestown, ND | 1,206,000.00 |
Marshall & Ilsley Bank | Livingston, MT | 900,000.00 |
Lutheran Brotherhood | Forest Lake, MN | 3,400,000.00 |
Lutheran Brotherhood | Forest Lake, MN | 760,000.00 |
Marshall & Ilsley Bank | Greenwood, MN | 750,000.00 |
Marshall & Ilsley Bank | Greenwood, MN | 250,000.00 |
American Express Financial | Pine City, MN | 2,300,000.00 |
Valley Bank | Kalispell, MT (Land) | 190,000.00 |
County Bank | Oakdale, MN | 200,000.00 |
American Express Financial | Ladysmith, WI | 1,200,000.00 |
U.S. Bank | Eden Prairie, MN | 3,600,000.00 |
American Express Financial | Eagan, MN; Prior Lake, MN; Ripley, TN | 3,350,000.00 |
Guarantees by the Company on behalf of the Shareholders
The Company has guaranteed a loan with First Interstate Bank dated February 1985, for property purchased by Peak Properties Development, a partnership owned by the Shareholders of the Company, in Helena, Montana. The original loan was in the amount of $1,335,000. As of January 1, 2003, the amount owed on the loan was $494,993.74; see also Schedule 3.26(3).
34
T. F. JAMES COMPANY
SCHEDULE 3.12
Financial Statements
| 1. | The undeveloped property, located at Highway 35 & 93, in Polson, Montana, was deeded to the James Family Properties and is mistakenly listed on the Company's Schedule of Real Estate as of September 30, 2002; see also "Built-In-Gains" disclosures set forth on Schedule 3.9(a) and disclosures set forth on Schedule 3.13(12). |
| 2. | See T.F. James Company and Subsidiaries Consolidated Financial Statement as of September 30, 2002 which follow. |
35
T. F. JAMES COMPANYAND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
TOGETHER WITH
INDEPENDENT AUDITORS’ REPORTSEPTEMBER 30, 2002
OLSEN THIELEN & CO., LTD.
Certified Public Accountants & Consultants
36
T. F. JAMES COMPANY AND SUBSIDIARIESCONTENTS
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet
Statement of Operations and Retained Earnings
Statement of Cash Flows
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY INFORMATION
SUPPLEMENTARY FINANCIAL INFORMATION:
Consolidating Schedules—
Balance Sheet Information
Statement of Operations and Retained Earnings (Deficit) Information
Statement of Cash Flows Information
Schedule of General and Administrative Expenses Information
Schedule of Rental Income
Schedule of Real Estate
37
INDEPENDENT AUDITORS' REPORT
Board of Directors
T. F. James Company and Subsidiaries
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheet of T. F. James Company (an Iowa corporation) and subsidiaries as of September 30, 2002 and 2001, and the related consolidated statements of operations and retained earnings and cash flows for the year and five months ended September 30, 2002 and 2001 and the year ended April 30, 2001. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of T. F. James Company and subsidiaries as of September 30, 2002 and 2001, and the results of their operations and their cash flows for the year and five months ended September 30, 2002 and 2001 and the year ended April 30, 2001, in conformity with accounting principles generally accepted in the United States of America.
/S/ Olsen Thielen & Co., LTD
St. Paul, Minnesota
November 14, 2002
38
T. F. JAMES COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2002 AND 2001
ASSETS
| | | 2002 | | | | 2001 | |
| | | | | | | | | |
Cash | | $ | 484,702 | | | $ | 361,869 | |
Cash in Escrow | | | 237,378 | | | | 306,675 | |
Accounts Receivable, Less Allowance for | | | | | | | | |
Doubtful Accounts of $52,124 | | | 1,089,735 | | | | 1,167,828 | |
Rents Receivable | | | 83,190 | | | | 49,707 | |
Income Taxes Receivable | | | 116,337 | | | | 57,702 | |
Other Receivables | | | 113,366 | | | | 100,000 | |
Inventory | | | 124,878 | | | | 140,608 | |
Prepaid Expenses | | | 13,974 | | | | 13,974 | |
Cash Value of Life Insurance | | | 92,327 | | | | 87,005 | |
Mortgage Commitment Fees, Net | | | 43,448 | | | | 43,448 | |
| | | 2,399,335 | | | | 2,328,816 | |
| | | | | | | | |
Rental Real Estate | | | 53,663,172 | | | | 52,514,303 | |
Real Estate Development in Progress | | | 372,213 | | | | 205,091 | |
Less Accumulated Depreciation | | | (19,329,329 | ) | | | (18,349,392 | ) |
Net Rental Real Estate | | | 34,706,056 | | | | 34,370,002 | |
| | | | | | | | |
Other Property and Equipment | | | 601,708 | | | | 707,056 | |
Less Accumulated Depreciation | | | (452,446 | ) | | | (509,500 | ) |
Net Other Property and Equipment | | | 149,262 | | | | 197,556 | |
| | | | | | | | |
| | | | | | | | |
TOTAL ASSETS | | $ | 37,254,653 | | | $ | 36,896,374 | |
The accompanying notes are an integral part of the consolidated financial statements. 39
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES: | | | 2002 | | | | 2001 | |
| | | | | | | | | |
Notes Payable | | $ | 1,017,833 | | | $ | 665,779 | |
Accounts Payable | | | 1,871,081 | | | | 1,928,297 | |
Accrued Real Property Taxes | | | 221,065 | | | | 235,359 | |
Accrued Interest Payable | | | 256,138 | | | | 256,138 | |
Payable to Related Party | | | 100,000 | | | | – | |
Rents Received in Advance | | | 156,574 | | | | 53,125 | |
Retirement Contract Payable | | | 93,249 | | | | 41,468 | |
Annuity Payable | | | 605,997 | | | | 655,942 | |
Long-Term Debt | | | 31,895,034 | | | | 32,846,989 | |
Total Liabilities | | | 36,216,971 | | | | 36,683,097 | |
| | | | | | | | |
| | | | | | | | |
STOCKHOLDERS' EQUITY: | | | | | | | | |
Common Stock, $100 Par Value, 1,250 | | | | | | | | |
Shares Authorized, 650 Shares | | | | | | | | |
Issued, 165.5 Shares Outstanding | | | 65,000 | | | | 65,000 | |
Retained Earnings | | | 4,090,562 | | | | 3,232,358 | |
Cost of 484.5 Shares of Common Stock | | | | | | | | |
Owned by Company | | | (3,117,880 | ) | | | (3,084,081 | ) |
Total Stockholders' Equity | | | 1,037,682 | | | | 213,277 | |
| | | | | | | | |
| | | | | | | | |
TOTAL LIABILITIES AND | | | | | | | | |
STOCKHOLDERS' EQUITY | | $ | 37,254,653 | | | $ | 36,896,374 | |
40
T. F. JAMES COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR AND FIVE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 AND
YEAR ENDED APRIL 30, 2001
| | | | | | | 2001 | |
| | | 2002 | | | | September
30 | | | | April 30 | |
REVENUES: | | | | | | | | | | | | |
Sales and Rental Income | | $ | 7,359,251 | | | $ | 3,300,873 | | | $ | 7,293,650 | |
Less Cost of Sales and Operating
Expenses | | | 5,353,734 | | | | 2,488,319 | | | | 5,350,389 | |
Gross Profit and Net Rental Income | | | 2,005,517 | | | | 812,554 | | | | 1,943,261 | |
| | | | | | | | | | | | |
Gain on Sale of Real Estate | | | 898,275 | | | | 15,614 | | | | 1,095,615 | |
Interest Income | | | 16,572 | | | | 4,985 | | | | 32,862 | |
Miscellaneous Income, Net | | | 96,530 | | | | 32,517 | | | | 478,587 | |
Net Revenues | | | 3,016,894 | | | | 865,670 | | | | 3,550,325 | |
| | | | | | | | | | | | |
GENERAL AND ADMINISTRATIVE EXPENSES | | | 1,726,503 | | | | 741,240 | | | | 1,996,924 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 1,290,391 | | | | 124,430 | | | | 1,553,401 | |
| | | | | | | | | | | | |
INCOME TAXES (BENEFIT) | | | 45,624 | | | | (384,711 | ) | | | 707,309 | |
| | | | | | | | | | | | |
NET INCOME | | | 1,244,767 | | | | 509,141 | | | | 846,092 | |
| | | | | | | | | | | | |
RETAINED EARNINGS at Beginning of Year | | | 3,232,358 | | | | 2,768,627 | | | | 1,922,535 | |
| | | | | | | | | | | | |
DIVIDENDS | | | (386,563 | ) | | | (45,410 | ) | | | – | |
| | | | | | | | | | | | |
RETAINED EARNINGS at End of Year | | $ | 4,090,562 | | | $ | 3,232,358 | | | $ | 2,768,627 | |
The accompanying notes are an integral part of the consolidated financial statements. 41
T. F. JAMES COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS
YEAR AND FIVE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 AND
YEAR ENDED APRIL 30, 2001
| |
| | | 2001 | |
| | 2002 | | | September 30 | | | April 30 | |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | |
Net Income | | $ | 1,244,767 | | | $ | 509,141 | | | $ | 846,092 | |
Adjustments to Reconcile Net
Income to Net Cash Provided
By Operating Activities: | | | | | | | | | | | | |
Depreciation | | | 1,355,866 | | | | 559,348 | | | | 1,276,831 | |
Gain on Sale of Property | | | (898,275 | ) | | | (15,614 | ) | | | (1,095,615 | ) |
Changes in Assets and Liabilities: | | | | | | | | | | | | |
Cash in Escrow | | | 69,297 | | | | (68,383 | ) | | | 34,555 | |
Accounts Receivable | | | 78,093 | | | | (393,944 | ) | | | (78,440 | ) |
Rents Receivable | | | (33,483 | ) | | | (29,289 | ) | | | 2,503 | |
Other Receivable | | | (13,366 | ) | | | – | | | | – | |
Inventory | | | 15,730 | | | | (902 | ) | | | 74,135 | |
Prepaid Expenses | | | – | | | | – | | | | 2,329 | |
Accounts Payable | | | (57,216 | ) | | | 451,300 | | | | 139,994 | |
Accrued Real Property Taxes | | | (14,294 | ) | | | 72,389 | | | | (33,658 | ) |
Accrued Interest Payable | | | – | | | | 12,825 | | | | 25,458 | |
Rents Received in Advance | | | 103,449 | | | | (135,930 | ) | | | 86,217 | |
Retirement Contract Payable | | | 51,781 | | | | (2,846 | ) | | | (6,502 | ) |
Accrued Income Taxes | | | (58,635 | ) | | | (437,631 | ) | | | 303,966 | |
Deferred Income Taxes | | | – | | | | (347,330 | ) | | | 199,839 | |
Net Cash Provided By Operating
Activities | | | 1,843,714 | | | | 173,134 | | | | 1,777,704 | |
| | | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | |
Increase in Other Receivables | | | – | | | | – | | | | (100,000 | ) |
Purchase of Property and Equipment | | | (1,820,795 | ) | | | (603,047 | ) | | | (5,060,320 | ) |
Proceeds from Sale of Property and
Equipment | | | 1,075,444 | | | | 24,300 | | | | 2,651,092 | |
Increase in Cash Value of Life
Insurance, Net | | | (5,322 | ) | | | 2,515 | | | | (11,426 | ) |
Payments Received on Contract
for Deed | | | – | | | | 9,896 | | | | 31,526 | |
Net Cash Used In Investing
Activities | | | (750,673 | ) | | | (566,336 | ) | | | (2,489,128 | ) |
| | | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | |
Net Borrowing (Repayment) Under
Line-of-Credit Agreements | | | 352,054 | | | | 479,033 | | | | (619,420 | ) |
Principal Payments of Long-Term
Debt | | | (1,739,397 | ) | | | (601,076 | ) | | | (2,386,334 | ) |
Proceeds from Issuance of
Long-Term Debt | | | 787,442 | | | | 294,851 | | | | 4,114,262 | |
Change in Treasury Stock | | | (33,799 | ) | | | – | | | | – | |
Related Party Loans, Net | | | 100,000 | | | | – | | | | (13,460 | ) |
Decrease in Annuity Payable | | | (49,945 | ) | | | – | | | | (33,837 | ) |
Payment of Dividends | | | (386,563 | ) | | | (45,410 | ) | | | – | |
Net Cash Provided By (Used In)
Financing Activities | | | (970,208 | ) | | | 127,398 | | | | 1,061,211 | |
| | | | | | | | | | | | |
NET INCREASE (DECREASE) IN CASH | | | 122,833 | | | | (265,804 | ) | | | 349,787 | |
| | | | | | | | | | | | |
CASH at Beginning of Year | | | 361,869 | | | | 627,673 | | | | 277,886 | |
| | | | | | | | | | | | |
CASH at End of Year | | $ | 484,702 | | | $ | 361,869 | | | $ | 627,673 | |
42
Net Cash Provided By (Used In)
Financing Activities | | | (970,208 | ) | | | 127,398 | | | | 1,061,211 | |
| | | | | | | | | | | | |
NET INCREASE (DECREASE) IN CASH | | | 122,833 | | | | (265,804 | ) | | | 349,787 | |
| | | | | | | | | | | | |
CASH at Beginning of Year | | | 361,869 | | | | 627,673 | | | | 277,886 | |
| | | | | | | | | | | | |
CASH at End of Year | | $ | 484,702 | | | $ | 361,869 | | | $ | 627,673 | |
The accompanying notes are an integral part of the consolidated financial statements. 43
T. F. JAMES COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company's principal line of business is the purchase, sale and operation of rental property. The Company holds real estate in five states concentrated mostly in the midwest.
