<PAGE>
As filed with the Securities and Exchange Commission on June 17, 1996
Registration No.: 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
________
METROGOLF INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
COLORADO 7200 84-1288480
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification Number)
</TABLE>
1999 Broadway, Suite 2435
Denver, Colorado 80202
(303) 294-9300
(Address and telephone number of principal executive offices)
________
Charles D. Tourtellotte
1999 Broadway, Suite 2435
Denver, Colorado 80202
(303) 294-9300
(Name, address and telephone number of agent for service)
________
COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:
<TABLE>
<S> <C>
Jeffrey M. Knetsch Kevin A. Cudney
Brent T. Slosky George A. Hagerty
Brownstein Hyatt Farber & Strickland, P.C. Dorsey & Whitney LLP
410 17th Street, 22nd Floor 370 17th Street, Suite 4400
Denver, Colorado 80202 Denver, Colorado 80202
telephone: (303) 534-6335 / facsimile: (303) 623-1956 telephone: (303) 629-3400 / facsimile (303) 629-3450
</TABLE>
________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ___________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Proposed Maximum Offering Proposed Maximum Amount of
Securities to be Registered Amount to be Registered(1) Price Per Share(2) Aggregate Offering Price Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 1,933,571 $8.00 $15,468,568 $5,334
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 180,000 shares to cover the Underwriters' over-allotment option.
Also includes 553,571 shares that are issuable upon conversion of the PP
Notes (as defined herein).
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
METROGOLF INCORPORATED
Cross Reference Sheet Showing Location in
Prospectus of Information Required by Items in
Part I of Form S-1
<TABLE>
<CAPTION>
FORM S-1 CAPTION PROSPECTUS CAPTION
---------------- ------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus. . . . . . . . . . . . . . . . . Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges . . . . . . . . . Prospectus Summary; Risk Factors
4. Use of Proceeds. . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price. . . . . . . . Outside Front Cover Page; Underwriting
6. Dilution . . . . . . . . . . . . . . . . . . . Dilution
7. Selling Security Holders . . . . . . . . . . . Converting Security Holders [Alternate Page]
8. Plan of Distribution . . . . . . . . . . . . . Outside Front Cover Page; Underwriting; Plan of
Distribution [Alternate Page]
9. Description of Securities to Be Registered . . Description of Capital Stock
10. Interests of Named Experts and Counsel . . . . Not Applicable
11. Information with Respect to the Registrant . . Prospectus Summary; Risk Factors; Capitalization; Selected
Consolidated Financial Data; Management's Discussion and Analysis
of Financial Condition and Results of Operations; Business;
Management; Description of Capital Stock; Consolidated and Combined
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Not Applicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) an offering of
1,380,000 shares of common stock, no par value ("Common Stock"), including
shares of Common Stock to cover over-allotments, of MetroGolf Incorporated (the
"Company"), a Colorado corporation, for sale by the Company in an underwritten
public offering, and (ii) an additional 553,571 shares of Common Stock (the
"Converting Shareholders' Stock") issuable upon conversion of the Company's 12%
Convertible Subordinated Notes due 1997 that were issued in a private placement
closed on May 30, 1996 for the sale by the holders thereof (the "Converting
Shareholders"), all for resale from time to time by the Converting Shareholders,
subject to the contractual restriction that the Converting Shareholders may not
sell the Converting Shareholders' Stock for a specific period after the closing
of the underwritten offering, without the Underwriters' prior consent. The
above number of shares of the Converting Shareholders' Stock is based on $7.00
per share (the middle of the expected range). The final number of shares of the
Converting Shareholders' Stock registered will depend on the final price of the
Common Stock in the underwritten offering, as the Convertible Notes are
convertible at 50% of such price.
The complete prospectus relating to the underwritten offering follows
immediately after this Explanatory Note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the
Converting Shareholder's Stock, including alternative front and back cover pages
and sections entitled "Concurrent Public Offering," "Plan of Distribution,"
"Converting Shareholders" and "Shares Eligible for Future Sale" to be used in
lieu of the sections entitled "Concurrent Offering," "Shares Eligible for Future
Sale" and "Underwriting" in the Prospectus relating to the underwritten
offering. Certain sections of the Prospectus for the underwritten offering will
not be used in the Prospectus relating to the Converting Shareholders' Stock
such as "Use of Proceeds" and "Dilution." In addition, certain language in the
Prospectus for the underwritten offering relating to the underwritten offering
will be changed, with such changes being submitted to the Securities and
Exchange Commission in a Prospectus pursuant to Rule 424.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 17, 1996
[LOGO] METROGOLF
I N C O R P O R A T E D
1,200,000 SHARES OF COMMON STOCK
MetroGolf Incorporated ("MetroGolf" or the "Company") is hereby offering
1,200,000 shares of its common stock, no par value ("Common Stock").
Prior to this offering (the "Offering"), there has been no public market
for the Common Stock, and no assurance can be given that any such market will
develop upon completion of the Offering. It is currently estimated that the
initial public offering price of the Common Stock will be between $6.00 and
$8.00 per share and will be determined by negotiation between the Company and
Laidlaw Equities, Inc. and Cruttenden Roth Incorporated, as representatives (the
"Representatives") of the several underwriters for the Offering (the
"Underwriters"). For information regarding the factors considered in
determining the price to the public in the Offering, see "Underwriting." The
Company intends to apply for listing of the Common Stock on the Nasdaq SmallCap
Market ("Nasdaq") under the proposed symbol ["MGLF"] and the Boston Stock
Exchange ("BSE") under the proposed symbol ["MGO."]
Concurrently with the Offering, the Company has also registered 553,571
shares of Common Stock that may be acquired by holders of the Company's 12%
Convertible Subordinated Notes due 1997 upon conversion thereof ("Converting
Shareholders"). The Underwriters are not offering any of these shares in the
Offering, and the Company will not receive any of the proceeds from any sale of
the 553,571 shares of Common Stock by the Converting Shareholders. See
"Concurrent Offering."
______________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" CONTAINED AT PAGES 5 - 9 OF THIS
PROSPECTUS AND "DILUTION."
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS PROCEEDS TO THE
PRICE TO THE PUBLIC AND COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share . . . . . . . . $ $ $
- ------------------------------------------------------------------------------------------
Total(3). . . . . . . . . $ $ $
- ------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $ ($ if the over-allotment option granted to the Underwriters
described below is exercised in full).
(3) The Company has granted to the Underwriters an option, exercisable within
45 days after the date hereof (the "Underwriters' Over-allotment Option"),
to purchase up to 180,000 additional shares of Common Stock on the same
terms as set forth above, solely to cover over-allotments, if any. If the
Underwriters' Over-allotment Option is exercised in full, the total Price
to the Public, Underwriting Discounts and Commissions and Proceeds to the
Company will be $___________, $___________ and $____________, respectively.
See "Underwriting."
The shares of Common Stock are offered on a "firm commitment" basis when,
as and if delivered to and accepted by the Underwriters and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares
of Common Stock will be made against payment therefor at the offices of Laidlaw
Equities, Inc., 100 Park Avenue, New York, New York 10017 on or about
____________ 1996.
______________
LAIDLAW EQUITIES, INC. CRUTTENDEN ROTH
INCORPORATED
THE DATE OF THIS PROSPECTUS IS __________, 1996
<PAGE>
[Aerial view of Illinois Center Golf]
Illinois Center Golf -- MetroGolf's flagship development -- Chicago
[Architectural rendering of New York City Facility]
MetroGolf's proposed Port Authority golf facility -- New York City
[Aerial view of proposed Port Authority Facility]
Location of MetroGolf's proposed Port Authority golf facility -- New York City
THE COMPANY WILL FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING AUDITED
FINANCIAL STATEMENTS AND SUCH OTHER PERIODIC REPORTS AS THE COMPANY MAY FROM
TIME TO TIME DEEM APPROPRIATE OR AS MAY BE REQUIRED BY LAW.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ, BSE OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) INCLUDED ELSEWHERE IN THIS PROSPECTUS. ALL COMMON
STOCK AMOUNTS IN THIS PROSPECTUS HAVE BEEN ADJUSTED TO REFLECT THE COMPANY'S
5.5-TO-1 STOCK SPLIT EFFECTED ON AUGUST 31, 1995 BUT DO NOT GIVE EFFECT TO THE
EXERCISE OF (i) THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (ii) THE UNDERWRITER'S
WARRANTS, AND (iii) UP TO 250,000 SHARES AVAILABLE FOR GRANT UNDER THE COMPANY'S
1996 STOCK OPTION AND STOCK BONUS PLAN (THE "STOCK OPTION PLAN"). THE COMPANY
WAS FORMERLY KNOWN AS THE VINTAGE GROUP USA, LTD. METROGOLF INCORPORATED AND,
IF THE CONTEXT SO REQUIRES, ILLINOIS CENTER GOLF PARTNERS, L.P. ("ICGP") AND
GOOSE CREEK GOLF PARTNERS LIMITED PARTNERSHIP ("GCGP"), AS SUBSIDIARIES TO BE
CONSOLIDATED WITH THE COMPANY, ARE REFERRED TO HEREIN AS THE "COMPANY."
THE COMPANY
MetroGolf Incorporated acquires, develops and operates golf centers
designed to provide a wide variety of practice and play opportunities in major
metropolitan areas. The Company selects locations in areas with high
concentrations of office, urban residential and hotel development that are
convenient for time-constrained golfers. The Company's golf centers typically
offer: practice facilities; instructional programs such as the David Leadbetter
Golf Academy-Registered Trademark-; a full-line pro shop; restaurant, bar and
catering facilities; group meeting areas; and, in some cases, par-3 or
executive-length golf courses. The Company designs golf centers around a
driving range with target greens, bunkers and traps to simulate golf course
conditions. The Company's driving ranges, which include substantially more
hitting stations than the industry average, are lighted to permit night play and
are enclosed or sheltered in a climate-controlled environment.
The Company's strategy is to become the leading owner and operator of golf
centers in major metropolitan areas. The Company intends to accomplish this
goal principally by acquiring existing golf facilities that have the potential
for revenue enhancement through expansion of facilities, more efficient
management and innovative marketing strategies. The Company intends to develop
new golf centers in attractive markets where existing facilities are not
suitable for acquisition. The Company has capitalized on the national media and
industry recognition of its flagship development, Illinois Center Golf, a golf
center and par-3 golf course in downtown Chicago, in building a substantial
pipeline of attractive projects for acquisition and development.
According to the National Golf Foundation (the "NGF"), there were over 25
million golfers in the United States in 1995. According to the Golf Range and
Recreational Association, there are currently between 1,900 and 2,300 stand-
alone driving ranges in the United States. The NGF estimates that, in 1993, 92%
of all stand-alone driving ranges were managed by independent owner-operators.
The Company believes that consolidation of this fragmented industry presents
numerous opportunities for the Company to acquire, upgrade and renovate golf
facilities and to realize economies of scale through efficiencies of management,
marketing and purchasing. The Company also believes that many individual owner-
operators lack the expertise and financial resources to compete effectively in a
consolidating industry.
The Company currently operates Illinois Center Golf and Goose Creek Golf
Club ("Goose Creek"), an 18-hole golf course in suburban Washington, D.C. The
Company is developing a golf center located on the top of the Port Authority Bus
Terminal in midtown Manhattan, New York City (the "New York Golf Center"). In
addition, the Company is acquiring a driving range and clubhouse in the City of
Fremont, California (the east San Francisco Bay area), where it plans to develop
an executive-length golf course (the "Fremont Golf Center"), and leasing and
operating the Harborside Golf Center, a double-tiered, double-ended driving
range, putting green, clubhouse and sports bar/cafe in downtown San Diego,
California. The Company has also identified other sites for acquisition or
development in major cities, including Denver, St. Louis, Kansas City, Toronto,
Atlanta, Los Angeles and Orlando. The Company will acquire most, if not all, of
the limited partnership interests in each of the limited partnerships that own
Illinois Center Golf and Goose Creek simultaneous with the closing of the
Offering through its purchase of such limited partnership interests for a
combination of cash and convertible notes.
MetroGolf is organized under the laws of the State of Colorado. The
Company's principal executive offices are located at 1999 Broadway, Suite 2435,
Denver, Colorado 80202. Its phone number is (303) 294-9300.
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered 1,200,000 shares(a)
Common Stock to be Outstanding:
Before Offering 2,040,897 shares(b)
After Offering 3,592,647 shares(c)
Risk Factors The Common Stock offered hereby involves
a high degree of risk and immediate and
substantial dilution. See "Risk
Factors" and "Dilution."
Use of Proceeds The Company will use the net proceeds
from the Offering to acquire certain
limited partnership interests in ICGP
and GCGP, to finance continued
development of golf projects in New York
City, Fremont and San Diego, to invest
in, construct or acquire other golfing
facilities and projects, to pay certain
dividends in arrears and to redeem the
Company's Redeemable Preferred Stock
(see "Description of Capital Stock --
Preferred Stock") and for working
capital. See "Use of Proceeds."
Proposed Nasdaq Symbol ["MGLF"]
Proposed BSE Symbol ["MGO"]
</TABLE>
_____________
(a) Does not give effect to any exercise of the Underwriters' Over-
allotment Option of 180,000 shares.
(b) Does not include (i) the 351,750 shares issuable upon conversion of
the convertible notes or the 157,500 shares issuable upon the exercise
of the warrants issuable upon conversion of such convertible notes
issued in connection with the acquisition of the limited partnership
interests in ICGP (the "Convertible Notes"), (ii) the 25,000 shares
issuable upon conversion of the warrant issued to Laidlaw Equities,
Inc. for its services as placement agent for the Company's private
placement (the "Private Placement") of 12% Convertible Subordinated
Notes due 1997 (the "PP Notes") completed May 30, 1996, (iii) 250,000
shares of Common Stock available for future grant under the Company's
Stock Option Plan or (iv) the exercise of the Underwriters' Over-
allotment Option. See "Management -- Stock Option Plan."
(c) Does not include (i) 157,500 shares issuable upon conversion of the
warrants issued in connection with the acquisition of the limited
partnership interests in ICGP, (ii) the 25,000 shares issuable upon
conversion of the warrant issued to Laidlaw Equities, Inc. for its
services as placement agent for the Private Placement, (iii) 250,000
shares of Common Stock available for future grant under the Company's
Stock Option Plan or (iv) the exercise of the Underwriters' Over-
allotment Option. See "Management -- Stock Option Plan."
2
<PAGE>
SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The historical financial information set forth below has been derived from
the Consolidated and Combined Financial Statements of the Company for the
respective periods presented and is qualified in its entirety by, and should be
read in conjunction with, the Consolidated and Combined Financial Statements and
notes thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial and statistical data included
elsewhere in this Prospectus. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that will be
achieved for future periods, including for the entire year ending on
December 31, 1996. The pro forma summary consolidated financial information set
forth below for the Company gives effect to the proceeds from the sale of the PP
Notes and proceeds from the sale of Common Stock in the Offering (but not
including the shares issuable pursuant to the Underwriters' Over-allotment
Option), the acquisition by the Company of the Fremont Golf Center, the
acquisition of limited partnership interests in ICGP and GCGP, the $1,750,000 in
proceeds from ICGP's long-term debt and ICGP's $1,435,000 in property and
equipment acquisitions, and are based on the estimates and assumptions set forth
herein. The unaudited pro forma information has been prepared utilizing
historical financial statements and notes thereto, which are incorporated by
reference herein. The unaudited pro forma financial data does not purport to be
indicative of the results which actually would have been obtained had the
purchase been effected on the dates indicated or of the results which may be
obtained in the future. The unaudited pro forma financial statements should be
read in conjunction with the historical financial statements (including the
notes to such financial statements) included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
----------------------------- ------------------------
Pro Pro
Forma Actual Forma Actual
----- ---------------- ----- ------------------------------
1996 1996 1995 1995 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Total revenues $313,141 $ 49,057 $ 42,403 $3,657,593 $335,303 $291,237 $106,313
Total operating expenses 872,267 220,955 181,187 4,657,943 882,709 565,811 109,176
-------- -------- -------- ---------- -------- -------- --------
Operating loss (559,126) (171,898) (138,784) (1,000,350) (547,406) (274,574) (2,863)
Other (217,316) (5,830) (5,203) (936,465) 15,294 9,761 (1,304)
-------- -------- -------- ---------- -------- -------- --------
Net loss $(776,442) $(177,728) $(143,987) $(1,936,815) $(532,112) $(264,813) $(4,167)
-------- -------- -------- ---------- -------- -------- --------
-------- -------- -------- ---------- -------- -------- --------
Net loss applicable to common
stockholders $(776,442) $(220,384) $(179,477) $(1,936,815) $(687,164) $(315,490) $(4,167)
-------- -------- -------- ---------- -------- -------- --------
-------- -------- -------- ---------- -------- -------- --------
Net loss per common share $(.35) $(.21) $(.17) $(.86) $(.66) $(.30) $ ---
Weighted average common and
common equivalent shares
outstanding 2,245,000 1,045,000 1,045,000 2,245,000 1,045,000 1,045,000 1,045,000
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1996 At December 31, 1995
------------------------------------ --------------------
Pro Forma
Historical Pro Forma As Adjusted Actual
---------- --------- ----------- ------
<S> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents $0 $4,744,790 $4,744,790 $324
Working capital (deficit) (761,278) 2,426,996 1,665,718 (505,968)
Total assets 970,003 19,098,859 20,068,862 979,679
Short-term debt 257,954 1,027,082 1,285,036 290,253
Long-term debt 18,624 10,642,000 10,660,624 23,151
Total stockholders' equity (deficit) (93,159) 5,610,000 5,516,841 100,961
</TABLE>
3
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK IS HIGHLY SPECULATIVE, INVOLVES A HIGH
DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE TO
AFFORD A LOSS OF THEIR ENTIRE INVESTMENT. IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK
OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, AND ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS.
LIMITED OPERATING HISTORY
The Company's predecessor was formed in 1992. When consolidated with its
subsidiaries, the Company had losses of $532,112, $264,813 and $4,167 in 1995,
1994 and 1993, respectively. GCGP reported net losses of $75,624, $28,115 and
$138,593 in the years 1995, 1994 and 1993, respectively. ICGP reported net
losses of $535,212, $1,110,765 and $239,331 in the years 1995, and 1994 and from
May 28, 1993 (inception date) to December 31, 1993, respectively. In their
report dated May 17, 1996, included herein, BDO Seidman, LLP, independent
certified public accountants for GCGP, expressed "substantial doubts" about
GCGP's ability to continue as a going concern. The Company's plans with regard
to this concern are discussed in Note 1 to the financial statements of GCGP
included herewith.
ADDITIONAL CAPITAL REQUIREMENTS
The fiscal strength of the Company will be affected by the amount of funds
raised in the Offering, in project financings and in future equity and debt
financings. Failure to raise capital will adversely affect the fiscal strength
of the Company. In the absence of such additional funds, the Company will have
a less diversified portfolio of investments in golf facilities and will have
less capital to enable it to withstand economic downturns. The Company may
incur mortgage or other indebtedness relating to its golf facilities by
borrowing from banks, institutional lenders or private lenders in order to
develop or purchase the golf projects and to finance rehabilitation and
construction improvements thereto. Should such financing, together with
revenues of any golf project subject to financing, be insufficient to service
such debt and pay taxes and other operating costs of such project, the Company
would be required to utilize working capital, seek additional debt or equity
investment funds or suffer foreclosure of the project. Any such use of working
capital would decrease the funds available to the Company for its other projects
and future acquisitions and developments.
EXPANSION STRATEGY
The Company's ability to significantly increase revenue, net income and
operating cash flow over time depends in large part upon its success in
acquiring or leasing and constructing additional golf facilities at suitable
locations upon satisfactory terms. There can be no assurance that suitable golf
facility acquisition or lease opportunities will be available or that the
Company will be able to consummate acquisition or leasing transactions on
satisfactory terms. The acquisition of golf facilities may become more
expensive in the future to the extent that competition for sites increases. The
likelihood of the success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the construction and opening or renovation of new
golf facilities. See "-- Additional Capital Requirements" and "-- Dependence On
Key Employee; Recruitment of Additional Personnel" below, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
To implement its expansion strategy, the Company must integrate acquired or
newly opened golf centers into its existing operations. As the Company grows,
there can be no assurance that additional golf centers can be readily
assimilated into the Company's operating structure. Inability to integrate golf
facilities efficiently will have a material adverse effect on the Company's
financial condition and results of operations. See "Business." The development
of golf centers is subject to all the delays and uncertainties associated with
development and construction projects generally, such as the performance by
construction contractors, costs of materials, labor and energy, inflation,
adverse weather, adverse subsurface conditions and other factors that could
cause construction and rehabilitation costs to exceed the Company's estimates.
The acquisition and development of golf centers may become more expensive in the
future to the extent that competition for sites increases. The future success
and growth of the Company will depend on, among other things, its ability to
acquire suitable operating properties and development sites and to obtain
required financing for future acquisitions or development of golf facilities.
There can be no assurance that the Company will be able to acquire suitable
sites or facilities or to obtain financing on favorable terms.
4
<PAGE>
RISK OF TERMINATION OF ILLINOIS CENTER GOLF LEASE
The 15-year ground lease for Illinois Center Golf is subject to early
termination under certain circumstances. See "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation."
Because of the financial penalties and costs to the landlord in a termination,
the Company believes such termination is unlikely for the next several years;
however, termination of the lease would result in the loss of the Company's
flagship project, which may have a negative impact on the Company's visibility
and ability to proceed with the construction or acquisition of new metropolitan
golf centers.
COMPETITION
The golf industry is highly competitive and includes competition from other
golf facilities, traditional golf ranges and golf courses, as well as other
recreational pursuits. The Company may face imitation and other forms of
competition. Many of the Company's potential competitors have considerably
greater financial and other resources, experience and customer recognition than
does the Company. The Company may also encounter substantial competition from
other investor groups, some of whom have significantly greater financial
resources than the Company, in seeking suitable golf investments. The Company's
golf investments may also experience competition in their day-to-day operations
from existing and newly constructed facilities. Such competition may adversely
impact the cash flow to the Company from its golf facility investments. See
"Business -- Competition."
VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS
The second and third quarters of the calendar year have historically
accounted for, and are expected in the future to account for, a greater portion
of the Company's operating revenue than do the first and fourth quarters of the
calendar year. This is primarily due to an outdoor playing season limited by
weather. Although most of the Company's driving ranges are designed to be all-
weather facilities, portions of such facilities, such as the golf courses, are
outdoors and vulnerable to weather conditions. Also, golfers are less inclined
to practice when weather conditions limit their ability to play golf on outdoor
courses. This seasonal pattern, as well as the timing of new golf center
openings, may cause the Company's results of operations to vary significantly
from quarter to quarter. Accordingly, period-to-period comparisons are not
necessarily meaningful and should not be relied on as indicative of future
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation."
POSSIBILITY OF NONSPECIFIED INVESTMENTS
As of the date hereof, the Company controls three sites for acquisition or
development. See "Business." The Company may determine not to proceed with any
of the current projects or may be unable to satisfy the conditions contained in
its agreements with respect to these three sites. In addition, the Company will
select additional projects for investments prior or subsequent to completion of
the Offering. While holders of Common Stock may be provided information with
respect to any metropolitan golf facility which is purchased or developed by the
Company, the holders of Common Stock will not receive a general distribution of
information about any facility prior to acquisition, nor will such holders have
a direct opportunity to evaluate or approve any of the properties or terms of
the Company's investments. The purchasers of Common Stock must rely primarily
upon the ability of the officers and directors of the Company with respect to
the selection and negotiation of site or facility investments. There can be no
assurance that desirable golf facilities meeting the Company's investment
criteria will be available or can be developed on financially attractive terms.
In addition, there can be no assurance that any golf facility that is selected
by the Company for acquisition or development will meet its projections and the
Company's investment objectives.
DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING
The amount spent by consumers on discretionary items, such as family,
leisure and entertainment activities, like those offered by the Company's golf
centers, have historically been dependent upon levels of discretionary income,
which may be adversely affected by general economic conditions. A decrease in
consumer spending on golf will have an adverse effect on the Company's financial
condition and results of operations.
DEPENDENCE ON KEY EMPLOYEE; RECRUITMENT OF ADDITIONAL PERSONNEL
The continuing services of the Company's President, Charles D.
Tourtellotte, are considered essential to the successful operation of the
Company. The Company has an employment contract with Mr. Tourtellotte through
December 31, 1998. If Mr. Tourtellotte should die or withdraw, or be removed
from his position as President, there can be no assurance that a capable
successor could be found. The Company maintains a $1,000,000 key man life
insurance policy on Mr. Tourtellotte, the proceeds
5
<PAGE>
of which are payable to the Company. The Company will also be required to
hire additional personnel to staff the golf centers it intends to develop or
acquire. There can be no assurances that the Company will be able to attract
and retain qualified personnel. See "Business -- Employees."
USE OF LEVERAGE
The Company expects to incur mortgage and other indebtedness relating to
its golf facilities by borrowing from banks, institutional lenders or private
lenders in order to develop or purchase its golf facilities and to finance
rehabilitation and construction improvements thereto. In addition, GCGP
currently has indebtedness of approximately $3.3 million secured by Goose Creek
and guaranteed by the Company, and ICGP currently has indebtedness of
approximately $1.75 million secured by the assets of Illinois Center Golf and
guaranteed by the Company. There are no assurances that the Company will be
able to satisfy such loans or to sell or refinance its golf facilities upon
favorable terms at the maturity of such loans. Should the revenues of any golf
project subject to financing be insufficient to service such debt and pay taxes
and other operating costs, the Company would be required to utilize working
capital, seek additional debt or equity investment funds or suffer foreclosure
of the project. There can be no assurance that additional funds, if needed,
would be available to the Company or, if available, would be made available on
terms acceptable to the Company.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability regardless of
whether the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. The existence of hazardous or toxic
substances or the failure to properly remediate such matters may adversely
affect the use of the property and result in a loss of value. In connection
with the ownership (direct or indirect), operation, management and development
of golf facilities, the Company may be liable for removal or remediation costs,
as well as certain other costs which could relate to such hazardous or toxic
substances (including governmental fines and injuries to persons and property).
The Company will make certain investigations and obtain a satisfactory Phase I
environmental survey of a property prior to purchase or development, but such
studies are not intended to disclose all environmental hazards. The Company
will not undertake the investment in golf facilities if it believes that the
environmental factors might have a material adverse effect on the Company's
business, assets or results of operations.
RISKS OF GOVERNMENTAL REGULATION
The rehabilitation and development of golf projects is subject, both
directly and indirectly, to federal, state, and local governmental regulation,
including environmental, sewer, water, zoning and similar regulations. It is
possible that (i) the enactment of new laws, (ii) changes in the interpretation
or enforcement of applicable codes, rules and regulations, or (iii) the decision
of any authority to change the current zoning classification or requirements may
have a substantial adverse effect on the value of the Company's golf facilities.
No assurance can be given that any of the regulations or controls which affect
its golf facilities will not be changed, and the Company will have no control
over any such change. Consequently, it is possible that one or more changes
could decrease the value of a golf facility or impair the operations of a golf
project after acquisition.
UNINSURED LOSSES
The Company intends to carry, and to cause its contractors, subcontractors
and its property managers to carry, insurance, appropriate to their activities,
including liability and extended coverage insurance and comprehensive "builder's
all-risk" insurance on the Company's golf projects, with policy specifications
and insured limits as are customarily carried for similar properties. There
may, however, be certain risks which are uninsurable or not insurable on terms
which are believed to be economical. Such risks could include, but are not
necessarily limited to, earthquakes, floods, hazardous waste contamination and
civil rights violations. Should a loss occur that is not covered by insurance,
the Company may be materially adversely affected. The Company believes that its
golf facilities will be adequately insured as is customary in the industry for
similar properties.
CONCENTRATION OF SHARE OWNERSHIP
Currently, 100% of the Company's capital stock is owned by Charles D.
Tourtellotte, the Company's President. Depending on whether or not the
Underwriters' Over-allotment Option is exercised by the Underwriters, upon
completion of the Offering and before considering the exercise of all
outstanding warrants (except warrants held by officers and directors),
options and conversion
6
<PAGE>
of all notes convertible into Common Stock, Mr. Tourtellotte will own between
46.0% and 42.9% of the outstanding shares of the Common Stock. Based on
acquisition of 90% of the limited partnership interest in ICGP and GCGP,
after giving effect to the exercise of all outstanding warrants, options and
conversion of notes convertible into common stock, Mr. Tourtellotte will own
between 29.7% and 28.3% of the outstanding shares of the Common Stock. The
Company's Certificate of Incorporation does not provide for cumulative
voting. Accordingly, by virtue of his Common Stock ownership, Mr.
Tourtellotte will be in a position to effectively control the election of all
of the members of the Board of Directors of the Company and to control the
outcome of matters submitted to a vote of the Company's stockholders, thereby
completely controlling the management, policies and operations of the Company.
NO PRIOR MARKET FOR COMMON STOCK; DILUTION
Prior to the Offering, there has been no public market for the Common
Stock. The Company intends to apply for the Common Stock to be traded, subject
to official notice of issuance, on Nasdaq and the BSE; however, there can be no
assurance that the Common Stock will be accepted for such listing or that an
active trading market will develop after the Offering or, if developed, that it
will be sustained. The price to the public of the Offering (the "IPO Price")
will be determined through negotiations between the Underwriters and the
Company. See "Underwriting" for the factors considered in determining the IPO
Price. There can be no assurance that the price at which the Common Stock will
trade in the public market will not be lower than the IPO Price. The IPO Price
will exceed the net tangible book value per share of the Common Stock.
Accordingly, purchasers of shares of Common Stock offered hereby will incur an
immediate and substantial dilution. See "Dilution."
MAINTENANCE CRITERIA FOR NASDAQ SECURITIES
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers the Nasdaq, recently made changes in the criteria for continued
eligibility on the Nasdaq. In order to continue to be included on the Nasdaq,
the Company must maintain $2 million in total assets, a $200,000 market value of
its public float and $1 million in total capital and surplus. In addition,
continued inclusion requires two market-makers, at least 300 holders of the
Common Stock and a minimum bid price of the Common Stock of $1 per share;
provided, however, that, if the Common Stock falls below such minimum bid price,
it will remain eligible for continued inclusion on the Nasdaq if the market
value of the public float is at least $1 million and the Company has $2 million
in capital and surplus. The Company's failure to meet these maintenance
criteria in the future may result in the discontinuance of the inclusion of its
securities on the Nasdaq. In such event, trading, if any, in the securities may
then continue to be conducted in the non-Nasdaq over-the-counter market in less
orderly markets commonly referred to as the electronic bulletin board and the
"pink sheets." As a result, an investor may find it more difficult to dispose
of or to obtain accurate quotations as to the market value of the securities.
In addition, the Company would be subject to a rule promulgated by the
Securities and Exchange Commission (the "Commission") that, if the Company fails
to meet criteria set forth in such rule, imposes various sales practice
requirements on broker-dealers who sell securities governed by the rule to
persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and must have received the purchaser's written
consent to the transactions prior to sale. Consequently, the rule may have an
adverse effect on the ability of broker-dealers to sell the Company's
securities, which may affect the ability of purchasers in the Offering to sell
the Company's securities in the secondary market.
If the Company fails to maintain its qualification for Common Stock to
trade on Nasdaq and is trading below $5.00 per share, the Common Stock will be
subject to the rules of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") relating to penny stocks. In the event that any of the
Company's securities will be subject to the disclosure rules for transactions
involving penny stocks which require broker-dealers among other things to (i)
determine the suitability of purchasers of the securities, and obtain the
written consent of purchasers to purchase such securities and (ii) disclose the
best (inside) bid and offer prices for such securities and the price at which
the broker-dealers last purchased or sold the securities. The additional
burdens imposed upon broker-dealers may discourage them from effecting
transactions in penny stocks, which could reduce the liquidity of the Common
Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market after the Offering could adversely affect the market price of the Common
Stock. Excluding the shares issued in the Offering and assuming all outstanding
warrants, options and convertible securities are exercised or converted into
Common Stock, there will be 2,575,147 shares of Common Stock available for
future sale. Of such shares, 553,571 shares (from the conversion of the PP
Notes (as defined herein in "Business")) may not be sold for a period of 180
days following the date of consummation of the Offering; 509,250 shares (from
the conversion of the Convertible Notes issued in connection with the Company's
acquisition of the limited partnership interests of ICGP and GCGP may not be
issued
7
<PAGE>
and sold until the date that is 13 months after the date of consummation of
the Offering; and 1,233,284 shares which are owned by officers, directors or
stockholders who own 5% or more of the outstanding Common Stock, and pursuant
to an Underwriters' lock-up, may not be sold for 13 months after the date of
consummation of the Offering.
In addition to the foregoing, in connection with the Offering, the Company
is adopting a stock option plan covering 250,000 shares of Common Stock, none of
which have been issued. Also, the Company issued warrants to purchase an
aggregate of 267,300 shares of Common Stock at an exercise price of $1.45 in
connection with the sale of the Redeemable Preferred Stock, all of which are
immediately exercisable. See "Management -- Stock Option Plan." All of the
Common Stock described above can only be issued if such stock is registered or
exempt from registration under the Securities Act. In addition, all such shares
will be "restricted shares" when issued unless registered under the Securities
Act.
8
<PAGE>
USE OF PROCEEDS
The net proceeds (the "Net Proceeds") to the Company from the sale of the
1,200,000 shares of Common Stock offered by the Company are estimated to be
approximately $7,110,000 ($8,244,000 if the Underwriters' Over-allotment Option
is fully exercised).
The Company expects to use approximately $2,500,000 of the Net Proceeds for
development of the New York Golf Center approximately $50,000 for the Harborside
Golf Center, and approximately $700,000 for the Fremont Golf Center. The
Company also intends to use approximately $1,500,000 to redeem all of the
Company's outstanding Redeemable Preferred Stock, together with accrued
dividends and $2,050,000 for acquisition of limited partnership interests of
ICGP and GCGP. See "Partnership Acquisitions." The Company intends to utilize
the balance of the Net Proceeds ($310,000 (without giving effect to the
Underwriters' Over-allotment Option)) to develop, acquire or operate additional
metropolitan golf centers in locations which meet the Company's investment
criteria described herein and for working capital.
Pending their use as set forth above, the Company intends to invest the Net
Proceeds in short-term, investment grade, interest-bearing securities for
working capital. The described use of proceeds is based upon management's
assumptions concerning certain acquisition, development, financial and other
matters which may affect the Company in the future. If the development of the
Company's business varies materially from these assumptions, the Company may
decide to make changes in the proposed location and size of its golf facilities
and accordingly may reallocate some proceeds based on a determination that such
reallocation is in the best interests of the Company.
DIVIDEND POLICY
The Company has not paid any dividends since its formation. The Company
intends to retain all future earnings for use in its business and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. This policy will be reviewed from time to time by the Company's Board
of Directors in light of, among other things, its results of operations and
capital requirements.
9
<PAGE>
DILUTION
The negative net tangible book value of the Company at March 31, 1996
was $(1,244,049) or approximately $(1.01) per share of Common Stock. Net
tangible book value per share represents the amount of total tangible assets
of the Company, less total liabilities, divided by the number of shares of
Common Stock, warrants and certain rights outstanding. After giving effect
to the sale by the Company of shares of its Common Stock offered hereby and
the application of the Net Proceeds therefrom (including the redemption of
all the outstanding Redeemable Preferred Stock) the net tangible book value
of the Company at March 31, 1996, after such adjustment would have been
$6,903,968, or $2.43 per share of Common Stock and warrants. This represents
an immediate increase in net tangible book value per share of $3.44 to
current stockholders and an immediate dilution in net tangible book value of
$4.57 per share to investors in the Offering at the assumed IPO Price. The
following illustrates this dilution per share:
<TABLE>
<S> <C>
Assumed initial public offering price per share . . . . . . . . . . . . . . . . $7.00
Net negative tangible book value before the Offering . . . . . . . $(1.01)
Increase per share attributable to investors in the Offering . . . 3.44
Net tangible book value per share after the Offering $2.43
-----
Dilution per share to investors in the Offering . . . . . . . . . . . . . . . . $4.57 65%
-----
-----
</TABLE>
The following table summarizes, as of March 31, 1996, the difference in the
total consideration paid and the original price per share paid between current
shareholders and investors in the Offering with respect to the number of shares
of Common Stock purchased from the Company, assuming an IPO Price of $7.00 per
share.
<TABLE>
<CAPTION>
SHARES CONSIDERATION AVERAGE PRICE
OWNED PERCENT PAID PERCENT PER SHARE
--------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Current Stockholders . . . . . . . 1,233,284(1) 50.7% $ 273,012 3.0% $0.22
Investors in the Offering . . . . . 1,200,000 49.3% $8,400,000 97.0% $7.00
--------- ------ ---------- -----
Total . . . . . . . . . . . . 2,433,284 100.0% $8,673,012 100.0%
--------- ------ ---------- -----
--------- ------ ---------- -----
</TABLE>
______________________________
(1) Includes all warrants (whether vested or unvested) issued to directors and
officers.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on a
consolidated basis at March 31, 1996, and as adjusted to give effect to the
Offering of 1,200,000 shares of Common Stock (assuming that the Underwriters'
Over-allotment Option is not exercised) at the IPO Price of $7.00 per share, net
of underwriting discounts and estimated Offering expenses and the application of
the Net Proceeds. See "Use of Proceeds."
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA INCLUDING
EXCLUDING OFFERING
MARCH 31, OFFERING PROCEEDS
1996 PROCEEDS(1) AS ADJUSTED(1)
--------- ------------ --------------
<S> <C> <C> <C>
Long term debt, less current maturities . . . . . . . . . . . . . . . . $ 18,624 $10,660,624 $10,660,624
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . 5,974
Minority interest in consolidated subsidiaries . . . . . . . . . . . . 37,253 508,007 508,007
--------- ----------- -----------
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . 61,851 11,168,631 11,168,631
--------- ----------- -----------
Stockholders' equity
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,500
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . 940,609
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,770) (96,770) 7,013,230
Notes receivable, stockholder . . . . . . . . . . . . . . . . . . . . (136,692) (136,692) (136,692)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (845,806) (1,359,697) (1,359,697)
--------- ----------- -----------
Total stockholders' equity (deficit) . . . . . . . . . . . . . . . . . (93,159) (1,593,159) 5,516,841
--------- ----------- -----------
Total long-term liabilities and stockholders' equity (deficit). . . . . ($ 31,308) $ 9,575,472 $16,685,472
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
______________________________
(1) The pro forma information of the Company gives effect to the proceeds
from the Private Placement, proceeds from the sale of common stock in the
Offering, the acquisition by the Company of the Fremont Golf Center
pursuant to the option agreement between the parties, and the acquisitions
of 90% of the limited partnership interests in ICGP and GCGP and are based
on the estimates and assumptions set forth in the pro forma consolidated
financial information headnote (Unaudited) and notes to pro forma
consolidated financial statements (Unaudited) included elsewhere in the
Prospectus.
11
<PAGE>
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The historical selected consolidated financial information set forth below
has been derived from the Consolidated and Combined Financial Statements of the
Company for the respective periods presented and is qualified in its entirety
by, and should be read in conjunction with, the Consolidated and Combined
Financial Statements and notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the other financial and
statistical data included elsewhere in this Prospectus. Operating results for
the three months ended March 31, 1996 are not necessarily indicative of the
results that will be achieved for future periods, including for the entire year
ending on December 31, 1996. The pro forma selected consolidated financial
information set forth below for the Company gives effect to the proceeds from
the sale of the PP Notes and proceeds from the sale of Common Stock in the
Offering (but not including the shares issuable pursuant to the Underwriters'
Over-allotment Option), the acquisition by the Company of the Fremont Golf
Center, the acquisition of limited partnership interests in ICGP and GCGP, the
$1,750,000 in proceeds from ICGP's long-term debt and ICGP's $1,435,000 in
property and equipment acquisitions, and are based on the estimates and
assumptions set forth herein. The unaudited pro forma information has been
prepared utilizing historical financial statements and notes thereto, which are
incorporated by reference herein. The unaudited pro forma financial data does
not purport to be indicative of the results which actually would have been
obtained had the purchase been effected on the dates indicated or of the results
which may be obtained in the future. The unaudited pro forma financial
statements should be read in conjunction with the historical financial
statements (including the notes to such financial statements) included elsewhere
in this Prospectus.
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------------- ---------------------------------------------
PRO FORMA ACTUAL PRO FORMA ACTUAL
--------- --------------------- --------- --------------------------------
1996 1996 1995 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Total revenues . . . . . . . . . . . . . . . . $ 313,141 $ 49,057 $ 42,403 $ 3,657,593 $ 335,303 $ 291,237 $106,313
Total operating expenses . . . . . . . . . . . 872,267 220,955 181,187 4,657,943 882,709 565,811 109,176
--------- --------- --------- ----------- --------- --------- --------
Operating loss . . . . . . . . . . . . . . . . (559,126) (171,898) (138,784) (1,000,350) (547,406) (274,574) (2,863)
Other income (expense) . . . . . . . . . . . . (254,770) 9,530 (2,053) (1,165,276) 35,122 13,630 88
Equity in loss of affiliates . . . . . . . . . (2,285) (1,500) (770) (309) (1,392)
Extraordinary item, debt extinguishment . . . 165,899
Minority interest in income of consolidated
subsidiaries . . . . . . . . . . . . . . . . 37,454 (13,075) (1,650) 62,912 (19,058) (3,560)
--------- --------- --------- ----------- --------- --------- --------
Net income (loss) . . . . . . . . . . . . . . ($776,442) ($177,728) ($143,987) ($1,936,815) ($532,112) ($264,813) ($4,167)
--------- --------- --------- ----------- --------- --------- --------
--------- --------- --------- ----------- --------- --------- --------
Net income (loss) applicable to common
stockholders . . . . . . . . . . . . . . . . ($776,442) ($220,384) ($179,477) ($1,936,815) ($687,164) ($315,490) ($4,167)
--------- --------- --------- ----------- --------- --------- --------
--------- --------- --------- ----------- --------- --------- --------
Net income (loss) per share . . . . . . . . . ($0.35) ($0.21) ($0.17) $(0.86) ($0.66) ($0.30) ($0.00)
--------- --------- --------- ----------- --------- --------- --------
--------- --------- --------- ----------- --------- --------- --------
Weighted average common and common
equivalent shares outstanding . . . . . . . 2,245,000 1,045,000 1,045,000 2,245,000 1,045,000 1,045,000 1,045,000
--------- --------- --------- ----------- --------- --------- --------
--------- --------- --------- ----------- --------- --------- --------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31,
--------------------------------------- -------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED 1995 1994 1993
---------- ----------- ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . $ 0 $ 4,774,790 $ 4,744,790 $ 324 $195,777 $ 41,590
Working capital (deficit) . . . . . . . . . (761,278) $ 2,426,996 1,665,718 (505,968) 179,422 (4,058)
Total assets . . . . . . . . . . . . . . . . 970,003 $19,098,859 20,068,862 979,679 812,725 206,388
Short term debt . . . . . . . . . . . . . . 257,954 $ 1,027,082 1,285,036 290,253 43,910 4,296
Long term debt . . . . . . . . . . . . . . . 18,624 $10,642,000 10,660,624 23,151 26,287 21,595
Total stockholders' equity (deficit) . . . . (93,159) $ 5,610,000 5,516,841 100,961 489,066 19,084
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto appearing elsewhere
in this Prospectus. This Prospectus contains forward-looking statements, and
actual results could differ materially from those projected in the
forward-looking statements, as well as those discussed in "Risk Factors" and
elsewhere in this Prospectus.
OVERVIEW
On February 21, 1992, Mr. Tourtellotte incorporated and was the sole
stockholder of The Vintage Group USA, Ltd. On May 26, 1993, Mr. Tourtellotte
incorporated and was the sole stockholder of TVG (Illinois Center) Inc.
("IC"). On July 29, 1994, The Vintage Group USA, Ltd. changed its name to TVG
(Virginia) Inc. ("VA"). Simultaneously, Mr. Tourtellotte formed the Company
under the name of The Vintage Group (USA) Ltd. and contributed his common
stock of VA and IC to the Company in exchange for 100% of its outstanding
common stock. The Company recently changed its name to MetroGolf
Incorporated.
VA and IC were formed for the purpose of holding the general partner
interests in GCGP and ICGP. VA is the general partner of GCGP. IC is the
general partner of ICGP, which owns Illinois Center Golf in downtown Chicago.
See "Business --- Company Golf Centers."
Based on the results and corresponding national exposure the Company
received from Illinois Center Golf, the Company refined its business plan to
focus on developing, acquiring and operating golf centers throughout the
United States with characteristics similar to Illinois Center Golf. To that
end, the Company has built its management team with people with skills and
experience that complement Mr. Tourtellotte's experience in real estate and
golf course acquisition and development.
The Company initially used outside management companies to manage its
golf centers. In September 1995, the operations management subcontract for
Illinois Center Golf was terminated. In March 1996, the Company terminated
the third-party management company for Goose Creek. All Company properties
are, and in the future are expected to be, managed by VGM.
EFFECT OF CERTAIN FINANCINGS AND PROPOSED ACQUISITIONS
The accompanying unaudited pro forma financial statements of the
Company, give effect to (i) the proceeds from the Private Placement sale of
$2,025,000 PP Notes, (ii) proceeds from the sale of Common Stock in the
Offering, (iii) the acquisition by the Company of the Fremont Golf Center,
and (iv) the acquisitions of 90% of the limited partnership interests in ICGP
and GCGP. On a pro forma basis, as adjusted to give effect to these
transactions as if they had occurred as of January 1, 1995, the Company
reported total revenue of approximately $3.6 million and a net loss of
approximately $1.9 million, compared with total revenue of $335,303 and a net
loss of $532,112 on a historical basis for the year ended December 31, 1995.
In addition, the total revenue is $313,141 and net loss is $776,442 on a pro
forma basis, compared with total revenue of $49,057 and net loss of $177,728
on a historical basis for the three months ended March 31, 1996. These
transactions adversely effect pro forma net income for the Company primarily
due to the pro forma interest expense relating to the PP Notes issued in
connection with the Private Placement, the acquisition of the limited
partnership interests, and the Fremont Golf Center acquisition as well as the
pro forma depreciation associated with the acquisition of the limited
partnership interests and the Fremont Golf Center. Total pro forma interest
for 1995 related to these transactions was $430,110 for the year ended
December 31, 1995 and $120,286 for the three months ended March 31, 1996.
In addition, the three proposed acquisitions reflect net losses for both the
year ended December 31, 1995 and the three months ended March 31, 1996, which
adversely effect the Company's historical earnings. In the case of ICGP, the
Company believes future earnings will substantially improve as a result of the
maturity of this new operation. In the case of GCGP and Fremont, the Company
believes it will enhance revenues at these facilities by Completing capital
improvements, enhancing the facilities and increasing and refocusing marketing
efforts for these projects. In addition, the Company believes it can improve
cash flows and reduce expenses by economies of scale achieved through
centralized purchasing, accounting, management information systems and cash
management. There can be no assurance, however, that the Company will be able
to improve the performance of newly-acquired facilities.
RESULTS OF OPERATIONS
The Company derived its revenue from two major sources: development or
acquisition fees and management fees. Management fees are generated by three
subsidiaries of the Company, as managing general partners of two
Company-sponsored
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limited partnerships, and property managers of the underlying golf
properties. The specific revenues of the three operating subsidiaries are as
follows:
THREE MONTHS ENDED MARCH 31, 1996, AS COMPARED TO THREE MONTHS ENDED
MARCH 31, 1995
Total revenues increased 15.7%, from approximately $42,400 for the three
months ended March 31, 1995, to approximately $49,000 for the three months
ended March 31, 1996. The increase is primarily the result of management
incentive fees of approximately $5,300 earned during the three months ended
March 31, 1996. No such fees were earned for the same period in 1995.
Operating expenses increased 21.9%, from $181,000 for the three months
ended March 31, 1995, to $221,000 for the three months ended March 31, 1996.
Officer salaries increased from $70,656 in 1995 to $134,944 for the three
months ended March 31, 1996 due to salary increases and the addition of two
corporate officers. In addition, general and administrative expenses for the
three months ended March 31, 1996 decreased from $105,706 in 1995 to $81,186
in 1996, due primarily to decreases in legal and accounting fees associated
with pursuing private financing.
Depreciation expense remained relatively unchanged from 1995 to 1996
primarily because there was little change in depreciable assets from 1995 to
1996.
Interest expenses increased from $4,800 in 1995 to $6,900 in 1996 due to
the increase in the Company's outstanding balance on its line of credit from
$166,000 in 1995 to $232,000 in 1996.
Interest income increased from $2,800 in 1995 to $16,000 in 1996 as a
result of an increase in interest-bearing receivables of approximately
$235,000.
TWELVE MONTHS ENDED DECEMBER 31, 1995, AS COMPARED TO DECEMBER 31, 1994
VA, a wholly owned subsidiary of the Company, is the managing partner of
GCGP, which is the owner of Goose Creek. VA earns a fee of approximately
$51,000 annually for managing GCGP. The Company earned management fees of
$51,000 for 1995, which increased by 5% from the prior year in accordance
with a contractual inflation adjustment.
IC, an 89% owned subsidiary, is the managing general partner of ICGP,
which is the owner of Illinois Center Golf. IC earns a fee of approximately
$60,000 annually for managing ICGP. The Company earned management fees of
$60,000 for 1995 and $35,000 for 1994 as IC began earning its management fee
beginning June 1, 1994.
VGM, a 51% owned subsidiary during 1995 (now wholly owned), earned
management fees of approximately $79,000 and $76,000 in 1995 and 1994 as the
facility manager of Illinois Center Golf.
In 1995, asset management fees and management fee income were
approximately $190,000, as compared to approximately $160,000 in 1994. The
increase in 1995 is primarily due to a 5% annual escalation of management
fees and the Company earned a full year of management fees from Illinois
Center Golf in 1995.
In 1994, the Company earned a development fee of $125,000 upon
completion of the Illinois Center Golf facility. In 1995, the Company did
not earn any development fees. In 1995, the Company earned a fee of $120,000
for assigning its rights to purchase a golf course in South Carolina. In
addition, the Company earned a $25,000 fee in 1995 from the purchaser of a
promissory note held by the former owner of Goose Creek for negotiating the
purchase of the promissory note at a substantial discount. Each of these
sources of revenue are considered nonrecurring.
Operating expenses increased from approximately $566,000 in 1994 to
approximately $883,000 in 1995. Although salaries decreased from $374,000 in
1994 to $344,000 in 1995, general and administrative expenses increased from
$181,000 in 1994 to $520,000 in 1995. The primary reasons for the increase
in general and administrative expenses was an increase in legal and
accounting fees in 1995 associated with preparation of various securities
offering documents and the initial audit of the Company in 1995. In
addition, the Company paid a commission of $25,000 from the fees it earned
for assigning its rights to purchase the South Carolina property and paid
subcontract property management fees of $45,000. These costs were not
incurred in 1994. The Company also leased new office space in September of
1994; accordingly, rent expense is higher in 1995 than in 1994 by
approximately $17,000.
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Depreciation expense increased slightly from $10,800 in 1994 to $19,000
in 1995.
Interest income increased from $15,500 in 1994 to $61,100 in 1995 as a
result of interest-bearing loans to ICGP and GCGP, starting in September 1994
and November 1995, as well as interest-bearing loans to its sole Common Stock
holder.
Interest expense increased from $1,800 in 1994 to $26,000 in 1995,
primarily due to the Company's borrowings under its line of credit, which
were primarily used to make loans to ICGP and GCGP.
The equity in loss of affiliates represents the Company's proportional
share of the losses of ICGP and GCGP, which had larger losses in 1996 than in
1995.
The minority interest in income of consolidated subsidiaries increased from
approximately $1,700 for the three months ended March 31, 1995 to
approximately $13,000 for the three months ended March 31, 1996 is primarily
due to the fact that management fees were not paid to an outside management
company to manage Illinois Center Golf in 1996, whereas those fees were paid
to an outside management company in 1995.
TWELVE MONTHS ENDED DECEMBER 31, 1994, AS COMPARED TO DECEMBER 31, 1993
Revenues were $106,000 in 1993, as compared to $291,000 in 1994. In
1993, the Company earned a $60,000 consulting fee and an asset management fee
from GCGP of $46,000. In 1994, the Company earned asset management fees and
property management fees from both ICGP and GCGP totalling approximately
$165,000 in the aggregate. In addition, the Company earned a $125,000
development fee in 1994, but none in 1993.
Overall, operating expenses were $109,000 in 1993, as compared to
$566,000 in 1994. The primary reason for the increase in 1994 is that the
Company was managing only one property in 1993. In 1994, the Company
expanded operations, added additional staff and leased new office space.
Commencing January 1, 1994, the President of the Company began earning a
monthly salary of $15,000. In 1993, nominal officer's compensation was paid.
Depreciation expense increased from $5,000 in 1993 to $10,800 in 1994
due to an increase in depreciable assets of $8,000.
Interest income increased from $3,000 in 1993 to $15,000 in 1994 as a
result of loans to ICGP starting in September 1994.
Interest expense decreased slightly from $3,000 in 1993 to $1,800 in
1994. The change was due to a reduction in the amount of interest-bearing
principal on outstanding indebtedness in 1994.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had a working capital deficit of
approximately $761,000, as compared to a working capital deficit of $506,000
at December 31, 1995. The increase in working capital deficit is due to
increases in accounts payable and accrued salaries resulting from continued
losses from operations and negative cash flow.
The cash used in operating activities increased from $103,585 in 1994 to
$221,689 in 1995. The primary reason for the increase has been the increase
in the net loss from $264,800 in 1994 to $532,100 in 1995. Cash raised in
debt and equity financing in 1994 and 1995 was primarily used to fund
operating losses and advances to related parties. In addition, the Company
used accounts payable as a source of financing. Trade accounts payable
increased $104,000 in 1994 and $260,000 in 1995. Because of reduced cash
flows, officers of the Company were not paid all of their salaries due them
in 1994 and 1995.
For the three months ended March 31, 1996, the Company had net cash
provided by operations, despite a net loss of $178,000. The net cash
provided by operations was the result of an increase in accounts payable and
accrued salaries of $190,000 from December 31, 1995 to March 31, 1996. In
addition, the Company received $83,000 in management fees during the three
months ended March 31, 1996 which had been accrued for in prior periods.
Since its inception, the Company has been funded primarily through
loans, capital contributions and the sale of preferred stock. In May 1996,
the Company successfully completed the sale of $2,025,000 of PP Notes,
resulting in net proceeds of approximately $1,792,000. Some of the proceeds
from the PP Notes were used to pay off the Company's line of credit. After
this payoff, the Company's primary liabilities are accounts payable and
accrued salaries. With the recent and expected future increased
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activities of the Company, the Company expects certain operating expenses to
increase such as office rent and salaries. The working capital provided from
the sale of the PP Notes, in the opinion of management, is sufficient to fund
the Company's day-to-day operations through the end of 1996. The Company is
dependent upon the completion of the Offering to provide financing for the
acquisition of the Fremont Golf Center, the acquisition of the limited
partnership interests in ICGP and GCGP, and to provide funding for the
development of the New York Golf Center. Upon completion of the Offering,
the Company anticipates that a substantial portion of the PP Notes will be
converted to equity and that the Convertible Notes issued upon acquisition of
the limited partnership interest will be converted to equity 13 months
thereafter. If the Offering is not consummated or if the PP Notes and the
Convertible Notes are not converted to equity, then the Company may not have
sufficient working capital to complete the acquisition of the Fremont Golf
Center, the development of the New York Golf Center and repayment of the PP
Notes when they come due in June 1997.
