Ex-10

 

  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.

  1

--------------------------------------------------------------------------------

  

 

 

T. F. JAMES COMPANY AND SUBSIDIARIES   CONSOLIDATED FINANCIAL STATEMENTS
TOGETHER WITH
INDEPENDENT AUDITORS’ REPORT SEPTEMBER 30, 2002

 

 

OLSEN THIELEN & CO., LTD.
Certified Public Accountants & Consultants  

 

2

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES CONTENTS

--------------------------------------------------------------------------------

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

 

3

--------------------------------------------------------------------------------

 

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 Theilen & Co., LTD.
St. Paul, Minnesota
November 14, 2002

 

4

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES CONSOLIDATED 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.   5

--------------------------------------------------------------------------------

 

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

 

  6

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES CONSOLIDATED 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.   7

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES CONSOLIDATED 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

 

8

--------------------------------------------------------------------------------

                                        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.   9

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T. F. JAMES COMPANY AND SUBSIDIARIES NOTES 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

 

10

--------------------------------------------------------------------------------

operating expense, and $30,113 and $54,046 and $82,220 was expensed as general
and administrative expense.

 

11

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES NOTES 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

 

 

12

--------------------------------------------------------------------------------

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.

 

13

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES NOTES 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

 

14

--------------------------------------------------------------------------------

 

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. 

 

15

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES NOTES 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.

 

16

--------------------------------------------------------------------------------

T. F. JAMES COMPANY AND SUBSIDIARIES NOTES 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.

 

17

--------------------------------------------------------------------------------

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 Theilen & Co., LTD
St. Paul, Minnesota
November 14, 2002

 

18

--------------------------------------------------------------------------------

 

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

  19

--------------------------------------------------------------------------------

 

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

  20

--------------------------------------------------------------------------------

 

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)

  21

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY AND SUBSIDIARIES CONSOLIDATING 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

  22

--------------------------------------------------------------------------------

 

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

  23

--------------------------------------------------------------------------------

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

  24

--------------------------------------------------------------------------------

 

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

  25

--------------------------------------------------------------------------------

 

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

  26

--------------------------------------------------------------------------------

 

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

  27

--------------------------------------------------------------------------------

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".

 

28

--------------------------------------------------------------------------------

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)

  29

--------------------------------------------------------------------------------

                                                                    

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

  30

--------------------------------------------------------------------------------

 

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.

                                              

 

31

--------------------------------------------------------------------------------

  T. F. JAMES COMPANY

SCHEDULE 3.15

Compliance with Laws

 

  None   32

--------------------------------------------------------------------------------

 

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

  33

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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

  34

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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

  35

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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

 

36

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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

 

37

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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

 

38

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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.

 

39

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  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.

 

40

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  T. F. JAMES COMPANY

SCHEDULE 3.21

Permits

 

None   41

--------------------------------------------------------------------------------

 

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

 

42

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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.

 

43

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T. F. JAMES COMPANY

SCHEDULE 3.23

Subsidiaries

1. 

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.

44

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               T. F. JAMES COMPANY

SCHEDULE 3.24

Insurance

1.  

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.

45

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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. 

      

46

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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).

 

47

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T. F. JAMES COMPANY

SCHEDULE 3.27

Hazardous Materials

 

  None   48

--------------------------------------------------------------------------------

 

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.

 

49

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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]

 

50

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T. F. JAMES COMPANY

SCHEDULE 3.31

Shareholder Loans

1.  

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).

 

51

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T. F. JAMES COMPANY

SCHEDULE 3.33

Absence of Certain Business Practices

 

  None   52

--------------------------------------------------------------------------------

T. F. JAMES COMPANY

SCHEDULE 3.34

Trade Regulation

 

  None   53

--------------------------------------------------------------------------------

 

T. F. JAMES COMPANY

SCHEDULE 3.35

Representations Regarding the Shareholders

Each 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.

 

54

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T. F. JAMES COMPANY

SCHEDULE 5.5

Restrictions on New Contracts

 

 

None   55

--------------------------------------------------------------------------------

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

  56

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