Accounting Estimates
The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and accounts have been eliminated in consolidation.
Inventory
Inventories of finished goods are valued at the lower of first-in, first-out cost or market.
Property and Depreciation
Property and equipment are recorded at original cost. Additions, improvements or major renewals are capitalized. Any gains or losses on property and equipment retirements are reflected in the current year operations.
Depreciation is computed using the straight-line and declining balance methods at rates based on the asset's useful life as follows:
Buildings | 5-40 years |
Rental Equipment | 7-8 years |
Furniture and Fixtures | 2-7 years |
Transportation Equipment | 3-5 years |
Interest
The Company capitalizes interest related to assets during their construction. For the year and five months ended September 30, 2002 and 2001 and the year ended and April 30, 2001, $0 and $0 and $156,948 was capitalized, $2,689,060 and $1,148,412 and $2,619,896 was expensed as rental
44
operating expense, and $30,113 and $54,046 and $82,220 was expensed as general and administrative expense.
45
T. F. JAMES COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the Company’s large number of customers and their dispersion across many different industries. The Company requires no collateral from its customers. Historically, the Company has not incurred significant credit related losses and believes no significant credit risk exists at September 30, 2002.
Income Taxes
Prior to May 1, 2001 the provision for income taxes consisted of an amount for taxes that were currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes were recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities were measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences were expected to be recovered or settled. The major temporary difference that gave rise to the net deferred tax liability was alternative minimum tax credit carryforwards and depreciation, which for tax purposes is determined based on accelerated methods and shorter lives.
As of May 1, 2001 the Company elected to have its income taxed to the shareholders under Subchapter S of the Internal Revenue Code. Therefore, for the years subsequent to April 30, 2001 the statements will not include a provision for income taxes, except for the benefit due to the reversal of previously recorded deferred income taxes.
Reclassification
Certain reclassifications have been made to the 2001 financial statements to conform to the 2002 presentations. These reclassifications had no effect on net income or total stockholders’ equity.
NOTE 2 - CASH VALUE OF LIFE INSURANCE
The Company has $207,000 of life insurance on a former shareholder. The cash value of life insurance is presented net of life insurance loans:
| | | 2002 | | | | 2001 | |
Cash Surrender Value | | $ | 527,057 | | | $ | 498,531 | |
Policy Loans | | | 434,730 | | | | 411,526 | |
| | | | | | | | |
Net Cash Value | | $ | 92,327 | | | $ | 87,005 | |
46
NOTE 3 - NOTES PAYABLE
Notes payable consists of two lines of credit agreements totaling $1,310,000. Interest is paid monthly at 1% above the prime rate. The notes are secured by real estate.
47
T. F. JAMES COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LONG-TERM DEBT
Long-term debt and related pledged assets are as follows:
| | | 2002 | | | | 2001 | |
Real Estate Mortgages payable in monthly installments with
6.5% to 10.5% interest. Mortgages are secured by real estate. | | $ | 31,846,317 | | | $ | 32,783,621 | |
| | | | | | | | |
Notes payable in monthly installments with 1.9% to 10%
interest. The notes are secured by transportation equipment. | | | 48,717 | | | | 63,368 | |
| | | | | | | | |
Total | | $ | 31,895,034 | | | $ | 32,846,989 | |
The principal payments required during the next five years are: 2003 $1,749,000; 2004 $2,263,000; 2005 $1,815,000; 2006 $1,837,000; and 2007 $1,916,000.
NOTE 5 - INCOME TAXES
The Company elected to be a Subchapter S corporation beginning May 1, 2001. Therefore, deferred income tax liabilities were eliminated resulting in a recognition of income tax benefits in 2001.
The provisions for income tax expense includes the following components:
| |
| | | 2001 | |
| | 2002 | | | September 30 | | | April 30 | |
|
|
|
|
|
|
|
|
|
|
Current Payable: | | | | | | | | | | | | |
Federal | | $ | (1,044 | ) | | $ | (41,880 | ) | | $ | 381,099 | |
State | | | 46,668 | | | | 4,499 | | | | 126,371 | |
Total | | | 45,624 | | | | (37,381 | ) | | | 507,470 | |
| | | | | | | | | | | | |
Deferred: | | | | | | | | | | | | |
Federal | | | – | | | | (169,742 | ) | | | 167,075 | |
State | | | – | | | | (177,588 | ) | | | 32,764 | |
|
| | – | | | | (347,330 | ) | | | 199,839 | |
| | | | | | | | | | | | |
Total Income Tax Expense
(Benefit) | | $ | 45,624 | | | $ | (384,711 | ) | | $ | 707,309 | |
The Company is subject to a built-in gains tax on asset appreciation. The appreciation is calculated as of the Subchapter S election date and is the excess of the fair market value of all corporate assets over their tax bases. The tax is imposed at the maximum federal rate of 35% and is based on the
48
Company’s asset appreciation that is realized within ten years after the Subchapter S election. Asset appreciation as of May 1, 2001 is approximately $34,800,000.
49
T. F. JAMES COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES AND INVESTMENT TAX CREDITS (Continued)
When a company changes from a C corporation to an S corporation it would continue to recognize a deferred tax liability to the extent it would be subject to the builtin gains tax. Deferred tax liabilities were eliminated May 1, 2001 since the realized asset appreciation for the ten year period cannot be reasonably estimated.
Built in gains of approximately $580,000 were recognized in the year ended September 30, 2002. Alternative minimum tax credit carryforwards of approximately $310,000 were used to offset the built in gains income tax liability.
NOTE 6 - RENTAL INCOME UNDER OPERATING LEASES
The Company rents various real estate under noncancelable leases. Real estate consists primarily of retail store buildings and related land. Most leases include provisions for additional rent based on excess sales. All of these leases, with terms of from one to twenty years, have been accounted for as operating leases.
The following is a schedule of future minimum rental revenue due under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of September 30, 2002:
2003 | | | | | | $ | 5,932,000 | |
2004 | | | | | | | 5,555,000 | |
2005 | | | | | | | 5,069,000 | |
2006 | | | | | | | 4,750,000 | |
2007 | | | | | | | 4,354,000 | |
Later Years | | | | | | | 13,964,000 | |
| | | | | | | | |
Total Minimum Rental Revenue | | | | | | $ | 39,624,000 | |
NOTE 7 - ANNUITY PAYABLE
On July 15, 1979, the Company purchased 475 shares of its common stock in exchange for a lifetime annuity payable to the former shareholder. The annuity contract provides for monthly payments of $11,786. The stock purchased and the liability for the annuity were recorded at the present value of the expected future payments discounted using a 6% rate and IRS mortality tables. The liability and treasury stock is adjusted annually based on the life expectancy of the former shareholder. Treasury stock increased $33,799 and $0 during the years ended September 30, 2002 and 2001 as a result of this adjustment.
50
T. F. JAMES COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCK REDEMPTION AGREEMENT
The Company has a stock redemption agreement with all stockholders requiring the corporation to purchase the outstanding shares of any stockholder upon death. The agreement requires an unspecified payment at time of death and the remainder to be paid in installments over five years with 8% interest. The Company has sufficient life insurance on all stockholders to meet current redemption agreement requirements. The agreement allows transfer by gift or sale to members of a stockholder's family, other stockholders or children of any other stockholder. This agreement also restricts the sale of corporation stock to outsiders by giving the corporation and other stockholders first option to purchase at a predetermined price.
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION
| |
| | | 2001 | |
| | 2002 | | | September 30 | | | April 30 | |
Cash Payments For: | | | | | | | | | | | | |
Interest | | $ | 2,719,173 | | | $ | 1,189,134 | | | $ | 2,665,447 | |
Income Taxes | | | 104,259 | | | | 400,250 | | | | 203,504 | |
NOTE 10 - RETIREMENT CONTRACT
The Company is making monthly payments of $816, including 7% interest, to a retired employee which will continue to September 1, 2006.