ICGP had a net loss of approximately $1,110,000 in 1994, $535,000 in
1995 and had a net loss of $217,000 for the three months ended March 31,
1996. The net loss for 1996 is not necessarily indicative of the results of
operations expected for 1996 because much of Illinois Center Golf's business
is seasonal, with most of Illinois Center Golf revenue coming during the
period May 1 to October 1. Illinois Center Golf, which was not completed
until July of 1994, has seen revenue continue to increase from $745,000 in
1994 to $1.55 million in 1995. The Company expects an increase in revenues
in 1996 over 1995. Illinois Center Golf had working capital deficits at
March 31, 1996, December 31, 1995 and 1994. The Company has funded losses of
Illinois Center Golf of approximately $460,000 and expects to fund additional
losses through 1996.
GCGP had net losses from operations of approximately $76,000 in 1995,
$28,000 in 1994 and $228,000 for the three months ended March 31, 1996. In
their report dated May 17, 1996, included herein, BDO Seidman, LLP,
independent certified public accountants for GCGP, expressed "substantial
doubts" about GCGP's ability to continue as a going concern. The Company's
plans with regard to this concern are discussed in Note 1 to the financial
statements of GCGP included herewith. As with Illinois Center Golf, the net
loss of Goose Creek for the three months ended March 31, 1996 is not
necessarily indicative of the results of operations expected for 1996 as
Goose Creek business is also seasonal, with a substantial portion of their
business between April 1 and October 30. Goose Creek is a more mature golf
course which generated revenues of approximately $1.4 million in 1993, $1.7
million in 1994 and $1.5 million in 1995.
The Company has taken over management of both Goose Creek and Illinois
Center Golf commencing April 1, 1996. Prior to this time, an independent
golf management company managed the facilities. In addition to generating
revenues from these management activities, the Company believes it will be
able to better evaluate daily changes in operation and react in a more timely
basis if needed.
At March 31, 1996, the Company had a deferred tax asset of $206,000 that
was fully reserved to reflect management's evaluation that it is more likely
than not that all of the deferred tax asset will not be realized.
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets" and SFAS No. 123, "Accounting for Stock Based
Compensation." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amounts or
their estimated recoverable amounts and the adoption of this statement by the
Company is not expected to have an impact on the financial statements. SFAS
No. 123 encourages the accounting for stock-based employee compensation
programs to be reported within the financial statements on a fair value based
method. If the fair value based method is not adopted, then the statement
requires pro forma disclosure of net income and earnings per share as if the
fair value based method has been adopted. The Company has not yet determined
in what form SFAS No. 123 will be adopted or its impact on the financial
statements. Both statements are effective for fiscal years beginning after
December 15, 1995.
SEASONALITY
Historically, the second and third quarters have accounted for a greater
portion of the Company's operating income than have the first and fourth
quarters of the year. This is primarily due to an outdoor playing season
limited by inclement weather. Although most of the Company's facilities are
designed to be all-weather, portions of the facilities tend to be vulnerable
to weather conditions. Also, golfers are less inclined to practice when
weather conditions limit their ability to play golf on outdoor courses. This
seasonal pattern, as well as the timing of new golf facility acquisitions,
developments and openings, may cause the Company's results of operations to
vary significantly from quarter to quarter. Accordingly, period-to-period
comparisons are not necessarily meaningful and should not be relied on as
indicative of future results.
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BUSINESS
GENERAL
MetroGolf Incorporated acquires, develops and operates golf centers
designed to provide a wide variety of practice and play opportunities in
major metropolitan areas. The Company selects locations in areas with high
concentrations of office, urban residential and hotel development that are
convenient to time-constrained golfers. The Company's golf centers typically
offer: practice facilities; instructional programs such as the David
Leadbetter Golf Academy; a full-line pro shop; restaurant, bar and catering
facilities; group meeting areas; and, in some cases, par-3 or
executive-length golf courses. The Company designs golf centers around a
driving range with target greens, bunkers and traps to simulate golf course
conditions. The Company's driving ranges, which include substantially more
hitting stations than the industry average, are lighted to permit night play
and are enclosed or sheltered in a climate-controlled environment.
The Company's strategy is to become the leading owner and operator of
golf centers in major metropolitan areas. The Company currently operates
Illinois Center Golf and Goose Creek, an 18-hole golf course in suburban
Washington, D.C. The Company is developing a golf center located on the top
of the Port Authority Bus Terminal in midtown Manhattan, New York City. In
addition, the Company is acquiring a driving range and clubhouse in the City
of Fremont, California (the east San Francisco Bay area), where it plans to
develop an executive-length golf course, and leasing and operating the
Harborside Golf Center, a double-tiered, double-ended driving range, putting
green, clubhouse and sports bar/cafe in downtown San Diego, California. The
Company has also identified other sites for acquisition or development in
major cities, including Denver, St. Louis, Kansas City, Toronto, Atlanta, Los
Angeles and Orlando. The Company will acquire most, if not all, of the
limited partnership interests in each of the limited partnerships that own
Illinois Center Golf and Goose Creek simultaneous with the closing of the
Offering through an offer to purchase of such limited partnership interests
for a combination of cash and Convertible Notes.
INDUSTRY OVERVIEW
According to the NGF, there were approximately 25 million golfers in the
United States in 1995. The average age of the golf driving range user was
37.1 years old, with an average household income of $55,700 per year. Those
with household income in excess of $75,000 (approximately 35% of all
stand-alone range users) were the most likely to visit a stand-alone range,
visiting 3.7 times more frequently than those with household income of less
than $30,000 (19% of all stand-alone range users) and 1.5 times more
frequently than those with household incomes between $30,000 and $75,000 (46%
of all stand-alone range users).
According to the Golf Range and Recreational Association, there are
currently between 1,900 and 2,300 stand-alone driving ranges in the United
States. The average number of tee stations per range in the industry in
1993, as estimated by the NGF, was 40, with 50% of all stand-alone ranges
offering 35 or fewer tee stations. Large stand-alone ranges, defined as
ranges with more than 50 tee stations, accounted for approximately 21% of all
facilities. The stand-alone range industry is highly fragmented. The NGF
estimates that in 1993, 92% of stand-alone ranges were managed by independent
owner-operators. The Company believes that many of these owner-operated
ranges are managed by individuals who may lack the experience, expertise and
financial resources to compete effectively in a consolidating industry.
Driving ranges and more extensive facilities incorporating driving
ranges with other facilities, often called golf practice and learning
centers, have experienced significant growth in recent years. Golf practice
and learning centers usually consist of a driving range with a minimum of 50
tee stations (often covered and heated in areas of colder climates), complete
practice areas, including putting, chipping and sand bunker areas and
maintenance facilities. Indoor video and other instructional analysis, in
conjunction with a national golf academy or other golf school, food and
beverage services and golf equipment retail operations, have become
increasingly popular at these facilities. Occasionally, such facilities are
combined with or incorporated into the full-length or executive course
facility types.
The ownership and operation of golf courses, driving ranges and other
golf facilities in the United States is highly fragmented, with very few
companies owning or operating substantial portfolios of golf facilities.
However, over the last 10 years, there has been an accelerating trend towards
consolidation of ownership and management of 18-hole golf courses. What had
been an industry characterized by fragmentation of ownership and management
is becoming increasingly concentrated. The ownership and operation of
driving ranges and golf practice and learning centers in the United States,
however, remains fragmented, with very few companies owning or operating
substantial golf facility portfolios. The Company believes that there are
very few companies who currently own and operate more than one or two golf
practice and learning centers and only one that owns and operates more than
ten golf practice and learning centers in the United States.
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BUSINESS STRATEGY
The Company's strategy is to become the leading owner and operator of
golf centers in major metropolitan areas. The Company intends to accomplish
this goal principally by acquiring existing golf projects that have the
potential for revenue enhancement through expansion of facilities, more
efficient management and innovative marketing strategies. The Company
intends to develop new golf centers in attractive markets where existing
facilities are not suitable for acquisition. The Company designs golf
centers around a driving range with target greens, bunkers and traps to
simulate golf course conditions. The Company's driving ranges, which include
substantially more hitting stations than the industry average, are lighted to
permit night play and are enclosed or sheltered in a climate-controlled
environment. The Company has capitalized on the national recognition of its
flagship development, Illinois Center Golf, a golf center and par-3 golf
course in downtown Chicago, in building a substantial pipeline of attractive
projects for acquisition and development. The Company intends to incorporate
Illinois Center Golf's features into its renovation of existing golf
facilities and new development of golf centers.
ACQUIRE EXISTING GOLF FACILITIES. The Company believes the ownership
and operation of driving ranges and other golf facilities is highly
fragmented and presents numerous opportunities for it to acquire,
upgrade and renovate golf centers and driving ranges. The Company's
acquisition strategy is to target well-located, under-performing stand-alone
ranges or golf centers in major metropolitan areas. The Company will either
purchase the land and facilities or enter into long-term leases for each
project. In determining which facilities may be suitable acquisition
candidates, management principally considers potential for improvement in
revenue and operating cash flow through capital improvements. Capital
improvements may include increasing the number of tee stations, sheltering
the hitting stations or enclosing the driving range, installing lights to
permit night play, adding or expanding pro shop and clubhouse facilities and
constructing other amenities to encourage corporate, executive and business
and leisure traveler participation.
DEVELOPMENTS OF NEW GOLF CENTERS. In desirable locations where
suitable acquisition opportunities are not available, the Company intends to
construct new facilities, often as an interim use for valuable urban real
estate under long-term leases. Such golf centers, typically modeled after
Illinois Center Golf, will be designed to provide a mix of features uniquely
focused on the demographics and other characteristics of the specific market
area. The Company's golf centers typically include: instructional programs
such as the David Leadbetter Golf Academy; enclosed heated hitting areas,
putting, sand bunker and chipping practice areas; full-line pro shop;
restaurant, bar and catering facilities; group meeting areas; and, in some
cases, par-3 or executive-length golf courses.
ECONOMIES OF SCALE. The Company believes that, in the course of its
acquisition and development activities, it will realize efficiencies of
management, purchasing and marketing unavailable to independent
owner-operators who manage the vast majority of stand-alone golf facilities
spreading corporate overhead costs, including accounting, insurance, cash
management, strategic marketing and financial reporting functions over
multiple facilities.
MARKETING STRATEGY. The Company believes it will achieve high margins
from strong demand and high utilization rates for golf practice and learning
facilities located in areas with few or nonexistent locally available
alternatives; by providing a unique recreational facility that is
user-friendly for the novice and intermediate golfer; by the inclusion of the
internationally-recognized David Leadbetter Golf Academy for golf
instruction; by the attraction of facilities designed to provide unique
venues for corporate and business outings, meetings and other special events;
and by offering opportunities for major corporate sponsorship and advertising.
METROPOLITAN GOLF CENTERS
Metropolitan golf centers have several attractive characteristics,
including: (i) ease of access for time-constrained metropolitan
area residents and local businesspersons in under-served markets; (ii)
corporate entertainment facilities and unique membership and entertainment
opportunities for local and national businesses; (iii) special appeal to
women, beginning golfers and high-handicap golfers because of the learning
center and the shorter length golf course; and (iv) availability of unique,
outdoor recreation amenities for the business and leisure traveler
patronizing nearby hotels.
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GOLF ACCESS TO UNDER-SERVED MARKET. Many major metropolitan areas lack
sufficient golf facilities to meet the increasing demand for tee times.
Golfers in densely populated areas frequently must drive long distances to
play or practice golf. In addition, the busy professional may lack
sufficient time for recreational activities. By locating a multi-use golf
facility close to the user's home or job in metropolitan residential or
business districts, the Company provides a convenience for the metropolitan
golfer. By offering opportunities to play and practice golf requiring only
one to two hours, including travel time, the Company allows the golfer more
frequent outings and meets the needs of a larger constituency. The
metropolitan golf center is not designed to replace the suburban country club
or daily-fee course, but rather to supplement regular rounds and offer a
high-quality practice medium.
CORPORATE ENTERTAINMENT CENTER. As corporate entertainment facilities,
metropolitan golf centers offer unique venues with easy access for client
entertainment and employee benefit functions. As highly visible outdoor
recreation facilities, metropolitan golf centers provide unique and
attractive advertising and sponsorship opportunities. Each metropolitan golf
center has staff members dedicated to corporate membership, group outings and
consumer products sponsorship sales. The presence of a par-3 or
executive-length golf course in many facilities allows the Company to offer
an enhanced opportunity to increase sales of both individual and corporate
memberships, host group outings and sponsor special events.
PREFERABLE FACILITY FOR WOMEN AND HIGH-HANDICAP GOLFERS. Women tend to
be consumers of golf lessons, specialized golf equipment and golf apparel.
The highly developed learning and practice facilities and upscale retail
merchandising of the Company's metropolitan golf centers cater to these
demands. The executive-length or par-3 golf course holds specific appeal for
women, one of the fastest growing market segments of new golfers. High
handicap golfers are also drawn to the shorter courses as a lower cost
alternative and as a means to improve their golf game before playing a
full-length course.
TRAVELERS' AMENITY. The metropolitan golf center offers hotels a rare
outdoor recreational product for their guests. Both business and leisure
travelers may take advantage of the proximity of the center to their hotel
and of special packages that may be offered to hotel guests. Hotels may be
interested in block purchases and may pay sponsorship fees to the
metropolitan golf center, thereby increasing the visibility of both the hotel
and the golf facility.
OPERATIONAL STRUCTURE
Generally, the Company's golf centers are open seven days per week. The
Company's revenues are derived from green fees, selling buckets of balls to
be used on the driving range, selling golf clubs, balls, bags, gloves,
videos, apparel and related accessories at its pro shop, fees for lessons,
from the sale of food and beverages and its share of the revenue for the
instructional programs. Golf facilities in general have seasonal attendance
due to outdoor facilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality."
An on-site general manager of each center has overall administrative
responsibility for his or her center's day-to-day operation including, as
applicable, the driving range, golf course, instructional program, short-game
practice area, pro shop, restaurant, bar, as well as the condition of the
facilities. In addition, general managers work with the Company's Chief
Financial Officer to prepare monthly and annual budgets and marketing plans.
The Company emphasizes recruiting and training skilled personnel. The
Company seeks general managers with broad and extensive business and
management skills, preferably from service and hospitality industries.
General managers, as well as other management personnel, are provided
performance incentive bonuses. The Company encourages each general manager
to emphasize customer service at his or her center. Employees undergo
comprehensive training and are required to be courteous, wear standardized
clothing and display a professional attitude.
By virtue of operating a number of golf centers, the Company believes it
achieves economies of scale not available to independent owner-operators.
Typically, the Company can acquire artificial turf, range balls, pro shop
merchandise and other golf center supplies and equipment at lower prices than
any individual owner-operator. The Company can also purchase insurance
coverage at a lower premium rate than would be charged for an individual golf
center. The Company's policies relating to personnel, labor, cash management
and budgets are formulated at the corporate level and required to be observed
by each of the Company's golf centers. The Company's accounting, legal,
insurance and finance functions and management information systems are also
centralized, which enables personnel at each golf center to focus solely on
operational matters related to the particular golf center.
The Company advertises in newspapers and on radio and cable television
and uses direct mailings and other promotions, including sponsoring certain
charitable events and contests and giving free clinics and equipment
demonstrations, to increase public awareness of its golf centers. Each golf
center employs sales and marketing employees who coordinate advertising and
solicit group events and memberships. The compensation of sales and
marketing employees is predominantly incentive-based. David Leadbetter Golf
Academy is required to include the Company's golf centers in its national
marketing materials.
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COMPANY GOLF CENTERS
ILLINOIS CENTER GOLF. Illinois Center Golf opened in July 1994 on a
31-acre parcel in downtown Chicago. This golf center features a 9-hole,
par-3 golf course; a year-round, lighted, 100-stall driving range; and a
complete, full-service clubhouse and learning center. Illinois Center Golf
is located in the heart of Chicago's financial district adjacent to the
Chicago Loop and is designed to attract business people, travelers and
residents in the immediate and surrounding downtown area. There are more
than 4,000 hotel rooms, 3,500 residences, and nine million square feet of
Class A office space located within two blocks of the facility. The Hyatt,
Sheraton, Fairmont and Swissotel hotels are located within one block of
Illinois Golf Center and contribute over 1,000,000 room nights per year to
the site area. In the immediate vicinity, there are over 12,000 residents
with mean household incomes in excess of $70,000. In addition, over 650,000
people are employed within a 12-block radius of the site.
The 9-hole, par-3 course was designed by Dye Designs International, Inc.
("Dye Designs") and features many of the trademark elements that characterize
Dye Designs courses. In particular, the 9th hole features an island green
which challenges the best golfers. Each hole has oversized tee boxes to
facilitate tee maintenance and offer frequent players varied approaches to
each green. The 350-yard, double-ended driving range has a choice of grass
or astroturf at either end (with a portion covered and heated for winter use)
and target fairways and elevated greens at various distances. The clubhouse
serves as the focal point and includes restaurant, bar and catering
facilities, a full-line pro shop and a state-of-the-art teaching center
featuring a David Leadbetter Golf Academy with its internationally recognized
teaching programs.
Illinois Center Golf generated approximately $1.6 million of revenue in
its first full year of operations (1995). Over 270 individual memberships
have been sold (generating both initiation fees and recurring monthly fees),
and both the course and driving range have received significant public usage.
Corporate membership sales at all levels reflect high interest from the
business community. Corporate and consumer product sponsorship interest has
been strong, with several sponsorship programs having been sold.
Additionally, agreements have been established with local hotels for block
purchases of tee times, range usage and other events. Illinois Center Golf
has been featured on the TODAY SHOW, CNN and 25 local and syndicated
television programs and has appeared in SPORTS ILLUSTRATED and 180 trade
publications and daily newspapers (including THE WALL STREET JOURNAL and THE
NEW YORK TIMES). The extensive media coverage of the Company's Chicago
operation attests to the innovative nature of its new metropolitan golf
centers and to the high level of public interest in metropolitan golf and
indicates the significant market potential for such facilities.
Illinois Center Golf is located on a property which is leased for 15
years, terminating in 2009. The lease may be extended by mutual agreement
between the lessor and lessee. The lease may be terminated by the lessor
under certain conditions. If the lease is terminated prior to the end of the
15-year period, the lessor must pay the lessee a termination fee of up to
$4.4 million, reduced by net earnings from the facility. See "Risk Factors
- -- Risks of Termination of Illinois Center Golf Lease." Illinois Center Golf
was financed through a $3.5 million private placement of limited partnership
units in ICGP. The Company is the owner of 89% of the common stock of IC
which is the sole general partner of ICGP, the holder of the ground sublease
of the Illinois Center Golf facility. Upon consummation of the Offering, the
Company expects to acquire approximately 90% of the limited partnership
interests in ICGP. See "Partnership Acquisitions."
GOOSE CREEK. Goose Creek is a 20-year old daily fee course located in
Leesburg, Virginia that was purchased by GCGP in June 1992. The golf course
is 6,800 yards in length and has a 5,000 square-foot clubhouse. The club is
located seven miles from Dulles International Airport in the northern
Virginia suburbs of Leesburg, outside of Washington, D.C. and logs in excess
of 40,000 rounds annually at current fees of as much as $30 per round. The
facility has been remodeled and repositioned in the market by the Company as
a higher-end, country club-type experience for daily fee golfers. Since its
acquisition in 1992, greens fees have been increased by as much as 40%. In
1995, Goose Creek generated over $1.4 million in total revenue. Goose Creek
was purchased by GCGP for slightly more than $4.3 million. Approximately
$975,000 of equity was raised for the purchase through a private limited
partnership offering in GCGP. The balance of the funds was provided by a
mortgage loan and $400,000 carryback financing from the seller. The Company
owns 100% of the issued and outstanding stock of VA which is the managing
general partner of GCGP. In addition, upon consummation of the Offering, the
Company expects to acquire approximately 85% of the limited partnership
interests in GCGP. See "Partnership Acquisitions."
PROJECTS UNDER CONTRACT
FREMONT GOLF CENTER. The Company has executed an agreement to purchase
the leasehold interest on an existing driving range/learning center facility
in Fremont, California for $1,350,000 (plus acquisition costs of
approximately $78,000). The acquisition is expected to close in the summer
of 1996. The existing golf facility consists of a 35-tee station driving
range, two practice putting greens, a clubhouse
21
<PAGE>
and a maintenance area on approximately 15 acres of land. The current
clubhouse design requires modifications to renovate a grill room and bar area
not currently in operation. The driving range has both natural and
artificial tee areas and lights for nighttime use.
In addition, the Company has been granted the exclusive right to
negotiate an agreement to develop an adjacent 35-acre tract of land owned by
the City of Fremont into a 9-hole executive-length golf course with expanded
practice facilities and significantly improved clubhouse amenities. This
grant expires on September 30, 1996 unless mutually extended. The Company
expects to commence construction of the 9-hole executive-length golf course
and begin modifications to the existing facility in the fall of 1996, with
the completion of the golf center scheduled for the summer of 1997. The
total acquisition and proposed development budget is approximately $3.5
million.
The new Fremont Golf Center is planned to include an expanded,
80-station tee area, practice putting green, chipping/short game practice and
sand bunker areas. Plans call for the clubhouse to be redesigned and
enhanced to include a full-line pro shop, locker rooms and grill room with an
outdoor patio. A corporate entertainment and group event area will be
located adjacent to the patio. The 9-hole executive-length golf course is to
be designed by Dye Designs and will have many of the trademark elements that
characterize Dye Designs golf courses. The Company also plans to include a
David Leadbetter Golf Academy.
The Fremont Golf Center site is an urban, in-fill site in the east San
Francisco Bay area, located between Oakland and San Jose in the heart of the
Silicon Valley. An estimated two million people live and work in the east
Bay area. The site is adjacent to Fremont's Central Park, which serves as a
regional park for the east Bay area and frequently experiences weekend crowds
in excess of 50,000 people. The site provides a significant opportunity
because of the limited availability of golfing options in the Fremont area.
The Company believes, based on its market research in the area, that there is
significant undercapacity of golf facilities in the area.
The purchase agreement for the Fremont Golf Center provides for payment
of $650,000 in cash, provided by existing cash and $700,000 payable by a
promissory note accruing interest at a rate of 9% per annum, with all
interest and principal payable in full on November 15, 1996. The note is
secured by a first deed of trust encumbering the leasehold. The Company
intends to retire the note as soon as possible upon funding of permanent debt
financing for the facility. The development budget for the new 9-hole
executive-length golf course, and modifications to the existing facility, are
anticipated to be approximately $2 million over a one-year (approximate)
development period. The Company intends to fund the development through a
combination of equity, expected to be provided by the proceeds of the
Offering, and debt, expected to be provided by a commercial bank, specialized
golf lending institution or private lender.
HARBORSIDE GOLF CENTER. The Company has entered into an agreement to
sublease, with an option to purchase, the Harborside Golf Center located in
downtown San Diego, California, commencing in the summer of 1996. The golf
center is located on a 4.63 acre site of land within close proximity to the
San Diego Convention Center and International Airport and is adjacent to
major hotels, restaurants and approximately eight million square feet of
commercial office space. The facility includes a driving range which has 80
tee stations, double-tiered and double-ended. There are 20 additional grass
practice tees, a putting green, chipping green and sand bunker area.
Multiple target greens and sand traps are located on the driving range. The
clubhouse covers approximately 10,000 square feet and includes a pro shop, a
sports bar/cafe, computerized video swing analysis and a full-swing golf
simulator.
The Company's agreement to sublease the Harborside Golf Center provides
for a term of one year for both sublease and purchase option, with an option
to extend for three months and with control of the facility to be transferred
in the summer of 1996. In addition to monthly lease payments of
approximately $35,000, the Company has agreed to pay the sublessor 50% of net
cash flow after monthly lease payments and management fees of $6,000 payable
to the Company. The Company will provide the required capital from funds from
operations, existing cash, and, if necessary, from the proceeds of the
Offering.
If the Company elects to exercise its option to purchase the facility
for approximately $1.2 million, it intends to fund the acquisition and any
subsequent development expenses through a combination of equity to be
provided by the proceeds of the Offering, and debt, expected to be provided
by a commercial bank, specialized golf lending institution or private lender.
There can be no assurances of consummation of any of these financings or any
other financings on terms acceptable to the Company.
NEW YORK GOLF CENTER. The Company has fully negotiated a lease with the
Port Authority of New York and New Jersey (the "Port Authority") to develop a
driving range and learning center on top of the Port Authority Bus Terminal
in midtown Manhattan, New York City. Construction is scheduled to commence
in the fourth quarter of 1996, with the opening scheduled for the summer of
1997. The proposed development budget is approximately $5.5 million. The
facility is planned to consist of a three-level facility occupying a portion
of the roof of the Port Authority Bus Terminal (approximately three acres)
and includes a 54-station tee area, a practice
22
<PAGE>
putting green, a sand bunker practice area, a greenside chipping area, a
video instruction center, locker rooms, a David Leadbetter Golf Academy and a
club facility. The driving range will include covered, heated tee stations.
The David Leadbetter Golf Academy, video instruction center, golf practice
areas and locker rooms will be located on the entry level of the 24,000
square foot clubhouse. The facility design includes a sports bar/cafe,
outdoor patio and a corporate entertainment and group event area. The sports
bar/cafe, pro shop, offices and restrooms will be located on the second level
of the clubhouse.
The Port Authority Bus Terminal site location provides a development
opportunity that the Company believes is unparalleled in the golf industry.
In this midtown Manhattan location at 42nd Street and 8th Avenue,
approximately 200,000 daily commuters pass through The Port Authority Bus
Terminal, and approximately 60,000 daily transit riders use the Times
Square subway exit at 42nd Street. Peak pedestrian traffic counts at the
corner of 42nd Street and 7th Avenue show an average of approximately 45,000
people per day and are among the highest in all of Manhattan. Demographics
show that over 1.1 million employees work in the New York City midtown area,
and 525,000 permanent residents live in the same area. In addition, over 20
million tourists visit New York City on an annual basis. The site location
is adjacent to the Times Square Business Improvement District, which includes
12,600 hotel rooms and accommodates 1.7 million visitors annually. Several
leading entertainment and service industry companies, including Disney
Enterprises, Inc., Viacom Inc./MTV Networks Inc., Sony Corp., Virgin Records
Inc. and American Multi-Cinema Inc. have recently announced or are
considering projects near The Port Authority Bus Terminal site. Because of
the interest in the area, several large corporations have expressed interest
in sponsorship and advertising opportunities associated with the facility.
The Company has formed a limited liability company to develop the Port
Authority site which is owned by the Company's wholly owned subsidiary, TVG
(New York) Inc., and several individual investors (the "Class B Members") who
assisted in the project presentation, concept development and negotiations
with the Port Authority. The Operating Agreement for the limited liability
company provides for distribution of cash to the members (i) first, in return
of capital contributed, plus a 15% per annum cumulative compounded deferred
return thereon (it is anticipated that the Class B Members will provide 5% of
the contributed capital); (ii) second, 75% to TVG (New York) Inc. and 25% to
the Class B Members until TVG (New York) Inc. has received a 30% internal
rate of return on its investment; and (iii) third, 70% to TVG (New York) Inc.
and 30% to the Class B Members. TVG (New York) Inc. is to be paid a
development fee of $250,000 for development services during construction and
a management fee of 5% per annum of gross revenues upon completion for
delivery of management services. The Company may offer to acquire the Class
B Members' current interests which could result in 100% Company ownership of
the New York Golf Center; however, there is no assurance upon what terms, if
any, such acquisition may occur. The Company plans to finance the
development budget of approximately $5.5 million for the New York Golf Center
primarily utilizing a combination of equity, expected to be provided by the
proceeds of the Offering, and debt, expected to be provided by a commercial
bank, specialized golf lending institution or private lender.
FUTURE PROJECTS
The Company has identified other sites for acquisition or development in
major cities, including Denver, St. Louis, Kansas City, Toronto, Atlanta, Los
Angeles and Orlando. These projects are in various stages of acquisition or
development ranging from identification and initial discussions to
non-binding letters of intent.
The Company plans to finance future projects directly through a
combination of the proceeds from the Offering, issuance of Company securities
in connection with acquisitions and development, and debt from banks or other
lenders. The balance of the capital requirements, if any, may be raised
through subsequent project specific private offerings or other financing
structures. By providing a substantial portion of the equity, the Company
believes it can structure future financings so that the Company will have
majority, if not 100%, ownership interests and thus receive percentages of
the profits and cash flows that are expected to be higher than the 40%
interest in ICGP held prior to the partnership acquisition described herein.
See "Partnership Acquisitions." The Company plans to acquire the land for
its metropolitan projects generally through long-term ground leases of 15
years or more.
The Company believes it can debt finance at least 50% of the capital
required for leasehold property-type projects concurrent with acquisition or
commencement of construction. It has recently received offers to finance,
from a prospective lender, the New York and Fremont Golf Centers which
support this expectation and is currently negotiating with several possible
lenders for those and other future projects. The Company believes that such
financings will allow it to leverage the operating profit margins which are
characteristic of such facilities and thereby maximize its return on equity.
There can be no assurance of the consummation of such financings or any other
similar financings on terms acceptable to the Company.
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<PAGE>
VINTAGE GOLF MANAGEMENT
VGM is a wholly owned golf management company formed to manage Illinois
Center Golf and other future projects of the Company and its affiliates. The
Company through VGM manages the operations of Illinois Center Golf and Goose
Creek, and plans to similarly manage operations of the New York Golf Center, the
Fremont Golf Center, Harborside Golf Center and other future projects.
Generally, all personnel employed at each facility are employees of VGM. The
management contracts between each facility and VGM generally include provisions
that the facility reimburse VGM for the costs of such employees as are required
at each facility.
COMPETITION
On a national basis, the Company faces several major competitors with
sizable portfolios of golf facilities. However, while these companies own or
manage large numbers of golf facilities, overall golf facilities ownership and
management generally remains highly fragmented. The ten largest golf course
management companies own or operate only approximately 3% of the over 14,000
privately owned golf courses in the country. The vast majority of the remaining
97% of privately owned courses are held by regional multi-course (three to five)
companies, small ventures and individuals who have limited experience in
operating a course to maximize profit. These smaller operators tend to lack the
access to capital and management expertise enjoyed by large multi-course owners
and operators. Some of the multi-facility owners have recently completed public
offerings to increase their portfolios with opportunities to acquire facilities
which require professional ownership and management to maximize the potential of
the chosen facility. The trend toward consolidation of 18-hole golf course
facilities has become very profitable, but increasingly competitive, over the
past few years. However, the consolidation trend recently evident for 18-hole
golf courses is only in its infancy for the driving range and practice and
learning center segments of the industry.
Only one other company has emerged as an active developer and acquiror of
driving ranges, golf practice and learning facilities or executive/par-3
facilities on a national scale. FAMILY GOLF CENTERS INC. ("FGCI"), recently
recapitalized through a public secondary offering, is the largest owner and
operator of golf driving ranges in the nation and is pursuing an aggressive
development and acquisition strategy that has already tripled the number of
ranges under its operation since January 1995. Its substantial capital gives it
a competitive advantage over the Company in attempting to absorb weaker
operations and provides it with increasing economies of scale. However, FGCI is
largely focused on the family golf market and on operations in suburban and
smaller metropolitan areas, although it has competed, and may in the future
compete, directly with the Company in certain large metropolitan areas. Other
private companies, such as Golden Bear Golf, Inc., Michael Jordan Golf Co. and
the Professional Golfers' Association of America, are pursuing opportunities in
the golf driving range and practice facility segment and may compete directly or
indirectly with the Company. Golden Bear Golf, Inc. recently filed a
registration statement for an initial public offering. Several other large and
well-financed companies are active in the full-length golf course segment;
however, none have focused on the driving range, golf practice and learning
center or executive/par-3 facility segments or on larger metropolitan areas,
although there can be no assurance that they may not do so in the future.
EMPLOYEES
The Company has eight full-time employees at the corporate level, and a
variable number of additional full-time and part-time employees at the facility
level through its wholly owned subsidiary, VGM. Currently, VGM has
approximately 16 full-time equivalent employees during the slow season, and 60
full-time equivalent employees during the peak season. See "Business --
Vintage Golf Management". In addition, the Company utilizes the services of
various independent contractors, primarily for computer, accounting and finance-
related services.
CORPORATE INFORMATION
The Company leases 1,815 square feet of corporate office space in Denver,
Colorado for rental of approximately $21,780 per year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview" for a discussion of corporate history.
LEGAL PROCEEDINGS
The Company knows of no material litigation or proceedings pending,
threatened or contemplated to which the Company is or may become a party.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The names and ages, along with certain biographical information, of the
executive officers and directors of the Company are as follows:
NAME AGE POSITION
------ --- --------
Charles D. Tourtellotte 41 Chairman of the Board; President
J. D. Finley 38 Executive Vice President; Chief
Financial Officer and Secretary
James K. Dignan 38 Vice President - Acquisitions
Ernie Banks 65 Director
Jack F. Lasday 39 Director
The members of the Board of Directors hold office until the next annual
meeting of shareholders or until their successors have been elected and
qualified. Officers are appointed by, and serve at the pleasure of, the Board
of Directors. The Company expects to add at least two additional directors
before consummating the Offering.
CHARLES D. TOURTELLOTTE. Mr. Tourtellotte is the President and Chairman of
the Board. Mr. Tourtellotte directs the development, acquisition and management
of the golf assets of the Company and the raising of debt and equity capital for
the Company's golf facilities portfolio. Prior to forming the Company in 1991,
Mr. Tourtellotte co-founded and served as a director and president of Dye Equity
Incorporated ("DEI"), the golf course development subsidiary of Dye Designs,
from January 1989 to December 1991. Dye Designs is a golf course design and
development firm headed by Perry Dye, son of renowned golf course architect Pete
Dye. During his tenure at DEI, Mr. Tourtellotte was responsible for acquisition
and development of golf and related real estate assets and sourced debt, equity,
and joint venture financing for DEI's and its clients' portfolios. Prior to
DEI, from 1984 to 1989, Mr. Tourtellotte served as Senior Vice President of
Acquisitions for Johnstown American Companies, then one of the nation's largest
real estate investment and property management firms. Earlier, he served as
senior acquisition/investment officer at two national real estate companies,
Consolidated Capital Corporation and Robert A. McNeil Corporation.
J.D. FINLEY. Mr. Finley, Executive Vice President and Chief Financial
Officer, coordinates all financial functions of the Company, including
management and disbursement of development and acquisition funds for the Company
and its affiliated entities. Mr. Finley also provides due diligence analysis
and assistance in structuring proposed asset acquisitions and development
projects. In addition, Mr. Finley assists Mr. Tourtellotte in managing the day-
to-day affairs of the Company. Prior to joining the Company in September 1994,
Mr. Finley was a shareholder and director of Mitchell Finley and Company, P.C.
("Mitchell Finley"), a Denver-based certified public accounting firm. A portion
of Mr. Finley's time while with Mitchell Finley was devoted to servicing the
Company's account as a tax consultant. Prior to joining Mitchell Finley in
1990, Mr. Finley was a shareholder and director of the accounting firm of
Shenkin Kurtz Baker and Company, P.C. Previous to his employment with Shenkin
Kurtz Baker and Company from 1985 to 1990, Mr. Finley was a manager with the
international accounting firm of Deloitte Haskins & Sells (now Deloitte &
Touche) from 1979 to 1985.
JAMES K. DIGNAN. Mr. Dignan, Vice President - Acquisitions, joined the
Company in July 1993 to facilitate the acquisition and development of golf
assets for the Company's portfolio. Mr. Dignan assists in the acquisition,
development and management of urban golf facilities for the Company. From
1986 to 1993, Mr. Dignan was an Associate Director for Cushman and Wakefield
where he was responsible for the leasing and management of commercial real
estate properties for several Fortune 500 companies. From 1982 to 1986, Mr.
Dignan served as Vice President for Heliconian, Ltd., a company which
specializes in real estate investment services. Mr. Dignan was a member of
the Professional Golfers Association (PGA) for several years.
ERNIE BANKS. Ernie Banks is a Director of the Company and was an
all-star shortstop and first baseman for the Chicago Cubs Baseball Club for
19 years, retiring in 1971. Mr. Banks was elected to the Baseball Hall of
Fame in 1977. Since 1991, Mr. Banks has been the owner and chief executive
officer of Ernie Banks International, Inc., a sports marketing and promotions
firm located in Chicago, and Community Relations Director for the Chicago
Cubs.
25
<PAGE>
JACK F. LASDAY. Mr. Lasday is a Director of the Company and Senior Vice
President - Investments of Prudential Securities. Prior to joining
Prudential Securities in September 1994, he was a Senior Vice President at
Rodman & Renshaw, Inc., where he was employed from 1982 to 1994. Mr. Lasday
is director of Gateway Foundation and a member of the Illinois C.P.A. Society
and the American Institute of Certified Public Accounts.
COMMITTEES OF THE BOARD OF DIRECTORS
Within 90 days after consummation of the Offering, the Board of Directors
intends to establish an Audit Committee and a Compensation Committee. The
functions of the Audit Committee will be to recommend annually to the Board of
Directors the appointment of the independent certified public accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit and review the results thereof with the independent certified public
accountants, review and approve non-audit services of the independent certified
public accountants, review compliance with existing major accounting and
financial policies of the Company, review the adequacy of the financial
organization of the Company and review management's procedures and policies
relative to the adequacy of the Company's internal accounting controls.
The functions of the Compensation Committee will be to review and approve
annual salaries and bonuses for all executive officers and review, approve and
recommend to the Board of Directors the terms and conditions of all employee
benefit plans or changes thereto and administer the Company's Stock Option Plan.
The Board of Directors will appoint independent directors to the Audit and
Compensation Committees.
DIRECTOR AND EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer and the only other officer of the Company
who received compensation in excess of $100,000 for services rendered to the
Company in all capacities during the three fiscal years ending December 31,
1993, 1994 and 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
- ----------------------------------------------------------------------------------------------
SHARES OF ALL OTHER
COMMON STOCK COMPENSATION ($)
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITION FISCAL YEAR SALARY ($) BONUS ($) COMPENSATION WARRANTS (#)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Tourtellotte 1993 $ 30,000 -- -- -- --
Chairman of the Board 1994 180,000 -- -- -- --
and President 1995 180,000 -- -- 75,000 shares(1) $125,000(2)
J.D. Finley
Executive Vice President
and Chief Financial 1994 $30,000(3) -- -- -- --
Officer 1995 120,000 -- -- 75,000 shares(1) --
</TABLE>
_________________
(1) Of these warrants, 37,500 shares are vested as of the date of this
Prospectus. Of the 37,500 unvested warrants, 50% will vest on August 28,
1996, and the remaining 50% will vest on February 28, 1997.
(2) Mr. Tourtellotte is entitled to receive $125,000 of compensation upon
receipt by the Company of the $125,000 contingent portion of its fee in
connection with the development of Illinois Center Golf. This $125,000 is
payable by ICGP upon the complete repayment of capital to the limited
partner investors, plus a preferred return of 15% per annum. Because of
this financial structure, this payment is not expected to be received
before 1999, if at all.
(3) Mr. Finley joined the Company in September 1994.
26
<PAGE>
<TABLE>
<CAPTION>
WARRANT/OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------
INDIVIDUAL GRANTS
PERCENTAGE OF
NUMBER OF TOTAL WARRANTS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE OF BASE
NAME WARRANTS GRANTED FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
(#)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles D. Tourtellotte 75,000 50% $1.45/sh December 1, 2000
J.D. Finley 75,000 50% $1.45/sh December 1, 2000
</TABLE>
Although 50% of each of Mr. Tourtellotte's and Mr. Finley's warrants
described above are vested and exercisable (subject to an Underwriters' lock-up)
as of the date hereof, none were exercised in 1995. See "Principal
Stockholders."
The members of the Company's Board of Directors are not presently
compensated directly by the Company for their service to the Company. Messrs.
Lasday and Banks have received warrants to purchase 12,513 shares each of Common
Stock at an exercise price of $1.45. In addition, outside directors will be
compensated for their reasonable expenses in attending meetings of the Board of
Directors.
EMPLOYMENT CONTRACTS
CHARLES D. TOURTELLOTTE. Effective January 1, 1996, Mr. Tourtellotte
entered into a three-year employment agreement to serve as President of the
Company, which expires December 31, 1998. Such agreement provides for a salary
of $250,000, payable semi-monthly in arrears, plus such bonuses as the Board of
Directors and the Company may from time to time approve. The agreement provides
for certain athletic club memberships and allowances for an automobile, parking
and other perquisites as from time to time are made available to the Company's
executive officers. The agreement is terminable by the Company for "Cause,"
which includes conduct which causes material harm to the Company, willful and
continued absence of employee (other than by reason of disability or death),
employee's abandonment of his duties and responsibilities, conviction of the
employee for a felony involving moral turpitude or fraud, misappropriation or
embezzlement of corporate funds. The agreement also has a non-compete clause
for a period of one-year immediately following the cancellation or termination
of the agreement for any reason. In the event of termination by reason of death
or disability and provided the Company has not otherwise provided
Mr. Tourtellotte with life or disability insurance of other benefit plan for
such occurrence, the Company is required to pay Mr. Tourtellotte or his estate
severance pay equal to six months' salary.
J.D. FINLEY. Effective January 1, 1996, Mr. Finley entered into a three-
year employment agreement to serve as Executive Vice President and Chief
Financial Officer of the Company, which expires December 31, 1998. Such
agreement provides a salary to Mr. Finley of $175,000 per year, plus such
bonuses as the Board of Directors of the Company may from time to time approve.
The agreement provides for payment of monthly dues for membership at a country
club and an allowance for a cellular phone, parking and other perquisites as
from time to time are made available by the Company to its executive officers.
The agreement is terminable by the Company for "Cause" as described above. The
agreement also has a non-compete clause effective for a period of one year
immediately following the cancellation or termination of the agreement. In the
event of termination by reason of death or disability and provided the Company
has not otherwise provided Mr. Finley with life or disability insurance of other
benefit plan for such occurrence, the Company is required to pay Mr. Finley or
his estate severance pay equal to six months' salary.
JAMES K. DIGNAN. Effective July 1, 1996, Mr. Dignan entered into a two and
one-half year employment agreement to serve as Vice President - Acquisitions of
the Company, which expires December 31, 1998. The agreement provides for a base
salary of $66,000 per year, plus such bonuses as the Board of Directors of the
Company may from time to time approve. The agreement is terminable by the
Company for "Cause" as described above. The agreement also has a non-compete
clause for a period of one year immediately following the cancellation or
termination of the agreement for any reason. In the event of termination by
reason of death or disability and provided the Company has not otherwise
provided Mr. Dignan with life or disability insurance of other benefit plan for
such occurrence, the Company is required to pay Mr. Dignan or his estate
severance pay equal to six months' salary.
STOCK OPTION PLAN
In connection with the Offering, the Board of Directors is adopting the
Company's Stock Option Plan. The purpose of the Stock Option Plan is to enable
the Company to attract or attain the services of the type of professional and
managerial employees and
27
<PAGE>
other persons considered essential to the long-range success of the Company
by providing long-term incentives to the Company's officers and employees.
The Stock Option Plan provides for issuance of up to 250,000 shares of Common
Stock at exercise prices no less than 85% of the fair market value of the
Common Stock at the time of grant. The options will vest over a five-year
period, except that up to 10% of the options may be subject to a shorter
vesting period at the discretion of the Company's Board of Directors. Options
may not be exercised more than three months after an employee's termination
of employment with the Company unless such termination was a result of death,
disability or retirement, in which case the exercise period is extended to
one year. The exercise price may be paid in cash, by tendering shares of the
Common Stock (valued at fair market value on the date of exercise) if so
provided in the applicable stock option agreement, or by a combination of
such means of payment, as may be determined by the Committee. The Stock
Option Plan provides that the total number of option shares covered by such
plan, the number of shares covered by each option and the exercise price per
share may be proportionately adjusted by the Board of Directors or the
Committee in the event of a stock split, reverse stock split, stock dividend
or similar capital adjustment effected without receipt of consideration by
the Company. To date, no options have been granted pursuant to the Stock
Option Plan.
Under the Stock Option Plan, the Company may grant stock options to
officers and employees of the Company. The Stock Option Plan will be
administered by the Compensation Committee, which will be composed of
disinterested members of the Board of Directors. Prior to appointment of the
Compensation Committee, the Stock Option Plan will be administered by the Board
of Directors. Subject to the terms of the Stock Option Plan, the Compensation
Committee will determine the persons to whom options are granted and the terms
of each option. The Compensation Committee may grant options that either are
intended to be "incentive stock options" as defined under Section 422 of the
Internal Revenue Code of 1986, as amended, or are not intended to be incentive
stock options.
Other than the stock option plan described above, no retirement, pension,
profit-sharing or similar program has been adopted or is in effect by the
Company for the benefit of its directors, officers or employees. In the future,
however, the Company will adopt such plans or other forms of incentive
compensation as the Board of Directors determines to be necessary or appropriate
to promote and foster the loyalty and dedication of its directors, officers and
employees.
PARTNERSHIP ACQUISITIONS
The Company has made an offer ("Offer to Purchase") to the limited partners
of ICGP and GCGP to purchase their limited partnership interests for a
combination of cash and Convertible Notes. The acquisitions are contingent upon
the closing of the Offering. Limited partners who elect not to exchange their
interests will remain limited partners in the Partnerships. Under the Offer to
Purchase, (i) each limited partner of ICGP who elects to sell will receive for
each $50,000 limited partnership interest, at such holder's option, either (a)
$25,000 cash and a $25,000 Convertible Note or (b) a $50,000 Convertible Note
and (ii) each limited partner of GCGP who elects to sell will receive for each
$25,000 limited partnership interest, at such holder's option, either (a)
$12,500 in cash and a $26,500 Convertible Note, or (b) a $39,000 Convertible
Note. Each limited partner in GCGP who does not qualify as an "accredited
investor" under Regulation D under the Securities Act, has been offered $39,000
cash for each $25,000 of limited partnership interest. Each limited partner in
ICGP who does not qualify as an "accredited investor" has been offered $50,000
cash for each $50,000 of limited partnership interest. Each Convertible Note
will bear interest at 6% per annum; interest only will be payable for 24 months
from issuance of the Convertible Notes. Thereafter, interest will continue to
be paid semi-annually and principal will be amortized evenly over the remaining
seven years until maturity. Each Convertible Note will be convertible at the
holder's option into Common Stock at any time after the date that is 13 months
after the closing of the Offering at a conversion price equal to the IPO Price.
In addition, each $25,000 Convertible Note issued to the limited partners of
ICGP will convert into a five-year warrant to purchase 2,500 shares of Common
Stock at an exercise price equal to 120% of the IPO Price.
Assuming that 90% of the limited partners of ICGP and GCGP agree to the
exchange, the Company would pay an aggregate of $4,515,000 to acquire the
limited partnership interests, of which amount the Company expects $2,462,250
will be in the form of Convertible Notes and $2,052,750 will be in cash. In
addition, the Company will issue five-year warrants to purchase 157,500 shares
of Common Stock in connection with the acquisition of the limited partnership
interests in ICGP. These amounts were based on independent appraisals of the
fair market value of the assets of ICGP and GCGP of $5,900,000 and $5,425,000,
respectively. The Company has agreed to file and use its best efforts to cause
to become effective, and cause to remain effective for one year, when the
Convertible Notes are first convertible, a registration statement covering the
Common Stock into which the Convertible Notes may be converted. Limited
partners who elect to sell will retain the same golfing privileges as they
currently hold and may also receive golfing privileges at other Company-owned
facilities for as long as the Company owns or leases such facilities.
28
<PAGE>
CERTAIN TRANSACTIONS
The following discussion of certain transactions and documents is
qualified in its entirety by reference to certain documents described, copies
of which are available from the Company upon request.
TRANSACTIONS WITH CHARLES D. TOURTELLOTTE
Charles D. Tourtellotte, the Company's President, received a total of
$30,000 in compensation in 1993. From January 1, 1994 through July 31, 1994,
Mr. Tourtellotte deferred $105,000 of compensation. As of March 31, 1996,
$58,333 of this deferred compensation remains unpaid. In addition, since
November 1, 1995 and continuing through the date of this Prospectus, Mr.
Tourtellotte has deferred additional amounts of compensation under his
employment contracts which, as of the date of this Prospectus, total $192,500
(not including the $125,000 described below). From time to time, the Company
has made loans to Mr. Tourtellotte against deferred compensation or in
anticipation, but in advance, of Mr. Tourtellotte earning bonus or other
extraordinary compensation. These loans are evidenced by three note
agreements. The notes bear interest at eight percent per annum and are due on
demand. The total amount of these loans made from time to time is $152,638.
As of March 31, 1996, the balances outstanding on the three notes are
$136,692 in the aggregate. Mr. Tourtellotte has paid the required amounts
under the loans when due. Mr. Tourtellotte continues to receive his base
salary while these notes remain outstanding. Pursuant to Mr. Tourtellotte's
employment contract, any amount still outstanding on the first note must be
paid from the $58,333 of deferred compensation referred to above. During
1996, the Company expects that the payment of Mr. Tourtellotte's deferred
compensation will be offset by the outstanding balance of the first note
which will be cancelled. Mr. Tourtellotte's employment contract also
specifies that any unpaid balance on the second note must be repaid from the
$125,000 Mr. Tourtellotte may receive upon receipt of the contingent portion
of the Company's development fee for Illinois Center Golf described under
"Management -- Director and Executive Compensation." This $125,000 is payable
by ICGP upon the complete repayment of capital to the limited partner
investors, plus a preferred return of 15% per annum. Because of this
financial structure, this payment is not expected to be received before 1999,
if at all. Any further loans to Mr. Tourtellotte will be approved by the
Board of Directors and will be made only if the aggregate of all outstanding
loans do not exceed the amount of reasonably anticipated compensation owed to
him, which may include the balance of the $125,000 of deferred compensation
referred to above. Mr. Tourtellotte has personally guaranteed $5.12 million
of indebtedness of ICGP and GCGP.
LOANS BY J.D. FINLEY
In 1995 and 1996, J.D. Finley, the Company's Executive Vice President
and Chief Financial Officer, made various loans to the Company. The balance
outstanding as of March 31, 1996 and December 31, 1995, including accrued
interest is $9,125 and $26,127. As of the date of this Prospectus, the
unpaid balance of such loans is approximately $5,000. These loans are due on
demand and bear interest at an annual rate of prime plus 2%.
TRANSACTIONS WITH OFFICERS, INDEPENDENT CONTRACTORS AND AFFILIATES
Since November 1, 1995 and continuing through the date of this
Prospectus, payment of various amounts due for salaries, fees and
reimbursable expenses of the officers of the Company and certain independent
contractors have been deferred. As of the date of this Prospectus, deferred
compensation owed to certain officers and former officers of the Company
aggregates approximately $381,000. The Company anticipates that
substantially all the deferred amounts will be paid to the officers and
independent contractors by September 30, 1996 out of the Company's available
cash flow.
NOTES RECEIVABLE, RELATED PARTIES
On September 1, 1994, IC entered into a $500,000 note agreement with
ICGP. Advances under the agreement accrue interest at two percent over the
Citibank's prime rate, which was 8.75 percent at December 31, 1995. The note
is unsecured and due the earlier of demand or September 1, 1996. The balance
outstanding on the note is $426,907, $459,739 and $275,724 as of March 31,
1996, and December 31, 1995 and 1994.
On November 21, 1995, VA entered into a $100,000 note agreement with
Goose Creek. Advances under the agreement accrue interest at two percent
over the Citibank's prime rate, which is 8.75 percent at December 31, 1995.
The note is unsecured and due the earlier of demand or November 21, 1996.
The balance outstanding on the note is $98,286 and $54,989 as of March 31,
1996 and December 1995.
29
<PAGE>
During 1994, the Company entered into two note agreements and, in 1995,
the Company entered into one note agreement with Charles D. Tourtellotte.
The notes bear interest at eight percent per annum and are due on demand.
The balances outstanding on the notes are $136,692, $120,300 and $64,803 as
of March 31, 1996 and December 31, 1995 and 1994.
DEVELOPMENT FEES FROM ILLINOIS CENTER GOLF
During 1994, the Company earned $125,000 for land acquisition, concept
planning design and development services provided to Illinois Center Golf.
PROPERTY MANAGEMENT FEES
On December 1, 1993, VGM entered into a property management agreement
with ICGP. The management agreement expires on January 1, 1997. The terms
of the management agreement provide for a management fee of $5,000 per month,
plus a membership incentive fee of ten percent of the gross proceeds received
from membership initiation fees and the equivalent of one month's membership
dues as received by Illinois Center Golf. The membership incentive fee for
renewal memberships will be reduced to four percent of annual dues for
renewal members. In addition, the management agreement provides for an annual
incentive fee of five percent of the amount of the annual net operating
income in excess of $1,600,000.
VGM initially was operated by Club Sports International ("CSI"). On
October 1, 1994, CSI was removed as operator of VGM. On November 17, 1994,
Billy Casper Golf Management, Inc. ("BCGM") was engaged as the new operator
of VGM. From the period June 1, 1994 through September 30, 1994, VGM's base
fee was split between CSI and the Company with CSI receiving $4,000 and the
Company receiving $1,000. From October 1, 1994 through November 18, 1994,
the Company earned the full amount of VGM's fee. From November 18, 1994
through November 30, 1995, BCGM earned the entire fee. During November 1995,
BCGM was removed as operator of VGM. In addition, VGM has agreed to waive 80
percent of the deferred $5,000 per month fees that it had earned under its
contract from the period December 1, 1993 to May 31, 1994. For the three
months ended March 31, 1996 and for the years ended December 31, 1995 and
1994, property management fees, including incentive fees, were $20,284,
$79,243 and $76,063. As of March 31, 1996 and December 31, 1995 and 1994,
ICGP owes VGM $0, $83,256 and $41,063.
IC, as managing general partner of ICGP, is entitled to receive an asset
management fee from ICGP of $60,000 per annum increased by a factor of five
percent per annum. Asset management fees for the three months ended March
31, 1996 and for the years ended December 31, 1995 and 1994 were $15,750,
$60,000 and $35,000.
VA as managing general partner of GCGP, receives an asset management fee
from GCGP of $5,000 per annum that started June 1, 1992 and increased by a
factor of five percent per annum on June 1 of each year. The Company also is
entitled to receive a fee equal to one percent of the gross proceeds upon any
disposition of GCGP property. Asset management fees for the three months
ended March 31, 1996 and for the years ended December 31, 1995, 1994 and
1993, were $13,023, $51,059, $48,628, and $46,313.
CONCURRENT OFFERING
The registration statement of which this Prospectus forms a part also
includes a Prospectus with respect to an offering by the Converting
Shareholders of 553,571 shares of the Converting Shareholders' Common Stock
issued in connection with the conversion of the PP Notes, which may be sold
in the open market, in privately negotiated transactions, or otherwise
directly by the holders thereof, subject to the following contractual
restrictions. Each Converting Shareholder has agreed not to sell, transfer
or otherwise publicly dispose of the Converting Shareholders' Common Stock
for up 180 days from the date of this Prospectus without the prior written
consent of the Laidlaw Equities, Inc.
The Company will not receive any proceeds from the sale of any of the
Converting Shareholders' Common Stock. Sales of the Converting Shareholders'
Common Stock or the potential of such sales may have an adverse effect on the
market price of the shares of Common Stock offered hereby.
30
<PAGE>
PRINCIPAL STOCKHOLDERS
Charles D. Tourtellotte owns 1,045,000 shares of Common Stock, which
represents 100% of the Common Stock currently outstanding. In addition, as
of the date of this Prospectus, the Company has issued warrants to purchase
467,326 shares of Common Stock to various individuals, and the Company has
adopted the Stock Option Plan covering up to 250,000 shares of Common Stock.
See "Management - Stock Option Plan." The following table summarizes the
current Common Stock and warrant ownership of the Company as of the date of
this Prospectus by (i) each person who is known by the Company to own
beneficially 5% or more of the Common Stock, (ii) all directors of the
Company, and (iii) all directors and officers as a group. Except for the
individuals listed in the table, no person is the beneficial owner of more
than 5% of Common Stock.
