Exhibit 10.2
September 27, 2002
Xxxxxx Xxxxxxx
Diamond Ventures, Inc.
0000 Xxxx Xxxxx Xx., Xxxxx 000
Xxxxxx, XX 00000-0000
Re: CHICAGO TITLE INSURANCE COMPANY ESCROW/TITLE NO. 2213848 46 (OPUS WEST
CORPORATION TO STRATFORD AMERICAN CORPORATION OF CERTAIN PROPERTY
("PROPERTY") LOCATED AT 00000 X. XXXXXXXXXX XX., XXXXXXXXXX, XXXXXXX)
Dear Don:
This letter agreement concerns the following financial and other aspects
involved in the purchase of the Property pursuant to a Purchase and Sale
Agreement, dated July 17, 2002, as amended, between Opus West Corporation
("OPUS"), as seller, and Stratford American Corporation ("STRATFORD"), as
purchaser:
1. TAX-FREE EXCHANGE(S); NEW LLC: In order to accommodate a tax-free
exchange(s), the Property will be conveyed by Opus to Stratford, as to an
undivided 80% tenancy in common interest, and certain Diamond Entities (Golden
Gate Apartments, Ltd., L.P., as to an undivided 13% tenancy in common interest;
Auriga Properties, Inc., as to an undivided 3% tenancy in common interest; and
DRD-97 Trust, as to an undivided 4% tenancy in common interest), and immediately
thereafter conveyed by Stratford and the Diamond Entities to a to-be-formed
Arizona limited liability company ("NEW LLC"). The initial members of New LLC
will be Stratford (which also will act as manager), as to an 80% interest, and
the foregoing Diamond Entities, as to a total 20% interest. New LLC will be a
single asset entity with respect to the Property.
2. FUNDING: Contemporaneously with the closing of escrow for the purchase
of the Property, the funds for the payment of the purchase price, closing costs
and other expenses involved in the estimated sum of $25,237,500 will be obtained
as follows:
(a) STRATFORD CONTRIBUTION. In return for its 80% member interest,
Stratford will contribute $750,000.00 cash to New LLC, the source
of which will include the purchase by DRD-97 Trust of 1,800,000
shares and by Xxxxx Xxxxxxxxx of 200,000 shares of Stratford
common stock at a price of $.25 per share (for a total of
$500,000), payable to Stratford contemporaneously with the
closing of escrow for the purchase of the Property.
(b) DIAMOND ENTITIES' CONTRIBUTION. In return for their total 20%
member interest, the Diamond Entities will contribute a total of
$187,500.00 to New LLC.
(c) ALLIANZ LOAN. Pursuant to the attached copy of a commitment
letter dated September ____, 2002, New LLC will obtain a $20
million loan from Allianz Life Insurance Company of North
America, secured by a first lien on the Property ("ALLIANZ
LOAN").
(d) BANK LOAN. New LLC also will obtain a two year, unsecured $2.5
million loan from a bank ("BANK LOAN") at an interest rate not to
exceed 10% per annum. The repayment of the Bank Loan will be
guaranteed ("GUARANTEED REPAYMENTS") by JDMD Investments, L.L.C.
("JDMD"), as to 50%, and by Diamond Ventures, Inc. ("DVI"), as to
50%. The repayment of the Bank Loan will be pari passu with the
repayment of the Diamond Loan described below.
(e) DIAMOND LOAN. New LLC also will obtain a two year, unsecured $1.8
million loan bearing interest at 10% per annum from DVI ("DIAMOND
LOAN"). The repayment of the Diamond Loan will be pari passu with
the repayment of the Bank Loan described above.
The shortfall amount of any increase in the estimated sum of $25,237,500, or any
reduction in the $20 million Allianz Loan, will be obtained either (at
Stratford's election) by (i) increasing the $2.5 million Bank Loan by such
shortfall amount, with the repayment of the shortfall amount to be guaranteed by
Stratford, or (ii) by a separate loan of the shortfall amount to New LLC by
Stratford, bearing interest at 10% per annum, repayable pari passu with the
repayment of the Bank Loan and the Diamond Loan.
3. DEBT/EQUITY CONVERSION: In the unlikely event of a default in the
repayment of the Bank and Diamond Loans by New LLC, resulting in JDMD and DVI
making their equally shared Guaranteed Payments of the Bank Loan as described
above, the indebtedness owing to JDMD and DVI will be converted to members'
interests in New LLC as follows:
(a) JDMD will be added as a member having a 23.87% interest in New
LLC (calculated by dividing JDMD's Guaranteed Repayment of $1.25
million by the total $5.237 million of capital contributions plus
the Guaranteed Repayments and the Diamond Loan);
(b) DVI will be added as a member having a 58.24% interest in New LLC
(calculated by dividing the total of $5.237 million into $3.05
million, comprised of DVI's Guaranteed Repayment of $1.25 million
plus its $1.8 million Diamond Loan); and
(c) Stratford's initial 80% interest will be reduced to 14.31%, and
the Diamond Entities' total 20% interest in New LLC shall be
reduced to 3.58%.
4. ALLIANZ LOAN NON-RECOURSE CARVE OUTS: JDMD will guarantee the payment
by New LLC of the non-recourse exceptions or carve outs under the Allianz Loan.
If JDMD actually makes any of its guaranteed payments for the Allianz Loan
non-recourse exceptions or carve outs, the then members of New LLC will
reimburse JDMD for their respective pro rata shares (equal to their respective
member percentage interests in New LLC) of the guaranteed payments made by JDMD.
5. JDMD/STRATFORD STOCK: As part of the consideration for JDMD agreeing
to guarantee payment of the aforementioned Allianz Loan non-recourse exceptions
or carve outs, the guaranty by JDMD of up to 50% of the Bank Loan, the
assignment by JDMD of all its interests in finding and negotiating the purchase
of the Property and the Allianz Loan and other financing involved, and the
waiver by JDMD of any fees for its efforts in this regard, Stratford will issue
1,200,000 shares of its common stock to JDMD, fully paid and non-assessable,
contemporaneously with the closing of escrow for the purchase of the Property.
6. STRATFORD LOAN: Contemporaneously with the execution of this letter
agreement, DVI will loan $650 thousand to Stratford, secured by Stratfords'
interest as a member of Raintree Development LLC, the repayment of which along
with 10% interest shall be due at the closing of escrow for the purchase of the
Property.
7. GENERAL: This letter constitutes a binding agreement with respect to
the matters set forth herein. The provisions of this letter are not intended to
be all-inclusive and may be superseded by a mutually agreed upon Operating
Agreement of New LLC (with respect to Paragraphs 1-5 above) and by the mutually
agreed upon promissory note and security agreement (with respect to paragraph 6
above).
Please indicate your acceptance with the matters set forth in this letter
agreement by signing and returning the enclosed copy of this letter to us.
Very truly yours,
/s/ Xxx Xxxxxx
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Xxx Xxxxxx on behalf of JDMD
/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx on behalf of Stratford
ACCEPTANCE:
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx on behalf of Diamond
Ventures, Inc. and the Diamond Entities
/s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