The Company has a lifetime annuity payable to a former employee. The annuity contract provides for monthly payments of $867. The liability for the annuity was recorded at the present value of expected future payments discounted using a 6% late and IRS mortality tables. The liability is adjusted annually based on the life expectancy of the former employee.
51
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
Board of Directors
T. F. James Company and Subsidiaries
Minneapolis, Minnesota
Our report on the audits of the basic financial statements of T. F. James Company and subsidiaries as of September 30, 2002 and 2001 appears on page 1. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on pages 12-26 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/S/ Olsen Thielen & Co., LTD
St. Paul, Minnesota
November 14, 2002
52
T. F. JAMES COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET INFORMATION
SEPTEMBER 30, 2002
ASSETS
| | Consolidated | | Eliminations | | T. F. James
Company | | Jamestown
Variety, Inc. | | Westlake
Liquors, Inc. |
Cash | | $ 484,702 | | $ | | $ 407,162 | | $ | | $ 77,540 |
Cash in Escrow | | 237,378 | | | | 237,378 | | | | |
Accounts Receivable Less Allowance | | | | | | | | | | |
| for Doubtful Accounts of $52,124 | | 1,089,735 | | | | 1,089,735 | | | | |
Rents Receivable | | 83,190 | | | | 83,190 | | | | |
Income Taxes Receivable | | 116,337 | | | | 116,337 | | | | |
| | | | | | | | | | | | |
Other Receivables | | 113,366 | | | | 113,366 | | | | |
Inventory | | 124,878 | | | | | | | | 124,878 |
Prepaid Expenses | | 13,974 | | | | 13,974 | | | | |
Cash Value of Life Insurance | | 92,327 | | | | 92,327 | | | | |
Mortgage Commitment Fees, Net | | 43,448 | | | | 43,448 | | | | |
| | | | | | | | | | | | |
Rental Real Estate | | 53,663,172 | | | | 53,663,172 | | | | |
Real Estate Development in Progress | | 372,213 | | | | 372,213 | | | | |
Other Property and Equipment | | 601,708 | | | | 483,406 | | | | 118,302 |
Accumulated Depreciation | | (19,781,775) | | | | (19,680,661) | | | | (101,114) |
Investment and Advances to Subsidiaries | – | | (884,148) | | 884,148 | | | | |
| | | | | | | | | | | | |
| | TOTAL ASSETS | | $ 37,254,653 | | $(884,148) | | $37,919,195 | | $ – | | $219,606 |
53
T. F. JAMES COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET INFORMATION (Continued)
SEPTEMBER 30, 2002
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | Consolidated | | Eliminations | | T. F. James
Company | | Jamestown
Variety, Inc. | | Westlake
iquors, Inc. |
LIABILITIES: | | | | | | | | | | |
Notes Payable | | $ 1,017,833 | | $ | | $ 1,017,833 | | $ | | $ |
Accounts Payable | | 1,871,081 | | | | 1,848,060 | | | | 23,021 |
Accrued Property Taxes | | 221,065 | | | | 221,065 | | | | |
Accrued Interest Payable | | 256,138 | | | | 256,138 | | | | |
Notes Payable to Related Parties | | 100,000 | | (220,046) | | 100,000 | | | | 220,046 |
Rents Received in Advance | | 156,574 | | | | 156,574 | | | | |
Retirement Contract Payable | | 93,249 | | | | 93,249 | | | | |
Annuity Payable | | 605,997 | | | | 605,997 | | | | |
Long-Term Debt | | 31,895,034 | | | | 31,895,034 | | | | |
| Total Liabilities | | 36,216,971 | | (220,046) | | 36,193,950 | | – | | 243,067 |
| | | | | | | | | | | | |
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock $100 Par Value, 1,250 | | | | | | | | | | |
| Shares Authorized, 650 Shares Issued, | | | | | | | | |
| 165.5 Shares Outstanding | | 65,000 | | (100,100) | | 65,000 | | 100,000 | | 100 |
Paid in Capital | | – | | (564,002) | | | | 394,694 | | 169,308 |
Retained Earnings (Deficit) | | 4,090,562 | | | | 4,778,125 | | (494,694) | | (192,869) |
Cost of 484.5 Shares of Common | | | | | | | | | | |
| Stock Owed by Company | | (3,117,880) | | | | (3,117,880) | | | | |
| Total Stockholders' Equity (Deficit) | | 1,037,682 | | (664,102) | | 1,725,245 | | – | | (23,461) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | $ 37,254,653 | | $(884,148) | | $37,919,195 | | $ – | | $219,606 |
54
T. F. JAMES COMPANY AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS AND
RETAINED EARNINGS (DEFICIT) INFORMATION
YEAR ENDED SEPTEMBER 30, 2002 | | Consolidated | | Eliminations | | T. F. James
Company | | Jamestown
Variety, Inc. | | Westlake
Liquors, Inc. |
REVENUES: | |
| |
| |
| |
| |
|
| Sales and Rental Income | | $ 7,359,251 | | $(42,000) | | $6,356,493 | | $ | | $1,044,758 |
| Less Cost of Sales and Operating Expenses | | 5,353,734 | | | | 4,518,447 | | | | 835,287 |
| | Gross Profit and Net Rental Income | | 2,005,517 | | (42,000) | | 1,838,046 | | – | | 209,471 |
| | | | | | | | | | | | | | |
| Gain on Sale of Property | | 898,275 | | | | 898,275 | | | | |
| Interest Income | | 16,572 | | | | 16,572 | | | | |
| Miscellaneous Income, Net | | 96,530 | | | | 96,530 | | | | |
| | Net Revenues | | 3,016,894 | | (42,000) | | 2,849,423 | | – | | 209,471 |
| | | | | | | | | | | | | | |
GENERAL AND ADMINISTRATIVE EXPENSES | | 1,726,503 | | (42,000) | | 1,540,880 | | – | | 227,623 |
| | | | | | | | | | | | | | |
INCOME (LOSS) BEFORE INCOME TAXES | | 1,290,391 | | – | | 1,308,543 | | – | | (18,152) |
| | | | | | | | | | | | | | |
INCOME TAXES | | 45,624 | | – | | 45,624 | | – | | – |
| | | | | | | | | | | | | | |
NET INCOME (LOSS) | | 1,244,767 | | – | | 1,262,919 | | – | | (18,152) |
| | | | | | | | | | | | | | |
RETAINED EARNINGS (DEFICIT) at Beginning of Year | | 3,232,358 | | – | | 3,901,769 | | (494,694) | | (174,717) |
| | | | | | | | | | | | | | |
DIVIDENDS | | (386,563) | | – | | (386,563) | | – | | – |
| | | | | | | | | | | | | | |
RETAINED EARNINGS (DEFICIT) at End of Year | | $ 4,090,562 | | $ – | | $4,778,125 | | $(494,694) | | $ (192,869) |
55
T. F. JAMES COMPANY AND SUBSIDIARIESCONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED SEPTEMBER 30, 2002
| | Consolidated | Eliminations | | T. F. James
Company | | Jamestown
Variety, Inc. | | Westlake
Liquors, Inc. |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
|
| |
| |
| |
|
| Net Income Loss) | | $ 1,244,767 | $ | | $1,262,919 | | $ | | $ (18,152) |
| Adjustments to Reconcile Net Income (Loss) to Net | | | | | | | | | |
| | | Cash Provided By (Used In) Operating Activities: | | | | | | | | | |
| | Depreciation | | 1,355,866 | | | 1,353,639 | | | | 2,227 |
| | Gain on Sale of Property | | (898,275) | | | (898,275) | | | | |
| | Changes in Assets and Liabilities:: | | | | | | | | | |
| | | Cash in Escrow | | 69,297 | | | 69,297 | | | | |
| | | Accounts Receivable | | 78,093 | | | 78,093 | | | | |
| | | Rents Receivable | | (33,483) | | | (33,483) | | | | |
| | | Other Receivable | | (13,366) | | | (13,366) | | | | |
| | | Inventory | | 15,730 |
| | | | | | | | 15,730 |
| | | Accounts Payable | | (57,216) | | | (36,505) | | | | (20,711) |
| | | Accrued Real Property Taxes | | (14,294) | | | (14,294) | | | | |
| | | Rents Received in Advance | | 103,449 | | | 103,449 | | | | |
| | | Retirement Contract | | 51,781 | | | 51,781 | | | | |
| | | Accrued Income Taxes | | (58,635) | | | (58,635) | | | | |
| | Net Cash Provided By (Used In) Operating Activities | | 1,843,714 | – | | 1,864,620 | # | – | | (20,906) |
| | | | | | | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | |
| Purchase of Property and Equipment | | (1,820,795) | | | (1,809,926) | | | | (10,869) |
| Proceeds from Sale of Property and Equipment | | 1,075,444 | | | 1,075,444 | | | | |
| Increase in Cash Value of Life Insurance | | (5,322) | | | (5,322) | | | | |
| | Net Cash Used In Investing Activities | | (750,673) | – | | (739,804) | | – | | (10,869) |
| | | | | | | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | |
| Net Receipts Under Line-of-Credit Agreements | | 352,054 | | | 352,054 | | | | |
| Principal Payments of Long-Term Debt | | (1,739,397) | | | (1,739,397) | | | | |
| Proceeds from Issuance of Long-Term Debt | | 787,442 | | | 787,442 | | | | |
| Change in Treasury Stock | | (33,799) | | | (33,799) | | | | |
| Related Party Loans | | 100,000 | | | 100,000 | | | | |
| Decrease in Annuity Payable | | (49,945) | | | (49,945) | | | | |
| Payment of Dividends | | (386,563) | | | (386,563) | | | | |
| | Net Cash Used in Financing Activities | | (970,208) | – | | (970,208) | | – | | – |
NET INCREASE (DECREASE) IN CASH | | 122,833 | – | | 154,608 | | – | | (31,775) |
CASH at Beginning of Year | | 361,869 | – | | 252,554 | | – | | 109,315 |
CASH at End of Year | | $ 484,702 | $ – | | $ 407,162 | | $ – | | $ 77,540 |