<TABLE>
<CAPTION>
WARRANTS PERCENTAGE OF COMMON STOCK OWNED
------------------ ---------------------------------------------
PRIMARY TOTAL
BENEFICIAL OWNER SHARES HELD VESTED UNVESTED HOLDINGS PRIOR TO OFFERING ($)(1) AFTER OFFERING(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Tourtellotte, President(3) 1,045,000 37,500 37,500 1,120,000 54.9% 31.2%
J.D. Finley, Vice President(3) 43,000 37,500 80,500 3.9% 2.2%
Ernie Banks, Director(4) 6,256 6,256 12,513 0.6% 0.3%
Jack F. Lasday, Director(4),(5) 14,014 6,256 20,271 1.0% 0.6%
--------------------------------------------------------------------------------------------
Total 1,045,000 379,813 87,512 1,512,326 60.4% 34.3%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
All Officers and Directors as a Group 1,045,000 100,770 87,512 1,233,284 60.4% 34.3%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
</TABLE>
- --------------------
(1) Does not include (i) the 351,750 shares issuable upon conversion of the
warrants issued in connection with the acquisition of the limited
partnership interests in ICGP, (ii) the 25,000 shares issuable upon
conversion of the warrant issued to Laidlaw Equities, Inc., (iii) 250,000
shares of Common Stock available for future grant under the Company's Stock
Option Plan, or (iv) the exercise of the Underwriters' Over-allotment
Option. See "Management -- Stock Option Plan."
(2) Does not include (i) 157,500 shares issuable upon conversion of the
warrants issued in connection with the acquisition of the limited
partnership interests in ICGP, (ii) the 25,000 shares issuable upon
conversion of the warrant issued to Laidlaw Equities, Inc. for its services
as placement agent for the Private Placement, (iii) 250,000 shares of
Common Stock available for future grant under the Company's Stock Option
Plan or (iv) the exercise of the Underwriters' Over-allotment Option. See
"Management -- Stock Option Plan."
(3) Of the 37,500 unvested warrants, 50% will vest on August 28, 1996 and the
remaining 50% will vest on February 28, 1997.
(4) Directors were granted warrants equal to 5% of the total warrants issued in
connection with the Company's Preferred Stock offering. Of the 6,256
unvested warrants, 50% will vest on August 28, 1996 and the remaining 50%
will vest on February 28, 1997.
(5) In addition to the warrants Mr. Lasday received as a director of the
Company, he received 7,758 warrants from Rodman & Renshaw, Inc. as
compensation while employed there.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 9,000,000 shares of
Common Stock, no par value, and 1,000,000 shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock").
COMMON STOCK
Each holder of Common Stock will be entitled to one vote per share of such
stock with respect to all matters. The holders of shares of the Redeemable
Preferred Stock described below shall not have any right or power to vote on any
question or in any proceeding or to be represented at or receive notice of any
meeting of Common Stock holders, except as described below in "Preferred Stock;"
provided, however, that so long as any shares of the Redeemable Preferred Stock
remain outstanding, the affirmative vote or consent of the holders of at least
two-thirds of the shares of the Redeemable Preferred Stock is necessary to
permit (i) the authorization, creation or issuance, or any increase in the
authorized or issued amount of any class or series of stock ranking prior to the
Redeemable Preferred Stock with respect to payment of dividends or the
distribution of assets on liquidation, dissolution or winding up, or (ii) the
amendment, alteration or appeal of any provisions of the Certificate of
Incorporation which would materially and adversely affect any right, preference,
privilege or voting power of the Redeemable Preferred Stock or of the holders
thereof. In addition, so long as any shares of the Redeemable Preferred Stock
remain outstanding, an affirmative vote of the holders of at least a majority of
the shares of the Redeemable Preferred Stock, is necessary to permit, effect or
validate the authorization of a merger or consolidation of the Company if the
effect of such merger or consolidation would be to materially and adversely
alter or change the rights, preferences, privileges or voting power given to the
holders of any shares of the Redeemable Preferred Stock. The
31
<PAGE>
foregoing voting provisions do not apply if, at or prior to the time when the
act with respect to such vote would otherwise be required, all outstanding
shares of the Redeemable Preferred Stock shall have been redeemed or
sufficient funds shall have been deposited in trust to effect such redemption.
The vote of holders of a majority of the shares of Common Stock is
required to decide any question brought before such stockholders, unless the
question is one upon which by express provision of a statute a different vote
is required, in which case such express provision shall govern and control
the decision of such question. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of the funds legally available therefor, subject to any
preferential dividend rights of any outstanding Redeemable Preferred Stock.
See "-- Preferred Stock." It is not anticipated that any Common Stock
dividends will be paid by the Company in the foreseeable future since the
Company intends to retain its earnings to finance the growth of its business.
The terms of the Redeemable Preferred Stock prohibit the payment of
dividends on the Common Stock (other than in shares of Common Stock) unless
all past dividends on the Redeemable Preferred Stock are paid and the current
dividend is either paid or provided for in cash. As of March 31, 1996, the
total dividends that the Company would be obligated to pay on the outstanding
Redeemable Preferred Stock was $248,385. See "-- Preferred Stock." Future
dividend policies will depend upon the Company's earnings, financial needs
and other pertinent factors. Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company, available after payment of all debts and other
liabilities, subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The shares of Common Stock are not subject to repurchase
by the Company or conversion into any other securities. The outstanding
shares of Common Stock offered in the Offering will be, when issued and paid
for, fully paid and non-assessable.
TRANSFER AGENTS AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
PREFERRED STOCK
The Company has 45,500 shares of Redeemable Preferred Stock outstanding.
The Company will redeem all such shares, together with accrued dividends, out
of the proceeds of the Offering.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of the Offering, the Company will have 3,775,147 shares
of the Common Stock outstanding (including shares of Common Stock issuable
upon exercise of certain warrants, conversion of the PP Notes, conversion of
the Convertible Notes and other rights to acquire Common Stock (not including
shares issuable pursuant to the Underwriters' Over-allotment Option or
250,000 shares issuable under the Stock Option Plan). Of these shares, the
1,200,000 shares of Common Stock sold in the Offering will be freely tradable
without restriction or future registration under the Securities Act and
Exchange Act of 1933, as amended (the "Securities Act"), unless purchased by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. Of the remaining 2,575,147 shares of Common Stock, 553,571
shares issuable upon conversion of the PP Notes will be registered shares
which will be freely tradable upon expiration of the 180-day Underwriters'
lock-up or upon earlier waiver of such lock-up by the Representatives.
In addition, the Company has agreed to file and use its best efforts to
become effective on the date that is 13 months after the date of the closing
of the Offering, and to cause to remain effective for a period of one year, a
registration statement covering the shares of Common Stock issuable upon
conversion of the Convertible Notes and the warrants issued in connection
therewith. All of the shares that are owned by Mr. Tourtellotte, all
officers, directors and stockholders, persons owning five percent or more of
the outstanding Common Stock of the Company, or warrants or options to
purchase five percent or more of such Common Stock, or securities convertible
into five percent or more of such Common Stock, or any combination thereof
that aggregates five percent or more of the outstanding Common Stock will, on
the date of consummation of the Offering, be subject to a lock-up to refrain
from making any public sale or distribution of their Common Stock or such
warrants, options or convertible securities (pursuant to Rule 144 or
otherwise) without the prior written consent of the Representatives for 13
months after the effective date of the Registration Statement for the
Offering.
In general, under Rule 144 as it is currently in effect, a person (or
persons whose shares are required to be aggregated) who beneficially owns
restricted shares with respect to which at least two years have elapsed since
the later of the date the shares were
32
<PAGE>
acquired from the Company, including persons who may be deemed to be
affiliates of the Company, would be entitled to sell, within any three-month
period, a number of shares which does not exceed the greater of 1% of the
then outstanding shares of the Common Stock or the average weekly reported
trading volume in the over-the-counter market during the four calendar weeks
preceding the filing of the Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner-of-sale provisions and notice
requirements, and to the availability of current public information about the
Company. A person who is not an affiliate of the Company under the
Securities Act, has not been an affiliate during the preceding 90 days, and
who beneficially owns shares with respect to which at least three years have
elapsed since the later of the date the shares were acquired from the Company
or from an affiliate of the Company, is entitled to sell such shares under
Rule 144(k) without regard to the requirements described above.
Until the existing stockholders of the Company have held the Restricted
Shares for two years, no sale of Restricted Shares will be permitted under
Rule 144. The Company is unable to estimate the number of shares that may be
sold under Rule 144 after the two-year minimum holding period has elapsed,
since this will depend on the market price for the Common Stock, the personal
circumstances of the sellers and other factors. Additionally, Laidlaw & Co.
has the right under its warrant to purchase 25,000 shares of Common Stock, at
any time during the exercise period thereof, to require the Company to file
and keep effective for so long as may be reasonably necessary for Laidlaw &
Co. to dispose of such shares, a registration statement covering such shares.
Subject to an agreement with the Underwriters, the Company may file a
registration statement under the Securities Act to register Common Stock to
be issued to employees pursuant to the Stock Option Plan. See
"Underwriting." Such registration statement may be filed at any time after
the date of this Prospectus and would become effective immediately upon
filing. Shares issued pursuant to the Stock Option Plan after the effective
date of any registration statement covering such shares generally will be
available for sale in the open market. As of the date of this Prospectus, no
options to purchase shares of Common Stock have been granted under the Stock
Option Plan. See "Management --Stock Option Plan."
The following table summarizes all shares eligible for future sale as of
the date of this Prospectus, assuming an IPO Price of $7.00 per share,
conversion of the PP Notes on the date of consummation of the Offering,
conversion of the Convertible Notes (assuming 90% of the limited partners of
ICGP and GCGP accept the Offer to Purchase and elect to receive 55% (ICGP)
and 65% (GCGP) Convertible Notes) and exercise all of warrants, whether
vested or unvested. This table does not reflect any options eligible for
issuance under the Stock Option Plan or the Underwriters' Over-allotment
Option.
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP PERCENTAGE OWNERSHIP
NAME NUMBER OF SHARES PRIOR TO OFFERING AFTER OFFERING
---- ---------------- -------------------- --------------------
<S> <C> <C> <C>
Charles D. Tourtellotte 1,120,000 43.5% 29.7%
J.D. Finley 80,500 3.1% 2.1%
Ernie Banks 12,513 0.5% 0.3%
Jack F. Lasday 20,271 0.8% 0.5%
Preferred Stockholders 244,750 9.5% 6.5%
Rodman & Renshaw, Inc. 9,292 0.3% 0.2%
Laidlaw & Co. 25,000 1.0% 0.7%
Holders of PP Notes 553,571 21.5% 14.7%
Holders of Convertible Notes 509,250 19.8% 13.5%
--------- ------ -----
Total 2,575,147 100.0% 68.2%
--------- ------ -----
--------- ------ -----
</TABLE>
Prior to the Offering, there has been no public market for any of the
Company's securities, including the Common Stock, and no predictions can be
made as to the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. There can be no assurance that a regular trading market will
develop in the Common Stock.
33
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions of the Underwriting Agreement between the
Company and the Underwriters, to purchase from the Company, and the Company has
agreed to sell to the Underwriters, the number of shares set forth opposite
their names in the table below at the price set forth on the cover page of this
Prospectus:
Underwriters Number of Shares
- ------------ ----------------
Laidlaw Equities, Inc. . . . . . . . . . . . . . . . . . . .
Cruttenden Roth Incorporated . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000
---------
---------
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by
counsel and to certain other conditions. Pursuant to the Underwriting
Agreement, the Underwriters are obligated to purchase all of the shares of
Common Stock offered hereby (other than the shares of Common Stock covered by
the Underwriters' Over-allotment Option described below) if any are purchased.
The Underwriters have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the IPO Price
set forth on the cover page of this Prospectus and to certain dealers (who
may include the Underwriters) at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share to certain other
dealers. After the initial public offering of the shares of Common Stock,
the public offering price and other selling terms may be changed by the
Underwriters.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 45 days from the date hereof, to
purchase up to an additional 180,000 shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on
the cover page hereof. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
made in connection with the sale of the shares of Common Stock offered
hereby. To the extent the Underwriters' Over-allotment Option is exercised,
the Underwriters will become obligated, subject to certain conditions, to
purchase such additional shares.
Subject to certain limited exceptions, the Company, its directors and
officers, and certain other securityholders of the Company have agreed with
the Underwriters not to offer, sell, contract to sell, grant any other option
to purchase or otherwise dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for, or warrants, rights or options to acquire, Common Stock or
enter into any agreement to do any of the foregoing for a period of 13 months
after the date of this Prospectus without the prior written consent of the
Representatives.
The Company has agreed to pay to the Representatives an expense
allowance, on a non-accountable basis, equal to 1.5% of the gross proceeds
derived from the sale of the shares of Common Stock. The Company has paid on
advance on such allowance in the amount of $30,000. The Company has also
agreed to pay certain of the Representatives' expenses in connection with
this Offering, including expenses in connection with qualifying the shares of
Common Stock offered hereby for sale under the laws of such states as the
Representatives may designate. In addition, the Company will sell to the
Representatives, or to their designees, at a purchase price of $.001 per
warrant, warrants to purchase an aggregate of 120,000 shares of Common Stock.
The Representatives' Warrants are exercisable for a period of four years
commencing one year from the date of this Prospectus at an exercise price per
share (the "Exercise Price") of 120% of the public offering price per share.
The Representatives' Warrants may not be sold, transferred, assigned, pledged
or hypothecated for a period of 12 months from the date of this Prospectus
except to members of the selling group and officers and partners of the
Representatives and members of the selling group. The Representatives'
Warrants contain anti-dilution provisions providing for adjustment of the
Exercise Price and number of shares issuable upon exercise upon the
occurrence of certain events, including stock dividends, stock splits,
recapitalizations and sales of Common Stock below the exercise price thereof.
The holders of the Representatives' Warrants have no voting, dividend or
other rights as stockholders of the Company with respect to shares of Common
Stock underlying the Representatives' Warrants unless the Representatives'
Warrants have been exercised.
A new registration statement or post-effective amendment to the
Registration Statement will be required to be filed and declared effective
before distribution to the public of the Representatives' Warrants and the
shares of Common Stock issuable upon exercise of the Representatives'
Warrants (the "Warrant Shares"). During such period beginning one year after
the date of this Prospectus and ending four years thereafter, the Company has
agreed, on one occasion if requested by the holders of a majority of the
Representatives' Warrants or Warrant Shares, to make all necessary filings to
permit a public offering of the Warrant Shares and to use its best efforts to
cause such filing to become effective under the Securities Act; provided,
however, that no such registration is required if upon receipt of such
request the Company or holders of 15% or more of the Common Stock agree to
purchase the Representatives' Warrants for the excess of the aggregate
current market price for the Warrant Shares over the aggregate Exercise Price
of the Representatives' Warrants. In addition, during the period beginning
one year after the date of this Prospectus and concluding five years after
the date hereof, the Company has agreed to give advance notice to holders of
the Representatives' Warrants and Warrant Shares of its intention to file a
registration statement and, in such case, holders of the Representatives'
Warrants shall have the right to require the Company to include the Warrant
Shares in such registration statement at the Company's expense.
During the period that the Representatives' Warrants are exercisable,
the Representatives and any transferee will have the opportunity to profit
from a rise in the market price of the Common Stock with a resulting dilution
in the interest of other stockholders. In addition, the terms on which the
Company will be able to obtain additional capital during the exercise period
may be adversely affected since the Representatives are likely to exercise
the Representatives' Warrants at a time when the Company would, in all
likelihood, be able to obtain capital by a new offering of securities on
terms more favorable than those provided by the terms of the Representatives'
Warrants.
In connection with this Offering, the Company has agreed that, for the
three-year period commencing on the date of this Prospectus, Laidlaw
Equities, Inc. has the right to appoint a designee as an observer at all
meetings of the Company's Board of Directors. This designee has the right to
attend all meetings of the Board of Directors, provided that the Board of
Directors shall have the right to exclude such observer at any meeting in
which, in the opinion of the Board of Directors, confidential or sensitive
matters are discussed. Such observer shall be entitled to receive
reimbursement for all expenses of attendance at such meetings and an amount
equal to any fee paid to outside directors for attending any Board of
Directors meetings.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
payments that the Underwriters may be required to make in respect thereof.
The Underwriters have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5% of the total number of
shares of Common Stock offered hereby.
Prior to the Offering, there has been no public market for the Common
Stock. The IPO Price was determined through negotiations among the Company
and the Underwriters. Among the factors considered in such negotiations were
an assessment of the Company's results of operations, the future prospects of
the Company and its industry in general, the ability of the Company's
management, the price earnings ratio and market prices of securities of
similar companies and prevailing conditions in the securities market at the
time of the Offering. There can be no assurance that an active trading market
will develop for the Common Stock or that the Common Stock will trade in the
public market subsequent to the Offering at or above the IPO Price.
34
<PAGE>
The Company intends to apply to have the Common Stock approved for
quotation on the Nasdaq and BSE . There can be no assurances that the Common
Stock will be accepted for such listing or any similar listing.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed
upon for the Company by Brownstein Hyatt Farber & Strickland, P.C. and for
the Underwriters by Dorsey & Whitney LLP, Denver, Colorado. Certain of the
shares reserved for sale to those having a business relationship with the
Company may be sold to members or employees of Brownstein Hyatt Farber &
Strickland, P.C. at the IPO Price.
EXPERTS
The financial statements and schedules included in this Prospectus and
elsewhere in the Registration Statement, to the extent and for the period
indicated in their reports, have been audited by BDO Seidman, LLP,
independent certified public accountants, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act,
with respect to the Common Stock offered by this Prospectus. For the
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the schedules and exhibits thereto, to which reference hereby
is made. Any interested party may inspect the Registration Statement and its
exhibits, without charge, at the public reference facilities of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street N.W.,
Room 1024, Washington, D.C. 20549, and at its regional office at 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10007. Any interested party may obtain copies
of all or any portion of the Registration Statement and its exhibits at
prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street N.W., Room 1024,
Washington, D.C. 20549.
As a result of the Offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities and
Exchange Act of 1934, as amended. As long as it is subject to such reporting
and informational requirements, the Company will file with the Commission all
reports, proxy statements and other information required thereby, which may
be inspected at the public reference facilities described above. The Company
intends to furnish its stockholders with annual reports containing
consolidated financial statements audited by independent certified public
accountants and with quarterly reports containing unaudited financial
information for each of the first three quarters of each fiscal year.
35
<PAGE>
[Architectural routing of proposed Fremont Golf Center]
[View of proposed Fremont Golf Center]
MetroGolf's proposed Fremont Golf Center
[Collage of published articles about Illinois Center Golf]
[Aerial view of proposed Harborside Golf Center]
MetroGolf's proposed Harborside Golf Center
36
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.):
CONTENTS
- --------------------------------------------------------------------------------
METROGOLF INCORPORATED AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.):
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS:
(UNAUDITED)
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited) F-3 - F-6
Pro Forma Consolidated Balance Sheet
(Unaudited) F-7 - F-9
Pro Forma Consolidated Statements of Operations
(Unaudited) F-10 - F-11
Notes to Pro Forma Consolidated Financial
Statements (Unaudited) F-12 - F-16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-17
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS:
Balance Sheets F-18 - F-19
Statements of Operations F-20
Statements of Stockholders' Equity (Deficit) F-21 - F-22
Statements of Cash Flows F-23 - F-24
Summary of Accounting Policies F-25 - F-28
Notes to Financial Statements F-29 - F-41
Report of Independent Certified Public Accountants
on Supplemental Schedule F-42
Schedule II - Valuation and Qualifying Accounts F-43
F-1
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.):
CONTENTS
- --------------------------------------------------------------------------------
FREMONT PARK GOLF CENTER:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-44
FINANCIAL STATEMENTS:
Statements of Net Assets F-45
Statements of Operations F-46
Statements of Cash Flows F-47
Summary of Accounting Policies F-48 - F-50
Notes to Financial Statements F-51 - F-52
ILLINOIS CENTER GOLF PARTNERS, L.P.:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-53
FINANCIAL STATEMENTS:
Balance Sheets F-54 - F-55
Statements of Operations F-56
Statements of Changes in Partners' Capital F-57
Statements of Cash Flows F-58
Summary of Accounting Policies F-59 - F-60
Notes to Financial Statements F-61 - F-68
GOOSE CREEK GOLF PARTNERS LIMITED PARTNERSHIP:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-69
FINANCIAL STATEMENTS:
Balance Sheets F-70 - F-71
Statements of Operations F-72
Statements of Changes in Partners' Capital F-73
Statements of Cash Flows F-74 - F-75
Summary of Accounting Policies F-76 - F-77
Notes to Financial Statements F-78 - F-85
F-2
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.):
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
EXPLANATORY HEADNOTE (UNAUDITED)
- --------------------------------------------------------------------------------
INTRODUCTION
The accompanying unaudited pro forma consolidated financial statements of
MetroGolf Incorporated and Subsidiaries, formerly The Vintage Group USA, Ltd.
(the "Company"), give effect to the proceeds from the sale of convertible
subordinated notes in a private placement, proceeds from the sale of common
stock in an initial public offering ("IPO"), the acquisition by the Company
of Fremont Park Golf Center ("Fremont") pursuant to the Option Agreement
between the parties, the acquisitions of 90% limited partnership interests in
Illinois Center Golf Partners, L.P. ("Illinois Center") and Goose Creek Golf
Partners Limited Partnership ("Goose Creek"), the $1,750,000 in proceeds
from Illinois Center's long-term debt and Illinois Center's acquisition of
$1,435,000 in property and equipment (the "Transactions") and are based on
the estimates and assumptions set forth herein. This unaudited pro forma
information has been prepared utilizing the historical financial statements
and notes thereto, which are incorporated by reference herein. The unaudited
pro forma financial data does not purport to be indicative of the results
which actually would have been obtained had the purchase been effected on the
dates indicated or of the results which may be obtained in the future. The
unaudited pro forma financial statements should be read in conjunction with
the historical financial statements set forth herein.
The pro forma condensed consolidated balance sheet as of March 31, 1996
assumes the Transactions were consummated as of March 31, 1996 and the pro
forma condensed consolidated statements of operations for the three months
ended March 31, 1996 and for the year ended December 31, 1995 assume the
Transactions were consummated as of the beginning of the respective periods.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
CONVERTIBLE SUBORDINATED NOTE OFFERING
During May 1996, the Company completed the sale in a private placement of
$2,025,000 convertible subordinated notes. The convertible notes bear
interest at 12% and are due June 1, 1997. The Company received $1,792,500 in
net proceeds after paying $232,500 in debt issue costs.
F-3
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
EXPLANATORY HEADNOTE (UNAUDITED)
- --------------------------------------------------------------------------------
PROPOSED INITIAL PUBLIC OFFERING
The Company has signed a letter of intent with Laidlaw & Co. for its
subsidiary, Laidlaw Equities, Inc., to complete an initial public offering
("IPO") of the Company's no par value common stock. The Company intends to
offer approximately 1,200,000 shares of its common stock at a proposed price
to the public of $7 per share for gross proceeds of approximately $8,400,000
and net proceeds of $7,110,000 after deducting estimated offering costs of
$1,290,000. The shares offered for sale to the public intended to be
registered with the Securities and Exchange Commission on Form S-1.
ACQUISITION OF FREMONT PARK GOLF CENTER
The Company has entered into an agreement to acquire the Fremont Park Golf
Center (the "Center") for $650,000 in cash, a $700,000 note due to the
seller, and $77,840 in acquisition costs. The $700,000 note will accrue
interest at 9% and is due November 15, 1996.
The purchase price for the Center is anticipated to be allocated as follows:
Inventories $ 55,000
Building and improvements 1,147,840
Furniture and equipment 225,000
----------
Total purchase price $1,427,840
----------
----------
ACQUISITION OF ILLINOIS CENTER GOLF PARTNERS, L.P.
The Company has offered to purchase all of the limited partnership interests
in Illinois Center. Under the Company's proposal, (i) each limited partner
who is an accredited investor and who elects to sell will receive for each
$50,000 limited partnership interest either (a) $25,000 cash and a $25,000
convertible note or (b) a $50,000 convertible note and (ii) each limited
partner who is a non-accredited investor and who elects to sell will receive
$50,000 in cash for each $50,000 limited partnership interest. Based on the
Company's discussions with certain limited partners, the Company anticipates
that it will acquire a 90% limited partnership interest in Illinois Center
for cash of $1,575,000 and convertible notes of $1,575,000.
F-4
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
EXPLANATORY HEADNOTE (UNAUDITED)
- --------------------------------------------------------------------------------
The purchase price for a 90% limited partnership interest in Illinois Center
is anticipated to be allocated as follows:
Cash $ 10,024
Accounts receivable 40,000
Inventories 13,090
Other current assets 18,766
Property and equipment 5,900,000
Excess of cost over net assets acquired 1,018,414
Intangible assets 186,581
Deposits 5,180
----------
7,192,055
----------
Less:
Accounts payable 434,629
Accrued real estate taxes 326,200
Accrued expenses 50,444
Deferred sponsorship revenue 30,000
Deferred membership revenue 113,717
Note payable, related party 426,907
Current maturities of long-term debt 177,796
Minority interest 325,158
Long-term debt, less current maturities 2,157,204
----------
4,042,055
----------
Total purchase price 3,150,000
Less convertible notes payable 1,575,000
----------
Cash to be paid at closing $1,575,000
----------
----------
ACQUISITION OF GOOSE CREEK GOLF PARTNERS LIMITED PARTNERSHIP
The Company has offered to purchase all of the limited partnership interests
in Goose Creek. Under the Company's proposal, (i) each limited partner who
is an accredited investor and who elects to sell will receive for each
$25,000 limited partnership interest either (a) $12,500 cash and a $26,500
convertible note or (b) a $39,000 convertible note and (ii) each limited
partner who is a non-accredited investor and who elects to sell will receive
$39,000 in cash for each $25,000 limited partnership interest. Based on the
Company's discussions with certain limited partners, the Company anticipates
that it will acquire a 90% limited partnership interest in Goose Creek for
cash of $477,750 and convertible notes of $887,250.
F-5
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
EXPLANATORY HEADNOTE (UNAUDITED)
- --------------------------------------------------------------------------------
The purchase price for a 90% limited partnership interest in Goose Creek is
anticipated to be allocated as follows:
Cash $ 21,999
Restricted cash 75,000
Inventories 31,657
Prepaid and other current assets 30,772
Property and equipment 5,425,000
Excess of cost over net assets
acquired 738,112
Intangible assets 50,334
Deposits 1,866
----------
6,374,740
----------
Less:
Accounts payable 317,258
Accrued expenses 41,862
Deferred membership revenue 40,887
Line of credit 149,941
Notes payable, other 31,650
Note payable, related party 98,279
Current maturities of long-term debt 192,695
Minority interest 139,622
Long-term debt, less current
maturities 3,997,546
----------
5,009,740
----------
Total purchase price 1,365,000
Less convertible notes payable 887,250
----------
Cash to be paid at closing $ 477,750
----------
----------
NOTES PAYABLE AND EQUIPMENT PURCHASE
On January 31, 1996, Illinois Center entered into a $2,000,000 promissory
note with Textron Financial Corporation ("Textron"). Textron advanced
$1,750,000 to Illinois Center. The note bears interest at 3% above the Chase
Manhattan Bank's prime rate and is due on or before December 31, 2002.
Illinois Center applied $900,000 of the proceeds to its working capital and
applied the remaining $850,000 of the proceeds to the purchase of a clubhouse
facility and various items of equipment. The total purchase price of the
clubhouse and equipment was $1,435,000. Illinois Center entered into a
$585,000 promissory note for the remaining purchase price. The promissory
note bears interest at 8% per annum and is due June 1, 2005. Principal and
interest payments on the note commence January 1, 1998.
F-6
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ILLINOIS
COMPANY FREMONT CENTER
THE PRO FORMA PRO FORMA ILLINOIS PRO FORMA
MARCH 31, 1996 COMPANY ADJUSTMENTS FREMONT ADJUSTMENTS CENTER ADJUSTMENTS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current:
Cash $ $ 942,500 (2) $ $ $ 10,024 $
3,770,267 (3)
Restricted cash 222,700 (200,000)(5)
Accounts receivable 40,000
Inventories 43,746 11,254 (4) 13,090
Other current assets 17,333 5,732 (5,732)(7) 18,766
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 240,033 4,512,767 49,478 5,522 81,880
- ---------------------------------------------------------------------------------------------------------------------------
Property and equipment, net 59,127 463,776 909,064 (4) 4,459,038 1,440,962(4)
- ---------------------------------------------------------------------------------------------------------------------------
Other:
Excess of cost over net
assets acquired, net of
accumulated amortization 1,018,414(4)
Debt issue costs 232,500 (2)
Notes receivable, related parties 525,186 (525,186)(6)
Intangible assets, net of
accumulated amortization 603,677 (603,677)(7) 186,581
Deferred offering costs 38,017 (38,017)(3)
Deferred acquisition costs 77,840 (77,840)(7)
Deposits 29,800 5,180
- ---------------------------------------------------------------------------------------------------------------------------
Total other assets 670,843 (408,543) 603,677 (603,677) 191,761 1,018,414
- ---------------------------------------------------------------------------------------------------------------------------
$970,003 $4,104,224 $1,116,931 $ 310,909 $4,732,679 $2,459,376
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GOOSE
CREEK
GOOSE PRO FORMA CONSOLIDATED
MARCH 31, 1996 CREEK ADJUSTMENTS PRO FORMA
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current:
Cash $ 21,999 $ $ 4,744,790
Restricted cash 75,000 97,700
Accounts receivable 40,000
Inventories 31,657 99,747
Other current assets 30,772 66,871
- -------------------------------------------------------------------------------
Total current assets 159,428 5,049,108
- -------------------------------------------------------------------------------
Property and equipment, net 4,970,710 454,290(4) 12,756,967
- -------------------------------------------------------------------------------
Other:
Excess of cost over net
assets acquired, net of
accumulated amortization 738,112(4) 1,756,526
Debt issue costs
Notes receivable, related parties 232,500
Intangible assets, net of
accumulated amortization 50,334 236,915
Deferred offering costs
Deferred acquisition costs
Deposits 1,866 36,846
- -------------------------------------------------------------------------------
Total other assets 52,200 738,112 2,262,787
- -------------------------------------------------------------------------------
$5,182,338 $1,192,402 $20,068,862
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
F-7
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
(CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ILLINOIS
COMPANY FREMONT CENTER
THE PRO FORMA PRO FORMA ILLINOIS PRO FORMA GOOSE
MARCH 31, 1996 COMPANY ADJUSTMENTS FREMONT ADJUSTMENTS CENTER ADJUSTMENTS CREEK
- -------------- ------- ----------- ------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 447,939 $ $ 28,746 $ (28,746)(7) $ 434,629 $ $ 317,258
Accrued real estate taxes 326,200
Deferred membership revenue 113,717 40,887
Deferred sponsorship revenue 30,000
Accrued expenses 15,329 50,444
Accrued interest expense 41,862
Checks written against
future deposits 1,555 10,838 (10,838)(7)
Accrued salaries 268,534
Advances payable 10,000
Notes payable, other 31,650
Notes payable, related party 426,907 (426,907)(6) 98,279
Note payable, officer 9,125
Lines of credit 232,052 (225,000)(5) 149,941
Current maturities of
long-term debt 16,777 700,000 (4) 76,760 (76,760)(7) 177,796 192,695
---------- ---------- ---------- ----------- ---------- ----------- ----------
Total current liabilities 1,001,311 475,000 116,344 (116,344) 1,559,693 (426,907) 872,572
---------- ---------- ---------- ----------- ---------- ----------- ----------
Long-term debt, less current
maturities 18,624 2,025,000 (2) 171,555 (171,555)(7) 2,157,204 3,997,546
2,462,250 (4)
---------- ---------- ---------- ----------- ---------- ----------- ----------
Investments in affiliates 5,974 (5,974)(6)
---------- ---------- ---------- ----------- ---------- ----------- ----------
Minority interest in
consolidated subsidiaries 37,253 470,754 (6)
---------- ---------- ---------- ----------- ---------- ----------- ----------
Total liabilities 1,063,162 5,427,030 287,899 (287,899) 3,716,897 (426,907) 4,870,118
---------- ---------- ---------- ----------- ---------- ----------- ----------
<CAPTION>
GOOSE
CREEK
PRO FORMA CONSOLIDATED
MARCH 31, 1996 ADJUSTMENTS PRO FORMA
- -------------- ----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ $ 1,199,826
Accrued real estate taxes 326,200
Deferred membership revenue 154,604
Deferred sponsorship revenue 30,000
Accrued expenses 65,773
Accrued interest expense 41,862
Checks written against
future deposits
Accrued salaries 1,555
Advances payable 268,534
Notes payable, other 10,000
Notes payable, related party (98,279)(6) 31,650
Note payable, officer 9,125
Lines of credit 156,993
Current maturities of
long-term debt 1,087,268
--------- -----------
Total current liabilities (98,279) 3,383,390
--------- -----------
Long-term debt, less current
maturities 10,660,624
--------- -----------
Investments in affiliates
Minority interest in
consolidated subsidiaries 508,007
--------- -----------
Total liabilities (98,279) 14,552,021
--------- -----------
</TABLE>
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
F-8
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
(CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE
COMPANY FREMONT
THE PRO FORMA PRO FORMA ILLINOIS
MARCH 31, 1996 COMPANY ADJUSTMENTS FREMONT ADJUSTMENTS CENTER
- -------------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY:
Preferred stock 45,500 (45,500)(3)
Common stock (96,770) 7,110,000 (3)
Additional paid-in capital 940,609 (940,609)(3)
Partners' capital 1,015,782
Net assets 829,032 (829,032)(6)
Notes receivable, stockholder (136,692)
Accumulated deficit (845,806) (513,891)(3)
---------- ----------- ---------- ----------- ----------
Total stockholders' equity (deficit) (93,159) 5,610,000 829,032 (829,032) 1,015,782
---------- ----------- ---------- ----------- ----------
$ 970,003 $11,037,030 $1,116,931 $(1,116,931) $4,732,679
---------- ----------- ---------- ----------- ----------
---------- ----------- ---------- ----------- ----------
<CAPTION>
ILLINOIS GOOSE
CENTER CREEK
PRO FORMA GOOSE PRO FORMA CONSOLIDATED
MARCH 31, 1996 ADJUSTMENTS CREEK ADJUSTMENTS PRO FORMA
- -------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY:
Preferred stock
Common stock 7,013,230
Additional paid-in capital
Partners' capital (1,015,782)(6) 312,220 (312,220)(6)
Net assets
Notes receivable, stockholder (136,692)
Accumulated deficit (1,359,697)
------------ ----------- ----------- ------------
Total stockholders' equity (deficit) (1,015,782) 312,220 (312,220) 5,516,841
------------ ----------- ----------- ------------
$ (1,442,689) $ 5,182,338 $ (410,499) $ 20,068,862
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
F-9
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ILLINOIS
COMPANY FREMONT CENTER
THE PRO FORMA PRO FORMA ILLINOIS PRO FORMA
THREE MONTHS ENDED MARCH 31, 1996 COMPANY ADJUSTMENTS FREMONT ADJUSTMENTS CENTER ADJUSTMENTS
- --------------------------------- ------- ----------- ------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 49,057 $ (49,057)(6) $ 80,295 $ $ 143,073 $
---------- ---------- --------- --------- ---------- ---------
Operating expenses 220,955 41,029 (8) 95,167 12,239 (8) 316,116 29,026 (8)
(36,034)(6)
---------- ---------- --------- --------- ---------- ---------
Income (loss) from operations (171,898) (90,086) (14,872) (12,239) (173,043) 7,008
---------- ---------- --------- --------- ---------- ---------
Other income (expense):
Interest income 16,460 (12,758)(6)
Interest expense (6,930) (54,844)(9) (7,500) (44,271) 12,758 (6)
(15,750)(9)
(23,625)(9)
(13,309)(9)
---------- ---------- --------- --------- ---------- ---------
Total other income (expense) 9,530 (120,286) (7,500) (44,271) 12,758
---------- ---------- --------- --------- ---------- ---------
Equity in loss of affiliates (2,285) 2,285 (6)
---------- ---------- --------- --------- ---------- ---------
Minority interest in loss of
consolidated subsidiaries (13,075) 50,529 (6)
---------- ---------- --------- --------- ---------- ---------
Net loss $ (177,728) $ (157,558) $ (22,372) $ (12,239) $ (217,314) $ 19,766
---------- ---------- --------- --------- ---------- ---------
---------- ---------- --------- --------- ---------- ---------
Net (loss) per common share $ (.17)
---------- ---------- --------- --------- ---------- ---------
---------- ---------- --------- --------- ---------- ---------
Weighted average number of
common shares outstanding 1,045,000
---------- ---------- --------- --------- ---------- ---------
---------- ---------- --------- --------- ---------- ---------
<CAPTION>
GOOSE
CREEK
GOOSE PRO FORMA CONSOLIDATED
THREE MONTHS ENDED MARCH 31, 1996 CREEK ADJUSTMENTS PRO FORMA
- --------------------------------- ----- ----------- ------------
<C> <C> <C> <C>
Revenues $ 89,773 $ $ 313,141
---------- ---------- ----------
Operating expenses 212,694 (5,902)(8) 872,267
(13,023)(6)
---------- --------- ----------
Income (loss) from operations (122,921) 18,925 (559,126)
---------- ---------- ----------
Other income (expense):
Interest income 2,432 6,134
Interest expense (107,433) (260,904)
---------- ---------- ----------
Total other income (expense) (105,001) (254,770)
---------- ---------- ----------
Equity in loss of affiliates
---------- ---------- ----------
Minority interest in loss of
consolidated subsidiaries 37,454
---------- ---------- ----------
Net loss $ (227,922) $ 18,925 $ (776,442)
---------- ---------- ----------
---------- ---------- ----------
Net (loss) per common share $ (.35)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of
common shares outstanding 2,245,000 (10)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
F-10
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ILLINOIS
COMPANY FREMONT CENTER
THE PRO FORMA PRO FORMA ILLINOIS PRO FORMA
YEAR ENDED DECEMBER, 1995 COMPANY ADJUSTMENTS FREMONT ADJUSTMENTS CENTER ADJUSTMENTS
- ------------------------- ----------- ----------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 335,303 $(190,303)(6) $507,959 $ $1,552,712 $
---------- --------- -------- -------- --------- ---------
Operating expenses 882,709 96,207 (8) 531,638 46,129 (8) 2,011,646 91,797 (8)
(139,244)(6)
(80,500)(11)
71,750 (8)
---------- --------- -------- -------- --------- ---------
Income (loss) from operations (547,406) (286,510) (23,679) (46,129) (458,934) 56,197
---------- --------- -------- -------- --------- ---------
Other income (expense):
Interest income 61,116 6
Interest expense (25,994) (243,000)(9) (28,585) (76,284) (199,523)(9)
23,625 (9)
(63,000)(9)
(94,500)(9)
(53,235)(9)
---------- --------- -------- -------- --------- ---------
Total other income (expense) 35,122 (430,110) (28,585) (76,278) (199,523)
---------- --------- -------- -------- --------- ---------
Equity in loss of affiliates (770) 770 (6)
---------- --------- -------- -------- --------- ---------
Loss before extraordinary item (513,054) (715,850) (52,264) (46,129) (535,212) (143,326)
---------- --------- -------- -------- --------- ---------
Extraordinary item, debt
extinguishment
---------- --------- -------- -------- --------- ---------
Minority interest in loss of
consolidated subsidiaries (19,058) 81,970 (6)
---------- --------- -------- -------- --------- ---------
Net loss $ (532,112) $(633,880) $(52,264) $(46,129) $(535,212) $(143,326)
---------- --------- -------- -------- --------- ---------
---------- --------- -------- -------- --------- ---------
Net (loss) per common share $ (.51)
----------
----------
Weighted average number of
common shares outstanding 1,045,000
----------
----------
<CAPTION>
GOOSE
CREEK
GOOSE PRO FORMA CONSOLIDATED
YEAR ENDED DECEMBER, 1995 CREEK ADJUSTMENTS PRO FORMA
- ------------------------- ---------- ----------- ------------
<S> <C> <C> <C>
Revenues $1,451,922 $ $ 3,657,593
---------- -------- -----------
Operating expenses 1,227,543 (30,673)(8) 4,657,943
(51,059)(6)
---------- -------- -----------
Income (loss) from operations 224,379 81,732 (1,000,350)
---------- -------- -----------
Other income (expense):
Interest income 3,830 64,952
Interest expense (469,732) (1,230,228)
---------- -------- -----------
Total other income (expense) (465,902) (1,165,276)
---------- -------- -----------
Equity in loss of affiliates
---------- -------- -----------
Loss before extraordinary item (241,523) 81,732 (2,165,626)
---------- -------- -----------
Extraordinary item, debt
extinguishment 165,899 165,899
---------- -------- -----------
Minority interest in loss of
consolidated subsidiaries 62,912
---------- -------- -----------
Net loss $ (75,624) $ 81,732 $(1,936,815)
---------- -------- -----------
---------- -------- -----------
Net (loss) per common share $ (.86)
---------- -------- -----------
---------- -------- -----------
Weighted average number of
common shares outstanding 2,245,000 (10)
---------- -------- -----------
---------- -------- -----------
</TABLE>
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
F-11
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. PRO FORMA ADJUSTMENTS
The pro forma condensed consolidated balance sheet as of March 31, 1996
assumes the Transactions were consummated as of March 31, 1996 and the pro
forma condensed consolidated statements of operations for the three months
ended March 31, 1996 and for the year ended December 31, 1995 assumes the
Transactions were consummated as of the beginning of the respective periods.
2. CONVERTIBLE SUBORDINATED NOTE OFFERING
Reflects the sale of $2,025,000 convertible subordinated notes. The Company
received $1,792,500 in net proceeds after paying $232,500 in debt issue
costs. The Company intends to use the proceeds from the sale of the
convertible notes as follows:
Acquisition of Fremont (Note 4) $ 650,000
Property acquisition and construction costs 625,000
Offering costs for the IPO (Note 3) 175,000
Pay off line of credit 25,000
Working capital 317,500
-----------
Net proceeds $ 1,792,500
-----------
-----------
3. PROPOSED INITIAL PUBLIC OFFERING
Reflects the sale of 1,200,000 shares of the Company's common stock at a
price of $7 per share for gross proceeds of $8,400,000 and net proceeds of
$7,110,000 after deducting estimated offering costs of $1,290,000, which
includes $213,017 in offering costs previously paid. The Company intends to
use the proceeds from the IPO as follows:
Acquisition of 90% limited
partnership interest in
Illinois Center (Note 4) $1,575,000
Acquisition of 90% limited
partnership interest in
Goose Creek (Note 4) 477,750
Redemption of preferred stock 1,500,000
Property acquisitions and construction costs 3,770,267
Offering costs (213,017)
----------
Net proceeds $7,110,000
----------
----------
F-12
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
4. ACQUISITIONS OF SUBSIDIARIES
FREMONT
Reflects the acquisition of inventories, building, leasehold improvements,
furniture, equipment and intangible assets for $650,000 in cash, a $700,000
note due to the seller, and $77,840 in acquisition costs. The acquisition of
Fremont is recorded using the purchase method.
ILLINOIS CENTER
Reflects the 90% acquisition of all assets including excess of cost over net
assets acquired offset by the assumption of all liabilities for $1,575,000 in
cash and $1,575,000 in convertible notes payable. The acquisition of
Illinois Center is recorded using the purchase method.
GOOSE CREEK
Reflects the 90% acquisition of all assets including excess of cost over net
assets acquired offset by the assumption of all liabilities for $477,750 in
cash and $887,250 in convertible notes payable. The acquisition of Goose
Creek is recorded using the purchase method.
5. PAYMENT OF LINE OF CREDIT
Removes a $200,000 money market account held as collateral on the Company's
line of credit. The money market account plus $25,000 received from the sale
of convertible notes payable (see Note 2) was used to payoff the Company's
line of credit.
6. ELIMINATING ENTRIES
INTERCOMPANY RECEIVABLES AND PAYABLES
Removes the Company's notes receivable due from Illinois Center and Goose
Creek against Illinois Center's and Goose Creek's notes payable due to the
Company.
F-13
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
INTERCOMPANY REVENUES AND EXPENSES
Removes the Company's intercompany revenues generated from Illinois Center
and Goose Creek against Illinois Center's and Goose Creek's intercompany
expenses generated from the Company.
INVESTMENTS IN AFFILIATES
Reflects the net adjustment in investment in affiliates when Fremont,
Illinois Center and Goose Creek are consolidated with the Company.
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
Reflects the minority interest in Illinois Center and Goose Creek when these
entities are consolidated with the Company.
NET ASSETS OF FREMONT
Reflects the adjustment to remove the net assets of Fremont when Fremont is
consolidated with the Company.
PARTNERS' CAPITAL
Reflects the adjustment to remove the partners' capital of Illinois Center
and Goose Creek when these entities are consolidated with the Company.
EQUITY IN LOSS OF AFFILIATE
Removes the Company's equity in earnings of Illinois Center and Goose Creek
when these entities are consolidated with the Company.
MINORITY INTEREST IN LOSS OF CONSOLIDATED SUBSIDIARIES
Reflects the Company's minority interest in loss of Illinois Center and Goose
Creek when these entities are consolidated with the Company.
F-14
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
7. UNACQUIRED ASSETS AND LIABILITIES
Removes assets not acquired and liabilities not assumed in the acquisition of
Fremont.
8. DEPRECIATION AND AMORTIZATION
THE COMPANY
Reflects amortization of debt issue costs due to the issuance of the
convertible subordinated notes.
FREMONT
Reflects additional depreciation of property and equipment due to the
increase in cost in the assets acquired.
ILLINOIS CENTER
Reflects additional depreciation of property and equipment due to the
increase in cost in the assets acquired. Reflects amortization of cost in
excess of assets acquired using the straight line method over 14.5 years.
The pro forma consolidated statement of operations for the year ended
December 31, 1995 reflects additional depreciation on clubhouse and equipment
(see Note 11).
GOOSE CREEK
Reflects change in depreciation of property and equipment due to the
increase in cost in the assets acquired. Reflects amortization of cost in
excess of assets acquired using the straight line method over 20 years.
9. INTEREST EXPENSE
THE COMPANY
Reflects interest expense for the $2,025,000 in convertible subordinated
notes payable. Reflects interest expense for the $700,000 note payable used
to finance the acquisition of Fremont. Reflects interest expense for the
$2,529,000 convertible notes payable used to finance the acquisition of
Illinois Center and Goose Creek. Reflects a reduction in interest expense
on the Company's $225,000 line of credit since the line of credit was paid
off.
F-15
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
ILLINOIS CENTER
The pro forma consolidated statement of operations for the year ended
December 31, 1995 reflects interest expense on Illinois Center's $1,750,000
and $585,000 promissory notes payable (see Note 11).
10. WEIGHTED AVERAGE SHARES OUTSTANDING
On a pro forma basis, weighted average shares are adjusted to reflect the
1,200,000 shares issued in the IPO. The 1,200,000 shares are assumed to be
outstanding for the entire period.
11. NOTES PAYABLE AND EQUIPMENT PURCHASE
On January 31, 1996, Illinois Center entered into a $2,000,000 promissory
note with Textron. Textron advanced $1,750,000 to Illinois Center. The note
bears interest at 3% above the Chase Manhattan Bank's prime rate and is due
on or before December 31, 2002. Illinois Center applied $900,000 of the
proceeds to its working capital and applied the remaining $850,000 of the
proceeds to the purchase of a clubhouse facility and various items of
equipment. The total purchase price of the clubhouse and equipment was
$1,435,000. Illinois Center entered into a $585,000 promissory note for the
remaining purchase price. The promissory note bears interest at 8% per annum
and is due June 1, 2005. Principal and interest payments on the note commence
January 1, 1998.
The pro forma consolidated statement of operations for the year ended
December 31, 1995 reflects a reduction in equipment lease expense as a result
of Illinois Center purchasing its clubhouse and equipment.
F-16
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
MetroGolf Incorporated (Formerly The Vintage Group USA, Ltd.)
Denver, Colorado
We have audited the accompanying consolidated balance sheets of MetroGolf
Incorporated and subsidiaries (the "Company"), formerly The Vintage Group USA,
Ltd., as of December 31, 1995 and 1994 and the related consolidated statement of
operations, stockholders' equity (deficit), and cash flows for the year ended
December 31, 1995 and the related combined statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1994 and
1993. These consolidated and combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated and combined 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 and combined financial statements referred to
above present fairly, in all material respects, the financial position of
MetroGolf Incorporated and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years ended December
31, 1995, 1994 and 1993 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Denver, Colorado
May 17, 1996
F-17
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------
<TABLE>
DECEMBER 31,
MARCH 31, -------------------
1996 1995 1994
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (Note 5)
Current:
Cash and cash equivalents $ - $ 324 $195,777
Restricted cash (Note 3) 222,700 222,700 200,000
Management fee receivable, related parties (Note 7) - 83,256 41,063
Commission advances to officer - - 13,500
Other current assets 17,333 15,452 18,417
-------- -------- --------
Total current assets 240,033 321,732 468,757
-------- -------- --------
PROPERTY AND EQUIPMENT:
Automobile 35,715 35,715 35,715
Furniture and equipment 52,262 52,262 13,455
-------- -------- --------
87,977 87,977 49,170
Less accumulated depreciation 28,850 24,025 4,726
-------- -------- --------
Net property and equipment 59,127 63,952 44,444
-------- -------- --------
OTHER:
Notes receivable, related parties (Note 1) 525,186 514,728 275,724
Deposits 29,800 19,800 18,800
Deferred offering costs 38,017 - 5,000
Deferred acquisition costs 77,840 59,467 -
-------- -------- --------
Total other assets 670,843 593,995 299,524
-------- -------- --------
$970,003 $979,679 $812,725
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-18
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
- -----------------------------------------------------------------------------
<TABLE>
DECEMBER 31,
MARCH 31, ---------------------
1996 1995 1994
---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 447,939 $ 380,217 $ 120,413
Accrued salaries 268,534 145,784 69,705
Accrued payroll taxes and other liabilities 15,329 1,446 45,307
Checks written against future deposits 1,555 - -
Advances payable 10,000 10,000 10,000
Note payable, officer (Note 4) 9,125 26,827 -
Lines of credit (Note 3) 232,052 246,937 38,863
Current portion of long-term debt (Note 5) 16,777 16,489 5,047
---------- --------- ---------
Total current liabilities 1,001,311 827,700 289,335
---------- --------- ---------
Long-term debt, less current portion (Note 5) 18,624 23,151 26,287
---------- --------- ---------
Investments in affiliates (Note 2) 5,974 3,689 2,919
---------- --------- ---------
Minority interest in consolidated subsidiaries 37,253 24,178 5,118
---------- --------- ---------
Total liabilities 1,063,162 878,718 323,659
---------- --------- ---------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT) (Note 8):
Preferred stock - $1 par value; 1,000,000 shares
authorized; 45,500, 45,500 and 37,500 shares
issued and outstanding; liquidation value of
$25 per share plus dividends in arrears of
$248,385, $205,729 and $50,677 (in the
aggregate $1,385,885, $1,343,229 and $988,177) 45,500 45,500 37,500
Additional paid-in capital 940,609 940,609 749,105
Common stock - no par value; 9,000,000 shares
authorized; 1,045,000 shares issued and outstanding (96,770) (96,770) (96,770)
Notes receivable, stockholder (Note 1) (136,692) (120,300) (64,803)
Accumulated deficit (845,806) (668,078) (135,966)
---------- --------- ---------
Total stockholders' equity (deficit) (93,159) 100,961 489,066
---------- --------- ---------
$ 970,003 $ 979,679 $ 812,725
---------- --------- ---------
---------- --------- ---------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-19
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------
<TABLE>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, -----------------------------------
CONSOLIDATED CONSOLIDATED COMBINED
--------------------- ------------ ---------------------
1996 1995 1995 1994 1993
--------- --------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Management fees, related parties
(Notes 2 and 7) $49,057 $ 42,403 $ 190,303 $ 159,691 $ 46,313
Development fees - - 145,000 - -
Development fees, related party
(Note 7) - - - 125,000 -
Consulting fees - - - 6,546 60,000
--------- --------- --------- --------- ---------
Total revenues 49,057 42,403 335,303 291,237 106,313
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Salaries and bonuses 134,944 70,656 343,827 373,779 50,816
General and administrative 81,186 105,706 519,583 181,201 53,438
Depreciation 4,825 4,825 19,299 10,831 4,922
--------- --------- --------- --------- ---------
Total operating expenses 220,955 181,187 882,709 565,811 109,176
--------- --------- --------- --------- ---------
Loss from operations (171,898) (138,784) (547,406) (274,574) (2,863)
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 16,460 2,764 61,116 15,472 3,146
Interest expense (6,930) (4,817) (25,994) (1,842) (3,058)
--------- --------- --------- --------- ---------
Total other income (expense) 9,530 (2,053) 35,122 13,630 88
--------- --------- --------- --------- ---------
Equity in loss of affiliates
(Note 2) (2,285) (1,500) (770) (309) (1,392)
--------- --------- --------- --------- ---------
Minority interest in income of
consolidated subsidiaries (13,075) (1,650) (19,058) (3,560) -
--------- --------- --------- --------- ---------
NET LOSS (177,728) (143,987) (532,112) (264,813) (4,167)
Dividend requirements on
preferred stock 42,656 35,490 155,052 50,677 -
--------- --------- --------- --------- ---------
Loss applicable to common stock $(220,384) $(179,477) $(687,164) $(315,490) $ (4,167)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net loss per common share $ (.21) $ (.17) $ (.66) $ (.30) $ 0
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of
common shares outstanding 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-20
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 1995, 1994 and 1993
and Three Months Ended March 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
PREFERRED STOCK ADDITIONAL COMMON STOCK NOTES
----------------- PAID-IN --------------------- RECEIVABLE, ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT STOCKHOLDER DEFICIT
------ ------- ---------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 - $ - $ - 100 $ 100 $ (40,073) $ 22,554
Issuance of IC's common stock
for cash - - - 900 90 - -
Change in notes receivable,
stockholder - - - - - (79,552) -
Combined net loss - - - - - - (4,167)
------ ------- -------- --------- --------- --------- ---------
Balance, December 31, 1993 - - - 1,000 190 (119,625) 18,387
Issuance of IC's common stock
for cash - - - 100 15,000 - -
Business reorganization as of
July 29, 1994 - - - (1,100) (15,190) - -
Issuance of common stock in
connection with business
reorganization - - - 1,045,000 13,690 - -
Reclassification of VA's and
IC's subchapter S income
and losses from accumulated
deficit to common stock - - - - (110,460) - 110,460
Issuance of preferred stock
for cash in private offering,
net of stock issuance costs
of $150,895 37,500 37,500 749,105 - - - -
Change in notes receivable,
stockholder - - - - - 54,822 -
Combined net loss - - - - - - (264,813)
------ ------- -------- --------- --------- --------- ---------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-21
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED AND COMBINED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Years Ended December 31, 1995, 1994 and 1993
and Three Months Ended March 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
PREFERRED STOCK ADDITIONAL COMMON STOCK NOTES
----------------- PAID-IN --------------------- RECEIVABLE, ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT STOCKHOLDER DEFICIT
------ ------- ---------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 37,500 37,500 749,105 1,045,000 (96,770) (64,803) (135,966)
Issuance of preferred stock
for cash 8,000 8,000 191,504 - - - -
Change in notes receivable,
stockholder - - - - - (55,497) -
Net loss - - - - - - (532,112)
------ ------- -------- --------- --------- --------- ----------
Balance, December 31, 1995 45,500 45,500 940,609 1,045,000 (96,770) (120,300) (668,078)
Change in notes receivable,
stockholder - - - - - (16,392) -
Net loss (Unaudited) - - - - - - (177,728)
------ ------- -------- --------- --------- --------- ----------
Balance, March 31, 1996
(Unaudited) 45,500 $45,500 $940,609 1,045,000 $(96,770) $(136,692) $(845,806)
------ ------- -------- --------- --------- --------- ----------
------ ------- -------- --------- --------- --------- ----------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-22
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------------
CONSOLIDATED CONSOLIDATED COMBINED
----------------------- ------------ ----------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(177,728) $(143,987) $(532,112) $(264,813) $ (4,167)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating
activities:
Depreciation 4,825 4,825 19,299 10,831 4,922
Salary expense - - - 125,000 -
Write off of deferred
offering costs - - 5,000 - -
Deferred revenue - - - (125,000) -
Equity in loss of
affiliates 2,285 1,500 770 309 1,392
Minority interest in
income of consolidated
subsidiaries 13,075 1,650 19,060 3,560 -
Changes in operating
assets and liabilities:
Management fee receivable,
related party 83,256 - (42,193) (41,063) -
Commission advances to officer - (9,000) 13,500 (13,500) -
Other current assets (1,881) 3,348 2,965 (17,837) (520)
Accounts payable 67,722 42,799 259,804 103,916 12,066
Accrued salaries 122,750 (11,372) 76,079 69,705 -
Accrued payroll taxes and
other liabilities 13,883 (45,249) (43,861) 45,307 -
Deferred revenue - - - - 125,000
--------- --------- --------- --------- --------
Net cash provided by (used in)
operating activities 128,187 (155,486) (221,689) (103,585) 138,693
--------- --------- --------- --------- --------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-23
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------------
CONSOLIDATED CONSOLIDATED COMBINED
----------------------- ------------ ----------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Restricted cash - - (22,700) (200,000) -
Payments for notes receivable,
related parties (10,458) (117,461) (239,004) (166,099) -
Proceeds from notes receivable,
stockholder - - - - 17,280
Payments for notes receivable,
stockholder (16,392) (18,310) (55,497) (189,803) (93,686)
Purchase of furniture and
equipment - (34,808) (38,807) (8,437) (20,569)
Payments for deferred acquisition
costs (18,373) - (59,467) - -
Payment for investment in
affiliate - - - - (90)
Deposits (10,000) 17,000 (1,000) (18,800) -
--------- --------- --------- --------- --------
Net cash used in investing
activities (55,223) (153,579) (416,475) (583,139) (97,065)
--------- --------- --------- --------- --------
FINANCING ACTIVITIES:
Checks written against future
deposits 1,555 - - - -
Proceeds from advances payable - - - - 20,000
Proceeds from (payments) on line
of credit (14,885) 127,149 208,074 38,863 -
Proceeds from long-term debt - 18,512 22,971 10,000 -
Proceeds from notes payable, officer - - 48,827 - -
Payments for long-term debt (4,239) (3,353) (14,665) (4,557) (1,120)
Payments on note payable, officer (17,702) - (22,000) - -
Principal payments for notes
payable - - - - (20,000)
Increase in deferred offering costs (38,017) 5,000 - (5,000) -
Proceeds from issuance of
common stock - - - 15,000 190
Proceeds from issuance of
preferred stock, net of
stock issuance costs - 25,000 199,504 786,605 -
--------- --------- --------- --------- --------
Net cash provided by (used in)
financing activities (73,288) 172,308 442,711 840,911 (930)
--------- --------- --------- --------- --------
Increase (decrease) in cash
and cash equivalents (324) (136,757) (195,453) 154,187 40,698
Cash and cash equivalents,
beginning of period 324 195,777 195,777 41,590 892
--------- --------- --------- --------- --------
Cash and cash equivalents,
end of period $ -0- $ 59,020 $ 324 $ 195,777 $ 41,590
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated and combined financial statements.
F-24
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
ORGANIZATION AND BUSINESS
MetroGolf Incorporated, formerly The Vintage Group USA, Ltd., (the
"Company"), a Colorado corporation, was incorporated on July 29, 1994 by its
sole common stockholder. The Company was formed for the purpose of acquiring
and consolidating its stockholder's ownership of two pre-existing
corporations, as described below and, therefore, it is a continuation of
these pre-existing corporations. The Company acquires, develops and manages
urban golf centers and other golf facilities.
On July 29, 1994, the Company acquired all of the issued and outstanding
common stock of TVG (Virginia), Inc. ("VA") a Colorado corporation
incorporated on February 21, 1992. Prior to the formation of the Company, VA
was the primary operating entity in the business of golf course management,
development and acquisition. VA is the managing general partner of Goose
Creek Golf Partners Limited Partnership ("Goose Creek"), a Virginia Limited
Partnership formed on June 1, 1992. Also on July 29, 1994, the Company
acquired 90 percent of the issued and outstanding common stock of TVG
(Illinois Center), Inc. ("IC"), a Colorado corporation incorporated on May
26, 1993. IC is the managing general partner of Illinois Center Golf
Partners, L.P. ("Illinois Center"), an Illinois Limited Partnership formed on
May 28, 1993. The Company issued 1,045,000 shares of its common stock to an
individual for 100 percent of his interest in VA and 90 percent of his
interest in IC. This exchange of ownership with entities under common
control has been accounted for at historical cost in a manner similar to that
of a pooling of interest. As of December 31, 1995, the Company held 89
percent of the issued and outstanding common stock of IC. Prior to the July
29, 1994 business reorganization, VA and IC were entities under common
control and management.
On March 30, 1994, the Company formed and acquired 51 percent of the issued
and outstanding common stock of Vintage Golf Management, Inc. ("VGM"), a
Colorado Corporation. VGM provides golf management services to Illinois
Center. During April 1996, the Company acquired the remaining 49 percent of
VGM for no cash consideration.
On May 24, 1995, the Company formed and acquired 100 percent of the issued
and outstanding common stock of TVG (New York), Inc., ("NY"), a New York
Corporation. NY is the 100 percent Class A member of Vintage New York Golf
L.L.C., a limited liability company formed to develop and operate an urban
golf center facility.
F-25
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned and majority-owned subsidiaries as of
December 31, 1995 and for the year then ended, and as of December 31, 1994.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
COMBINED FINANCIAL STATEMENTS
The combined statements of operations, stockholders' equity and cash flows
include the accounts of the Company for the period from July 29, 1994
(inception) to December 31, 1994, the accounts of VA for the years ended
December 31, 1994 and 1993, the accounts of IC for the year ended December
31, 1994 and for the period from May 26, 1993 (inception) to December 31,
1993 and the accounts of VGM for the period from March 30, 1994 (inception)
to December 31, 1994. All significant intercompany accounts and transactions
have been eliminated in combination.
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim consolidated financial
statements for the three months ended March 31, 1996 and 1995 are presented
on a basis consistent with the audited financial statements and reflect all
adjustments, consisting only of normal recurring accruals, necessary for fair
presentation of the results of such periods. The results of operations for
the interim period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the year ending December 31, 1996.
CASH AND CASH EQUIVALENTS
The Company considers all money market accounts and highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Upon sale or other retirement of
depreciable property, the cost and accumulated depreciation are removed from
the related accounts and any gain or loss is reflected in operations.
Depreciation is provided on the straight-line method based upon the estimated
useful lives of the depreciable assets.
DEFERRED OFFERING COSTS
Deferred offering costs include professional fees directly related to the
Company's proposed private and public offerings. If the offerings are
successful, costs incurred will be offset against the proceeds of the
offerings. If the offerings are unsuccessful, such costs will be expensed.
F-26
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
DEFERRED ACQUISITION COSTS
Deferred acquisition costs include professional fees and other direct costs
related to evaluation of prospective property acquisitions. If the
acquisitions are completed, these costs are included as property costs. If a
prospective property is not acquired, the costs are expensed.
INVESTMENTS IN AFFILIATES
The Company has recorded its investments in limited partnerships using the
equity method of accounting. Under such method, the Company's share of net
income (loss) is included as a separate item in the statement of operations.
CONCENTRATION OF RISK
Financial instruments which potentially expose the Company to concentration
of credit risk, as defined by Financial Accounting Standards Board Statement
No. 105, "Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit
Risk," consist primarily of cash equivalents and notes receivable with the
Company's related parties. The Company establishes an allowance for doubtful
accounts based on factors surrounding the credit risk of specific customers,
historical trends and other information.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles necessarily requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets" and SFAS No. 123, "Accounting for Stock Based
Compensation." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amounts or
their estimated recoverable amounts and the adoption of this statement by the
Company is not expected to have an impact on the financial statements. SFAS
No. 123 encourages the accounting for stock-based employee compensation
programs to be reported within the financial statements on a fair value based
method. If the fair value based method is not adopted, then the statement
requires pro forma disclosure of net income and earnings per share as if the
fair value based method has been adopted. The Company has not yet determined
how SFAS No. 123 will be adopted nor its impact on the financial statements.
Both statements are effective for fiscal years beginning after December 15,
1995.
F-27
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
RECEIVABLES FROM RELATED PARTIES
Due to their related party nature and terms of the receivables from related
parties, the Company cannot estimate the fair market value of such financial
instruments.
NOTES PAYABLE AND LONG TERM DEBT
Substantially all of these notes bear interest at a floating rate of interest
based upon the lending institutions prime lending rate. Accordingly, the
fair value approximates their reported carrying amount at March 31, 1996, and
December 31, 1995 and 1994.
LOSS PER SHARE
Primary loss per share is computed using the weighted average number of
common and common equivalent shares outstanding during each period. Pursuant
to the requirements of the Securities and Exchange Commission (SEC) Staff
Accounting Bulletin No. 83 (SAB 83), common shares issued by the Company
during the twelve months immediately preceding the initial public offering at
a price below the initial public offering price plus the number of common
share equivalents which result from the grant of common stock options and
warrants having exercise prices below the initial public offering price
during the same period have been included in the calculation of the shares
used in computing loss per share as if they were outstanding for all periods
presented.
F-28
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
1. NOTES RECEIVABLE
NOTES RECEIVABLE, RELATED PARTIES
On September 1, 1994, IC entered into a $500,000 note agreement with Illinois
Center. Advances under the agreement accrue interest at two percent over the
Citibank's prime rate, which is 8.75 percent at December 31, 1995. The note
is unsecured and due on the earlier of demand or September 1, 1996. The
balance outstanding on the note is $426,907, $459,739 and $275,724 as of
March 31, 1996, and December 31, 1995 and 1994.
On November 21, 1995, VA entered into a $100,000 note agreement with Goose
Creek. Advances under the agreement accrue interest at two percent over the
Citibank's prime rate, which is 8.75 percent at December 31, 1995. The note
is unsecured and due on the earlier of demand or November 21, 1996. The
balance outstanding on the note is $98,286 and $54,989 as of March 31, 1996
and December 31, 1995.
NOTES RECEIVABLE, STOCKHOLDER
During 1994, the Company entered into two note agreements and in 1995 the
Company entered into one note agreement with its sole common stockholder.
The notes bear interest at eight percent per annum and are due on demand.
The balances outstanding on the notes are $136,692, $120,300 and $64,803 as
of March 31, 1996 and December 31, 1995 and 1994.
2. INVESTMENTS IN AFFILIATES
INVESTMENT IN GOOSE CREEK
VA is the managing general partner of Goose Creek in which it holds a 0.5
percent general partnership interest. As the managing general partner of
Goose Creek, VA is responsible for the day-to-day management and operation of
the business and property of Goose Creek. The administrative general partner
of Goose Creek, an unaffiliated corporation also having a 0.5 percent
interest in Goose Creek, holds joint authority with VA over annual budgets,
significant capital expenditures, significant deposits into and withdrawals
from the Goose Creek reserve account, as defined, and replacement of the
management company, as hired by Goose Creek. The general partners do not
have the authority to sell or refinance all or any material portion of the
property without the consent of 51 percent of the Class A limited partners.
Both general partners contributed their expertise to Goose Creek's formation
and other consideration in exchange for an interest in Goose Creek.
F-29
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
In addition to its 0.5 percent general partnership interest, VA holds a 10.33
percent Class B limited partnership interest in Goose Creek. The Class B
limited partnership interest entitles the Company to share in cash
distributions and profit or loss allocations, as described below, subsequent
to the Class A limited partners receiving a preferred return of 12 percent on
their capital contributions and certain other funding requirements.
Goose Creek's partnership agreement allows for cash distributions to the
general and limited partners from available net cash flow, at the discretion
of the managing general partner. Net cash flow is defined as the excess of
operating cash receipts over operating cash disbursements after the funding
of reasonable reserves for anticipated expenses and capital replacement.
Profits and losses are allocated to the partners in the same proportion as
net cash flow is distributed subject to the provision of Section 704(b) of
the Internal Revenue Code of 1986 relating to substantial economic effect. As
of March 31, 1996 and December 31, 1995 and 1994, the Company has recorded an
investment in Goose Creek of $(6,010), ($3,731), and ($2,975).
In addition to the above, VA as managing general partner, receives an asset
management fee from Goose Creek of $45,000 per annum that started June 1,
1992 and increased by a factor of five percent per annum on June 1st of each
year. The Company is also be entitled to receive a fee equal to one percent
of the gross proceeds upon any disposition of Goose Creek's property. Asset
management fees for the three months ended March 31, 1996 and for the years
ended December 31, 1995, 1994 and 1993, are $13,023, $51,059, $48,628, and
$46,313.
INVESTMENT IN ILLINOIS CENTER
IC is the managing general partner of Illinois Center in which it holds a 40
percent general partnership interest. As the managing general partner, IC
has the responsibility to make all decisions affecting the day-to-day
business of Illinois Center. The general partner does not have the authority
except under certain conditions as provided for in the partnership agreement,
to cause Illinois Center to secure certain indebtedness of Illinois Center
with a mortgage, deed of trust or similar lien on the property, nor shall the
general partner have the authority to sell or transfer all or substantially
all of the assets of Illinois Center, unless the general partner first
obtains the majority consent of the limited partners. The general partner
contributed $90, its agreement to develop and acquire the Illinois Center's
ground lease and expertise to Illinois Center's formation in exchange for its
interest in Illinois Center.
F-30
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
Illinois Center's partnership agreement allows for cash distributions to the
general and limited partners from available net cash flow. Net cash flow is
defined for any period as the excess, if any, of revenues over expenses. Net
cash flow is to be distributed not less frequently than quarterly, commencing
after the first full calendar quarter following the opening to the public of
Illinois Center. Profits and losses are allocated to the partners as defined
in the partnership agreement. As of March 31, 1996 and December 31, 1995 and
1994, the Company has recorded an investment in Illinois Center of $36, $42
and $56.
In addition to the above, IC, as managing general partner, is entitled to
receive an asset management fee from Illinois Center of $60,000 per annum
increased by a factor of five percent per annum. Asset management fees for
the three months ended March 31, 1996 and for the years ended December 31,
1995 and 1994 were approximately $15,750, $60,000 and $35,000.
The Company, as general partner of Goose Creek, does not have the authority
to sell or refinance all or any material portion of the property without the
consent of 51 percent of the Class A limited partners. The Company, as
general partner of Illinois Center, does not have the authority except under
certain conditions as provided for in the partnership agreement, to cause
Illinois Center to secure certain indebtedness of Illinois Center with a
mortgage, deed of trust or similar lien on the property, nor does the general
partner have the authority to sell or transfer all or substantially all of
the assets of Illinois Center, unless the general partner first obtains the
majority consent of the limited partners. Accordingly, the Company has
recorded its investments in affiliates using the equity method of accounting.
3. LINES OF CREDIT
The Company entered into a $225,000 line of credit agreement dated December
20, 1994 and a $22,000 line of credit dated November 28, 1995. Borrowings
under the lines accrue interest at the National Prime Lending Rate (8.5
percent) and are due on March 25, and May 28, 1996, respectively. The
$225,000 line is collateralized by the Company's note receivable from a
related party, a $200,000 money market account and is personally guaranteed
by the sole common stockholder of the Company. The $225,000 line of credit
was paid in full during May 1996 and the Company redeemed its $200,000 money
market account. The $22,000 line of credit is collateralized by a $22,700
certificate of deposit. The balance outstanding on the lines are $232,052,
$246,937 and $38,863 as of March 31, 1996 and December 31, 1995 and 1994.
F-31
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
4. NOTE PAYABLE, OFFICER
During 1995, an officer of the Company advanced funds to the Company. The
advances are due on demand and accrue interest at two percentage points over
Citibank's prime rate. The balance outstanding at March 31, 1996 and
December 31, 1995 including accrued interest is $9,125 and $26,827.
5. LONG-TERM DEBT
The following is a summary of the Company's long-term debt:
MARCH 31, DECEMBER 31,
---------- ------------------
1996 1995 1994
---------- ------- -------
(UNAUDITED)
Note payable to a
bank, interest at
7.75 percent;
principal and interest
payments of $545 through
October 1998. The note
is collateralized by an
auto and is personally
guaranteed by the common
stockholder of the Company. $15,224 $16,547 $21,334
Note payable to a bank,
interest at ten percent;
principal and interest
payments of $1,099 through
December 25, 1997. The note
is collateralized by
substantially all assets of
the Company and is personally
guaranteed by the common
stockholder of the Company. 20,177 23,093 10,000
------- ------- -------
35,401 39,640 31,334
Less current portion 16,777 16,489 5,047
------- ------- -------
$18,624 $23,151 $26,287
------- ------- -------
------- ------- -------
F-32
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
Future maturities of long-term debt as of December 31, 1995 are as follows:
1996 $16,489
1997 15,629
1998 7,522
-------
Total $39,640
-------
-------
6. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
During 1994, the Company entered into employment agreements with its
President through December 1996 and with its Executive Vice President through
September 1997. The employment agreements set forth annual compensation of
$180,000 to the President and $120,000 to the Executive Vice President plus
bonuses as the board of directors of the Company may from time to time
approve. Effective January 1, 1996, both agreements were extended until
December 31, 1998 with annual salaries of $250,000 and $175,000, respectively.
OPERATING LEASES
The Company leases office space and equipment under noncancelable leases with
terms that expire at various dates through August 1997. Future minimum lease
payments as of December 31, 1995 are as follows:
1996 $23,000
1997 15,500
-------
Total $38,500
-------
-------
Total lease expenses for the three months ended March 31, 1996 and for the
years ended December 31, 1995, 1994 and 1993 are approximately $6,500,
$25,000, $8,000 and $7,000.
F-33
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
DIRECT GUARANTEES
The Company is the guarantor of long-term indebtedness of Illinois Center
totaling approximately $1,750,000, and the Company is the guarantor of
long-term acquisition indebtedness of Goose Creek totaling approximately
$3,384,000 and $3,333,000 as of March 31, 1996 and December 31,1995. In
addition, VA has guaranteed Goose Creek's $150,000 line of credit. Goose
Creek's balance on the line of credit is $150,000, $150,000 and $0 as of
March 31, 1996 and December 31, 1995 and 1994.
7. RELATED PARTY TRANSACTIONS
DEVELOPMENT FEES
During 1994, the Company earned $125,000 for land acquisition, concept
planning design and development services provided to Illinois Center. The
Company earned no development fees for the year ended December 31, 1995.
PROPERTY MANAGEMENT AGREEMENT
On December 1, 1993, VGM entered into a property management agreement with
Illinois Center. The management agreement expires on January 1, 1997. The
terms of the management agreement provide for a management fee of $5,000 per
month plus a membership incentive fee of ten percent of the gross proceeds
received from membership initiation fees and the equivalent of one month's
membership dues as received by Illinois Center. The membership incentive fee
for renewal memberships will be reduced to four percent of annual dues for
renewal members. In addition, the management agreement provides for an
annual incentive fee of five percent of the amount of annual net operating
income in excess of $1,600,000.
VGM initially was operated by Club Sports International ("CSI"). On October
1, 1994, CSI was removed as operator of VGM. On November 17, 1994, Billy
Casper Golf Management, Inc. ("BCGM") was engaged as the new operator of VGM.
From the period June 1, 1994 through September 30, 1994, VGM's' base fee was
split between CSI and the Company with CSI receiving $4,000 and the Company
receiving $1,000. From October 1, 1994 through November 18, 1994, the
Company earned the full amount of VGM's fee. From November 18, 1994 through
November 30, 1995, BCGM earned the entire fee. During November 1995, BCGM was
removed as operator of VGM. In addition, VGM has agreed to waive 80 percent
of the deferred $5,000 per month fees that it had earned under its contract
from the period December 1, 1993 to May 31, 1994. For the three months ended
March 31, 1996 and for the years ended December 31, 1995 and 1994, property
management fees, including incentive fees, are $20,284, $79,243 and $76,063.
As of March 31, 1996 and December 31, 1995 and 1994, Illinois Center owes VGM
$0, $83,256 and $41,063.
F-34
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
8. STOCKHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK
During August 1995, the Company amended its articles of incorporation to
increase the authorized shares of preferred stock from 100,000 to 1,000,000
shares. Of the 1,000,000 authorized shares, 100,000 shares have been
designated as redeemable preferred stock. The holders of redeemable
preferred stock are entitled to receive, when, and if declared by the Board
of Directors and out of funds legally available for the payment of dividends
or if mandatorily redeemable as discussed below, dividends at the annual
dividend rate of 15 percent per annum ($3.75) on each outstanding share of
preferred stock, commencing upon issuance and thereafter through the end of
the eighth complete calendar quarter after the date of issuance. Thereafter,
the annual dividend rate on the redeemable preferred stock is 18 percent per
annum ($4.50) on each outstanding share of preferred stock. Dividends on
shares of the redeemable preferred stock are payable in four equal quarterly
installments on the last day of March, June, September and December beginning
September 30, 1994. The dividends shall accrue and become cumulative not
compounded from the date of issuance. Accumulated dividends do not bear
interest. Whenever dividends on the redeemable preferred stock are in arrears
for eight consecutive quarters or in an amount equal to at least 12 quarterly
dividends, the holders of such stock (voting as a class) have the right to
elect one director of the Company until all cumulative dividends have been
paid in full. Dividends in arrears on the outstanding preferred shares total
$248,385, $205,729 and $50,677 as of March 31, 1996 and December 31, 1995 and
1994. No dividends have been declared for the three months ended March 31,
1996 and for the years ended December 31, 1995 and 1994. Therefore, assuming
no dividends are paid and the redeemable preferred stock is not redeemed
prior to September 30, 1996, the holders of such stock will have the right to
appoint one director on such date.
Shares of the redeemable preferred stock are redeemable, at the Company's
election, in whole or in part. However, if IC declares a dividend, the
Company is contractually obligated to use those proceeds, subject to
sufficient legally available funds to redeem, in whole or in part, the
preferred stock, to the extent such cash dividends are not applied to payment
of accrued dividends on redeemable preferred stock. The shares are
redeemable at $26.25 per share together with accrued and unpaid dividends, if
any. Shares of the redeemable preferred stock have a liquidation value of
$25 per share plus accrued dividends, including cumulative dividends.
F-35
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
COMMON STOCK
During August 1995, the Company amended its articles of incorporation to
increase the authorized shares of common stock from 1,000,000 shares to
9,000,000 shares.
PREFERRED STOCK OFFERING
During 1994, the Company offered to sell 50,000 Units in a private offering
of up to $1.25 million in redeemable preferred stock and warrants at $25 per
Unit. Each Unit consists of one share of preferred stock and one warrant to
purchase 5.5 shares of the Company's common stock at an exercise price of
$1.45 per share subject to antidilution adjustments. The warrants expire
five years from the date of issuance. During 1995, the Company sold 8,000
shares of preferred stock resulting in net proceeds of $199,504 and during
1994, the Company issued 37,500 shares of its preferred stock resulting in
net proceeds to the Company after paying offering costs of $786,605.
The underwriter received warrants entitling the underwriter to purchase
17,050 shares of common stock at an exercise price of $1.45 per share on a
fully diluted basis. At the closing of the offering, two directors of the
Company will receive, as compensation, warrants equal to five percent of the
number of Units sold in the offering entitling them to purchase one percent
of the outstanding common stock at an exercise price of $1.45 per share on a
fully diluted basis. Twenty-five percent of the warrants issued to the
directors vested on August 28, 1995 and an additional 25 percent will vest
every six months thereafter.
OFFICERS' WARRANTS
During 1995, the Company issued warrants to its officers to purchase an
aggregate of 150,000 shares of common stock at an exercise price of $1.45 per
share. Twenty-five percent of the warrants vested on December 1, 1995 and an
additional 25% will vest every six months thereafter.
F-36
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
STOCK SPLIT
During August 1995, the Company declared a 5.5 to 1.0 forward stock split.
All other share information herein has been restated to reflect the 5.5 to
1.0 forward stock split.
9. INCOME TAXES
At March 31, 1996 and December 31, 1995, the Company has available net
operating loss carry forwards of approximately $756,000 and $584,000 for tax
reporting purposes which expire through 2011. These operating loss carry
forwards are subject to various limitations imposed by the rules and
regulations of the Internal Revenue Service.
The Company has deferred tax assets fully reserved as of March 31, 1996 and
December 31, 1995 and 1994. The tax effect on the components is as follows:
MARCH 31, DECEMBER 31,
--------- -------------------
1996 1995 1994
--------- --------- --------
(UNAUDITED)
Net operating loss
carry forward $ 151,000 $ 117,000 $ 35,000
Salary accrual 53,000 29,000 13,000
Basis difference in
property and equipment 2,000 1,000 1,000
--------- --------- --------
206,000 147,000 49,000
Valuation allowance (206,000) (147,000) (49,000)
--------- --------- --------
$ - $ - $ -
--------- --------- --------
--------- --------- --------
A 100 percent valuation allowance has been established to reflect
management's evaluation that it is more likely than not that all of the
deferred tax assets will not be realized. For the three months ended March
31, 1996 and for the years ended December 31, 1995 and 1994, the valuation
allowance increased by $59,000, $98,000 and $49,000.
VA and IC are Subchapter S Corporations for income tax purposes through July
27, 1994. Under provisions of the Internal Revenue Code, the net income or
loss of VA and IC are to be included in the Federal income tax
F-37
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
returns of the individual stockholders. Since VA and IC incurred losses
while Subchapter S Corporations, no pro forma income tax provision is
required.
10. SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
CONSOLIDATED CONSOLIDATED COMBINED
------------------ ----------------------------
1996 1995 1995 1994 1993
------ ------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash payments
for interest $4,730 $4,817 $25,994 $ 1,842 $ 3,058
Excluded from the consolidated and combined statements of cash flows were the
effects of certain noncash investing and financing activities as follows:
Payable to
related party offset $ - $ - $ - $ 10,000 $ -
Vehicle acquired
through long-term debt $ - $ - $ - $ - $27,011
Reclassification
of VA's and IC's
Subchapter S income and
losses from accumulated
deficit to common
stock $ - $ - $ - $110,460 $ -
------ ------ ------- -------- -------
------ ------ ------- -------- -------
</TABLE>
F-38
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
11. ACQUISITIONS
FREMONT PARK GOLF CENTER
The Company has executed an agreement to purchase the leasehold interest on
an existing driving range/learning center facility for $1,350,000 plus
acquisition costs of approximately $78,000. The acquisition is expected to
close during the summer of 1996. The existing golf facility consists of a
35-tee station driving range, two practice putting greens, a clubhouse and a
maintenance area on approximately 15 acres of land. The current clubhouse
design will require modifications to re-incorporate a grill room and bar area
with an outdoor patio after the acquisition.
After closing of the acquisition, the Fremont Park Golf Center will be
expanded to include an 80-station tee area, practice putting green,
chipping/short game practice and sand bunker areas. The clubhouse redesign
will also include a pro shop and locker rooms. A corporate entertainment and
group area will be located adjacent to the patio.
HARBORSIDE GOLF CENTER
The Company has entered into a letter of intent to sublease, with an option
to purchase, the Harborside Golf Center located in downtown San Diego,
California. Under the current agreement, the Company intends to operate the
Harborside Golf Center sublease commencing in the summer of 1996.
ACQUISITIONS OF LIMITED PARTNERSHIP INTERESTS
The Company has offered to purchase all of the limited partnership interests
in Illinois Center and Goose Creek. Under the Company's current proposal,
(i) each accredited limited partner of Illinois Center who elects to sell
will receive for each $50,000 limited partnership interest either (a) $25,000
cash and a $25,000 convertible note or (b) a $50,000 convertible note (ii)
each accredited limited partner of Goose Creek who elects to sell will
receive for each $25,000 limited partnership interest (a) $12,500 in cash and
a convertible note in the amount of $26,500 or (b) a convertible note in the
amount of $39,000. The convertible notes will bear interest at 6% per annum
and will mature on June 1, 2005; interest only will be payable for the first
24 months from the date of the issuance of the convertible notes.
Thereafter, interest will continue to be paid semi-annually and principal
will be amortized evenly over the remaining seven years until maturity. Each
convertible note will be convertible at the holder's option into common stock
at any time after the date that is 13 months after the closing of the IPO at
a conversion price equal to the price of the common stock to public in the
IPO (see Note 12). In addition, each
F-39
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
convertible note issued to the limited partners of Illinois Center will
convert into warrants to purchase 2,500 shares of common stock at an exercise
price equal to 120% of the IPO price. Non-accredited investors of Illinois
Center will receive cash only in the amount of $50,000 for each $50,000
limited partnership interest. Non-accredited investors of Goose Creek will
receive cash only in the amount of $39,000 for each $25,000 limited
partnership interest. The acquisitions will be contingent upon the closing
of the IPO.
12. PUBLIC OFFERING
The Company has signed a letter of intent with Laidlaw & Co. for its
subsidiary, Laidlaw Equities, Inc., to complete an initial public offering of
the Company's common stock. The Company intends to offer approximately
1,200,000 shares of its common stock at a proposed price to the public of $7
per share. The shares offered for sale to the public intend to be registered
with the Securities and Exchange Commission on Form S-1.
13. EVENT SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS (UNAUDITED)
CONVERTIBLE SUBORDINATED NOTE OFFERING
On May 30, 1996, the Company completed its offer for sale in a private
placement $2,025,000 in convertible subordinated notes ("Notes"). The Notes
were offered by Laidlaw Equities, Inc. ("Laidlaw") on a "best efforts" basis.
Net proceeds from the offering, after paying commissions and offering costs
were approximately $1,792,500. The Notes bear interest at 12 percent, with
interest payable June 1 and December 1 of each year commencing on December 1,
1996. The Notes, including any accrued but unpaid interest, are convertible,
at the option of the holder, at any time upon the earlier of (i) the closing
of the Company's IPO or (ii) November 30, 1996, into shares of common stock
of the Company at either 50 percent of the IPO price, if converted
simultaneously with the closing of the IPO, or 50 percent of the market
price, if converted after the IPO.
Laidlaw purchased for $100 warrants to purchase 25,000 shares of common stock
at an exercise price equal to 120% of the IPO price.
F-40
<PAGE>
METROGOLF INCORPORATED
AND SUBSIDIARIES
(FORMERLY THE VINTAGE GROUP USA, LTD.)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
STOCK OPTION PLAN
In connection with the IPO, the Board of Directors is adopting the Company's
stock option plan (the "Stock Option Plan"). The Stock Option Plan provides
for an initial authorization of 250,000 shares of Common Stock for issuance
thereunder at exercise prices no less than 85% of the fair market value of
the Common Stock at the time of grant. The options will vest over a
five-year period, except that up to 10% of the options may be subject to a
shorter vesting period at the discretion of the Company's Board of Directors.
Options may not be exercised more than three months after an employee's
termination of employment with the Company unless such termination was a
result of death, disability or retirement, in which case the exercise period
is extended to one year. The exercise price may be paid in cash, by tendering
shares of the Common Stock (valued at fair market value on the date of
exercise) if so provided in the applicable stock option agreement, or by a
combination of such means of payment, as may be determined by the Committee.
To date, no options have been granted pursuant to the Stock Option Plan.
Prior to the IPO, the Stock Option Plan will be approved by the Company's
sold stockholder.
F-41
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
MetroGolf Incorporated
(Formerly The Vintage Group USA, Ltd.)
Denver, Colorado
The audits referred to in our report to MetroGolf Incorporated dated May 17,
1996 which is contained in the Prospectus constituting part of this
Registration Statement included the audits of the schedules listed under Item
16 for the years ended December 31, 1995, 1994 and 1993. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audits.
In our opinion, such schedule presents fairly, in all material respects, the
information set forth therein.
BDO Seidman, LLP
Denver, Colorado
May 17, 1996
F-42
<PAGE>
METROGOLF INCORPORATED AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
YEAR EXPENSES DEDUCTIONS YEAR
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995;
Deferred tax asset valuation
allowance $49,000 $98,000 $ - $147,000
Year Ended December 31, 1994;
Deferred tax asset valuation
allowance $ - $49,000 $ - $ 49,000
Year Ended December 31, 1993;
Deferred tax asset valuation
allowance $ - $ - $ - $ -
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
F-43
<PAGE>
FREMONT PARK
GOLF CENTER
FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
MetroGolf Incorporated
We have audited the accompanying statements of net assets of Fremont Park
Golf Center (the "Center") as of December 31, 1995 and 1994 and the related
statements of operations and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Center's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying statements of net assets and statements of operations were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion in the registration
statement on Form S-1 of MetroGolf Incorporated) as described in the Summary
of Accounting Policies.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets of Fremont Park Golf Center at December
31, 1995 and 1994 and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
Denver, Colorado
May 24, 1996
F-44
<PAGE>
FREMONT PARK GOLF CENTER
STATEMENTS OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------
1996 1995 1994
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT:
Cash $ - $ 9,571 $ 2,568
Inventories 43,746 41,128 72,660
Prepaid expenses 5,732 8,147 779
---------- ---------- ----------
Total current assets 49,478 58,846 76,007
---------- ---------- ----------
Property and equipment, net (Note 2) 463,776 469,227 496,568
---------- ---------- ----------
OTHER ASSETS:
Excess of costs over net assets acquired,
net of accumulated amortization of $111,630,
$102,830 and $67,574 600,980 609,780 645,036
Other intangibles 2,697 3,097 2,647
---------- ---------- ----------
Total other assets 603,677 612,877 647,683
---------- ---------- ----------
Total assets $1,116,931 $1,140,950 $1,220,258
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES
CURRENT LIABILITIES:
Checks issued against future deposits $ 10,838 $ - $ -
Accounts payable and accrued expenses 28,746 30,042 52,596
Current maturities of notes payable (Note 3) 76,760 76,760 36,490
---------- ---------- ----------
Total current liabilities 116,344 106,802 89,086
Notes payable, less current maturities (Note 3) 171,555 182,744 227,504
---------- ---------- ----------
Total liabilities 287,899 289,546 316,590
---------- ---------- ----------
COMMITMENTS (Note 1)
NET ASSETS $ 829,032 $ 851,404 $ 903,668
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-45
<PAGE>
FREMONT PARK GOLK CENTER
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- ---------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Range $ 55,798 $ 52,778 $293,030 $331,047 $336,383
Merchandise 17,377 23,328 136,917 144,649 169,698
Lessons 5,090 6,764 65,819 68,111 75,554
Food and beverage 2,030 2,635 12,193 14,477 8,551
-------- -------- -------- -------- --------
Total revenues 80,295 85,505 507,959 558,284 590,186
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Range operations 46,005 56,057 240,440 299,641 288,255
Merchandise expenses 12,529 20,588 115,043 100,338 120,523
Lessons expense 2,550 3,100 29,932 34,231 37,198
Food and beverage expenses 883 1,402 6,043 7,395 4,606
General and administrative 16,500 18,800 75,153 73,540 79,230
Depreciation and amortization 16,700 16,548 65,027 65,215 62,702
-------- -------- -------- -------- --------
Total operating expenses 95,167 116,495 531,638 580,360 592,514
-------- -------- -------- -------- --------
Loss from operations (14,872) (30,990) (23,679) (22,076) (2,328)
Interest expense (Note 3) (7,500) (6,000) (28,585) (22,387) (35,024)
-------- -------- -------- -------- --------
Net loss $(22,372) $(36,990) $(52,264) $(44,463) $(37,352)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-46
<PAGE>
FREMONT PARK GOLK CENTER
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- ---------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(22,372) $(36,990) $(52,264) $(44,463) $(37,352)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating activities:
Depreciation 7,500 7,501 30,221 29,606 25,798
Amortization 9,200 9,047 34,806 35,609 34,318
Change in operating assets
and liabilities:
Inventories (2,618) 7,895 31,532 (7,491) (169)
Prepaid expenses 2,415 (4,954) (7,368) 2,721 3,500
Accounts payable and
accrued expenses (1,296) (11,411) (22,554) 22,588 17,818
-------- -------- -------- -------- --------
Net cash (used in) provided by
operating activities (7,171) (28,912) 14,373 38,570 43,913
-------- -------- -------- -------- --------
CASH FLOWS USED IN INVESTING
ACTIVITIES
Purchases of property and
equipment (2,049) (2,840) (2,880) (8,148) -
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks issued against future
deposit 10,838 6,644 - - -
Proceeds from note payable - 32,000 32,000 - -
Payments on note payable (11,189) (9,460) (36,490) (37,613) (34,154)
-------- -------- -------- -------- --------
Net cash (used in) provided by
financing activities (351) 29,184 (4,490) (37,613) (34,154)
-------- -------- -------- -------- --------
Net increase (decrease) in cash (9,571) (2,568) 7,003 (7,191) 9,759
Cash, beginning of period 9,571 2,568 2,568 9,759 -0-
-------- -------- -------- -------- --------
Cash, end of period $ - $ - $ 9,571 $ 2,568 $ 9,759
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-47
<PAGE>
FREMONT PARK GOLK CENTER
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The statements of net assets and statements of operations relate to the
operations of a golf center in Fremont, California. The Fremont Park Golf
Center (the "Center") operates a practice golf driving range. The Center also
provides individual and group lessons in addition to selling various golf
merchandise. The Center was constructed in 1989 and has since been owned and
operated by various entities and individuals. In February 1993, the Center
was sold for $1.2 million in a transaction involving unrelated entities. The
purchase price was financed through a $335,000 bank note payable, the
issuance of a short-term note to the seller of $625,000 (which was paid off
in July 1993) and cash of approximately $300,000. In July 1993, the entity
was again sold in a transaction involving related parties. The February 1993
sales transaction is being used as the basis for valuing the property and
equipment since this was the last arm's-length transaction involving the
transfer of ownership. The Center currently is owned by an individual and
the related land lease (Note 1) controlled by an affiliated entity.
Subsequent to December 31, 1995, the owner and operator of the Center have
entered into a preliminary agreement to sell the assets and assign the land
lease of the Center to MetroGolf Incorporated ("MetroGolf"). MetroGolf
intends to use funds raised from the placement of convertible subordinated
notes to purchase the assets (Note 4).
Expenses of the Center have been allocated to the business using primarily
the specific identification method. The Center's management believes that the
allocations are reasonable, but they are not necessarily indicative of the
costs that would have been incurred if the business had operated as a
separate company.
The statements of net assets and statements of operations have been prepared
to substantially comply with rules and regulations of the Securities and
Exchange Commission for business combinations to be accounted for as a
purchase.
INVENTORIES
Inventories consisting primarily of golf merchandise are recorded at lower of
cost (first-in, first-out) or market.
F-48
<PAGE>
FREMONT PARK GOLK CENTER
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
PROPERTY, EQUIPMENT AND AND DEPRECIATION
Property and equipment are valued at cost and are depreciated on a
straight-line basis over their estimated useful lives as follows:
Buildings 31.5 years
Furniture, fixtures and equipment 5-7 years
Land improvement 15 years
----------
EXCESS OF COSTS OVER NET ASSETS ACQUIRED
The excess of costs over net assets acquired, which relate to the February
1993 acquisition of the Center, is being amortized over a 20-year period
using the straight-line method. The Center periodically evaluates
realization of this asset based on discounted cash flows.
INCOME TAXES
No provision has been made for income taxes or income tax benefits in the
accompanying financial statements, as operating results are reportable in the
tax returns of the owner.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the 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.
CONCENTRATION OF CREDIT RISK
The Center's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash. The Center's cash is in demand
deposit accounts placed with federally insured financial institutions. Such
deposit accounts at times may exceed federally insured limits. The Center
has not experienced any losses on such amounts.
F-49
<PAGE>
FREMONT PARK GOLK CENTER
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Center's cash, accounts payable, accrued expenses
and notes payable approximate their estimated fair values.
RECENT ACCOUNTING PRONOUNCEMENT
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amounts of
their estimated recoverable amounts and the adoption of this statement by the
Center is not expected to have an impact on the financial statements.
UNAUDITED INFORMATION AS OF MARCH 31, 1996 AND 1995
In the opinion of management, the unaudited interim financial statements for
the three months ended March 31, 1996 and 1995 are presented on a basis
consistent with the audited annual financial statements and reflect all
adjustments, consisting only of normal recurring accruals, necessary for fair
presentation of the results of such periods. The results of operations for
the interim period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the year ending December 31, 1996.
F-50
<PAGE>
FREMONT PARK GOLF CENTER
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- -------------------------------------------------------------------------------
1. LEASE OBLIGATION
The Center is operated from land which is subject to a lease with the City of
Fremont through the year 2014, with an option to extend for 10 years. The lease
requires monthly payments equal to the following percentages of gross revenue:
1995 1994 1993
---- ---- ----
Range balls 12% 10% 10%
Golf lessons 12 10 10
Merchandise 5 5 5
Food and beverage 10 10 10
Rent expense for the years ended December 31, 1995, 1994 and 1993 and for the
three months ended March 31, 1996 and 1995 totaled $49,718, $46,142, $45,273,
$7,114 and $8,417.
The terms of the lease also require the Center's operator to maintain certain
insurance levels for general upkeep of the facility and provide golf
professionals to teach lessons to the public.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 31,
MARCH 31, ----------------------
1996 1995 1994
-------- -------- --------
(UNAUDITED)
Building $308,922 $308,922 $308,922
Land improvements 211,793 211,793 211,793
Furniture, fixtures
and equipment 36,186 34,137 31,257
-------- -------- --------
556,901 554,852 551,972
Less accumulated depreciation 93,125 85,625 55,404
-------- -------- --------
$463,776 $469,227 $496,568
-------- -------- --------
-------- -------- --------
F-51
<PAGE>
FREMONT PARK GOLF CENTER
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- -------------------------------------------------------------------------------
3. NOTES PAYABLE
In connection with the acquisition in February 1993, a $335,000 note payable was
incurred by the buyers to finance the acquisition. The note requires monthly
principal payments of $3,730 plus interest through December 2000. The note bears
interest at prime (8.5% at December 31, 1995) plus 1.5%. In January 1995, the
Center borrowed $32,000 from an affiliate of the owner to fund operating
expenses. This note bears interest at 10% and was due to be paid in March 1995.
This note has not yet been repaid.
Annual maturities of notes payable for the years subsequent to December 31, 1995
are as follows:
YEARS ENDING DECEMBER 31,
- -------------------------
1996 $ 76,760
1997 44,760
1998 44,760
1999 44,760
2000 48,464
--------
259,504
Less current portion 76,760
--------
$182,744
--------
--------
4. OFFER TO PURCHASE
MetroGolf has executed an agreement to purchase the leasehold interest and
related assets of the Center for $1,350,000. The closing of the acquisition is
expected during the summer of 1996.
5. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest is as follows:
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ---------------------------------
1996 1995 1995 1994 1993
------ ------ ------- ------- -------
$7,500 $6,000 $28,585 $22,387 $35,024
------ ------ ------- ------- -------
F-52
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Illinois Center Golf Partners, L.P.
(An Illinois Limited Partnership)
Denver, Colorado
We have audited the accompanying balance sheets of Illinois Center Golf
Partners, L.P. (an Illinois limited partnership) (the "Partnership") as of
December 31, 1995 and 1994 and the related statements of operations, changes
in partners' capital and cash flows for the years ended December 31, 1995 and
1994 and for the period from May 28, 1993 (Inception) to December 31, 1993.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership at December
31, 1995 and 1994 and the results of its operations and its cash flows for
the years ended December 31, 1995 and 1994 and for the period from May 28,
1993 (Inception) to December 31, 1993.
BDO Seidman, LLP
Denver, Colorado
May 3, 1996
F-53
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
1996 1995 1994
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
ASSETS (Note 3)
CURRENT:
Cash $ 10,024 $ 7,349 $ 56,871
Accounts receivable 40,000 - -
Inventories 13,090 11,196 18,690
Prepaid expenses - - 16,437
Other current assets 18,766 3,521 2,100
----------- ----------- -----------
Total current assets 81,880 22,066 94,098
----------- ----------- -----------
FIXED ASSETS (Note 2):
Course and practice facility 1,503,943 1,503,943 1,503,943
Building and related improvements 1,725,097 1,140,097 1,125,605
Design and development costs 1,044,815 524,719 522,056
Furniture, fixtures and equipment 524,719 163,973 143,020
----------- ----------- -----------
4,798,574 3,332,732 3,294,624
Less accumulated depreciation and amortization 339,536 275,284 90,029
----------- ----------- -----------
Net fixed assets 4,459,038 3,057,448 3,204,595
----------- ----------- -----------
OTHER:
Organization costs 175,017 175,017 175,017
Loan fees 113,269 21,000 -
----------- ----------- -----------
288,286 196,017 175,017
Less accumulated amortization 101,705 90,426 55,422
----------- ----------- -----------
186,581 105,591 119,595
Deposits 5,180 36,022 35,222
----------- ----------- -----------
Total other assets 191,761 141,613 154,817
----------- ----------- -----------
$ 4,732,679 $ 3,221,127 $ 3,453,510
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-54
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
(CONTINUED)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------- ----------------------
1996 1995 1994
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 434,629 $ 757,025 $ 795,007
Accrued real estate taxes 326,200 285,573 83,335
Deferred membership revenue 113,717 106,250 166,583
Deferred sponsorship revenue 30,000 - -
Accrued expenses 49,847 15,277 42,222
Sales tax payable 597 - -
Accounts payable, related party (Note 5) - 83,256 41,063
Line of credit (Note 2) - 200,000 200,000
Notes payable (Note 3) - 80,911 81,268
Note payable, related party (Note 4) 426,907 459,739 275,724
Current maturities of long-term debt 177,796 - -
----------- ----------- -----------
Total current liabilities 1,559,693 1,988,031 1,685,202
----------- ----------- -----------
Long-term debt, less current maturities 2,157,204 - -
----------- ----------- -----------
Total liabilities 3,716,897 1,988,031 1,685,202
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 5)
Partners' capital (Note 1) 1,015,782 1,233,096 1,768,308
----------- ----------- -----------
$ 4,732,679 $ 3,221,127 $ 3,453,510
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-55
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
MAY 28, 1993
THREE MONTHS ENDED (INCEPTION) TO
MARCH 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------- ------------------------- --------------
1996 1995 1995 1994 1993
--------- --------- ---------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Green fees and driving range
revenue $ 28,544 $ 28,618 $ 579,186 $ 238,099 $ -
Membership revenue 71,658 68,500 352,324 245,749 -
Instruction revenue 2,233 5,040 145,226 55,026 -
Merchandise 1,906 6,339 63,969 83,415 -
Food and beverage 10,140 16,238 194,117 60,982 -
Special events 3,961 7,493 62,446 54,084 -
Sponsorship 10,000 12,500 75,000 - -
Parking 13,425 6,475 51,474 - -
Other income 1,206 4,770 28,970 7,792 -
--------- --------- ---------- ----------- ---------
Total revenues 143,073 155,973 1,552,712 745,147 -
--------- --------- ---------- ----------- ---------
OPERATING EXPENSES:
Pro shop expenses 62,789 38,584 152,586 239,856 -
Instruction expenses - 1,428 146,651 46,247 -
Food and beverage expenses 18,095 30,371 201,013 178,344 -
Golf course maintenance expenses 20,402 36,338 196,938 155,663 -
General and administrative expenses 103,265 222,701 954,957 1,083,506 244,678
Depreciation and amortization 75,531 54,779 220,258 125,033 20,419
Asset management fees, affiliate
(Note 4) 36,034 30,000 139,243 35,000 -
--------- --------- ---------- ----------- ---------
Total operating expenses 316,116 414,201 2,011,646 1,863,649 265,097
--------- --------- ---------- ----------- ---------
Loss from operations (173,043) (258,228) (458,934) (1,118,502) (265,097)
--------- --------- ---------- ----------- ---------
Other income (expense):
Interest income - 4 6 27,121 25,766
Interest expense (44,271) (9,691) (76,284) (19,384) -
--------- --------- ---------- ----------- ---------
Total other income (expenses) (44,271) (9,687) (76,278) 7,737 25,766
--------- --------- ---------- ----------- ---------
NET LOSS $(217,314) $(267,915) $ (535,212) $(1,110,765) $(239,331)
--------- --------- ---------- ----------- ---------
--------- --------- ---------- ----------- ---------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-56
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994, AND FOR THE
PERIOD FROM MAY 28, 1993 (INCEPTION) TO DECEMBER 31, 1993
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Capital balance, May 28, 1993 (inception) $ - $ - $ -
Capital contributions, net of syndication costs of
$365,171 90 2,984,839 2,984,929
Net loss (6) (239,325) (239,331)
---- ----------- -----------
Capital balance, December 31, 1993 84 2,745,514 2,745,598
Capital contributions, net of syndication costs of
$16,525 - 183,475 183,475
Partner redemption - (50,000) (50,000)
Net loss (28) (1,110,737) (1,110,765)
---- ----------- -----------
Capital balance, December 31, 1994 56 1,768,252 1,768,308
Net loss (14) (535,198) (535,212)
---- ----------- -----------
Capital balance, December 31, 1995 42 1,233,054 1,233,096
Net loss (Unaudited) (6) (217,308) (217,314)
---- ----------- -----------
Capital balance, March 31, 1996 (Unaudited) $ 36 $ 1,015,746 $ 1,015,782
---- ----------- -----------
---- ----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-57
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
MAY 28, 1993
THREE MONTHS ENDED (INCEPTION) TO
MARCH 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------ ------------------------ --------------
1996 1995 1995 1994 1993
----------- --------- ---------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (217,314) $(267,915) $(535,212) $(1,110,765) $ (239,331)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 75,531 54,779 220,258 125,033 20,419
Changes in operating assets and
liabilities:
Accounts receivable (40,000) - - - -
Inventories (1,894) 6,393 7,494 (18,690) -
Receivable, affiliate - - - 8,000 (20,000)
Prepaid expenses and other
current assets (15,245) 16,437 15,016 (16,437) (100)
Accounts payable (322,396) (17,675) (37,981) 521,895 52,741
Accrued real estate taxes 40,627 50,560 202,238 83,335
Accrued expenses 47,924 (17,984) (1,950) 46,350 -
Deferred membership revenue 7,467 3,501 (60,333) 166,584 -
Deferred sponsorship revenue 30,000 37,500 - - -
Accounts payable, related party (83,256) 110,346 42,193 41,063 -
----------- --------- --------- ----------- -----------
Net cash used in operating activities (478,556) (24,058) (148,277) (153,632) (186,271)
----------- --------- --------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of and construction of
fixed assets (1,435,000) - (38,108) (2,018,656) (983,238)
Payment of syndication costs - - - (16,525) (360,132)
Payment of organization costs - - - - (154,863)
Payments for deposits - (800) (800) (26,522) (8,700)
----------- --------- --------- ----------- -----------
Net cash used in investing activities (1,435,000) (800) (38,908) (2,061,703) (1,506,933)
----------- --------- --------- ----------- -----------
FINANCING ACTIVITIES:
Payments on, proceeds from line of credit (200,000) - - 200,000 -
Proceeds from note payable, affiliate 4,072 - 213,679 266,074 -
Proceeds from note payable 2,335,000 - - - -
Payments on note payable, affiliate (49,661) - (51,259) - -
Payments on note payable (80,911) (517) (3,757) (764) -
Payments for loan fees (92,269) - (21,000) - -
Proceeds from capital contributions - - - 62,500 3,350,100
Proceeds from subscriptions pending - - - - 137,500
Payments for redemption of limited
partner's interest - - - (50,000) -
----------- --------- --------- ----------- -----------
Net cash provided by (used in)
financing activities 1,916,231 (517) 137,663 477,810 3,487,600
----------- --------- --------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,675 (25,375) (49,522) (1,737,525) 1,794,396
Cash and cash equivalents,
beginning of period 7,349 56,871 56,871 1,794,396 -
----------- --------- --------- ----------- -----------
Cash and cash equivalents,
end of period $ 10,024 $ 31,496 $ 7,349 $ 56,871 $ 1,794,396
----------- --------- --------- ----------- -----------
----------- --------- --------- ----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-58
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
ORGANIZATION AND BUSINESS
Illinois Center Golf Partners, L. P. (the "Partnership") was formed on May
28, 1993 under the laws of the State of Illinois. The Partnership was formed
for the purpose of developing, owning and operating a public, nine-hole, par
3 golf course and driving range practice facility located in downtown Chicago
known as Illinois Center Golf and commenced primary operation in August 1994.
The Partnership's business is seasonal. A substantial portion of its
business is between May 1 to October 1. Limited partnership interests were
offered to investors through a private placement, which raised $3,500,000.
The limited partners hold a 60 percent interest in the Partnership (see
Note 1).
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim financial statements for
the three months ended March 31, 1996 and 1995 are presented on a basis
consistent with the audited annual financial statements and reflect all
adjustments, consisting only of normal recurring accruals, necessary for fair
presentation of the results of such periods. The results of operations for
the interim period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the year ending December 31, 1996.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments purchased with
original maturities of three months or less and money market accounts to be
cash equivalents.
INVENTORIES
Inventories, which consist of pro-shop merchandise and food and beverage, are
recorded at the lower of cost (first-in, first-out) or market.
FIXED ASSETS
Fixed assets are stated at cost and are depreciated and amortized on a
straight-line basis over the estimated useful lives of the assets or over the
term of the lease, whichever is shorter.
LOAN FEES
Loan fees are recorded at cost and are amortized using the straight-line
method over the term of the long-term debt (see Note 3).
ORGANIZATION COSTS
Organization costs are recorded at cost and are amortized using the
straight-line method over 60 months.
F-59
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
INCOME TAXES
No provision has been made for income taxes or income tax benefits in the
accompanying financial statements, as taxable income or losses are reportable
in the tax returns of the individual partners. The net difference between
the tax basis and the reported amounts of the Partnership's assets and
liabilities as of March 31, 1996 and December 31, 1995 and 1994 are
approximately $720,000, $678,000 and $733,000.
CONCENTRATIONS OF CREDIT RISK
The Partnership's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Partnership's
cash equivalents are in demand deposit accounts placed with federally insured
financial institutions. Such deposit accounts at times may exceed federally
insured limits. The Partnership has not experienced any losses on such
accounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Partnership's cash, accounts receivable, accounts
payable, accrued expenses, related party notes payable and notes payable
approximate their estimated fair values.
REVENUE RECOGNITION
Green fees, driving range fees, instruction revenue, merchandise and food and
beverage revenue are recognized as revenue immediately upon sale to the
customer. Membership fees are recognized as revenue ratably over the life of
the membership, usually 12 months. Sponsorship revenue is recognized as
revenue ratably over the life of the contract.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amounts or
their estimated recoverable amounts and the adoption of this statement by the
Partnership is not expected to have an impact on the financial statements.
F-60
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
1. PARTNERS' CAPITAL ACCOUNTS
The general partner of the Partnership, with a 40-percent interest in the
Partnership, has the responsibility to make all decisions affecting the
day-to-day business of the Partnership. The general partner does not have the
authority except under certain conditions as provided for in the partnership
agreement, to cause the Partnership to secure any indebtedness of the
Partnership with a mortgage, deed of trust or similar lien on the property,
nor does the general partner have the authority to sell or transfer all or
substantially all of the assets of the Partnership, unless the general
partner first obtains the majority consent of the limited partners. The
general partner contributed $90, its agreement to develop and acquire the
ground lease (see Note 5) and expertise to the Partnership formation in
exchange for its interest in the Partnership. The selling agent for the
Partnership received a special limited partner interest for its services.
For financial statement purposes, activity for the special limited partner is
grouped with the limited partners.