56
T. F. JAMES COMPANY AND SUBSIDIARIES
CONSOLIDATING SCHEDULE OF GENERAL AND
ADMINISTRATIVE EXPENSES INFORMATION
YEAR ENDED SEPTEMBER 30, 2002
| | Consolidated | | Eliminations | | T. F. James
Company | | Westlake
Liquors, Inc. |
Annuity Expense | | $ 57,688 | | $ | | $ 57,688 | | $ |
Auto | | | | 7,129 | | | | 7,129 | | |
Advertising | | 4,317 | | | | 2,090 | | 2,227 |
Board Fees | | 72,000 | | | | 72,000 | | |
Computer Services | | 2,573 | | | | 2,573 | | |
| | | | | | | | | | | |
Depreciation | | 49,079 | | | | 45,212 | | 3,867 |
Donations | | 2,070 | | | | 1,795 | | 275 |
Group Insurance | | 101,369 | | | | 97,812 | | 3,557 |
General Insurance | | 63,255 | | | | 63,255 | | |
Interest | | | 30,113 | | | | 30,113 | | |
| | | | | | | | | | | |
Legal, Accounting and Architectural | | 136,606 | | | | 136,606 | | |
Mortgage Fees | | 5,500 | | | | 5,500 | | |
Officers' Life Insurance | | 86,296 | | | | 86,296 | | |
Operating | | 76,393 | | | | 53,936 | | 22,457 |
Payroll Taxes | | 51,484 | | | | 42,989 | | 8,495 |
| | | | | | | | | | | |
Real Estate Taxes | | 45,065 | | | | 30,431 | | 14,634 |
Rents | | | – | | (42,000) | | | | 42,000 |
Repairs and Maintenance | | 11,836 | | | | 7,971 | | 3,865 |
Supplies | | 108 | | | | | | 108 |
| | | | | | | | | | | |
Telephone | | 23,094 | | | | 20,816 | | 2,278 |
Travel and Entertainment | | 15,003 | | | | 15,003 | | |
Utilities | | | 8,530 | | | | | | 8,530 |
Wages and Benefits | | 876,995 | | | | 761,665 | | 115,330 |
| | | | | | | | | | | |
| TOTAL | | $ 1,726,503 | | $(42,000) | | $1,540,880 | | $227,623 |
57
T. F. JAMES COMPANY AND SUBSIDIARIES
SCHEDULE OF RENTAL INCOME
YEAR ENDED SEPTEMBER 30, 2002
|
|
|
| Gross
Rental
Income |
| Interest |
| Taxes | Other Operating
Expense |
| Building
Depreciation |
| Total
Expenses |
| Net Rental
Income (Loss) |
MINNESOTA: |
|
|
|
|
|
|
|
|
|
|
|
|
| Andover - Tom Thumb | $ 10,625 |
| $ |
| $ | $ |
| $ 2,612 |
| $ 2,612 |
| $ 8,013 |
| Anoka | 77,410 |
| 16,894 |
| | 11,328 |
| 7,651 |
| 35,873 |
| 41,537 |
| Bethel | 31,710 |
| 14,601 |
|
| |
| 7,861 |
| 22,462 |
| 9,248 |
| Blaine | 48,037 |
| |
|
| 4,703 |
| 8,359 |
| 13,062 |
| 34,975 |
| Bloomington | 1,815 |
| |
|
| 2,157 |
| 748 |
| 2,905 |
| (1,090) |
| Brooklyn Park-63rd Ave(retail) | 12,860 |
|
|
|
| 419 |
|
|
| 419 |
| 12,441 |
| Buffalo | 46,858 |
| 15,054 |
|
| 198 |
| 6,440 |
| 21,692 |
| 25,166 |
| Burnsville - Phase I | 129,853 |
| 27,014 |
|
| (3,438) |
| 19,498 |
| 43,074 |
| 86,779 |
| Burnsville - Phase II | 79,055 |
| 34,244 |
| 672 | 2,045 |
| 16,775 |
| 53,736 |
| 25,319 |
| Centerville | 30,055 |
| 5,707 |
|
|
|
| 5,782 |
| 11,489 |
| 18,566 |
| Chanhassen | 1,765,680 |
| 984,702 |
| 9,424 | 52,060 |
| 323,606 |
| 1,369,792 |
| 395,888 |
| Eagan - Phase I | 115,818 |
| 29,248 |
|
| 1,478 |
| 25,379 |
| 56,105 |
| 59,713 |
| Eagan - Phase II | 101,748 |
| 50,140 |
|
| 19,533 |
|
|
| 69,673 |
| 32,075 |
| Eagan - PDQ | – |
| 25,070 |
|
| (765) |
| 9,642 |
| 33,947 |
| (33,947) |
| Eden Prairie | 546,626 |
| 206,737 |
| 4,296 | 2,456 |
| 132,590 |
| 346,079 |
| 200,547 |
| Excelsior | 85,063 |
| 6,819 |
| 6,727 | 11,537 |
| 653 |
| 25,736 |
| 59,327 |
| Faribault | 40,781 |
| 6,050 |
|
|
|
| 980 |
| 7,030 |
| 33,751 |
| Forest Lake - Crown Auto | 42,000 |
| 7,902 |
|
|
|
|
|
| 7,902 |
| 34,098 |
| Forest Lake - Retail | 687,392 |
| 244,037 |
|
| (15,719) |
| 160,412 |
| 388,730 |
| 298,662 |
| Glencoe | 31,641 |
| 15,433 |
|
| 152 |
| 7,024 |
| 22,609 |
| 9,032 |
| Greenwood | 32,000 |
| 93,724 |
| 28,755 | 19,009 |
| 43,045 |
| 184,533 |
| (152,533) |
| Ham Lake | 27,552 |
| 7,160 |
|
| |
| 5,576 |
| 12,736 |
| 14,816 |
| Howard Lake | 40,836 |
| 5,707 |
|
|
|
| 5,294 |
| 11,001 |
| 29,835 |
| Inver Grove Heights | 92,874 |
| 92,384 |
| | (1,641) |
| 15,145 |
| 105,888 |
| (13,014) |
| Lakeland | 53,442 |
| 8,104 |
|
|
|
| 7,246 |
| 15,350 |
| 38,092 |
| Lakeville | 4,400 |
| 8,716 |
| 26,515 | 4,489 |
| 4,649 |
| 44,369 |
| (39,969) |
| Lindstrom | 13,451 |
|
|
|
|
|
| 2,864 |
| 2,864 |
| 10,587 |
| Lino Lakes | 40,784 |
| 7,175 |
| | (3,228) |
| 9,206 |
| 13,153 |
| 27,631 |
| Monticello | 22,778 |
|
|
|
| 6,856 |
| 3,567 |
| 10,423 |
| 12,355 |
| Mora | 15,827 |
|
|
|
|
|
| 3,374 |
| 3,374 |
| 12,453 |
| Mound | 23,621 |
|
|
|
|
|
| 5,012 |
| 5,012 |
| 18,609 |
| Mounds View | 29,011 |
| 3,941 |
|
|
|
| 3,398 |
| 7,339 |
| 21,672 |
| Northfield | – |
|
|
| 10,317 | 2,206 |
| 2,688 |
| 15,211 |
| (15,211) |
| Oakdale | 86,461 |
| 18,312 |
|
| 14,749 |
| 13,115 |
| 46,176 |
| 40,285 |
| Paynesville | 28,879 |
| 14,459 |
|
|
|
| 7,106 |
| 21,565 |
| 7,314 |
| Pine City | 343,745 |
| 157,073 |
| 202 | 14,571 |
| 91,431 |
| 263,277 |
| 80,468 |
| Prior Lake | 64,940 |
| 57,876 |
| 2,970 | 4,868 |
| 13,843 |
| 79,557 |
| (14,617) |
| Rochester | 34,236 |
| 12,328 |
|
| |
| 3,462 |
| 15,790 |
| 18,446 |
| St. Louis Park | 24,081 |
| 6,734 |
|
| 39 |
| 377 |
| 7,150 |
| 16,931 |
| Sauk Rapids | – |
|
|
| 5,642 | 3,752 |
| 3,845 |
| 13,239 |
| (13,239) |
| Shoreview | 15,900 |
|
|
|
| 120 |
| 4,402 |
| 4,522 |
| 11,378 |
| St. Paul - West 7th Street | 36,000 |
| 5,314 |
|
| |
| 1,863 |
| 7,177 |
| 28,823 |
58
|
|
|
| Gross
Rental
Income |
| Interest |
| Taxes | Other Operating
Expense |
| Building
Depreciation |
| Total
Expenses |
| Net Rental
Income (Loss) |
| Willmar | 43,262 |
|
|
|
|
|
| 5,366 |
| 5,366 |
| 37,896 |
| Winsted | 45,519 |
| 8,104 |
| | |
| 6,024 |
| 14,128 |
| 31,391 |
|
| Total Minnesota | 5,004,626 |
| 2,196,763 |
| 95,520 | 153,934 |
| 997,910 |
| 3,444,127 |
| 1,560,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTANA: |
|
|
|
|
|
|
|
|
|
|
|
|
| Kalispell | $ 256,890 |
| $ 86,612 |
| $ 26,118 | $ 600 |
| $ 49,434 |
| $ 162,764 |
| $ 94,126 |
| Livingston | 196,114 |
| 50,745 |
| | |
| 45,960 |
| 96,705 |
| 99,409 |
|
| Total Montana | 453,004 |
| 137,357 |
| 26,118 | 600 |
| 95,394 |
| 259,469 |
| 193,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTH DAKOTA: |
|
|
|
|
|
|
|
|
|
|
|
|
| Fargo | 145,379 |
| 87,978 |
| 14,087 | 6,213 |
| 34,843 |
| 143,121 |
| 2,258 |
| Jamestown | 332,115 |
| 76,428 |
| 36,838 | 125,104 |
| 79,441 |
| 317,811 |
| 14,304 |
|
| Total North Dakota | 477,494 |
| 164,406 |
| 50,925 | 131,317 |
| 114,284 |
| 460,932 |
| 16,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNESSEE: |
|
|
|
|
|
|
|
|
|
|
|
|
| Ripley | 40,808 |
| 119,986 |
| 21,027 | 28,879 |
| 21,863 |
| 191,755 |
| (150,947) |
|
| Total Tennessee | 40,808 |
| 119,986 |
| 21,027 | 28,879 |
| 21,863 |
| 191,755 |
| (150,947) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WISCONSIN: |
|
|
|
|
|
|
|
|
|
|
|
|
| Berlin | 14,400 |
|
|
| 3,338 | 3,208 |
|
|
| 6,546 |
| 7,854 |
| Ladysmith | 165,410 |
| 65,761 |
|
| |
| 48,297 |
| 114,058 |
| 51,352 |
| Schofield | 200,751 |
| 4,787 |
| 2,470 | 3,624 |
| 30,679 |
| 41,560 |
| 159,191 |
|
| Total Wisconsin | 380,561 |
| 70,548 |
| 5,808 | 6,832 |
| 78,976 |
| 162,164 |
| 218,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
| $6,356,493 |
| $2,689,060 |
| $199,398 | $321,562 |
| $1,308,427 |
| $4,518,447 |
| $1,838,046 |
59
T. F. JAMES COMPANY AND SUBSIDIARIES
SCHEDULE OF REAL ESTATE
SEPTEMBER 30, 2002
| Date
Acquired |
| Land |
| Buildings and
Improvements |
| Total |
| Accumulated
Depreciation |
| Net Book
Value |
| Mortgage
Or Note
Payable |
MINNESOTA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Andover - Tom Thumb | 1976-1978 |
| $ 30,000 |
| $ 77,951 |
| $ 107,951 |
| $ 64,677 |
| $ 43,274 |
| $ |
| Anoka | 1971 |
| 75,000 |
| 329,756 |
| 404,756 |
| 168,122 |
| 236,634 |
| 181,892 |
| Bethel | 1984 |
| 32,551 |
| 235,819 |
| 268,370 |
| 142,803 |
| 125,567 |
| 140,906 |
| Blaine | 1978-1979 |
| 30,349 |
| 250,774 |
| 281,123 |
| 199,567 |
| 81,556 |
|
|
| Buffalo | 1976-1979 |
| 31,000 |
| 193,050 |
| 224,050 |
| 154,066 |
| 69,984 |
| 140,269 |
| Burnsville - Phase I | 1985 |
| 81,561 |
| 584,949 |
| 666,510 |
| 324,972 |
| 341,538 |
| 391,309 |
| Burnsville - Phase II | 1986-1987 |
| 81,560 |
| 503,241 |
| 584,801 |
| 265,378 |
| 319,423 |
| 368,700 |
| Centerville | 1979-1982 |
| 15,214 |
| 173,449 |
| 188,663 |
| 124,407 |
| 64,256 |
| 61,450 |
| Chanhassen | 1986-1994, 2001-2002 |
| 1,796,596 |
| 13,055,779 |
| 14,852,375 |
| 1,928,749 |
| 12,923,626 |
| 11,112,725 |
| Eagan - Phase I | 1978-1981 |
| 16,542 |
| 332,866 |
| 349,408 |
| 214,906 |
| 134,502 |
| 322,789 |
| Eagan - Phase II | 1979-1984 |
| 34,196 |
| 562,497 |