The Partnership agreement allows for cash distributions to the general and
limited partners from available net cash flow. Net cash flow is defined for
any period as the excess, if any, of revenues over expenses. Net cash flow
is to be distributed not less frequently than quarterly, commencing after the
first full calendar quarter following the opening to the public of Illinois
Center Golf, as follows:
a. first, 100 percent to the limited partners until the limited
partners have received cash in an amount equal to a 15 percent per
annum return on their net capital contribution calculated on a
cumulative and compounded basis from the date on which their capital
contributions were delivered to the Partnership;
b. second, to the limited partners in proportion to their net capital
contributions until their net capital contributions are reduced to
zero; and
c. thereafter, 57-1/2 percent to the limited partners, 40 percent to the
general partner and 2-1/2 percent to the special limited partner.
F-61
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
Profits and losses are allocated to the partners as follows:
PROFITS
a. first, to the partners in proportion to their negative adjusted capital
account balances, if any, until the negative balance of each partner's
adjusted capital account equals such partner's share of partnership
minimum gain and partner nonrecourse debt minimum gain;
b. second, to the partners until the aggregate amount allocated to each
partner for all years equals the aggregate of net losses allocated to
each partner for all previous years, pro rata in proportion to the net
losses being offset;
c. third, to the general partner until the aggregate amount allocated to the
general partner for all years equals the aggregate distributions of net
cash flow to the general partner for all years;
d. fourth, to the special limited partner until the aggregate amount allocated
to the special limited partner for all years equals the aggregate
distributions of net cash flow to the special limited partner for all
years; and
e. the balance, if any, to the limited partners.
LOSSES
a. first, to the limited partners until the amount allocated to each partner
equals the aggregate of net profits allocated to each limited partner
for all previous years;
b. second, to the special limited partner until the amount allocated to the
special limited partner equals the aggregate of net profits allocated
to the special limited partner for all previous years;
c. third, to the general partner until the amount allocated to the general
partner equals the aggregate net profits allocated to the general
partner for all previous years;
d. fourth, to the partners up to the amount of net capital contributions,
allocated pro rata in proportion to net capital contributions; and
e. the balance, if any, to the general partner.
F-62
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
2. LINE OF CREDIT
The Partnership entered into a $200,000 line of credit agreement dated May 6,
1994. Borrowings under the line accrue interest at 1.5 percent over the
Associated Bank's prime rate, which was 8.5 percent at December 31, 1995.
The line is collateralized by inventory, contract rights, equipment and
fixtures. The balance outstanding on the line of credit was $200,000 as of
December 31, 1995. The line of credit was paid in full during January 1996.
3. NOTES PAYABLE
During 1994, the Partnership entered into two note agreements with a
contractor of the Illinois Center Golf facility. Both note agreements are
unsecured, accrue interest at fifteen percent and were due in monthly
principal and interest installments of $500 through June 1, 1995. The
balances on the notes as of December 31, 1995 are $58,493 and $22,418 and as
of December 31, 1994 are $57,030 and $24,238. During January 1996, the notes
were paid in full.
NOTE PAYABLE - TEXTRON
On January 31, 1996, subsequent to year end, the Partnership entered into a
$2,000,000 promissory note with Textron. Textron advanced $1,750,000 to the
Partnership. The Partnership may be entitled to receive additional advances
up to $250,000 from Textron pursuant to the terms of the note agreement. The
note bears interest at three percent above the Chase Manhattan Bank's prime
rate and is due on or before December 31, 2002. Principal and interest
payments are due under a seasonal payment structure. The note is
collateralized by substantially all of the assets of the Partnership and is
personally guaranteed by the president of the managing general partner.
EQUIPMENT PURCHASE
On January 31, 1996, subsequent to year end, the Partnership purchased its
clubhouse facility and various items of equipment which were previously under
operating leases for $1,435,000. The Partnership paid $850,000 in cash and
entered into a $585,000 promissory note. The note bears interest at eight
percent per annum and is due June 1, 2005. Principal and interest payments
on the note commence January 1, 1998. The note is collateralized by its
clubhouse facility and various items of equipment. The note is subordinate to
the Textron note payable.
F-63
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
ASSET MANAGEMENT FEE
The general partner is entitled to receive a $60,000 annual asset management
fee, increased by five percent per annum, for its services relating to the
operation of Illinois Center Golf, financial advisory services, partnership
reporting and other administrative services. The asset management fee is
payable in monthly installments beginning July 1994. For the three months
ended March 31, 1996 and for the years ended December 31, 1995 and 1994, the
Partnership incurred asset management fees of $15,750, $60,000 and $35,000.
NOTE PAYABLE TO AFFILIATE
On September 1, 1994, the Partnership entered into a $500,000 note agreement
with its general partner. Borrowings under the agreement accrue interest at
two percent over the Citibank's prime rate, which was 8.5 percent at December
31, 1995. The note is unsecured and due the earlier of demand or September
1, 1996. The balance outstanding on the note is $426,907, $459,739 and
$275,724 as of March 31, 1996 and December 31, 1995 and 1994.
5. COMMITMENTS AND CONTINGENCIES
PROPERTY MANAGEMENT AGREEMENT
On December 1, 1993, the Partnership entered into a property management
agreement with Vintage Golf Management, Inc. ("VGM"), an affiliate of the
general partner. The management agreement expires on January 1, 1997. The
terms of the management agreement provide for a management fee of $5,000 per
month plus a membership incentive fee of ten percent of the gross proceeds
received from membership initiation fees and the equivalent of one month's
membership dues as received by Illinois Center Golf. The membership
incentive fee for renewal memberships will be reduced to four percent of
annual dues for renewal memberships. In addition, the management agreement
provides for an annual incentive fee of five percent of the amount of annual
net operating income in excess of $1,600,000.
F-64
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
Prior to November 11, 1994, VGM was operated by Club Sports International
("CSI"). On October 1, 1994, CSI was removed as operator of VGM. On November
11, 1994, Billy Casper Golf Management, Inc. ("BCGM") was engaged as the new
operator of VGM. From June 1, 1994 through September 30, 1994, VGM's base
management fee was split between CSI and the general partner, with CSI
receiving $4,000 and the general partner receiving $1,000. From October 1
through November 10, the general partner earned the full amount of VGM's fee.
Starting November 11, 1994 through November 30, 1995, BCGM earned the entire
fee. During November 1995, BCGM was removed as operator of VGM and the
general partner became the operator of VGM. In addition, VGM has agreed to
waive 80% of the deferred $5,000 per month fees that it had earned under its
contract from the period December 1, 1993 to May 31, 1994.
For the three months ended March 31, 1996 and for the years ended December
31, 1995 and 1994, property management expense, including the incentive fees,
were $20,284, $79,243 and $76,063. As of March 31, 1996 and December 31,
1995 and 1994, the Partnership owed VGM $-0-, $83,256 and $41,063 in unpaid
property management fees and incentive fees.
LEASING ACTIVITY
The Partnership has noncancelable operating lease agreements for equipment
and golf carts which expire through October 1998. Total lease expense
approximated $6,000, $159,000, $179,000 and $-0- for the three months ended
March 31, 1996 and for the years ended December 31, 1995 and 1994, and for
the period from May 28, 1993 (inception) to December 31, 1993.
Future minimum payments in accordance with the above lease agreements as of
December 31, 1995 are as follows:
1996 $ 23,000
1997 17,000
1998 7,000
--------
$ 47,000
--------
--------
F-65
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
GROUND SUBLEASE AND SUBLICENSE AGREEMENT
The Partnership entered into a ground sublease and sublicense agreement on
July 14, 1993 for the property on which Illinois Center Golf is constructed.
The term of the lease is for fifteen years, commencing with the opening date
of July 14, 1994, and may be extended by agreement of the parties.
The sublease agreement calls for the payment of a tax contribution, land
rent, and additional rent. Payments for these amounts are subject to
available operational proceeds, which are applied and expended in the
following order:
1. Expenses
2. Debt service
3. Tax contribution
4. Operational reserve
5. Partnership preferred return
6. Partnership contribution
7. Land rent
8. Distributable cash
The tax contribution is in the amount of $10,417 per month starting August 1,
1994, increased by $6,250 per month for any month in which land rent is not
paid. Land rent is in the amount of $6,250 per month pro rated from July 13,
1994 to August 17, 1994, and $12,500 per month thereafter. Additional land
rent is payable in the amount of 32.5 percent of distributable cash. The
contingent payments for tax contribution and land rent as of December 31,
1995 were approximately $285,600 and $282,500. As of December 31, 1995, the
Partnership paid no tax contribution nor land rent to the lessor. As of
March 31, 1996 and December 31, 1995 and 1994, the Partnership has accrued
tax contributions of approximately $326,200, $285,600 and $83,300. As of
March 31, 1996 and December 31, 1995, the Partnership was not obligated to
pay land rent under the provisions of the agreement.
F-66
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
6. SUPPLEMENTAL DISCLOSURES FOR THE STATEMENTS OF CASH FLOWS
The following is a summary of noncash investing and financing activities.
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
MAY 28, 1993
THREE MONTHS ENDED (INCEPTION) TO
MARCH 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------- ------------------------- --------------
1996 1995 1995 1994 1993
--------- --------- ---------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Construction of course,
practice facility,
building and related
improvements financed
with accounts payable $ - $ - $ - $259,224 $33,507
Purchase of equipment
financed with deposits $30,482 $ - $ - $ - $ -
Organization costs financed
with accounts payable $ - $ - $ - $ - $20,154
Syndication costs financed
with accounts payable $ - $ - $ - $ - $ 5,039
Accounts payable converted
to notes payable $ - $ - $ - $ 81,758 $ -
Accounts payable converted
to note payable, affiliate $ - $15,000 $ - $ 15,796 $ -
Accrued interest converted
to note payable $ - $ - $ 3,400 $ 274 $ -
Accrued interest converted
to note payable, affiliate $12,757 $ - $21,595 $ 3,854 $ -
Receivable due from
affiliate offset against
note payable, affiliate $ - $ - $ - $ 10,000 $ -
Subscriptions pending
converted to partners'
capital $ - $ - $ - $137,500 $ -
</TABLE>
The Partnership made cash payments for interest of $19,131, $3,482, $37,523,
$17,716 and $0 for the three months ended March 31, 1996 and 1995 and for the
years December 1995, 1994 and for the period from May 28, (inception) to
December 31, 1993.
F-67
<PAGE>
ILLINOIS CENTER GOLF
PARTNERS, L.P.
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- --------------------------------------------------------------------------------
7. PROPOSED PARTNERSHIP ACQUISITION
TVG (Illinois Center), Inc. is the managing general partner of the
Partnership and is a wholly owned subsidiary of MetroGolf Incorporated (the
"Company"). The Company has offered to purchase limited partnership
interests for a combination of cash and convertible notes. The acquisition
will be contingent upon the closing of the Company's initial public offering
("IPO").
Limited partners who elect not to exchange their interest will remain limited
partners in the partnership. Under the Company's current proposal, each
accredited limited partner who elects to sell will receive for each $50,000
limited partnership interest either $25,000 cash and a $25,000 convertible
note or a $50,000 convertible note. Each limited partner who is a
non-accredited investor and who elects to sell will receive $50,000 in cash
for each $50,000 limited partnership interest. Each convertible note will
bear interest at 6% per annum and will mature on June 1, 2005; interest only
will be payable for the first 24 months from issuance of the convertible
notes, with the remaining interest and principal being amortized evenly over
the remaining seven years. Each convertible note will be convertible at the
holder's option into common stock at any time after the date is 13 months
after the closing of the IPO at a conversion price equal to the price of the
common stock to the public in the IPO. In addition, each $25,000 convertible
note issued to the limited partners will convert into warrants to purchase
2,500 shares of common stock at an exercise price equal to 120% of the IPO
price.
When the convertible notes are first convertible into the common stock of the
Company, the Company will use its best efforts to cause such shares to be
registered.
The closing of the acquisition of the limited partnership interests and the
promissory notes is contingent upon the closing of the Company's IPO. The
limited partnership and promissory note acquisitions will not be consummated
before the closing of the IPO and there can be no assurance that the limited
partnership interests and promissory note acquisitions or the IPO will occur.
8. LIQUIDITY
As of December 31, 1995, the Partnership had negative working capital. As
discussed in Note 3, the Partnership was advanced $1,750,000 on January 31,
1996. The Partnership believes that with this loan it will have sufficient
working capital to fund its 1996 operations.
F-68
<PAGE>
GOOSE CREEK GOLF
PARTNERS LIMITED
PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Goose Creek Golf Partners Limited Partnership
(A Virginia Limited Partnership)
Denver, Colorado
We have audited the accompanying balance sheets of Goose Creek Golf Partners
Limited Partnership (a Virginia limited partnership) (the "Partnership") as
of December 31, 1995 and 1994 and the related statements of operations,
changes in partners' capital and cash flows for the years ended December 31,
1995, 1994 and 1993. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of
December 31, 1995 and 1994 and the results of its operations and its cash
flows for the years ended December 31, 1995, 1994 and 1993 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 1 to the
financial statements, the Partnership has suffered recurring losses from
operations and has a working capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
BDO Seidman, LLP
Denver, Colorado
May 17, 1996
F-69
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------- ------------------------
1996 1995 1994
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (Note 3)
Current:
Cash $ 21,999 $ 19,386 $ 26,466
Restricted cash (Note 2) 75,000 75,000 -
Inventories 31,657 34,145 31,226
Prepaid insurance 15,521 15,521 5,030
Real estate tax escrow 15,251 11,666 6,474
---------- ---------- ----------
Total current assets 159,428 155,718 69,196
---------- ---------- ----------
FIXED ASSETS:
Land 3,526,961 3,526,961 3,526,961
Buildings 859,401 859,401 859,401
Furniture, fixtures and equipment 1,127,060 1,127,060 1,109,701
---------- ---------- ----------
5,513,422 5,513,422 5,496,063
Less accumulated depreciation and amortization 542,712 500,877 333,542
---------- ---------- ----------
Net fixed assets 4,970,710 5,012,545 5,162,521
---------- ---------- ----------
OTHER:
Organization costs 89,463 89,463 89,463
Loan fees 119,305 119,305 119,305
---------- ---------- ----------
208,768 208,768 208,768
Less accumulated amortization 158,434 148,479 106,725
---------- ---------- ----------
50,334 60,289 102,043
Deposits 1,866 1,866 2,300
---------- ---------- ----------
Total other assets 52,200 62,155 104,343
---------- ---------- ----------
$5,182,338 $5,230,418 $5,336,060
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying report of independent certified public accountants,
summary of accounting policies and notes to financial statements.
F-70
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------- ------------------------
1996 1995 1994
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 316,548 $ 220,687 $ 135,448
Accounts payable, related party - - 393
Sales tax payable 710 547 1,120
Accrued interest 41,862 30,700 28,567
Deferred membership revenue 40,887 51,210 69,574
Line of credit (Note 2) 149,941 149,941 -
Note payable, related party (Note 6) 98,279 54,989 -
Notes payable, other 31,650 11,650 -
Note payable - Textron, current portion (Note 3) 86,616 84,477 76,441
Convertible notes payable, current portion (Note 3) - - 527,307
Capital lease obligations, current portion (Note 5) 106,079 103,343 93,084
---------- ---------- ----------
Total current liabilities 872,572 707,544 931,934
---------- ---------- ----------
LONG-TERM LIABILITIES:
Note payable - Textron, less current portion (Note 3) 3,278,103 3,248,486 3,332,953
Convertible notes payable, less current portion (Note 3) 380,000 380,000 -
Capital lease obligation, less current portion (Note 5) 339,443 354,246 455,407
---------- ---------- ----------
Total long-term liabilities 3,997,546 3,982,732 3,788,360
---------- ---------- ----------
Total liabilities 4,870,118 4,690,276 4,720,294
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
Partners' capital (Note 4) 312,220 540,142 615,766
---------- ---------- ----------
$5,182,338 $5,230,418 $5,336,060
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying report of independent certified public accountants,
summary of accounting policies and notes to financial statements.
F-71
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------------- ------------------------------------
1996 1995 1995 1994 1993
--------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Greens fees $ 33,773 $ 63,039 $ 655,398 $ 743,816 $ 704,953
Golf cart rental 11,533 19,433 304,188 336,180 266,809
Merchandise 12,148 16,167 176,185 204,356 190,073
Food and beverage 6,872 17,789 188,953 222,570 174,235
Membership revenue 20,287 29,513 114,574 154,007 104,158
Other income 5,160 - 12,624 - 388
--------- --------- ---------- ---------- ----------
Total revenues 89,773 145,941 1,451,922 1,660,929 1,440,616
--------- --------- ---------- ---------- ----------
OPERATING EXPENSES:
Pro shop 34,985 51,113 295,546 304,337 312,520
Food and beverage 3,068 10,421 120,698 128,071 103,982
Golf course maintenance 26,082 12,856 258,147 241,283 183,652
General and administrative 83,746 52,596 293,004 279,901 322,165
Depreciation and amortization 51,790 52,272 209,089 237,966 174,132
Asset management fee,
related party (Note 6) 13,023 12,403 51,059 48,628 46,313
--------- --------- ---------- ---------- ----------
Total operating expenses 212,694 191,661 1,227,543 1,240,186 1,142,764
--------- --------- ---------- ---------- ----------
Income (loss) from operations (122,921) (45,720) 224,379 420,743 297,852
--------- --------- ---------- ---------- ----------
OTHER INCOME (EXPENSES):
Interest income 2,432 14 3,830 384 1,073
Interest expense (107,433) (103,813) (469,732) (449,242) (437,518)
--------- --------- ---------- ---------- ----------
Total other (expenses) (105,001) (103,799) (465,902) (448,858) (436,445)
--------- --------- ---------- ---------- ----------
Loss before extraordinary item (227,922) (149,519) (241,523) (28,115) (138,593)
--------- --------- ---------- ---------- ----------
Extraordinary item,
debt extinguishment - - 165,899 - -
--------- --------- ---------- ---------- ----------
NET LOSS $(227,922) $(149,519) $ (75,624) $ (28,115) $ (138,593)
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
</TABLE>
See accompanying report of independent certified public accountants,
summary of accounting policies and notes to financial statements.
F-72
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
- -----------------------------------------------------------------------------
Years Ended December 31, 1995, 1994 and 1993 and
Three Months Ended March 31, 1996 (Unaudited)
<TABLE>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Balance, January 1, 1993 $(1,308) $ 747,115 $ 745,807
Capital contributions - 50,000 50,000
Distribution to partners - (13,333) (13,333)
Net loss (1,386) (137,207) (138,593)
------- --------- ---------
Balance, December 31, 1993 (2,694) 646,575 643,881
Net loss (281) (27,834) (28,115)
------- --------- ---------
Balance, December 31, 1994 (2,975) 618,741 615,766
Net loss (756) (74,868) (75,624)
------- --------- ---------
Balance, December 31, 1995 (3,731) 543,873 540,142
Net loss (Unaudited) (2,279) (225,643) (227,922)
------- --------- ---------
Balance, March 31, 1996 (Unaudited) $(6,010) $ 318,230 $ 312,220
------- --------- ---------
------- --------- ---------
</TABLE>
See accompanying report of independent certified public accountants,
summary of accounting policies and notes to financial statements.
F-73
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
<TABLE>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(227,922) $(149,519) $ (75,624) $ (28,115) $(138,593)
Adjustments to reconcile
net loss to cash provided
by (used in) operating
activities:
Depreciation and
amortization 51,790 52,272 209,089 237,966 174,132
Extraordinary item,
debt extinguishment - - (165,899) - -
Debt issued for
services - - 11,650 - -
Changes in operating
assets and liabilities:
Inventories 2,488 (34,485) (2,919) 9,036 10,273
Prepaid insurance - 237 (10,491) (979) 3,983
Real estate tax escrow (3,585) - (5,192) (3,031) 8,281
Other current assets - - - - (5,732)
Accounts payable 95,861 22,223 85,239 25,472 46,657
Accounts payable, related party - 3,303 (393) 393 -
Accrued expenses 43,074 41,885 77,857 131,759 41,745
Deferred membership revenue (10,323) (8,401) (18,364) (6,610) 73,850
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities (48,617) (72,485) 104,953 365,891 214,596
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchase of certificate of deposit - (75,000) (75,000) - -
Purchase of fixed assets - (400) (17,359) (157,128) (263,066)
Decrease in deposits - - 434 1,250 -
--------- --------- --------- --------- ---------
Net cash used in investing
activities - (75,400) (91,925) (155,878) (263,066)
--------- --------- --------- --------- ---------
</TABLE>
See accompanying report of independent certified public accountants,
summary of accounting policies and notes to financial statements.
F-74
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS (CONTINUED)
- -----------------------------------------------------------------------------
<TABLE>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Payments on long-term
debt - - (131,953) (161,760) (62,778)
Borrowings on convertible
notes payable - - 380,000 - -
Payments on convertible
notes payable - - (380,000) - -
Payments on capital lease
obligations (12,067) (9,604) (93,085) (81,174) (71,790)
Borrowings on
line-of-credit - 155,755 149,941 - -
Borrowings on note payable,
related party 43,297 - 54,989 - -
Borrowings on notes payable,
other 20,000 - - - -
Partner capital contributions - - - - 50,000
Partner distributions - - - - (13,333)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities 51,230 146,151 (20,108) (242,934) (97,901)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash 2,613 (1,734) (7,080) (32,921) (146,371)
Cash, beginning of period 19,386 26,466 26,466 59,387 205,758
--------- --------- --------- --------- ---------
Cash, end of period $ 21,999 $ 24,732 $ 19,386 $ 26,466 $ 59,387
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying report of independent certified public accountants,
summary of accounting policies and notes to consolidated financial statements.
F-75
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
ORGANIZATION AND BUSINESS
Goose Creek Golf Partners Limited Partnership (the "Partnership") was formed
on May 1, 1992 under the laws of the State of Virginia. The Partnership was
formed for the purpose of acquiring, owning, managing and improving a public,
daily fee golf course located in Virginia known as Goose Creek Golf Course
and commenced primary operations on June 1, 1992. The Partnership's business
is seasonal. A substantial portion of its business is between April 1 to
October 30. Limited partnership interests were offered to investors through
a private placement which raised $975,000. The limited partners hold a 99
percent interest in the Partnership. The managing general partner and the
administrative general partner each hold a 0.5 percent interest in the
Partnership (see Note 4).
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim financial statements for
the three months ended March 31, 1996 and 1995 are presented on a basis
consistent with the audited annual financial statements and reflect all
adjustments, consisting only of normal recurring accruals, necessary for fair
presentation of the results of such periods. The results of operations for
the interim period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the year ending December 31, 1996.
CASH EQUIVALENTS
The Partnership considers all highly liquid investments purchased with
original maturities of three months or less and money market accounts to be
cash equivalents.
INVENTORIES
Inventories, consisting of proshop merchandise and food and beverage, are
recorded at lower of cost (first-in, first-out) or market.
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight line basis
over the estimated useful lives of the assets. Equipment under capital leases
is stated at cost and is amortized over the estimated useful life of the
equipment or over the term of the lease, whichever is shorter.
LOAN FEES
Loan fees are recorded at cost and are amortized using the straight-line
method over the term of the long-term debt (see Note 3).
F-76
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
ORGANIZATION COSTS
Organization costs are recorded at cost and are amortized using the
straight-line method over 60 months.
INCOME TAXES
No provision has been made for income taxes or income tax benefits in the
accompanying financial statements, as taxable income or losses are reportable
in the tax returns of the individual partners. The net difference between
the tax basis and the reported amounts of the Partnership's assets and
liabilities as of March 31, 1996 and December 31, 1995 and 1994 are
approximately $12,000, $1,000 and $114,000.
CONCENTRATION OF CREDIT RISK
The Partnership's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Partnership's
cash and cash equivalents are in demand deposit accounts placed with
federally insured financial institutions. Such deposit accounts at times may
exceed federally insured limits. The Partnership has not experienced any
losses on such amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Partnership's cash, accounts payable, accrued
expenses, related party notes payable and long-term debt approximate their
estimated fair values.
REVENUE RECOGNITION
Green fees, golf cart rental, merchandise and food and beverage are
recognized as revenue immediately upon sale to the customer. Membership fees
are recognized as revenue ratably over the life of the membership, usually 12
months.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amounts or
their estimated recoverable amounts, and the adoption of this statement by
the Partnership is not expected to have an impact on the financial
statements.
F-77
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
1. GOING CONCERN
The Partnership has incurred losses since its inception and had a working
capital deficit of $713,144 and $551,826 as of March 31, 1996 and December
31, 1995 (reduced from $862,738 as of December 31, 1994 and $589,838 as of
December 31, 1993). These conditions raise substantial doubt about the
Partnership's ability to continue as a going concern. The Partnership's
continued existence is dependent on management's ability to generate
additional cash flow from operations or obtain financing to meet its
obligations when due (see Note 8). The general partner has replaced the
management company in an effort to improve operations (see Note 5) and is
negotiating with a lender to refinance its existing long-term debt, to make
additional capital improvements to the golf course, and to retire short-term
debt obligations. In addition, the general partner has advanced funds to the
Partnership to help it meet its obligations. The accompanying financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
2. LINE OF CREDIT
The Partnership entered into a $150,000 line of credit agreement dated
December 23, 1994. Borrowings under the line accrue interest at two percent
over the prime rate, which was 8.5 percent at December 31, 1995. The line is
due on April 23, 1996. The Partnership deposited a $75,000 certificate of
deposit with the lender as collateral for the debt, and the managing general
partner of the Partnership has guaranteed the debt. As of March 31, 1996 and
December 31, 1995 and 1994 the balance on the line of credit is $149,941,
$149,941 and $0.
3. LONG-TERM DEBT
NOTE PAYABLE - TEXTRON
On June 1, 1992, the Partnership was advanced $3.6 million under a loan
agreement whereby the Partnership may borrow up to $4.2 million. The loan
agreement bears interest at 10.05 percent and has a five-year term which may
be extended for an additional five-year term under certain conditions of the
loan agreement. Principal and interest payments are due under a seasonal
payment structure with a balloon payment of principal due on June 1, 1997,
unless the Partnership exercises its right to extend the maturity date. The
loan agreement allows for subsequent advances in amounts of at least $100,000
each until total advances reach $4.2 million, so long as no more than one
advance occurs in any 12-month period. The amount of additional advances are
tied to a formula involving certain net operating income levels and
debt-coverage ratios. The loan is collateralized by all property of the
Partnership and is personally guaranteed by the president of the managing
general partner.
F-78
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
CONVERTIBLE NOTES PAYABLE
On June 1, 1992, the Partnership entered into a convertible note agreement
for $400,000 with the seller of the golf course land, buildings and
improvements. The note had an original maturity date of June 1, 1994.
As of June 2, 1994, the Partnership was in default of a provision of the
conversion agreement requiring all net proceeds from the sale of Class A
Limited Partnership Interests in excess of the initial $950,000 to be paid to
the seller. Accordingly, interest has been accrued at the default rate as
specified in the note agreement from April 2, 1993 (the date of default).
During August 1995, the general partner negotiated the purchase, at a
discount, of the seller's note for $380,000 as payment in full under the note
agreement. The purchase price was $165,899 less than the outstanding balance
on the note at the time of the purchase. Accordingly, the partnership
recorded $165,899 in debt extinguishment income for the year ended December
31, 1995.
During August 1995, the Partnership entered into three unsecured convertible
note agreements. The notes accrue interest at 8 percent per annum through
August 1, 1996. Thereafter, the notes accrue interest at 15 percent per
annum. Interest-only payments are due on the first of each month. The notes
are due on August 1, 1997. The note agreements are subordinate to the note
payable with Textron.
The note agreements contain a conversion provision whereby the noteholders
may convert no less than all of the then outstanding principal and accrued
interest into limited partnership interests.
Future maturities of long-term debt as of December 31, 1995 are as follows:
1996 $ 84,477
1997 3,628,486
----------
$3,712,963
----------
----------
F-79
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
4. PARTNERS' CAPITAL ACCOUNTS
The managing general partner of the Partnership, with a 0.5 percent interest
in the Partnership, is responsible for the day-to-day management and
operation of the business and property of the Partnership. The
administrative general partner of the Partnership, who also has a 0.5 percent
interest in the Partnership, holds joint authority with the managing general
partner over annual budgets, capital expenditures, significant deposits into
and withdrawals from the Partnership reserve account, as defined, and
replacement of the management company (see Note 5). The general partners
shall not have the authority to sell or refinance all or any material portion
of the property without the consent of 51 percent of the limited partners.
Both general partners contributed their expertise to the Partnership
formation in exchange for an interest in the Partnership.
The Partnership agreement allows for cash distributions to the general and
limited partners from available net cash flow, at the discretion of the
managing general partner. Net cash flow is defined as the excess of operating
cash receipts over operating cash disbursements after the funding of
reasonable reserves for anticipated expenses and capital replacement. Net
cash flow is distributed as follows:
(i) 99 percent to the limited partners andone percent to the general
partners (0.5 percent to each) until the limited partners have
received an amount equal to 12 percent per annum, cumulative,
noncompounded, on their capital contributions;
(ii) thereafter, to the Partnership reserve account, as defined; and
(iii) thereafter, distributed to the general and limited partners in
accordance with their percentage interests in the Partnership.
Profits and losses are allocated to the partners in the same proportion as
net cash flow is distributed subject to the provisions of Section 704(b) of
the Internal Revenue Code of 1986 relating to substantial economic effect.
F-80
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
5. COMMITMENTS AND CONTINGENCIES
PROPERTY MANAGEMENT AGREEMENT
On June 1, 1992, the Partnership entered into a five-year property management
agreement with a Virginia corporation in the business of managing golf
courses and clubs. The terms of the management agreement provide for a
management fee of $5,000 per month plus an incentive fee of four percent of
gross monthly revenues, to the extent the amount exceeds $5,000 per month.
In addition, the management agreement provides for an annual incentive fee of
$15,000 plus an additional five to fifteen percent of net operating income in
excess of $600,000. The aggregate amount of these fees shall not exceed six
percent of gross revenues with respect to the applicable calendar year or
portion thereof. In addition, a membership fee of 10 percent of the gross
proceeds received from initiation fees is to be paid to the management
company.
For the three months ended March 31, 1996 and for the years ended December
31, 1995, 1994, and 1993, the Partnership paid $15,000, $60,000, $60,000, and
$60,000 for management fees.
During March 1996, the general partner gave notice to terminate the property
management agreement discussed above. In accordance with the property
management agreement, the Partnership is required to pay as much as $75,000
to the property manager for cancelling the agreement as long as the property
manager is not in default with respect to this agreement. The general
partner is of the opinion that the property manager is in default;
accordingly, no provision for any liability that may result from this
agreement has been recognized in the accompanying financial statements.
CAPITAL LEASE OBLIGATIONS
The Partnership has various lease agreements for irrigation system,
maintenance equipment and golf carts. These obligations extend through 2001
with unexpired terms ranging from one to five years.
F-81
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
Included in fixed assets in the accompanying balance sheets are the following
assets held under capital leases:
DECEMBER 31,
MARCH 31, -------------------
1996 1995 1994
-------- -------- --------
(UNAUDITED)
Turf and maintenance
equipment $261,000 $261,000 $261,000
Golf carts 196,345 196,345 196,345
Irrigation system 284,662 284,662 284,662
Assets under capital lease 742,007 742,007 742,007
Less accumulated amortization 423,372 390,338 258,203
-------- -------- --------
Assets under capital lease, net $318,635 $351,669 $483,804
-------- -------- --------
-------- -------- --------
Future minimum lease payments and the present value of the minimum lease
payments under the capital lease obligations as of December 31, 1995 are as
follows:
Total future minimum lease payments $738,826
Less amount representing interest 281,237
--------
Present value of minimum lease payments 457,589
Current portion of capital lease obligations 103,343
--------
Long-term portion of capital lease
obligations $354,246
--------
--------
F-82
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
As of December 31, 1995, annual maturities of the capital lease obligations
for each of the next five years and in the aggregate are as follows:
1996 $103,343
1997 87,772
1998 26,804
1999 27,628
Thereafter 212,042
--------
$457,589
--------
--------
6. RELATED PARTY TRANSACTIONS
ASSET MANAGEMENT FEE
The general partner is entitled to receive a $45,000 annual asset management
fee, increased by five percent per annum, for its services relating to the
Partnership. For the three months ended March 31, 1996 and for the years
ended December 31, 1995, 1994 and 1993, the Partnership incurred asset
management fees of $13,023, $51,059, $48,628 and $46,313.
NOTE PAYABLE, RELATED PARTY
On November 21, 1995, the Partnership entered into a $100,000 note agreement
with its general partner. Advances under the agreement accrue interest at
two percent over the Citibank's prime rate, which was 8.75 percent at
December 31, 1995. The note is unsecured and due the earlier of demand or on
November 21, 1996. The balance outstanding on the note is $98,279 and
$54,989 as of March 31, 1996 and December 31, 1995.
F-83
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest was $64,515 and $62,163 for the three months ended
March 31, 1996 and 1995 and $335,625, $291,047 and $356,822 for the years
ended December 31, 1995, 1994 and 1993.
Excluded from the statements of cash flows were the effects of certain
noncash investing and financing activities as follows:
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
----------------- ----------------------------
1996 1995 1995 1994 1993
------- ------- ------- -------- -------
(UNAUDITED)
Accrued interest
converted to debt $31,756 $41,650 $76,297 $132,146 $44,266
Equipment acquired
through capital lease
obligations $ - $ $ - $297,680 $ -
------- ------- ------- -------- -------
------- ------- ------- -------- -------
8. PROPOSED PARTNERSHIP ACQUISITION
TVG (Virginia), Inc. is the managing general partner of the Partnership and
is a wholly-owned subsidiary of MetroGolf Incorporated (the "Company"). The
Company has offered to purchase the limited partnership interests for a
combination of cash and convertible notes. The acquisition will be contingent
upon the closing of the Company's initial public offering ("IPO").
Limited partners who elect not to exchange their interest will remain limited
partners in the old partnership. Each accredited limited partner who elects
to sell will receive for each $25,000 limited partnership interest $12,500 in
cash and a convertible note in the amount of $26,500 or a convertible note in
the amount of approximately $39,000. Each limited partner who is a
non-accredited investor and who elects to sell will receive $39,000 in cash
for each $25,000 limited partnership interest. Each convertible note will
bear interest at 6% per annum and will mature on June 1, 2005; interest only
will be payable for the first 24 months from the date of the issuance of the
convertible notes, with the remaining interest and principal being amortized
evenly over the remaining seven years until maturity. Each convertible note
will be convertible at the holder's option into common stock at any time
after the date that is 13 months after the closing of the IPO at a conversion
price equal to the price of the Common Stock to the public in the IPO.
F-84
<PAGE>
GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
(A VIRGINIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Information as to the periods ended March 31, 1996 and 1995 is unaudited.
- ------------------------------------------------------------------------------
When the convertible notes are first convertible into the common stock of the
Company, the Company will use its best efforts to cause such shares to be
registered.
The closing of the acquisition of the limited partnership interests and the
promissory notes is contingent upon the closing of the Company's IPO. The
limited partnership and promissory note acquisitions will not be consummated
before the closing of the IPO, and there can be no assurance that the limited
partnership interests and promissory note acquisitions or the IPO will occur.
F-85
<PAGE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
______________
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY ........................................ 1
RISK FACTORS .............................................. 4
USE OF PROCEEDS ........................................... 9
DIVIDEND POLICY ........................................... 9
DILUTION .................................................. 10
CAPITALIZATION ............................................ 11
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA ........ 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ............................................... 14
BUSINESS .................................................. 18
MANAGEMENT ................................................ 26
PARTNERSHIP ACQUISITIONS .................................. 29
CERTAIN TRANSACTIONS ...................................... 30
CONCURRENT OFFERING ....................................... 31
PRINCIPAL STOCKHOLDERS .................................... 32
DESCRIPTION OF CAPITAL STOCK .............................. 32
SHARES ELIGIBLE FOR FUTURE SALE ........................... 33
UNDERWRITING .............................................. 35
LEGAL MATTERS ............................................. 36
EXPERTS ................................................... 36
ADDITIONAL INFORMATION .................................... 36
UNTIL _______________, 19____ (25 DAYS AFTER THE DATE HEREOF), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER.
______________
1,200,000 SHARES
[LOGO]
COMMON STOCK
___________________
P R O S P E C T U S
___________________
LAIDLAW EQUITIES, INC.
CRUTTENDEN ROTH
INCORPORATED
___________, 1996
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGE]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 17, 1996
PROSPECTUS
553,571 Shares of Common Stock
METROGOLF INCORPORATED
This Prospectus relates to 553,571 shares of common stock, no par value
(the "Common Stock"), of MetroGolf Incorporated, a Colorado corporation (the
"Company"), held by certain holders of the Company's Common Stock (the
"Converting Shareholders"). The Converting Shareholders' Common Stock was
issued to the Selling Stockholders upon conversion of the Company's 12%
Convertible Subordinated Notes Due 1997 (the "Notes") and upon exercise of
warrants issuable upon conversion of the Notes. The Notes were issued by the
Company in a private placement on May 30, 1996 (the "Private Placement"). See
"Converting Shareholders" and "Plan of Distribution."
The Common Stock offered by the Converting Shareholders pursuant to this
Prospectus may be sold from time to time by the Converting Shareholders or by
their transferees. The distribution of the Common Stock offered hereby by the
Converting Shareholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the Converting Shareholders.
The Converting Shareholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Converting Shareholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Converting Shareholders. See "Converting Shareholders" and "Plan
of Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company of
1,200,000 shares of Common Stock was declared effective by the Securities and
Exchange Commission. The Company will receive approximately $7,110,000 in net
proceeds from such offering (assuming no exercise of the Underwriter's over-
allotment option) after payment of underwriting discounts and commissions and
estimated expenses of such offering.
--------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS."
--------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------------------
The date of this Prospectus is ___________ ____, 1996
A-1
<PAGE>
[ALTERNATE PAGE]
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 3,775,147 shares of the Common Stock outstanding (including
shares of Common Stock issuable upon exercise of certain warrants, conversion of
the PP Notes, conversion of the Convertible Notes and other rights to acquire
Common Stock (not including 25,000 shares issuable upon exercise of Laidlaw
Equities, Inc.'s warrant, or 250,000 shares issuable under the Stock Option
Plan). Of these shares, 1,200,000 shares of Common Stock are freely tradable
without restriction or future registration under the Securities Act, unless
purchased by "affiliates" of the Company, as that term is defined in Rule 144
under the Securities Act. Of the remaining 2,575,147 shares of Common Stock,
553,571 shares covered by this Prospectus will be freely tradable upon
expiration of the 180-day Underwriters' lock-up or upon earlier waiver of such
lock-up by the Underwriters.
In addition, the Company has agreed to file and use its best efforts to
become effective on the date that is 13 months after the date of the closing of
its initial public offering and to cause to remain effective for a period of one
year, a registration statement covering the shares of Common Stock issuable upon
conversion of the Convertible Notes and the warrants issued in connection
therewith. All of the shares that are owned by Mr. Tourtellotte, all officers,
directors and stockholders, persons owning five percent or more of the
outstanding Common Stock of the Company, or warrants or options to purchase five
percent or more of such Common Stock, or securities convertible into five
percent or more of such Common Stock, or any combination thereof that aggregates
five percent or more of the outstanding Common Stock are subject to a lock-up to
refrain from making any public sale or distribution of their Common Stock or
such warrants, options or convertible securities (pursuant to Rule 144 or
otherwise) without the prior written consent of the Underwriters for 13 months
after the date hereof.
In general, under Rule 144 as it is currently in effect, a person (or
persons whose shares are required to be aggregated) who beneficially owns
Restricted Shares with respect to which at least two years have elapsed since
the later of the date the shares were acquired from the Company, including
persons who may be deemed to be affiliates of the Company, would be entitled to
sell, within any three-month period, a number of shares which does not exceed
the greater of 1% of the then outstanding shares of the Common Stock or the
average weekly reported trading volume in the over-the-counter market during the
four calendar weeks preceding the filing of the Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner-of-sale
provisions and notice requirements, and to the availability of current public
information about the Company. A person who is not an affiliate of the Company
under the Securities Act, has not been an affiliate during the preceding 90
days, and who beneficially owns shares with respect to which at least three
years have elapsed since the later of the date the shares were acquired from the
Company or from an affiliate of the Company, is entitled to sell such shares
under Rule 144(k) without regard to the requirements described above.
Until the existing stockholders of the Company have held the Restricted
Shares for two years, no sale of Restricted Shares will be permitted under Rule
144. The Company is unable to estimate the number of shares that may be sold
under Rule 144 after the two-year minimum holding period has elapsed, since this
will depend on the market price for the Common Stock, the personal circumstances
of the sellers and other factors. Additionally, Laidlaw & Co. has the right
under its warrant to purchase 25,000 shares of Common Stock, at any time during
the exercise period thereof, to require the Company to file and keep effective
for so long as may be reasonably necessary for Laidlaw & Co. to dispose of such
shares, a registration statement covering such shares.
Subject to an agreement with the Underwriters, the Company may file a
registration statement under the Securities Act to register Common Stock to be
issued to employees pursuant to the Stock Option Plan. See "Underwriting."
Such registration statement may be filed at any time after the date of this
Prospectus and would become effective immediately upon filing. Shares issued
pursuant to the Stock Option Plan after the effective date of any registration
statement covering such shares generally will be available for sale in the open
market. As of the date of this Prospectus, no options to purchase shares of
Common Stock have been granted under the Stock Option Plan. See "Management --
Stock Option Plan."
A-2
<PAGE>
[ALTERNATE PAGE]
The following table summarizes all shares eligible for future sale as of
the date of this Prospectus assuming, conversion of the PP Notes on the date
hereof, conversion of the Convertible Notes (assuming 90% of the limited
partners of ICGP and 85% of the limited partners of GCGP accept the Offer to
Purchase and elect to receive 55% (ICGP) and 65% (GCGP) Convertible Notes) and
exercise all of warrants, whether vested or unvested. This table does not
reflect any options eligible for issuance under the Stock Option Plan.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENTAGE OWNERSHIP
<S> <C> <C>
Charles D. Tourtellotte 1,120,000 29.7%
J.D. Finley 80,500 2.1%
Ernie Banks 12,513 0.3%
Jack F. Lasday 20,271 0.5%
Preferred Stockholders 244,750 6.5%
Preferred Stock Placement Agent 9,292 0.3%
Laidlaw & Co. 25,000 0.7%
PP Notes 553,571 14.7%
Convertible Notes 502,500 13.3%
--------- -----
Shares publicly held 1,200,000 31.9%
--------- -----
Total 3,775,147 100.0%
--------- -----
--------- -----
</TABLE>
Prior to the initial public offering, there has been no public market for
any of the Company's securities, including the Common Stock, and no predictions
can be made as to the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. There can be no assurance that a regular trading market will
develop in the Common Stock.
A-3
<PAGE>
[ALTERNATE PAGE]
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 1,200,000 shares of Common Stock by the Company and up to 180,000
additional shares of Common Stock to cover over-allotment, if any.
A-4
<PAGE>
[ALTERNATE PAGE]
THE OFFERING
Common Stock Offered 553,571 shares. See "Converting Shareholders."
Common Stock Outstanding 3,592,647 shares(1)
Risk Factors The Common Stock offered hereby involves a high
degree of risk. See "Risk Factors."
Boston Stock Exchange Symbol
Nasdaq SmallCap Market ["MGLF"]
Symbol ["MGO"]
- ------------------
(1) Does not include (i) 157,500 shares issuable upon conversion of the
warrants issued in connection with the acquisition of the limited partnership
interests in ICGP, (ii) the 25,000 shares issuable upon conversion of the
warrant issued to Laidlaw Equities, Inc. for its services as placement agent
for the Company's private placement (the "Private Placement") of 12%
Convertible Subordinated Notes due 1997 (the "PP Notes") completed May 30,
1996, (iii) 250,000 shares of Common Stock available for future grant under
the Company's Stock Option Plan or (iv) the exercise of the Underwriter's
Over-allotment Option. See "Management -- Stock Option Plan."
A-5
<PAGE>
[ALTERNATE PAGE]
CONVERTING SHAREHOLDERS
The Converting Shareholders may, from time to time hereafter, resell any or
all of the Converting Shareholders' Common Stock to the public. All of such
stock is being registered hereby. As a result, up to 553,571 shares of
Converting Shareholders' Common Stock may be offered for resale.
The Company will not receive any of the proceeds from the sale of such
Common Stock. There are no material relationships between any of the Converting
Shareholders and the Company or any of its predecessors or affiliates, nor have
any such material relationships existed within the past three years.
A-6
<PAGE>
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
The sale of the Common Stock by the Converting Shareholders may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Converting Shareholders) in the over-the-counter market
or in negotiated transactions, through the writing of options on the securities,
a combination of such methods of sale or otherwise. Sales may be made at fixed
prices which may be changed, at market prices prevailing at the time of sale, or
at negotiated prices.
The Converting Shareholders may effect such transactions by selling their
Common Stock directly to purchasers, through broker-dealers acting as agents for
the Converting Shareholders or to broker-dealers who may purchase Common Stock
as principals and thereafter sell the Common Stock from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such broker-
dealers, if any, may receive compensation in the form of discounts, concessions
or commission from the Converting Shareholders or the purchasers for whom such
broker-dealers may act as agents or to whom they may sell as principals or
otherwise (which compensation as to a particular broker-dealer may exceed
customary commissions).
Each Converting Shareholder has agreed not to sell, transfer, or otherwise
dispose publicly by the Converting Shareholders' Common Stock for a period of
180 days after the date of the consummation of the Company's initial public
offering.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Converting Shareholders' Common Stock may not
simultaneously engage in market making activities with respect to any securities
of the Company for a period of at least two (and possibly nine) business days
prior to the commencement of such distribution. Accordingly, in the event that
Laidlaw Equities, Inc. or Cruttenden Roth Incorporated, the Underwriters of the
Company's initial public offering, are engaged in a distribution of the
Converting Shareholders' Common Stock it will not be able to make a market in
the Company's Common Stock during the applicable restrictive period. However,
the Underwriters have not agreed to nor are they obliged to act as broker-dealer
in the sale of the Converting Shareholders' Common Stock. The Converting
Shareholders may be required, and in the event the Underwriters are a market
maker, will likely be required to sell, such Common Stock through another
broker-dealer. In addition, each Converting Shareholder desiring to sell Common
Stock will be subject to the applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules 10b-6 and
10b-7, which provisions may limit the timing of the purchases and sales of the
Company's Common Stock by such Converting Shareholders.
The Converting Shareholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
<PAGE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
[ALTERNATE PAGE]
NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
______________
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY ........................................
RISK FACTORS ..............................................
DIVIDEND POLICY ...........................................
CAPITALIZATION ............................................
SELECTED CONSOLIDATED FINANCIAL DATA ......................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ...............................................
BUSINESS ..................................................
MANAGEMENT ................................................
PARTNERSHIP ACQUISITION ...................................
CERTAIN TRANSACTIONS ......................................
CONCURRENT PUBLIC OFFERING ................................
PRINCIPAL STOCKHOLDERS ....................................
CONVERTING SHAREHOLDERS ...................................
DESCRIPTION OF CAPITAL STOCK ..............................
SHARES ELIGIBLE FOR FUTURE SALE ...........................
PLAN OF DISTRIBUTION ......................................
LEGAL MATTERS .............................................
EXPERTS ...................................................
ADDITIONAL INFORMATION ....................................
______________
UNTIL _______________, 19____ (25 DAYS AFTER THE DATE HEREOF), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER.
______________
553,571 SHARES
COMMON STOCK
___________________
P R O S P E C T U S
___________________
___________, 1996
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The amount of expenses in connection with the issuance and distribution of
the Common Stock registered hereby are set forth in the following table. All
the amounts shown are estimates, except the SEC registration fee and the NASD
filing fee.
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . $5,334.00
NASD Filing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,604.00
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . *
Printing and Engraving Costs . . . . . . . . . . . . . . . . . . . . *
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . *
Stock Exchange Fees . . . . . . . . . . . . . . . . . . . . . . . . *
Transfer Agent and Registrar Fees. . . . . . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . *
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
---------
---------
_______________
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Article 109 of the Colorado Business Corporation Act authorizes the
Registrant to indemnify its directors and officers under specified
circumstances. The Bylaws of the Registrant provide that the Registrant shall,
subject to approval by a majority of its directors, indemnify, to the extent
permitted by Colorado law, its directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three year period prior to the filing of this Registration
Statement, the Registrant has sold the following unregistered securities:
PREFERRED STOCK UNITS
Between July 29, 1994 and August 28, 1996, the Registrant sold 45,500
Units; each Unit consists of one share of its Redeemable Preferred Stock and
warrants to purchase 5.5 shares of its Common Stock at an exercise price of
$1.45 per share. The Units were sold for cash at $25 per unit, resulting in
gross proceeds to the issuer of $1,137,500. Rodman & Renshaw, Inc. acted as
placement agent for the offering of Units and received cash compensation equal
to 9% of the gross proceeds raised in the offering ($101,250). In addition,
Rodman & Renshaw, Inc. received warrants to purchase 17,050 shares of Common
Stock at an exercise price of $1.45 per share. None of the warrants have been
exercised as of the date of this Registration Statement.
CONVERTIBLE NOTES
Between May 20, 1996 and May 30, 1996 the Registrant sold $2,025,000
aggregate principal amount of its 12% Convertible Subordinated Notes Due 1997
II-1
<PAGE>
(the "Convertible Notes"). The Convertible Notes were sold for 100% of their
principal amount, resulting in gross proceeds to the issuer of $2,025,000.
Laidlaw Equities, Inc. acted as placement agent for the Convertible Notes and
received cash compensation equal to 10% of the gross proceeds raised in the
offering ($202,500). In addition, Laidlaw Equities, Inc. purchased for $100
warrants to purchase 25,000 share of Common Stock at an exercise price equal to
120% of the price to public in the offering of the Common Stock registered
hereby. None of the warrants have been exercised as of the date of this
Registration Statement.
OFFICERS' AND DIRECTORS' WARRANTS
In 1995, the Registrant issued warrants to purchase 12,513 shares of Common
Stock at an exercise price of $1.45 per share to each of its two non-management
directors, Ernie Banks and Jack F. Lasday. These warrants were issued as
compensation for serving as directors. The Registrant does not otherwise
compensate its directors except for their reasonable expenses in attending
meetings of the board of directors. None of the warrants has been exercised as
of the date of this Registration Statement.
As compensation for their services in 1995, the Registrant issued warrants
to purchase 75,000 shares of Common Stock at an exercise price of $1.45 per
share to each of Charles D. Tourtellotte, its President, and J.D. Finley, its
Executive Vice President and Chief Financial Officer. None of the warrants has
been exercised as of the date of this Registration Statement.
EXEMPTION FROM REGISTRATION CLAIMED
The Units and Convertible Notes described above were issued pursuant to
Section 4(2) of the Securities Act of 1933 and in reliance on Rules 505 and 506
of Regulation D under the Securities Act of 1933. The Units and the Convertible
Notes were offered and sold in separate private offerings not involving any form
of general solicitation and only to persons that the Company reasonably believed
to be "accredited investors" as contemplated by Regulation D or to fewer than 35
persons that the Company had reason to believe were not "accredited investors"
but that the Company reasonably believed satisfied the conditions set forth in
Rule 506(b)(ii), and in each case who made appropriate investment
representations in their purchase agreements. The Officers' and Directors'
warrants were issued as compensation for services and were not offered to any
other person.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES
(a) Exhibits
1 Form of Underwriting Agreement*
3.1 Articles of Incorporation, as amended, incorporated herein by reference
from the Registrant's Offering Statement on Form 1-A (File No. 24D-3840)
with June 3, 1996 amendment filed herewith.**
3.2 Bylaws, incorporated herein by reference from the Registrant's Offering
Statement on Form 1-A (File No. 24D-3840)
4 Specimen Common Stock Certificate of MetroGolf Incorporated*
II-2
<PAGE>
4.2 Form of Note Purchase Agreement dated May 8, 1996 between The
Vintage Group USA, Ltd. and the Purchasers of its 12% Convertible
Subordinated Notes due 1997 (the PP Notes).**
5.1 Opinion of Brownstein Hyatt Farber & Strickland, P.C.*
10.1 Employment Agreement between the Company and Charles D.
Tourtellotte effective as of January 1, 1996**
10.2 Employment Agreement between the Company and J.D. Finley effective
as of January 1, 1996**
10.3 Employment Agreement between the Company and James K. Dignan effective
as of July 1, 1996**
10.4(a) Form of outstanding Warrant Certificates, incorporated herein by
reference from the Registrant's Offering Statement on Form 1-A
(File No. 24D-3840)
10.4(b) Warrant Agreement, incorporated herein by reference from the
Registrant's Offering Statement on Form 1-A (File No. 24D-3840)
10.7 Agreement of Limited Partnership of Illinois Center Golf Partners
L.P., incorporated herein by reference from the Registrant's
Offering Statement on Form 1-A (File No. 24D-3840)
10.8 Ground Sublease and Sublicense Agreement for Illinois Center Golf
Facilities between Illinois Center Golf Partners L.P. and Illinois
Center Plaza Venture, as amended, incorporated herein by reference
from the Registrant's Offering Statement on Form 1-A (File No.
24D-3840)
10.9 Agreement of Limited Partnership of Goose Creek Golf Partners
Limited Partnership, incorporated herein by reference from the
Registrant's Offering Statement on Form 1-A (File No. 24D-3840)
10.10 Credit Line Deed of Trust for the benefit of Textron Financial
Corporation, incorporated herein by reference from the Registrant's
Offering Statement on Form 1-A (File No. 24D-3840)
10.11 Port Authority Letter Agreement, incorporated herein by reference from
the Registrant's Offering Statement on Form 1-A (File No. 24D-3840)
10.12 Operating Agreement of Vintage New York Golf L.L.C., incorporated
herein by reference from the Registrant's Offering Statement on
Form 1-A (File No. 24D-3840)
10.13 Agreement of Purchase and Sale between Robert Selleck and Fremont Golf
Partnership and The Vintage Group USA Ltd. dated as of March 19, 1996**
10.14 Letter of Intent relating to Harborside Golf Center from The Vintage
Group USA Ltd. to Shapery Enterprises dated March 18, 1996**
10.15 Management Agreement between Vintage Golf Management, Inc. and
Illinois Center Golf, incorporated herein by reference from the
Registrant's Offering Statement on Form 1-A (File No. 24D-3840)
II-3
<PAGE>
10.16 Settlement Agreement relating to 15% interest in Illinois Center Golf
and Goose Creek, incorporated herein by reference from the
Registrant's Offering Statement on Form 1-A (File No. 24D-3840)
10.17 Company's 1996 Stock Option and Stock Bonus Plan**
11 Statement re Computation of per share Earnings**
21 Subsidiaries of the Registrant**
23.1 Consent of BDO Seidman, LLP**
23.1 Consent of Brownstein Hyatt Farber & Strickland, P.C. (included in
their opinion filed as Exhibit 5.1)*
24 Power of Attorney (appears on the signature page of this
Registration Statement)
27.1 Financial Data Schedule**
(b) Financial Statement Schedules**
(i) MetroGolf Incorporated and Subsidiaries
Report of Independent Certified Public Accountants
Schedule II - Valuation and Qualifying Accounts
__________
* To be filed by amendment.
** Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
II-4
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant tot he foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defence of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such case.
The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 4214(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on June 14,
1996.
METROGOLF INCORPORATED
By: /s/ Charles D. Tourtellotte
------------------------------
Charles D. Tourtellotte,
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles D. Tourtellotte and J. D. Finley, or any
one of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Act, this Registration Statement has
been signed on June 14, 1996 by the following persons in the capacities
indicated.
/s/ Charles D. Tourtellotte
------------------------------
Charles D. Tourtellotte,
President and Director
(principal executive officer)
/s/ J.D. Finley
------------------------------
J.D. Finley, Vice President
and Chief Financial Officer
principal financial and
accounting officer)
/s/ Ernie Banks
------------------------------
Ernie Banks, Director
/s/ Jack F. Lasday
------------------------------
Jack F. Lasday, Director
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is THE VINTAGE GROUP USA, LTD.