| 596,693 |
| 418,144 |
| 178,549 |
| 553,352 |
| Eagan - PDQ | 1990-1991 |
| 15,000 |
| 290,512 |
| 305,512 |
| 114,774 |
| 190,738 |
| 276,676 |
| Eden Prairie | 1979-1990 |
| 84,781 |
| 3,983,677 |
| 4,068,458 |
| 2,218,371 |
| 1,850,087 |
| 2,566,871 |
| Excelsior | 1976 |
| 50,000 |
| 220,171 |
| 270,171 |
| 220,171 |
| 50,000 |
| 55,721 |
| Faribault | 1971 |
| 35,000 |
| 84,887 |
| 119,887 |
| 61,168 |
| 58,719 |
| 65,137 |
| Forest Lake - Champion Auto | 1978-1985 |
| 107,294 |
| 270,140 |
| 377,434 |
| 162,835 |
| 214,599 |
| 76,290 |
| Forest Lake - Retail | 1989, 2001 |
| 138,583 |
| 4,669,396 |
| 4,807,979 |
| 1,505,668 |
| 3,302,311 |
| 3,307,207 |
| Glencoe | 1984 |
| 55,697 |
| 210,739 |
| 266,436 |
| 127,029 |
| 139,407 |
| 140,617 |
| Greenwood | 1971-2000 |
| 225,300 |
| 1,181,399 |
| 1,406,699 |
| 237,870 |
| 1,168,829 |
| 1,028,159 |
| Ham Lake | 1976-1985 |
| 43,000 |
| 166,807 |
| 209,807 |
| 119,938 |
| 89,869 |
| 550,476 |
| Howard Lake | 1978-1982 |
| 20,879 |
| 158,810 |
| 179,689 |
| 114,076 |
| 65,613 |
| 61,450 |
| Inver Grove Center | 1984 |
| 87,061 |
| 454,359 |
| 541,420 |
| 284,819 |
| 256,601 |
| 226,027 |
| Inver Grove - Undeveloped | 1984 |
| 231,541 |
|
|
| 231,541 |
|
|
| 231,541 |
| 68,861 |
| Lakeland | 1977-1982 |
| 11,402 |
| 217,378 |
| 228,780 |
| 155,876 |
| 72,904 |
| 87,259 |
| Lakeville | 1971-1987 |
| 29,798 |
| 274,014 |
| 303,812 |
| 203,892 |
| 99,920 |
| 117,475 |
| Lindstrom | 1976 |
| 18,500 |
| 94,445 |
| 112,945 |
| 74,159 |
| 38,786 |
|
|
| Lino Lakes | 1978-1979 |
| 22,000 |
| 276,193 |
| 298,193 |
| 171,180 |
| 127,013 |
| 81,007 |
| Long Prairie | 2002 |
| 100,000 |
| 583,247 |
| 683,247 |
| 1,620 |
| 681,627 |
| 470,693 |
| Monticello | 1978-1979 |
| 58,685 |
| 107,024 |
| 165,709 |
| 82,260 |
| 83,449 |
|
|
| Mora | 1978-1979 |
| 32,000 |
| 101,184 |
| 133,184 |
| 80,659 |
| 52,525 |
|
|
| Mound | 1977-1979 |
| 47,788 |
| 150,234 |
| 198,022 |
| 119,745 |
| 78,277 |
|
|
| Mounds View | 1973 |
| 22,424 |
| 123,567 |
| 145,991 |
| 86,331 |
| 59,660 |
| 52,070 |
| Oakdale | 1977-1979 |
| 34,325 |
| 449,248 |
| 483,573 |
| 174,892 |
| 308,681 |
| 235,434 |
| Paynesville | 1984 |
| 27,375 |
| 213,172 |
| 240,547 |
| 129,089 |
| 111,458 |
| 139,532 |
| Pine City - Tom Thumb | 1978-1985 |
| 50,000 |
| 282,029 |
| 332,029 |
| 169,217 |
| 162,812 |
| 139,983 |
60
| Date
Acquired |
| Land |
| Buildings and
Improvements |
| Total |
| Accumulated
Depreciation |
| Net Book
Value |
| Mortgage
Or Note
Payable |
| Pine City - Pamida Center | 1978-1989 |
| 132,099 |
| 2,460,892 |
| 2,592,991 |
| 1,053,497 |
| 1,539,494 |
| 1,700,114 |
| Prior Lake - PDQ | 1977-1984 |
| 39,218 |
| 393,833 |
| 433,051 |
| 248,334 |
| 184,717 |
| 638,723 |
| Prior Lake - Undeveloped | 1977-1984 |
| 30,235 |
|
|
| 30,235 |
|
|
| 30,235 |
|
|
| Prior Lake 2 | 2002 |
| 165,000 |
| 257,521 |
| 422,521 |
| 715 |
| 421,806 |
|
|
| Rochester | 1972 |
| 44,000 |
| 148,653 |
| 192,653 | | 110,483 |
| 82,170 |
| 132,732 |
| St. Louis Park | 1970 |
| $ 35,000 |
| $ 73,825 |
| $ 108,825 |
| $ 65,130 |
| $ 43,695 |
| $ 72,511 |
| Sauk Rapids | 1978-1981 |
| 13,500 |
| 115,354 |
| 128,854 |
| 88,830 |
| 40,024 |
|
|
| Shoreview | 1978-1979 |
| 24,000 |
| 132,049 |
| 156,049 |
| 102,687 |
| 53,362 |
|
|
| St. Paul - West 7th Street | 1972 |
| 55,000 |
| 96,373 |
| 151,373 |
| 89,291 |
| 62,082 |
| 56,929 |
| Willmar | 1973 |
| 36,610 |
| 250,803 |
| 287,413 |
| 131,253 |
| 156,160 |
|
|
| Winsted | 1978-1982 |
| 34,152 |
| 180,713 |
| 214,865 |
| 129,790 |
| 85,075 |
| 87,259 |
|
| Total Minnesota |
|
| 4,381,816 |
| 34,972,779 |
| 39,354,595 |
| 12,641,440 |
| 26,713,155 |
| 25,708,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTANA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Polson | 1988 |
| 51,246 |
|
|
| 51,246 |
| |
| 51,246 |
|
|
| Libby | 1989 |
| 97,676 |
|
|
| 97,676 |
| |
| 97,676 |
|
|
| Kalispell - Pamida Center | 1989-1990 |
| 389,000 |
| 1,483,221 |
| 1,872,221 |
| 609,706 |
| 1,262,515 |
| 1,146,324 |
| Kalispell - Undeveloped | 1989 |
| 610,217 |
|
|
| 610,217 |
|
|
| 610,217 |
| 157,566 |
| Livingston | 1989-1990 |
| 195,693 |
| 1,378,792 |
| 1,574,485 |
| 548,520 |
| 1,025,965 |
| 640,401 |
|
| Total Montana |
|
| 1,343,832 |
| 2,862,013 |
| 4,205,845 |
| 1,158,226 |
| 3,047,619 |
| 1,944,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTH DAKOTA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fargo | 1962-1989 |
| 369,889 |
| 1,245,455 |
| 1,615,344 |
| 684,400 |
| 930,944 |
| 1,142,011 |
| Jamestown | 1974-1979 |
| 325,224 |
| 3,592,369 |
| 3,917,593 |
| 2,314,858 |
| 1,602,735 |
| 847,770 |
|
| Total North Dakota |
|
| 695,113 |
| 4,837,824 |
| 5,532,937 |
| 2,999,258 |
| 2,533,679 |
| 1,989,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNESSEE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ripley | 1974-1975 |
| 193,996 |
| 914,296 |
| 1,108,292 |
| 767,379 |
| 340,913 |
| 1,191,764 |
| Ripley - Bank of Ripley | 1978 |
|
|
| 123,520 |
| 123,520 |
| 98,472 |
| 25,048 |
| 132,418 |
| Ripley - Pizza Hut | 1975 |
| |
| 68,082 |
| 68,082 |
| 68,082 |
| – |
| |
|
| Total Tennessee |
|
| 193,996 |
| 1,105,898 |
| 1,299,894 |
| 933,933 |
| 365,961 |
| 1,324,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WISCONSIN: |
|
|
|
|
|
|
|
|
|
|
|
| |
| Berlin | 1960 |
| 32,000 |
| 76,888 |
| 108,888 |
| 76,888 |
| 32,000 |
|
|
| Ladysmith | 1990 |
| 95,046 |
| 1,453,671 |
| 1,548,717 |
| 622,425 |
| 926,292 |
| 709,195 |
| River Falls | 2002 |
| 165,870 |
|
|
| 165,870 |
|
|
| 165,870 |
| 150,000 |
| Schofield | 1967-1987 |
| 149,000 |
| 1,297,426 |
| 1,446,426 |
| 897,159 |
| 549,267 |
| 20,263 |
|
| Total Wisconsin |
|
| 441,916 |
| 2,827,985 |
| 3,269,901 |
| 1,596,472 |
| 1,673,429 |
| 879,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REAL ESTATE |
|
| $7,056,673 |
| $46,606,499 |
| $53,663,172 |
| $19,329,329 |
| $34,333,843 |
| $31,846,317 |
61
T. F. JAMES COMPANY
SCHEDULE 3.13
Absence of Certain Developments
1. | Since June 30, 2002, the Company has expended sums for architectural and other services to undertake the remodeling of the Company's Lakeville, Minnesota Strip Center. When completed, this project is estimated to require in excess of $750,000. This remodeling project is anticipated to begin in the winter of 2002-2003. |
2. | Any mortgages on properties that were due for renewal after June 30, 2002 have been renewed. This is in the normal course of business. |
3. | The Company may apply for and complete a loan transaction in the approximate amount of $3,200,000.00 with the Bremer Bank (or a similar lending institution) prior to or upon the Closing. |
4. | The Company made Shareholder distributions in 2002 and 2003 in the approximate aggregate amount of $621,301.00. An additional $3.2 million will be paid in January, 2003; see attached 2002 and 2003 Payment to Stockholders. |
5. | See Litigation disclosures set forth on Schedule 3.7. |
6. | See also Schedule 3.17(h)(1 and 2) |
| 7. | See disclosures under "Built-In-Gains Tax" set forth in Schedule 3.9(a) |
| 8. | Bonus Accruals for payment to the employees of the Company as of the closing date will approximate $450,000. Payment on this Accrual must be made within 2½ months after the Closing Date. |
| 9. | The Company sold the New York Life Insurance Company Policy #25 448 610 and the CUNA Mutual Life Insurance Company Policy #00758065, both in the name of Thomas F. James, to the James Family Properties in January 2003; see also disclosures set forth in Schedule 3.10(1 and 2) at "Life Insurance Policies". |
| 10. | In January 2003, the Company transferred the Term Life Policies on the Company shareholders to each of the shareholders individually; see also Schedule 3.10 at "Term Life Policies on Present Shareholders". |
| 11. | On January 27, 2003, the Company paid-in-full the individual annuities owed to each of Elaine Engels and James B. O'Rourke; see also Schedule 3.10 at "Annuities/Pensions to Former Employees". |
62
12. | See disclosures regarding property located in Polson, Montana set forth on Schedule 3.12(1). |
13. | On January 28, 2003, Douglas M. James, a Shareholder and an employee of the Company, purchased a _____ Volvo from the Company. |
14. | In January of 2003 the Company paid to Charles Wm. James, a Shareholder and an employee of the Company $100,000 for the purchase of land in Kalispell, Montana; see also Schedules 3.31(1) and 3.26(2) |