SECOND: The following amendment to the Articles of Incorporation was
adopted on the third day of June, 1996, as prescribed by the Colorado
Business Corporation Act, by a vote of the Shareholders. The number of Shares
voted for the amendment was sufficient for approval. Article I is hereby
deleted in its entirety and the following Article I is inserted:
"ARTICLE I
The name of the Corporation is METROGOLF INCORPORATED."
THIRD: The amendment does not effect any exchange, reclassification, or
cancellation of issued shares.
IN WITNESS WHEREOF, the undersigned, CHARLES D. TOURTELLOTTE, as President
of the Corporation, has executed these Articles of Amendment to the Articles
of Incorporation on the third day of June, 1996.
THE VINTAGE GROUP USA, LTD.
A Colorado Corporation
By /s/ Charles D. Tourtellotte
----------------------------
CHARLES D. TOURTELLOTTE
President
<PAGE>
EXHIBIT 4.2
THE VINTAGE GROUP USA, LTD.
12% CONVERTIBLE SUBORDINATED NOTES DUE 1997
NOTE PURCHASE AGREEMENT
May 8, 1996
TO EACH OF THE INVESTORS LISTED
ON A COUNTERPART OF THE
SIGNATURE PAGE HEREOF:
Ladies and Gentlemen:
The Vintage Group USA, Ltd., a Colorado corporation (the
"Company"), agrees with each of you as follows:
1. OFFERING OF NOTES. The Company agrees to issue and sell to
each of the Investors (as defined below) listed on a counterpart of the
signature page hereof an aggregate of up to $1,750,000 principal amount of
12% Convertible Subordinated Notes due 1997 (the "Notes") in accordance with
the terms hereof. The Company shall authorize the issue and sale of the Notes
to the Investors in a minimum aggregate principal amount of $800,000 and a
maximum aggregate principal amount of $1,750,000. Each of the Notes shall be
dated the date of issue and bear interest from such date at the rate of 12%
per annum, calculated on the basis of actual days elapsed, divided by 360,
payable semi-annually on the 1st day of each of June and December in each
year (commencing December 1, 1996) and at maturity and shall bear interest on
the overdue principal, if any, and (to the extent legally enforceable) on any
overdue installment of interest at the rate of 18% per annum after the date
due, whether by acceleration or otherwise, until paid. Each Note shall mature
on June 1, 1997. Each Note shall be substantially in the form attached
hereto as Exhibit A. The Notes shall be subject to the further terms and
conditions set forth in this Note Purchase Agreement (the "Note Agreement").
2. DEFINITIONS. In addition to other capitalized terms defined
elsewhere in this Note Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate" shall mean any person (other than a Subsidiary) (a)
that, directly or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, the Company, (b) that
beneficially owns or holds 5% or more of any class of the Common Stock of the
Company, or (c) 5% or more of the Common Stock (or,
<PAGE>
in the case of a person that is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act") becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of more than 35 % of the total voting
stock of the Company on a fully diluted basis; or (ii) individuals who, at
the beginning of any period of two consecutive calendar years, constituted
the Board of Directors (together with any new directors whose election by the
Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the members of
the Board of Directors then still in office who either were members of the
Board of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of such Board of Directors then in
office.
"Common Stock" shall mean the common stock, no par value, of the
Company.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default, as defined in Section 8 hereof.
"Initial Public Offering" shall mean the first underwritten public
offering of Common Stock made pursuant to a registration statement filed by
the Company with, and declared effective by, the Securities and Exchange
Commission in accordance with the Securities Act.
"Investor Representative" shall mean the representative of the
Investors appointed by the Placement Agent at the request of the Investors,
which Investor Representative must be reasonably acceptable to the Company.
In the event that the Investor Representative is not reasonably acceptable to
the Company, the Investor Representative shall be the Placement Agent.
"IPO Price" shall mean the price per share of Common Stock at which
the Common Stock is offered pursuant to an Initial Public Offering.
"Market Price of the Common Stock" shall mean (i) if the Common
Stock is listed on the New York Stock Exchange, the American Stock Exchange
or another securities exchange designated by the Company's Board of
Directors, or if the Common Stock is quoted on a National Association of
Securities Dealers, Inc. system that reports closing prices, the average
closing price of the Common Stock as reported by THE WALL STREET JOURNAL for
the previous five trading days from the date the price is to be determined,
or, if no such price is reported for any of such days, then the average
closing price of the Common Stock calculated as of the last immediately
preceding five trading days on which the closing price is so reported; or
(ii) if the Common Stock is not so listed or admitted to unlisted trading
privileges or so
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<PAGE>
quoted, the average of the last reported highest bid and lowest asked prices
for the previous five trading days as quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System; or (iii) if the Common
Stock is not so listed or admitted to unlisted trading privileges or so
quoted, and bid and asked prices are not reported, such price as is
determined in a reasonable manner by the Board of Directors.
"Placement Agent" shall mean Laidlaw Equities, Inc., as placement
agent for the Notes offered pursuant to the Placement Memorandum.
"Placement Memorandum" shall mean the Private Placement Memorandum,
dated May 8, 1996, of the Company, pursuant to which the Notes have been
offered to accredited investors, including exhibits and appendices thereto,
as the same may be amended or supplemented from time to time.
"Purchaser" shall mean a single purchaser of a Note. "Purchasers"
shall mean the several purchasers of the Notes.
"Senior Indebtedness" shall mean the principal of, and interest on,
(i) all current indebtedness of the Company; (ii) all indebtedness of the
Company, evidenced by a note, guarantee or similar instrument given in
connection with the acquisition of any business, property or assets of any
kind, provided that the principal amount of such indebtedness shall not
exceed 80% of the value of such business, properties or assets; (iii)
obligations created, incurred or assumed by the Company as lessee under
leases required to be capitalized on the balance sheet of the Company under
generally accepted accounting principles, and leases of property or assets
made as part of any sale and leaseback transaction to which the Company is a
party; (iv) amounts owed for goods or materials purchased, or services
utilized, in the ordinary course of business of the Company and (v)
amendments, renewals, extensions, modifications (other than modifications
that increase the principal amount) and refundings of any indebtedness or
obligation described in (i), (ii), (iii) or (iv), whether such indebtedness
or obligation described in (i), (ii), (iii) or (iv) is outstanding on the
date of issuance of the Notes or is thereafter created, incurred or assumed,
unless, with respect to any of the foregoing, the instrument creating or
evidencing any such indebtedness or obligation states that such indebtedness
or obligation is neither senior to nor PARI PASSU with the Notes in right of
payment. Notwithstanding the foregoing, (A) until the closing of an Initial
Public Offering, "Senior Indebtedness" shall not be deemed to include
indebtedness to Affiliates of the Company or amounts owed as compensation to
employees; and (B) on and after the closing of an Initial Public Offering,
"Senior Indebtedness" shall mean the principal of, and interest on, all
indebtedness of the Company that is not expressly subordinated to the Notes.
"Subscription Agreement" shall mean the Subscription Agreement of
an Investor for Notes whose subscription is accepted by the Company and the
Placement Agent as described therein and in the Placement Memorandum.
-3-
<PAGE>
"Subsidiary" shall mean, as to the Company, any corporation of
which more than 50% (by number of votes) of the voting stock shall be
beneficially owned, directly or indirectly, by the Company or a another
Subsidiary of the Company or any other person or entity (other than a
corporation) in which the Company or a Subsidiary of the Company directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest.
3. PREPAYMENT.
(a) OPTIONAL PREPAYMENT. Upon fifteen days' prior written
notice to an Investor, the Company may prepay in cash all or any part of the
principal amount of such Investor's Note, together with accrued and unpaid
interest thereon, but without payment of any penalty or premium, at any time
or from time to time, commencing 180 days after the date a registration
statement for an Initial Public Offering has been declared effective by the
Securities and Exchange Commission, PROVIDED that the Market Price of the
Common Stock (determined for purposes of this Section 3(a) during a period of
20 consecutive trading days prior to the date of delivery of the notice from
the Company to the Investor) is equal to or greater than the IPO Price.
Notwithstanding the foregoing, an Investor shall have the right to convert
such Investor's Note in accordance with Section 6 hereof during the 15-day
notice period. Any partial prepayment made by the Company pursuant to this
Section 3(a) shall be applied first to the payment of accrued interest and
then to the unpaid principal installments in the inverse order of maturity.
(b) MANDATORY PREPAYMENT. If an Investor has so elected in
such Investor's Subscription Agreement, the Company shall be required to
prepay in cash fifty percent (50%) of the principal amount of such Investor's
Note, together with accrued and unpaid interest on such portion of the
principal amount, from the proceeds of an Initial Public Offering, if such
Initial Public Offering is consummated.
4. SUBORDINATION. The indebtedness evidenced by the Notes is and
shall remain subordinate in right of payment to all Senior Indebtedness to
the extent and in the manner hereinafter set forth. The subordination
provisions contained in this Section 4 are expressly and only for the benefit
of third-party senior creditors of the Company and shall in no way limit the
rights or remedies of an Investor against the Company, including, without
limitation, the time at which or the method with which an Investor may
proceed against the Company for any default.
No payment of principal of or interest on the Notes shall be made
(i) if the Company is in default, or such payment would result in a default,
with respect to the payment of moneys on any Senior Indebtedness, or (ii)
such payment would result in a default (as defined pursuant to the terms of
such Senior Indebtedness) other than a default with respect to the payment of
moneys on any Senior Indebtedness. For purposes of this paragraph, default
with respect to payment of any Senior Indebtedness shall refer to failure of
the Company to pay in full when due the principal of or interest or premium
on any such Senior
-4-
<PAGE>
Indebtedness, or any portion thereof, according to its terms. Upon any
distribution of assets of the Company, upon dissolution, winding up,
liquidation or reorganization of the Company, whether in bankruptcy,
insolvency or receivership proceedings, or upon an assignment for the benefit
of creditors, or any other marshalling of the assets and liabilities of the
Company, or otherwise, Senior Indebtedness shall first be paid in full, or
provision made for such payment in cash, before any payment is made on
account of the principal of and interest on the Notes. In such events, upon
payment in full of all Senior Indebtedness, Investors shall be subrogated
ratably to all rights of such Senior Indebtedness to receive payments or
distributions of the assets of the Company applicable to such Senior
Indebtedness until the principal of and interest on the Notes shall be paid
in full.
Notwithstanding the foregoing, payment of principal and interest on
the Notes shall not be subordinated to the prior payment of such Senior
Indebtedness as to all amounts which actually are paid by the Company under
this Note Agreement if the Company is not in default under any or all of said
Senior Indebtedness at the time or times such payment or payments are made.
5. GRANT OF SECURITY INTEREST. To secure the prompt and full
payment of all principal and interest payments owing to the Investors
pursuant to the Notes, the Company hereby grants PRO RATA to the Investors a
security interest in (i) all goods, equipment, inventory or other assets
purchased with the proceeds of the sale of the Notes, subject in each case to
any purchase money security interest therein or other security interest
granted by the Company to a third party in connection with the financing of
such purchase; (ii) a security interest in all goods, equipment, inventory,
accounts receivable and other assets of the Company that are unencumbered as
permitted by the terms of any current or future indebtedness of the Company;
and (iii) all proceeds therefrom. Such security interest is expressly
subordinate to any security interest subsequently granted by the Company to a
bank, financial institution or other third-party lender. The Company shall
prepare and file, at its expense, any financing statements or continuation
statements as may be required from time to time to perfect or continue
Investors' security interest in such assets.
6. CONVERSION RIGHTS. The Notes shall be convertible, in whole
or in part, into fully paid and nonassessable shares of Common Stock, at the
option of an Investor, upon the following terms:
(a) An Investor may exercise its right of conversion at any
time prior to the full payment by the Company of the principal balance of the
Note upon the earlier of (i) the closing of an Initial Public Offering, or
(ii) 180 days after the latest issuance date of the Notes.
(b) The Company shall not be required to issue any fraction
of a share of Common Stock or scrip representing a fraction of a share of
Common Stock upon any conversion of this Note Agreement. The Company may
make a cash adjustment in lieu of any such fraction of a share which
otherwise would be issuable upon such conversion.
-5-
<PAGE>
(c) The "Conversion Price" at which the Notes may be
converted shall be at the rate of such number of shares of Common Stock as
shall equal (i) the principal of the Note being converted, plus accrued and
unpaid interest thereon, divided by (ii) (A) if conversion occurs
simultaneously with the closing of an Initial Public Offering, an amount
equal to fifty percent (50%) of the IPO Price, or (B) if conversion occurs
subsequent to the closing of an Initial Public Offering, an amount equal to
fifty percent (50%) of the Market Price of the Common Stock.
(d) The Conversion Price shall be subject to adjustment from
time to time as hereinafter provided in this subparagraph 6(d).
(i) If any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of the
Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for such Common Stock,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, each Investor shall have the right
to purchase and receive upon the basis and upon the terms and
conditions specified in this Note Agreement and in lieu of the
shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, other securities or
assets as would have been issued or delivered to such Investor if
such Investor had exercised the conversion rights set forth in
this Section 6 and had received such shares of Common Stock prior
to such reorganization, reclassification, consolidation, merger
or sale. The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to
the Investor at the last address of such Investor appearing on
the books of the Company, the obligation to deliver to such
Investor such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Investor may be
entitled to purchase.
(ii) If the Company takes any other action,
or if any other event occurs, which does not come within
the scope of the provisions of subparagraph 6(d)(i), but which
should result in an adjustment in the conversion price and/or the
number of shares subject to the conversion rights of the Notes in
order to fairly protect the conversion rights of the Investors,
an appropriate adjustment in such conversion rights shall be made
by the Company, but no adjustment
-6-
<PAGE>
shall be required upon the issuance of any capital stock of
the Company for the "Fair Market Value," which shall mean (i)
if the capital stock is listed on the New York Stock Exchange,
the American Stock Exchange or another securities exchange
designated by the Company's Board of Directors, or if the
capital stock is quoted on a National Association of
Securities Dealers, Inc. system that reports closing prices,
the average closing price of the capital stock as reported by
THE WALL STREET JOURNAL for the previous five trading days
from the date the price is to be determined, or, if no such
price is reported for any of such days, then the average
closing price of the capital stock calculated as of the last
immediately preceding five trading days on which the closing
price is so reported; or (ii) if the capital stock is not so
listed or admitted to unlisted trading privileges or so
quoted, the average of the last reported highest bid and
lowest asked prices for the previous five trading days as
quoted on the National Association of Securities Dealers, Inc.
Automated Quotation System; or (iii) if the capital stock is
not so listed or admitted to unlisted trading privileges or so
quoted, and bid and asked prices are not reported, such price
as is determined by the Board of Directors, acting in its
reasonable discretion after consultation with the Placement
Agent, to be the fair market value of such capital stock.
(e) To convert a Note into shares of Common Stock,
an Investor shall (i) surrender such Note at the principal office of the
Company, duly endorsed in blank, and (ii) give written notice to the Company
that it elects to convert all, or any part of such Note, which notice shall
specify the portion hereof to be converted. As promptly as possible
thereafter, the Company shall issue and deliver to such Investor certificates
representing the number of its shares of Common Stock into which such
Investor's Note has been converted. Thereupon, such Note, or the portion
thereof converted, shall be deemed to have been satisfied and discharged, and
the shares of Common Stock into which such Note shall be so converted shall
be fully paid and nonassessable shares. In the event the Note has not been
converted in full, the Company shall issue and deliver to the converting
Investor a new note identical to the one surrendered, except that it shall be
in the reduced principal amount giving effect to the partial conversion.
(f) As a condition to the conversion by an Investor
of a Note into shares of Common Stock, such Investor shall agree not to
effect any sale or distribution of the Common Stock during the seven days
prior to and the 180-day period beginning on the closing of the Initial
Public Offering, unless the underwriters managing the Initial Public Offering
otherwise agree in writing.
7. COVENANTS OF THE COMPANY. So long as any amount is
owing to Investors pursuant to the Notes or this Note Agreement, the Company
covenants and agrees with the Investors as follows:
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<PAGE>
(a) NATURE OF BUSINESS. The Company shall not
engage in any business if, as a result, the general nature of the business
that would then be engaged in by the Company would be substantially changed
from the general nature of the business engaged in by the Company as
described in the Placement Memorandum.
(b) RESTRICTED PAYMENTS. Until the completion of an
Initial Public Offering, the Company shall not, except as expressly approved
in writing by the Investor Representative:
(i) declare or pay any dividends on Common
Stock;
(ii) directly or indirectly purchase, redeem or
retire any shares of Common Stock or any warrants or options
to purchase Common Stock; or
(iii) make any other payments or
distributions, either directly or indirectly or through any
Subsidiary of the Company, in respect to the Common Stock.
(c) INVESTMENTS. Until the completion of an
Initial Public Offering, without the prior consent of the Investor
Representative, the Company shall not make any investments other than as
described in the "Use of Proceeds" section of the Placement Memorandum or
other than:
(i) investments by the Company in and to its
subsidiaries, including any investment in a corporation
which, after giving effect to such investment, shall become
a Subsidiary of the Company;
(ii) investments in commercial paper maturing in
270 days or less from the date of issuance which, at the
time of acquisition by the Company or a Subsidiary of the
Company, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Service. Inc., or other
nationally recognized credit rating agency of similar
standing;
(iii) investments in direct obligations of the
United States of America or any agency or instrumentality of
the United States or America, the payment or guarantee of
which constitutes a full faith and credit obligation of the
United States of America, in either case, maturing in 12
months or less from the date of acquisition thereof; and
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(iv) investments in certificates of deposit,
maturing within one year from the date of issuance thereof,
issued by a bank or trust company organized under the laws
of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least
$100,000,000 and whose long-term certificates of deposit
are, at the time of acquisition thereof by the Company or a
Subsidiary rated "AA" or better by Standard & Poor's
Corporation or "Aa" or better by Moody's Investors Service,
Inc.
(d) CHANGE OF CONTROL; MERGERS, CONSOLIDATIONS.
Except with respect to an Initial Public Offering and the Company's
acquisition of the limited partnership interests in Illinois Center Golf
Partners L.P., an Illinois limited partnership, Goose Creek Golf Partners
Limited Partnership, a Virginia limited partnership ("Goose Creek Limited
Partnership") and certain outstanding indebtedness of the Goose Creek Limited
Partnership, the Company shall not (i) cause or allow a Change of Control;
(ii) consolidate with, or be a party to a merger, with any other corporation,
or (iii) sell, lease or otherwise dispose of any assets of the Company other
than in the ordinary course of the business of the Company.
(e) SALES OF ASSETS. Without the consent of the
Investor Representative, the Company shall not permit any Subsidiary of the
Company to issue or sell any shares of capital stock of any class (including
as "capital stock" for the purposes of this covenant, any warrants, rights or
options to purchase or otherwise acquire capital stock or other securities
exchangeable for or convertible into capital stock) of such Subsidiary of the
Company to any person other than the Company or a wholly owned Subsidiary of
the Company, except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the simultaneous issuance
of stock to the Company or a Subsidiary of the Company whereby the Company or
such Subsidiary maintains its same proportionate interest in such Subsidiary.
(f) GUARANTIES. Without the consent of the
Investor Representative, the Company shall not, and shall not permit any
Subsidiary to, become or be liable in respect of any guaranty, except
guaranties of the Company or any Subsidiary entered into in the ordinary
course of business.
(g) TRANSACTIONS WITH AFFILIATES. Without the
consent of the Investor Representative, the Company shall not enter into or
be a party to any transaction or arrangement with any Affiliate (including,
without limitation, the purchase from, sale to or exchange of property with,
or the rendering of any service by or for, any Affiliate), except in the
ordinary course of and pursuant to the reasonable requirements of the
Company's business and upon fair and reasonable terms no less favorable to
the Company
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than would be obtained in a comparable arm's-length transaction with a person
other than an Affiliate.
(h) EMPLOYMENT AGREEMENTS. Until the consummation
of an Initial Public Offering, the Company shall not, without the prior
consent of the Investor Representative, (i) enter into any employment,
management, consulting or benefit program of any type, other than the
existing employment agreements with Charles D. Tourtellotte, J.D. Finley and
James K. Dignan; (ii) grant any option under the Company's stock option plan;
or (iii) amend any such employment agreement or the Company's stock option
plan for the benefit of the management of the Company.
(i) FINANCIAL STATEMENTS, REPORTS AND RIGHTS OF
INSPECTION. The Company shall keep proper books of record and account in
which full and correct entries shall be made of all dealings or transactions
of, or in relation to, the business and affairs of the Company, in accordance
with generally accepted accounting principles ("GAAP") consistently applied
(except for changes disclosed in the financial statements furnished to the
Investor Representative pursuant to this covenant and concurred in by the
Company's independent public accountants), and shall furnish to the Investor
Representative:
(i) QUARTERLY STATEMENTS. As soon as available,
and in any event within 45 days after the end of each quarterly
fiscal period (except the last such quarterly period) of each
fiscal year, copies of:
(A) a balance sheet of the Company as of the close
of such quarterly fiscal period, and, beginning with the
quarterly fiscal period ending on June 30, 1996, setting
forth in comparative form the projected budget figures for
such quarterly period and the figures for the fiscal year
then most recently ended; and
(B) a statement of income of the Company for such
quarterly fiscal period and for the portion of the fiscal
year ending with such quarterly fiscal period. in each case
setting forth in comparative form the projected budget
figures for such periods and the figures for the
corresponding periods of the preceding fiscal year.
(ii) ANNUAL STATEMENTS. As soon as available and
in any event within 90 days after the close of each fiscal year
of the Company, copies of the balance sheets of the Company as of
the close of such fiscal year, and statements of income and
retained earnings of the Company for such fiscal year, in each
case setting forth in comparative form the projected budget
figures for such periods and the figures for the
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preceding fiscal year, all in reasonable detail and
accompanied by a report thereon of BDO Seidman (or another
independent public accounting firm which may be selected by
the Company and which is reasonably acceptable to the Investor
Representative) to the effect that the financial statements
present fairly, in all material respects, the financial
position of the Company as of the end of the fiscal year being
reported on and the results of the operations for said year in
conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has
been conducted in accordance with generally accepted auditing
procedures as such accountants deemed necessary in the
circumstances.
(iii) BUDGET AND PROJECTIONS. As soon as
practicable, and in any event prior to the commencement of each
new fiscal year, reasonably detailed statements showing a
projected balance sheet and income statement for the year end of
such new fiscal year.
(iv) AUDIT REPORTS. Promptly upon their becoming
available, one copy of each interim or special audit made by the
Company's independent accountants of the books of the Company.
(v) INCOME TAX RETURNS. As soon as practicable
after filing with the Internal Revenue Service, complete copies
of all federal income tax returns, excluding all schedules
thereto.
(vi) SEC AND OTHER REPORTS. Promptly upon receipt or delivery
thereof, one copy of (A) each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally; (B) each regular or
periodic report and any registration statement or prospectus filed by the
Company or any Subsidiary of the Company with any securities exchange or the
Securities and Exchange Commission or any successor agency; and (C) copies of
any orders in any proceedings to which the Company is a party issued by any
governmental agency, federal or state, having jurisdiction over the Company.
(vii) OFFICER'S CERTIFICATES. Within the
periods provided in subparagraphs (i) and (ii) above, a
certificate of the chief financial officer of the Company stating
that such officer has reviewed the provisions of this Note
Agreement and the Notes and setting forth whether there existed
as of the date of such financial statements and whether, to the
best of such officer's knowledge, there exists on the date of the
certificate or existed at any time during the period covered by
such financial statements, any Default or Event of Default and,
if any such condition or event exists on the date of the
certificate, specifying
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the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto.
(viii) ACCOUNTING MATERIALS. A copy of any
letters from independent accountants of the Company to the
Company's management assessing the internal controls, or
financial or accounting practices of the Company (commonly
referred to as a "management letter"), and a copy of any
correspondence from legal counsel to such accountants or to the
Company pursuant to the Statement of Financial Accounting
Standards No. 5.
(ix) REQUESTED INFORMATION. With reasonable
promptness, such other data and information as the Investor
Representative may reasonably request. Without limiting the
foregoing, upon reasonable notice, the Company shall permit the
Investor Representative (or such persons as the Investor
Representative may designate) to visit and inspect any of the
properties of the Company or any Subsidiary of the Company, to
examine all of their books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss
their respective affairs, finances and accounts with their
respective officers and independent public accountants (and by
this provision, the Company authorizes such accountants to
discuss with the Investor Representative the finances and affairs
of the Company), all upon reasonable prior notice to the Company
and to take place at such times during regular business hours and
as often as may be reasonably requested.
(j) MANAGEMENT; MANAGEMENT COMPENSATION. Until the
consummation of an Initial Public Offering, without the written approval of
the Investor Representative, the Company shall not increase annual management
compensation by more than 10% of the annual management compensation for the
preceding year, PROVIDED, that there shall be excluded from such calculation
any bonuses paid to management. The Company shall not pay any bonuses
without the prior approval of the Investor Representative.
8. EVENTS OF DEFAULT. Any one or more of the
following shall constitute an "Event of Default" as such term is used herein:
(a) Default in the payment of interest on the Notes
when the same shall have become due and such default shall have continued for
a period of 30 days; or
(b) Default in the making of any payment of the
principal of the Notes at the expressed or any accelerated maturity date or
at any date fixed for prepayment; or
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<PAGE>
(c) Default in the payment when due (whether by
lapse of time, declaration, call for redemption or otherwise) of the
principal of or interest on any indebtedness (other than the Notes) of the
Company or a Subsidiary of the Company in an amount in excess of $200,000,
with such default continuing beyond the period of grace, if any, allowed with
respect thereto; or
(d) Default in the observance or performance of any
covenant or agreement contained in the Notes, provided that no Event of
Default will occur if the default is cured by the Company no later than 30
days after the earlier of (i) the day on which the Company first obtains
knowledge of such default, or (ii) the day on which notice thereof is given
to the Company by the Investor Representative;
(e) The Company's diversion of the net proceeds of
the sale and issuance of the Notes, or a material portion thereof, to a use
other than as specified in the section entitled "Use of Proceeds" in the
Placement Memorandum without the Investor Representative's prior written
consent; or
(f) Final judgment or judgments for the payment of
money aggregating in excess of $200,000 is or are outstanding against the
Company or against any of its property or assets, and any one of such
judgments has remained unpaid, unvacated or unstayed by appeal or otherwise
for a period of 30 days from the date of its entry; or
(g) A custodian, liquidator, trustee or receiver is
appointed for the Company or for the major part of its property and is not
discharged within 30 days after such appointment; or
(h) The Company becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment for
the benefit of creditors, or the Company applies for or consents to the
appointment of a custodian, liquidator, trustee or receiver for the Company
or for the major part of its property; or
(i) Bankruptcy, reorganization, arrangement or
insolvency proceedings, or other proceedings for relief under any bankruptcy
or similar law or laws for the benefit of debtors. are instituted by or
against the Company or any Subsidiary of the Company and, if instituted
against the Company or any Subsidiary of the Company, are consented to or are
not dismissed within 60 days after such institution.
9. REMEDIES.
(a) NOTICE TO THE INVESTOR REPRESENTATIVE. When
any Default or Event of Default described in the foregoing Section 8 has
occurred, the Company shall give notice thereof to the Investor
Representative no later than 10 business days after the occurrence of such
Default or Event of Default.
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<PAGE>
(b) ACCELERATION OF MATURITIES. When an Event of
Default has occurred and is continuing, an Investor may, by notice to the
Company, declare the entire principal and all interest accrued on its Note to
be, and such Note shall thereupon become, forthwith due and payable, without
any presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived. Thereupon, the Company shall forthwith pay to
such Investor the entire principal and interest accrued on its Note. No
course of dealing on an Investor's part nor any delay or failure on its part
to exercise any right will operate as a waiver of such right or otherwise
prejudice Investor's rights, powers and remedies. The Company also shall, to
the extent permitted by law, pay to an Investor all costs and expenses
incurred by such Investor in the collection of its Note upon any default
hereunder, including compensation to such Investor's attorneys for all
services rendered in connection therewith.
(c) ENFORCEMENT OF REMEDIES; REALIZATION ON
SECURITY. Upon the occurrence of an Event of Default, the Investor
Representative shall have the power to enforce the rights of the Investors,
which may include marshalling the assets of the Company and realizing upon
the collateral security for the Notes. In the event that the Placement Agent
is appointed as Investor Representative, or in the event the Investor
Representative is unable or unwilling to perform such duty, not later than
ten days after the occurrence of an Event of Default, the Investment
Representative shall delegate the obligation to enforce the rights of the
Investors, which may include marshalling and realizing upon the collateral,
to a bank or other financial institution. As part of such delegation, the
Investment Representative, on behalf of the Investors, shall agree to provide
reasonable compensation to such bank or financial institution for performance
of such obligations. Notwithstanding anything herein to the contrary,
however, upon an Event of Default, nothing herein shall prevent an Investor
from acting independently of the other Investors in enforcing its remedies
under this Note Agreement or at law.
(d) ADDITIONAL RIGHT. If an Initial Public
Offering is not consummated for any reason prior to maturity of the Notes,
and the outstanding principal amount of the Notes, together with all accrued
and unpaid interest thereon, in not paid in full at such maturity date, the
Investor Representative shall have the right to appoint a director to the
Company's Board of Directors. Such appointee shall remain as a director
until the earlier of the closing of an Initial Public Offering or repayment
of all amounts outstanding on the Notes.
10. TRANSFER OF NOTE. By execution of this Note
Agreement, Investor agrees to give written notice to the Company before
transferring any Note or transferring any shares of the Common Stock issuable
or issued upon the exercise of such Note, describing briefly the manner of
any proposed transfer of the Note or Investor's intention as to the shares of
Common Stock issued upon the exercise thereof. Investor further agrees to
offer, sell or otherwise transfer such security, prior to the date which is
three after the later of the original issue date hereof and the last date on
which the Company or any Affiliate of the Company was the owner of this
security (or any
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<PAGE>
predecessor of such security), only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, or (c) pursuant to an available exemption from the registration
requirements of the Securities Act, subject to the Company's right prior to
any such offer, sale or transfer pursuant to this clause (c) to require the
delivery of an opinion of counsel, certification and/or other information
satisfactory to the Company. If such opinion of counsel, certification,
and/or other information is deemed satisfactory to the Company, in its sole
discretion, Investor shall be entitled to transfer its Note, or to exercise
its Note in accordance with the terms hereof and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of its Note, all in accordance with the terms of
the notice delivered by Investor to the Company, provided that an appropriate
legend in substantially the form required by the Company respecting the
foregoing restrictions on transfer and disposition may be endorsed on the
Note or the certificates for such shares. Prior to any such transfer, the
transferee must agree in writing to be bound by the terms and conditions of
this Note Agreement
11. REGISTRATION RIGHTS; COVENANT RE SALE OF COMMON
STOCK. The Company hereby agrees to register the shares of the Common Stock
into which the Notes are convertible in the registration statement used by
the Company for its Initial Public Offering as follows:
(a) REGISTRATION RIGHTS. At such time the Company
shall determine to proceed with the actual preparation and filing of a
registration statement under the Securities Act in connection with the
proposed offer and sale for money of any of its securities which constitutes
an Initial Public Offering, the Company shall, except as herein provided,
cause all such number of shares of Common Stock as are issuable upon
conversion of the Notes to be included in such registration statement, all to
the extent requisite to permit the sale or other disposition by Investors of
the shares to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it.
(b) REGISTRATION PROCEDURES. If and whenever the
Company is required by the provisions of Section 11(a) to effect the
registration of any shares under the Securities Act, the Company shall:
(i) prepare and file with the Commission a
registration statement with respect to such securities, and use
its best efforts to cause such registration statement to become
and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed
twelve (12) months;
(ii) prepare and file with the Commission such
amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such
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<PAGE>
registration statement effective for such period as may be
reasonably necessary to effect the sale of such securities, not
to exceed twelve (12) months;
(iii) furnish to Investors such reasonable
number of copies of the registration statement, final prospectus
and such other documents as Investors may reasonably request in
order to facilitate the public offering of such securities;
(iv) use its best efforts to register or qualify
the securities covered by such registration statement under such
state securities or blue sky laws of such jurisdictions as the
underwriters in the Initial Public Offering may reasonably
request within 20 days following the original filing of such
registration statement, except that the Company shall not for any
purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified; and
(v) prepare and promptly file with the
Commission and promptly notify Investors of the filing of any
amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act,
any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in
the light of the circumstances in which they were made, not
misleading.
(c) EXPENSES. With respect to any registration of
shares pursuant to Section 11(a), the Company shall bear the following fees,
costs and expenses: all registration and other filing fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
all internal Company expenses, the premiums and other costs of policies of
insurance against liability arising out of the public offering, and all legal
fees and disbursements and other expenses of complying with state securities
or blue sky laws of any jurisdictions in which the securities to be offered
are to be registered or qualified. Fees and disbursements of counsel and
accountants for Investors, underwriting discounts and commissions and
transfer taxes for Investors and any other expenses incurred by Investors not
expressly included above shall be borne by Investors.
(d) INDEMNIFICATION. In the event that any shares
owned by Investors are included in a registration statement under this
Section 11:
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(i) The Company shall indemnify and hold
harmless Investors and any underwriter (as defined in the
Securities Act) from and against any and all loss, damage,
liability, cost and expense to which Investors or any such
underwriter may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue statement or alleged untrue
statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, damage,
liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission (i) so made in conformity with information
furnished by Investors or such underwriter; or (ii) in any
preliminary prospectus, if a copy of an amended or supplemented
prospectus which, as amended or supplemented, would have cured
the defect giving rise to such loss, claim, damage, liability,
cost or expense, was not delivered by or on behalf of such
underwriter to the person asserting the claim or action, if
required by law to have been so delivered by such underwriter, at
or prior to the written confirmation of the sale of the Common
Stock.
(ii) Purchasers shall indemnify and hold harmless
the Company and any underwriter from and against any and all
loss, damage, liability, cost or expense to which the Company or
any underwriter may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue or alleged untrue statement of
any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in
conformity with information furnished by Investors.
(iii) Promptly after receipt by an indemnified
party pursuant to the provisions of paragraph (i) or (ii) of this
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subsection of notice of the commencement of any action involving
the subject matter of the foregoing indemnity provisions, such
indemnified party shall, if a claim thereof is to be made against
the indemnifying party pursuant to the provisions of said
paragraph (i) or (ii), promptly notify the indemnifying party of
the commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement thereof,
the indemnifying party shall have the right to participate in,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party;
provided, however, if the defendants in any action include both
the indemnified party and the indemnifying party and there is a
conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party,
the indemnified party or parties shall have the right to select
separate counsel to participate in the defense of such action on
behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of
said paragraph (i) or (ii) for any legal or other expense
subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of
investigation, unless (A) the indemnified party shall have
employed counsel in accordance with the proviso of the preceding
sentence, (B) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of
the commencement of the action, or (C) the indemnifying party has
authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
12. NOTICES. All demands and notices to be given
hereunder shall be delivered or sent by certified mail, return receipt
requested; in the case of the Company, addressed to its corporate
headquarters, 1999 Broadway, Suite 2435, Denver, Colorado 80202, until a new
address shall have been substituted by like notice; and in the case of an
Investor, addressed to Investor at the address for the Investor set forth in
such Investor's Subscription Agreement, until a new address shall have been
substituted by like notice.
13. EXECUTION OF THIS NOTE AGREEMENT; COUNTERPARTS. The
execution hereof by an Investor or Investors shall constitute a contract
between the
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Company and such Investor or Investors for the purposes set forth in this
Note Agreement. As contemplated by the Subscription Agreements, the Note
Agreement may be executed by the Placement Agent on behalf of an Investor as
such Investor's attorney-in-fact. This Note Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
14. MISCELLANEOUS.
(a) PURCHASERS' CONSENT REQUIRED. Any term,
covenant, agreement or condition of this Note Agreement binding upon or to be
performed or complied with by the Company may be waived (either generally or
in a particular instance and either retroactively or prospectively) with the
Investors' consent, which consent may be given on behalf of all Investors by
the Investor Representative or the holders of a majority of the principal
amount of the Notes.
(b) LOSS, THEFT, ETC. OF NOTE. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of a Note and, if reasonably requested by the Company, a
reasonable indemnification by the Investor of such Note, the Company shall
make and deliver without expense to such Investor, a new Note, of like tenor
and issue, in lieu of such lost, stolen, destroyed or mutilated Note.
(c) POWERS AND RIGHTS NOT WAIVED. No delay or
failure on the part of an Investor in the exercise of any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise
of the same preclude any other or further exercise thereof, or the exercise
of any other power or right, and the rights and remedies of the Investors are
cumulative to, and are not exclusive of, any rights or remedies the Investors
would otherwise have.
(d) SUCCESSORS AND ASSIGNS. This Note Agreement
and the rights evidenced hereby shall inure to the benefit of and be binding
upon and the successors and permitted assigns of the Company and the
Investors.
(e) AMENDMENTS. This Note Agreement may not be
modified, supplemented, varied or amended except by an instrument in writing
signed by the Company and (i) the Investor Representative or (ii) the holders
of a majority of the principal amount of the Notes.
(f) HEADINGS. The index and the descriptive
headings of sections of this Note Agreement are provided solely for
convenience of reference and shall not, for any purpose, be deemed a part of
this Note Agreement.
(g) GOVERNING LAW. This Note Agreement and all
matters concerning this Note Agreement, including the Notes, shall be
governed by the
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laws of the State of Colorado for contracts entered into and to be performed
in such State, without regard to principles of conflicts of laws.
THE VINTAGE GROUP USA, LTD.
By
--------------------------------
Charles D. Tourtellotte
President
Agreed and accepted this ____ day of ______, 1996.
$
----------------------------------- ---------------------------------------
- ----------------------------
(Principal Amount of Notes (Name of Purchaser)
purchased by Purchaser)
By
-----------------------------------
Laidlaw Equities, Inc.,
Attorney-in-Fact
By:
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into effective
as of January 1, 1996, by and between THE VINTAGE GROUP USA, LTD., a Colorado
corporation (the "Company") and CHARLES D. TOURTELLOTTE (the "Employee").
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination hereafter provided,
the initial term of this Agreement shall commence on January 1, 1996, and
terminate on December 31, 1998. Employer shall have the right to extend this
Agreement after the initial term for an additional one-year term upon payment of
such salary as the parties may agree, but otherwise on the terms and conditions
provided herein.
2. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay to the Employee:
(i) a salary of $250,000.00 per year, payable at the rate of $10,416.67
semi-monthly in arrears; and
(ii) such bonuses as the Board of Directors of the Company may from time to
time approve.
3. DUTIES. The Employee is engaged as president and chief executive
officer of the Company and in such capacity will be responsible for the general
management of the affairs of the Company reporting directly to the Board of
Directors. During the term of this Agreement, Employee shall also serve as an
officer and a director of all affiliates and subsidiaries of the Company as the
Board of Directors of such affiliate or subsidiary may elect. The Employee shall
be an active key executive of the Company and shall perform the customary duties
of a chief executive officer and such other duties with respect to the business
and operation of the Company as the Board may reasonably direct.
4. EFFORTS OF THE EMPLOYEE. The Employee shall devote substantially all
of his working time to carry out the duties required of him by the Company and
shall not engage in any commercial activity which competes with the business of
the Company. During the period of his employment hereunder and except for
periods of illness or incapacity and vacation periods, the Employee shall devote
substantially all of his business time, attention, skill and effort to the
faithful performance of his duties hereunder. Except for travel requirements,
such services shall be rendered at the principal place of business
<PAGE>
of the Company which is presently at 1999 Broadway, Suite 2435, Denver,
Colorado, and at such other place or places in Denver, Colorado, as the
Company shall require.
5. WORKING FACILITIES. The Employee shall be furnished with an executive
office, secretary and all such other facilities and services suitable to his
position and adequate for the performance of his duties at the principal office
of the Company in Denver, Colorado.
6. EXPENSES. The Employee is authorized to incur reasonable expenses in
the pursuit of the business of the Company, including his expenses for
entertainment, travel and similar items. The Company shall reimburse the
Employee for all such reasonable expenses after submission by the Employee to
the Company from time to time of proof of payment and an itemized account of
such expenditures. All legal fees associated with the preparation of this
Agreement shall be borne by the Company.
7. EMPLOYEE BENEFITS.
(a) During the term of the Employee's employment hereunder,
Employee and his dependents shall be entitled to participate in or receive
benefits under any employee benefit plan or other arrangement adopted by the
Company including health, disability and life insurance, and retirement plan,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plan or arrangement. Nothing paid to the Employee under
any plan or arrangement presently in effect or made available in the future
shall be deemed to be in lieu of the salary amounts to the Employee pursuant to
Paragraph 2. Any payment or benefits payable to the Employee in respect of any
calendar year during which the Employee is employed by the Company for less than
the entire calendar year shall, unless otherwise provided in the applicable plan
or arrangement, be prorated in accordance with the number of days in such
calendar year during which he is so employed.
(b) The Employee shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its executive officers, but not less than 20 working days each year
(prorated in any calendar year during which the Employee is employed for less
than the entire calendar year in accordance with the number of days in such
calendar year during which he is so employed). The Employee shall also be
entitled to all paid holidays given by the Company to its employees.
(c) The Employee shall be entitiled to the payment of dues for
membership in Los Verdes Golf Club and the Denver Tennis club, as such shall be
due from time to time during the term of this Agreement.
2
<PAGE>
(d) The Employee shall be entitled to receive an allowance for use of
an automobile, parking and such other perquisites, as from time to time are made
available by the Company to its executive officers.
8. TRADE SECRETS AND CONFIDENTIAL INFORMATION. During Employee's
employment and for a period of one (1) year thereafter, the Employee shall treat
as trade secrets all confidential information with respect to the business of
the Company acquired by him at any time prior to or during the term of this
Agreement, and shall at no time during his employment, and for a period of one
(1) year thereafter, use, directly or indirectly, any such trade secrets or
confidential information for his own benefit nor disclose it, nor any part of
it, to any other person, firm, corporation or organization not connected with
the Corporation, except as authorized in writing by the Corporation.
9. TERMINATION OF AGREEMENT. This Agreement shall terminate prior to
December 31, 1998, only upon the earliest to occur of the following events:
(a) the disability (as defined below) of the Employee;
(b) the death of the Employee;
(c) delivery of written notice to the Employee by the Employer
terminating this Agreement for Cause (as defined below); and
(d) delivery of written notice to the Company by the Employee
terminating this Employment Agreement.
For the purpose of this Employment Agreement, the term "disability" shall mean
the inability of the Employee, due to illness, accident or any other physical or
mental incapacity, to perform his duties hereunder, continuing for a period of
six successive months. Any dispute regarding the existence, extent or
continuance of a disability of the Employee shall be resolved by the
determination of a majority of a Board of Arbitrators consisting of three
physicians, one selected by the Employee, one selected by the Company, and one
selected by the physicians selected by the Employee and the Company. All of the
physicians so selected shall be members of the Colorado Medical Association. The
decision of such Board of Arbitrators shall be binding upon the parties to this
Employment Agreement, and the cost of such arbitration, if any, shall be borne
by the Company. For purposes hereof, termination for disability shall occur at
the end of such six month period or, in the event of a dispute, upon a
determination of disability by the Board of Arbitrators. For purposes hereof,
"Cause" means (i) conduct which causes material harm to the Company; (ii) the
willful and continued absence of Employee (other than by reason of disability or
death), (iii) Employee's abandonment of his duties and responsibilities, (iv)
conviction of the Employee for a felony involving moral turpitude, or (v) fraud,
misappropriation or embezzlement of corporate funds. In the event that the
3
<PAGE>
grounds for termination for cause specified in the written notice are not fraud,
embezzlement or conviction of a specified felony and are capable of being cured,
the Employee shall have thirty days from his receipt of any such notice to cure
the actions or omissions specified in the notice.
In the event of termination by reason of death or disability and
provided the Company has not otherwise provided the Employee with life or
disability insurance or other benefit plan for such occurrences, the Company
shall pay to the Employee severance pay equal to 6 months salary. Except as
otherwise provided herein, upon termination of this Agreement as provided in
this Paragraph 9, the Company shall not have any further obligation to make
any payments to, or bestow any benefits on, the Employee from and after the
date of such termination.
10. ASSISTANCE IN LITIGATION. For one full year after the expiration or
termination of this Agreement, Employee shall, upon reasonable notice and
payment of expenses, furnish such information and assistance as the Company may
reasonably require in connection with any litigation which the Company or any of
its subsidiaries or affiliates is or may become, a party.
11. NOTICES. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall be
deemed given sufficiently if in writing and sent by hand delivery or registered
or certified mail, return receipt requested and postage prepaid, or by telex,
telegram or cable to, in the case of the Company:
THE VINTAGE GROUP USA, LTD.
1999 Broadway, Suite 2435
Denver, Colorado 80202
and in the case of the Employee:
CHARLES D. TOURTELLOTTE
9071 East Mississippi, Apt. 14-E
Denver, Colorado 80231
12. NONCOMPETE. During the term of this Agreement, Employee shall not
become employed or assume any position similar to that of chief executive
officer,
4
<PAGE>
director, partner or principal, or otherwise engage or invest in any similar
business as that of the Company (except as to an investment in a publicly
held corporation of not more than five (5%) of its outstanding capital
stock). For a period of one year immediately following the cancellation or
termination of this Agreement for any reason, Employee shall not become
employed or assume any position similar to that of chief executive officer,
director, partner, principal, owner or senior manager which during said
one-year period develops a golf course, driving range or other golf facility
within a 10-mile radius of the location of any golf course, driving range or
other golf facility in which the Company then directly or indirectly owns an
interest (except as to an investment in a publicly held corporation of not
more than five percent (5%) of its outstanding capital stock). To clarify the
foregoing, the maintenance of an office at which Employee is a principal in
the golf course development business within said 10-mile radius as the sole
consideration, or the engagement of Employee at less than a senior management
position, as the sole consideration, will not constitute a breach of the
foregoing sentence.
13. ASSIGNMENT OF AGREEMENT. The Employee may not assign or otherwise
transfer this Agreement or any of his rights or obligations hereunder without
the prior written consent of the Company, and any such attempted assignment
without such written consent shall be void and without force or effect.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. This Agreement
and the representations, warranties, covenants and other agreements (however
characterized or described) by both parties hereto and contained herein or made
pursuant to the provisions hereof shall survive the execution and delivery of
this Agreement and any inspection or investigation made at any time with respect
to any thereof until any and all moneys, payments, obligations and liabilities
which either hereto shall have made, incurred or become liable for pursuant to
the terms of this Agreement shall have been paid in full.
15. FURTHER INSTRUMENTS. The Company and the Employee shall execute and
deliver any and all such other instruments and shall take any and all such other
actions as may be reasonably necessary to carry the intent of this Agreement
into full force and effect.
16. SEVERABILITY.
(a) If any provision of this Agreement shall be held, declared or
pronounced void, voidable, invalid, unenforceable or inoperative for any reason
by any court of competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely any other
provision of this Agreement, which shall otherwise remain in full force and
effect and be enforced in accordance with its terms and the effect of such
holding, declaration or pronouncement.
5
<PAGE>
(b) The parties hereto intend to confer and hereby confer
jurisdiction. to enforce the terms, covenants, and provisions contained herein
upon the courts of the State of Colorado.
17. WAIVER. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement shall
operate as a waiver of any subsequent right or remedy arising from a subsequent
breach of this Agreement. The consent of any party where required hereunder to
any act or occurrence shall not be deemed to be a consent to any other act or
occurrence.
18. GENERAL PROVISIONS. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Colorado. Except as
otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be modified or
amended or any term or provision hereof waived or discharged except in writing
signed by the party against whom such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are for
convenience in reference only and shall not limit or otherwise affect the
meaning thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
THE COMPANY:
THE VINTAGE GROUP USA, LTD., a
Colorado corporation
ATTEST:
By: /s/ Charles D. Tourtellotte
----------------------------------
Its: President
/s/ J. D. Finley
- ------------------------
Secretary
THE EMPLOYEE:
/s/ Charles D. Tourtellotte
--------------------------------------
Charles D. Tourtellotte
6
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
effective as of January 1, 1996, by and between THE VINTAGE GROUP USA, LTD.,
a Colorado corporation (the "Company") and J. D. FINLEY (the "Employee").
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination hereafter
provided, the initial term of this Agreement shall commence on January 1,
1996, and terminate on December 31, 1998. Employer shall have the right to
extend this Agreement after the initial term for an additional one-year term
upon payment of such salary as the parties may agree, but otherwise on the
terms and conditions provided herein.
2. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay to the Employee:
(i) a salary of $175,000.00 per year, payable at the rate of $7,291.67
semi-monthly in arrears; and
(ii) such bonuses as the Board of Directors of the Company may from time
to time approve.
3. DUTIES. The Employee is engaged as executive vice president and
chief financial officer of the Company and in such capacity will be
responsible for the general management of the affairs of the Company
reporting directly to the Board of Directors. During the term of this
Agreement, Employee shall also serve as an officer of all affiliates and
subsidiaries of the Company as the Board of Directors of such affiliate or
subsidiary may elect. The Employee shall be an active key executive of the
Company and shall perform the customary duties of a executive vice president
and such other duties with respect to the business and operation of the
Company as the Board may reasonably direct.
4. EFFORTS OF THE EMPLOYEE. The Employee shall devote substantially
all of his working time to carry out the duties required of him by the
Company and shall not engage in any commercial activity which competes with
the business of the Company. During the period of his employment hereunder
and except for periods of illness or incapacity and vacation periods, the
Employee shall devote substantially all of his business time, attention,
skill and effort to the faithful performance of his duties hereunder. Except
for travel requirements, such services shall be rendered at the principal
place of business
<PAGE>
of the Company which is presently at 1999 Broadway, Suite 2435, Denver,
Colorado, and at such other place or places in Denver, Colorado, as the
Company shall require.
5. WORKING FACILITIES. The Employee shall be furnished with an
executive office, secretary and all such other facilities and services
suitable to his position and adequate for the performance of his duties at
the principal office of the Company in Denver, Colorado.
6. EXPENSES. The Employee is authorized to incur reasonable expenses
in the pursuit of the business of the Company, including his expenses for
entertainment, travel and similar items. The Company shall reimburse the
Employee for all such reasonable expenses after submission by the Employee to
the Company from time to time of proof of payment and an itemized account of
such expenditures. All legal fees associated with the preparation of this
Agreement shall be borne by the Company.
7. EMPLOYEE BENEFITS.
(a) During the term of the Employee's employment hereunder,
Employee and his dependents shall be entitled to participate in or receive
benefits under any employee benefit plan or other arrangement adopted by the
Company including health, disability and life insurance, and retirement plan,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plan or arrangement. Nothing paid to the Employee
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary amounts to the Employee
pursuant to Paragraph 2. Any payment or benefits payable to the Employee in
respect of any calendar year during which the Employee is employed by the
Company for less than the entire calendar year shall, unless otherwise
provided in the applicable plan or arrangement, be prorated in accordance
with the number of days in such calendar year during which he is so employed.
(b) The Employee shall be entitled to the number of paid vacation
days in each calendar year determined by the Company from time to time for
its executive officers, but not less than 20 working days each year (prorated
in any calendar year during which the Employee is employed for less than the
entire calendar year in accordance with the number of days in such calendar
year during which he is so employed). The Employee shall also be entitled to
all paid holidays given by the Company to its employees.
(c) The Employee shall be entitiled to the payment of regular
monthly dues (excluding assessments and food and bar charges unless
reimbursable pursuant to Section 6 hereof) for membership in the Cherry Hills
Country Club located at 4125 S. University Blvd., Cherry Hills Village,
Colorado 80110 as shall be due from time to time during the term of this
agreement.
2
<PAGE>
(d) The Employee shall be entitled to receive an allowance for use
of a cellular phone, parking and such other perquisites, as from time to time
are made available by the Company to its executive officers.
8. TRADE SECRETS AND CONFIDENTIAL INFORMATION. During Employee's
employment and for a period of one (1) year thereafter, the Employee shall
treat as trade secrets all confidential information with respect to the
business of the Company acquired by him at any time prior to or during the
term of this Agreement, and shall at no time during his employment, and for a
period of one (1) year thereafter, use, directly or indirectly, any such
trade secrets or confidential information for his own benefit nor disclose
it, nor any part of it, to any other person, firm, corporation or
organization not connected with the Corporation, except as authorized in
writing by the Corporation.
9. TERMINATION OF AGREEMENT. This Agreement shall terminate prior to
December 31, 1998, only upon the earliest to occur of the following events:
(a) the disability (as defined below) of the Employee;
(b) the death of the Employee;
(c) delivery of written notice to the Employee by the Employer
terminating this Agreement for Cause (as defined below); and
(d) delivery of written notice to the Company by the Employee
terminating this Employment Agreement.
For the purpose of this Employment Agreement, the term "disability"
shall mean the inability of the Employee, due to illness, accident or any
other physical or mental incapacity, to perform his duties hereunder,
continuing for a period of six successive months. Any dispute regarding the
existence, extent or continuance of a disability of the Employee shall be
resolved by the determination of a majority of a Board of Arbitrators
consisting of three physicians, one selected by the Employee, one selected by
the Company, and one selected by the physicians selected by the Employee and
the Company. All of the physicians so selected shall be members of the
Colorado Medical Association. The decision of such Board of Arbitrators shall
be binding upon the parties to this Employment Agreement, and the cost of
such arbitration, if any, shall be borne by the Company. For purposes
hereof, termination for disability shall occur at the end of such six month
period or, in the event of a dispute, upon a determination of disability by
the Board of Arbitrators. For purposes hereof, "Cause" means (i) conduct
which causes material harm to the Company; (ii) the willful and continued
absence of Employee (other than by reason of disability or death), (iii)
Employee's abandonment of his duties and responsibilities, (iv) conviction of
the Employee for a felony involving moral turpitude, or (v) fraud,
misappropriation or embezzlement of corporate funds. In the event that the
3
<PAGE>
grounds for termination for cause specified in the written notice are not
fraud, embezzlement or conviction of a specified felony and are capable of
being cured, the Employee shall have thirty days from his receipt of any such
notice to cure the actions or omissions specified in the notice.
In the event of termination by reason of death or disability and
provided the Company has not otherwise provided the Employee with life or
disability insurance or other benefit plan for such occurrences, the Company
shall pay to the Employee severance pay equal to 6 months salary. Except as
otherwise provided herein, upon termination of this Agreement as provided in
this Paragraph 9, the Company shall not have any further obligation to make
any payments to, or bestow any benefits on, the Employee from and after the
date of such termination.
10. ASSISTANCE IN LITIGATION. For one full year after the expiration
or termination of this Agreement, Employee shall, upon reasonable notice and
payment of expenses, furnish such information and assistance as the Company
may reasonably require in connection with any litigation which the Company or
any of its subsidiaries or affiliates is or may become, a party.
11. NOTICES. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently if in writing and sent by hand delivery or
registered or certified mail, return receipt requested and postage prepaid,
or by telex, telegram or cable to, in the case of the Company:
THE VINTAGE GROUP USA, LTD.
1999 Broadway, Suite 2435
Denver, Colorado 80202
and in the case of the Employee:
J. D. FINLEY
8009 South Monaco Circle
Englewood, Colorado 80112
12. NONCOMPETE. During the term of this Agreement, Employee shall not
become employed or assume any position similar to that of executive vice
president or chief financial officer, or otherwise engage or invest in any
similar business as that of the
4
<PAGE>
Company (except as to an investment in a publicly held corporation of not
more than five (5%) of its outstanding capital stock). For a period of one
year immediately following the cancellation or termination of this Agreement
for any reason, Employee shall not become employed or assume any position
similar to that of executive vice president or chief financial officer which
during said one-year period develops a golf course, driving range or other
golf facility within a 10-mile radius of the location of any golf course,
driving range or other golf facility in which the Company then directly or
indirectly owns an interest (except as to an investment in a publicly held
corporation of not more than five percent (5%) of its outstanding capital
stock). To clarify the foregoing, the maintenance of an office at which
Employee is a principal in the golf course development business within said
10-mile radius as the sole consideration, or the engagement of Employee at
less than a senior management position, as the sole consideration, will not
constitute a breach of the foregoing sentence.
13. ASSIGNMENT OF AGREEMENT. The Employee may not assign or otherwise
transfer this Agreement or any of his rights or obligations hereunder without
the prior written consent of the Company, and any such attempted assignment
without such written consent shall be void and without force or effect.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. This
Agreement and the representations, warranties, covenants and other agreements
(however characterized or described) by both parties hereto and contained
herein or made pursuant to the provisions hereof shall survive the execution
and delivery of this Agreement and any inspection or investigation made at
any time with respect to any thereof until any and all moneys, payments,
obligations and liabilities which either hereto shall have made, incurred or
become liable for pursuant to the terms of this Agreement shall have been
paid in full.
15. FURTHER INSTRUMENTS. The Company and the Employee shall execute
and deliver any and all such other instruments and shall take any and all
such other actions as may be reasonably necessary to carry the intent of this
Agreement into full force and effect.
16. SEVERABILITY.
(a) If any provision of this Agreement shall be held, declared or
pronounced void, voidable, invalid, unenforceable or inoperative for any
reason by any court of competent jurisdiction, government authority or
otherwise, such holding, declaration or pronouncement shall not affect
adversely any other provision of this Agreement, which shall otherwise remain
in full force and effect and be enforced in accordance with its terms and the
effect of such holding, declaration or pronouncement.
5
<PAGE>
(b) The parties hereto intend to confer and hereby confer jurisdiction.
to enforce the terms, covenants, and provisions contained herein upon the
courts of the State of Colorado.
17. WAIVER. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement shall
operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where required
hereunder to any act or occurrence shall not be deemed to be a consent to any
other act or occurrence.
18. GENERAL PROVISIONS. This Agreement shall be construed and enforced
in accordance with, and governed by, the laws of the State of Colorado.
Except as otherwise expressly stated herein, time is of the essence in
performing hereunder. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, and this Agreement may
not be modified or amended or any term or provision hereof waived or
discharged except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings of
this Agreement are for convenience in reference only and shall not limit or
otherwise affect the meaning thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
THE COMPANY:
THE VINTAGE GROUP USA, LTD., a
Colorado corporation
By: /s/ Charles D. Tourtellotte
----------------------------------
Its: President
THE EMPLOYEE:
/s/ J. D. Finley
--------------------------------------
J. D. Finley
6
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
effective as of July 1, 1996, by and between THE VINTAGE GROUP USA, LTD., a
Colorado corporation (the "Company") and JAMES K. DIGNAN (the "Employee").
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination hereafter provided,
the initial term of this Agreement shall commence on January 1, 1996, and
terminate on December 31, 1998. Employer shall have the right to extend this
Agreement after the initial term for an additional one-year term upon payment of
such salary as the parties may agree, but otherwise on the terms and conditions
provided herein.
2. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay to the Employee:
(i) a salary of $66,000.00 per year, payable at the rate of $2,750.00
semi-monthly in arrears; and
(ii) such bonuses as the Board of Directors of the Company may from
time to time approve.
3. DUTIES. The Employee is engaged as vice president-acquisitions of the
Company and in such capacity will be responsible for the assisting the President
of the Company reporting directly to the Board of Directors. During the term of
this Agreement, Employee shall also serve as an officer of all affiliates and
subsidiaries of the Company as the Board of Directors of such affiliate or
subsidiary may elect. The Employee shall be an active executive of the Company
and shall perform the customary duties of a vice president-acquisitions and such
other duties with respect to the business and operation of the Company as the
Board may reasonably direct.
4. EFFORTS OF THE EMPLOYEE. The Employee shall devote substantially all
of his working time to carry out the duties required of him by the Company and
shall not engage in any commercial activity which competes with the business of
the Company. During the period of his employment hereunder and except for
periods of illness or incapacity and vacation periods, the Employee shall devote
substantially all of his business time, attention, skill and effort to the
faithful performance of his duties hereunder. Except for travel requirements,
such services shall be rendered at the principal place of business
<PAGE>
of the Company which is presently at 1999 Broadway, Suite 2435, Denver,
Colorado, and at such other place or places in Denver, Colorado, as the
Company shall require.
5. WORKING FACILITIES. The Employee shall be furnished with an executive
office, secretary and all such other facilities and services suitable to his
position and adequate for the performance of his duties at the principal office
of the Company in Denver, Colorado.
6. EXPENSES. The Employee is authorized to incur reasonable expenses in
the pursuit of the business of the Company, including his expenses for
entertainment, travel and similar items. The Company shall reimburse the
Employee for all such reasonable expenses after submission by the Employee to
the Company from time to time of proof of payment and an itemized account of
such expenditures. All legal fees associated with the preparation of this
Agreement shall be borne by the Company.
7. EMPLOYEE BENEFITS.
(a) During the term of the Employee's employment hereunder, Employee
shall be entitled to participate in or receive benefits under any employee stock
option plan or other similar arrangement adopted by the Company, subject to and
on a basis consistent with the terms, conditions and overall administration of
such plan or arrangement.
(b) The Employee shall be entitled to the number of paid vacation
days in each calendar year determined by the Company from time to time for its
executive officers, but not less than 15 working days each year (prorated in any
calendar year during which the Employee is employed for less than the entire
calendar year in accordance with the number of days in such calendar year during
which he is so employed). The Employee shall also be entitled to all paid
holidays given by the Company to its employees.
8. TRADE SECRETS AND CONFIDENTIAL INFORMATION. During Employee's
employment and for a period of one (1) year thereafter, the Employee shall treat
as trade secrets all confidential information with respect to the business of
the Company acquired by him at any time prior to or during the term of this
Agreement, and shall at no time during his employment, and for a period of one
(1) year thereafter, use, directly or indirectly, any such trade secrets or
confidential information for his own benefit nor disclose it, nor any part of
it, to any other person, firm, corporation or organization not connected with
the Corporation, except as authorized in writing by the Corporation.
9. TERMINATION OF AGREEMENT. This Agreement shall terminate prior to
December 31, 1998, only upon the earliest to occur of the following events:
(a) the disability (as defined below) of the Employee;
2
<PAGE>
(b) the death of the Employee;
(c) delivery of written notice to the Employee by the Employer
terminating this Agreement for Cause (as defined below); and
(d) delivery of written notice to the Company by the Employee
terminating this Employment Agreement.
For the purpose of this Employment Agreement, the term "disability"
shall mean the inability of the Employee, due to illness, accident or any
other physical or mental incapacity, to perform his duties hereunder,
continuing for a period of six successive months. Any dispute regarding the
existence, extent or continuance of a disability of the Employee shall be
resolved by the determination of a majority of a Board of Arbitrators
consisting of three physicians, one selected by the Employee, one selected by
the Company, and one selected by the physicians selected by the Employee and
the Company. All of the physicians so selected shall be members of the
Colorado Medical Association. The decision of such Board of Arbitrators shall
be binding upon the parties to this Employment Agreement, and the cost of
such arbitration, if any, shall be borne by the Company. For purposes
hereof, termination for disability shall occur at the end of such six month
period or, in the event of a dispute, upon a determination of disability by
the Board of Arbitrators. For purposes hereof, "Cause" means (i) conduct
which causes material harm to the Company; (ii) the willful and continued
absence of Employee (other than by reason of disability or death), (iii)
Employee's abandonment of his duties and responsibilities, (iv) conviction of
the Employee for a felony involving moral turpitude, or (v) fraud,
misappropriation or embezzlement of corporate funds. In the event that the
grounds for termination for cause specified in the written notice are not
fraud, embezzlement or conviction of a specified felony and are capable of
being cured, the Employee shall have thirty days from his receipt of any such
notice to cure the actions or omissions specified in the notice.
In the event of termination by reason of death or disability and
provided the Company has not otherwise provided the Employee with life or
disability insurance or other benefit plan for such occurrences, the Company
shall pay to the Employee severance pay equal to 6 months salary. Except as
otherwise provided herein, upon termination of this Agreement as provided in
this Paragraph 9, the Company shall not have any further obligation to make
any payments to, or bestow any benefits on, the Employee from and after the
date of such termination.
10. ASSISTANCE IN LITIGATION. For one full year after the expiration or
termination of this Agreement, Employee shall, upon reasonable notice and
payment of expenses, furnish such information and assistance as the Company may
reasonably require in connection with any litigation which the Company or any of
its subsidiaries or affiliates is or may become, a party.
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<PAGE>
11. NOTICES. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall be
deemed given sufficiently if in writing and sent by hand delivery or registered
or certified mail, return receipt requested and postage prepaid, or by telex,
telegram or cable to, in the case of the Company:
THE VINTAGE GROUP USA, LTD.
1999 Broadway, Suite 2435
Denver, Colorado 80202
and in the case of the Employee:
JAMES K. DIGNAN
5310 East Third Avenue
Denver, Colorado 80220
12. NONCOMPETE. During the term of this Agreement, Employee shall not
become employed or assume any position similar to that of vice president-
acquisitions, or otherwise engage or invest in any similar business as that of
the Company (except as to an investment in a publicly held corporation of not
more than five (5%) of its outstanding capital stock). For a period of one year
immediately following the cancellation or termination of this Agreement for any
reason, Employee shall not become employed or assume any position similar to
that of vice president-acquisitions which during said one-year period develops a
golf course, driving range or other golf facility within a 10-mile radius of the
location of any golf course, driving range or other golf facility in which the
Company then directly or indirectly owns an interest (except as to an investment
in a publicly held corporation of not more than five percent (5%) of its
outstanding capital stock). To clarify the foregoing, the maintenance of an
office at which Employee is a principal in the golf course development business
within said 10-mile radius as the sole consideration, or the engagement of
Employee at less than a senior management position, as the sole consideration,
will not constitute a breach of the foregoing sentence.
13. ASSIGNMENT OF AGREEMENT. The Employee may not assign or otherwise
transfer this Agreement or any of his rights or obligations hereunder without
the prior written consent of the Company, and any such attempted assignment
without such written consent shall be void and without force or effect.
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<PAGE>
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. This Agreement
and the representations, warranties, covenants and other agreements (however
characterized or described) by both parties hereto and contained herein or made
pursuant to the provisions hereof shall survive the execution and delivery of
this Agreement and any inspection or investigation made at any time with respect
to any thereof until any and all moneys, payments, obligations and liabilities
which either hereto shall have made, incurred or become liable for pursuant to
the terms of this Agreement shall have been paid in full.
15. FURTHER INSTRUMENTS. The Company and the Employee shall execute and
deliver any and all such other instruments and shall take any and all such other
actions as may be reasonably necessary to carry the intent of this Agreement
into full force and effect.
16. SEVERABILITY.
(a) If any provision of this Agreement shall be held, declared or
pronounced void, voidable, invalid, unenforceable or inoperative for any reason
by any court of competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely any other
provision of this Agreement, which shall otherwise remain in full force and
effect and be enforced in accordance with its terms and the effect of such
holding, declaration or pronouncement.
(b) The parties hereto intend to confer and hereby confer
jurisdiction. to enforce the terms, covenants, and provisions contained herein
upon the courts of the State of Colorado.
17. WAIVER. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement shall
operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where required
hereunder to any act or occurrence shall not be deemed to be a consent to any
other act or occurrence.
18. GENERAL PROVISIONS. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of
Colorado. Except as otherwise expressly stated herein, time is of the essence
in performing hereunder. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, and this Agreement may
not be modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment, modification,
waiver or discharge is sought to be enforced. The headings of this
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<PAGE>
Agreement are for convenience in reference only and shall not limit or otherwise
affect the meaning thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first above written.
THE COMPANY:
THE VINTAGE GROUP USA, LTD., a
Colorado corporation
By: /s/ Charles D. Tourtellotte
------------------------------------
Its: President
THE EMPLOYEE:
/s/ James K. Dignan
---------------------------------------
James K. Dignan
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<PAGE>
AGREEMENT OF PURCHASE AND SALE
BETWEEN
ROBERT SELLECK
AND
FREMONT GOLF PARTNERSHIP
("SELLERS")
AND
THE VINTAGE GROUP USA LTD.
("PURCHASER")
DATED AS OF MARCH 19, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Sale and Purchase; the Property. . . . . . . . . . . . . . . . . . 1
(a) Sale and Conveyance by Seller to Purchaser. . . . . . . . . . 1
(b) Description of the Property . . . . . . . . . . . . . . . . . 1
2. Purchase Price/Earnest Money . . . . . . . . . . . . . . . . . . . 3
3. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Time and Place of Closing . . . . . . . . . . . . . . . . . . 4
4. Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Due Diligence and Right of Termination . . . . . . . . . . . . . . 4
(a) Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Rights of Termination . . . . . . . . . . . . . . . . . . . . 5
6. Title Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Survey Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. Additional Conditions Precedent to Closing . . . . . . . . . . . . 7
(a) No Legal Modification . . . . . . . . . . . . . . . . . . . . 8
(b) Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Update. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Representations, Warranties and Covenants . . . . . . . . . . 8
(e) Closing Documents . . . . . . . . . . . . . . . . . . . . . . 8
(f) Lease Modifications . . . . . . . . . . . . . . . . . . . . . 8
9. Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . . 8
10. Representations and Warranties of Seller.. . . . . . . . . . . . . 9
(a) Organization. . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Title to the Property . . . . . . . . . . . . . . . . . . . . 10
(d) No Condemnation . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Zoning. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(f) Subdivision Laws. . . . . . . . . . . . . . . . . . . . . . . 10
(g) Districts . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Taxes and Assessments . . . . . . . . . . . . . . . . . . . . 11
(i) Public Improvement Assessments. . . . . . . . . . . . . . . . 11
(j) Mechanics' Liens. . . . . . . . . . . . . . . . . . . . . . . 11
(k) Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(l) Utilities and Services. . . . . . . . . . . . . . . . . . . . 11
(m) Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 11
(n) No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 12
(o) No Disputes . . . . . . . . . . . . . . . . . . . . . . . . . 12
(p) Hazardous Substances. . . . . . . . . . . . . . . . . . . . . 12
(q) Information Correct . . . . . . . . . . . . . . . . . . . . . 13
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(r) Soil Condition. . . . . . . . . . . . . . . . . . . . . . . . 13
(s) Foreign Persons . . . . . . . . . . . . . . . . . . . . . . . 13
(t) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Representations and Warranties of Purchaser. . . . . . . . . . . . 14
(a) Organization. . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12. Covenants of Seller. . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Payment of Bills. . . . . . . . . . . . . . . . . . . . . . . 14
(d) Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Change in Condition . . . . . . . . . . . . . . . . . . . . . 15
(f) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(g) Further Assurances. . . . . . . . . . . . . . . . . . . . . . 15
13. Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Bill of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Assignment of Intangible Personal Property. . . . . . . . . . 16
(d) Assignment of Contracts . . . . . . . . . . . . . . . . . . . 16
(e) Original Documents. . . . . . . . . . . . . . . . . . . . . . 16
(f) Keys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Affidavit of Title. . . . . . . . . . . . . . . . . . . . . . 16
(h) Closing Statement . . . . . . . . . . . . . . . . . . . . . . 16
(i) Water Rights/Opinion. . . . . . . . . . . . . . . . . . . . . 16
(j) Seller Affidavit. . . . . . . . . . . . . . . . . . . . . . . 16
(k) Estoppel Letter . . . . . . . . . . . . . . . . . . . . . . . 16
(l) Other Documents . . . . . . . . . . . . . . . . . . . . . . . 17
14. Prorations and Adjustments . . . . . . . . . . . . . . . . . . . . 17
(a) Other Deposits. . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Utility Charges . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Assigned Contracts. . . . . . . . . . . . . . . . . . . . . . 17
(d) Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . 17
(e) Special Assessments . . . . . . . . . . . . . . . . . . . . . 17
(f) Rent and Other Items. . . . . . . . . . . . . . . . . . . . . 17
(g) Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
16. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
17. Default; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Default by Purchaser. . . . . . . . . . . . . . . . . . . . . 20
(b) Default by Seller . . . . . . . . . . . . . . . . . . . . . . 21
(c) Seller's Indemnities. . . . . . . . . . . . . . . . . . . . . 21
(d) Purchaser's Indemnities . . . . . . . . . . . . . . . . . . . 22
(e) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 23
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<PAGE>
19. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Seller's Warranty . . . . . . . . . . . . . . . . . . . . . . 23
(b) Purchaser's Warranty. . . . . . . . . . . . . . . . . . . . . 23
20. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Entire Agreement; Waiver. . . . . . . . . . . . . . . . . . . 24
(b) Business Day. . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Construction. . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Time is of the Essence. . . . . . . . . . . . . . . . . . . . 25
(f) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
iii
<PAGE>
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "AGREEMENT"), made and
entered into this 19 day of March, 1996 (the "CONTRACT DATE"), is by and
among ROBERT SELLECK ("SELLECK"), FREMONT GOLF PARTNERSHIP, a California
general partnership ("FGP") (Selleck and FGP are hereinafter collectively
referred to as "SELLER"), and THE VINTAGE GROUP USA LTD., a Colorado
corporation, or its assignee ("PURCHASER").
RECITALS
A. Seller is the lessee of the land and improvements known as
Fremont Park Golf Center located in Fremont, California, as more described in
Paragraph 1 and EXHIBIT A below.
B. Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller the Property (as defined in Paragraph 1 below), subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, Seller and Purchaser hereby covenant and agree as follows:
AGREEMENT
1. SALE AND PURCHASE; THE PROPERTY.
(a) SALE AND CONVEYANCE BY SELLER TO PURCHASER. Seller
agrees to sell and convey the Property to Purchaser and Purchaser agrees to
purchase the Property from Seller, for the Purchase Price and on and subject
to the terms and conditions herein set forth.
(b) DESCRIPTION OF THE PROPERTY. The Property is comprised
of the following:
(1) The leasehold interest (the "LEASEHOLD") of the lessee
as set forth in that certain Agreement For Construction and Operation
of the City of Fremont's Golf Driving Range Complex dated November 19,
1987 as amended (the "LEASE") between the City of Fremont and Fremont
Threesome, Incorporated, Seller's predecessor in interest as lessee,
real property located in Fremont, California, and more particularly
described in EXHIBIT A attached hereto and made a part hereof, which,
in the aggregate, contains a driving range consisting of approximately
15 acres of land, together with all rights, easements, licenses,
appurtenances and other interests appurtenant thereto (the "LAND");
<PAGE>
(2) Seller's interest in the improvements, buildings and
fixtures of every kind and nature located on the Land, subject to the
terms of the Lease, consisting primarily of a clubhouse and a
maintenance facility (all of such buildings, fixtures and improvements
are sometimes referred to herein collectively as the "IMPROVEMENTS");
(3) All tangible personal property, if any, now or
hereafter owned by Seller and located on the Land or the Improvements
and used in connection with, or necessary for the ownership,
operation, management or maintenance of, the Land or the Improvements
including Seller's inventory (all such property being sometimes
referred to herein collectively as the "PERSONAL PROPERTY"); and
(4) To the extent owned and transferable by Seller: (i)
All intangible property owned by Seller, if any, and used in
connection with the foregoing, including, without limitation, all
copyrights, trademarks, service marks, trade names, designs and logos
for the name "Fremont Park Golf Center," and (ii) all contract rights,
guarantees, warranties, certificates of occupancy, authorizations,
licenses, permits, deposits for golf functions (which are applicable
after the Closing Date) and other rights now or hereafter in effect
with respect to the Land or the Improvements, and the operation
thereof as a golf driving range, but excluding Seller's receivables
(sometimes referred to herein collectively as the "INTANGIBLE PERSONAL
PROPERTY").
(5) The Beer and Wine License, presently in Seller's name,
pursuant to which Seller conducts retail sales of beer and wine for on
premises consumption on the Property (notwithstanding the foregoing,
Seller has advised Purchaser that the cost of acquiring a new Beer and
Wine License may be LESS than the cost of transferring Seller's
existing Beer and Wine License to Purchaser. Purchaser and Seller
agree that if in fact the cost of acquiring such new Beer and Wine
License shall be less than transferring the existing Beer and Wine
License, and if such new Beer and Wine License is readily available,
then Purchaser shall acquire at its expense a new Beer and Wine
License in lieu of a transfer of the existing Beer and Wine License.
The Land and the Improvements are sometimes referred to herein collectively as
the "REAL PROPERTY", and the Real Property, the Personal Property and the
Intangible Personal Property are sometimes referred to herein collectively as
the "PROPERTY".
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<PAGE>
2. PURCHASE PRICE/EARNEST MONEY.
(a) PURCHASE PRICE. The total purchase price to be paid to
Seller by Purchaser for the Property is One Million Three Hundred Fifty
Thousand and No/100 Dollars ($1,350,000.00) (the "PURCHASE PRICE"), subject
to the closing adjustments and prorations shall be paid as hereinafter
provided.
(b) EARNEST MONEY. On or before two (2) business days after
full execution hereof, Purchase shall deposit with Northwestern Title
Company, Pleasanton, California (the "TITLE COMPANY"), as escrowee, the sum
of Fifty Thousand and No/100 Dollars ($50,000.00) (the "DEPOSIT") in the form
of a Promissory Note. The earnest money note shall be converted to cash on
or before two (2) business days after delivery of the Acceptance Notice (as
defined in Paragraph 5(b) hereof), assuming such notice is given. The
Deposit shall be held, invested, and disbursed or released by the Title
Company in accordance with the terms of this Agreement. Unless otherwise
provided in Paragraph 17 hereof, any interest earned on the Deposit shall be
for the benefit of Purchaser.
(c) PAYMENT AT CLOSING. Subject to the terms and conditions
set forth herein, at "CLOSING" (as hereinafter defined), the Title Company
shall apply the Deposit together with all interest earned thereon to the
payment of the Purchase Price. Payment of the Balance of the Purchase Price
subject to the closing adjustments and prorations described hereinbelow shall
be paid as follows: (i) $600,000 cash at Closing, by wire transfer of
immediately available United States funds; and (ii) $700,000 payable by a
promissory note (the "NOTE") accruing interest at the rate of 9% per annum
with all interest and principal payable in full on November 15, 1996. The
Note shall be secured by a first deed of trust encumbering the Leasehold.
In addition to the foregoing, Purchaser shall make a cash payment
at Closing in an amount equal to the wholesale cost of Seller's proshop
inventory, which price shall be determined during the Due Diligence Period.
3. CLOSING.
The event of the transfer of title to the Property by Seller
and payment of the Purchase Price by Purchaser pursuant hereto is herein
called the "CLOSING"; the date of Closing is herein called the "CLOSING DATE".
(a) CLOSING DATE. Provided that the conditions precedent to the
respective obligations of Seller and Purchaser hereunder have been satisfied (or
if not satisfied, have been waived in writing by the appropriate party), the
Closing Date shall occur on a date which is mutually agreeable to Seller and
3
<PAGE>
Purchaser, but in no event later than forty-five (45) days from expiration of
the Due Diligence Period.
(b) TIME AND PLACE OF CLOSING. The Closing shall take place
at 10:00 a.m. (California time) on the Closing Date at the office of Seller's
attorneys or at such other place as may be reasonably agreed upon by
Purchaser and Seller. At the Closing (i) all documents and instructions
shall be executed and delivered, and (ii) the Title Company shall complete or
confirm the transfer of all funds and cause the issuance of the final Title
Policy (as hereinafter defined).
4. CLOSING COSTS.
Seller shall pay at Closing any deed transfer or intangible
taxes and the fees of Seller's attorneys, accountants and other professionals
retained by Seller. The cost of the title insurance with endorsements,
survey, fees of Purchaser's attorneys, accountants and other professionals
retained by Purchaser, the mortgagee's title insurance, if any, and all fees
and costs associated with acquisition of the new financing, recording fees,
if any, shall be the responsibility of Purchaser. All closing and escrow
fees shall be shared equally between the parties.
5. DUE DILIGENCE AND RIGHT OF TERMINATION.
(a) DELIVERIES. Except to the extent the following items are
attached hereto as exhibits or have been previously delivered to Purchaser,
within fifteen (15) days after the Contract Date, Seller shall, at Seller's
sole cost and expense, deliver to Purchaser all of the following items, to
the extent such items are in Seller's possession or as to which Seller is a
party (collectively, the "DUE DILIGENCE ITEMS"):
(1) A true and correct copy of the Lease and all amendments
thereto;
(2) Copies of all guaranties and warranties in Seller's
possession relating to the Improvements and copies of all existing
contracts, agreements, brokerage and commission agreements,
management, maintenance, operating and service contracts and all other
contracts or agreements relating to or affecting the Property or its
operation as of the Contract Date or which may be binding upon the
Property or Purchaser subsequent to Closing, and a written description
of any such oral contracts (collectively, the "OPERATING CONTRACTS");
(3) Copies of any and all engineering and architectural
plans and specifications, reports and studies, drawings, soils
studies, drainage reports, structural reports and surveys relating to
the Property that are in Seller's possession (the "STUDIES");
4
<PAGE>
(4) Copies of any environmental audits or reports relating
to the Property that are in Seller's possession (the "ENVIRONMENTAL
REPORT");
(5) Copies of any and all building and other permits and
authorizations issued in connection with the construction of the
Improvements or operation of the Property (the "PERMITS");
(6) Copies of Seller's records (audited, if available) of
operating statements for the duration of Seller's ownership;
(7) Copies of the documents pursuant to which Seller is
organized and operates its business and appropriate evidence of the
authority of the signatory or signatories of this Agreement on behalf
of Seller to execute this Agreement;
(8) An inventory of any material personal property owned by
Seller to be conveyed hereunder, e.g., golf carts, pumps, motors,
irrigation equipment, and the like;
(9) A complete list of employees engaged in the operation
or maintenance of the Property, detailing position, wages and
benefits; and
(10) Any additional materials and documents requested by
Purchaser and reasonably related to Purchaser's inspection and due
diligence of the Property and the transaction contemplated hereby;
provided such materials and documents requested by Purchaser are in
Seller's possession.
(b) RIGHTS OF TERMINATION. If Purchaser, in its sole and
absolute discretion, determines on or before forty-five (45) business days
after full execution hereof (the "DUE DILIGENCE PERIOD") that in Purchaser's
sole and absolute discretion the Property is acceptable, THEN Purchaser may
elect to continue this Agreement by delivering written notice to Seller (the
"ACCEPTANCE NOTICE"). Additionally, during the Due Diligence Period,
Purchaser shall negotiate a price for Seller's proshop inventory. If not
previously given, the Acceptance Notice shall contain a confirmation of the
purchase price agreed upon by Seller and Purchaser. In the event that the
Acceptance Notice is not timely given, this Agreement shall automatically be
terminated and thereafter neither party shall have any further liability to
the other hereunder, except for such provisions contained herein which, by
their express terms, survive a termination of this Agreement. Seller and
Purchaser acknowledge that Purchaser may expend material sums of money in
reliance on Seller's obligations under this Agreement, in connection with
negotiating and executing this Agreement, conducting the inspections
contemplated in this Paragraph 5 and other provisions of this Agreement, and
preparing
5
<PAGE>
for Closing and that Purchaser would not have entered
into this Agreement without the availability of the inspection rights provided
herein. Accordingly, Seller and Purchaser agree that adequate consideration
exists to support Seller's obligations hereunder prior to the expiration of the
Due Diligence Period.
6. TITLE MATTERS.
Seller shall deliver to Purchaser within seven (7) days after the
Contract Date: (i) a title commitment (the "TITLE COMMITMENT") issued by the
Title Company, pursuant to which the Title Company commits to issue to Purchaser
with respect to the Property a current form of an ALTA 1970 Form B Leasehold
policy of title insurance in an amount equal to the Purchase Price, showing
title to the Leasehold in Seller, subject only to such exceptions as Purchaser
shall approve in its sole discretion on or before the expiration of the Due
Diligence Period (the "PERMITTED EXCEPTIONS"), and such other exceptions (the
"TEMPORARY EXCEPTIONS") as shall be removed from the title policy to be issued
at Closing pursuant to the Title Commitment (the "TITLE POLICY") and (ii) copies
of all documents, whether recorded or unrecorded, referred to as Schedule B
exceptions in the Title Commitment. The Title Commitment shall include the
Title Company's commitment to insure Purchaser's title to any easements created
for the benefit of the Property. In addition, prior to or at Closing:
(a) The parties shall cause the Temporary Exceptions, any
general or standard printed exceptions to be removed or insured over so as to
provide "gap" coverage, mechanic lien coverage and full "extended coverage" in
the Title Policy at Closing;
(b) From and after the Contract Date, Seller shall deliver to
Purchaser for Purchaser's prior approval copies of any easements or other
matters to be recorded against the Property which were not reflected on the
Title Commitment initially delivered to Purchaser, which approval shall not be
unreasonably withheld or delayed. Accordingly, said later dated Title
Commitment shall not show any claim, lien, encumbrance or other defect not
previously disclosed or otherwise approved by Purchaser;
(c) At Purchaser's request, cause the Title Company to delete
all standard printed exceptions and to issue such endorsements as Purchaser may
reasonably request; and
(d) The Title Policy shall be issued as of the Closing Date.
In the event the Title Commitment discloses any claim, lien, encumbrance or
other defect not acceptable to Purchaser in its sole discretion (herein
collectively referred to as "TITLE DEFECTS"), Purchaser shall deliver written
notice to Seller of those Title Defects on or before ten (10) business days from
the date of this
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Agreement. If the Purchaser does not notify the Seller prior to the end of
the Due Diligence Period of any Title Defect, then (i) the title to the
Property as described in the Title Commitment shall for purposes of this
Agreement be deemed acceptable to Purchaser and (ii) the exceptions to the
Title to the Property disclosed in the Title Commitment shall be deemed to be
the "PERMITTED EXCEPTIONS." If prior to the end of the Due Diligence Period
the Purchaser notifies the Seller of one or more Title Defects, and if in
Seller's judgment the Title Defects can be readily removed by the payment of
money, or by legal action, or otherwise insured over, the Title Defects shall
be removed or insured over by Seller at its expense. If Seller determines
that the removal of the Title Defect(s) (or the insuring over of such
defects) whether by direct payment of money, or by legal action (i) would
cost in the aggregate more than Two Thousand Dollars ($2,000.00), or (ii)
could not be accomplished on or before the Closing Date, then Seller may
elect at its option (by written notice to Purchaser within ten (10) days of
receipt of notice from Purchaser of a Title Defect or Title Defects) to
either (i) proceed to cure the Title Defect(s) at its expense, or (ii) notify
Purchaser of its decision not to cure the Title Defect(s). If Seller elects
not to cure or otherwise obtain title insurance over one or more Title
Defects, Purchaser within ten (10) days of Seller's notice may either waive
such objection or decline to give the Acceptance Notice and to terminate this
Agreement in which event Purchaser and Seller shall have no further rights or
obligations to each other under this Agreement. As to Title Defects arising
after delivery of the Acceptance Notice, or matters to which Seller has
previously agreed to correct, if Seller fails to correct, remove or insure
over any such Title Defect prior to or at Closing, Purchaser may, at its sole
option, either (i) proceed to close and deduct from the cash portion of the
Purchase Price payable at Closing such sums as may reasonably be deemed
necessary to correct or remove such Title Defects, or (ii) declare Seller in
default hereunder and exercise any rights and remedies specified in Paragraph
17 hereof.
7. SURVEY MATTERS.
Seller shall deliver to Purchaser within thirty (30) days after
the Contract Date, at Seller's sole cost and expense, three (3) prints of an
ALTA boundary survey of the Real Property (the "SURVEY"), prepared by a surveyor
registered in the State of California. Seller shall cause the Survey to be
certified by said surveyor to Purchaser and its Lender, if any, and the Title
Company.
8. ADDITIONAL CONDITIONS PRECEDENT TO CLOSING.
In addition to the other conditions set forth in this Agreement,
the following shall be conditions precedent to Purchaser's obligation to close
hereunder:
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(a) NO LEGAL MODIFICATION. On the Closing Date, no proceedings
shall be pending which could or would involve the change, redesignation,
redefinition or other modification of the zoning classification or requirements
of (or any building or environmental code requirements applicable to) the
Property, or any portion thereof, which would have a material adverse effect on
the use of the Property as a golf driving range.
(b) UTILITIES. On the Closing Date, no moratorium or proceeding
shall be pending or threatened which adversely affects the availability of
sewer, water, electric, gas, telephone, drainage or other necessary services or
necessary utilities servicing the Property.
(c) UPDATE. Prior to closing, Seller will advise Purchaser in
writing of any new matters not reflected in the materials previously delivered
to Purchaser.
(d) REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Seller shall be true and accurate in all
material respects as of the Closing Date and Seller shall have observed and
performed all covenants and obligations on its part to be performed or observed
at or prior to Closing.
(e) CLOSING DOCUMENTS. Unexecuted copies of all Closing
Documents in final form shall have been reasonably approved by Seller and
Purchaser at least one (1) business day prior to Closing.
(f) LEASE MODIFICATIONS. Purchaser shall have obtained such
modifications to the Lease from the City of Fremont as Purchaser shall require.
In this regard, Purchaser shall make written request of such modifications to
the City of Fremont within fourteen (14) days of execution of this Agreement.
9. INSPECTION RIGHTS. Prior to Closing, during normal business
hours and upon reasonable notice to Seller, Purchaser and its agents and
representatives shall be entitled to:
(a) Enter upon the Real Property to perform all such surveys,
inspections, tests and studies of the Property and its systems as Purchaser
shall deem necessary or appropriate (including inspections and tests designed to
verify, among other things, the extent of any asbestos, PCB's, radon, and other
toxic, hazardous or dangerous substances, wastes or materials in any portion of
the Property), including, without limitation, inspections and testing of (i) any
and all roofs, foundations, walls and other structural components, (ii) any
electrical, plumbing, heating, ventilating, air conditioning, sprinkling and
mechanical systems, and (iii) soil conditions, ground water, surface water,
water quantity and quality, building materials, utility areas and retail spaces;
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(b) Inspect, audit and copy any and all books, records,
correspondence, reports and other files maintained by Seller or any of its
agents (including, without limitation, financial statements, operating budgets,
tax records, litigation files, insurance policies and records, payroll records,
maintenance schedules and reports, and leasing information) relating to the
Property, but excluding the personal financial statements and tax returns of
Selleck and any partners in FGP (collectively, the "RECORDS");
(c) Make studies with regard to annexation, subdivision, zoning,
utility access and building code requirements applicable to the Property;
(d) Make market studies, operating expense and other financial
projections and analyses, real estate tax analyses, income tax analyses, and any
other studies or analyses relating to the value of the Property as Purchaser may
deem appropriate; and
(e) Contact and negotiate with the Title Company, governmental
authorities and utilities with respect to the Property.
Purchaser shall indemnify and hold Seller harmless from any and all
claims, causes of action or other liabilities related in any way to Purchaser's
inspection of the Property as set forth pursuant to Section 17(d)(1).
Purchaser, its agents and representatives, shall use diligent efforts to
minimize interference with the use and operation of the Property and shall not
make any disclosure to the general public regarding the results of any such
inspections, tests or studies prior to Closing. Purchaser shall promptly repair
or restore any damage to the Real Property caused by any inspections, tests or
studies undertaken by Purchaser or Purchaser's representatives.
10. REPRESENTATIONS AND WARRANTIES OF SELLER.
In order to induce Purchaser to enter into this Agreement and
consummate the transaction contemplated hereby, Seller hereby represents and
warrants to Purchaser that the following matters are true as of the Contract
Date:
(a) ORGANIZATION. FGP is a general partnership duly organized,
validly existing and in good standing under the laws of the State of California.
(b) CAPACITY. FGP has taken all actions required by its
organizational documents and applicable law, and has obtained all necessary
consents, to execute and deliver this Agreement and all documents and
instruments to be executed and delivered by FGP at Closing, to perform all
obligations of FGP hereunder and thereunder, and to otherwise consummate the
transaction contemplated in this Agreement. Each Seller has full power and
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authority to enter into this Agreement and to assume and perform all of its
obligations under this Agreement, and the person or persons executing this
Agreement on FGP's behalf have been duly authorized and are empowered to bind
FGP to this Agreement.
(c) TITLE TO THE PROPERTY. Selleck is the legal and equitable
owner of the tenant's interest in the Leasehold and portions of the Personal
Property, free and clear of (i) all mortgages and security interests (except for
those mortgages which are among the Temporary Exceptions), (ii) leases and
tenancies, and (iii) licenses, claims, options, options to purchase, rights of
first refusal and rights of first opportunity, liens, covenants, conditions,
restrictions, rights-of-way, easements, judgments and other matters affecting
title to the Property, except, as of the Closing Date, the Permitted Exceptions.
FGP is the sole owner of good title to all of the inventory, free and clear of
all liens, encumbrances and rights in favor of third parties.
(d) NO CONDEMNATION. No condemnation proceedings, eminent
domain proceedings or similar actions or proceedings are now pending, or to the
best of Seller's knowledge threatened against the Property subject to the
following:
(i) the City of Fremont's award for construction of golf
course adjacent to the Property forces Seller to sell the Property to Purchaser
on negotiated terms or face a termination of the Lease; and
(ii) the Bay Area Rapid Transit may condemn a right of way
over a portion of the property proposed for the golf course. Purchaser
acknowledges the aforesaid exceptions and accepts all risks associated
therewith.
(e) ZONING. To the best of Seller's knowledge, the zoning for
the Real Property permits a driving range use as a matter of right under the
pertinent ordinances governing the Real Property. To the best of Seller's
knowledge, there are no off-site facilities necessary to ensure compliance with
all zoning and building statutes, ordinances, codes and regulations, including,
without limitation, parking requirements.
(f) SUBDIVISION LAWS. To the best of Seller's knowledge, the
Land complies with all applicable subdivision laws and regulations, and no final
subdivision map, parcel map or division of land is required to validly transfer
the Leasehold to Purchaser.
(g) DISTRICTS. To the best of Seller's knowledge, no special
improvement districts have been formed or are proposed that affect or will
affect the Property.
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(h) TAXES AND ASSESSMENTS. Seller has paid all real property
and personal property taxes and all regular and special assessments and any
interest, penalties or late charges affecting the Property which are currently
due and payable.
(i) PUBLIC IMPROVEMENT ASSESSMENTS. No assessments for public
improvements have been made against the Real Property which remain unpaid,
including, without limitation, those for construction of sewer and water lines
and mains, streets, sidewalks, curbs and lighting. To the best of Seller's
knowledge, no public improvements which have been ordered, threatened, announced
or contemplated and/or which have not heretofore been completed, assessed and
paid for.
(j) MECHANICS' LIENS. All work that has been performed in, on
or about the Real Property at the direction of Seller and all materials
furnished in connection therewith that might in any circumstance give rise to a
mechanic's, materialmen's or similar lien against the Property, or any portion
thereof, will, as of the Closing Date, have been paid for and all necessary lien
waivers related thereto will, as of the Closing Date, have been obtained, except
for claims which are being contested diligently and in good faith or are in
dispute and for which a bond or other adequate security has been posted or
escrowed therefor.
(k) ACCESS. To the best of Seller's knowledge, the Real
Property has full and free access to and from a public street which has been
fully completed, dedicated and accepted for public maintenance and use by the
appropriate public authorities. Seller has no knowledge of any fact or
condition which would result in the termination of such access.
(l) UTILITIES AND SERVICES. The Property is served by the City
of Fremont's water system. To the best of Seller's knowledge, the Property has
all utilities which are necessary for its operation as a golf driving range and
Purchaser is not aware of any material defect in the availability of such
utilities. Seller has not experienced any shortfall in the availability of
water to properly irrigate the golf driving range. Seller has no notice of any
adverse or conflicting claims to such water, any applicable water agreement or
usage by Seller. Seller has no knowledge of any fact which may impair
Purchaser's right to use such water subsequent to closing.
(m) COMPLIANCE WITH LAWS. Seller has not received any notice
that the Property is in violation of any laws, ordinances, rules, regulations,
codes, licenses, permits, orders or governmental authorizations applicable to
the ownership, construction or operation of the Property, including, but not
limited to, any federal, state, county or municipal zoning ordinances or
regulations, building, construction or subdivision laws, rules, codes or
requirements, land use laws or regulations,
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drainage codes, health, fire or safety laws or regulations, utility tariffs
or regulations, conservation laws, or laws regulating interstate land sales
(collectively, "GOVERNMENTAL LAWS"), or is in violation of any Governmental
Approvals, which violation has not been remedied, nor does Seller otherwise
have knowledge of (i) any claim of such a violation by any governmental
authority, or (ii) any violation of any Governmental Laws or Governmental
Approvals with respect to the Property or any part thereof. The Beer and
Wine Licenses is in full force and effect.
(n) NO LITIGATION. To the best of Seller's knowledge, there is
no litigation, action, proceeding or governmental investigation pending or
threatened against or relating to Seller, its properties or business, which will
materially and adversely affect the Property or any interest therein or the
transaction contemplated by this Agreement, and Seller is not in default with
respect to any order, writ, injunction, decree or demand of any court or any
governmental authority relating to the Property or any part thereof. No
attachments, execution proceedings, assignments for the benefit of creditors,
insolvency, bankruptcy, liquidation, reorganization or other proceedings are
pending or have been threatened against Seller, nor are any of such proceedings
contemplated by Seller.
(o) NO DISPUTES. To the best of Seller's knowledge, there is no
dispute arising out of the Lease or any contract or commitment entered into
regarding the Property, nor is there any outstanding indebtedness, including
real estate taxes or other taxes due or any deposits owed, with respect to the
Property which will not be fully satisfied and discharged concurrently with the
Closing nor is there any basis known to Seller for any of the foregoing.
(p) HAZARDOUS SUBSTANCES.
(i) Seller has not been advised of, and is not aware of,
any health or environmental hazard in the condition of any of the Land or the
Improvements, or any portion thereof (including, without limitation, hazards
resulting from the presence of asbestos, PCBs, radon or other Hazardous
Materials in the Land, the roofs, foundations, walls, floors or other structural
elements of the Improvements, or heating, ventilating, air conditioning,
plumbing, electrical, elevator, security, utility, sprinkler, life safety and
other systems thereof) which violates applicable law;
(ii) Seller has not caused any Hazardous Material to be
placed, held, released, discharged onto or from, located or disposed of on,
under, at or from the Property, or any part thereof, in violation of applicable
laws;
(iii) the Property has never been used by Seller or, to
Seller's best knowledge, by any other person as a garbage or
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refuse dump site, landfill, waste disposal facility, waste transfer station
or any other type of facility for the storage, processing, treatment or
temporary or permanent disposal of waste materials of any kind; and
(iv) to the best of Seller's knowledge there are no
underground storage tanks located on the Real Property. For the purposes of
this Agreement, "HAZARDOUS MATERIAL" means and includes any petroleum product or
hazardous, toxic, infectious or dangerous waste, substance or material defined
as such in (for purposes of) the Comprehensive Environmental Response,
Compensation, and Liability Act, any so-called "Superfund" or "Superlien" law,
or any other federal, state or local statute, law, ordinance, code, rule,
regulation, order, decree or other requirement of any governmental authority
regulating, relating to, or imposing liability or standards of conduct
concerning, any petroleum product or hazardous, toxic, infectious or dangerous
waste, substance or material, as now in effect and applicable to the Property.
(q) INFORMATION CORRECT. To Seller's knowledge, all information
heretofore or hereafter submitted to Purchaser by Seller, including, but not
limited to, the Exhibits attached to this Agreement, is true, complete and
correct in all material respects. Seller has no information or knowledge with
respect to any adverse fact or condition relating to the Property, or any
portion thereof, or its intended use which has not been specifically disclosed
to Purchaser in writing.
(r) SOIL CONDITION. To Seller's knowledge, there are no adverse
soil conditions affecting the Property.
(s) FOREIGN PERSONS. There are no non-resident foreign
taxpayers which are or will be, directly or indirectly, entitled to all or any
portion of the proceeds from the sale of the Property.
(t) EMPLOYEES. As of the Closing, all employees of Seller
engaged in the operation or maintenance of the Property shall have been paid in
full as to all wages and benefits accrued to such date.
The representations and warranties made in this Agreement by Seller
shall be reaffirmed by Seller as of the Closing Date. All representations and
warranties made in this Agreement by Seller shall survive the Closing, and shall
not merge into any of the Closing Documents. Notwithstanding anything to the
contrary contained in this Agreement, the rights and benefits conferred upon
Purchaser in this Agreement by and with respect to the representations and
warranties made in this Agreement shall not be diminished or deemed to be waived
by any of the inspections, tests or other reviews made by Purchaser in
connection with this transaction.
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11. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
In order to induce Seller to enter into this Agreement and
consummate the transaction contemplated hereby, Purchaser hereby represents and
warrants to Seller that the following matters are true as of the Closing Date:
(a) ORGANIZATION. Purchaser is a corporation duly organized and
validly existing under the laws of the State of Colorado and is and at all
relevant times shall be in good standing under the laws of the State of
Colorado. Purchaser shall be qualified to conduct business in the State of
California.
(b) CAPACITY. Purchaser has taken all actions required by its
organizational documents and applicable law, and has obtained all necessary
consents, to execute and deliver this Agreement and all documents and
instruments to be executed and delivered by Purchaser at Closing, to perform all
obligations of Purchaser hereunder and thereunder, and to otherwise consummate
the transaction contemplated in this Agreement. Purchaser has full power and
authority to enter into this Agreement and to assume and perform all of its
obligations under this Agreement, and the person executing this Agreement on
Purchaser's behalf has been duly authorized and is empowered to bind Purchaser
to this Agreement.
The representations and warranties made in this Agreement by Purchaser
shall be reaffirmed by Purchaser as of the Closing Date and shall survive the
Closing.
Purchaser has been awarded the right to negotiate a lease with the
City of Fremont for a golf course adjacent to the subject property. Seller has
made no representations or warranties to Purchaser with respect to such lease or
its award. The award of the lease shall not be a condition to Purchaser's
obligations hereunder.
12. COVENANTS OF SELLER.
Seller hereby covenants with Purchaser as follows:
(a) CONTRACTS. Seller shall not hereafter, without Purchaser's
prior written consent, enter into any contract with respect to the Property
which will survive the Closing and for which Purchaser shall be liable or which
will otherwise affect the use, operation or enjoyment of the Property after the
Closing.
(b) INSURANCE. Seller shall maintain through the Closing Date
all customary insurance.
(c) PAYMENT OF BILLS. Seller will pay in full, prior to or at
Closing, all bills and invoices for labor, goods, material and services of any
kind relating to the Property. Seller shall
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timely make all payments of principal and interest required under all
mortgages encumbering the Property.
(d) TITLE. Seller shall not cause or permit any change in the
status of title to the Property prior to Closing without the prior written
consent of Purchaser.
(e) CHANGE IN CONDITION. Seller shall promptly notify Purchaser
of any change in any condition with respect to the Property or of any event or
circumstance which occurs prior to Closing and thereby makes any representation
or warranty of Seller to Purchaser under this Agreement materially untrue or
misleading, or any covenant of Seller under this Agreement incapable of being
performed, it being understood that Seller's obligation to provide notice to
Purchaser under this Paragraph 12 shall in no way relieve Seller of any
liability for a breach by Seller of any of its representations, warranties or
covenants under this Agreement. The covenant set forth in this subparagraph
shall survive the Closing and shall not merge into any of the Closing Documents.
(f) EMPLOYEES. Prior to Closing, Purchaser shall designate the
employees of the Property it desires to retain. Seller shall terminate all
employees who are not to be retained as of the Closing and shall be responsible
for payment of any termination benefits for such persons.
(g) FURTHER ASSURANCES. All actions of Seller required pursuant
to this Agreement which are necessary to effectuate the transaction contemplated
herein will be taken promptly and in good faith by Seller.
13. CLOSING DOCUMENTS.
At Closing, Seller shall deliver or cause to be delivered to
Purchaser (or to the Title Company) and Purchaser shall deliver or cause to be
delivered to Seller (or to the Title Company), as appropriate, the following
documents (collectively, the "CLOSING DOCUMENTS"), in form and substance
reasonably approved by Seller and Purchaser pursuant to Paragraph 5(l) hereof:
(a) ASSIGNMENT. Seller shall deliver an assignment of the
Leasehold, executed by Seller, in recordable form, conveying the tenant's
interest in the Leasehold to the Land and the Improvements to Purchaser, free
and clear of all claims, interests, liens and encumbrances, other than the
Permitted Exceptions.
(b) BILL OF SALE. To the extent necessary, Seller shall deliver
a bill of sale, executed by Seller, assigning and conveying to Purchaser title
to the Improvements free and clear of all claims, interests, liens and
encumbrances, other than the Permitted Exceptions.
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(c) ASSIGNMENT OF INTANGIBLE PERSONAL PROPERTY. Seller shall
deliver a quit claim assignment assigning to Purchaser all right, title and
interest of Seller and its agents in and to the Intangible Personal Property,
together with an agreement by Seller not to use the name of the Property or any
derivative thereof in the State of California. Purchaser shall join in the
execution of this document as a party thereto to evidence its acceptance of the
assignment and its assumption of all duties and obligations of Seller under the
Intangible Personal Property arising from and after the Closing Date.
(d) ASSIGNMENT OF CONTRACTS. There are no contracts or personal
property leases to be assigned.
(e) ORIGINAL DOCUMENTS. To the extent not previously delivered
to Purchaser and in Seller's possession, Seller shall also deliver to Purchaser
originals of any Governmental Approvals, guarantees and warranties made in
connection with the construction, improvement, use or operation of the Property
and any notices, correspondence and other documentation relating to any of the
foregoing.
(f) KEYS. Seller shall deliver all keys it has for locks
located on the Property, it being understood that Seller does not have keys for
all of the locks located on the Property.
(g) AFFIDAVIT OF TITLE. Seller shall deliver an affidavit of
title, ALTA statement or other certification required by the Title Company to
issue the Title Policy.
(h) CLOSING STATEMENT. Seller and Purchaser shall each deliver
a closing statement conforming to the proration and other relevant provisions of
this Agreement. Seller and Purchaser shall cooperate with each other in the
timely preparation of the closing statements.
(i) WATER RIGHTS/OPINION. The Property is served by city water.
If necessary, Seller shall deliver at Closing such documentation as is necessary
to convey to Purchaser all water taps for the Property.
(j) SELLER AFFIDAVIT. Seller shall deliver an affidavit of
Seller to the effect that Seller is not a "Foreign Person" and is not subject to
withholding requirements under the Foreign Investment in Real Property Tax Act
of 1980, as amended.
(k) ESTOPPEL LETTER. Seller shall deliver an estoppel letter
executed by the City of Fremont to the effect that the Lease has not been
terminated and is not in default and such other matters as Purchaser may
reasonably request.
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(l) OTHER DOCUMENTS. Such other documents and instruments as
may reasonably be required by Purchaser, Seller or the Title Company and
necessary to consummate this transaction and to otherwise effect this
transaction or otherwise effect the agreements of the parties hereto, including,
but not limited to, state, county and local transfer declarations, Internal
Revenue Form 1099B and any disclosures required under applicable environmental
laws.
At Closing, contemporaneously with the delivery by Seller of all of
the Closing Documents to be delivered by Seller, Purchaser shall deliver to
Seller the cash portion of the Purchase Price payable at Closing, subject to the
other credits, adjustments and prorations as provided in this Agreement.
14. PRORATIONS AND ADJUSTMENTS.
At the Closing, the parties shall prorate and adjust, as of 11:59
p.m. of the day preceding the Closing Date, the following with respect to the
Property, and the net amount thereof shall be added to (if such net amount is in
Seller's favor) or deducted from (if such net amount is in Purchaser's favor)
the payment required pursuant to Paragraph 2(c) hereof:
(a) OTHER DEPOSITS. Any tax, insurance and other escrow
deposits held under any mortgages shall be the property of Seller and shall be
payable to Seller by such mortgagees after Closing. In addition, any deposits
made by Seller to any utility or governmental authority shall likewise remain
the property of Seller after Closing without proration or contribution from
Purchaser.
(b) UTILITY CHARGES. Water, electricity, sewer, gas, telephone
and other utility charges based, to the extent practicable, on final meter
readings and final invoices, shall be prorated, if necessary.
(c) ASSIGNED CONTRACTS. Amounts paid or payable under Assigned
Contracts shall be prorated.
(d) REAL ESTATE TAXES. General real estate and ad valorem taxes
assessed against the Property for the calendar year 1996 ("1996 TAXES") (whether
or not currently due) shall be prorated on the basis of the most recent assessed
valuation of the Property and the most recent tax rate available and shall be
final.
(e) SPECIAL ASSESSMENTS. Special assessments which are
certified or become a lien prior to Closing (including those which are to become
due and payable after Closing) shall be prorated between Seller and Purchaser at
Closing.
(f) RENT AND OTHER ITEMS. Rent and other amounts payable on the
Leasehold and such other items that are customarily
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prorated in transactions of this nature shall be reasonably prorated.
(g) INCOME. All items of income, revenue, prepaid deposits,
membership fees and similar items which are allocable to time periods after the
Closing shall be credited to Purchaser.
For purposes of calculating prorations, Purchaser shall be deemed to
be in title to the Property, and therefore entitled to the income therefrom and
responsible for the expenses thereof, for the entire day upon which the Closing
occurs. All prorations shall be made on the basis of the actual number of days
of the year and month which shall have elapsed as of the Closing Date. Except
as otherwise expressly set forth herein, items of income and expense for the
period prior to the Closing Date will be for the account of Seller and items of
income and expense for the period on and after the Closing Date will be for the
account of Purchaser, all as determined by the accrual method of accounting.
Bills received after Closing which relate to the Property and to expenses
incurred by Seller, services performed for Seller or other amounts allocable to
Seller and the period prior to the Closing Date shall be paid promptly by Seller
to the extent the same were not accurately prorated on the closing statements.
At Closing, the amount of the prorations and adjustments pursuant to the
foregoing provisions of this Paragraph 14 shall be determined to the extent
practicable, and monetary adjustment shall be made in cash on the basis of the
actual amounts of the respective items on or before sixty (60) days after the
Closing Date.
The provisions of this Paragraph 14 shall survive Closing and shall
not be merged into any of the Closing Documents.
15. CONDEMNATION. Except as to the items referred to in
subparagraphs 10(d)(i) and (ii) for which Purchaser has assumed all risks, if
prior to the Closing Date a condemnation proceeding (involving the power of
eminent domain or the police power as expressed by any governmental or quasi-
governmental entity, including but not limited to any fire or building
department) is instituted with respect to all or any portion of the Property, or
if prior to the Closing Date Seller has notice or knowledge that there is a
reasonable likelihood of some such proceeding being instituted, or if there is
then pending a threat of the exercise thereof, Seller shall promptly notify
Purchaser of such fact, setting forth in writing the terms and conditions with
respect to such proceeding and the parties' names, addresses, and telephone
numbers with whom to deal on behalf of such condemning or potentially condemning
governmental entity. In this instance, Purchaser shall have a period of
fourteen (14) days following the receipt of such written notice to terminate
this Agreement. If Purchaser does not timely make such election, this Agreement
shall continue in full force and effect; but Purchaser shall be entitled to all
proceeds received in such condemnation proceedings and shall
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<PAGE>
be solely in charge of conducting all settlement negotiations or defending
such action, as the case may be.
16. CASUALTY.
Prior to the Closing Date, and notwithstanding the pendency of
this Agreement, the entire risk of loss or damage to the Property by fire or
other casualty is borne and assumed by Seller, except as otherwise expressly
provided in this Paragraph 16. If, prior to the Closing, the Property is
destroyed or damaged by one or more fires, windstorms, hurricanes, hailstorms,
floods, accidents, explosions, earthquakes, sinkholes, acts of God, vandalism or
other casualty or cause (herein collectively called a "CASUALTY"), Seller shall
immediately give Purchaser written notice thereof. Seller shall immediately
take such action as is required to secure the damaged portion of the Property
and protect the Property from further damage and shall immediately file all
appropriate claims under its insurance policies and proceed to negotiate in good
faith the highest possible settlement amount from the insurer(s). Purchaser
shall have the right to participate in the adjustment of the claim, but all
decisions regarding the adjustment may be made by Seller without Purchaser's
consent. Seller shall notify Purchaser in writing, prior to Seller's acceptance
of any settlement, of the amount which Seller proposes to accept (the
"SETTLEMENT NOTICE").