63
2002 AND 2003 PAYMENTS TO SHAREHOLDERS
| Douglas
M. James | Judith
Scherer | Thomas
M. James | Charles
Wm. James | Robert
R. James | Thomas J.
Legierski | TOTAL |
|
|
|
|
|
|
|
|
3/29/2002 | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 | $30,000.00 |
4/15/2002 | 4,217.00 | 4,217.00 | 4,217.00 | 4,217.00 | 4,217.00 | 3,752.00 | 24,837.00 |
4/15/2002 | 19,109.00 | 19,109.00 | 19,109.00 | 19,109.00 | 19,109.00 | 17,002.00 | 112,547.00 |
6/14/2002 | 3,526.00 | 3,526.00 | 3,526.00 | 3,526.00 | 3,526.00 | 3,137.00 | 20,767.00 |
6/14/2002 | 15,977.00 | 15,977.00 | 15,977.00 | 15,977.00 | 15,977.00 | 14,214.00 | 94,099.00 |
9/16/2002 | 14,504.00 | 14,504.00 | 14,504.00 | 14,504.00 | 14,504.00 | 12,904.00 | 85,424.00 |
9/16/2002 | 3,201.00 | 3,201.00 | 3,201.00 | 3,201.00 | 3,201.00 | 2,848.00 | 18,853.00 |
12/13/2002 | 1,430.00 | 1,430.00 | 1,430.00 | 1,430.00 | 1,430.00 | 1,272.00 | 8,422.00 |
1/10/2003 | 6,479.00 | 5,479.00 | 6,479.00 | 6,479.00 | 6,479.00 | 5,765.00 | 37,160.00 |
1/21/2003 | 1,031.00 | 1,031.00 | 1,031.00 | 1,031.00 | 1,031.00 | 917.00 | 6,072.00 |
1/21/2003 | 26,534.00 | 26,534.00 | 26,534.00 | 26,534.00 | 26,534.00 | 23,605.00 | 156,275.00 |
1/21/2003 | 3,389.00 | 3,353.00 | 3,389.00 | 3,389.00 | 3,389.00 | 3,015.00 | 19,924.00 |
1/21/2003 | 550.00 | 550.00 | 550.00 | 550.00 | 550.00 | 490.00 | 3,240.00 |
1/21/2003 | 625.00 | 625.00 | 625.00 | 625.00 | 625.00 | 556.00 | 3,681.00 |
|
|
|
|
|
|
|
|
TOTAL | $105,572.00 | $104,536.00 | $ 105,572.00 | $ 105,572.00 | $ 105,572.00 | $94,477.00 | $ 621,301.00 |
64
T. F. JAMES COMPANY
SCHEDULE 3.14
Intellectual Property
7. | Service Mark Reg. No. 1,699,398; Ser. No. 74-135,952, Filed by the Company on February 4, 1991 The mark consists of the letter "J" in a design which forms the stylized letters "TFJ". See Service Mark below: |
[ TFJ LOGO]
8. | TFJamesco.com – domain name |
9. | Various software such as real estate management software and GL software are owned by the Company and are under no restrictions or claims. |
10. | The Company uses various "off-the-shelf" software in the conduct of its business for which no separate list has been prepared. |
65
T. F. JAMES COMPANY
SCHEDULE 3.15
Compliance with Laws
None 66
T. F. JAMES COMPANY
SCHEDULE 3.16
Operating Contracts
| Location | Contractor | Service | Contract Date | Contract Terms |
| Anoka, MN | Alley Brothers Lawn & Landscape
9804 – 302nd Avenue NW
Princeton, MN 55371
Phone: (612) 282-4009 | Snowplow | 10/7/02 | 11/1/02 – 4/1/02
$65 per hour |
| Blaine, MN | Alley Brothers Lawn & Landscape
9804 – 302nd Avenue NW
Princeton, MN 55371
Phone: (612) 282-4009 | Snowplow | 10/7/02 | 11/1/02 – 4/1/03
$65 per hour |
| Buffalo, MN | Tri-Co Tree Movers
5412 County Road 12N
Buffalo, MN 55313
Phone: (763) 682-1050 | Snowplow | 10/10/02 | 11/1/02 – 4/1/03
$45 per hour |
| Burnsville, MN | Dennis Jenkins
14078 Natalie Road NE
Prior Lake, MN 55372
Phone: (952) 440-2135 | Snowplow | 10/7/02 | 11/1/02 – 4/1/03
$236 per plow |
| Chanhassen, MN | Kahnke Bros., Inc.
1400 Arboretum Boulevard
Victoria, MN 55386
Phone: (952) 443-3800 | Snowplow | 10/2/02 | 11/1/02 – 4/1/03
$40-$80 per hour based on equipment |
| Chanhassen, MN | Waste Management
124 Union Street, PO Box 119
Norwood Young America, MN 55368 | Trash Service | 8/30/95 | $291 per month |
| Chanhassen, MN | Waste Management
124 Union Street, PO Box 119
Norwood Young America, MN 55368 | Trash Service | 3/14/02 | $260 per month |
| Chanhassen, MN | Thyssen Lagerquist
1801 West River Road North
Minneapolis, MN 55411
Phone: (612) 588-7844 | Elevator | 6/8/00 | $140 per month
5 year term to June 2005 with automatic renewal unless terminated |
| Chanhassen, MN | ADT
2561 Territorial Road
St. Paul, MN 55114
Phone: (888) 238-2666 | Fire Sprinkler Monitor | 4/11/95 (renewed 7/10/00) | 5 Year term
$1,488 per year |
| Chanhassen, MN | ADT
2561 Territorial Road
St. Paul, MN 55114
Phone: (888) 238-2666 | Fire Sprinkler Monitor | 1/15/01 | 5 Year term
$832 per year |
| Eagan, MN | Heikes Enterprises
19595 Lillehei Avenue
Hastings, MN 55033
Phone: (651) 437-3847 | Snowplow | 10/7/02 | 11/1/02 – 4/1/03
$400 per plow
4-8" snow |
67
| Location | Contractor | Service | Contract Date | Contract Terms |
Eden Prairie, MN | Kahnke Bros., Inc.
1400 Arboretum Boulevard
Victoria, MN 55386
Phone: (952) 443-3800 | Snowplow |
| 11/1/02 – 4/1/03
$40-$80 per hour based on equipment |
| Eden Prairie, MN | Perfection Plus | Cleaning Service | 1/23/97 | $2,795 per month |
| Eden Prairie, MN | Aspen Waste
2951 Weeks Avenue SE
Minneapolis, MN 55414 | Trash Service |
| $450 per month |
| Excelsior, MN | Bernie Whetston
5835 Eureka Road
Excelsior, MN 55331
Phone: (952) 474-4908 | Snowplow | 10/22/02 | 11/1/02 – 4/1/03
$60 per plow |
| Forest Lake, MN | Oakley Contracting
19480 Fenway Avenue North
Forest Lake, MN 55025
Phone: (651) 464-2750 | Snowplow | 10/7/02 | 11/1/02 – 4/1/03
$42-$105 per hour based on equipment |
| Greenwood, MN | Bernie Whetston
5835 Eureka Road
Excelsior, MN 55331
Phone: (952) 474-4908 | Snowplow | 10/22/02 | 11/1/02 – 4/1/03
$60 per plow |
Inver Grove Heights, MN | Koehnen Landscaping & Trucking
9932 Rich Valley Boulevard
Inver Grove Heights, MN 55077
Phone: (651) 450-1025 | Snowplow | 10/17/02 | 11/1/02 – 4/1/03
$125 per plow
$45 per hour |
| Jamestown, ND | Brad Thronton | Snowplow | 10/1/02 | 10/02 – 4/03 $1,500 per month |
| Jamestown, ND | Ella Rettig | Mall Manager |
| $650 per month |
| Lakeville, MN | Reisinger Lawn & Snowplowing
PO Box 507
Lakeville, MN 55044
Phone: (952) 469-6695 | Snowplow | 10/14/02 | 11/1/02 – 4/1/03
$50 per hour |
| Line Lakes, MN | Breen Enterprises
14001 Julliard Street NE
Forest Lake, MN 55025
Phone: (651) 982-6292 | Snowplow | 10/21/02 | 11/1/02 – 4/1/03
$95 per plow |
| Oakdale, MN | D and R & Son, Inc.