(a) If the reasonably estimated cost of repair and restoration
of the Property is $50,000.00 or less, the Closing shall take place in
accordance with the terms of this Agreement and Seller shall use its diligent
efforts to repair and restore the Property prior to Closing to its condition
required for Closing hereunder. If Seller is unable to complete said repair and
restoration prior to Closing, Purchaser shall be entitled to elect, by written
notice delivered to Seller no later than ten (10) days prior to Closing, either
to (i) postpone the Closing in order to enable Seller to complete said repair
and restoration of the Property, in which event Seller shall continue to
diligently pursue the repair and restoration of the Property and the Closing
Date shall be correspondingly extended, or (ii) accept an assignment from Seller
to Purchaser of all of Seller's rights with respect to all insurance proceeds
receivable in respect of such Casualty which have not been applied to repair and
restoration of the Property and to receive a proration credit at Closing equal
to all deductibles therefrom plus the amount, if any, by which the cost of
repair exceeds the insurance proceeds. If Purchaser fails to make the aforesaid
election on or before the date that is ten (10) days prior to Closing, Purchaser
shall be deemed to have made the election set forth in clause (ii) above.
(b) If the reasonably estimated cost of repair and restoration
of the Property is more than $50,000.00 at any time prior to the date that is
thirty (30) days following the date of
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Purchaser's receipt of the Settlement Notice, Purchaser may elect in a
written notice to Seller (it being understood that Purchaser may make the
following election prior to the receipt of the Settlement Notice) either to:
(1) proceed with the Closing in accordance with the terms
of this Agreement, in which event, (i) the insurance proceeds shall be
assigned to Purchaser at Closing (with any proceeds paid to Seller
prior to Closing to be credited to Purchaser), and Purchaser shall
receive a proration credit at Closing equal to all deductibles
therefrom, plus the amount, if any, by which the cost of repairs
exceeds the insurance proceeds; or
(2) elect to terminate this Agreement by the delivery to
Seller of a notice of termination, in which event the provisions of
Paragraph 16(c) below shall be applicable.
(c) If this Agreement is terminated pursuant to this
Paragraph 16, the Deposit, together with all interest earned thereon, shall be
immediately returned to Purchaser, whereupon this Agreement shall be null and
void except for such provisions contained herein which, by their express terms,
survive a termination of this Agreement.
17. DEFAULT; INDEMNITY.
(a) DEFAULT BY PURCHASER. If, as of the Closing Date, all of
the material conditions precedent to Purchaser's obligations under this
Agreement have been fully satisfied (other than Seller's delivery of Closing
Documents) but Purchaser fails to close, then, as Seller's sole and exclusive
remedy therefor, Seller shall thereupon be entitled to retain the Deposit and
all interest accrued thereon as liquidated damages (and not as a penalty) for
such breach and, in such case, the Title Company as escrowee shall deliver the
Deposit and all interest earned thereon to Seller and Seller and Purchaser shall
thereupon each be released from all liability or obligation hereunder to the
other except as expressly set forth herein as surviving a termination of this
Agreement, and this Agreement shall otherwise become null and void. The parties
acknowledge that the actual damages to Seller as a result of any such breach by
Purchaser would be difficult or impossible to accurately ascertain and that the
Deposit represents a reasonable good faith estimate of such damages.
IN THE EVENT THE SALE OF THE PROPERTY CONTEMPLATED HEREUNDER IS NOT
CONSUMMATED PRIOR TO THE CLOSING DATE AS A RESULT OF A DEFAULT HEREUNDER OR
OTHER FAILURE TO COMPLY WITH THE TERMS OF THIS CONTRACT ON THE PART OF BUYER AND
PROVIDED THE DUE DILIGENCE PERIOD IS SATISFIED, SELLER SHALL BE ENTITLED TO THE
DEPOSIT AND ALL INTEREST EARNED THEREON AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE AND AGREE THAT SELLER'S ACTUAL DAMAGES IN SUCH AN
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EVENT, INCLUDING, WITHOUT LIMITATION, SELLER'S ACTUAL COSTS INCURRED IN
NEGOTIATING AND DRAFTING THIS CONTRACT, SATISFYING CONDITIONS TO CLOSING AND
SEEKING ANOTHER BUYER, AND SELLER'S OPPORTUNITY COSTS IN KEEPING THE PROPERTY
OUT OF THE MARKETPLACE AND BEING UNABLE TO USE THE PROCEEDS FROM THE SALE OF
THE PROPERTY IN OTHER BUSINESS VENTURES, WOULD BE EXTREMELY DIFFICULT AND
IMPRACTICABLE TO ASCERTAIN PROSPECTIVELY AND, THEREFORE, BY PLACING THEIR
INITIALS BELOW, BUYER AND SELLER ACKNOWLEDGE THAT SUCH AMOUNT, FROM TIME TO
TIME EXISTING, HAS BEEN AGREED UPON, AFTER NEGOTIATION, TO BE THEIR
REASONABLE ESTIMATE OF SELLER'S DAMAGES AND TO BE SELLER'S SOLE AND EXCLUSIVE
REMEDY AGAINST BUYER IN SUCH AN EVENT AND IS NOT A PENALTY.
Buyer Initials: CDT Seller Initials: DFS RDS II
(b) DEFAULT BY SELLER. If, prior to Closing, Seller violates,
breaches or defaults under any of the material representations, warranties,
covenants or any other material terms and conditions of this Agreement
applicable to Seller, which violation, breach or default has not been cured as
of the Closing Date, and if all of the conditions precedent to Seller's
obligations under this Agreement have been fully satisfied (other than
Purchaser's payment of the Purchase Price and delivery of Closing Documents),
then Purchaser shall have the right to either (i) specifically enforce this
Agreement against Seller and, at Closing, Seller shall pay Purchaser a sum equal
to the cost of such action and all expenses incurred by Purchaser in connection
therewith, including reasonable attorneys' fees and costs, together with all
damages suffered by Purchaser as a result of Seller's violations, breaches and
defaults hereunder and any delay occasioned thereby, or (ii) terminate this
Agreement, in which event (x) the Deposit, together with all interest earned
thereon shall be returned to Purchaser, (y) Seller shall pay to Purchaser
documented and verifiable out-of-pocket costs and expenses incurred by Purchaser
to third parties in connection with the transaction contemplated by this
Agreement, including, without limitation, the cost and expense incurred to third
parties in connection with the evaluation of the Property, the preparation of
studies and all reasonable fees of Purchaser's accountants and attorneys other
than such accountants and attorneys who are employees of Purchaser, and
(z) Purchaser shall be entitled to recover all damages suffered by Purchaser as
a result of Seller's violations, breaches and defaults hereunder, provided that
the total amount recoverable under (y) and (z) above shall not exceed $50,000.
(c) SELLER'S INDEMNITIES.
(1) Provided the Closing is completed hereunder, Seller
shall indemnify, defend and hold harmless Purchaser against and in
respect of any and all claims, losses, obligations, liabilities,
damages, costs and expenses (including reasonable attorney's fees and
costs) which accrue
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<PAGE>
prior to Closing or which Purchaser may incur or suffer arising out
of, in connection with or based upon any material breach of any of
Seller's representations, warranties or covenants under this
Agreement.
(2) Provided Closing is completed hereunder, Seller shall
indemnify, defend and hold harmless Purchaser against and in respect
of any and all claims, losses, obligations, liabilities, damages,
costs and expenses (including reasonable attorney's fees and costs)
which Purchaser may incur or suffer arising out of, in connection with
or based upon any claims by third parties for personal injury or
physical damage to such third party's property resulting from an act
or omission or event occurring or alleged to have occurred prior to
Closing and relating to Seller's ownership, operation or use of the
Property to the extent Purchaser has not actually recovered insurance
proceeds with respect thereto.
(d) PURCHASER'S INDEMNITIES.
(1) Purchaser hereby indemnifies, defends and holds
harmless Seller against and in respect of any and all claims, losses,
obligations, liabilities, damages, costs and expenses (including
reasonable attorney's fees and costs) which accrue prior to Closing or
which Seller may incur or suffer arising out of, in connection with or
based upon claims for personal injury or physical damage resulting
from access to the Property by Purchaser or its agents, employees,
contractors or consultants prior to Closing.
(2) Provided Closing is completed hereunder, Purchaser
shall indemnify, defend and hold harmless Seller against and in
respect of any and all claims, losses, obligations, liabilities,
damages, costs, and expenses (including reasonable attorney's fees and
costs) which Seller may incur or suffer arising out of, in connection
with or based upon any claims by third parties for personal injury or
physical damage to such third party's property resulting from an act
or omission or event occurring or alleged to have occurred after
Closing and relating to Purchaser's ownership, operation or use of the
Property to the extent Seller has not actually recovered insurance
proceeds with respect thereto or from material breach of any of
Purchaser's representations, warranties, or covenants under this
Agreement.
(e) SURVIVAL. The provisions of Paragraphs 17(c) and 17(d)
above shall survive the Closing and shall not be merged into any of the Closing
Documents.
22
<PAGE>
18. SUCCESSORS AND ASSIGNS.
The terms, conditions and covenants of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement is assignable to an affiliate
of the Purchaser. All other assignments shall require the prior written
approval of Seller, which shall not be unreasonably withheld.
19. BROKERS.
(a) SELLER'S WARRANTY. Seller warrants to Purchaser that it has
not dealt with any broker, salesman, finder or consultant with respect to this
Agreement or the sale contemplated herein to whom a commission or fee of any
kind whatsoever is due. Seller shall indemnify, protect, defend and hold
Purchaser harmless from and against all claims, losses, costs, expenses and
damages (including reasonable attorneys' fees, costs and expenses incurred in
the investigation, defense and settlement of claims) resulting from a breach of
the foregoing warranty.
(b) PURCHASER'S WARRANTY. Purchaser warrants to Seller that it
has not dealt with any broker, salesman, finder or consultant with respect to
this Agreement or the sale contemplated herein to whom a commission or fee of
any kind whatsoever is due. Purchaser shall indemnify, protect, defend and hold
Seller harmless from and against all claims, losses, costs, expenses and damages
(including reasonable attorneys' fees, costs and expenses incurred in the
investigation, defense and settlement of claims) resulting from a breach of the
foregoing warranty.
Notwithstanding any provision of this Agreement to the contrary, the
obligations of the parties under this Paragraph 19 shall survive any termination
of this Agreement, shall survive Closing and shall not be merged into any of the
Closing Documents.
20. LITIGATION.
In the event of litigation between the parties with respect to
the Property, this Agreement, the performance of their obligations hereunder or
the effect of a termination under this Agreement, the losing party shall pay all
costs and expenses incurred by the prevailing party in connection with such
litigation, including reasonable attorneys' fees and costs and expenses incurred
in the investigation, defense and settlement of claims. Notwithstanding any
provision of this Agreement to the contrary, the obligations of the parties
under this Paragraph 20 shall survive any termination of this Agreement, shall
survive Closing and shall not be merged into any of the Closing Documents.
23
<PAGE>
21. NOTICES.
Any notice, demand or request which may be permitted, required or
desired to be given in connection herewith shall be given in writing and
directed to Seller and Purchaser as follows:
Seller: Robert Selleck
2655 Lindero Canyon Road
West Lake Village, California 91362
Telephone: (818) 991-7890
Fax: (818) 991-8811
with a copy to: Milton Righetti, Esq.
318 Diablo Road; Suite 200
Danville, California 94526
Telephone: (510) 743-9988
Fax: (510) 838-0367
Purchaser: The Vintage Group USA Ltd.
1999 Broadway, Suite 2435
Denver, Colorado 80202
ATTN: Charles D. Tourtellotte
Telephone: (303) 294-9300
Fax: (303) 294-9360
with a copy to: Steven M. Sommers, Esq.
Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Telephone: (303) 534-6335
Fax: (303) 623-1956
or to such other address as may be designated in writing and delivered to the
other party in accordance herewith. Notices shall be either (i) personally
delivered (including delivery by Federal Express or other recognized private
courier service) to the offices set forth above, in which case they shall be
deemed delivered on the date of delivery to said offices; or (ii) sent by
facsimile transmission, in which case they shall be deemed delivered on the date
actually received; or (iii) sent by certified mail, return receipt requested, in
which case they shall be deemed delivered on the date shown on the receipt
unless delivery is refused or delayed by the addressee, in which event they
shall be deemed delivered on the date of deposit in the U.S. mail.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; WAIVER. This Agreement constitutes the
entire understanding between the parties with respect to the transaction
contemplated herein, and all prior or contemporaneous oral agreements,
understandings, discussions, representations and statements, and all prior
written agreements,
24
<PAGE>
understandings, letters of intent, representations and statements are merged
into this Agreement. Neither this Agreement nor any provisions hereof may be
waived, modified, amended, discharged or terminated except by an instrument
in writing signed by the party against which the enforcement of such waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in such instrument. The waiver of any particular
condition precedent shall not constitute the waiver of any other.
(b) BUSINESS DAY. If any date herein set forth for the
performance of any obligations by Seller or Purchaser or for the delivery of any
instrument or notice as herein provided should be on a Saturday, Sunday or legal
holiday, the compliance with such obligations or delivery shall be deemed
acceptable on the next business day following such Saturday, Sunday or legal
holiday. As used herein, the term "legal holiday" means any state or federal
holiday for which financial institutions or post offices are generally closed in
the State of California or the State of Colorado for observance thereof.
(c) CONSTRUCTION. This Agreement shall not be construed more
strictly against one party than against the other merely by virtue of the fact
that it may have been prepared by counsel for one of the parties, it being
recognized that both Seller and Purchaser have contributed substantially and
materially to the preparation of this Agreement. The table of contents and the
headings of various paragraphs in this Agreement are for convenience only and
are not to be utilized in construing the content or meaning of the substantive
provisions hereof.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California.
(e) TIME IS OF THE ESSENCE. All times, wherever specified
herein, are of the essence of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
shall be taken to be one and the same instrument, for the same effect as if all
of the parties hereto had signed the same signature page. Any signature page of
this Agreement may be detached from any counterpart of this Agreement without
impairing the legal effect of any signatures thereon and may be attached to
another counterpart of this Agreement identical in form hereto but having
attached to it one or more additional signature pages.
(g) EXHIBITS. Each of the exhibits attached hereto is hereby
incorporated herein by this reference and made a part hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
of Purchase and Sale on the date first above written.
SELLER:
/s/ Robert Selleck II
--------------------------------
Robert Selleck
FREMONT GOLF PARTNERSHIP, a
California general partnership
By: /s/ David F. Selleck
-----------------------------
Its: General Partner
----------------------------
PURCHASER:
THE VINTAGE GROUP USA LTD., a
Colorado corporation
By: /s/ Charles D. Tourtellotte
-----------------------------
Its: President
----------------------------
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EXHIBIT A
D E S C R I P T I O N
---------------------
All that certain real property situated in the City of Fremont, County of
Alameda, State of California, described as follows:
PARCEL A, as shown on Parcel Map No. 626, filed May 25, 1971, Map Book 69,
Page 61, Alameda County Records.
Commonly known as: Mission Blvd.
Alameda County Account No.: 525-1-7
<PAGE>
EXHIBIT 10.14
March 18, 1996
Mr. Sandor W. Shapery
Shapery Enterprises
801 W. Ash Street
San Diego, CA 92101-3504
Re: LETTER OF INTENT - SUBLEASE - HARBORSIDE GOLF CENTER
The following sets forth our proposal to sublease with a right of first
refusal to purchase Harborside Golf Center. This letter is to be superseded
by formal documentation constituting the Sublease Agreement between
Harborside Golf Center, L.P. (the "Sublessor") and The Vintage Group USA,
Ltd. ( the "Sublessee").
1. Term: One year with a 3-month
extension option upon notice of
exercise.
2. Capital Commitment: Minimum of $25,000.00 as
initial capital infusion to be
used for working capital and
will work with current vendors
to achieve satisfactory payment
schedule pursuant to attached
three vendors payable lists.
Sublessee upon possession shall
pay all back interest payments
which are currently estimated
to be $7,500 on the $150,000
second trust deed on the
subject property from November
1995. Sublessee upon
possession shall pay the sum of
$5,000, funded from the $25,000
initial capital infusion, for
the loan extension fee for the
$500,000 first trust deed note
secured by the Shapery
residence and funded to
Sublessor.
Sublessor shall have the right
to audit the books and records
as reasonably required, and
shall receive monthly operating
reports within 20 days after
the end of each month.
Sublessor shall have quarterly
reviews with Sublessee's
management team to go over
operations and the business
plan.
At the end of the one year sub-
lease, all current and past due
operating liabilities will be
paid and all debt service will
be current.
<PAGE>
March 18, 1996
Page 2
3. Lease Payment: The actual amount of project
debt service to include
principal and interest only.
Sublessee will guaranty no net
operating losses to Sublessor
during the term of the lease.
Sublessee to make payments
directly to lenders.
Lease Payment shall consist of
the following approximate
monthly payments:
a. $5,000 to Columbia Funding
Corp.
b. $12,151 to Owens Financial
Group
c. $1,500 to Bridges and Cunningham
4. Participating Rent: Sublessor shall receive 50% of
residual cash flow, which is
defined as net cash flow less
monthly lease payments. Net
cash flow is defined as all
operating income less operating
expenses including land rent
and management fees to
Sublessee of $6,000/month.
5. Purchase Option: Effective during lease term and
subsequent option periods, on
terms substantially the same as
those outlined in Schedule A.
(Letter of Intent).
6. Closing/Possession Date: May 1, 1996.
The Vintage Group will guarantee net operating losses, if any, involving
project operations during the term of the lease.
Sincerely,
James K. Dignan
Vice President/Acquisitions
Agreed and Acknowledged this _____ day of March, 1996.
By:
-------------------------
Its:
-------------------------
Encl.
<PAGE>
EXHIBIT 10.17
THE VINTAGE GROUP USA, LTD.
1996 STOCK OPTION AND STOCK BONUS PLAN
PURPOSES OF AND BENEFITS UNDER THE PLAN. This 1996 Stock Option and
Stock Bonus Plan (the "Plan") is intended to encourage stock ownership by
employees and officers and directors (whether or not they are employees) of and
consultants to The Vintage Group USA, Ltd. and its controlled, affiliated, and
subsidiary corporations, partnership's or other entities (collectively, the
"Corporation"), so that they may acquire or increase their proprietary interest
in the Corporation, and is intended to facilitate the Corporation's efforts to
(i) induce qualified persons to become employees, officers or directors of or
consultant to the Corporation; (ii) compensate employees, officers, directors
and consultants for services to the Corporation; and (iii) encourage such
persons to remain in the employ of or associated with the Corporation and to put
forth maximum efforts for the success of the Corporation.
1. DEFINITIONS. As used in this Plan, the following words and
phrases shall have the meanings indicated:
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Committee" shall mean the Compensation Committee appointed
by the Board, if one has been appointed. If no Committee has been appointed,
the term "Committee" shall mean the Board. Following the Registration Date, the
Committee shall consist of at least two persons (or such other number as may be
required under Rule 16b-3, each of whom is a Disinterested Director, appointed
by and holding office at the pleasure of the Board).
(c) "Common Stock" shall mean the Corporation's $.01 par value
common stock.
(d) "Disability" shall mean a Recipient's inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or that
has lasted or can be expected
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to last for a continuous period of no less than 12 months. If the Recipient has
a disability insurance policy, the term "Disability" shall be defined therein.
(e) "Disinterested Director" means a member of the Board who is
not, during the one year prior to service as a member of the Committee, or
during such service, granted or awarded equity securities pursuant to the Plan
or any other plan of the Corporation, except for formula grants or awards made
pursuant to exceptions provided under Rule 16b-3.
(f) "Fair Market Value" per share as of a particular date shall
mean: (i) the last sale price of the Corporation's Common Stock as reported on
a national securities exchange or on the NASDAQ National Market System or by
NASDAQ; or (ii) if the quotation for the last sale reported is not available for
the Corporation's Common Stock as so reported; or (iii) if such quotations are
unavailable, the value determined by the Committee in its discretion in a bona
fide, good faith determination of fair market value. Fair Market Value shall be
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse. In the case of Bonuses granted at a time when the
Corporation does not have a registration statement in effect relating to the
shares issuable hereunder, the value at which the Bonus shares are issued may be
determined by the Committee at a reasonable discount from Fair Market Value to
reflect the restricted nature of the shares to be issued and the inability of
the Recipient to sell those shares promptly.
(g) "Recipient" means any person granted an Option or awarded a
Bonus hereunder.
(h) "Rule 16b-3" means Rule 16b-3 which has been adopted by the
Securities and Exchange Commission under the Securities and Exchange Act of
1934, if and as such rule is then in effect.
2. Administration.
(a) The Plan shall be administered by the Committee. The
Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and
to exercise all the powers and authorities either specifically conferred under
the Plan or necessary or advisable in the administration of the Plan, including
the authority: to grant Options and Bonuses; to determine the vesting schedule
and other restrictions, if any, relating to Options and Bonuses; to determine
which Options shall constitute Incentive Stock Options and which shall
constitute Non-qualified Stock Options; to determine the purchase price of the
shares of Common Stock covered by each Option (the "Option Price"); to determine
the persons
2
<PAGE>
to whom, and the time or times at which, Options and Bonuses shall be granted;
to determine the number of shares to be covered by each Option or Bonus; to
determine Fair Market Value per share; to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of the Option agreements (which need not be identical)
entered into in connection with Options granted under the Plan; and to make all
other determinations deemed necessary or advisable for the administration of the
Plan. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan.
(b) Options and Bonuses granted under the Plan shall be evidenced
by duly adopted resolutions of the Committee included in the minutes of the
meeting at which they are adopted or in a unanimous written consent.
(c) The Committee shall endeavor to administer the Plan and grant
Options and Bonuses hereunder in a manner that is compatible with the
obligations of persons subject to Section 16 of the Securities Exchange Act of
1934 (the "1934 Act"), although compliance with Section 16 is the obligation of
the Recipient, not the Corporation. Neither the Committee, the Board nor the
Corporation can assume any legal responsibility for a Recipient's compliance
with his obligations under Section 16 of the 1934 Act.
(d) No member of the Committee or the Board shall be liable for
any action taken or determination made in good faith with respect to the Plan or
any Option or Bonus granted hereunder.
3. ELIGIBILITY.
(a) Subject to certain limitations hereinafter set forth, Options
and Bonuses may be granted to employees and officers and directors (whether or
not they are employees) of and consultants to the Corporation. In determining
the persons to whom Options or Bonuses shall be granted and the number of shares
to be covered by each Option or Bonus, the Committee shall take into account the
duties of the respective persons, their present and potential contributions to
the success of the Corporation, and such other factors as the Committee shall
deem relevant to accomplish the purposes of the Plan.
3
<PAGE>
(b) A Recipient shall be eligible to receive more than one grant
of an Option or Bonus during the term of the Plan, on the terms and subject to
the restrictions herein set forth.
4. STOCK RESERVED.
(a) The stock subject to Options or Bonuses hereunder shall be
shares of Common Stock. Such shares, in whole or in part, may be authorized but
unissued shares or shares that shall have been or that may be reacquired by the
Corporation. The aggregate number of shares of Common Stock as to which Options
and Bonuses may be granted from time to time under the Plan shall not exceed
250,000 subject to adjustment as provided in Section 7(h) hereof.
(b) If any Option outstanding under the Plan for any reason
expires or is terminated without having been exercised in full, or if any Bonus
granted is forfeited because of vesting or other restrictions imposes at the
time of grant, the shares of Common Stock allocable to the unexercised portion
of such Option or the forfeited portion of the Bonus shall become available for
subsequent grants of Options and Bonuses under the Plan.
5. INCENTIVE STOCK OPTIONS.
(a) Options granted pursuant to this Section 5 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 7 hereof. Only employees of the Corporation shall be entitled to
receive Incentive Stock Options.
(b) The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which Incentive Stock Options granted under this and any other plan of the
Corporation or any Parent Corporation or Subsidiary Corporation are exercisable
for the first time by an Optionee during any calendar year may not exceed the
amount set forth in Section 422(d) of the Internal Revenue Code.
(c) Incentive Stock Options granted under this Plan are intended
to satisfy all requirements for incentive stock options under Section 422 of the
Internal Revenue Code and the Treasury Regulations thereunder and,
notwithstanding any other provision of this Plan, the Plan and all Incentive
Stock Options granted under it shall be so construed, and all contrary
provisions shall be so limited in scope and effect and, to the extent they
cannot be so limited, they shall be void.
4
<PAGE>
6. NON-QUALIFIED STOCK OPTIONS. Options granted pursuant to this
Section 6 are intended to constitute Non-qualified Stock Options and shall be
subject only to the general terms and conditions specified in Section 7 hereof.
Non-qualified Stock Options may be granted at an exercise price of not less than
85% of the Fair Market Value of the Common Stock.
7. TERMS AND CONDITIONS OF OPTIONS; OPTION AGREEMENTS. Each Option
granted pursuant to the Plan shall be evidenced by a written Option agreement
between the Corporation and the Recipient, which agreement shall be
substantially in the form of Exhibit A hereto as modified from time to time by
the Committee in its discretion. Each Option Agreement shall specifically
identify the portion, if any, of the Option which constitutes an Incentive Stock
Option and the portion, if any, which constitutes a Non-qualified Stock Option.
Each Option Agreement shall comply with and be subject to the following terms
and conditions:
(a) NUMBER OF SHARES. Each Option agreement shall state the
number of shares of Common Stock covered by the Option.
(b) OPTION PRICE. Each Option agreement shall state the Option
Price, which shall be determined by the Committee subject only to the following
restrictions:
(1) The Option Price shall be subject to adjustment as
provided in Section 7(h) hereof.
(2) The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such option is
granted, unless a future date is specified in the resolution, and the Fair
Market Value of the Common Stock to which such Option relates shall be
determined at the close of the day on which the resolution is adopted, unless
another value and/or another date is specified in the resolution.
(3) The exercise price of the Incentive Stock Option must
not be less than 100% of the Fair Market Value. The exercise price of Non-
qualified Stock Options must not be less than 85% of the Fair Market Value. Any
Incentive Stock Option granted under the Plan to a person owning more than ten
percent of the total combined voting power of the Common Stock shall be at a
price no less than 110% of the Fair Market Value per share on the date of grant
of the Incentive Stock Option.
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(c) Term and Vesting of Option. Each Option agreement shall
state the period during and time at which the Option shall vest and be
exercisable, in accordance with the following limitations:
(1) The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such Option is
granted, although such grant shall not be effective until the Recipient has
executed an Option Agreement with respect to such Option.
(2) The exercise period of any Option shall not exceed ten
years from the date of grant of the Option. The exercise period of Incentive
Stock Options granted to a person owning more than ten percent of the total
combined voting power of the Common Stock of the Corporation shall not exceed
five years.
(3) The Committee shall have the authority to accelerate or
extend the exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. No exercise
period may be so extended to increase the term of the Option beyond ten years
from the date of the grant.
(4) The exercise period shall be subject to earlier
termination as provided in Sections 7(e) and 7(f) hereof, and, furthermore,
shall be terminated under surrender of the Option by the holder thereof if such
surrender has been authorized in advance by the Committee.
(5) The Option shall vest no earlier than in equal amounts
annually over five years; provided, that Options and Bonuses relating to up to
an aggregate of 25,000 shares of Common Stock may be subject to a shorter
vesting period at the discretion of the Committee.
(d) METHOD OF EXERCISE AND MEDIUM AND TIME OF PAYMENT.
(1) An Option may be exercised as to any or all whole
shares of Common Stock as to which it then is exercisable; provided, however,
that no Option may be exercised as to less than 100 shares (or such number of
shares as to which the Option is then exercisable if such number of shares is
less than 100).
(2) Each exercise of an Option granted hereunder, whether
in whole or in part, shall be effected by written notice to the Secretary of the
Corporation designating the number of shares as to which the Option is being
exercised, and shall be accompanied by payment in full of the Option Price for
the number of shares so
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designated, together with any written statements required by, or deemed by the
Corporation's counsel to be advisable pursuant to, any applicable securities
laws.
(3) The Option Price shall be paid in cash, or in shares of
Common Stock having a Fair Market Value equal to such Option Price, or in
property or in a combination of cash, shares and property and, subject to
approval of the Committee, may be effected in whole or in part with funds
received from the Corporation at the time of exercise as a compensatory cash
payment.
(4) The Committee shall have the sole and absolute
discretion to determine whether or not property other than cash or Common Stock
may be used to purchase the shares of Common Stock hereunder and, if so, to
determine the value of the property received.
(5) The Recipient shall make provision for the withholding
of taxes as required by Paragraph 9 hereof.
(e) Termination. Except as provided herein or in the Option
Agreement by and between the Corporation and the Recipient, an Option may not be
exercised unless the Recipient then is an employee or officer or director of or
consultant to the Corporation (or a corporation or a Parent or Subsidiary
Corporation of such corporation issuing or assuming the option in a transaction
to which Section 424(a) of the Internal Revenue Code applies), and unless the
Recipient has remained continuously as an employee or officer or director of or
consultant to the Corporation since the date of grant of the Option.
(1) Unless otherwise provided in the Option Agreement by
and between the Corporation and the Recipient, if the Recipient ceases to be an
employee or officer or director of, or consultant to, the Corporation (other
than by reason of death, Disability or retirement) all Options theretofore
granted to such Recipient that are exercisable at the time of such cessation
may, unless earlier terminated in accordance with their terms, be exercised
within three months after such cessation; provided, however, that if the
employment or consulting relationship of a Recipient shall terminate, or if an
officer or director shall be removed, for cause, all Options theretofore granted
to such Recipient shall, to the extent not theretofore exercised, terminate
forthwith.
(2) Nothing in the Plan or in any Option or Bonus granted
hereunder shall confer upon an individual any right to continue in the employ of
or maintain any other relationship with the Corporation or interfere in any way
with the right
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of the Corporation to terminate such employment or other relationship between
the individual and the Corporation.
(f) Death, Disability or Retirement of Recipient. Unless
otherwise provided in the Option Agreement by and between the Corporation and
the Recipient, if a Recipient shall die while an employee or officer or director
of or a consultant to the Corporation, or if the Recipient's employment, officer
status or consulting relationship shall terminate by reason of Disability or
retirement, all Options theretofore granted to such Recipient, whether or not
otherwise exercisable, unless terminated in accordance with their terms, may be
exercised by the Recipient or by the Recipient's estate or by a person who
acquired the right to exercise such Options by bequest or inheritance or
otherwise by reason of the death or Disability of the Recipient, at any time
within one year after the date of death, Disability or retirement of the
Recipient; provided, however, that in the case of Incentive Stock Options such
one-year shall be limited to three months in the case of retirement.
(g) TRANSFERABILITY RESTRICTION.
(1) Options granted under the Plan shall not be
transferable other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of Title I of the Employee Retirement Income Security Act of 1974,
or the rules thereunder. Options may be exercised, during the lifetime of the
Recipient, only by the Recipient and thereafter only by his legal
representative.
(2) Any attempted sale, pledge, assignment, hypothecation
or other transfer of an Option contrary to the provisions hereof and/or the levy
of any execution, attachment or similar process upon an Option, shall be null
and void and without force or effect and shall result in a termination of the
Option.
(3)(A) As a condition to the transfer of any shares of
Common Stock issued upon exercise of an Option granted under this Plan, the
Corporation may require an opinion of counsel, satisfactory to the Corporation,
to the effect that such transfer will not be in violation of the Securities Act
of 1933, as amended (the "1933 Act") or any other applicable securities laws or
that such transfer has been registered under federal and all applicable state
securities laws. (B) Further, the Corporation shall be authorized to refrain
from delivering or transferring shares of Common Stock issued under this Plan
until the Committee determines that such delivery or transfer will not violate
applicable securities laws and the Recipient has tendered to the Corporation any
federal, state or local tax owed by the Recipient as a result of exercising the
Option or disposing of any Common Stock when the Corporation has a legal
liability to satisfy such
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tax. (C) The Corporation shall not be liable for damages due to delay in the
delivery or issuance of any stock certificate for any reason whatsoever,
including, but not limited to, a delay caused by listing requirements of any
securities exchange or any registration requirements under the 1933 Act, the
1934 Act, or under any other state, federal or provincial law, rule or
regulation. (D) The Corporation is under no obligation to take any action or
incur any expense in order to register or qualify the delivery or transfer of
shares of Common Stock under applicable securities laws or to perfect any
exemption from such registration or qualification. (E) Furthermore, the
Corporation will not be liable to any Recipient for failure to deliver or
transfer shares of Common Stock if such failure is based upon the provisions of
this paragraph.
(h) EFFECT OF CERTAIN CHANGES.
(1) If there is any change in the number of shares of
outstanding Common Stock through the declaration of stock dividends, or through
a recapitalization resulting in stock splits or combinations or exchanges of
such shares, the number of shares of Common Stock available for Options and the
number of such shares covered by outstanding Options, and the exercise price per
share of the outstanding Options, shall be proportionately adjusted by the
Committee to reflect any increase or decrease in the number of issued shares of
Common Stock; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.
(2) In the event of the proposed dissolution or
liquidation of the Corporation, or any corporate separation or division,
including, but not limited to, split-up, split-off or spin-off, or a merger or
consolidation of the Corporation with another corporation, the Committee may
provide that the holder of each Option then exercisable shall have the right to
exercise such Option (at its then current Option Price) solely for the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such dissolution, liquidation, corporate
separation or division, or merger or consolidation by a holder of the number of
shares of Common Stock for which such Option might have been exercised
immediately prior to such dissolution, liquidation, corporate separation or
division, or merger or consolidation; or, in the alternative the Committee may
provide that each Option granted under the Plan shall terminate as of a date
fixed by the Committee; provided, however, that not less than 30 days' written
notice of the date so fixed shall be given to each Recipient, who shall have the
right, during the period of 30 days preceding such termination, to exercise the
Option as to all or any part of the shares of Common Stock covered thereby,
including shares as to which such Option would not otherwise be exercisable.
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(3) Paragraph (2) of this Section 7(h) shall not apply
to a merger or consolidation in which the Corporation is the surviving
corporation and shares of Common Stock are not converted into or exchanged for
stock, securities of any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or merger
of another corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (excluding a change in par value, or from no par value to
par value, or any change as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series of
shares), the Committee may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for the kind and
amount of shares of stock and other securities (including those of any new
direct or indirect parent of the Corporation), property, cash or any combination
thereof receivable upon such reclassification, change, consolidation or merger
by the holder of the number of shares of Common Stock for which such Option
might have been exercised.
(4) To the extent that the foregoing adjustments relate
to stock or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
(5) Except as expressly provided in this Section 7(h)
the Recipient shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class, or by
reason of any dissolution, liquidation, merger, or consolidation or spin-off of
assets or stock of another corporation; and any issue by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option. The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures, or to merge or
consolidate, or to dissolve, liquidate, or sell or transfer all or any part of
its business or assets.
(6) To the extent that the foregoing adjustments relate
to stock or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to this
Plan shall not be adjusted in a manner that cases such Option to fail to
continue to qualify as an Incentive Stock Option within the meaning of Section
422 of the Internal Revenue Code.
(i) NO RIGHTS AS SHAREHOLDER - NON-DISTRIBUTIVE INTENT.
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(1) Neither a Recipient of an Option nor such Recipient's
legal representative, heir, legatee or distribute, shall be deemed to be the
holder of, or to have any rights of a holder with respect to, any shares subject
to such Option until after the Option is exercised and the shares are issued.
(2) No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distribution or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 7(h) hereof.
(3) Upon exercise of an Option at a time when there is no
registration statement in effect under the 1933 Act relating to the shares
issuable upon exercise, shares may be issued to the Recipient only if the
Recipient represents and warrants in writing to the Corporation that the shares
purchased are being acquired for investment and not with a view to the
distribution thereof and provides the Corporation with sufficient information to
establish an exemption from the registration requirements of the 1933 Act. A
form of subscription agreement containing representations and warranties deemed
sufficient as of the date of adoption of this Plan is attached hereto as Exhibit
B.
(4) No shares shall be issued upon the exercise of an
Option unless and until there shall have been compliance with any then
applicable requirements of the Securities and Exchange Commission or any other
regulatory agencies having jurisdiction over the Corporation.
(j) OTHER PROVISIONS. Option Agreements authorized under the
Plan may contain such other provisions as the Committee shall deem advisable,
including, without limitation, the imposition of restrictions upon the vesting
and exercise of an Option.
8. GRANT OF STOCK BONUSES. In addition to, or in lieu of, the grant
of an Option, the Committee may grant shares of Common Stock as a Bonus.
(a) Each Bonus shall vest no earlier than in equal amounts
annually over five years; provided, that Options and Bonuses relating to an
aggregate of 25,000 shares of Common Stock may be subject to a shorter vesting
period at the discretion of the Committee. At the time of grant of a Bonus, the
Committee may impose additional restrictions upon the vesting of a Bonus and
such other restrictions which it deems appropriate. Unless otherwise directed
by the Committee at the time of grant of a Bonus,
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the Recipient shall be considered a shareholder of the Corporation as to the
Bonus shares which have vested in the grantee at any time regardless of any
forfeiture provisions which have not yet arisen.
(b) The grant of a Bonus and the issuance and delivery of shares
of Common Stock pursuant thereto shall be subject to approval by the
Corporation's counsel of all legal matters in connection therewith, including
compliance with the requirements of the 1933 Act, the 1934 Act, other applicable
securities laws, rules and regulations, and the requirements of any stock
exchanges upon which the Common Stock then may be listed. Any certificates
prepared to evidence Common Stock issued pursuant to a Bonus grant shall bear
legends as the Corporation's counsel may seem necessary or advisable. Included
among the foregoing requirements, but without limitation, any Recipient of a
Bonus at a time when a registration statement relating thereto is not effective
under the 1933 Act shall execute a Subscription Agreement substantially in the
form of Exhibit B.
9. AGREEMENT BY RECIPIENT REGARDING WITHHOLDING TAXES. Each
Recipient agrees that the Corporation, to the extent permitted or required by
law, shall be permitted to deduct a sufficient number of shares due to the
Recipient upon exercise of the Option or the grant of a Bonus to allow the
Corporation to pay federal, provincial, state and local taxes of any kind
required by law to be withheld upon the exercise of such Option or payment of
such Bonus. The Corporation shall not be obligated to advise any Recipient of
the existence of any tax or the amount which the Corporation will be so required
to withhold.
10. TERM OF PLAN. Options and Bonuses may be granted under this Plan
from time to time within a period of ten years from the date the Plan is adopted
by the Board.
11. AMENDMENT AND TERMINATION OF THE PLAN. The Committee at any time
and from time to time may suspend, terminate, modify or amend the Plan. Except
as provided in Section 7 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any Option or Bonus previously
granted, unless the written consent of the Recipient is obtained.
12. ASSUMPTION. Subject to Section 7, the terms and conditions of any
outstanding Options granted pursuant to this Plan shall be assumed by, be
binding upon and shall inure to the benefit of any successor corporation to the
Corporation and shall, to the extent applicable, continue to be governed by the
terms and conditions of this Plan. Such successor corporation may, but shall
not be obligated to, assume this Plan.
13. TERMINATION OF RIGHT OF ACTION. Every right of action arising out
of or in connection with the Plan by or on behalf of the Corporation, or by any
shareholder of the
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Corporation against any past, present or future member of the Board or the
Committee, or against any employee, or by an employee (past, present or future)
against the Corporation, irrespective of the place where an action may be
brought and of the place of residence of any such shareholder, director or
employee, will cease and be barred by the expiration of three years from the
date of the act or omission in respect of which such right of action is alleged
to have arisen or such shorter period as may be provided by law.
14. TAX LITIGATION. The Corporation shall have the right, but not the
obligation, to contest, at its expense, any tax ruling or decision,
administrative or judicial, on any issue which is related to the Plan and which
the Board believes to be important to holders of Options or Common Stock issued
pursuant to Bonuses granted under the Plan and to conduct any such contest or
any litigation arising therefrom to a final decision.
15. LOANS. The Committee may, in its discretion, authorize the
Corporation to extend one or more loans to holders of Options or recipients of
Bonuses in connection with the exercise or receipt of Options or Bonuses. The
terms and conditions of any such loan shall be set by the Committee and may
include, in the Committee's discretion, loans that are secured, unsecured,
recourse or nonrecourse.
16. ADOPTION BY BOARD; APPROVAL OF SHAREHOLDERS. This Plan was
approved by the Board of Directors and the Shareholders of the Corporation
effective _____________.
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EXHIBIT A
FORM OF STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT mad as of this ____ day of ______, 199__, by and
between The Vintage Group USA, Ltd., a Colorado corporation (the "Corporation"),
and ______________ (the "Recipient").
In accordance with the Corporation's 1996 Stock Option and Stock Bonus
Plan (the "Plan"), a copy of which is attached hereto and is incorporated herein
by reference, the Corporation desires, in connection with the services of the
Recipient, to provide the Recipient with an opportunity to acquire shares of the
Corporation's no par value common stock ("Common Stock") on favorable terms and
thereby increase the Recipient's proprietary interest in the Corporation and
incentive to put forth maximum efforts for the success of the business of the
Corporation. Capitalized terms used but not defined herein are used as defined
in the Plan.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein set forth and other good and valuable consideration, the Corporation and
the Recipient agree as follows:
1. CONFIRMATION OF GRANT OF OPTION. Pursuant to a determination of
the Committee made on ______________, 19__ (the "Date of Grant"), the
Corporation, subject to the terms of the Plan and of this Agreement, confirms
that the Recipient has been irrevocably granted on the Date of Grant, as a
matter of separate inducement and agreement, and in addition to and not in lieu
of salary or other compensation for services, a Stock Option (the "Option")
exercisable to purchase an aggregate of _____ shares of Common Stock on the
terms and conditions herein set forth, subject to adjustment as provided in
Paragraph 8 hereof. The Option [is/is not] intended to qualify as an Incentive
Stock Option pursuant to Section 422 of the Internal Revenue Code.
2. OPTION PRICE. The Option Price of shares of Common Stock covered
by the Option will be $____ per share (the "Option Price") subject to adjustment
as provided in Paragraph 8 hereof.
3. EXERCISE OF OPTION. Except as otherwise provided herein or in
Section 7 of the Plan, the Option may be exercised in [five] cumulative
installments as follows:
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(i) The first installment shall consist of [20]% of the shares covered
by the Option and shall become exercisable on ____________________ ____, ______.
(ii) The second installment shall consist of [20]% of the shares
covered by the Option and shall become exercisable on ____________________ ____,
______.
(iii) The third installment shall consist of [20]% of the shares covered
by the Option and shall become exercisable on ____________________ ____, ______.
(iv) The fourth installment shall consist of [20]% of the shares
covered by the Option and shall become exercisable on ____________________ ____,
______.
(v) The fifth installment shall consist of [20]% of the shares covered
by the Option and shall become exercisable on ____________________ ____, ______.
The Option may not be exercised at any one time as to fewer than 100 shares (or
such number of shares as to which the Option is then exercisable if such number
of shares is less than 100). The Option may be exercised by written notice to
the Secretary of the Corporation accompanied by payment in full of the Option
Price as provided in Section 7(d) of the Plan.
4. TERM OF OPTION. The term of the Option will be through ________,
___, subject to earlier termination or cancellation as provided in this
Agreement. The holder of the Option will not have any rights to dividends or
any other rights of a shareholder with respect to any shares of Common Stock
subject to the Option until such shares shall have been issued (as evidenced by
the appropriate transfer agent of the Corporation) upon purchase of such shares
through exercise of the Option.
5. TRANSFERABILITY RESTRICTION. The Option may not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way
(whether by operation of law or otherwise) except in strict compliance with
Section 7 of the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any levy of execution,
attachment or other process will cause the Option to terminate immediately upon
the happening of any such event; provided, however, that any such termination of
the Option under the provisions of this Paragraph 7 will not prejudice any
rights or remedies which the Corporation may have under this Agreement or
otherwise.
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6. EXERCISE UPON TERMINATION. The Recipient's rights to exercise this
Option upon termination of employment or cessation of service as an officer or
consultant shall be as set forth in Section 7(e) of the Plan.
7. DEATH, DISABILITY OR RETIREMENT OF RECIPIENT. The exercisability
of this Option upon the death, Disability or retirement of the Recipient shall
be as set forth in Section 7(f) of the Plan.
8. ADJUSTMENTS. The Option shall be subject to adjustment upon the
occurrence of certain events as set forth in Section 7(h) of the Plan.
9. NO REGISTRATION OBLIGATION. The Recipient understands that the
Option is not registered under the 1933 Act and, unless by separate written
agreement, the Corporation has no obligation to so register the Option or any of
the shares of Common Stock subject to and issuable upon the exercise of the
Option, although it may from time to time register under the 1933 Act the shares
issuable upon exercise of Options granted pursuant to the Plan. The Recipient
represents that the Option is being acquired for the Recipient's own account and
that unless registered by the Corporation, the shares of Common Stock issued on
exercise of the Option will be acquired by the Recipient for investment. The
Recipient understands that the Option is, and the underlying securities may be,
issued to the Recipient in reliance upon exemptions from the 1933 Act, and
acknowledges and agrees that all certificates for the shares issued upon
exercise of the Option will bear the following legends unless such shares are
registered under the 1933 Act prior to their issuance:
The shares represented by this Certificate have not been registered under
the Securities Act of 1933 (the "1933 Act"), and are "restricted
securities" as that term is defined in Rule 144 under the 1933 Act. The
shares may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the 1933 Act or
pursuant to an exemption from registration under the 1933 Act, the
availability of which is to established to the satisfaction of the
Company.
The Recipient further understands and agrees that the Option may be
exercised only if at the time of such exercise the underlying shares are
registered and/or the Recipient and the Corporation are able to establish the
existence of an exemption from registration under the 1933 Act and applicable
state or other laws.
10. NOTICES. (INSERT APPROPRIATE LANGUAGE HERE)______________________
________________________________________________________________________________
________________________________________________________________________________
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________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
11. APPROVAL OF COUNSEL. The exercise of the Option and the issuance
and delivery of shares of Common Stock pursuant thereto shall be subject to
approval by the Corporation's counsel of all legal matters in connection
therewith, including compliance with the requirements of the 1933 Act, the 1934
Act, applicable state and other securities laws, the rules and regulations
thereunder, and the requirements of any national securities exchange(s) upon
which the Common Stock then may be listed.
12. BENEFITS OF AGREEMENT. This Agreement will inure to the benefit
of and be binding upon each successor and assignee of the Corporation. All
obligations imposed upon the Recipient and all rights granted to the Corporation
under this Agreement will be binding upon the Recipient's heirs, legal
representatives and successors.
13. EFFECT OF GOVERNMENTAL AND OTHER REGULATIONS. The exercise of the
Option and the Corporation's obligation to sell and deliver shares upon the
exercise of the Option are subject to all applicable federal and state laws,
rules and regulations, and to such approvals by any regulatory or governmental
agency which may, in the opinion of counsel for the Corporation, be required.
14. INCORPORATION OF THE PLAN. The Plan is attached hereto and
incorporated herein by reference. In the event that any provision in this
Agreement conflict with a provision in the Plan, the provisions of the Plan
shall govern.
15. ADMINISTRATION. The Committee shall have the power to interpret
the Plan and this Agreement consistent with Section 2 of the Plan.
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Executed in the name and on behalf of the Corporation by one of its duly
authorized officers and by the Recipient all as of the date first above written.
THE VINTAGE GROUP USA, LTD.
Date , 19 By
------------ --- ------------------------------------
The undersigned Recipient has read and understands the terms of this
Option Agreement and the attached Plan and hereby agrees to comply therewith.
Date , 19
------------ --- --------------------------------------
Signature of Recipient
Tax ID Number:
------------------------
Address:
--------------------------------------
--------------------------------------
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EXHIBIT B
SUBSCRIPTION AGREEMENT
THE SECURITIES BEING ACQUIRED BY THE UNDERSIGNED HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY OTHER LAWS AND ARE OFFERED UNDER EXEMPTIONS
FROM THE REGISTRATION PROVISIONS OF SUCH LAWS. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
RESTRICTIONS ON TRANSFER CONTAINED IN THIS STOCK SUBSCRIPTION AGREEMENT AND
APPLICABLE SECURITIES LAWS.
This Subscription Agreement is entered for the purpose of the undersigned
acquiring ___________ shares of the no par value common stock (the "Securities")
of The Vintage Group USA, Ltd., a Colorado corporation (the "Corporation") from
the Corporation as a Bonus or pursuant to exercise of an Option granted pursuant
to the Corporation's 1996 Stock Option and Stock Bonus Plan (the "Plan"). All
capitalized terms not otherwise defined herein shall be as defined in the Plan.
It is understood that no grant of any Bonus or exercise of any Option at
a time when no registration statement relating thereto is effective under the
1933 Act can be completed until the undersigned executes this Subscription
Agreement and delivers it to the Corporation, and that such grant or exercise is
effective only in accordance with the terms of the Plan and this Subscription
Agreement.
In connection with the undersigned's acquisition of the Securities, the
undersigned represents and warrants to the Corporation as follows:
1. The undersigned has been provided with, and has reviewed the
following reports, if any, filed by the Corporation pursuant to the Securities
Exchange Act of 1934, including (without limitation) the Corporation's most
recent annual report on Form 10-K, all Forms 10-Q for the quarters subsequent to
the date of such Form 10-K, all Forms 8-K filed subsequent to the date of such
Form 10-K, and all other reports filed by the Corporation pursuant to such Act
subsequent to the date of the most recent Form 10-K. The undersigned has also
reviewed the Plan, and such other information as the undersigned may have
requested of the Corporation regarding its business, operations,
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management, and financial condition (all of which is referred to herein as the
"Available Information").
2. The Corporation has given the undersigned the opportunity to ask
questions of and to receive answers from persons acting on the Corporation's
behalf concerning the terms and conditions of this transaction and the
opportunity to obtain any additional information regarding the Corporation, its
business and financial condition or to verify the accuracy of the Available
Information which the Corporation possesses or can acquire without unreasonable
effort or expense.
3. The Securities are being acquired by the undersigned for the
undersigned's own account and not on behalf of any other person or entity.
4. The undersigned understands that the Securities being acquired
hereby have not been registered under the 1933 Act or any state or foreign
securities laws, and are, and unless registered will continue to be, restricted
securities within the meaning of Rule 144 of the General Rules and Regulations
under the 1933 Act and other statutes, and the undersigned consents to the
placement of appropriate restrictive legends on any certificates evidencing the
Securities and any certificates issued in replacement or exchange therefor and
acknowledges that the Corporation will cause its stock transfer records to note
such restrictions.
5. By the undersigned's execution below, it is acknowledged and
understood that the Corporation is relying upon the accuracy and completeness
hereof in complying with certain obligations under applicable securities laws.
6. This Agreement binds and inures to the benefit of the
representatives, successors and permitted assigns of the respective parties
hereto.
7. The undersigned acknowledges that the grant of any Bonus or Option
and the issuance and delivery of shares of Common Stock pursuant thereto shall
be subject to prior approval by the Corporation's counsel of all legal matters
in connection therewith, including compliance with the requirements of the 1933
Act, the 1934 Act, other applicable securities laws, the rules and regulations
thereunder, and the requirements of any national securities exchange(s) upon
which the Common Stock then may be listed.
8. The undersigned acknowledges and agrees that the Corporation has
withheld ________ shares for the payment of taxes as a result of the grant of
the Bonus or the exercise of an Option.
20
<PAGE>
9. The Plan is attached hereto and incorporated herein by reference.
In the event that any provision in this Agreement conflicts with ANY provision
in the Plan, the provisions of the Plan shall govern.
Date: , 19 .
--------------- -- ------------------------------
Signature of Recipient
Tax ID Number:
---------------------
Address:
------------------------------
------------------------------
21
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Historical per share information is not considered relevant as it would
differ materially from pro forma per share data, given the contemplated
acquisition of Fremont Golf Center, 90% of the limited partnership interests
in Illinois Center Golf Partner, L.P. and Goose Creek Golf Partners Limited
Partnership, the sale of 1,200,000 shares of common stock in an Initial
Public Offering and the convertible subordinated notes not being considered a
common stock equivalent in computing primary earnings per share. Convertible
subordinates notes are not considered common stock equivalents in the
computation of primary and fully diluted loss per share since their
inconclusion would be anti-dilutive.
THREE MONTHS
ENDED
PRIMARY EARNINGS PER SHARE MARCH 31, 1996
- -------------------------- --------------
Pro forma net loss $ (776,441)
----------
----------
Shares:
Historical shares outstanding 1,045,000
Shares to be issued in IPO 1,200,000
----------
Pro forma weighted average number of
shares outstanding 2,245,000
----------
----------
Primary net loss per share $ (.35)
----------
----------
<PAGE>
THREE MONTHS
ENDED
FULLY DILUTED EARNINGS PER SHARE MARCH 31, 1996
- -------------------------------- --------------
Pro forma net loss $ (776,441)
----------
----------
Shares:
Historical shares outstanding 1,045,000
Shares to be issued in IPO 1,200,000
----------
Pro forma weighted average number of
shares outstanding 2,245,000
----------
----------
Primary net loss per share $ (.35)
----------
----------
ADDITIONAL FULLY DILUTED COMPUTATION
- ------------------------------------
This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
Pro forma net loss $ (776,441)
Add: interest on 12% convertible subordinated notes 101,779
Add: interest on 6% convertible notes 36,934
----------
Net loss, as adjusted $ (637,728)
----------
----------
Additional adjustment to weighted average number of
shares outstanding:
Pro forma weighted average number of shares
outstanding 2,245,000
12% convertible subordinated notes 553,571
6% convertible notes 351,750
Outstanding warrants 624,826
----------
----------
Weighted average number of shares outstanding, as adjusted 3,775,147
----------
Fully diluted net loss per share $ (.17)
----------
----------
<PAGE>
Exhibit 21
SUBSIDIARIES
Subsidiaries of METROGOLF INCORPORATED
GOOSE CREEK GOLF PARTNERS LIMITED PARTNERSHIP, an Illinois Limited
Partnership
ILLINOIS CENTER GOLF PARTNERS, L.P., an Illinois Limited Partnership
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
MetroGolf Incorporated
(Formerly The Vintage Group USA, Ltd.)
Denver, Colorado
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated May 17, 1996 relating to the
consolidated financial statements of MetroGolf Incorporated (formerly The
Vintage Group USA, Ltd.) which is contained in that Prospectus, and of our
report dated May 17, 1996 relating to the schedule, which is contained in
Part II of the Registration Statement.
We also consent to the reference to us under the captions "Selected Consolidated
Financial Data" and "Experts" in the Prospectus.
BDO Seidman, LLP
Denver, Colorado
June 13, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROGOLF
INCORPORATED AND SUBSIDIARIES CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 0 324
<SECURITIES> 0 0
<RECEIVABLES> 0 83,256
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 240033 321732
<PP&E> 87977 87977
<DEPRECIATION> (28950) (24025)
<TOTAL-ASSETS> 970003 979679
<CURRENT-LIABILITIES> 1001311 827700
<BONDS> 0 0
0 0
45500 45500
<COMMON> (96770) (96770)
<OTHER-SE> (41889) 152231
<TOTAL-LIABILITY-AND-EQUITY> 970003 979679
<SALES> 49057 335303
<TOTAL-REVENUES> 49057 335303
<CGS> 0 0
<TOTAL-COSTS> 220955 882709
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6930 25994
<INCOME-PRETAX> (177728) (532112)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (177728) (532112)
<EPS-PRIMARY> (.21) (.66)
<EPS-DILUTED> (.21) (.66)
</TABLE>