1245 Granada Avenue North
Oakdale, MN 55128
Phone: (651) 295-0811 | Snowplow | 10/23/02 | 11/1/02 – 4/1/02
$95 per plow up to 6"
$55 per hour |
| Oakdale, MN | TruGreen ChemLawn Maplewood, MN | Lawn Fertilizer | 10/23/02 | $290 per year |
| Pine City, MN | Stransky Construction
645 NE 2nd Street
Pine City, MN 55063
Phone: (320) 629-6589 | Snowplow | 10/17/02 | 1/1/02 – 4/1/03
$45 - $85 per hour based on equipment |
| Prior Lake, MN | Dennis Jenkins
14078 Natalie Road NE
Prior Lake, MN 55372
Phone: (952) 440-2135 | Snowplow | 10/7/02 | 11/1/02 -4/1/03
$177 per plow |
68
| Location | Contractor | Service | Contract Date | Contract Terms |
Golden Valley, MN | GMAC Financial Services | 2002 Bravada Oldsmobile | 09/23/01 | $570.50 per month for 60 months *See also Schedule 3.29 |
| Burnsville, MN | Chrysler Financial Company L.L.C. | 2001 Jeep Grand Cherokee | 05/17/01 | $650.38 per month for 60 months *See also Schedule 3.29 |
69
T. F. JAMES COMPANY
SCHEDULE 3.17
Real Estate
Schedule 3.17 (a):
The following properties/locations are owned by the Company:
| LOCATION | BUILDING DESCRIPTION | ADDRESS |
| Andover | Tom Thumb # 255 | 15825 7th Avenue, Andover, MN 55303 |
| Anoka | River Road Shopping Ctr. | 504 - 516 East River Road, Anoka, MN 55303 |
| Blaine | Tom Thumb #180 | 601 - 641 Main Street NE, Blaine, MN 55433 |
| Burnsville 1 | PDQ #210 Strip | 13700 - 13720 County Road 11, Burnsville, MN 55337 |
| Burnsville 2 | Phase 2 Strip | 13600 - 13614 County Road 11, Burnsville, MN 55337 |
| Buffalo | Tom Thumb #218 | 401 - 409 East Highway 55, Buffalo, MN 55313 |
| Centerville | Tom Thumb #295 | 1801 Main Street, Centerville, MN 55038 |
| Centerville | Undeveloped Land | Next door to 1801 Main Street, Centerville, MN 55038 |
| Chanhassen 1 | Byerlys | 800 West 78th Street, Chanhassen, MN 55317 |
| Chanhassen 2 | Retail Center | 816 - 860 West 78th Street, Chanhassen, MN 55317 |
| Chanhassen 3 | Kinko's Copy Center | 880 West 78th Street, Chanhassen, MN 55317 |
| Chanhassen 4 | TCF Bank | 900 West 78th Street, Chanhassen, MN 55317 |
| Chanhassen 5 | Office Max | 960 West 78th Street, Chanhassen, MN 55317 |
| Chanhassen 6 | Retail Center Phase 2 | 910 - 950 West 78th Street, Chanhassen, MN 55317 |
| East Bethel | Tom Thumb #243 | 4825 East Viking Road, East Bethel, MN 55092 |
| Eagan 1 | Hilltop Plaza | 4160 - 4166 Pilot Knob Road, Eagan, MN 55123 |
| Eagan 2 | Hilltop Plaza | 4168 - 4180 Pilot Knob Road, Eagan, MN 55123 |
| Eagan 3 | PDQ #213 | 4198 Pilot Knob Road, Eagan, MN 55123 |
| Eden Prairie | Central Bank Building | 6640 Shady Oak Road, Eden Prairie, MN 55344 |
| Excelsior | Water Street Strip | 10 Water Street & 324 - 332 Lake Street, MN 55331 |
| Fargo | Express Shopping Center | 1431 - 1441 South University Avenue, Fargo, ND 58102 |
| Faribault | CSK Auto Store | 1233 West Highway 60, Faribault, MN 55021 |
| Forest Lake 1 | Champion Auto Store #407 | 107 SW. 12th Street, Forest Lake, MN 55025 |
| Forest Lake 2 | West Lake Shopping Center | 119 - 289 SW. 12th Street, Forest Lake, MN 55025 |
| Glencoe | Tom Thumb #246 | 415 Chandler Avenue North, Glencoe, MN 55336 |
| Greenwood 1 | T.F. James Company | 21500 Highway 7, Excelsior, MN 55331 |
| Greenwood 2 | Excelsior Chiropractic Clinic | 21450 Highway 7, Excelsior, MN 55331 |
| Ham Lake | Tom Thumb #185 | 16315 Highway 65, Ham Lake, MN 55303 |
| Howard Lake | Tom Thumb #222 | 1025 6th Street, Howard Lake, MN 55343 |
| Inver Grove Hts. | PDQ #212 | 5440 - 5472 Roberts Trail, Inver Grove Heights, MN 55077 |
| Inver Grove Hts. | Undeveloped Land | Roberts Trail, Inver Grove Heights, MN 55077 |
| Jamestown | Jamestown Mall | 3rd Street N.E. & 3rd Avenue, Jamestown, ND 58401 |
| Kalispell | Ernst Home Center | 1441 Montana Highway 35, Kalispell, MT 59901 |
| Kalispell | Undeveloped Land | Montana Highway 35, Kalispell, MT 59901 |
| Ladysmith | Pamida #282 | 500 West 9th Street, Ladysmith, WI 54848 |
| Lakeland | Tom Thumb #546 | 280 St. Croix Trail, Lakeland, MN 55043 |
| Lakeville | Lakeville Strip | 17440 - 17450 Kenwood Trail, Lakeville, MN 55044 |
70
| LOCATION | BUILDING DESCRIPTION | ADDRESS |
| Libby | Undeveloped Land | Highway 2, Libby, MT |
| Lindstrom | Tom Thumb #178 | 100 West St. Croix Avenue, Lindstrom, MN 55055 |
| Lino Lakes | Tom Thumb #197 Strip | 797 Lake Drive, Lino Lakes, MN 55014 |
| Livingston | Pamida | 100 West Washington, Livingston, MT 59047 |
| Long Prairie | Tom Thumb # 303 | 904 1st Avenue NE, Long Prairie, MN 56347 |
| Monticello | Tom Thumb #583 | 110 Oakwood Drive, Monticello, MN 55362 |
| Mora | Tom Thumb | Highway 23 & 65, Mora, MN 55362 |
| Mound | PDQ 292 | 5550 Three Points Blvd., Mound, MN 55364 |
| Moundsview | Interstate Brands | 2701 Highway 10, Moundsview, MN 55112 |
| Oakdale | Tom Thumb #214 Strip | 1025 - 1043 Hadley Drive, Oakdale, MN 55128 |
| Paynesville | Tom Thumb #244 | 28976 Collins Road, Paynesville, MN 55362 |
| Pine City | Evergreen Square | 100 - 170 Evergreen Square, Pine City, MN 55063 |
| Pine City | Tom Thumb #248 | 1120 Hillside, Pine City, MN 55063 |
| Prior Lake 1 | PDQ Shopping Center | 14161 - 14173 Commerce Ave., Prior Lake, MN 55372 |
| Prior Lake 2 | Undeveloped Land | Commerce Ave., Prior Lake, MN 55372 |
| Prior Lake 3 | Shopping Center | 14123 - 14129 Commerce Ave., Prior Lake, MN 55372 |
| Ripley | Shopping Center | 309 - 319 South Washington, Ripley, TN 38063 |
| River Falls | Undeveloped Land | SE Corner of STH 65 & Cemetary Road ( 830th Ave.) |
| Rochester | CSK Auto Store | 2001 South Broadway, Rochester, MN 55901 |
| Sauk Rapids | Tom Thumb Strip | 1313 2nd Street North, Sauk Rapids, MN 55901 |
| Schofield | Schofield Plaza | 5302 - 5317 Business Highway 51, Schofield, WI 54476 |
| Shoreview | Tom Thumb #195 | 5995 Hodgson Road, Shoreview, MN 55343 |
| Saint Louis Park | Dilly Lilly | 4611 Excelsior Blvd., St. Louis Park, MN 55411 |
| St. Paul | Interstate Brands | 1546 West 7th Street, St. Paul, MN 55102 |
| Willmar | Sam Goody | 701 South First Street, Willmar, MN 56201 |
| Winsted | Tom Thumb #223 | 132 5th Street North, Winsted, MN 55395 |
Schedule 3.17(b)
Curbing was recently installed at the Company's Winsted, MN location. The formal assessment has not yet been received by the Company; however, it is estimated to approximate $2,000.00.
Schedule 3.17(c)
None
Schedule 3.17(d)
See mortgages against Company's properties set forth in Schedule 3.22.
Schedule 3.17(e)
None
Schedule 3.17(f)
None
71
Schedule 3.17(g)
Several of the Company's locations are leased to convenience stores that purchase, store and sell gasoline.
Schedule 3.17(h)
| 1. | The Central Bank Building, located at 6640 Shady Oak Road, Eden Prairie, MN 55344, has a re-occurring problem with leaky window seals. The Company has on several occasions made attempts to repair the leaks, however they appear to be an ongoing problem; see also Schedule 3.13(6) |
| 2. | In April of 2002, The Company entered into an Agreement for Purchase and Sale of Commercial Real Estate with the Economic Development Authority of the City of Northfield, for the purchase of its property located at 110 North Water Street, Northfield, MN. The sale was in lieu of condemnation that allows the Company to qualify for an IRS Code Section 1033 exchange; see also disclosures set forth under "Built-In-Gains Tax" at Schedule 3.9(a) and Schedule 3.13(6). |
Schedule 3.17(i)
None
Schedule 3.17(j)
None
Schedule 3.17(k)
None
Schedule 3.17(l)
None
72
T. F. JAMES COMPANY
SCHEDULE 3.19
Books and Records; Bank Accounts
Checking Accounts: Authorized Signers
Central Bank, Eden Prairie, MN Douglas M. James
Account #270082 Thomas J. Legierski
Robert J. Martin
Central Bank, Eden Prairie, MN Douglas M. James
Account #270504 Thomas J. Legierski
Robert J. Martin
Marshall & Ilsley Bank, Minneapolis, MN Douglas M. James
Account #110-6414 Thomas J. Legierski
Robert J. Martin
Lake Elmo Bank, Lake Elmo, MN Douglas M. James
Account #927623 Thomas J. Legierski
Robert J. Martin
Safe Deposit Box
Central Bank, Eden Prairie, MN Douglas M. James
Thomas J. Legierski
Certificate of Deposit
Central Bank, Eden Prairie, MN Douglas M. James
Account #305471 Thomas J. Legierski
Escrow/Savings Account
Marshall & Ilsley Bank, Minneapolis, MN Heitman Financial*
Account #1915428
* The Company remits an additional monthly payment to Heitman Financial which, in turn, is remitted by Heitman Financial to pay the real estate taxes on the Chanhassen Phase 1 Development.
73
T. F. JAMES COMPANY
SCHEDULE 3.20
Employees
1. The following employee list does not include the 4 owners/officers/shareholders of the Company.
Employee Job Desc. Vacation* Sick/Leave*
Richard Kvanbeck Prop Mgr/ 4 weeks 6 days
Leasing Agent
Anthony Oxborough Prop Mgr/ 3 weeks 6 days
Leasing Agent
Robert Martin Payable/Rec./ 4 weeks 6 days
Insurance
Brian Rose Gen. Maint. 2 weeks 6 days
Tonia Sikorski Receptionist 2 weeks 6 days
Clerk
* The period of time indicated is a yearly amount. No accumulation of vacation or sick leave is permitted.
2. There are no written employment contracts or benefit plans.
74
T. F. JAMES COMPANY
SCHEDULE 3.21
Permits
None 75
T. F. JAMES COMPANY
SCHEDULE 3.22
Mortgages and Tenant Leases
Mortgage Location Due Date
Marshall & Ilsley Bank Kalispell, MT 12/31/02
Lake Elmo Bank Lakeland, Centerville, MN 10/10/03
The County Bank Forest Lake, MN 10/17/03
Twin City Federal Excelsior, MN 11/1/03
Premier Bank West St. Paul, MN 1/14/04
Twin City Federal Pine City, MN 4/1/04
Twin City Federal Paynesville, MN 4/1/04
Twin City Federal Glencoe, MN 4/1/04
Twin City Federal East Bethel, MN 4/1/04
Prior Lake State Bank Ham Lake, Moundsview, MN 8/15/05
Teachers Insurance Chanhassen, MN 8/31/05
Oakley National Bank Buffalo, MN 9/10/05
Marshall & Ilsley Bank Chanhassen #2, MN 1/27/06
Wells Fargo Bank Inver Grove, MN (Land) 6/1/06
Marshall & Ilsley Bank �� Lakeville, MN 11/1/06
Lake Country State Bank Long Prairie, MN 9/1/07
Marshall & Ilsley Bank Jamestown, ND 4/5/08
First Security State Bank Lino Lakes, MN 4/16/08
Marshall & Ilsley Bank Livingston, MT 12/10/08
U.S. Bank Inver Grove, MN 2/20/09
Lutheran Brotherhood Forest Lake, MN 5/1/09
Lutheran Brotherhood Forest Lake, MN 5/1/09
Marshall & Ilsley Bank Greenwood, MN 5/22/09
Marshall & Ilsley Bank Greenwood #2, MN 9/2/09
American Express Pine City, MN 1/1/10
Valley Bank Kalispell, MT 8/10/10
US Bank Burnsville, MN 1/1/11
The County Bank Oakdale, MN 8/1/11
American Express Ladysmith, WS 9/1/11
First Security State Bank Anoka, MN 3/10/12
Burnsville #2, MN
St. Louis Park, MN
Winsted, MN
76
Mortgage Location Due Date
Howard Lake, MN
Rochester, MN
Faribault, MN
U.S. Bank Eden Prairie, MN 5/20/14
Standard Mtge Investors, LLC Fargo, ND 9/1/14
American Express Eagan, MN 9/1/15
Prior Lake, MN
Ripley, TN
See attached tenant summary by location.
77
T. F. JAMES COMPANY
SCHEDULE 3.23
Subsidiaries1. | The Company owns 100% of the stock in Westlake Liquors, Inc., a Minnesota corporation. This is a retail off-sale establishment which leases space from the Company in the Forest Lake, Minnesota facility. For Tax purposes, this entity is a "disregarded entity." |
2. | Jamestown Variety, Inc., a former wholly-owned subsidiary of the Company, was involuntarily dissolved and ceased to exist with the North Dakota Secretary of State's office on August 6, 2001, for failure to file its 2000 Annual Report. |
78
T. F. JAMES COMPANY
SCHEDULE 3.24
Insurance1. | Business Property/Casualty Insurance – T. F. James Company and/or Westlake Liquors, Inc. DBA Westlake Warehouse Liquors and/or Peak Properties Development, for the period September 1, 2002 to September 1, 2003. Insurance Carrier: Cincinnati Insurance Company. Policy Coverage: (i) Commercial Main Package, Policy #COP2314667; (ii) Commercial Package – Vacant Buildings, Policy #CPP0734709; (iii) Commercial Umbrella, Policy #CCC4479494; (iv) Commercial Automobile, Policy #CAP5450417; (v) Workers Compensation, Policy #WC1914512-01. |
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T. F. JAMES COMPANY
SCHEDULE 3.25
Brokers and Finders
1. | The Company is obligated to CB Richard Ellis and its former agent, Joseph Sullivan, for a finder's fee in the approximate amount of $138,000, in connection with the transaction contemplated by the Agreement. |
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T. F. JAMES COMPANY
SCHEDULE 3.26
Relationship with Related Persons
1. | The Company is indebted to Mr. T. F. James (the father of each of the Shareholders other than Thomas Legierski) for an annuity which has a principal amount of approximately $600,000; see also Schedule 3.10. |
2. | The Company was indebted to Charles Wm. James as set forth in Schedules 3.31(14) and 3.31(1). |
3. | See Guarantees by Shareholders on Debts of the Company set forth on Schedules 3.11 and 5.14 and Guarantees by the Company on behalf of the Shareholders set forth on Schedule 3.11. |
| 4. | Stock Purchase Agreement by and between Phillip M. James, Thomas M. James, Douglas M. James, Judith James Scherer, Robert R. James, Charles W. James and Thomas J. Legierski and James Refrigeration Company, dated effective July 15, 1979; see also Schedule 3.2(1). |
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T. F. JAMES COMPANY
SCHEDULE 3.27
Hazardous Materials
None 82
T. F. JAMES COMPANY
SCHEDULE 3.28
Other Environmental Matters
Schedule of Underground Storage Tanks Owned by Tenants
| LOCATION | TENANT |
Andover, MN | Tom Thumb |
Bethel, MN | Tom Thumb |
Buffalo, MN | Tom Thumb |
Blaine, MN | Tom Thumb |
Burnsville #1, MN
(Recently removed) | PDQ |
Centerville, MN | Tom Thumb |
Eagan, MN | PDQ |
Glencoe, MN | Tom Thumb |
Ham Lake, MN | Tom Thumb |
Howard Lake, MN | Tom Thumb |
Inver Grove, MN | PDQ |
Lakeland, MN | Tom Thumb |
Lino Lakes, MN | Tom Thumb |
Lindstrom, MN | Tom Thumb |
Monticello, MN | Tom Thumb |
Mora, MN | Tom Thumb |
Mound, MN | PDQ |
Oakdale, MN | Tom Thumb |
Paynesville, MN | Tom Thumb |
Pine City, MN | Tom Thumb |
Prior Lake, MN | PDQ |
Shoreview, MN | Tom Thumb |
Winsted, MN | Tom Thumb |
Other Matters
The Inver Grove, Minnesota location has a tenant that performs on-site dry cleaning. The Eagan, Minnesota and Burnsville, Minnesota locations have tenants that provide dry cleaning services off-site; however, on-site dry cleaning services were previously performed at these locations.
83
T. F. JAMES COMPANY
SCHEDULE 3.29
Debt Instruments
Other than the mortgages which are set forth on Schedule 3.22, the Company has outstanding Debt Instruments with and with respect to the following:
Central Bank, Eden Prairie | Line of Credit |
Marshall & Ilsley Bank | Line of Credit |
*GMAC | Auto Loan - 2002 Bravada |
*Chrysler Financial | Auto Loan - 2001 Jeep Grand Cherokee |
*see also Schedule 3.16
[**Note to IRET – One or more of the currently owned vehicles may be purchased by one or more of the Shareholders prior to the closing. We may need to add a covenant in the Agreement to reflect this]
84
T. F. JAMES COMPANY
SCHEDULE 3.31
Shareholder Loans1. | The Company was indebted to Charles Wm. James, a Shareholder and an employee of the Company, in the amount of $100,000 for land purchased by the Company in Kalispell, Montana. This debt was paid in full in January, 2003; see also Schedules 3.13(14) and 3.26(2). |
85
T. F. JAMES COMPANY
SCHEDULE 3.33
Absence of Certain Business Practices
None 86
T. F. JAMES COMPANY
SCHEDULE 3.34
Trade Regulation
None 87
T. F. JAMES COMPANY
SCHEDULE 3.35
Representations Regarding the ShareholdersEach of the Shareholders' right, title and interest in and to the Company Common Stock, other than Thomas J. Legierski, is Encumbered by a Federal Tax Lien which was issued by the IRS on March 29, 2000, and filed in the office of the Minnesota Secretary of State on April 30, 2001. The amount of the IRS Tax Lien as stated on the April 30, 2001 filing with the Minnesota Secretary of State is $350,660.15. As of January 31, 2003, the Federal Tax Lien is estimated to approximate $459,325, including interest accrued from June 29, 1999 through January 31, 2003 in the amount of 108,657.00; see also Schedule 3.5.
88
T. F. JAMES COMPANY
SCHEDULE 5.5
Restrictions on New Contracts
None 89
T. F. JAMES COMPANY
SCHEDULE 5.14
Shareholder Guarantees
Each of the Company Shareholders have personally guaranteed the following Indebtedness of the Company; see also Schedules 3.11 and 3.26(3):
Indebtedness Owed To: | Description of Purpose/Location |
|
|
Central Bank | Line of Credit |
Marshall & Ilsley Bank | Line of Credit |
Marshall & Ilsley Bank | Mortgage Loan, Schofield, WI |
Marshall & Ilsley Bank | Mortgage Loan, Kalispell, MT |
Twin City Federal | Mortgage Loan, Excelsior, MN |
Premier Bank | Mortgage Loan, St. Paul, MN |
Oakley National Bank | Mortgage Loan, Buffalo, MN |
Marshall & Ilsley Bank | Mortgage Loan, Chanhassen #2, MN |
Wells Fargo Bank | Mortgage Loan, Inver Grove Land, MN |
Marshall & Ilsley Bank | Mortgage Loan, Lakeville, MN |
Lake Country Bank | Mortgage Loan, Long Prairie, MN |
Marshall & Ilsley Bank | Jamestown, ND |
Marshall & Ilsley Bank | Livingston, MT |
Lutheran Brotherhood | Forest Lake, MN |
Lutheran Brotherhood | Forest Lake, MN |
Marshall & Ilsley Bank | Greenwood Office, MN |
Marshall & Ilsley Bank | Greenwood, MN |
American Express Financial | Pine City, MN |
Valley Bank | Kalispell, MT |
County Bank | Oakdale, MN |
American Express Financial | Ladysmith, WI |
U.S. Bank | Eden Prairie, MN |
American Express Financial | Eagan, MN; Prior Lake, MN; Ripley, TN |
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